nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2011‒03‒12
thirteen papers chosen by
Matthew Baker
City University of New York

  1. Preferences for Redistribution and Pensions: What Can We Learn from Experiments? By Tausch Franziska; Potters Jan; Riedl Arno
  2. Adaptive social learning By Christoph March
  3. Economic Decision-making in Poverty Depletes Behavioral Control By Dean Spears
  4. Behavioral Economics and the Conduct of Benefit-Cost Analysis: Towards Principles and Standards By Hammitt, James; Robinson, Lisa
  5. Pro-social preferences and self-selection into the public health sector: evidence from economic experiments By Kolstad, Julie Riise; Lindkvist, Ida
  6. Building Social Capital through Microfinance By Feigenberg, Benjamin; Field, Erica M.; Pande, Rohini
  7. Meaningful talk By Jorge M. Streb; Gustavo Torrens
  8. Evolutionary Foundations of Mathematics By Tuncer, Ruhi
  9. Social Cohesiveness and gender Role Attitudes By VALENTOVA Marie
  10. Religiosity as a determinant of happiness By Gundlach, Erich; Opfinger, Matthias
  11. Benoit Mandelbrot (1924 - 2010): A Greek among Romans By Estrada, Fernando
  12. Behavioural characteristics and financial distress By Yvonne McCarthy
  13. Neuroeconomics? By David K Levine

  1. By: Tausch Franziska; Potters Jan; Riedl Arno (METEOR)
    Abstract: Redistribution is an inevitable feature of collective pension schemes. It is still largely an open question what people‘s preferences are regarding redistribution—both through pensions schemes as well as more generally. It would seem that economists have little to say about this question, as they routinely assume that people are predominantly selfish. Economic experiments have revealed, however, that most people do in fact have redistributional preferences that are not merely inspired by self-interest. This paper reviews this experimental evidence. For that purpose we distinguish between three fundamentally different types of situations. The first deals with distributional preferences behind a veil of ignorance. What type of income distribution do people prefer when they do not know whether they will end up in an advantaged or disadvantaged position? A main result here is that, contrary to what John Rawls suggested, people do not prefer the maximin rule, but rather favor a utilitarian justice concept appended with a safety net for the poorest. Another result is that people are willing to accept income inequalities—as long as these are due to choices for which people can be held accountable. In the second type of situation, individuals make choices in front of the veil of ignorance and know their position. Experiments show that preferences for redistribution are strongly dependent on a person‘s own position. People in a relatively disadvantaged position want more redistribution than those in a relatively advantaged position, which shows that preferences for redistribution are clearly affected by self-interest. Still, even many of those in an advantaged position display a preference forredistribution. This holds, in particular, if inequality is due to chance rather than effort. There are also significant differences in preferences between the genders and between people with different political orientations. Finally, we discuss situations in which income is determined by interdependent rather than individual choices. People are dependent upon the cooperation of others for the achievement of their (income) goals. Experiments show that behavioral factors such as trust and reciprocity play a crucial role, and they also indicate that these factors are strongly affected by the institutional setting. In the closing parts of the paper we discuss whether and how these experimental results speak to the redistribution issues of pensions. For example, do they argue for or against mandatory participation? Should we have less redistribution and more actuarial fairness? How does this depend on the type of redistribution involved?
    Keywords: public economics ;
    Date: 2011
  2. By: Christoph March (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This paper investigates the learning foundations of economic models of social learning. We pursue the prevalent idea in economics that rational play is the outcome of a dynamic process of adaptation. Our learning approach offers us the possibility to clarify when and why the prevalent rational (equilibrium) view of social learning is likely to capture observed regularities in the field. In particular it enables us to address the issue of individual and interactive knowledge. We argue that knowledge about the private belief distribution is unlikely to be shared in most social learning contexts. Absent this mutual knowledge, we show that the long-run outcome of the adaptive process favors non-Bayesian rational play.
