New Economics Papers
on Neuroeconomics
Issue of 2010‒09‒03
seven papers chosen by

  1. The "Out of Africa" Hypothesis, Human Genetic Diversity, and Comparative Economic Development By Quamrul Ashraf; Oded Galor
  2. History, Culture, and Trade: A Dynamic Gravity Approach By Douglas L. Campbell
  3. Altruistic Behavior and Habit Formation By Harvey S. Rosen; Stephen T. Sims
  4. Overweighting Private Information: Three Measures, One Bias? By Gerlinde Fellner; Sebastian Krügel
  5. Unawareness in Dynamic Psychological Games By Carsten S. Nielsen; Alexander Sebald
  6. Endogenous Information Acquisition in Coordination Games By David P. Myatt; Chris Wallace
  7. The Transfer Space By Thomas Friedrich

  1. By: Quamrul Ashraf (Williams College); Oded Galor (Brown University)
    Abstract: This research argues that deep-rooted factors, determined tens of thousands of years ago, had a significant effect on the course of economic development from the dawn of human civilization to the contemporary era. It advances and empirically establishes the hypothesis that, in the course of the exodus of Homo sapiens out of Africa, variation in migratory distance from the cradle of humankind to various settlements across the globe affected genetic diversity and has had a long-lasting effect on the pattern of comparative economic development that is not captured by geographical, institutional, and cultural factors. In particular, the level of genetic diversity within a society is found to have a hump-shaped effect on development outcomes in both the pre-colonial and the modern era, reflecting the trade-off between the beneficial and the detrimental effects of diversity on productivity. While the intermediate level of genetic diversity prevalent among Asian and European populations has been conducive for development, the high degree of diversity among African populations and the low degree of diversity among Native American populations have been a detrimental force in the development of these regions. Further, the optimal level of diversity has increased in the process of industrialization, as the beneficial forces associated with greater diversity have intensified in an environment characterized by more rapid technological progress.
    Keywords: The "Out of Africa" hypothesis, Human genetic diversity, Comparative development, Income per capita, Population density, Neolithic Revolution, Land productivity
    JEL: N10 N30 N50 O10 O50 Z10
    Date: 2010–08
  2. By: Douglas L. Campbell
    Abstract: What determines trade patterns? Habit persistence in consumer tastes and learning-by-doing in production imply that history and culture matter. Deriving a dynamic gravity equation from a simple model, it is shown that cultural similarity is a product of history, so that trade patterns are a function of bilateral GDP, current trade costs, and the past history of trade costs. Using a trade data set which spans from 1870 to 2000, I demonstrate that many gravity variables operate via lagged trade, that historical trade shocks matter, and that trade patterns are persistent, even across centuries.
    Keywords: Dynamic Gravity Equation, Endogenous Preferences, Habit Persistence, Learning By-Doing.
    JEL: F10 F12 F22 N70
    Date: 2010–08–26
  3. By: Harvey S. Rosen (Princeton University); Stephen T. Sims (STS Associates)
    Abstract: This paper examines whether altruistic behavior is habit forming. We take advantage of a data set that includes a rich set of information concerning individuals’ donations of cash and time as adults as well as information about whether they were involved with charitable activities when they were young. The basic premise is that if altruistic behavior when young is a good predictor of such behavior in adulthood, then this is consistent with the notion that altruistic behavior is habit forming. Using U.S. data, we examine both donations of money and time, and find that engaging in charitable behavior when young is a strong predictor of adult altruistic behavior, ceteris paribus. A major issue in the interpretation of this result is that the correlation between youthful and adult altruistic behavior may be due to some third variable that affects both. While it is impossible to rule out such a possibility, we are able to control for family influences that likely could affect lifetime attitudes toward altruism. We find that, even taking this factor into account, altruistic behavior as a youth plays a significant role in explaining adult behavior. This result applies to donations of money and time to a variety of types of non-profit organizations.
    Keywords: altruistic behavior, donations, nonprofit fundraising
    JEL: D19 D83 L31
    Date: 2010–07
  4. By: Gerlinde Fellner (WU Vienna, Department of Economics, Institute of Economic Policy and Industrial Economics); Sebastian Krügel (Max Planck Institute of Economics, IMPRS "Uncertainty", Jena)
