nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2022‒11‒14
six papers chosen by
Matthew Baker
City University of New York

  1. Slavery and the British Industrial Revolution By Stephan Heblich; Stephen J. Redding; Hans-Joachim Voth
  2. Informal Institution Meets Child Development: Clan Culture and Child Labor in China By Tang, Can; Zhao, Zhong
  3. Human Behavioral Models Using Utility Theory and Prospect Theory By Anuradha M. Annaswamy; Vineet Jagadeesan Nair
  4. The Economics of Women's Rights By Michèle Tertilt; Matthias Doepke; Anne Hannusch; Laura Moutenbruck
  5. Behavioral and Neuroeconomics of Environmental Values By Phoebe Koundouri; Barbara Hammer; Ulrike Kuhl; Alina Velias
  6. Biased or Limited: Modeling Sub-Rational Human Investors in Financial Markets By Penghang Liu; Kshama Dwarakanath; Svitlana S Vyetrenko

  1. By: Stephan Heblich (University of Toronto); Stephen J. Redding (Princeton University); Hans-Joachim Voth (University of Zurich)
    Abstract: Did overseas slave-holding by Britons accelerate the Industrial Revolution? We provide theory and evidence on the contribution of slave wealth to Britain’s growth prior to 1835. We compare areas of Britain with high and low exposure to the colonial plantation economy, using granular data on wealth from compensation records. Before the major expansion of slave holding from the 1640s onwards, both types of area exhibited similar levels of economic activity. However, by the 1830s, slavery wealth is strongly correlated with economic development – slave-holding areas are less agricultural, closer to cotton mills, and have higher property wealth. We rationalize these findings using a dynamic spatial model, where slavery investment raises the return to capital accumulation, expanding production in capital-intensive sectors. To establish causality, we use arguably exogenous variation in slave mortality on the passage from Africa to the Indies, driven by weather shocks. We show that weather shocks influenced the continued involvement of ancestors in the slave trade; weather-induced slave mortality of slave-trading ancestors in each area is strongly predictive of slaveholding in 1833. Quantifying our model using the observed data, we find that Britain would have been substantially poorer and more agricultural in the absence of overseas slave wealth. Overall, our findings are consistent with the view that slavery wealth accelerated Britain’s industrial revolution.
    Keywords: Slavery, Industrial Revolution, Great Britain
    JEL: F60 J15 N63
    Date: 2022–09
  2. By: Tang, Can (Renmin University of China); Zhao, Zhong (Renmin University of China)
    Abstract: Using a national representative sample, the China Family Panel Studies, this paper explores the influences of clan culture, a hallmark of Chinese cultural history, on the prevalence of child labor in China. We find that clan culture significantly reduces the incidence of child labor and working hours of child laborer. The results exhibit strong boy bias, and are driven by boys rather than girls, which reflects the patrilineal nature of Chinese clan culture. Moreover, the impact is greater on boys from households with lower socioeconomic status, and in rural areas. Clan culture acts as a supplement to formal institutions: reduces the incidence of child labor through risk sharing and easing credit constraints, and helps form social norms to promote human capital investment. We also employ an instrument variable approach and carry out a series of robustness checks to further confirm the findings.
    Keywords: informal institution, clan culture, child labor, China
    JEL: J22 J81 O15
    Date: 2022–10
  3. By: Anuradha M. Annaswamy; Vineet Jagadeesan Nair
    Abstract: Several examples of Cyber-physical human systems (CPHS) include real-time decisions from humans as a necessary building block for the successful performance of the overall system. Many of these decision-making problems necessitate an appropriate model of human behavior. Tools from Utility Theory have been used successfully in several problems in transportation for resource allocation and balance of supply and demand \citep{ben1985discrete}. More recently, Prospect Theory has been demonstrated as a useful tool in behavioral economics and cognitive psychology for deriving human behavioral models that characterize their subjective decision-making in the presence of stochastic uncertainties and risks, as an alternative to conventional Utility Theory \citep{kahneman_prospect_2012}. These models will be described in this article. Theoretical implications of Prospect Theory are also discussed. Examples will be drawn from transportation use cases such as shared mobility to illustrate these models as well as the distinctions between Utility Theory and Prospect Theory.
    Date: 2022–10
  4. By: Michèle Tertilt (Universität Mannheim); Matthias Doepke (Northwestern University); Anne Hannusch (University of Mannheim); Laura Moutenbruck (University of Mannheim)
    Abstract: Two centuries ago, in most countries around the world, women were unable to vote, had no say over their own children or property, and could not obtain a divorce. Women have gradually gained rights in many areas of life, and this legal expansion has been closely intertwined with economic development. We aim to understand the drivers behind these reforms. To this end, we distinguish between four types of women's rights—economic, political, labor, and body—and document their evolution over the past 50 years across countries. We summarize the political-economy mechanisms that link economic development to changes in women's rights and show empirically that these mechanisms account for a large share of the variation in women's rights across countries and over time.
    Keywords: female suffrage, family economics, bargaining, political economy
    JEL: D13 D72 E24 J12 J16 N30 O10 O43
  5. By: Phoebe Koundouri; Barbara Hammer; Ulrike Kuhl; Alina Velias
    Abstract: Identifying mechanisms of real-life human decision-making is central to inform effective, human-centric public policy. Here, we report larger trends and synthesize preliminary lessons from behavioral and neuroeconomic investigations focusing on environmental values. We review the currently available evidence at different levels of granularity, from insights of how individuals value natural resources (individual level), followed by evidence from work on group externalities, common pool resources, and social norms (social group level), to the study of incentives, policies, and their impact (institutional level). At each level, we identify viable directions for future scientific research and actionable items for policy-makers. Coupled with new technological and methodological advances, we suggest that behavioural and neuroeconomic insights may inform effective strategy to optimize environmental resources. We conclude that the time is ripe for action, to enrich policies with scientifically grounded insights, making an impact in the interest of current and future generations.
    Keywords: behavioural economics, neuroeconomics, environmental values,individual decision-making, common pool resources, policy
    Date: 2022–10–24
  6. By: Penghang Liu; Kshama Dwarakanath; Svitlana S Vyetrenko
    Abstract: Multi-agent market simulation is an effective tool to investigate the impact of various trading strategies in financial markets. One way of designing a trading agent in simulated markets is through reinforcement learning where the agent is trained to optimize its cumulative rewards (e.g., maximizing profits, minimizing risk, improving equitability). While the agent learns a rational policy that optimizes the reward function, in reality, human investors are sub-rational with their decisions often differing from the optimal. In this work, we model human sub-rationality as resulting from two possible causes: psychological bias and computational limitation. We first examine the relationship between investor profits and their degree of sub-rationality, and create hand-crafted market scenarios to intuitively explain the sub-rational human behaviors. Through experiments, we show that our models successfully capture human sub-rationality as observed in the behavioral finance literature. We also examine the impact of sub-rational human investors on market observables such as traded volumes, spread and volatility. We believe our work will benefit research in behavioral finance and provide a better understanding of human trading behavior.
    Date: 2022–10

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