nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2009‒05‒23
25 papers chosen by
Erik Thomson
University of Manitoba

  1. The Economic Problem of Happiness. Keynes on Happiness and Economics By Anna M. Carabelli; Mario A. Cedrini
  2. Indian Currency and Beyond. The Legacy of the Early Economics of Keynes in the Times of Bretton Woods II By Anna M. Carabelli; Mario A. Cedrini
  3. Posner, Economics and the Law: from Law and Economics to an Economic Analysis of Law. By Alain Marciano; Sophie Harnay
  4. Economic crisis, its prospects and challenges for economic theory By Slavica Manic
  5. Les conséquences idéologiques de la crise des subprimes By Sandye Gloria-Palermo
  6. Social Contracts and Historical Rules By Enrico Colombatto
  7. Free Riders and Cooperators in Public Goods Experiments: Can Evolutionary Dynamics Explain their Coexistence? By Angelo Antoci; Paolo Russu; Luca Zarri
  8. Bringing History into Evolutionary Economic Geography for a Better Understanding of Evolution By Zhigao Liu
  9. The St. Petersburg Paradox despite risk-seeking preferences: An experimental study By Eike B. Kroll; Bodo Vogt
  10. Free riders and strong reciprocators coexist in public goods experiments: evolutionary foundations By Angelo Antoci; Paolo Russu; Luca Zarri
  11. An Assessment of Subjectivism. Its Meaning and its Limits By Marian Eabrasu
  12. New Rationales for Innovation Policy? A Comparison of the Systems of Innovation Policy Approach and the Neoclassical Perspective By Alexandra Schröter
  13. Le monde selon Girard (The world according to Girard) By Rémy VOLPI
  14. La politique économique dans la mondialisation : de la récusation au renouveau (The economic policy in the globalization : from the denial in the revival) By Lamia YACOUB
  15. Some Notes on Institutions in Evolutionary Economic Geography By Ron Boschma; Koen Frenken
  16. Is brain activity observable that leads to an evaluation of a probability of 0.5 that is different from 0.5 in binary lottery choices? By Marcus Heldmann; Ralf Morgenstern; Thomas Münte; Bodo Vogt
  17. Game or frame? Incentives in modified Dictator Games By Timo Heinrich; Thomas Riechmann; Joachim Weimann
  18. Why Worry about Climate Change? By Tol, Richard S. J.
  19. The Fragility of Social Capital By Fabio Sabatini; Angelo Antoci; Mauro Sodini
  20. A Theory of Bayesian Decision Making By Edi Karni
  21. On rational exuberance. By Stefano Bosi; Thomas Seegmuller
  22. Walras-Lindahl-Wicksell : What equilibrium concept for public goods provision ? I - The convex case. By Monique Florenzano
  23. Why Pay Taxes When No One Else Does? By Epstein, Gil S.; Gang, Ira N.
  24. Fear and Loathing in Las Vegas: Evidence from Blackjack Tables By Bruce Ian Carlin; David T. Robinson
  25. Why do Institutions of Higher Education Reward Research While Selling Education? By Dahlia K. Remler; Elda Pema

  1. By: Anna M. Carabelli; Mario A. Cedrini (SEMEQ Department - Faculty of Economics - University of Eastern Piedmont)
    Abstract: In their latest book (2008), Bruno Frey and the members of the research group he chairs at the University of Zurich announce that happiness research is leading a revolution in economics. More precisely, the revolutionary character of happiness economics would draw on measurement, on how people value goods and social conditions, as well as on policies. This paper aims to discuss critically this claim and what we identified as five crucial issues of mainstream happiness economics, i.e.: 1. the ambiguous relationship between income and happiness, 2. the “back to Bentham” approach, 3. problems of incommensurability, 4. heterogeneity and multidimensionality, 5. the scope of economics in relation to happiness. In so doing, we attempt to review John Maynard Keynes’s vision about happiness and economics, starting from a revisiting of his essay Economic Possibilities for Our Grandchildren in the light of his early unpublished writings on ethics as well as of the whole bulk of his writings in economics. We then provide reasons to argue that the rediscovery of Keynes’s legacy in this respect can be of help to point out and examine the most controversial aspects of today’s happiness research.
