Past Talks : Spring, 2009
May 1st
The Chinese Miracle: Causes, Problems and Future
Xingyuan Feng
Abstract: The rapid economic development and transformation of the Chinese society over the past three decades has, by a large mass of analysts, been called a ‘Miracle’. The concept of a miracle, however, is controversial. One opinion is that Chinese growth might be nothing else than a "recovery and catch up" (China gets back what it missed). Another opinion is that it should have been a “miracle” if a nation haven’t developed fast since nobody could stop the speedy growth within that nation if all productive forces were liberated (labor, capital, land, institutions, and technology, open market etc) .This paper addresses the shortcomings of the existing interpretations by developing a new analytical framework based on North’s theory of institutional change and Hayek’s theory of institutional evolution. As such, this paper provides a multi-dimensional interpretation of the causes of the Chinese ‘Miracle’, including favorable initial conditions, a gradualist reform path, favorable informal institutions, etc. This paper also provides a set of policy recommendations to sustain the ‘Miracle’. Interestingly, the gradualist reform involves many el
ements: improved protection of property rights, increase in contract freedom and personal liability, relative stability of currency, increase in market openness, and relatively high degree of consistency of economic policy. These steps reflect indeed an unintended simulation and approximation to what Walter Eucken, founder of the Freiburg School advocated for as constituting principles of a competition order - This thought of competition order constituted the core source of thought for the attainment of the “Wirtschaftswunder” (Economic Miracle) in Germany.
April 24th
Estimating Aversion to Uncertainty
Glenn W. Harrison
ABSTRACT. It is intuitive that decision-makers might have attitudes towards uncertainty just as they might have attitudes towards risk. However, it is only recently that this intuitive notion has been formalized and axiomatically characterized. We estimate the extent of uncertainty aversion in a manner that is parsimonious and consistent with theory. We demonstrate that one can jointly estimate attitudes towards uncertainty, attitudes towards risk, and subjective probabilities in a rigorous manner. Our structural econometric model constructively demonstrates the theoretical claims that it is possible to define uncertainty aversion in an empirically tractable manner. Our results show that attitudes towards risk and uncertainty can be different, qualitatively and quantitatively, and that allowing for these differences can have significant effects on inferences about subjective probabilities.
-April 17th
Social Preferences and the brain functional and structural evidence
Bernd Weber
Abstract : Humans interact in everyday life and the extent to which social information influences our own decisions and perceptions is important for many economic and social transactions. This talk will give an overview over recent studies perfor
med in our lab on how humans integrate information about other people in the perception of own rewards and how brain reactivity in reward-related areas might influences our social preferences.In a study conducted with male subj
ects, reward-related brain activity in the ventral striatum was found to increase as the amount of the subject’s own reward increased relative to that of another subject. We extended this experiment to female subjects and additionally obtained comprehensive personality data as well as ratings for the pleasantness of different relative reward levels from all subjects. This allowed us to i) test for gender differences in relative reward processing in the brain ii) test for associations between brain activity and personality traits across subjects iii) test whether self-reported ratings are predictable by brain activity.
Reference paper can be downloaded at
-April 10th
From Perception to action: an Economic model of brain process
Isabelle Brocas
Abstract: We build on evidence from neurobiology to model the process through which the brain maps evidence received from the outside world into decisions. This mechanism can be represented by a decision-threshold model. The sensory system encodes information in the form of cell-firing. Cell-firing is then measured against a threshold and an action is triggered depending on whether the threshold is surpassed. The decision system is responsible for modulating the threshold. We show that, for a large class of situations, the (constrained) optimal threshold is set in a way that existing beliefs are likely to be confirmed. We then derive behavioral implications of this theory. Our mechanism predicts: (i) belief anchoring (the order in which evidence is received affects both beliefs and choices); (ii) polarization (individuals with opposite priors may polarize their opinions when receiving mixed evidence); (iii) payoff-dependence of beliefs and (iv) belief disagreement (individuals with identical priors who receive the same evidence may end up with different posterior beliefs).
