dunnettreader + behavioral_economics   62

Emmanuel Saez - Taxing the Rich More: Preliminary Evidence from the 2013 Tax Increase (Nov 2016) | NBER Working Papers
Taxing the Rich More: Preliminary Evidence from the 2013 Tax Increase
Emmanuel Saez
NBER Working Paper No. 22798 - Issued in November 2016
This paper provides preliminary evidence on behavioral responses to taxation around the 2013 tax increase that raised top marginal tax rates on capital income by about 9.5 points and on labor income by about 6.5 points. Using published tabulated tax statistics from the Statistics of Income division of the IRS, we find that reported top 1% incomes were significantly higher in 2012 than in 2013, implying a large short-run elasticity of reported income with respect to the net-of-tax rate in excess of one. This large short-run elasticity is due to income retiming for tax avoidance purposes and is particularly high for realized capital gains and dividends, and highest at the very top of the income distribution. However, comparing 2011 and 2015 top incomes uncovers only a small medium-term response to the tax increase as top income shares resumed their upward trend after 2013. Overall, we estimate that at most 20% of the projected tax revenue increase from the 2013 tax reform is lost through behavioral responses. This implies that the 2013 tax increase was an efficient way to raise revenue.
paywall  capital_gains  fiscal_policy  tax_collection  behavioral_economics  tax_increases  US_government  Obama_administration  1-percent  top-marginal_tax_rates  NBER  tax_policy  paper  tax_avoidance 
december 2016 by dunnettreader
Nicola Gennaioli, Yueran Ma, and Andrei Shleifer - Expectations and Investment (2016) | Andrei Shleifer
Gennaioli, Nicola, Yueran Ma, and Andrei Shleifer. 2016. “Expectations and Investment.” NBER Macroeconomics Annual, Vol. 30 (2015): 379-442.
Abstract
Using micro data from Duke University quarterly survey of Chief Financial Officers, we show that corporate investment plans as well as actual investment are well explained by CFOs’ expectations of earnings growth. The information in expectations data is not subsumed by traditional variables, such as Tobin’s Q or discount rates. We also show that errors in CFO expectations of earnings growth are predictable from past earnings and other data, pointing to extrapolative structure of expectations and suggesting that expectations may not be rational. This evidence, like earlier findings in finance, points to the usefulness of data on actual expectations for understanding economic behavior. -- downloaded via iPhone to DBOX
cognition  rational_choice  microeconomics  behavioral_economics  article  cognitive_bias  investment  cognitive_science  downloaded  rational_expectations  corporate_finance  extrapolation  microfoundations  heuristics 
august 2016 by dunnettreader
Bordalo, Pedro, Nicola Gennaioli, and Andrei Shleifer - “Competition for Attention” (2016) Rev of Econ Studies
Bordalo, Pedro, Nicola Gennaioli, and Andrei Shleifer. 2016. “Competition for Attention.” Review of Economic Studies 83 (2): 481-513. -- Abstract
We present a model of market competition in which consumers' attention is drawn to the products' most salient attributes. Firms compete for consumer attention via their choices of quality and price. Strategic positioning of a product affects how all other products are perceived. With this attention externality, depending on the cost of producing quality some markets exhibit “commoditized” price salient equilibria, while others exhibit “de-commoditized” quality salient equilibria. When the costs of quality change, innovation can lead to radical shifts in markets, as in the case of decommoditization of the coffee market by Starbucks. In the context of financial innovation, the model generates the phenomenon of “reaching for yield”. -- downloaded via iPhone to DBOX
behavioral_economics  attention  paywall  consumerism  competition  cognition  article  cognitive_bias  downloaded  prices  rational_choice  commodities  cognitive_science  consumer_demand 
august 2016 by dunnettreader
Psychologists at the Gate: Review of Daniel Kahneman’s Thinking, Fast and Slow (2012) | Andrei Shleifer - J of Econ Lit
Shleifer, Andrei. 2012. “Psychologists at the Gate: Review of Daniel Kahneman’s Thinking, Fast and Slow.” Journal of Economic Literature 50 (4): 1080-1091. -- downloaded via iPhone to DBOX
investors  cognition  neuroscience  reviews  books  credit  cognitive_bias  cognitive_science  financial_regulation  Minsky  risk_assessment  asset_prices  bubbles  creditors  downloaded  financial_system  credit_booms  behavioral_economics  financial_crisis 
august 2016 by dunnettreader
Bordalo, Gennaioli and Shleifer - Salience and Asset Prices (2013) | Andrei Shleifer - Am Econ Rev Papers
Bordalo, Pedro, Nicola Gennaioli, and Andrei Shleifer. 2013. “Salience and Asset Prices.” American Economic Review Papers and Proceedings 103 (3): 623-628. -- In Bordalo, Gennaioli, and Shleifer (2012a)— henceforth, BGS (2012a)—we described a new approach to choice under risk that we called salience theory. In comparisons of risky lotter- ies, we argued, individuals’ attention is drawn to those payoffs which are most different or salient relative to the average. In making choices, indi- viduals overweight these salient payoffs relative to their objective probabilities. A simple for- malization of such salience-based probability weighting provides an intuitive account of a vari- ety of puzzling evidence in decision theory, such as Allais paradoxes and preference reversals.
Salience theory naturally lends itself to the analysis of the demand for risky assets. After all, risky assets are lotteries evaluated in a context described by the alternative investments avail- able in the market. An asset’s salient payoff is naturally de ned as one most different from the average market payoff in a given state of the world. We present a simple model of inves- tor choice and market equilibrium in which salience in uences the demand for risky assets. This model accounts for several time series and cross-sectional puzzles in nance in an intuitive way, based on its key implication that extreme payoffs receive disproportionate weight in the market valuation of assets. -- downloaded via iPhone to DBOX
downloaded  risk_management  investors  investment  cognitive_bias  behavioral_economics  article  cognition  risk  heuristics  asset_prices 
august 2016 by dunnettreader
Pedro Bordalo, Katherine Coffman, Nicola Gennaioli & Andrei Shleifer - “Stereotypes” (Forthcoming 2016) Quarterly Journal of Economics
Citation:
Bordalo, Pedro, Katherine Coffman, Nicola Gennaioli, and Andrei Shleifer. Forthcoming. “Stereotypes.” Quarterly Journal of Economics. -- We present a model of stereotypes based on Kahneman and Tversky’s representative-ness heuristic. A decision maker assesses a target group by overweighting its representative types, defined as the types that occur more frequently in that group than in a baseline ref-erence group. Stereotypes formed in this way contain a “kernel of truth”: they are rooted in true di˙erences between groups. Because stereotypes focus on di˙erences, they cause belief distortions, particularly when groups are similar. Stereotypes are also context dependent: beliefs about a group depend on the characteristics of the reference group. In line with our predictions, beliefs in the lab about abstract groups and beliefs in the field about political groups are context dependent and distorted in the direction of representative types. -- downloaded via iPhone to DBOX
behavioral_economics  cognitive_bias  credit_crunch  financial_system  article  heuristics  bubbles  credit_booms  downloaded  cognition  investors  capital_markets 
august 2016 by dunnettreader
D. Georgarakos
Trust, Sociability, and Stock Market Participation
Dimitris Georgarakos1 and
Giacomo Pasini2
1Goethe University Frankfurt and Center for Financial Studies
2Venice University
