nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2020‒09‒21
eight papers chosen by
Matthew Baker
City University of New York

  1. Evolution and Heterogeneity of Social Preferences By Ayoubi, Charles; Thurm, Boris
  2. Pro-environmental behavior and morality: An economic model with heterogeneous preferences By Ayoubi, Charles; Thurm, Boris
  3. Social Transmission Bias and Cultural Evolution in Financial Markets By Erol Akcay; David Hirshleifer
  4. Bismarck to no Effect: Fertility Decline and the Introduction of Social Insurance in Prussia By Guinnane, Timothy; Streb, Jochen
  5. Moonshots, Investment Booms, and Selection Bias in the Transmission of Cultural Traits By David Hirshleifer; Joshua Plotkin
  6. Evolution of Conditional Cooperation in Prisoner's Dilemma By Saral, Ali Seyhun
  7. Subsidizing Agricultural Technology Adoption: An Experimental and Behavioral Economics Approach By Shukla, Pallavi; Pullabhotla, Hemant K.; Baylis, Kathy
  8. Evolution of the Family: Theory and Implications for Economics By Alger, Ingela; Cox, Donald

  1. By: Ayoubi, Charles; Thurm, Boris
    Abstract: Why do individuals take different decisions when confronted with similar choices? This paper investigates whether the answer lies in an evolutionary process. Our analysis builds on recent work in evolutionary game theory showing the superiority of a given type of preferences, homo moralis, in fitness games with assortative matching. We adapt the classical definition of evolutionary stability to the case where individuals with distinct preferences coexist in a population. This approach allows us to establish the characteristics of an evolutionarily stable population. Then, introducing an assortment matrix for assortatively matched interactions, we prove the existence of a heterogeneous evolutionarily stable population in 2×2 symmetric fitness games under constant assortment, and we identify the conditions for its existence. Conversely to the classical setting, we find that the favored preferences in a heterogeneous evolutionarily stable population are context-dependent. As an illustration, we discuss when and how an evolutionarily stable population made of both selfish and moral individuals exists in a prisoner’s dilemma. These findings offer a theoretical foundation for the empirically observed diversity of preferences among individuals.
    Date: 2020–08–26
  2. By: Ayoubi, Charles; Thurm, Boris
    Abstract: Some individuals voluntarily engage in costly pro-environmental actions although their efforts have limited direct benefits. This paper proposes a novel economic model with heterogeneous agents explaining why. Each agent has a homo moralis type of preference, which combines selfishness and morality. Morality is modeled here as the payoff an agent receives if all other agents act like her. Our model builds on extant literature showing that homo moralis preferences have an evolutionary advantage to better evaluate the behavioral motives of agents. Shedding light on how people respond not only to economic but also moral incentives, we contribute to the ongoing policy debate on the design of efficient environmental policies.
    Date: 2020–08–27
  3. By: Erol Akcay; David Hirshleifer
    Abstract: The thoughts and behaviors of financial market participants depend upon adopted cultural traits, including information signals, beliefs, strategies, and folk economic models. Financial traits compete to survive in the human population, and are modified in the process of being transmitted from one agent to another. These cultural evolutionary processes shape market outcomes, which in turn feed back into the success of competing traits. This evolutionary system is studied in an emerging paradigm, new evolutionary finance. In this paradigm, social transmission biases determine the evolution of financial traits in the investor population. It considers an enriched set of cultural traits, both selection on traits and mutation pressure, and market equilibrium at different frequencies. Other key ingredients of the paradigm include psychological bias, social network structure, information asymmetries, and institutional environment.
    JEL: D03 D21 D53 D8 D82 D83 D84 D85 D9 D91 D92 G02 G1 G11 G12 G14 G28 G3 G31 G32 G34 G35 O31
    Date: 2020–08
  4. By: Guinnane, Timothy; Streb, Jochen
    Abstract: Economists have long argued that introducing social insurance will reduce fertility. The hypothesis relies on standard models: if children are desirable in part because they provide security in case of disability or old age, then state programs that provide insurance against these events should induce couples to substitute away from children in the allocation of wealth. We test this claim using the introduction of social insurance in Germany in the 1880s and 1890s. Bismarck's social-insurance system provided health insurance, workplace-accident insurance, and old age pensions to a majority of the working population. The German case appeals because the social insurance program started on a large scale and was compulsory for covered classes of workers, and because fertility in Germany in this period was still relatively high. Focusing on the state of Prussia, we estimate differences-in-differences models that ask whether marriage and marital fertility reacted to the introduction or extension of the main social insurance programs. For Prussia as a whole we find little impact.
    Keywords: fertility transition,marriage pattern,old-age pension,health insurance,accident insurance
    JEL: J13 H55 N33
    Date: 2019
  5. By: David Hirshleifer; Joshua Plotkin
    Abstract: Biased information about the payoffs received by others can drive innovation, risk-taking, and investment booms. We study this cultural phenomenon using a model based on two premises. The first premise is a tendency for large successes, and the actions that lead to them, to be more salient to onlookers than small successes or failures. The second premise is selection neglect – the failure of observers to adjust for biased observation. In our model, each firm in sequence chooses to adopt or to reject a project that has two possible payoffs, one positive and one negative. The probability of success is higher in the high state of the world than in the low state. Each firm observes the payoffs received by past adopters before making its decision, but there is a chance that an adopter's outcome will be censored, especially if the payoff was negative. Failure to account for biased censoring causes firms to become overly optimistic, leading to irrational booms in adoption. Booms may eventually collapse, or they may last forever. We describe these effects as a form of cultural evolution with adoption or rejection viewed as traits transmitted between firms. Evolution here is driven not only by differential copying of successful traits, but also by cognitive reasoning about which traits are more likely to succeed – quantified using the Price Equation to decompose the effects of mutation pressure and evolutionary selection. This account provides a new explanation for investment booms, merger and IPO waves, and waves of technological innovation.
    JEL: D03 D21 D53 D83 D92 G02 G3 M2 O31 O35
    Date: 2020–08
  6. By: Saral, Ali Seyhun
    Abstract: In this study, we investigate conditional types and their evolution in an iterated Prisoner's Dilemma, comparing different continuation probabilities, by using a computational model. In our setting, agents are characterized by their responses to each level of cooperation in a linearly extended Prisoner's Dilemma. By using repeated simulations, we estimate the likelihood of cooperation and the conditional strategies that are likely to succeed. Our results show that, when the continuation probability is sufficiently large, full cooperation is achieved. In this case, the most successful strategies are the ones who employ an all-or-none type of conditional cooperation, followed by perfect conditional cooperators. In the intermediate levels of continuation probability, however, hump-shaped contributor types are the ones that are most likely to exist, followed by imperfect conditional cooperators. Those agents cooperate in a medium level of cooperation within themselves and each other. Our results provide an explanation for the commonly observed hump-shaped strategy and imperfect conditional cooperators in experiments. Furthermore, a potential implication of our results is that the heterogeneity of conditional strategies might stem from the diverse interaction frequencies among real-world interactions.
    Date: 2020–08–24
  7. By: Shukla, Pallavi; Pullabhotla, Hemant K.; Baylis, Kathy
    Keywords: Research Methods/Statistical Methods, International Development, Institutional and Behavioral Economics
    Date: 2020–07
  8. By: Alger, Ingela; Cox, Donald
    Date: 2020–08

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