nep-neu New Economics Papers
on Neuroeconomics
Issue of 2020‒01‒13
four papers chosen by

  1. Individual differences in cortical processing speed predict cognitive abilities: A model-based cognitive neuroscience account By Schubert, Anna-Lena; Nunez, Michael D.; Hagemann, Dirk; Vandekerckhove, Joachim
  2. Cognitive Uncertainty By Benjamin Enke; Thomas Graeber
  3. Can personality traits explain compliance behaviour? - A study of compliance with water-protection rules in German agriculture By Funke, Katja; Hirschauer, Norbert; Peth, Denise; Mußhoff, Oliver; Becker, Oliver Arránz
  4. Some Contributions of Economics to the Study of Personality By James J. Heckman; Tomas Jagelka; Tim Kautz

  1. By: Schubert, Anna-Lena; Nunez, Michael D. (University of California, Irvine); Hagemann, Dirk; Vandekerckhove, Joachim
    Abstract: Previous research has shown that individuals with greater cognitive abilities display a greater speed of higher-order cognitive processing. These results suggest that speeded neural information processing may facilitate evidence accumulation during decision making and memory updating and thus yield advantages in general cognitive abilities. We used a hierarchical Bayesian cognitive modeling approach to test the hypothesis that individual differences in the velocity of evidence accumulation mediate the relationship between neural processing speed and cognitive abilities. We found that a higher neural speed predicted both the velocity of evidence accumulation across behavioral tasks and cognitive ability test scores. However, only a negligible part of the association between neural processing speed and cognitive abilities was mediated by individual differences in the velocity of evidence accumulation. The model demonstrated impressive forecasting abilities by predicting 36% of individual variation in cognitive ability test scores in an entirely new sample solely based on their electrophysiological and behavioral data. Our results suggest that individual differences in neural processing speed might affect a plethora of higher-order cognitive processes, that only in concert explain the large association between neural processing speed and cognitive abilities, instead of the effect being entirely explained by differences in evidence accumulation speeds.
    Date: 2018–12–18
  2. By: Benjamin Enke; Thomas Graeber
    Abstract: This paper introduces a formal definition and an experimental measurement of the concept of cognitive uncertainty: people’s subjective uncertainty about what the optimal action is. This concept allows us to bring together and partially explain a set of behavioral anomalies identified across four distinct domains of decision-making: choice under risk, choice under ambiguity, belief updating, and survey expectations about economic variables. In each of these domains, behavior in experiments and surveys tends to be insensitive to variation in probabilities, as in the classical probability weighting function. Building on existing models of noisy Bayesian cognition, we formally propose that cognitive uncertainty generates these patterns by inducing people to compress probabilities towards a mental default of 50:50. We document experimentally that the responses of individuals with higher cognitive uncertainty indeed exhibit stronger compression of probabilities in choice under risk and ambiguity, belief updating, and survey expectations. Our framework makes predictions that we test using exogenous manipulations of both cognitive uncertainty and the location of the mental default. The results provide causal evidence for the role of cognitive uncertainty in belief formation and choice, which we quantify through structural estimations.
    Keywords: cognitive uncertainty, beliefs, bounded rationality
    Date: 2019
  3. By: Funke, Katja (Martin Luther University Halle-Wittenberg); Hirschauer, Norbert; Peth, Denise; Mußhoff, Oliver; Becker, Oliver Arránz
    Abstract: Going beyond the rational choice approach used in conventional economics of crime, the question arises whether psychological personality traits analysis can contribute to a better understanding of non-compliance and, eventually, to the prevention of illicit behaviours. This study investigated how personality traits are related to compliance with environmental regulation in agriculture. The object of study was a water-protection rule that required farmers using fertilising to keep it a minimum distance away from nearby water bodies. Self-interested infringements can cause serious environmental damage to waters (negative externalities) through nitrogen runoff. In a survey among German farmers, we employed a 10-item version of the Big Five Inventory to measure the traits that are used as predictor variables in a regression analysis. The outcome variable was the farmers’ compliance behaviour in a business management game where rule-breaking was more profitable than rule-abidance. Some noteworthy findings were observed in the surveyed sample. (i) Neuroticism was positively related to ‘overall compliance’, measured as a binary yes/no variable; that is, more anxious farmers were less prone to rule-breaking. Surprisingly, however, a positive relationship between neuroticism and compliance was not found when looking separately at the deviant subgroup; here, greater neuroticism was associated with more severe rule violations, in terms of illicitly fertilised acreage. (ii) In the deviant subgroup, as might have been expected, higher levels of conscientiousness were associated with less severe rule-violations. Contrary to expectations, again, higher levels of agreeableness were linked to more severe non-compliance. A substantial positive relationship was found between extraversion and the severity of non-compliance, in accordance with ex-ante expectation. For openness to experience, no noteworthy results were obtained. The results indicate that agents with heterogeneous personality traits might react differently to identical economic and institutional environments. Moreover, it is suggested that, other than traits, there is another quality in agents (e.g. social control) that may have a decisive influence on their belonging to the compliant or non-compliant subpopulation. Farmers’ responses to changes brought forward by regulators who aim to prevent rule-breaking might therefore differ as well.
    Date: 2019–04–12
  4. By: James J. Heckman (The University of Chicago); Tomas Jagelka; Tim Kautz (Mathematica)
    Abstract: This paper synthesizes recent research in economics and psychology on the measurement and empirical importance of personality skills and preferences. They predict and cause important life outcomes such as wages, health, and longevity. Skills develop over the life cycle and can be enhanced by education, parenting, and environmental influences to different degrees at different ages. Economic analysis clarifies psychological studies by establishing that personality is measured by performance on tasks which depends on incentives and multiple skills. Identification of any single skill therefore requires isolation of confounding factors, accounting for measurement error using rich data and application of appropriate statistical techniques. Skills can be inferred not only by questionnaires and experiments but also from observed behavior. Economists advance the analysis of human differences by providing anchored measures of economic preferences and studying their links to personality and cognitive skills. Connecting the research from the two disciplines promotes understanding of the number and nature of skills and preferences required to characterize essential differences.
    Keywords: preferences, psychology, behavioral economics, human diversity
    JEL: C91 C93 D12 D91
    Date: 2019–12

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