    Abstract: Overweighting private information is often used to explain various detrimental decisions. In behavioral economics and finance, it is usually modeled as a direct consequence of misperceiving signal reliability. This bias is typically dubbed overconfidence and linked to the judgment literature in psychology. Empirical tests of the models often fail to find evidence for the predicted effects of overconfidence. These studies assume, however, that a specific type of overconfidence, i.e., "miscalibration," captures the underlying trait. We challenge this assumption and borrow the psychological methodology of single-cue probability learning to obtain a direct measure for overweighting private information. We find that overweighting private information and measures of "miscalibration" are unrelated, indicating that different kinds of misperceptions are at work. Thus, in order to test the theoretical predictions of the overconfidence literature in economics and finance, one cannot rely on the well-established "miscalibration" bias. We find no gender differences in overconfidence for our measures except for one, where women are more overconfident than men.
    Keywords: overconfidence, miscalibration, signal perception, cognitive bias
    JEL: C91 D83
    Date: 2010–08–25
  5. By: Carsten S. Nielsen (Department of Economics, University of Copenhagen); Alexander Sebald (Department of Economics, University of Copenhagen)
    Abstract: Building on Battigalli and Dufwenberg (2009)'s framework of dynamic psychological games and the recent progress in the modeling of dynamic unawareness, we provide a general framework that allows for `unawareness' in the strategic interaction of players motivated by belief-dependent psychological preferences like reciprocity and guilt. We show that unawareness has a pervasive impact on the strategic interaction of psychologically motivated players. Intuitively, unawareness influences players' beliefs concerning, for example, the intentions and expectations of others which in turn impacts their behavior. Moreover, we highlight the strategic role of communication concerning feasible paths of play in these environments.
    Keywords: unawareness; extensive-form games; communication; belief-dependent preferences; sequential equilibrium
    JEL: C72 C73 D80
    Date: 2010–08
  6. By: David P. Myatt; Chris Wallace
    Abstract: In the context of a “beauty contest” coordination game (in which payoffs depend on the quadratic distance of actions from an unobserved state variable and from the average action) players choose how much costly attention to pay to various informative signals. Each signal has an underlying accuracy (how precisely it identifies the state) and a clarity (how easy it is to understand). The unique linear equilibrium has interesting properties: the signals which receive attention are the clearest available, even if they have poor underlying accuracy; the number of signals observed falls as the complementarity of players’ actions rises; and, if actions are more complementary, the information endogenously acquired in equilibrium is more public in nature. The consequences of “rational” inattention constraints on information transmission and processing are also studied.
    Keywords: Beauty contest games, Coordination games, Endogenous information acquisition, Rational inattention
    JEL: C72 D83
    Date: 2010
  7. By: Thomas Friedrich
    Abstract: Within the transfer space source and sink exchange substrates (material and energy) to selfishly optimize their own productivity. Under certain conditions this will lead to a productivity increase of the whole ensemble. The present day view that cooperation is the most productive interaction between organisms is an illusion. Whenever two not identically equipped parties meet with the potential to exchange substrates one party will become a source and the other a sink. This is realistically called exploitation. The outcome depends on the relation between fix cost, variable cost, productivity and affinity. Brute force and educational conditioning used by the sink take advantage of emotions to hide the real size of cost to the source in exploitation. In case the transfer of substrates leads to increased productivity parts of the productivity might be reinvested to keep the exploited party. The lasting relationship is called wise exploitation. Wise exploitation may last for one or many generations depending on the use of brute force, education or breeding. All actions have to be viewed under thermodynamic considerations and the benefit must always exceed the cost to maintain a stable system. This hypothesis explains observations from catalytic networks to societies.
    Keywords: Transfer space, symbiosis, productivity, saturation function.
    JEL: J10 C70 Q2
    Date: 2010–08–20

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.