Review of Finance (2011) 15 (4): 693-725. doi: 10.1093/rof/rfr028 -- This article investigates the importance of both trust and sociability for stock market participation and for differences in stockholding across Europe. We estimate significant effects for the two, and find that sociability can partly balance the discouragement effect on stockholding induced by low regional prevailing trust. We test for exogeneity of trust and sociability indicators using variation in history of political institutions and in frequency of contacts with grandchildren, respectively. Moreover, the effect of trust is stronger in countries with limited participation and low average trust, offering an explanation for the remarkably low stockholding rates of the wealthy living therein. - downloaded via iPhone to DBOX
trust  sociability  investors  financial_system  article  capital_markets  investment  behavioral_economics  downloaded 
july 2016 by dunnettreader
Stefan Linder, Nicolai J. Foss - Agency Theory :: SSRN April 23, 2013
Stefan Linder, ESSEC Business School -- Nicolai J. Foss, Copenhagen Business School - Department of Strategic Management and Globalization *--* Agency theory studies the problems and solutions linked to delegation of tasks from principals to agents in the context of conflicting interests between the parties. Beginning from clear assumptions about rationality, contracting and informational conditions, the theory addresses problems of ex ante (“hidden characteristics”) as well as ex post information asymmetry (“hidden action”), and examines conditions under which various kinds of incentive instruments and monitoring arrangements can be deployed to minimize the welfare loss. Its clear predictions and broad applicability have allowed agency theory to enjoy considerable scientific impact on social science; however, it has also attracted considerable criticism. -- PDF File: 35 -- Keywords: adverse selection, agency costs, compensation, conflict of interest, contracting, corporate governance, delegation, hidden action, hidden characteristics, incentive intensity, information asymmetry, informativeness, monitoring, moral hazard, motivation, nexus of contracts, pay-for-performance -- downloaded pdf to Note
paper  SSRN  economic_theory  social_sciences-post-WWII  microeconomics  microfoundations  behavioral_economics  incentives  incentives-distortions  agency  agents  game_theory  rational_choice  rationality-economics  rationality-bounded  information-asymmetric  adverse_selection  delegation  moral_psychology  moral_hazard  contracts  principal-agent  downloaded 
january 2016 by dunnettreader
Richard Thayer - Keynes's 'beauty contest' | The University of Chicago Booth School of Business - Sept 2015
Many other economists who supported the efficient-markets hypothesis (EMH) have been surprised by recent history, but there is one man who would not have been “shocked”: John Maynard Keynes.
capital_markets  Keynes  speculative_finance  asset_prices  financial_crisis  financial_regulation  EMH  behavioral_economics  bubbles  Instapaper  from instapaper
september 2015 by dunnettreader
Akerlof, G.A. and Shiller, R.J.: Phishing for Phools: The Economics of Manipulation and Deception. (eBook and Hardcover)
Phishing for Phools therefore strikes a radically new direction in economics, based on the intuitive idea that markets both give and take away. Akerlof and Shiller bring this idea to life through dozens of stories that show how phishing affects everyone, in almost every walk of life. We spend our money up to the limit, and then worry about how to pay the next month’s bills. The financial system soars, then crashes. We are attracted, more than we know, by advertising. Our political system is distorted by money. We pay too much for gym memberships, cars, houses, and credit cards. Drug companies ingeniously market pharmaceuticals that do us little good, and sometimes are downright dangerous. Phishing for Phools explores the central role of manipulation and deception in fascinating detail in each of these areas and many more. It thereby explains a paradox: why, at a time when we are better off than ever before in history, all too many of us are leading lives of quiet desperation. At the same time, the book tells stories of individuals who have stood against economic trickery—and how it can be reduced through greater knowledge, reform, and regulation. -- Intro downloaded pdf to Note
financial_crisis  kindle-available  behavioral_economics  competition  downloaded  market_manipulation  markets-psychology  financial_system  pharma  accountability  books  politics-and-money  marketing  information-asymmetric  markets-dependence_on_government  disclosure  markets-failure  financial_innovation  financial_regulation 
august 2015 by dunnettreader
Paul Frijters - An Economic Theory of Greed, Love, Groups, and Networks | Cambridge University Press - March 2013
PaperbackISBN: 9781107678941 $63.95 inc GST --;Why are people loyal? How do groups form and how do they create incentives for their members to abide by group norms? Until now, economics has only been able to partially answer these questions. In this groundbreaking work, Paul Frijters presents a new unified theory of human behaviour. To do so, he incorporates comprehensive yet tractable definitions of love and power, and the dynamics of groups and networks, into the traditional mainstream economic view. The result is an enhanced view of human societies that nevertheless retains the pursuit of self-interest at its core. This book provides a digestible but comprehensive theory of our socioeconomic system, which condenses its immense complexity into simplified representations. The result both illuminates humanity's history and suggests ways forward for policies today, in areas as diverse as poverty reduction and tax compliance.
books  economic_theory  economic_models  economic_sociology  utility  rationality-economics  behavioral_economics  networks  action-theory  self-interest  altruism  power  loyalty 
july 2015 by dunnettreader
Edward B. Rock - Institutional Investors in Corporate Governance (Jan 2015) :: SSRN - Oxford Handbook on Corporate Law and Governance, 2015, Forthcoming
Penn Law School -- chapter examines the role of institutional investors in corporate governance and the role of regulation in encouraging institutional investors to become active stewards. (..) what lessons we can draw from the US experience for the EU’s 2014 proposed amendments to the Shareholder Rights Directive.(...) survey how institutional investors themselves are governed and how they organize share voting. (...) 2 central questions: (a) why, over the last 25 years, have institutional investors not fulfilled the optimists’ hopes?; and (b) can the core incentive problems that subvert Institutional Investor activism be cured by regulation? The US experience [substantial deregulation led to only modest increases in shareholder activism], suggests (..) institutional investors’ relative passivity is a fundamental lack of incentives. I examine the disappointing results of the SEC’s long experiment with incentivizing mutual funds to vote their shares (...) the EU efforts are likely to be similarly disappointing. I then examine the important role that hedge funds now play in catalyzing institutional shareholders, and consider some of the risks in relying on such highly incentivized actors. -- PDF File: 26 -- saved to briefcase
chapter  books  SSRN  law-and-economics  behavioral_economics  financial_economics  financial_regulation  corporate_governance  corporate_law  corporate_finance  capital_markets  corporate_control_markets  institutional_investors  shareholders  shareholder_voting  mutual_funds  incentives  activist_investors  investors  hedge_funds  proxies  comparative_law  administrative_law  EU-law  regulation-harmonization  regulation-enforcement  fiduciaries  profit_maximization  EU-regulation 
july 2015 by dunnettreader
Ronald J. Gilson, Reinier Kraakman - Market Efficiency after the Financial Crisis: It's Still a Matter of Information Costs :: SSRN - European Corporate Governance Institute Law Working Paper No. 242/2014