The paper can also be downloaded at
-April 3rd
"Stress-Testing Institutional Arrangements via Agent-Based Modeling: Illustrative Results for U.S. Electric Power Markets"
Leigh Tesfatsion
ABSTRACT:The extraordinary economic crisis now taking place is leading to calls for a comprehensive restructuring of U.S. financial, health, energy, and education systems. The proposed restructuring takes the form of improved regulation and oversight of operations as well as possible changes in the form these operations take. Critics worry that the restructuring of these complex systems could produce unintended consequences, resulting in lower rather than higher efficiency and reliability. Given these concerns, pre-testing of proposed changes is eminently desirable, but also exceedingly difficult. This talk will focus on the potential use of agent-based computational test beds for stress-testing proposed changes in institutional arrangements in advance of actual implementation. The recently developed AMES test bed for U.S. restructured wholesale power markets will be used for concrete illustration.
Basic reference paper for talk: "The AMES Wholesale Power Market Test Bed: A Computational Laboratory for Research, Teaching, and Training
Competition and the Ratchet Effect
Marie Claire Villeval
Abstract: The 'ratchet effect' refers to a situation where a principal uses private information that is revealed by an agent's early actions to the agent's later disadvantage, in a context where binding multi-period contracts are not enforceable. In a simple, context-rich environment, we experimentally study the robustness of the ratchet effect to the introduction of ex post competition for principals or agents. While we do observe substantial and significant ratchet effects in the baselin
ny_mce/themes/advanced/langs/en.js" type="text/javascript"> e (no competition) case of our model, we find that ratchet behavior is nearly eliminated by labor-market competition; interestingly this is true regardless of whether market conditions favor principals or agents.
Paper can be view at
http://www.ices-gmu.org/article.php/474.html
- Feb 20th, 2009
Concatenate Coordination and Mutual Coordination
Daniel Klein, George Mason University
Abstract:
We tell of the evolving meaning of the term coordination as used by economists. The paper is based on systematic electronic searches (on "coord," etc.) of major works and leading journals. The term coordination first emerged in professional economics around 1880, to describe the directed productive concatenation of factors or activities within a firm. Also, transportation economists used the term to describe the concatenation of routes and trips of a transportation system. These usages represent what we term concatenate coordination. The next major development came in the 1930s from s
everal LSE economists (Hayek, Plant, Hutt, and Coase), who extended that concept beyond the eye of any actual coordinator. That is, they wrote of the concatenate coordination of a system of polycentric or spontaneous activities. These various applications of concatenate coordination prevailed until the next major development, namely, Thomas Schelling and game models. Here coordination referred to a mutual meshing of actions. Game theorists developed crisp ideas of coordination games (like "battle of the sexes"), coordination equilibria, convention, and path dependence. This "coordination" was not a refashioning, but rather a distinct concept, one we distinguish as mutual coordination. As game models became more familiar to economists, it
was mutual coordination that economists increasingly
had in mind when they spoke of "coordination." Economists switched, so to speak, to a new semantic equilib
rium. Now, mutual coordination overshadows the older notion of concatenate coordination. The two senses of coordination are conceptually distinct and correspond neatly to the two dictionary definitions of the verb to coordinate. Both are crucial to economics. We suggest that distinguishing between the two senses can help to clarify "coordination" talk. Also, compared to talk of "efficiency" and "optimality," concatenate coordination allows for a richer, more humanistic, and more openly aesthetic discussion of social affairs. The narrative is backed up by Excel worksheets that report on systematic content searches of the writings of economics using the worldwide web and, using JSTOR, of Quarterly Journal of Economics, Economic Journal, Journal of Political Economy, American Economic Review, and Economica.
