New Economics Papers
on Neuroeconomics
Issue of 2009‒10‒17
three papers chosen by

  1. How to adapt to changing markets: experience and personality in a repeated investment game By Hopfensitz, Astrid; Wranik, Tanja
  2. How Sapient is Homo Economicus? The Evolutionary Origins of Trade, Ethics and Economic Rationality By Kaushik Basu
  3. Recent Developments in Evolutionary Biology and Their Relevance for Evolutionary Economics By Karin Knottenbauer

  1. By: Hopfensitz, Astrid; Wranik, Tanja
    Abstract: Investment behavior is traditionally investigated with the assumption that risky investment is on average advantageous. However, this may not always be the case. In this paper, we experimentally studied investment choices made by students and financial professionals under favorable and unfavorable market conditions in a multi-round investment game. In particular, the probability of winning was set so that investment in one condition was advantageous, and in one condition was disadvantageous. To investigate who is more likely to adapt their investment behaviors to the changing market conditions, we also measured personality and self-efficacy. We expected that investment behavior in changing markets could be predicted by a combination of experience (students, professionals), personality (anxiety, optimism, impulsivity, and Openness to Experience), and self-efficacy (belief in one’s ability to make good decisions in an investment task). Results indicate that professionals do not significantly differ from students in their decisions. Personality and self-efficacy both predicted investment behavior. In particular, we found that optimism and anxiety were a liability in unfavorable markets, leading to unreasonable levels of risk. Impulsivity was a liability in both favorable and unfavorable markets, leading to high risk on unfavorable markets, and low risk in favorable markets. Openness to experience was an asset in unfavorable markets, leading to adjusted risk taking. Finally, self-efficacy was generally related to higher levels of risk.
    Keywords: risk taking; field experiment; personality; unfavorable conditions; professionals
    JEL: D53 D81 G11 C93 C91 D14
    Date: 2009–09–30
  2. By: Kaushik Basu
    Abstract: The paper argues that economism and, in particular, the individual drive to maximize utility and amass profit are not enough to ensure the efficient functioning of an economy; and that even for elementary economic activities, such as trade, exchange and contracting to occur smoothly, it is essential that human beings be endowed with appropriate social norms, such as a critical level of trustworthiness. This, in turn, implies that an economy’s development can depend significantly on whether the citizen is endowed with the relevant norms. Where these norms come from and how they gather stability remain open questions, though we can get some important insights from theories of evolutionary processes.
    Keywords: ecomism, economic rationality, profit, elementary economic, economy development, theories, economics, evolutionary processes trade, exchange, utility, human beings, rationality,
    Date: 2009
  3. By: Karin Knottenbauer
    Abstract: The paper gives attention to the question of whether the development of evolutionary theories in biology over the last twenty years has any implications for evolutionary economics. Though criticisms of Darwin and the modern synthesis have always existed, most of them have not been widely accepted or have been absorbed by the mainstream. Recent findings in evolutio¬nary biology have started to question again the main principles of the modern synthesis. These findings suggest amongst others that the phenomena of co-operation, communication, and self-organization have been under¬estimated, and that selection is not the predominant factor of evolution, but only one among many. Thus, in evolutionary economics, the question is whether the popular variation-retention-selection principle is still up to date. The implications for evolutionary economics with respect to analogies, generalized Darwinism, and the continuity hypothesis are also addressed.
    Keywords: Analogies, evo-devo, evolutionary economics, evolutionary biology, co-operation, genes, Lamarckism, modern synthesis, neo-Darwinism, selection, self-organization Length 18 pages
    Date: 2009–09

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