Ronald J. Gilson, Stanford Law & Columbia Law; Reinier Kraakman, Harvard Law; both ECGI -- [Financial crisis is said] to have demonstrated the bankruptcy of the Efficient Capital Market Hypothesis (“ECMH”). (..) the ECMH had moved beyond academia, fueling decades of a deregulatory agenda. (..) when economic theory moves from academics to policy, (..) inevitably refashioned to serve the goals of political argument. This happened starkly with the ECMH. It was subject to its own bubble – (..) expanded from a narrow but important academic theory about the informational underpinnings of market prices to a broad ideological preference for market outcomes over even measured regulation. (..) the ECMH addresses informational efficiency, which is a relative, not an absolute measure. This focus on informational efficiency leads to a more focused understanding of what went wrong in 2007-2008. Yet informational efficiency is related to fundamental efficiency (..) Properly framing market efficiency focuses our attention on the frictions that drive a wedge between relative efficiency and efficiency under perfect market conditions. (..) relative efficiency is a diagnostic tool that identifies the information costs and structural barriers that reduce price efficiency which, in turn, provides part of a realistic regulatory strategy. While it will not prevent future crises, improving the mechanisms of market efficiency will make prices more efficient, frictions more transparent, and the influence of politics on public agencies more observable, which may allow us to catch the next problem earlier. PDF File: 87 -- saved to briefcase
paper  SSRN  financial_system  financial_regulation  financial_crisis  capital_markets  EMH  information-markets  information-asymmetric  efficiency  prices  financial_economics  animal_spirits  behavioral_economics 
july 2015 by dunnettreader
Robert H. Sitkoff - An Economic Theory of Fiduciary Law :: SSRN - Philosophical Foundations of Fiduciary Law, Andrew Gold & Paul Miller eds. (Oxford UP, 2014
Harvard Law -- In consequence of this common economic structure [agency problem], there is a common doctrinal structure that cuts across the application of fiduciary principles in different contexts. However, (..) the particulars of fiduciary obligation vary in accordance with the particulars of the agency problem in the fiduciary relationship at issue. This explains (1) the purported elusiveness of fiduciary doctrine and (2) why courts apply fiduciary law both categorically, such as to trustees and (legal) agents, as well as ad hoc to relationships involving a position of trust and confidence that gives rise to an agency problem. (...) a functional distinction between primary and subsidiary fiduciary rules. In all fiduciary relationships we find general duties of loyalty and care, typically phrased as standards, (..) we also find specific subsidiary fiduciary duties, often phrased as rules, that elaborate on the application of loyalty and care to commonly recurring circumstances in the particular form of fiduciary relationship. (..) the puzzle of why fiduciary law includes mandatory rules that cannot be waived in a relationship deemed fiduciary. Committed economic contractarians, such as Easterbrook and Fischel, have had difficulty in explaining why the parties to a fiduciary relationship do not have complete freedom of contract. The answer is that the mandatory core of fiduciary law serves a cautionary and protective function within the fiduciary relationship as well as an external categorization function that clarifies rights for third parties. -- PDF File: 14 -- Keywords: fiduciary, agency, trust, loyalty, care, prudence, agency costs, duty
chapter  books  SSRN  law-and-economics  behavioral_economics  philosophy_of_law  jurisprudence  fiduciaries  agents  principal-agent  freedom_of_contract  trust  trusts  duty_of_care  duty_of_loyalty  conflict_of_interest  legal_reasoning  rights-legal  duties-legal  common_law 
july 2015 by dunnettreader
Lee Anne Fennell, Richard H. McAdams, eds. - Fairness in Law and Economics: Introduction :: SSRN - (Edward Elgar 2013)
Lee Anne Fennell and Richard H. McAdams, both University of Chicago Law School -- University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 704 -- This introduction, prepared for an edited volume, offers some observations on the importance — indeed, inescapability — of fairness concerns in law and economics. The relationship between fairness and the economic concept of efficiency is usually cast as an adversarial one. Rational choice economics typically describes human behavior as motivated by simple self-interest, rather than by concerns of morality, justice, or fairness. But we have found that the connections between concepts of fairness and the economic analysis of law are robust and diverse. After discussing some of these linkages, we describe the organization and content of the volume we have compiled. In it, economics engages with fairness, challenging the idea that the two concepts are alien to each other. -- PDF File: 18 -- Keywords: fairness, law and economics -- downloaded pdf to Note
chapter  books  SSRN  law-and-economics  behavioral_economics  game_theory  rational_choice  rationality-economics  fairness  efficiency  welfare_economics  self-interest  altruism  microeconomics  policymaking  legal_system  legal_theory  legal_reasoning  utility  status_quo_bias  downloaded 
july 2015 by dunnettreader
Lee Anne Fennell, Richard H. McAdams - The Distributive Deficit in Law and Economics :: SSRN - Minnesota Law Review, Forthcoming (April 2015)
Lee Anne Fennell, Richard H. McAdams, both University of Chicago Law School -- University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 713 -- Welfarist law and economics ignores the distributive consequences of legal rules to focus solely on efficiency, even though distribution unambiguously affects welfare, the normative maximand. The now-conventional justification for disregarding distribution is the claim of tax superiority: that the best means of influencing or correcting distribution is via tax-and-transfer. Critics have observed that optimal redistribution through tax may be politically infeasible, but have generally overlooked the rejoinder that the same political impediments to redistribution through tax will block redistribution through legal rules. This “invariance hypothesis,” as we label it, holds that there is only one distributive equilibrium and that Congress will offset through tax any deviations from it. We highlight the centrality of invariance to the conventional economic wisdom and assert that it is just as relevantly false as the zero transaction cost assumption. In contexts where political impediments to tax-based redistribution exceed the impediments to doctrinal redistribution, it may be possible to increase welfare by redistributing outside of tax. Welfarists should, therefore, devote as much scholarly attention to the “political action costs” of redistribution as they do to transaction costs.-- PDF File: 65. -- Keywords: redistribution, tax-and-transfer, legal rules, law and economics, welfare economics -- saved to briefcase
article  SSRN  philosophy_of_law  welfare_economics  behavioral_economics  law-and-economics  redistribution  tax_policy  transaction_costs  inequality  inequality-wealth  policymaking  US_politics 
july 2015 by dunnettreader
Noah Smith - Economics Gets Real - Bloomberg View - June 2015
“It works in practice, but does it work in theory?” This joke is so commonly applied to economists that no one even knows who said it originally. The idea fits… Still too polyanna "both sides do it" and facts only have a modest liberal bias, but nice roundup of interesting papers and research programs on the empirical side that at least puts the kabosh on the Theory leads empirical which can be fitted or handwaved away which dominated the better part of the 1970s to the Great Depression -- and the Great Moderation is being reexaminedas not necessarily all so great
Instapaper  macroeconomics  microeconomics  microfoundations  behavioral_economics  economic_theory  links  from instapaper
june 2015 by dunnettreader
Thorsten Beck, Ralph De Haas, Steven Ongena - Understanding Emerging Market Banks: A new eBook | VOX, CEPR’s Policy Portal - 06 November 2013
New micro-level data sets allow better testing of existing and new hypotheses on how banks operate in the often challenging environment of emerging markets. This column introduces an eBook that reports on the findings of a recent conference in London on using different research methodologies and data sources in banking research the way towards an exciting research agenda. The papers presented in the conference and summarised in this eBook point *-* First, more detailed micro-level data help researchers and practitioners understand the impact of innovative products, lending techniques, and delivery channels. *-* Second, micro-level data allow a more careful analysis of the impact of specific financial-sector policies on banks and customers. *'* Third, the data opens the important area of how demand- and supply-side constraints on entrepreneurs affect access to external finance. Applying lessons from behavioural economics will be critical in the third point. -- didn't download
