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on History and Philosophy of Economics |
| By: | Tiziana Medda (University of Cagliari); Vittorio Pelligra (University of Cagliari); Tommaso Reggiani (LUMSA University) |
| Abstract: | One of the most common criticisms about the external validity of lab experiments in economics concerns the representativeness of participants usually considered in these studies. The ever-increasing number of experiments and the prevalent location of research centers in university campuses produced a peculiar category of subjects: Students with high level of laboratory experience built through repeated participations in experimental sessions. We investigate whether the experience accumulated in this way biases subjects’ behaviour in a set of simple games widely used to study social preferences (Dictator Game, Ultimatum Game, Trust Game, and Prisoner’s Dilemma Game). Our main finding shows that subjects with a high level of experience in lab experiments do not behave in a significantly different way from novices. |
| Keywords: | Experimental Methodology, External Validity, Experience, Lab Experiment |
| JEL: | D03 D83 C91 C92 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=&r=hpe |
| By: | Stefano Ugolini (University of Toulouse (Institute of Political Studies and LEREPS)) |
| Abstract: | Is a strong commitment to monetary stability enough to ensure credibility? The recent literature suggests it might not be if the central bank cannot perform pure interest rate policy and has to resort to balance sheet policy: the central bank’s financial strength (i.e. the long-term sustainability of its policy) is also a determinant of credibility. This paper provides historical evidence on the issue by focusing on the case of the Bank of England at the heyday of the classical gold standard. It shows that as the Bank was not perceived as having the means to fulfil all of its obligations, the efficacy of its interest rate policy was poor. Failing to reform for political economy reasons, the Bank eventually had to default on its formal convertibility mandate. |
| Keywords: | Central banking, institutional design, monetary policy implementation, reverse repos, term structure of interest rates, gold standard |
| JEL: | E42 E43 E58 N13 |
| Date: | 2016–07–01 |
| URL: | http://d.repec.org/n?u=&r=hpe |
| By: | Thomas I. Palley |
| Abstract: | NIRP is quickly becoming a consensus policy within the economics establishment. This paper argues that consensus is dangerously wrong, resting on flawed theory and flawed policy assessment. Regarding theory, NIRP draws on fallacious pre-Keynesian economic logic that asserts interest rate adjustment can ensure full employment. That pre-Keynesian logic has been augmented by ZLB economics which claims times of severe demand shortage may require negative interest rates, which policy must deliver since the market cannot. Regarding policy assessment, NIRP turns a blind eye to the possibility that negative interest rates may reduce AD, cause financial fragility, create a macroeconomics of whiplash owing to contradictions between policy today and tomorrow, promote currency wars that undermine the international economy, and foster a political economy that spawns toxic politics. Worst of all, NIRP maintains and encourages the flawed model of growth, based on debt and asset price inflation, which has already done such harm. |
| Keywords: | Negative interest rate policy, zero lower bound |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=&r=hpe |
| By: | Paul Dolan; Georgios Kavetsos; Christian Krekel; Dimitris Mavridis; Robert Metcalfe; Claudia Senik; Stefan Szymanski; Nicolas R. Ziebarth |
| Abstract: | We show that hosting the Olympic Games in 2012 had a positive impact on the life satisfaction and happiness of Londoners during the Games, compared to residents of Paris and Berlin. Notwithstanding issues of causal inference, the magnitude of the effects is equivalent to moving from the bottom to the fourth income decile. But they do not last very long: the effects are gone within a year. These conclusions are based on a novel panel survey of 26,000 individuals who were interviewed during the summers of 2011, 2012, and 2013, i.e. before, during, and after the event. The results are robust to selection into the survey and to the number of medals won. |
| Keywords: | subjective wellbeing, life satisfaction, happiness, Olympic Games, natural experiment |
| JEL: | I30 I31 I38 L83 Z20 Z28 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=&r=hpe |
| By: | Laura Kudrna; Georgios Kavetsos; Chloe Foy; Paul Dolan |
| Abstract: | How achievement makes people feel depends upon counterfactual thoughts about what could have been. One body of evidence for this comes from studies of observer ratings of Olympians’ happiness, which suggests that category-based counterfactual thoughts affect the perceived happiness of Olympians. Silver medallists are less happy than bronze medallists, arguably because silver medallists think about how they could have won gold, and bronze medallists feel lucky to be on the podium at all. We contribute to this literature by showing that the effect of category-based counterfactual thoughts on Olympians’ happiness depends on the margin by which athletes secured their medal. Although gold and bronze medallists appeared happier the better they performed, silver medallists were less happy when they were closer to winning gold. This suggests silver medallists feel disappointed relative to gold medallists but that bronzes do not feel particularly fortunate relative to non-medal winners. Teams were rated as happier than individual athletes and Olympians happier than Paralympians. Observers’ ethnic and gender similarity to athletes negatively influence happiness ratings; whilst observers’ self-reported happiness has a negligible effect on ratings. We integrate these findings with prior literature on counterfactual thinking and the determinants of happiness, and suggest avenues for future research. |