    Keywords: Happiness, Happiness economics, John Maynard Keynes, Economic Possibilities for Our Grandchildren
    JEL: H1 I31 B31
    Date: 2009–05
  2. By: Anna M. Carabelli; Mario A. Cedrini (SEMEQ Department - Faculty of Economics - University of Eastern Piedmont)
    Abstract: In the paper, we revisit the focus and method of “Indian Currency and Finance” (1913) and the rationale of Keynes's proposal for an international monetary system combining cheapness with stability. In particular, we centre on the management of exchange reserve and the pattern of relationships between creditor and debtor countries, to suggest that Keynes's fresh look at Asia in the first years of the twentieth century may provide useful hints for an overall rethinking of the major faults of today's Bretton Woods II system as well as the rationale for a global monetary reform.
    Keywords: John Maynard Keynes, Indian Currency and Finance, international economic order, exchange reserves
    JEL: B31 B40 F02 F31
    Date: 2009–05
  3. By: Alain Marciano; Sophie Harnay
    Abstract: The purpose of this article is to discuss Posner's economic analysis of law and to analyse the differences between his economic analysis of law and law and economics. We propose and demonstrate a twofold original argument. First, we show that Posner does not only propose an economic analysis of the working of the legal system but also that his approach has changed in the early 1970s, shifting from a law and economics perspective in which the focus is put on the working of the economic system to an economic analysis of law in which the emphasis is put on the functioning of the legal system. He appears then no longer influenced by Aaron Director and Ronald Coase but rather by Gary Becker. Therefore, and this is the second part of our demonstration, we show that the evolution in Posner's works essentially derives from the influence of Becker and the adoption by the former of the methodological views of the latter. More precisely, we claim that Posner no longer retains a -- restrictive -- definition of economics by subject matter but that he aligns himself on Becker and his broader definition of economics placing nonmarket decisions and method at the core of the discipline. In other words, we argue that Posner is the first who transposes Becker’s definition of economics in law and economics and that this is precisely what makes Posner's economic analysis of law possible and specific, and also of particular importance.
    Date: 2008–06
  4. By: Slavica Manic (Faculty of Economics, Belgrade, Serbia)
    Abstract: Actual crisis which originated from USA quickly spread throughout the world economy. Although at the beginning it was labeled as exclusively financial one, after its second wave (in 2008) everything became much clear.
    Keywords: economic crisis, economic theory
    JEL: F4
    Date: 2009–05
  5. By: Sandye Gloria-Palermo
    Abstract: The aim of this article is to analyse the ideological impact of the current financial and economic crisis upon the neoliberal values which predominate since the end of the 70s. The specificity of this economic crisis leads to a process of questioning on these values. This is far from being insignificant because cultural hegemony is reached when value judgements transform into assertions perceived as unquestionable, universal and natural. Up to now, there is no such a thing as an ideological revolution because all the economic interventions are justified on the ground of pragmatism. But at least, the current crisis allows the fundamental assertions of neoliberalism to come back to their value judgment status. Another important consequence of the crisis is that alternative value judgements also gain in legitimacy and audience. These conclusions are reached through an analysis of the various interventions actually implemented by governments and central banks and through the presentation of a selection of representative alternative visions of the current financial capitalist order.
    Date: 2009
  6. By: Enrico Colombatto
    Abstract: The public choice-school has explained why policy- making is generally disappointing and frequently against the very interest of the public at large. The economics profession has put forward two kinds of allegedly free-market remedies. On the one hand, the mainstream view underscores the need for more expert advice and better agency rules. On the other, the constitutional standpoint emphasizes the role of meta-rules founded on a social contract, so that abuse can be restrained, if not eliminated. This paper questions the foundations of the new contractarian views, which hardly escape the consequentialist and utilitarian problems raised by the orthodox approach to policy- making. In particular, it is argued that in order to understand the nature of today’s policy- making, rational constructivism is of little help; competing explanations, such as those offered by the institutional or the evolutionary schools, are similarly ineffective. The insufficiencies of the mainstream approaches suggest an alternative. We develop the idea that “First Principles” – that is those set of ideas that have characterized Western Civilization during the past two millennia – provide a better lens for understanding the role and characteristics of policy-making.
    Date: 2009–05
  7. By: Angelo Antoci; Paolo Russu; Luca Zarri
    Abstract: An oft-cited and robust result from Public Goods Game experiments is that, when subjects start playing, the aggregate level of contributions is significantly different from zero. At the same time, a sizeable proportion of players free ride from the outset. Behavioural economics has persuasively shown that these laboratory findings are compatible with the presence of motivationally heterogeneous agents, displaying both standard, self-centred preferences and non-standard, interdependent preferences. However, at the theoretical level, economists would prefer to account for motivational heterogeneity endogenously, instead of simply assuming it from the outset. Our work provides such endogenisation, by assuming that social evolution is driven by material payoffs only. By separately focusing on different types of ‘experimentally salient’ pro-social players (such as Reciprocators, Strong Reciprocators and Altruists), we are able to shed light – to our knowledge, for the first time, within the public good framework – on the evolutionary stability of two-type populations consisting of positive proportions of both ‘nice’ and ‘mean’ guys.