Paper can be viewed at
http://swopec.hhs.se/ratioi/abs/ratioi0116.htm
- Feb 13th, 2009
Divergent Opinions
James Andreoni, University of California, San Diego
Abstract:
People often see the same evidence but draw opposite conclusions, becoming increasingly polarized over time. Prior discussions of this puzzle have focused on the failure of Bayesian reasoning, or on justifying non-common priors. By contrast, we explain diverging opinions using a Bayesian model with common priors. We assume two-dimensional uncertainty and no prior disagreement. Intuitively, one dimension of uncertainty is over the correct model or world-view through which the second dimension of uncertainty is ltered. Disagreement may arise and continually increase if additional information comes on only the second dimension. If individuals could communicate about all dimensions, however, agreement would follow. We support our model with an experiment and find that opinions do diverge, but are not fully unifi ed when "world views" are shared. We argue for a useful reframing of the puzzle: Why can't individuals share their private information on all dimensions of an issue, but instead concede to agree to disagree?
Paper can be downloaded at
http://econ.ucsd.edu/~jandreon/WorkingPapers/disagreement.pdf
- Feb 6th, 2009
Lost in the Mail: A Field Experiment on Crime
Ragan Petrie
Friday, February 6th
Carow Hall 2:15 -3:30 pm
Abstract:
Crime in the mail sector can hamper the development of electronic markets. We use a field experiment to detect crime and measure its differential impacts. We subtly, and realistically, manipulate the content and information available in mail sent to households and detect high levels of shirking and stealing. Eighteen percent of the mail never arrived at its destination, and even more was lost if there was even a slight hint of something additional inside the envelope. Our study demonstrates that privatization has been unable to extricate moral hazard and that crime is strategic and not equally distributed across the population.
Paper can be downloaded at
http://www2.gsu.edu/~ecorap/research/lostmail14.pdf
- Jan 30th, 2009
Does the Nature of Spillovers Matter? An Investigation into the Implications of Spillover Directionality in Research and Development Efforts
Andrew Gillen
Abstract:
In the second half of the 20th century - spurred by …findings that technological change played an important role in determining economic growth - research on innovation and Research and Development (R&D) became more common. The positive externalities, or spillovers, associated with R&D have typically been modeled as either benefiting everyone by expanding the pool of knowledge for everyone (symmetric), or as benefi…ting only those who are behind, by some measure, the investing …rm (asymmetric). In addition to the changes in R&D efforts that theoretical models would suggest based purely on profit maximization, it is possible that behavioral norms could effect decisions in ways that the current theories do not account for. This part examines the implications of these different assumptions about the nature of spillovers (symmetric vs. asymmetric) in an experimental setting to determine if the behavioral norms that have been observed elsewhere, notably inequality aversion, are likely to be observed in the area of R&D as well. Aggregate results give little evidence that the nature of spillovers matters, but there is considerable heterogeneity among the subjects, with some investing more and others less when spillovers are asymmetric. Overall, between a fourth and a third of subjects appear to significantly change their investments based on the nature of spillovers.
Paper can be downloaded at
http://myweb.fsu.edu/ajg03e/jmpaper.pdf
and
http://myweb.fsu.edu/ajg03e/dis.pdf
If Money Doesn't Buy Happiness, How could Happiness still be Contingent on Money? Resolving the Happiness Paradox
Elias L. Khalil
Abstract:
New data and more rigorous testing are questioning the Easterlin paradox, i.e., the general finding that happiness does not generally rise with the increase of income. The new data confirm the prediction of standard theory that income matters after all. However, anecdotal traditions in psychology concerning individual profiles affirm the old cliché that money does not buy happiness. That is, there is an inconsistency, called here the "happiness paradox," between standard economic theory and data, on the one hand, and anecdotal traditions in psychology. This paper aims to solve the happiness paradox. It starts by severing the conflation of happiness with wellbeing. This is done by highlighting the role of context-dependent satisfaction and how it is related to wellbeing.
Keywords: Easterlin paradox; happiness paradox; experienced satisfaction; life satisfaction; misery loves company; misery effect; free-lunch effect; self-motivation; desired wellbeing; actual wellbeing; context-dependent satisfaction
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