etexts  financial_economics  banking  microfinance  emerging_markets  financial_innovation  property_rights  rule_of_law  accounting  methodology-quantitative  methodology-qualitative  SMEs  investment  entrepreneurs  access_to_finance  access_to_services  behavioral_economics 
may 2015 by dunnettreader
Richard Thaler - Unless You Are Spock, Irrelevant Things Matter in Economic Behavior - NYTimes.com - May 2010
Early in my teaching career I managed to get most of the students in my class mad at me. A midterm exam caused the problem. I wanted the exam to sort out the… He's finding a larger audience for the themes of his new book, Misbehaving
behavioral_economics  rational_choice  rationality-economics  microeconomics  Instapaper  from instapaper
may 2015 by dunnettreader
Herbert A. Simon - Altruism and Economics (May, 1993) | JSTOR - The American Economic Review
Herbert A. Simon,The American Economic Review, Vol. 83, No. 2, Papers and Proceedings of the Hundred and Fifth Annual Meeting of the American Economic Association (May, 1993), pp. 156-161 -- overview of how he models "utility" to handle bounded rationality, and how groups need to be included in utility behavior models to get at "altruism" or preferences for other-regarding behavior -- basic message is public choice and rational choice have such an impoverished concept of "rationality" they will never be able to get their axiomatic models to work with what requires rich empirical observations -- doesn't say it, but their limited concept of rationality is less an empirically verified theory re how the world works, but rather a bundle of normative assumptions -- and when they try to extend what's really prescriptive to areas like the family, they've gotten way outside their lane -- downloaded pdf to Note
paper  jstor  economic_theory  economic_sociology  microeconomics  behavioral_economics  rational_choice  rationality-economics  rationality-bounded  rationality-adaptive  Darwinism  evolution-as-model  evolution-social  evolution-group_selection  self-interest  altruism  utility  public_choice  Simon_Herbert  downloaded 
april 2015 by dunnettreader
Andrew W. Lo - Reconciling Efficient Markets with Behavioral Finance: The Adaptive Markets Hypothesis - 2005 :: SSRN - Journal of Investment Consulting, Forthcoming
Massachusetts Institute of Technology (MIT) - Sloan School of Management; Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL); National Bureau of Economic Research (NBER) -- The battle between proponents of the Efficient Markets Hypothesis and champions of behavioral finance has never been more pitched, and there is little consensus as to which side is winning or what the implications are for investment management and consulting. In this article, I review the case for and against the Efficient Markets Hypothesis, and describe a new framework - the Adaptive Markets Hypothesis - in which the traditional models of modern financial economics can co-exist alongside behavioral models in an intellectually consistent manner. Based on evolutionary principles, the Adaptive Markets Hypothesis implies that the degree of market efficiency is related to environmental factors characterizing market ecology such as the number of competitors in the market, the magnitude of profit opportunities available, and the adaptability of the market participants. Many of the examples that behavioralists cite as violations of rationality that are inconsistent with market efficiency - loss aversion, overconfidence, overreaction, mental accounting, and other behavioral biases - are, in fact, consistent with an evolutionary model of individuals adapting to a changing environment via simple heuristics. Despite the qualitative nature of this new paradigm, I show that the Adaptive Markets Hypothesis yields a number of surprisingly concrete applications for both investment managers and consultants. -- Pages in PDF File: 44 Keywords: Efficient markets, behavioral finance, adaptive markets
paper  SSRN  financial_economics  EMH  behavioral_economics  markets-structure  markets-psychology  rationality-economics  rationality-adaptive  efficiency  heuristics  methodology-qualitative  methodology-quantitative  complex_adaptive_systems  downloaded 
april 2015 by dunnettreader
Gennaioli Shleifer and Vishny - Money Doctors (2015) | Andrei Shleifer
2015. “Money Doctors.” Journal of Finance 70 (1): 91-114.
Abstract
We present a new model of investors delegating portfolio management to professionals based on trust. Trust in the manager reduces an investor’s perception of the riskiness of a given investment, and allows managers to charge fees. Money managers compete for investor funds by setting fees, but because of trust, fees do not fall to costs. In equilibrium, fees are higher for assets with higher expected return, managers on average under perform the market net of fees, but investors nevertheless prefer to hire managers to investing on their own. When investors hold biased expectations, trust causes managers to pander to investor beliefs. -- downloaded via iPhone to DBOX
investors  risk-mitigation  risk_premiums  risk  liquidity  long-term  article  benchmarks  consumer_demand  institutional_investors  asset_prices  trust  capital_markets  financial_instiutions  risk_management  flight-to-quality  behavioral_economics  investment  management_fees  financial_innovation  downloaded  risk_assessment  asset_management 
march 2015 by dunnettreader
Janet L. Yellen, “Behavioral Economics and Economic Policy in the Past and Future” (September 2007 speech) - President and CEO, Federal Reserve Bank San Francisco
Panel on: “Behavioral Economics and Economic Policy in the Past and Future”
Federal Reserve Bank of Boston Conference: “Implications of Behavioral Economics for Economic Policy”, Boston, Massachusetts, September 28, 2007 -- linked to as good literature overview for behavioral_economics and its uses -- downloaded pdf to Note
speech  Yellen  Fed  central_banks  monetary_policy  fiscal_policy  economic_policy  behavioral_economics  economic_theory  economic_sociology  macroeconomics  microfoundations  incentives  incentives-distortions  lit_survey  bibliography  downloaded 
february 2015 by dunnettreader
Rajiv Sethi: On Animal Spirits and Knee-Jerk Reactions | December 2009
Mark Thoma re his trying, when reading Schiller, to overcome a knee-jerk reaction to claims that mass psychology drives markets rather than the reverse. Seth says: I too have the greatest respect for Shiller and consider his 1981 paper on stock price (relative to dividend) volatility to be an absolute classic. But I can't help thinking that too much is being asked of behavioral economics at this time, (..) regularities identified in controlled laboratory experiments with standard subject pools have limited application to environments in which the distribution of behavioral propensities is both endogenous and psychologically rare. This is the case in financial markets (..) Those who enter the profession are unlikely to be psychologically typical, and market conditions determine which behavioral propensities survive and thrive at any point in historical time. If one is to look beyond economics for metaphors and models, why stop at psychology? For financial market behavior, a more appropriate discipline might be evolutionary ecology. This is not a new idea. (..) look at the chapter on "The Ecology of Markets" in Victor Niederhoffer's extraordinary memoir. Or study Hyman Minsky's financial instability hypothesis .. which depends explicitly on the assumption that aggressive financial practices are rapidly replicated during periods of stable growth, eventually becoming so widespread that systemic stability is put at risk. To my mind this reflects an ecological rather than psychological understanding of financial market behavior.