    Keywords: Free Riding; Strong Reciprocity; Altruism; Nonstrategic Punishment; Public Goods Game; Evolutionary Game Theory.
    JEL: C7 D6 H8 Z1
    Date: 2009–05
  8. By: Zhigao Liu
    Abstract: The paper tries to construct the historical methodology for evolutionary economic geography. I elevate history to the methodological foundation of evolutionary economic geography, on which concrete research methods should be based. I explore how to evolution in economic geography by placing history in historical time and historical contexts. Accordingly, the concepts of path creation and path dependence should be used together in historical study. More important, the concept of path interdependence, which stresses the importance of the circumstances under which different processes and events are likely to occur, opens a new window on the temporal aspects of the world.
    Keywords: Organizational ecology, fashion industry, creative industries, clusters, institutional lock-in
    Date: 2009–01
  9. By: Eike B. Kroll (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Bodo Vogt (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: The St. Petersburg is one of the oldest violations of expected utility theory. Thus far, explanations of the paradox aim at small probabili- ties being perceived as zero and the boundedness of utility. This paper provides experimental results showing that neither risk attitudes nor perception of small probabilities explain the paradox. We nd that even in situations where subjects are risk-seeking, the St. Petersburg Paradox exists. This indicates that the paradox lies at the very core of human decision-making processes and cannot be explained by the parameters discussed in previous research so far.
    Date: 2009–01
  10. By: Angelo Antoci; Paolo Russu; Luca Zarri
    Abstract: Experimental evidence indicates that free riders and strongly reciprocal papers coexist in the public goods game framework. By means of an evolutionary analysis, we provide an endogenization of this behavioral regularity.
    Keywords: Free Riding, Cooperation, Strong Reciprocity, Public Goods Game, Evolutionary Game Theory.
    JEL: B41 C73 D74 Z13
    Date: 2009–05
  11. By: Marian Eabrasu
    Abstract: This working-paper deals with the meaning of the subjective theory of value. It is argued that in spite of its wide utilization in economic theory, subjectivism is an equivocal concept generating incompatible interpretations. The affluence of various and incompatible interpretations is the consequence of a conception that is either too complex or too elastic. This is the case since the subjective theory of value cannot accommodate most of the features that are traditionally associated with it: utility, marginalism, ordinal evaluation, knowledge, expectations. Actually, this working-paper defends a specific view of subjectivism which is much simpler than most of its current interpretations.
    Date: 2008–06
  12. By: Alexandra Schröter (Friedrich Schiller University Jena, Faculty of Economics and Business Administration)
    Abstract: Ever since its introduction in the 1990s, the systems of innovations (SI) concept has received a great deal of attention from researchers and politicians. The systems of innovation policy (SIP) approach, which is based on the SI concept, is considered an alternative to neoclassical theory. Its goal is to provide new rationales and criteria for innovation policy, as well as concrete implications and guidelines for policymakers, that are more appropriate for innovation processes in comparison to the rationales and criteria of standard economic theory. The aim of this paper is to critically investigate to what extent the SIP approach provides additional rationales for public intervention in innovation processes compared to neoclassical theory.