    Keywords: social Learning ; informational herding ; adaptation ; analogies ; non-Bayesian updating
    Date: 2011–02
  3. By: Dean Spears (Princeton University)
    Abstract: Economic theory and common sense suggest that time preference can cause or per- petuate poverty. Might poverty also or instead cause impatient or impulsive behavior? This paper reports a randomized lab experiment and a partially randomized field ex- periment, both in India, and analysis of the American Time Use Survey. In all three studies, poverty is associated with diminished behavioral control. The primary contri- bution is to isolate the direction of causality from poverty to behavior; three theoretical mechanisms from psychology cannot be deffinitively separated. One supported expla- nation is that poverty, by making economic decision-making more difficult for the poor, depletes cognitive control.
    Keywords: impatient, impulsive behavior, poverty, psychology, cognative control
    JEL: D19 D63 I39 J19
    Date: 2010–12
  4. By: Hammitt, James; Robinson, Lisa
    Date: 2010–10
  5. By: Kolstad, Julie Riise (University of Bergen); Lindkvist, Ida (CMI (Chr. Michelsen Institute)
    Abstract: There is growing interest in the role of pro-social motivation in public service delivery. In general, economists no longer question whether people have social preferences, but ask how and when such preferences will influence their economic and social decisions. Apart from revealing that individuals on average share and cooperate even when such actions lower their own material pay-off, economic experiments have documented substantial individual heterogeneity in the strength and structure of social preferences. In this paper we study the extent to which these differences are related to career choices, by testing whether preferences vary systematically between Tanzanian health worker students who prefer to work in the private health sector and those who prefer to work in the public health sector. Despite its important policy implications, this issue has received hardly any attention to date. By combining data from a questionnaire and two economic experiments, we find that students who prefer to work in the public health sector have stronger pro-social preferences than those who prefer to work in the private sector. We also show that the extent to which these students care about others can be conditional and linked to inequality aversion. A systematic selfselection of pro-socially motivated health workers into the public sector suggests that it is a good idea to have two sectors providing health services: this can ensure efficient matching of individuals and sectors by allowing employers in the two sectors to use different payment mechanisms tailored to attract and promote good performance from different types of health workers.
    Keywords: pro-social preferences; career choice; economic experiments; health workers
    JEL: H40 I18 J33 J45
    Date: 2010–04–01
  6. By: Feigenberg, Benjamin (MIT); Field, Erica M. (Harvard University); Pande, Rohini (Harvard University)
    Abstract: A number of development assistance programs promote community interaction as a means of building social capital. Yet, despite strong theoretical underpinnings, the role of repeat interactions in sustaining cooperation has proven difficult to identify empirically. We provide the first experimental evidence on the economic returns to social interaction in the context of microfinance. Random variation in the frequency of mandatory meetings across first-time borrower groups generates exogenous and persistent changes in clients' social ties. We show that the resulting increases in social interaction among clients more than a year later are associated with improvements in informal risk-sharing and reductions in default. A second field experiment among a subset of clients provides direct evidence that more frequent interaction increases economic cooperation among clients. Our results indicate that group lending is successful in achieving low rates of default without collateral not only because it harnesses existing social capital, as has been emphasized in the literature, but also because it builds new social capital among participants.
    JEL: C81 C93 O12 O16
    Date: 2010–06
  7. By: Jorge M. Streb; Gustavo Torrens
    Abstract: In economics, the standard approach to language is that talk is cheap. Here, instead, language is a social convention that a¤ects utility. Unless language is used in its ordinary sense, it cannot help to coordinate actions because there is no way of decoding it. This points to a unique informative equilibrium where words are used in their ordinary sense in natural language. Misrepresentation costs may eliminate uninformative, babbling, equilibria. More generally, meaningful talk provides a concrete mechanism through which consistent expectations are generated in Nash equilibria. Classification-JEL: D8, C7
    Keywords: cheap talk, symbols, meaning, encoding-decoding, common priors, Nash equilibria
    Date: 2011–02
  8. By: Tuncer, Ruhi (Galatasaray University Economic Research Center)
    Abstract: We propose a simple cognitive model where qualitative and quantitative comparisons enable animals to identify objects, associate them with their properties held in memory and make naive inference. Simple notions like equivalence relations, order relations are used. We then show that such processes are at the root of human mathematical reasoning by showing that the elements of totally ordered sets satisfy the Peano axioms. The process through which children learn counting is then formalized. Finally association is modeled as a Markov process leading to a stationary distribution.
