nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2011‒07‒13
nineteen papers chosen by
Matthew Baker
City University of New York

  1. Moral Emotions and Partnership By Jürgen Bracht; Tobias Regner
  2. Scelte e razionalità nei modelli economici: un'analisi multidisciplinare By Schilirò, Daniele; Graziano, Mario
  3. Public disclosure of players? conduct and Common Resources Harvesting: Experimental Evidence from a Nairobi Slum By Leonardo Becchetti; Pierluigi Conzo; Giacomo Degli Antoni
  4. Individual Expectations and Aggregate Macro Behavior By Tiziana Assenza; Peter Heemeijer; Cars Hommes; Domenica Massaro
  5. The Minority Game Unpacked: Coordination and Competition in a Team-based Experiment By T. Brenner; G. Devetag; F. Pancotto
  6. Endogenous Norm Formation over the Life Cycle. The case of tax evasion By Nordblom, Katarina; Zamac, Jovan
  7. The Experimental Economics of Religion By Robert Hoffmann
  8. Fair Wages When Employers Face the Risk of Losing Money By Karina Gose; Abdolkarim Sadrieh
  9. A Note on Within-group Cooperation and Between-group Interaction in the Private Provision of Public Goods By Hattori, Keisuke
  10. A Multi-Method Approach to Identifying Norms and Normative Expectations within a Corporate Hierarchy: Evidence from the Financial Services Industry By Burks, Stephen V.; Krupka, Erin L.
  11. Field Experiments in Economics: Comment on an article by Levitt and List By Stephen T. Ziliak
  12. Becoming oneself through trials: a framework for identity work research. By Pezé, Stéphan
  13. Motivational Cherry Picking By Tobias Regner; Gerhard Riener
  14. Growth on a Finite Planet: Resources, Technology and Population in the Long Run By Pietro F. Peretto; Simone Valente
  15. Questioning Ethnic Fragmentation's Exogeneity - Drivers of Changing Ethnic Boundaries By Philipp Kolo
  16. When development meets culture : the contribution of Celso Furtado in the 1970s By Alexandre Mendes Cunha; Gustavo Britto
  17. Risk Aversion as Attitude towards Probabilities: A Paradox By James C. Cox; Vjollca Sadiraj
  18. Agents intentionality, capabilities and the performance of Systems of Innovation By Muñoz, Félix; Encinar, María Isabel
  19. An Evolutionary Theory of Economic Change, Nelson & Winter (1982) By Nadia Jacoby

  1. By: Jürgen Bracht (University of Aberdeen, United Kingdom); Tobias Regner (Max Planck Institute of Economics, Jena, Germany)
    Abstract: Actual behaviour is influenced in important ways by moral emotions, for instance guilt or shame (see among others Tangney et al., 2007). Belief-dependant models of social preferences using the framework of psychological games aim to consider such emotions to explain other-regarding behaviour. Our study links recent advances in psychological theory on moral emotions to belief-dependant models in economics. We find that - in addition to the positive effect of second-order beliefs and promises - individuals' disposition to guilt (their proneness to respond in an evaluative way to personal transgressions) is an important determinant of kind behaviour. This applies to private as well as public settings.
    Keywords: social preferences, other-regarding behaviour, experiments, psychological game theory, guilt aversion, shame, beliefs, emotions, partnership
    JEL: C70 C91 D82
    Date: 2011–06–28
  2. By: Schilirò, Daniele; Graziano, Mario
    Abstract: This paper argues critically the issue of choices and rationality in economic models through a multidisciplinary analysis. First, the analysis aims at highlight the scientific contributions of psychology in economics, since psychology and the related approach of cognitive economics has made more complex and problematic the analysis of choices of the standard neoclassical economics. The cognitive approach in economics has pointed out the complexity of the choice process and the unsolved relationship between economic and psychological dimensions of such a process, showing the biases and the limits of rationality. Second, the analysis focuses on the use of evolutionary concepts in economic theory. Economic models, which are consistent with an evolutionary approach, have necessarily to be very different from those of standard economics. In particular, this paper examines the works of Alfred Marshall, since he is the first major economist to refer explicitly to biology for explaining economic evolution. The purpose of the analysis is to reveal the conditions required to succeed in building a real evolutionary model. A major condition, which is found in Marshall models, particularly in his Principles of Economics, is the understanding and the integration of darwinian philosophical matrix in his general economic approach. The paper, therefore, aims at demonstrating that economics has not been historically a discipline homogenously aligned to a single, undifferentiated form of thought, locked into the idea of perfect rationality, but that is a discipline that enriched and still enriches itself by contributions and contaminations from other disciplines.