    Keywords: Innovation, innovation systems, innovation policy
    JEL: O31 O38 P00
    Date: 2009–05–11
  13. By: Rémy VOLPI (labrii, ULCO)
    Abstract: L’imitation explique comment et pourquoi, d’un point de vue historique, l’hominisation a eu lieu. Girard soutient que le désir mimétique en soi est propre à mettre à mal toute communauté pré-humaine en ce qu’elle conduit à la rivalité mimétique qui se propage à l’ensemble et aboutit au chaos de la lutte de tous contre tous, rivaux indifférenciés. La théorie mimétique de Girard pose que toute société humaine est issue du meurtre collectif originel d’une victime arbitraire innocente, processus de réconciliation soudaine et inespérée. Ce sacrifice apportant la paix et l’ordre, la différenciation des membres de la communauté est entretenu par des interdits, des rites, des mythes. Les interdits empêchent tout ce qui peut recréer le chaos mimétique. Les mythes sacralisent la victime et escamotent le meurtre collectif humain en attribuant le miracle de la réconciliation à des puissances extra-humaines, les divinités. Les rites sont des cérémonies répétitives qui reproduisent le sacrifice initial à travers des victimes de substitution. A partir de la nécessité vitale de recourir au symbole, c’est-à-dire de la substitution d’une chose par une autre, commence la culture humaine, et notamment le langage. Un cerveau plus grand est un moyen de sélection naturelle si, crise après crise, l’usage de symboles se complexifie. La culture occidentale a apporté une révolution radicale car le message judéo-chrétien s’est graduellement rangé du côté du « bouc émissaire », en signifiant son innocence. Ce faisant, il a dédivinisé le monde, ouvrant la voie à l’émulation à tout-va avec pour effet un progrès formidable par l’innovation depuis trois siècles. Mais du même coup, la violence mimétique prend de l’ampleur et semble immaîtrisable, l’éthique, seul moyen désormais de la contenir, n’étant apparemment pas à la hauteur. L’apocalypse est-elle proche ? Imitation explains how and why, historically, humanization took place. Girard holds that mimetic desire per se is likely to jeopardize any pre-human community as it would lead to mimetic rivalry, a contagious process that quickly snowballs to end up into the chaos of a struggle of all against all, as undifferentiated rivals. Girard’s mimetic theory has it that any human society is stemming from an original collective murder of an innocent arbitrary victim, as a sudden and unexpected reconciliation process. As this sacrifice brings peace and order, the differentiation of the community members is maintained through taboos, rites and myths. Taboos forbid anything that could lead again to mimetic chaos. Myths make the victim sacred and conceal the fundamental collective murder in attributing the miracle of reconciliation to some extra-human powers, divinities. Rites repeatedly reenact the original sacrifice through a substitute victim. From this vital necessity to symbolize, that is to replace one thing by another, starts human culture, and among its main traits, language. A bigger brain is a way of natural selection if, crisis after crisis, the use of symbols is sophisticating. Western culture has brought a radical revolution as the judaic-christian message has taken sides, gradually meaning that the “scapegoat” is innocent. By so doing, it has “dedivinized” the world, paving the way to open emulation resulting into a fantastic progress through innovation since the last three centuries. But by the same token, mimetic violence is gathering momentum and seems unstoppable, ethics, by now the only way to prevent it, being apparently no match. Is apocalypse near?
    Keywords: Gerard, mimetic theory
    JEL: Y50 Z10
    Date: 2009–03
  14. By: Lamia YACOUB (labrii, ULCO)
    Abstract: Le processus de la mondialisation, ses paradoxes et ses enjeux, ont revitalisé les polémiques autour du statut et du rôle de l’Etat et les ont posées avec une grande acuité dans la littérature et les discours politico-économiques. Tandis que certains y voient une récusation des politiques économiques actives, d’autres considèrent que c’est ce processus même qui suscite une redéfinition du rôle de l’Etat dans la promotion du développement. L’objet de cette contribution est de démontrer qu’une telle redéfinition devrait relever d’une réflexion pragmatique et rénovée sur le rôle clé de la politique économique en matière de développement et non pas s’effectuer dans le sens d’une intervention publique plus neutre et plus passive, comme le suggère l’approche néolibérale, celle qui a tant inspiré la thérapeutique des plans d’ajustement structurel et les commandements du Consensus de Washington. Ce sont désormais les contestations et les crises qui ont rendu visibles les lacunes des lignes de conduite proposées et la fragilité des doctrines qui les ont inspirées. Les nouveaux enjeux de la mondialisation nous incitent à en tirer des leçons et à saisir toute la « crucialité » d’un nouveau modèle de développement. Face à un système de gouvernance mondiale se révélant récemment en crise et d’une approche libérale devenant fortement contestée, la concrétisation de ce modèle ne requiert-elle pas un renouveau des politiques économiques actives ; plus volontaristes et mieux réfléchies ? Mots clés : Politique économique, Mondialisation, développement, Etat, gouvernance. The process of globalization, its paradoxes and its stakes, have revitalized the polemics about the statute and the role of the State and posed them with a great acuity in the politico-economic literature and speeches. While some see in it a denial of active economic policies, others consider that it is this process itself that arouses a redefinition of the State’s role in the promotion of the development. The object of this contribution is to show that such a redefinition should arise from a pragmatic and renewed reflection on the key role of the economic policy in development, rather than in the sense of a more neutral and passive public intervention, as suggested by the neo-liberal approach, which so much inspired the therapeutics of the structural adjustment programs and the commands of the Washington Consensus. It is henceforth the contesting and the crises that made visible the gaps of the proposed lines of conduct and the fragility of the doctrines which inspired them. The new stakes of globalization incite us to take lessons from this and to seize all the "cruciality" of a new development model. In front of a world governance system showing recently in crisis and of a liberal approach becoming strongly controversial, the realization of such a model does not require a revival of the active economic policies; more voluntarist and better reflected? Key words: Economic policy, globalization, development, State, governance.
