nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2023‒10‒02
four papers chosen by
Matthew Baker, City University of New York

  1. Behavioral Finance through the Lens of Evolution: "Survival of the Fittest" for Portfolio Rules By Igor V. Evstigneev; Thorsten Hens; Mohammad Javad Vanaei; Mohammad Mikhail Zhitlukhin
  2. Cultural Distance and Ethnic Civil Conflict By Eleonora Guarnieri
  3. Zero-Sum Thinking, the Evolution of Effort-Suppressing Beliefs, and Economic Development By Jean-Paul Carvalho; Augustin Bergeron; Joseph Henrich; Nathan Nunn; Jonathan L. Weigel
  4. Breakthroughs in Historical Record Linking Using Genealogy Data: The Census Tree Project By Kasey Buckles; Adrian Haws; Joseph Price; Haley E.B. Wilbert

  1. By: Igor V. Evstigneev (University of Manchester); Thorsten Hens (University of Zurich, Norwegian School of Economics and Business Administration, University of Lucerne, and Swiss Finance Institute); Mohammad Javad Vanaei (University of Manchester); Mohammad Mikhail Zhitlukhin (Steklov Mathematical Institute)
    Abstract: This paper analyzes a dynamic stochastic equilibrium model of an asset market based on behavioral and evolutionary principles. The core of the model is a non-traditional game-theoretic framework combining elements of stochastic dynamic games and evolutionary game theory. Its key characteristic feature is that it relies only on objectively observable market data and does not use hidden individual agents' characteristics (such as their utilities and beliefs). A central goal of the study is to identify an investment strategy that allows an investor to survive in the market selection process, i.e., to keep with probability one a strictly positive, bounded away from zero share of market wealth over an infinite time horizon, irrespective of the strategies used by the other players. The main results show that under very general assumptions, such a strategy exists, is asymptotically unique and easily computable. Most of the related models currently considered in this field assume that asset payoffs are exogenous and depend only on the underlying stochastic process of states of the world. The present work develops a modeling framework where the payoffs are endogenous: they depend on the share of total market wealth invested in the asset.
    Keywords: Evolutionary Finance, Behavioral Finance, Stochastic dynamic games, DSGE, Survival portfolio rules
    JEL: C73 D53 D58 G11 G02
    Date: 2023–08
  2. By: Eleonora Guarnieri
    Abstract: Ethnically diverse countries are more prone to conflict, but why do some groups engage in conflict while others do not? I show that civil conflict is explained by ethnic groups’ cultural distance to the central government: an increase in cultural distance, proxied by linguistic distance, increases an ethnicity’s propensity to fight over government power. To identify this effect, I leverage within-ethnicity variation in linguistic distance resulting from power transitions between ethnic groups over time. I provide evidence that the effects can be attributed to differences in preferences over both the allocation and the type of public goods.
    Keywords: ethnic civil war, culture, linguistic distance, Africa, Bantu expansion
    JEL: D74 Z10 O55
    Date: 2023
  3. By: Jean-Paul Carvalho; Augustin Bergeron; Joseph Henrich; Nathan Nunn; Jonathan L. Weigel
    Abstract: We study the evolution of belief systems that suppress productive effort. These include concerns about the envy of others, beliefs in the importance of luck for success, disdain for competitive effort, and traditional beliefs in witchcraft. We show that such demotivating beliefs can evolve when interactions are zero-sum in nature, i.e., gains for one individual tend to come at the expense of others. Within a population, our model predicts a divergence between material and subjective payoffs, with material welfare being hump-shaped and subjective well-being being decreasing in demotivating beliefs. Across societies, our model predicts a positive relationship between zero-sum thinking and demotivating beliefs and a negative relationship between zero-sum thinking (or demotivating beliefs) and both material welfare and subjective well-being. We test the model's predictions using data from two samples in the Democratic Republic of Congo and from the World Values Survey. In the DRC, we find a positive relationship between zero-sum thinking and the presence of demotivating beliefs, such as concerns about envy and beliefs in witchcraft. Globally, zero-sum thinking is associated with skepticism about the importance of hard work for success, lower income, less educational attainment, less financial security, and lower life satisfaction. Comparing individuals in the same zero-sum environment, we observe the divergence between material outcomes and subjective well-being predicted by our model.
    JEL: N10 O10 Q55
    Date: 2023–09
  4. By: Kasey Buckles; Adrian Haws; Joseph Price; Haley E.B. Wilbert
    Abstract: The Census Tree is the largest-ever database of record links among the historical U.S. censuses, with over 700 million links for people living in the United States between 1850 and 1940. These high-quality links allow researchers in the social sciences and other disciplines to construct a longitudinal dataset that is highly representative of the population. In this paper, we describe our process for creating the Census Tree, beginning with a collection of over 317 million links contributed by the users of a free online genealogy platform. We then use these links as training data for a machine learning algorithm to make new matches, and incorporate other recent efforts to link the historical U.S. censuses. Finally, we introduce a procedure for filtering the links and adjudicating disagreements. Our complete Census Tree achieves match rates between adjacent censuses that are between 69 and 86% for men, and between 58 and 79% for women. The Census Tree includes women and Black Americans at unprecedented rates, containing 314 million links for the former and more than 41 million for the latter.
    JEL: C81 J10 N01
    Date: 2023–09

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