nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2023‒09‒25
six papers chosen by
Matthew Baker, City University of New York

  1. Roots of Inequality By Oded Galor; Marc Klemp; Daniel C. Wainstock
  2. Is it time to reboot welfare economics? Overview By Coyle, Diane; Fabian, Mark; Beinhocker, Eric; Besley, Timothy; Stevens, Margaret
  3. On the Source and Instability of Probability Weighting By Cary Frydman; Lawrence J. Jin
  4. Resource Risk and the Origins of Inequality: Evidence from a Pastoralist Economy By Konstantinos Angelopoulos; Spyridon Lazarakis; Rebecca Mancy; Dorice Agol; Elissaios Papyrakis
  5. The Inheritance of Historical Trauma: Intergenerational Effects of Early-Life Exposure to Famine on Mental Health By Zhang, Zihan; Kim, Jun Hyung
  6. ON THE APPEAL OF COMPLEXITY By Brice Corgnet; Roberto Hernán González

  1. By: Oded Galor; Marc Klemp; Daniel C. Wainstock
    Abstract: Why does inequality vary across societies? We advance the hypothesis that in a market economy, where earning differentials reflect variations in productive traits, a significant component of the differences in income inequality across societies can be attributed to variation in societal interpersonal diversity, shaped during the prehistoric Out-of-Africa Migration. The roots of income inequality within the US population provide supporting evidence for the hypothesis. It suggests that variation in income inequality across groups of individuals originating from different ancestral backgrounds can be traced to the degree of diversity of their ancestral populations as was carved in the course of the dispersal of humanity from Africa.
    JEL: O10 Z10
    Date: 2023–08
  2. By: Coyle, Diane; Fabian, Mark; Beinhocker, Eric; Besley, Timothy; Stevens, Margaret
    Abstract: The contributions of economists have long included both positive explanations of how economic systems work and normative recommendations for how they could and should work better. In recent decades, economics has taken a strong empirical turn as well as having a greater appreciation of the importance of the complexities of real-world human behaviour, institutions, the strengths and failures of markets, and interlinkages with other systems, including politics, technology, culture and the environment. This shift has also brought greater relevance and pragmatism to normative economics. While this shift towards evidence and pragmatism has been welcome, it does not in itself answer the core question of what exactly constitutes ‘better’, and for whom, and how to manage inevitable conflicts and trade-offs in society. These have long been the core concerns of welfare economics. Yet, in the 1980s and 1990s, debates on welfare economics seemed to have become marginalised. The articles in this Fiscal Studies symposium engage with the question of how to revive normative questions as a central issue in economic scholarship.
    Keywords: economic welfare; normative; positive; policy
    JEL: I30 I32
    Date: 2023–08–25
  3. By: Cary Frydman; Lawrence J. Jin
    Abstract: We propose and experimentally test a new theory of probability distortions in risky choice. The theory is based on a core principle from neuroscience called efficient coding, which states that information is encoded more accurately for those stimuli that the agent expects to encounter more frequently. As the agent's prior beliefs vary, the model predicts that probability distortions change systematically. We provide novel experimental evidence consistent with the prediction: lottery valuations are more sensitive to probabilities that occur more frequently under the subject's prior beliefs. Our theory generates additional novel predictions regarding heterogeneity and time variation in probability distortions.
    JEL: D03 G02 G41
    Date: 2023–08
  4. By: Konstantinos Angelopoulos; Spyridon Lazarakis; Rebecca Mancy; Dorice Agol; Elissaios Papyrakis
    Abstract: Resource risk is a core ingredient of models of wealth inequality in modern economies, but remains understudied in explanations of inequality in early human and small-scale societies that can inform us about the origins of inequality. Resource risk generates variation in resources and leads to wealth inequality via savings decisions, given the available production and storage technology and the institutional arrangements that govern property rights and insurance. We examine whether this mechanism can explain wealth inequality in a pastoralist economy where wealth is held in livestock, production and storage technology resembles that of early human societies and there is virtually no financial market penetration. Our analysis uses original survey data from traditional Turkana pastoralist communities in Kenya to measure wealth inequality and relevant shocks to resources and to inform a model of wealth accumulation under resource risk. The data reveal substantial wealth inequality and resource risk, including via shocks to the growth rate of livestock holdings, which depends on droughts. Asset accumulation decisions also show that livestock is not used as a buffer stock with respect to shocks to livestock. The wealth accumulation model accurately reproduces the empirical wealth distribution while also predicting the pattern of asset accumulation decisions in response to different shocks to resources observed in the data. These results demonstrate that resource risk and the economic decision making it implies explain the wealth inequality observed in the Turkana pastoralist economy we study. Our findings highlight the role of the resource risk mechanism as a driver of inequality in a small-scale economy, suggesting its importance in the origins of inequality in early human societies.
    Keywords: origins of inequality, risk exposure, small-scale economy, Turkana pastoralists
    JEL: E21 N30 O15 D31
    Date: 2023
  5. By: Zhang, Zihan (Jinan University); Kim, Jun Hyung (Korea Advanced Institute of Science and Technology)
    Abstract: Can the effects of early childhood trauma persist across generations, impacting the long-run outcomes of their children? To answer this question, we exploit the geographic variation in the intensity of the Great Famine in China and distinguish the effects of exposures during four stages of childhood cognitive development between ages 0 to 15 as defined in the child development theory of Jean Piaget. We find that exposure to famine in childhood, especially in ages 0—2 and 3—7, negatively impacts the adult mental health of the survivors' children. We also find negative effects on parent's mental health and parent-child interaction frequency, consistent with the role of childhood home environments as transmission channels. Our findings show that the determinants of mental health problems can be traced back across a generation and demonstrate the persistent damage of early childhood trauma on the survivors and their children.
    Keywords: collective trauma, famine, mental health, intergenerational effects
    JEL: I14 I18 J13
    Date: 2023–08
  6. By: Brice Corgnet (emlyon business school, GATE UMR 5824, F-69130 Ecully, France); Roberto Hernán González (CEREN EA 7477, Burgundy School of Business, Université Bourgogne Franche-Comté, Dijon, France)
    Abstract: Recent works have emphasized the role of complexity as a critical constraint on human behavior following Herbert Simon’s original proposal (complexity-cost hypothesis). By contrast, we propose, in line with recent neuroscience models, that complexity can often be appealing (complexity-value hypothesis). Complexity can attract decision makers because it is associated with a large diversity of outcomes, thus offering many opportunities for the resolution of uncertainty, which is inherently appealing to humans. Using incentivized experiments, we show that, in the absence of immediate feedback on lottery outcomes, decision makers prefer lotteries with less outcomes (low-entropy) in line with the complexity-cost hypothesis. However, when feedback is provided and opportunities for resolving uncertainty are thus offered, this effect disappears in line with the complexity-value hypothesis. We discuss various implications of these findings in human resource management, marketing, and finance.
    Keywords: Complexity, entropy, experiments
    JEL: C91 D01 D81 D87
    Date: 2023

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