nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2021‒10‒18
four papers chosen by
Matthew Baker
City University of New York

  1. Evolutionary Foundation for Heterogeneity in Risk Aversion By Heller, Yuval; NEHAMA, Ilan
  2. Adaptive Rationality in Strategic Interaction: Do Emotions Regulate Thinking about Others? By Timo Ehrig; Monica Jaison Manjaly; Aditya Singh; Shyam Sunder
  3. Why We All Must Work By Jon D. Wisman
  4. Norm Prevalence and Interdependence: Evidence from a Large-Scale Historical Survey of German speaking Villages By Radost Holler; Paul Ivo Schäfer

  1. By: Heller, Yuval; NEHAMA, Ilan
    Abstract: We examine evolutionary basis for risk aversion with respect to aggregate risk. We study populations in which agents face choices between aggregate risk and idiosyncratic risk. We show that the choices that maximize the long-run growth rate are induced by a heterogeneous population in which the least and most risk averse agents are indifferent between aggregate risk and obtaining its linear and harmonic mean for sure, respectively. Moreover, an approximately optimal behavior can be induced by a simple distribution according to which all agents have constant relative risk aversion, and the coefficient of relative risk aversion is uniformly distributed between zero and two.
    Keywords: Evolution of preferences, risk interdependence, long-run growth rate.
    JEL: D81
    Date: 2021–10–13
  2. By: Timo Ehrig (Max Planck Institute for Mathematics in the Sciences, Leipzig); Monica Jaison Manjaly (Indian Institute of Technology, Gandhinagar); Aditya Singh (Indian Institute of Technology, Gandhinagar); Shyam Sunder (School of Management and Cowles Foundation, Yale University)
    Abstract: Forming beliefs or expectations about others’ behavior is fundamental to strategy, as it co-determines the outcomes of interactions in and across organizations. In the game theoretic conception of rationality, agents reason iteratively about each other to form expectations about behavior. According to prior scholarship, actual strategists fall short of this ideal, and attempts to understand the underlying cognitive processes of forming expectations about others are in their infancy. We propose that emotions help regulate iterative reasoning, that is, their tendency to not only reflect on what others think, but also on what others think about their thinking. Drawing on a controlled experiment, we ï¬ nd that a negative emotion (fear) deepens the tendency to engage in iterative reasoning, compared to a positive emotion (amusement). Moreover, neutral emotions yield even deeper levels of iterative reasoning. We tentatively interpret these early ï¬ ndings and speculate about the broader link of emotions and expectations in the context of strategic management. Extending the view of emotional regulation as a capability, emotions may be building blocks of rational heuristics for strategic interaction and enable interactive decision-making when strategists have little experience with the environment.
    Date: 2020–04
  3. By: Jon D. Wisman
    Abstract: Much, if not most work has been debased since the rise of the state 5,500 years ago. Because most workers lack ownership, control, or readily access to productive wealth, they must locate owners willing to provide them with employment, those failing to do so suffer the material, social, and psychological costs of unemployment. Because owners possess control over the work process, workers can be bossed about, often to perform unpleasant and dangerous work. Yet for the first 97 percent of human history – that prior to state societies -- all had equal access to the means of production, providing them with control over their work. Anthropological research reveals that work for pre-state peoples was democratically performed and pleasurable. Biological evolution also predicts that work would have been naturally selected to be pleasurable to better motivate its performance and hence survival. Diligent work served as a source of status and self-respect, enhancing reproductive success by signaling to potential mates a capacity to provision offspring. This article claims that even had the debasement of work been necessary for eventually producing today’s abundance, it no longer is. Two reforms, both preserving capitalism’s two principal institutions of private property and markets, would transform work to provide greater human flourishing: guaranteed employment at living wages with reskilling where necessary, and measures to promote workplace democracy. These reforms would eliminate poverty, reduce inequality, prepare economies for future technological dynamism and globalization, and by better enabling social and self-respect through work and community, would reduce the pressure to do so through consumption, thereby lowering ecological devastation.
    Keywords: Debased work, ideology, human flourishing, guaranteed employment, workplace democracy.
    JEL: B15 I31 P13 Z1
    Date: 2021
  4. By: Radost Holler (Bonn Graduate School of Economics); Paul Ivo Schäfer (Bonn Graduate School of Economics)
    Abstract: We use large-scale survey data of German speaking villages from the 1930's to investigate drivers of cooperation, gender, and religious norms. Through geographic cluster analysis, we show that inter-regional variation explains only little heterogeneity in norms. Villages in the same physical and institutional environment still maintain different norms. We argue that local differences in the structure of social relationships can explain intra-regional heterogeneity in norms. We focus on a community's ability to transmit and enforce norms to derive theoretical links between correlates of community social relationships and the number of norms it maintains (norm prevalence). Empirically we find that: (1) norm prevalence is positively related to three correlates of community social relationships: religiously homogeneous villages, villages that border on other villages with a different majority religion, and villages with more within-village social gatherings; (2) villages with stronger community-level social relationships are also less likely to segment their reference group for the cooperation norm to smaller social units; (3) cooperation norms make other norms more likely.
    Keywords: social norms; gender; religion; cooperation; culture; geography; communities
    JEL: Z10 N94 J16 D03 Z12
    Date: 2021–10

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