    Keywords: scelta; razionalità; economia cognitiva; modelli evolutivi; biologia
    JEL: D81 B52 D90 D01
    Date: 2011–06
  3. By: Leonardo Becchetti (Department of Economics, Universitˆ Tor Vergata); Pierluigi Conzo (Università di Roma Tor Vergata & EIEF); Giacomo Degli Antoni (University of Milano-Bicocca)
    Abstract: We evaluate the effect of information disclosure on players? behaviour in a multiperiod common pool resource game experiment run in an area of notably scarce social capital such as the Nairobi slum of Kibera. We document divergence of average withdrawal rates across time with an increasingly lower cooperation in the non anonimous setting. We demonstrate that information induced asymmetric conformity contributes to explain what we observe, that is, players who withdraw less than the average of the group in the previous round react more negatively when individual payoffs are disclosed than when they are not, and their reaction is less than compensated by the mean reversion of those who withdrew more. Our results are consistent with the (Ostrom, 2000) hypothesis that, in absence of punishment, disclosure of information about individual (cooperative or non cooperative) behaviour makes common resource management more difficult and tragedy of the commons easier.
    Keywords: common pool resource game, conformism, information disclosure field experiments, tragedy of commons
    JEL: C93 Q20 H40
    Date: 2011–06
  4. By: Tiziana Assenza; Peter Heemeijer; Cars Hommes; Domenica Massaro
    Abstract: The way in which individual expectations shape aggregate macroeconomic variables is crucial for the transmission and effectiveness of monetary policy. We study the individual expectations formation process and the interaction with monetary policy, within a standard New Keynesian model, by means of laboratory experiments with human subjects. We find that a more aggressive monetary policy that sets the interest rate more than point for point in response to inflation stabilizes inflation in our experimental economies. We use a simple model of individual learning, with a performance-based evolutionary selection among heterogeneous forecasting heuristics, to explain coordination of individual expectations and aggregate macro behavior observed in the laboratory experiments. Three aggregate outcomes are observed: convergence to some equilibrium level, persistent oscillatory behaviour and oscillatory convergence. A simple heterogeneous expectations switching model fits individual learning as well as aggregate outcomes and outperforms homogeneous expectations benchmarks.
    Keywords: Experiments; Monetary Policy; Expectations; Heterogeneity
    JEL: C91 C92 E52
    Date: 2011–05
  5. By: T. Brenner; G. Devetag; F. Pancotto
    Abstract: While in the literature participants' behavior in minority games has been extensively studied, nobody so far has made the eort to open the black box of strategic arguments and considerations laying behind this behavior. To this aim we use an experimental setting in which decisions behind behaviors are analyzed tracking down decisional processes and participants reasoning as the result of transcribed video recorded sessions of teams that constitute decisional units. Such discussions are then analyzed with Content Analysis. Results show the relevance of others' behavior as well as the own history of choices and payoffs, while theoretical solutions based on game understanding as well as randomization as hypothesized by game theoretical solutions, are rare. Secondly, co-evolution between arguments is present: teams that tend to be more strategic, induce the opposite attitude in opponent teams.
    JEL: C72 C91 C92
    Date: 2011–07
  6. By: Nordblom, Katarina (Department of Economics, School of Business, Economics and Law, Göteborg University); Zamac, Jovan (Dept of Economics, Uppsala University)
    Abstract: This paper offers an explanation to why the general observation that elderly hold stronger moral attitudes than young ones may be an age rather than a cohort effect. We apply mechanisms from social psychology to explain how personal norms may evolve over the life cycle. We assume that people update their norms influenced by their own past behavior (e.g., cognitive dissonance) and/or by the attitudes of their peers (normative conformity). We apply the theory on actual norm distributions for young and old concerning tax evasion. Allowing for heterogeneous updating of norms where only those who identify with their network are actually conforming with it, while the others are only influenced by their own past behavior, we can explain the difference between young and old people’s moral values as an age effect through endogenous norm formation.