behavioral_economics  financial_economics  financial_system  social_psychology  systems-complex_adaptive  ecology  Minsky  Schiller  animal_spirits  capital_markets  financial_crisis  principal-agent  markets-psychology  markets-structure  contagion 
february 2015 by dunnettreader
Paul A. Lewis, review essay - Varieties of Emergence: Minds, Markets and Novelty (STUDIES IN EMERGENT ORDER, VOL 4 (2011): 170-192) :: SSRN
King's College London - Department of Political Economy -- This paper is an essay review of Richard Wagner's book, 'Mind, Society and Human Action'. It focuses on the ontological presuppositions of Wagner's account of of the social world (that is, on what Wanger's account presupposes about the nature of social reality). Issue discussed include the following: the nature of emergence and emergent properties; spontaneous order, and the shortcomings of Walrasian general equilibrium theory in modelling it; the significance of the impact of social interaction on peolpe's preferences and dispositions; and the role of novelty and innovation in Wagner's account of the market process. -- Number of Pages in PDF File: 23 -- Keywords: Emergence, complexity, Austrian Economics, ontology, spontaneous order, novelty -- downloaded pdf to Note
article  review  SSRN  philosophy_of_social_science  social_theory  ontology-social  mind  social_order  social_process  preferences  emergence  equilibrium  heterodox_economics  Innovation  complexity  economic_models  utility  behavioral_economics  markets-psychology  markets  methodology  methodology-qualitative  downloaded  EF-add 
february 2015 by dunnettreader
Paul A. Lewis - An Analytical Core for Sociolgy: A Complex, Hayekian Analysis (2014, Review of Behavioral Economics, Forthcoming) :: SSRN
Lewis, Paul A., An Analytical Core for Sociolgy: A Complex, Hayekian Analysis (November 11, 2014). Review of Behavioral Economics, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2522810 -- King's College London - Department of Political Economy -- This paper develops a Hayekian perspective on Herbert Gintis, and Dirk Helbing's, attempts to develop a unified analytical approach to the social sciences. Like Hayek, Gintis and Helbing view both the economy, and also the human mind, as a complex adaptive system. Their emphasis on emergence, on group selection, on the social relations that structure people’s interactions, and on the importance of motivations stemming from so-called 'social preferences', sees them develop themes present in Hayek's own work, often in ways that build on and strengthen Hayek's own analysis. However, Gintis and Helbing's continued commitment to a model of people as maximising their expected utility, and to general equilibrium theory, arguably leaves them less able than Hayek to do justice to the importance of innovation, novelty and radical uncertainty in the economic process. -- Number of Pages in PDF File: 24 -- Keywords: Gintis, complexity, evolution, emergence, Hayek, reductionism, behavioral economics, equilibrium, order, uncertainty. -- downloaded pdf to Note
paper  SSRN  social_theory  Hayek  Gintis  complexity  complex_adaptive_systems  evolution-as-model  evolution-social  evolutionary_biology  evolution  emergence  behavioral_economics  behavioralism  evolution-group_seledtion  rationality-economics  rational_choice  rationality-bounded  utility  social_order  uncertainty  reductionism  equilibrium  Innovation  economic_theory  economic_sociology  downloaded  EF-add 
february 2015 by dunnettreader
Sven Ove Hansson -Risk (updated 2011) | Stanford Encyclopedia of Philosophy
Since the 1970s, studies of risk have grown into a major interdisciplinary field of research. Although relatively few philosophers have focused their work on risk, there are important connections between risk studies and several philosophical subdisciplines. This entry summarizes the most well-developed of these connections and introduces some of the major topics in the philosophy of risk. It consists of six sections dealing with the definition of risk and with treatments of risk related to epistemology, the philosophy of science, the philosophy of technology, ethics, and the philosophy of economics.
1. Defining risk [including objective vs subjective and risk vs uncertainty - the latter comparison mostly formalized in decision tgeory]
2. Epistemology
3. Philosophy of science
4. Philosophy of technology
5. Ethics
6. Risk in economic analysis
Related Entries -- causation: in the law | causation: probabilistic | consequentialism | contractarianism | economics, philosophy of | game theory | luck: justice and bad luck | scientific knowledge: social dimensions of | technology, philosophy of
philosophy  epistemology  epistemology-social  epistemology-moral  causation  causation-social  probability  Bayesian  moral_philosophy  utilitarianism  utility  rights-legal  game_theory  philosophy_of_science  philosophy_of_social_science  economic_theory  behavioral_economics  financial_economics  sociology_of_knowledge  philosophy_of_law  risk  risk-mitigation  risk_management  uncertainty  rational_choice  rationality-economics 
february 2015 by dunnettreader
Seamus Bradley Imprecise Probabilities (Dec 2014) | Stanford Encyclopedia of Philosophy
It has been argued that imprecise probabilities are a natural and intuitive way of overcoming some of the issues with orthodox precise probabilities. Models of this type have a long pedigree, and interest in such models has been growing in recent years. This article introduces the theory of imprecise probabilities, discusses the motivations for their use and their possible advantages over the standard precise model. It then discusses some philosophical issues raised by this model. There is also a historical appendix which provides an overview of some important thinkers who appear sympathetic to imprecise probabilities. *-* Related Entries -- belief, formal representations of | epistemic utility arguments for probabilism | epistemology: Bayesian | probability, interpretations of | rational choice, normative: expected utility | statistics, philosophy of | vagueness
epistemology  philosophy_of_science  technology  probability  risk  uncertainty  rational_choice  rationality-economics  rationality  rationality-bounded  statistics  Bayesian  linguistics  causation  causation-social  causation-evolutionary  complexity  complex_adaptive_systems  utility  behavioral_economics  behavioralism  neuroscience  vagueness 
february 2015 by dunnettreader
Filip Palda, A school in decline: In Chicago, economists honour Gary Becker | Financial Post | November 4, 2014
Too bad. Becker was far superior to his promoters and acolytes - same with Coase. An embarrassingly feeble celebration of the Becker-Friedman-Stigler counter-revolution of outsider genius rebels against "Keynesian hegemony" beginning in the 1950s. The take-away seems to have been that markets are efficient when left alone and that government programs will inevitably be defeated by either regulatory capture or clever, rational, forward-looking agents that will game the system to produce an unintended (often perverse) outcome. Ironically, the only big example chosen to illustrate how Becker's forays into other social sciences flummoxed left-wing by overturning their cherished worldview looks increasingly flimsy - treating criminals as rational calculating economic agents rather than victims of assorted "pathologies." The microeconomist "knows" that the key to behavioral change is to just get the incentives and prices right through adjusting levels and types of punishment or type and amount of policing. Unfortunately for this example of economic imperialism, It's now clear that the enormous increase in crime rates over decades, followed by an equally enormous decline, shows that macro effects of some, yet to be agreed upon, social factors simply swamped any of the micro concerns of Becker's rational calculating agents. That's not to suggest microfoundations were irrelevant, but it increasingly appears that individual behavior was affected by factors of precisely the opposite sort from those that would be involved in rational utility calculations - the environmental poisoning of children's neurological systems, especially in the segregated urban-industrial ghettos into which the black population was forced to live, that reduced the capacity for self-control and rational calculation, and increased impulsive, indeed irrational, aggressive behavior, too often violent crime. And as the amount of poisoning has declined, so too has irrational, impulsive violence. But despite the accumulating evidence of macro factors, we can expect for decades to come that micro textbooks and right-wing economists will be reciting the "lessons" Becker's approach has "taught" for designing social policy. Just as they "know" voluntary unemployment doesn't exist - only that the government must be interfering with the prices and market incentives. Pthew!
20thC  intellectual_history  economic_theory  social_theory  behavioral_economics  microeconomics  microfoundations  incentives  prices  markets_in_everything  crime  criminal_justice  Chicago_School 
january 2015 by dunnettreader
George Akerloff - The Missing Motivation in Macroeconomics | AEA Presidential Address 2007
The discovery of five neutralities surprised the economics profession and forced the re-thinking of macroeconomic theory. Those neutralities are: the independence of consumption and current income (given wealth); the independence of investment and finance decisions (the Modigliani- Miller theorem); inflation stability only at the natural rate of unemployment; the ineffectiveness of macro stabilization policy with rational expectations; and Ricardian equivalence. However, each of these surprise results occurs because of missing motivation. The neutralities no longer occur if decision makers have natural norms for how they should behave. This lecture suggests a new agenda for macroeconomics with inclusion of those norms. -- downloaded pdf to iPhone
economic_theory  macroecomics  behavioral_economics  downloaded 
january 2015 by dunnettreader
Capitalist Revolutionary — Roger E. Backhouse, Bradley W. Bateman | Harvard University Press
The Great Recession of 2008 restored John Maynard Keynes to prominence. After decades when the Keynesian revolution seemed to have been forgotten, the great British theorist was suddenly everywhere. The NYT asked, “What would Keynes have done?” The FT wrote of “the undeniable shift to Keynes.” Le Monde pronounced the economic collapse Keynes’s “revenge.” Two years later, following bank bailouts and Tea Party fundamentalism, Keynesian principles once again seemed misguided or irrelevant to a public focused on ballooning budget deficits. In this readable account, Backhouse and Bateman elaborate the misinformation and caricature that have led to Keynes’s repeated resurrection and interment since his death in 1946. Keynes’s engagement with social and moral philosophy and his membership in the Bloomsbury Group of artists and writers helped to shape his manner of theorizing. Though trained as a mathematician, he designed models based on how specific kinds of people (such as investors and consumers) actually behave—an approach that runs counter to the idealized agents favored by economists at the end of the century. Keynes wanted to create a revolution in the way the world thought about economic problems, but he was more open-minded about capitalism than is commonly believed. He saw capitalism as essential to a society’s well-being but also morally flawed, and he sought a corrective for its main defect: the failure to stabilize investment. Keynes’s nuanced views, the authors suggest, offer an alternative to the polarized rhetoric often evoked by the word “capitalism” in today’s political debates.