| Keywords: | Counterfactual thinking, Close calls, Relative status, Happiness, Olympic Games |
| JEL: | D60 I31 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=&r=hpe |
| By: | Alesina, Alberto Francesco; Giuliano, Paola |
| Abstract: | A growing body of empirical work measuring different types of cultural traits has shown that culture matters for a variety of economic outcomes. This paper focuses on one specific aspect of the relevance of culture: its relationship to institutions. We review work with a theoretical, empirical, and historical bent to assess the presence of a two-way causal effect between culture and institutions. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=&r=hpe |
| By: | S. Agarwal; D. Ghosh; A. S. Chakrabarti |
| Abstract: | In this paper we consider a distributed coordination game played by a large number of agents with finite information sets, which characterizes emergence of a single dominant attribute out of a large number of competitors. Formally, $N$ agents play a coordination game repeatedly which has exactly $N$ Nash equilibria and all of the equilibria are equally preferred by the agents. The problem is to select one equilibrium out of $N$ possible equilibria in the least number of attempts. We propose a number of heuristic rules based on reinforcement learning to solve the coordination problem. We see that the agents self-organize into clusters with varying intensities depending on the heuristic rule applied although all clusters but one are transitory in most cases. Finally, we characterize a trade-off in terms of the time requirement to achieve a degree of stability in strategies and the efficiency of such a solution. |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=&r=hpe |
| By: | Breitmoser, Yves |
| Abstract: | Individual choice exhibits "presentation effects" such as default, ordering and round-number effects. Using existing models, presentation effects bias utility estimates, which suggests instability of preferences and obscures behavioral patterns. This paper derives a generalized model of stochastic choice by weakening logit's axiomatic foundation. Weakening the axioms implies that focality of options is choice-relevant, alongside utility, which entails presentation effects. The model is tested on four well-known studies of dictator games exhibiting typical round-number patterns. The generalized logit model captures the choice patterns reliably, substantially better than existing models: it robustly predicts and controls for the round-number effects, thus provides "clean" utility estimates that are stable and predictive across experiments. |
| Keywords: | stochastic choice, systematic mistakes, axiomatic foundation, utility estimation, dictator game |
| JEL: | C10 C90 D03 |
| Date: | 2016–07–28 |
| URL: | http://d.repec.org/n?u=&r=hpe |
| By: | Richard N. Langlois (University of Connecticut) |
| Abstract: | A dominant view in the Coasean law-and-economics tradition is that the firm (including in its form as the corporation) is nothing but a nexus of contracts: the firm is entirely a matter of contract law, and the corporate entity, the legal fiction of corporate personhood, is nothing but a name for a bundle of contracts. This view has implication both for the theory of the firm and for the political economy of the corporation – for the question of the “rights” of corporate entities. By asserting that the corporation is nothing but a set of contractual arrangements, the nexus-of-contracts view implies that any rights possessed by contracting individuals “pass through” to the corporation itself. Unsurprisingly, the powerful phalanx of writers who wish to limit the rights of the corporation take square and largely exclusive aim at the nexus-of-contracts view, assuming that arguments against that view are necessarily arguments against all kinds of “bottom up” accounts of the corporate form. I will argue that critics of the nexus-of-contracts view are indeed right in one sense (though by no means in every sense). Yet, despite this, the fact that the corporation cannot be constructed solely out of voluntary contract narrowly understood does not destroy the argument that the corporation is ultimately “nothing but” a form of cooperation among rights-holding individuals. The corporation understood from the perspective of property rights is both an object of ownership and a form of ownership. Much of the confusion in the literature arises from a procrustean attempt to appraise the corporation in light of simplified and partial accounts of the rights involved. |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=&r=hpe |
| By: | Smith, Jeffrey A. (University of Michigan); Sweetman, Arthur (McMaster University) |
| Abstract: | Estimation, inference and interpretation of the causal effects of programs and policies have all advanced dramatically over the past 25 years. We highlight three particularly important intellectual trends: an improved appreciation of the substantive importance of heterogeneous responses and of their methodological implications, a stronger focus on internal validity brought about by the "credibility revolution," and the scientific value that follows from grounding estimation and interpretation in economic theory. We discuss a menu of commonly employed partial equilibrium approaches to the identification of causal effects, emphasizing that the researcher's central intellectual contribution always consists of making an explicit case for a specific causal interpretation given the relevant economic theory, the data, the institutional context and the economic question of interest. We also touch on the importance of general equilibrium effects and full cost-benefit analyses. |
| Keywords: | causal effects, heterogeneous treatment effects, partial equilibrium identification |
| JEL: | C18 C21 C26 C50 C90 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=&r=hpe |