    Keywords: Social norms; Endogenous norms; Tax evasion; Cognitive dissonance; Self-signaling; Normative conformity
    JEL: H26
    Date: 2011–07–01
  7. By: Robert Hoffmann (Nottingham University Business School)
    Abstract: This article surveys the experimental economics approach to the study of religion. The field has a place in the context of the scientific study of religion generally and the social psychology of religion in particular, but employs distinct economic methods which promise new and different insights. In particular, certain features of the experimental approach as used by economists such as incentive compatibility are particularly appropriate for studying the effect of religion on individual behaviour. The paper discusses results obtained so far in terms of two roles of religion in shaping individual behaviour, i.e. as a social group identifier and as a set of values.
    Keywords: Religion, Religiosity, Experiments
    Date: 2011–06–28
  8. By: Karina Gose (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Abdolkarim Sadrieh (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: We study the behavior of employers and employees in a gift exchange game and find that employers offer lower wages when there is the risk of losing money. This, however, does not lead to lower effort level choices. In fact, effort per wage unit is significantly higher in the treatment with potential employer losses. This result can be in line with social comparison theories that are based on relative payoff differences. Alternatively, this result is also in line with the hypothesis that the risk of losing money increases the credibility of the employer's trust signal and, thus, the employee's reciprocity.
    Keywords: fair wage, efficiency wage, social comparison, loss aversion
    JEL: C92 J41
    Date: 2011–04
  9. By: Hattori, Keisuke
    Abstract: Using a simple two-group model of the private provision of public goods, this paper investigates how endogenous formation of within-group cooperation is affected by different types and degrees of between-group interactions. We show that when between-group interactions are of the same directions and weak (strong), within-group cooperation for providing public goods will (will not) occur in each group for strategic reasons. On the other hand, when between-group interactions are of the opposite directions or unidirectional, within-group cooperation will necessarily occur. In addition, endogenous formation of cooperation is independent of absolute (individual) levels of income as well as income distribution between agents, which corresponds to an extended version of Warr's neutrality theorem. We also show whether endogenous formation of within-group cooperation is beneficial or harmful to each group crucially depends on the degree of between-group interactions. The variation in the interaction degree leads to three different types of games concerning welfare consequences: the Prisoners' Dilemma, Coordination Game, and Invisible Hand.
    Keywords: Private provision; Public goods; Cooperation;
    JEL: H41 C72
    Date: 2011–07–06
  10. By: Burks, Stephen V. (University of Minnesota, Morris); Krupka, Erin L. (University of Michigan)
    Abstract: This paper presents the results of a field study at a large financial services firm that combines multiple methods, including two economic experiments, to measure ethical norms and their behavioral correlates. Standard survey questions eliciting ethical evaluations of actions in on-the-job ethical dilemmas are transformed into a series of incentivized coordination games in the first experiment. We use the results of this experiment to identify the actual ethical norms for financial adviser behavior held by key personnel – financial advisers and their corporate leaders – in three settings: a clash of incentives between serving the client and earning commissions, a dilemma about fiduciary responsibility to a client, and a dilemma about whistle-blowing on a peer. We also measure the beliefs of financial advisers about the ethical expectations of their corporate leaders and the beliefs of corporate leaders about financial adviser norms. In addition, we ask financial advisers about their personal normative opinions, matching a common methodology in the literature. We find, first, systematic agreements in the normative evaluations across the corporate hierarchy that are consistent with ex ante expectations, but second, we also find some measurable differences between the normative expectations of corporate leaders about on-the-job behavior and the actual norms shared among financial advisers. When there is a normative mismatch across the hierarchy we are able to distinguish miscommunication from ethical disagreement between leaders and employees. Our subjects also report their job satisfaction and take part in a second incentivized experiment in which it is costly to report private information honestly. A last finding is that a mismatch between advisers’ personal ethical opinions and corporate norms – especially those of peers – strongly correlates with job dissatisfaction, and less strongly but significantly with the willingness to be dishonest.