books  kindle-available  intellectual_history  20thC  entre_deux_guerres  economic_theory  macroeconomics  Great_Depression  gold_standard  public_finance  unemployment  capitalism  moral_philosophy  political_economy  economic_culture  economic_reform  economic_policy  probability  behavioral_economics  microfoundations  neoclassical_economics  Keynes  Keynesianism  Great_Recession  investment 
september 2014 by dunnettreader
Lance Taylor - Maynard's Revenge: The Collapse of Free Market Macroeconomics (2011) | Harvard University Press
Taylor argues that the ideas of J.M. Keynes and others provide a more useful framework both for understanding the crisis and for dealing with it effectively. Keynes’s basic points were fundamental uncertainty and the absence of Say’s Law. He set up machinery to analyze the macro economy under such circumstances, including the principle of effective demand, liquidity preference, different rules for determining commodity and asset prices, distinct behavioral patterns of different collective actors, and the importance of thinking in terms of complete macro accounting schemes. Economists working in this tradition also worked out growth and cycle models. Employing these ideas throughout Maynard’s Revenge, Taylor provides an analytical narrative about the causes of the crisis, and suggestions for dealing with it. 1. Macroeconomics. 2. Macroeconomic Thought during the Long 19thC. 3. Gold Standard, Reparations, Mania, Crash, and Depression. 4. Maynard Ascendant. 5. Keynesian Growth, Cycles, and Crisis. 6. The Counterrevolution. 7. Finance. 8. The International Dimension. 9. Keynesianism and the
books  intellectual_history  economic_theory  economic_history  economic_models  18thC  19thC  20thC  social_sciences-post-WWII  entre_deux_guerres  political_economy  macroeconomics  classical_economics  neoclassical_economics  Keynes  Keynesianism  Post-Keynesian  finance_capital  financial_economics  microfoundations  EMH  rational_expectations  rationality-economics  rationality-bounded  behavioral_economics  business_cycles  Great_Depression  Great_Recession  financial_crisis  gold_standard  economic_growth  international_monetary_system  balance_of_payments  FX  uncertainty  liquidity  savings  Labor_markets  wages 
september 2014 by dunnettreader
Jon Elster - One Social Science or Many? - 2009 | Scribd
Discusses his version of methodological individualism and aggregated units of analysis as "second best" -- example of household as unit distorts behavior because doesn't capture social dynamics within hiusehold -- ends with appeal to the various social sciences reading classics of history -- jn other wirds, "history is philosophy teaching by example"
paper  Scribd  social_theory  social_sciences-post-WWII  behavioral_economics  methodology-quantitative  methodology  individualism-methodology  Bolingbroke  historical_sociology  history-as_experiment  history-and-social_sciences 
august 2014 by dunnettreader
Chris Dillow - Stumbling and Mumbling: What can economics explain? - May 2014
The death of Gary Becker, the father of the "economics of everything" set me wondering: could it be that basic neoclassical economics does a better job of explaining "non-economic" behaviour than it does of economic phenomena? Take three examples where basic neoclassical is, at best, questionable: - A theory of distribution. The idea that wages are equal to workers' marginal product is deeply questionable. .. And the idea of a marginal product of capital is just close to meaningless, which gives neoclassical economics little idea of where profits come from. - The Solow-Swan growth model found that most economic growth was due to exogenous technical progress, which is pretty much no explanation of growth at all... - The neoclassical explanation of unemployment stresses wage inflexibility and "rigidities". But this fails to account for why unemployment was high in the 19th century. By contrast, Beckerian economics has given us some useful insights into crime, family life (pdf) and racial discrimination. There might be good reasons for this difference. Matters of individual choice are often more tractable in the "non-economic" than economic arena. -- as usual Chris provides gobs of links
economic_theory  economic_growth  economic_models  neoclassical_economics  behavioral_economics  rational_choice  rationality-economics  social_theory  links  EF-add 
may 2014 by dunnettreader
Ben Ho - The economics of apologies | vox 13 May 2014
Apologies are often hard – that’s the point. An apology is due when trust is broken, and to restore trust the apology must be hard. This column discusses a model of apologies as costly signals with some recent experimental evidence.
behavioral_economics  trust  you  relations-social  game_theory 
may 2014 by dunnettreader
Eduardo Fernández-Huerga - The Economic Behavior of Human Beings: The Institutional/Post-Keynesian Model | JSTOR: Journal of Economic Issues, Vol. 42, No. 3 (Sep., 2008), pp. 709-726
This paper attempts to present the basic features that would define a model of behavior suited to an institutional and post-Keynesian approach. To facilitate explanation, human behavior is divided into three phases: motivation, cognition and reasoning and decision-making. Motivation appears as a process directed toward the satisfaction of a complex structure of various needs and wants. The role of emotions and the social and cognitive aspects of motivation are recognized. Moreover, it is also recognized that human beings have limited cognitive and rational capacities, and it is accepted that they are potentially creative. Partly as a consequence of that, cognition becomes a social act and knowledge of reality is subject to fundamental uncertainty. Finally, human rationality (or intelligence) is associated with a search for good solutions, and it includes elements of procedural rationality, creativity and emotional rationality. The role of habits and institutions in all these phases is stressed. -- good references -- didn't download
article  jstor  social_theory  economic_theory  economic_sociology  institutional_economics  Post-Keynesian  behavioral_economics  cognition-social  rationality-economics  creativity  uncertainty  motivation  decision_theory  bibliography  EF-add 
may 2014 by dunnettreader
Robert's Stochastic thoughts: Thoughts on "Paradigm Shifts" - April 2014
I think macroeconomics works OK provided one sticks to 1972 vintage macroeconomics. Or in other words, Krugman usually seems to know what is going to happen next, so what's the problem. I'd say the rest of economics is doing much better than macro. A huge amount of current research is solidly empirical based on experiments or natural experiments. Research doesn't need a general theory to progress. We can learn what sort of policies work without theory.
