nep-soc New Economics Papers
on Social Norms and Social Capital
Issue of 2016‒07‒30
five papers chosen by
Fabio Sabatini
Università degli Studi di Roma “La Sapienza”

  1. Does empathy Beget Guile? By Chen, Daniel L.
  2. Social networks and informal financial inclusion By Chai, Shijun; Chen, Yang; Huang, Bihong; Ye, Dezhu
  3. A needs theory of governance By Silvia Sacchetti; Ermanno Tortia
  4. Acquiring information through peers By Bernard Herskovic; Joao Ramos
  5. Identifying Peer Effects Using Gold Rushers By John Lynham

  1. By: Chen, Daniel L.
    Abstract: Some theories about the positive impact of markets on morality suggest that competition increases empathy, not between competitors, but between them and third parties. However, empathy may be a necessary evolutionary antecedent to guile, which is when someone knows what the other person wants and intentionally deceives him or her, and deception may have evolved as a means of exploiting empathy. This paper examines how individuals primed for empathy behave towards third parties in a simple economic game of deception. It reports the results of a data entry experiment in an online labor market. Individuals enter data randomized to be a prime for empathy, for guile, or a control. Empathy is then measured using a Reading the Mind in the Eyes Test and guile is measured using a simple economic game. Individuals primed for empathy become less deceptive towards third parties. Individuals primed for guile become less likely to perceive that deceiving an individual is unfair in a vignette. These results are robust to a variety of controls and to restricting to workers who entered the prime accurately. These findings are inconsistent with the hypothesis that empathy causes guile and suggests that empathy may cause those who are making judgements to become less deceptive.
    Keywords: Normative Commitments, Other-Regarding Preferences, Empathy, Deception, Guile
    JEL: D03 D64 K00
    Date: 2016–07
  2. By: Chai, Shijun (School of Economics, Xinyang Normal University); Chen, Yang (Division of Economics, Xi'an Jiaotong-Liverpool University); Huang, Bihong (Asian Development Bank Institute); Ye, Dezhu (School of Economics, Jinan University)
    Abstract: Using the 2011 China Household Finance Survey (CHFS) database, this article explores the heterogeneous impacts of social networks on informal financial inclusion for rural and urban households and identifies two mechanisms through which the informal institution changes households’ financial market decisions. The IV-Probit and IV-Tobit estimation results indicate that social networks significantly increase the probability of the household’s informal financial market participation, the size of informal lending and financing and the ratio of informal lending over the total household assets. By reducing risk aversion and the precautionary saving, we find social networks play a larger role in the urban area of China compared to the rural counterpart. And notably, the effects of informal institution, shaped by various cultural factors and kinships, remain strong and persistent even with formal institutions being firmly established.
    Keywords: Social Networks, Informal financial inclusion, Risk attitude, Precautionary saving, Formal institutions
    JEL: G21 O16 P34 Z13
    Date: 2016–07–08
  3. By: Silvia Sacchetti (The Open University); Ermanno Tortia (University of Trento)
    Abstract: New-institutional economics hypothesizes imperfect rationality, self-seeking preferences, monetary-related needs, and opportunism as fundamental features of human behavior. Consistently, new-institutionalist models of governance highlight the efficiency and transaction costs minimizing features of control rights and governance. Differently, needs theory of governance, as here presented, hypothesizes imperfect rationality, multiple needs, and reciprocity, in which case opportunism is reduced to an exception to individual behavior. Consistently, it presents a theory that links production governance with the wellbeing of those partaking in production. Building on Maslow’s human psychology, the governance model suggested in this paper is aimed at evidencing the self-actualization potential of control rights, organizational structures and practices. The application of Maslow’s theory to the institutional structure of organizations suggests that the deepest organizational layers (control rights and governance) broadly correspond to the most basic needs in Maslow’s theory (survival, security and belonging), while the outer layers (managerial models and employment relations) correspond to the fulfillment of the highest needs (self-esteem and self-actualization). Cooperative firms are used as an illustration of governance solutions consistent with needs theory in human psychology
    Keywords: new-institutional economics; opportunism; governance; needs theory; human psychology; self-fulfillment; cooperative firms; inclusive governance
    Date: 2016–07
  4. By: Bernard Herskovic (UCLA Anderson School of Management); Joao Ramos (NYU)
    Abstract: We study information acquisition from peers when agents’ actions balance adaptation and coordination motives. Agents acquire information personally and may obtain additional information by connecting to other agents. Although equally informative regarding adaptation, the source’s relative position in the information structure is relevant to form expectations about actions of other players. In our setting, information sources are not perfectly substitutable, and the information of an “opinion maker†—an agent whose information is more public—is more informative of how others act. We show that, when players choose their connections, (i) it is always preferable to connect to opinion makers, and (ii) opinion makers have less incentives to form links. These two results characterize the endogenous shape of the network: Any strict equilibrium of the network formation game generates a hierarchical information structure. Furthermore, if the marginal cost of acquiring information is increasing, the information structure is “core-periphery†. We take advantage of the simplicity of the equilibrium information structure to provide two applications. First, we analyze how much of the aggregate volatility of forecast can the information structure account for. Second, we study the origins of leadership: how individual characteristics influence the role of the agent in the information structure.
    Date: 2016
  5. By: John Lynham (Department of Economics, University of Hawaii)
    Abstract: Fishers pay attention to where other fishers are fishing, suggesting the potential for peer effects. But peer effects are difficult to identify without an exogenous shifter of peer group membership. We propose an identification strategy that exploits a shifter of peer group membership: gold rushes of new entrants. Following an exchange-rate-induced gold rush in an American fishery, we find that new entrants are strongly influenced by the location choices of their peers. Over-identification tests suggest that the assumptions underlying identification hold when new entrants are inexperienced but identification is lost as new entrants start to potentially influence their peers.
    Keywords: Peer Effects, Gold Rushes, Resource Extraction
    JEL: J0 Q0 D8

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