    Keywords: norms, ethics, financial adviser, corporate leader, financial services, field experiment, coordination game
    JEL: C93 D23 M14
    Date: 2011–06
  11. By: Stephen T. Ziliak (Roosevelt University)
    Abstract: In an article titled "Field Experiments in Economics: The Past, the Present, and the Future," Levitt and List (2009) make three important claims about the history, philosophy, and future of field experiments in economics. They claim that field experiments in economics began in the 1920s and 1930s, in agricultural work by Neyman and Fisher. Second, they claim that artificial randomization is the sine qua non of good experimental design; they claim that randomization is the only valid justification for use of Student‘s test of significance. Finally, they claim that the theory of the firm will be advanced by economists doing randomized controlled trials (RCTs) for private sector firms. Several areas of economics, for example the development economics of Banerjee and Duflo, have been influenced by the article, despite the absence of historical and methodological review. This comment seeks to fill that gap in the literature. Student has, it is found, priority over Fisher and Neyman; he compared balanced and random designs in the field—on crops from barley to timber—from 1905 to 1937. The power and efficiency of balanced over random designs - discovered by Student and confirmed by Pearson, Neyman, Jeffreys, and others adopting a decision-theoretic and/or Bayesian approach - is not mentioned by Levitt and List. Neglect of Student is especially regrettable, for he showed in his job as Head Brewer of Guinness that artificial randomization is neither necessary nor sufficient for improving efficiency, identifying causal relationships, or discovering economically significant differences. One way forward is to take a step backwards, from Fisher to Student.
    Keywords: field experiments, balanced, random
    JEL: B1 C9 C93
    Date: 2011–06–30
  12. By: Pezé, Stéphan
    Abstract: This paper aims to offer a new way to think and to study identity work in relation with organizational identity regulation attempts and a deeper understanding of both the several facets of materiality of identity work and the agency/structure interplays in this process. The current growing body of studies about identity work is useful to understand how the self become. However, these studies encounter some limits, especially the lack of contextualization of individuals‘ identity work vis-à-vis broader cultural and social structures and their organizational diffraction or the overemphasis on discourses at the expense of other identity resources, whereof material artefacts and embodied practices. To overcome these limits, this paper intends to offer a framework based on the concept of trials designed by the French sociologist Danilo Martuccelli, which are ‗historical challenges, socially produced, culturally represented, unequally distributed, that individuals must face‘ (Araujo and Martuccelli, 2010:8). I argue that when facing an identity trial, an organizational member measure himself and this can be a useful framework to think identity work and to overtake the limits underlined above. Methodological implications of this perspective – identity trials as analytical lens to study identity work – are further discussed.
    Keywords: Identity regulation; Trials; Identity work;
    JEL: J28
  13. By: Tobias Regner (Max Planck Institute of Economics, Jena, Germany); Gerhard Riener (Friedrich Schiller University and Max Planck Institute of Economics, Jena, Germany)
    Abstract: We construct a simple three person trust game with one trustor and two trustees. The trustor has the possibility to either trust both trustees or none, while the trustees make their decisions either sequentially or simultaneously, depending on the treatment. When trustees play sequentially, follower trustees who are informed about the leader's choice are significantly less kind than in the simultaneous move treatment as well as the leader trustees. These findings can not be explained by models of inequity aversion, pure guilt aversion, or conformity. Instead, follower trustees cherry pick the motivation that serves them best. When the leader trustee played unkind, they tend to conform and play unkind, too. When the leader made a kind choice, followers seem to perceive the duty of reciprocating to the trustor as already fulfilled by the leader. While guilt works well as a motivational force in a dyadic situation, it gets alleviated easily when there is someone to shift responsibility to, like the leader in our three person game.
    Keywords: Team production, Trust, Principal Agent, Guilt, Guilt alleviation, Conformity, False consensus effect, Lab experiment, Cherry picking
    JEL: D71 C79 C92
    Date: 2011–06–28
  14. By: Pietro F. Peretto (Department of Economics, Duke University); Simone Valente (ETH Zurich, Switzerland)
    Abstract: We study the interactions between technological change, resource scarcity and population dynamics in a Schumpeterian model with endogenous fertility. There exists a pseudo- Malthusian equilibrium in which population is constant and income grows exponentially: the equilibrium population level is determined by resource scarcity but is independent of technology. The stability properties are driven by (i) the income reaction to increased resource scarcity and (ii) the fertility response to income dynamics. If labor and resources are substitutes in production, income and fertility dynamics are self-balancing and the pseudo-Malthusian equilibrium is the global attractor of the system. If labor and resources are complements, income and fertility dynamics are self-reinforcing and drive the economy towards either demographic explosion or human extinction. Introducing a minimum resource requirement, we obtain a second steady state implying constant population even under complementarity. The standard result of exponential population growth appears as a rather special case of our model.
