nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2010‒11‒20
six papers chosen by
Matthew Baker
City University of New York

  1. The Relevance of Evolutionary Science For Economic Theory and Policy By John M. Gowdy; David Sloan Wilson
  2. Does consistency predict accuracy of beliefs?: Economists surveyed about PSA By Berg, Nathan; Biele, Guido; Gigerenzer, Gerd
  3. Do I really want to know? A cognitive dissonance-based explanation of other-regarding behavior By Astrid Matthey; Tobias Regner
  4. Punishment and cooperation: the "old" theory By Ortona, Guido
  5. Moral Judgments in Social Dilemmas: How Bad is Free Riding? By Robin P. Cubitt; Michalis Drouvelis; Simon Gaechter; Ruslan Kabalin
  6. Inconsistency Pays?: Time-inconsistent subjects and EU violators earn more By Berg, Nathan; Eckel, Catherine; Johnson, Cathleen

  1. By: John M. Gowdy (Department of Economics, Rensselaer Polytechnic Institute, Troy NY 12180-3590, USA); David Sloan Wilson (Department of Economics, Binghamton University, Binghamton, NY 13903)
    Abstract: NSF’s “Dear Colleague Letter” reflects the widely perceived need to go beyond current economic theory in the formulation of public policy. At the same time, there is a profound lack of unity among the disciplines that comprise the behavioral, social, and economic sciences. This white paper emphasizes the relevance of evolutionary science as a way to integrate the SBE sciences, similar to the integration that is more advanced in the biological sciences. Modern evolutionary science is broadly construed to include cultural in addition to biological evolution and the study of neural and psychological mechanisms (proximate causation) in addition to the environmental factors that brought the mechanisms into existence and result in the expression of specific behaviors (ultimate causation). It provides an exceptionally useful set of theoretical and empirical tools for integrating the many disciplines in the biological and SBE sciences required to formulate economic theory and public policy for the 21st century. The task of integration is already in progress and can be applied to the formulation of public policy without a long academic time lag. We therefore call for integration across disciplines and evolutionary science as an integrative framework to be recognized as a funding priority by NSF.
    JEL: A10 A11 P48
    Date: 2010–11
  2. By: Berg, Nathan; Biele, Guido; Gigerenzer, Gerd
    Abstract: Subjective beliefs and behavior regarding the Prostate Specific Antigen (PSA) test for prostate cancer were surveyed among attendees of the 2006 meeting of the American Economic Association. Logical inconsistency was measured in percentage deviations from a restriction imposed by Bayes’ Rule on pairs of conditional beliefs. Economists with inconsistent beliefs tended to be more accurate than average, and consistent Bayesians were substantially less accurate. Within a loss function framework, we look for and cannot find evidence that inconsistent beliefs cause economic losses. Subjective beliefs about cancer risks do not predict PSA testing decisions, but social influences do.
    Keywords: logical consistency; predictive accuracy; elicitation; non-Bayesian; ecological rationality
    Date: 2010
  3. By: Astrid Matthey (Max Planck Institute of Economics, Jena, Germany); Tobias Regner (Max Planck Institute of Economics, Jena, Germany)
    Abstract: We investigate to what extent genuine social preferences can explain observed other-regarding behavior. In a dictator game variant subjects can choose whether to learn about the consequences of their choice for the receiver. We find that a majority of subjects showing other-regarding behavior when the payoffs of the receiver are known, choose to ignore these consequences if possible. This behavior is inconsistent with preferences about outcomes. Other-regarding behavior may also be explained by avoiding cognitive dissonance as in Konow (2000). Our experiment's choice data is in line with this approach. In addition, we successfully relate individual behavior to proxies for cognitive dissonance.
    Keywords: social preferences, other-regarding behavior, experiments, social dilemma, cognitive dissonance
    JEL: C72 D01 C91 D80
    Date: 2010–11–11
  4. By: Ortona, Guido
    Abstract: The so-called problem of the spontaneous cooperation has been substantially resolved through a mix of biology and economics. All the elements of the solution had been discovered by 1980s, yet they went somehow unnoticed. This "old" solution is the subject of this review. Its most relevant feature was the discovery that the adoption of punishment as an equilibrium-enforcing device makes a cooperative solution in a repeated prisoner's dilemma possible. This opened the way to a biological (or anthropological) explanation otherwise logically inconsistent.
    Keywords: norms, cooperation, punishment
    JEL: A12
    Date: 2010–11
  5. By: Robin P. Cubitt (University of Nottingham); Michalis Drouvelis (University of Birmingham); Simon Gaechter (University of Nottingham); Ruslan Kabalin (University of Lancaster)
    Abstract: In the last thirty years, economists and other social scientists have investigated people’s normative views on distributive justice. Here we study people’s normative views in social dilemmas, which underlie many situations of economic and social significance. Using insights from moral philosophy and psychology we provide an analysis of the morality of free riding. We use experimental survey methods to investigate people’s moral judgments empirically. We vary others’ contributions, the framing (“give-some” vs. “take-some”) and whether contributions are simultaneous or sequential. We find that moral judgments of a free rider depend strongly on others’ behaviour; and that failing to give is condemned more strongly than withdrawing all support.
    Keywords: moral judgments, moral psychology, framing effects, public goods experiments, free riding
    Date: 2010–10
  6. By: Berg, Nathan; Eckel, Catherine; Johnson, Cathleen
    Abstract: Experimental choice data from 881 subjects based on 40 time-tradeoff items and 32 risky choice items reveal that most subjects are time-inconsistent and most violate the axioms of expected utility theory. These inconsistencies cannot be explained by well-known theories of behavioral inconsistency, such as hyperbolic discounting and cumulative prospect theory. Aggregating expected payoffs and the risk associated with each subjects’ 72 choice items, the statistical links between inconsistency and total payoffs are reported. Time-inconsistent subjects and those who violate expected utility theory both earn substantially higher expected payoffs, and these positive associations survive largely undiminished when included together in total payoff regressions. Consistent subjects earn lower than average payoffs because most of them are consistently impatient or consistently risk averse. Positive payoffs from inconsistency cannot, however, be fully explained by greater risk taking. Controlling for the total risk of each subject’s risk choices as well as for socio-economic differences among subjects, time inconsistent subjects earn significantly more money, in statistical and economic terms. So do expected utility violators. Positive returns to inconsistency extend outside the domain in which inconsistencies occurs, with time-inconsistent subjects earning more on risky choice items, and expected utility violators earning more on time-tradeoff items. The results seem to call into question whether axioms of internal consistency—and violations of these axioms that behavioral economists frequently focus on—are economically relevant criteria for evaluating the quality of decision making in human populations.
    Keywords: behavioral economics; hyperbolic discounting; hypobolic; normative; coherence; correspondence; consistency; irrationality; rationality
    Date: 2010

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