economic_theory  economic_models  macroeconomics  microeconomics  microfoundations  behavioral_economics  social_theory 
may 2014 by dunnettreader
Bradley Rosser - EconoSpeak: Will Future Fed Policy Be Driven By Behavioral Macroeconomics? - Feb 2014
Re Akerlof identifying himself as a behavioral macroeconomist and Yellen's work with him, the 2% inflation target was from their joint influence 2 decades ago -- Finally, in his presidential address he arguably became more openly behavioral with his emphasis on the role of norms, something that Yellen clearly agreed with him on in some of their joint work on labor markets. He argued that this "missing motivation" underlay why five supposed "neutralities" of macroeconomics do not hold in reality. These are the independence of consumption from current income, the independence of investment from fiancial decisions, that inflation stability can only hold at the natural rate of unemployment, that macro policy is ineffective due to rational expectations, and Ricardian equivalence. Now, several of these were pushed to the side already by the NK DSGE modelers, but some others have continued to be used in such models, with the now-under-attack Euler equation that underlies the first point being an example. My guess is that by now most of those participating in FOMC meetings have already absorbed that these five neutralities do not hold, even if they do not do so by reasoning from people following norms as Akerlof argues and Yellen may argue.
macroeconomics  economic_theory  economic_models  behavioral_economics  Fed  monetary_policy  information-asymmetric  Labor_markets  wages  inflation  EF-add 
march 2014 by dunnettreader
Clifford Asness, John Liew - The Great Divide over Market Efficiency | Institutional Investor March 2014
The Nobel committee decided to split the economic prize between Eugene Fama and Robert Shiller — and that’s okay. - superb description of what's wrong with EMH extremism (value and momentum really do produce better returns over the long haul that can't be accommodated in a risk adjusted rational equilibrium, and there really are bubbles when the market as a whole goes batshit crazy) but it's a good starting assumption with fewer irrationalities or anomalies that can be exploited than much behaviorist literature would seem to suggest. They then have some motherhood and apple pie suggestions for what government should and shouldn't do to improve the efficiency of markets. They think blaming the financial crisis on "market fundamentalism" is getting a hold of the wrong end of the stick. Of course the opposition to some of their suggestions hasn't come from those who want closer regulations but those who claim the measures would interfere with the Holy Market. They mention only one - opposition to accounting for executive stock options, but the too big to fail and the subsidies for housing examples aren't the fault of those who rail against market fundamentalism.
capital_markets  EMH  efficiency  bubbles  financial_crisis  financial_regulation  liquidity  banking  property_rights  behavioral_economics  financial_economics  EF-add 
march 2014 by dunnettreader
Mark J. Roe - Chaos and Evolution in Law and Economics | JSTOR: Harvard Law Review, Vol. 109, No. 3 (Jan., 1996), pp. 641-668
Adds chaos theory for accidental starting position, path dependency, to standard Social Darwinism of law and economics evolutionary model. Heavily cited for a decade and still showing up in corporate governance. Not clear how he deals with "efficiency" as the evolutionary fitness test, and impacts of judiciary, regulations, lobbying on both efficiency and survival. -- didn't download
article  jstor  legal_theory  social_theory  evolution-social  corporate_governance  firms-theory  Social_Darwinism  chaos_theory  path-dependency  rational_choice  efficiency  behavioral_economics  law-and-economics  EF-add 
february 2014 by dunnettreader
Robert B. Ekelund, Jr. and Robert F. Hébert - Interest Groups, Public Choice and the Economics of Religion | JSTOR: Public Choice, Vol. 142, No. 3/4 (Mar., 2010), pp. 429-436
This article reviews Bob Tollison's conjoint contributions to the burgeoning area of the economics of religion, underscoring his integration of public choice and interestgroup themes into the microeconomic analysis of faith-based organizational architecture, institutional decision making and doctrinal innovation. Beginning with study of the medieval Catholic Church, moving forward to the Protestant Reformation and beyond, it supplies a timeline of developments and the major findings of each phase of his research program. -- hegemonic ambition of public choice school -- downloaded pdf to Note
article  jstor  religious_history  sociology_of_religion  economics_of_religion  public_choice  interest_groups  rent-seeking  church_history  Roman_Catholicism  Reformation  Protestants  Counter-Reformation  secularization  organizations  institutional_economics  behavioral_economics  downloaded  EF-add 
january 2014 by dunnettreader
Nathan Sussman and Yishay Yafeh - Institutional Reforms, Financial Development and Sovereign Debt: Britain 1690-1790 | JSTOR: The Journal of Economic History, Vol. 66, No. 4 (Dec., 2006), pp. 906-935
We revisit the evidence on the relations between institutions, the cost of government debt, and financial development in Britain (1690-1790) and find that interest rates remained high and volatile for four decades after the Glorious Revolution, partly due to wars and instability; British interest rates co-moved with those in Holland; Debt per capita remained lower in Britain than in Holland until around 1780; and Britain did not borrow at lower rates than European countries with more limited protection of property rights. We conclude that, in the short run, institutional reforms are not rewarded by financial markets. -- reasonably up to date bibliography on institutional_economics, behavioral_economics, financial markets (Shleifer et al), emerging markets, economic history of 17thC 18thC 19thC re industrial revolution, crowding_out and public finance -- downloaded pdf to Note
article  jstor  economic_history  political_history  finance_capital  capital_markets  capital_flows  sovereign_debt  17thC  18thC  British_history  Dutch  France  public_finance  taxes  interest_rates  institutional_economics  institutional_change  North-Weingast  constitutionalism  Absolutism  behavioral_economics  emerging_markets  international_finance  bibliography  downloaded  EF-add 
january 2014 by dunnettreader
Andrés Rodríguez-Pose and Michael Storper - Better Rules or Stronger Communities? On the Social Foundations of Institutional Change and Its Economic Effects | JSTOR: Economic Geography, Vol. 82, No. 1 (Jan., 2006), pp. 1-25
Huge literature review -- didn't download -- Much of the literature on the impact of institutions on economic development has focused on the tradeoffs between society and community as mutually opposed forms of institutional coordination. On the one hand, sociologists, geographers, and some economists have stressed the positive economic externalities that are associated with the development of associational or group life. Most economists, in contrast, hold that the development of communities may be a second-best solution to the development of formal institutions or even have negative effects, such as the promotion of rent-seeking behavior and principal-agent problems. Societal institutions-such as clear, transparent rules and enforcement mechanisms-are held to be universally positive for development. But there are no real-world cases in which only one of the two exists; society and community are always and everywhere in interaction. This interaction, however, has attracted little attention. In this article, society and community are conceived of as complementary forms of organization whose relative balance and interaction shape the economic potential of every territory. Changes in the balance between community and society take place constantly and affect the medium- and long-run development prospects of every territory. The depth and the speed of change depend on a series of factors, such as starting points in the interaction of society and community, the sources and dynamics of change, and the conflict-solving capacities of the preexisting situation.
article  jstor  economic_history  social_history  social_theory  community  society  social_capital  economic_sociology  economic_growth  development  institution-building  rent-seeking  behavioral_economics  institutional_change  institutional_economics  bibliography  EF-add 
january 2014 by dunnettreader
Dan Monaco - Thinking Through the Savage Machinery: Peter Temin and Economic Crises | The Straddler Jan 2014
Long interview - though most focused on change in fashion of economic theory and what went wrong in Great Depression, the purpose of the interview is Temin's take on Kindleberger need for global economic hegemon to make coordination feasible. Monaco thinks through some of the links between economic and military hegemony. In Temin's Leaderless World, he marks US loss of hegemony in 2008,with winding down of disastrous wars and global financial crisis. So we're an inflection point in the international political economy regime - what will come next, and how are we going to get there. Temin using Tilly's nation-state theory sketches an approach to IR development from Hobbesian chaos, to kleptocracy that forged the state and monopoly on violence, and as the system stays stable with reduced violence, to better and less violent leadership that becomes possible to emerge. So maybe next shift of hegemony won't have to be based on military power? The interview is more interesting re the power of economic history to challenge conventional wisdom - see his early work on the financial crisis and depression in Jacksonian era (even in this early stage of capitalism, the laissez faire drawn from classical economics didn't work in reality), and comments on Friedman and Schwartz re monetary policy and Great Depression (they got only one factor in a collective worldview that couldn't cope, and to which the global plutocracy seems to be returning to in what's becoming class warfare waged from the top). One common theme to Temin's work in these areas is to put domestic economic factors and policies in context of the international system at the time.