    Keywords: Endogenous Innovation, Resource Scarcity, Population Growth, Fertility Choices
    JEL: E10 L16 O31 O40
    Date: 2011–06
  15. By: Philipp Kolo (Georg-August-Universität Göttingen / Germany)
    Abstract: Ethnic fragmentation is a variable increasingly used in the economic literature to explain differences in economic development level, growth or the incidence of conflicts. Nearly all articles have in common that they treat ethnic fragmentation as a static, exogenous fact. Only recently some contributions outlined first ideas, why different levels of ethnic fragmentation evolved based on biodiversity and evolutionary theories. This article has two main goals. In connecting with these recent findings, the article boldly confirms their results that a ‘base-level’ of fragmentation evolved due to geographical and evolutionary factors. Additionally, it draws the attention to the impact of colonization on fragmentation, especially on how a country was colonized. The main goal, however, is to show that ethnic fragmentation is not only evolving over centuries, but changes over a short period of time. As static factors, e.g. geographical ones, can’t be responsible for changes in the short run, the article offers a structured assessment of factors that may influence diversity levels in the short term. Although migration is the most obvious factor, urbanization and especially education play an even more important role in influencing a country’s ethnic boundaries.
    Keywords: Colonization, Endogeneity, Ethnic fractionalization (ELF), Heterogeneity
    JEL: C23 F54 I29 O10 Z10
  16. By: Alexandre Mendes Cunha (Cedeplar-UFMG); Gustavo Britto (Cedeplar-UFMG)
    Abstract: The article assesses the work of Celso Furtado (1920-2004) in the 1970s, when the author promotes an ambitious attempt to redefine the field of development economics. Furtado's works have recently been revisited by several authors, including in the field of history of economic thought. The text is devoted to explore how the author challenges development theory’s perceived failure to explain the reality of underdeveloped nations in the late 1970s by expanding the scope of analysis and giving culture a pivotal role in the dynamics of development and underdevelopment. This theoretical movement happens at the time in which development economics begins to drift out of the mainstream of economic theory. Hence, unlike the concept of underdevelopment introduced in the 1950s, the discussion of creativity and dependence encounters an adverse intellectual landscape, even though it represents one of the author’s most original contributions.
    Keywords: Celso Furtado, development, underdevelopment, creativity, culture.
    JEL: B20 O14
    Date: 2011–07
  17. By: James C. Cox; Vjollca Sadiraj
    Abstract: Theories of decision under risk that challenge expected utility theory model risk attitudes at least partly with transformation of probabilities. We explain how attributing risk aversion (partly or wholly) to attitude towards probabilities, can produce extreme probability distortions that imply paradoxical risk aversion.
    Keywords: risk aversion, probability transformation, calibration, reference dependence, loss aversion
    Date: 2011–06
  18. By: Muñoz, Félix (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.); Encinar, María Isabel
    Abstract: We are interested on why and how an economic system evolves and, in particular, on the causes of the differences across systems of innovation (SI). SI’s performance differs substantially because there are specific causes at work, apart from the differences in the underlying technologies, institutions, etc. In particular, we refer to the intentionality of the agents interacting within a system for innovation to find out the relationship between agents’ goals, SI’s performance and its policy implications. The underlying thesis in this paper is that agent intentionality is a necessary condition for a substantive explanation of the dynamism of any socio-economic system. The paper departs from an abstract definition of a system as a set of constitutive elements and the connections among them serving a common purpose. And explores how intentionality shapes the structure, evolution and performance of an SI. In this context an evolutionary efficiency criterion is proposed.
    Keywords: systems of innovation; intentionality; evolving capabilities; evolutionary efficiency.
    JEL: B41 D01 E11 O10
    Date: 2011–06
  19. By: Nadia Jacoby (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: Avec cet ouvrage paru en 1982, Nelson & Winter posent les bases d'une nouvelle théorie économique : la théorie évolutionniste. Cet ouvrage séminal est le fruit de près de 20 années de recherches, initiées avec l'article de Winter " Economic "natural selection" and the theory of the firm " paru en 1964 dans Yale Economic Essays. Partant d'une critique fondamentale de l'orthodoxie économique, et plus particulièrement d'une critique du principe de maximisation et de la recherche de solutions optimales, Nelson & Winter proposent une théorie alternative du changement économique. Pour cela, ils empruntent à la fois des idées simples à la biologie mais se réfèrent également à Schumpeter et à Simon envers qui ils expriment leur plus grande dette intellectuelle.
    Date: 2010

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