    Keywords: Economic policy, globalization, development state, governance
    JEL: M19 O10 E60 A20
    Date: 2009–03
  15. By: Ron Boschma; Koen Frenken
    Abstract: Within the evolutionary economic geography framework the role of institutions deserves more explicit attention. We argue that territorial institutions are to be viewed as orthogonal to organisational routines in that each territory is characterised by a variety of routines, and in that a single firm can apply its routines in different territorial contexts. It is therefore meaningful to distinguish between institutional economic geography and evolutionary economic geography as their explanans is different. Yet, the two approaches can be combined in a dynamic framework in which institutions co-evolve with organisational routines, particularly in emerging industries. Furthermore, integrating the evolutionary and institutional approach allows one to analyse the spatial diffusion of organisational routines that mediate conflicts between social groups, in particular, those between capitalists and labourers. An evolutionary economic geography advocates an empirical research program, both qualitative and quantitative, in which the relative importance of organisational routines and territorial institutions for regional development can be addressed.
    Keywords: evolutionary economic geography, routines, institutions
    Date: 2008–10
  16. By: Marcus Heldmann (Otto-von-Guericke University Magdeburg); Ralf Morgenstern (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Thomas Münte (Otto-von-Guericke University Magdeburg); Bodo Vogt (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: This paper focuses on the problem of probability weighing in the evaluation of lotteries. According to Prospect Theory a probability of 0.5 has a weight of smaller than 0.5. We conduct an EEG experiment in which we compare the results of the evaluation of binary lotteries by certainty equivalents with the results of the bisection method. The bisection method gives the amount of money that corresponds to the midpoint of the utilities of the two payoffs in a binary lottery as it has been shown previously. In this method probabilities are not evaluated. We analyzed EEG data focused on whether a probability is evaluated or not. Our data show differences between the two methods connected with the attention towards sure monetary payoffs, but they do not show brain activity connected with a devaluation of the probability of 0.5.
    Date: 2009–01
  17. By: Timo Heinrich; Thomas Riechmann; Joachim Weimann (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: We use modified dictator games in which the productivity of taking or giving is varied. Subjects have to decide which of the different games will be payoff relevant in the end. We can show that the behavior of dictators does not depend on the productivity of their gifts, but that their behavior is strongly influenced by the right to choose the relevant game. If the recipients have the right to choose, the dictators become more generous.
    Date: 2009–03
  18. By: Tol, Richard S. J. (Economic and Social Research Institute (ESRI))
    Date: 2009–04
  19. By: Fabio Sabatini (Università di Siena); Angelo Antoci (Università di Sassari); Mauro Sodini (Università di Pisa)
    Abstract: This paper addresses two hot topics of the contemporary debate, social capital and economic growth. Our theoretical analysis sheds light on decisive but so far neglected issues: how does social capital accumulate over time? Which is the relationship between social capital, technical progress and economic growth in the long run? The analysis shows that the economy may be attracted by alternative steady states, depending on the initial social capital endowments and cultural exogenous parameters representing the relevance of social interaction and trust in well-being and production. When material consumption and relational goods are substitutable, the choice to devote more and more time to private activities may lead the economy to a “social poverty trap”, where the cooling of human relations causes a progressive destruction of the entire stock of social capital. In this case, the relationship of social capital with technical progress is described by an inverted U-shaped curve. However, the possibility exists for the economy to follow a virtuous trajectory where the stock of social capital endogenously and unboundedly grows. Such result may follow from a range of particular conditions, under which the economy behaves as if there was no substitutability between relational activities and material consumption.
    Keywords: Economic Growth, Technical Progress, Social Interactions, Social Capital
    JEL: A13 O43 Z13
    Date: 2009–03
  20. By: Edi Karni
    Abstract: This paper presents a complete, choice-based, axiomatic Bayesian decision theory. It introduces a new choice set consisting of information-contingent plans for choosing actions and bets and subjective expected utility model with effect-dependent utility functions and action-dependent subjective probabilities which, in conjunction with the updating of the probabilities using Bayes' rule, gives rise to a unique prior and a set of action-dependent posterior probabilities representing the decision maker's prior and posterior beliefs.