    Keywords: Cognitive system; equivalence relations; order relations; naive logic; Peano axioms; order precedes number; association; Markov chain
    Date: 2011–03–03
  9. By: VALENTOVA Marie
    Abstract: The main aims of the present paper are to examine whether gender role attitudes mitigate or facilitate social cohesiveness of Luxembourg residents and to uncover whether this effect is moderated by gender. Social cohesiveness is measured by composite indicators: first two represent general dimensions of social cohesiveness (behavioural and attitudinal) and the remaining five stand for specific domains of the concept (institutional trust, solidarity, socio-cultural participation, political participation and social relations). Attitudes toward gender are operationalized into three indicators: childcare, homemaking and economic relations. The outcomes of the analysis reveal that traditional attitudes, mainly those regarding homemaking, have a mixed impact on social cohesiveness. On the one hand, being more traditional increases attitudinal level of cohesiveness, i.e. institutional trust and solidarity. On the other hand, it seems to negatively affect cohesiveness at behaviour level, concretely in the intensity of socio-cultural relations and political participation. Gender appears to moderate the effect of gender role attitudes on political participation and solidarity, implying that traditional attitudes decrease the level of these type of cohesiveness more among women than among men.
    Keywords: gender roles; social cohesion; attitudes; multidimensional concepts
    JEL: D63 Z13
    Date: 2011–02
  10. By: Gundlach, Erich; Opfinger, Matthias
    Abstract: We find a U-shaped relation between happiness and religiosity in cross-country panel data after controlling for income levels. At a given level of income, the same level of happiness can be reached with high and low levels of religiosity, but not with intermediate levels. A rise in income causes an increase in happiness along with a decline of religiosity. Our interpretation of the empirical results is that the indifference curves for religiosity and other commodities of the utility function are hump-shaped.
    Keywords: Happiness, religiosity, utility function, long-run development
    JEL: I31 Z12 O11
    Date: 2011–03
  11. By: Estrada, Fernando
    Abstract: In this brief note describes the trajectory of the fractal models/multifractal F/M by Benoit Mandelbrot. The promise was discovered by the geometry of Mandelbrot covers a broad area of research fields, from meteorology and mathematical physics to the individual and collective behavior in society, besides his contributions to the analysis of the financial crisis in his wonderful essay on «The (mis) Behavior of Markets. A fractal view of Risk, Ruin and Reward» (2004). Mandelbrot’s arguments have revealed significant anomalies in the prevailing paradigms. Is this a new paradigm in Kuhn’s sense as stated by the same Mandelbrot?
    Keywords: Mandelbrot; Fractals; Finance; Financial Markets; Epistemology; Thomas Kuhn.
    JEL: B10 B0 B4 C70 C7 G00 D7 B16 G32 G0 B41
    Date: 2011–02–25
  12. By: Yvonne McCarthy (Central Bank of Ireland.)
    Abstract: Using a new nationally representative survey of financial capability and experience in the UK and Ireland, I investigate the key factors that cause individuals to experience financial distress. In this context, a key area that I focus on is whether individuals’ behavioural traits, such as their capacities for self-control, planning, and patience, affect their ability to stay out of financial trouble. I find that the variables that proxy for these behavioural characteristics are both statistically significant and economically important for predicting both mild and extreme forms of financial distress, in a regression controlling for demographic and socio-economic factors. Furthermore, behavioural traits emerge as having a stronger impact on the incidence of financial distress than education or financial literacy. The results raise questions about whether policy can be oriented towards improving financial habits and mitigating the impact of behavioural characteristics on personal finances. JEL Classification: C25, D14.
    Keywords: Personal Finance, Financial Strain, Debt, Behaviour, Financial Literacy.
    Date: 2011–02
  13. By: David K Levine
    Date: 2011–03–03

This nep-evo issue is ©2011 by Matthew Baker. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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