    Date: 2009–05
  21. By: Stefano Bosi (EQUIPPE - Université de Lille 1 et EPEE - Université d'Evry); Thomas Seegmuller (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: In his seminal contribution, Tirole (1985) shows that an overlapping generations economy may monotonically converges to a steady state with a positive rational bubble, characterized by the dynamically efficient golden rule. The issue we address is whether this monotonic convergence to an efficient long-run equilibrium may fail, while the economy experiences persistent endogenous fluctuations around the golden rule. Our explanation leads on the features of the credit market. We consider a simple overlapping generations model with three assets : money, capital and a pure bubble (bonds). Collateral matters because increasing his portfolio in capital and bubble, the household reduces the share of his consumption paid by cash. From a positive point of view, we show that the bubbly steady state can be locally indeterminate under arbitrarily small credit market imperfections and, thereby, persistent expectation-driven fluctuations of equilibria with (rational) bubbles can arise. From a normative point of view, monetary policies that are not too expansive, are recommended in order to rule out the occurence of sunspot fluctuations and enhance the welfare evaluated at the steady state.
    Keywords: Bubbles, collaterals, indeterminacy, cash-in-advance constraint, overlapping generations.
    JEL: D91 E32 E50
    Date: 2009–01
  22. By: Monique Florenzano (Centre d'Economie de la Sorbonne)
    Abstract: Despite the large number of its references, this paper is less a survey than a systematic exposition, in an unifying framework and assuming convexity as well on the consumption side as on the production side, of the different equilibrium concepts elaborated for studying provision of public goods. As weak as possible conditions for their existence and their optimality properties are proposed. The general conclusion is that the drawbacks of the different equilibrium concepts lead to founding public economic policy either on direct Pareto improving government interventions or on state enforcement of decentralized mechanisms.
    Keywords: Private provision equilibrium, Lindahl-Foley equilibrium, public competitive equilibrium, abstract economies, equilibrium existence, welfare theorems, core.
    JEL: D51 D60 H41
    Date: 2009–02
  23. By: Epstein, Gil S. (Bar-Ilan University); Gang, Ira N. (Rutgers University)
    Abstract: In this paper we try to understand the phenomena whereby a large proportion of the population evades tax payments. We present a model which incorporates elements from the theory of information cascades with the standard model of tax evasion and analyze the connection between the decision of a potential tax evader, the number of tax evaders and the number caught in previous periods. General conditions exist under which any expected utility maximizing tax evaders will decide to emulate other tax evaders.
    Keywords: tax evasion, uncertainty, information cascades
    JEL: H26 H31 D82
    Date: 2009–04
  24. By: Bruce Ian Carlin; David T. Robinson
    Abstract: Psychologists study regret primarily by measuring subjects' attitudes in laboratory experiments. This does not shed light on how expected regret affects economic actions in market settings. To address this, we use proprietary data from a blackjack table in Las Vegas to analyze how expected regret affects peoples''decisions during gambles. Even among a group of people who choose to participate in a risk-taking activity, we find strong evidence of an economically significant omission bias: players incur substantial losses by playing too conservatively. This behavior is prevalent even among large stakes gamblers, and becomes more severe following previous aggressive play, suggesting a rebound effect after aggressive play.
    Date: 2009–05
  25. By: Dahlia K. Remler; Elda Pema
    Abstract: Higher education institutions and disciplines that traditionally did little research now reward faculty largely based on research, both funded and unfunded. Some worry that faculty devoting more time to research harms teaching and thus harms students’ human capital accumulation. The economics literature has largely ignored the reasons for and desirability of this trend. We summarize, review, and extend existing economic theories of higher education to explain why incentives for unfunded research have increased. One theory is that researchers more effectively teach higher order skills and therefore increase student human capital more than non-researchers. In contrast, according to signaling theory, education is not intrinsically productive but only a signal that separates high- and low-ability workers. We extend this theory by hypothesizing that researchers make higher education more costly for low-ability students than do non-research faculty, achieving the separation more efficiently. We describe other theories, including research quality as a proxy for hard-to-measure teaching quality and barriers to entry. Virtually no evidence exists to test these theories or establish their relative magnitudes. Research is needed, particularly to address what employers seek from higher education graduates and to assess the validity of current measures of teaching quality.
    JEL: I2 I21 I23 J24
    Date: 2009–05

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