books  economic_history  US_economy  economic_theory  macroeconomics  IR_theory  19thC  20thC  Kindleberger  international_political_economy  Great_Depression  Friedman_Milton  Keynes  Keynesianism  neoclassical_economics  laisser-faire  globalization  plutocracy  Tilly  gold_standard  austerity  rational_choice  behavioral_economics  EF-add 
january 2014 by dunnettreader
Joseph Henrich - A cultural species: How culture drove human evolution | Science Brief - Am Psychological Assoc Nov 2011
Recognizing the centrality of culture in human life leads to a novel evolutionary theory of status and status psychology. Evolutionary researchers have tended to assume that human status is merely an extension of primate dominance hierarchies. However, because humans are so heavily dependent on an information economy for survival, our species has evolved a second avenue to social status that operates alongside dominance and has its own suite of cognitive and affective processes. -- This work connects with the emotion literature where prior empirical studies had indicated the existence of two facets for the emotion pride—labeled authentic and hubristic pride. Our ongoing efforts suggest that hubristic pride is associated with dominance-status and authentic pride with prestige-status. -- Much empirical work treats status as a uni-dimensional construct, and then unknowingly operationalizes it as either prestige or dominance, or some mix of the two. -- The cultural evolution of norms over tens or hundreds of thousands of years, and their shaping by cultural group selection, may have driven genetic evolution to create a suite of cognitive adaptations we call norm psychology. -- This suite facilitates, among other things, our identification and learning of social norms, our expectation of sanctions for norm violations, and our ability to internalize normative behavior as motivations. This approach also predicts that humans ought to be inclined to “over-imitate” for two different evolutionary reasons, one informational and the other normative. The informational view hypothesizes that people over-imitate because of an evolved reliance on cultural learning to adaptively acquire complex and cognitively-opaque skills, techniques and practices that have been honed, often in nuanced and subtle ways, over generations. However, because individuals should also “over-imitate” because human societies have long been full of arbitrary norms (behaviors) for which the “correct” performance is crucial to one’s reputation (e.g., rituals, etiquette), we expect future investigations to reveal two different kinds of over-imitation. -- The selection pressures created by reputational damage and punishment for norm-violation may also favour norm-internalization. Neuroeconomic studies suggest that social norms are in fact internalized as intrinsic motivations in people’s brains.
biocultural_evolution  social_psychology  norms  status  power  leaders  learning  children  innate_ideas  incentives  behavioral_economics  moral_psychology  emotions  morality-conventional  sociology_of_religion  trust  cooperation  Innovation  tools  bibliography  EF-add 
january 2014 by dunnettreader
Joe Henrich - Website | University of British Columbia
Research Program: Coevolution, Development, Cognition & Cultural Learning -- Published Papers and Book Chapters by Category

- Societal Complexity and Cultural Evolution
- Social Norms and Cooperation
- Social Status (Prestige and Dominance)
- Religion
- Methodological Contributions and Population Variations
- Overviews
- Cultural Learning (Models and Evidence)
- Ethnography (Fiji, Machiguenga, Mapuche)
- Chimpanzee Sociality
- General Interest
bibliography  research  paper  biocultural_evolution  culture  social_psychology  anthropology  behavioral_economics  sociology_of_religion  status  norms  morality-conventional  moral_psychology  emotions  networks  institutions  complexity  demography  children  learning  tools  cooperation  competition  Innovation 
january 2014 by dunnettreader
Hruschka DJ and Henrich J (2013) Economic and evolutionary hypotheses for cross-population variation in parochialism | Frontiers in Human Neuroscience
Human populations differ reliably in the degree to which people favor family, friends, and community members over strangers and outsiders. In the last decade, researchers have begun to propose several economic and evolutionary hypotheses for these cross-population differences in parochialism. In this paper, we outline major current theories and review recent attempts to test them. We also discuss the key methodological challenges in assessing these diverse economic and evolutionary theories for cross-population differences in parochialism. -- Keywords: parochialism, in-group favoritism, cross-cultural, market integration, religion, institutions, parasite stress, closeness --
Citation: Hruschka DJ and Henrich J (2013) Economic and evolutionary hypotheses for cross-population variation in parochialism. Front. Hum. Neurosci. 7:559. doi: 10.3389/fnhum.2013.00559
culture  anthropology  biocultural_evolution  economic_sociology  behavioral_economics  moral_psychology  sociology_of_religion  incentives  cosmopolitanism  parochialism  EF-add 
january 2014 by dunnettreader
Prospect theory and economics: Future prospects | The Economist
" PROSPECT theory” is an important contribution to the study of economics. It challenges some of thefundamental assumptions that economists have made concerning human behaviour. Daniel Kahneman, one of the researchers behind the idea, won a Nobel Prize in Economics for his work. But one of the longstanding jokes in the economics profession is that, since prospect theory was proposed in 1979, it has had little impact on real world problems.  A new paper* by Nicholas Barberis, an economist at Yale, finds this consensus dismaying. Mr Barberis shows that prospect theory has actually influenced the study of finance—and it can explain some of the central puzzles of how markets work.
economic_models  behavioral_economics  financial_system  capital_markets  EF-add 
august 2013 by dunnettreader
Abhijit Banerjee, Esther Duflo: Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty (2011) eBook: : Kindle Store
Promotes randomized control trials (RCTs)
Why do the poor borrow to save? Why do they miss out on free life-saving immunizations, but pay for unnecessary drugs? In Poor Economics, Abhijit V. Banerjee and Esther Duflo, two practical visionaries working toward ending world poverty, answer these questions from the ground. In a book the Wall Street Journal called “marvelous, rewarding,” the authors tell how the stress of living on less than 99 cents per day encourages the poor to make questionable decisions that feed—not fight—poverty. The result is a radical rethinking of the economics of poverty that offers a ringside view of the lives of the world’s poorest, and shows that creating a world without poverty begins with understanding the daily decisions facing the poor.
books  kindle-available  poverty  development  economic_models  microeconomics  incentives  behavioral_economics 
july 2013 by dunnettreader
Finance and the Preservation of Wealth by Nicola Gennaioli, Andrei Shleifer, Robert W. Vishny :: SSRN June 2013
SSRN briefcase NBER $
Abstract:      We introduce the model of asset management developed in Gennaioli, Shleifer, and Vishny (2012) into a Solow-style neoclassical growth model with diminishing returns to capital. Savers rely on trusted intermediaries to manage their wealth (claims on capital stock), who can charge fees above costs to trusting investors. In this model, the size of the financial sector rises with aggregate wealth, and wealth grows relative to GDP. As a consequence, the ratio of financial income to GDP rises over time, even though fees for given financial services decline. Because the size of the financial sector fluctuates with changes in investor trust, the model can account for the sharp decline of finance in the Great Depression, as well as its slow recovery afterwards. Entry by financial intermediaries as wealth increased in recent years may have further deepened investor trust and encouraged growth of financial income.
Number of Pages in PDF File: 40

Gennaioli, Nicola, Shleifer, Andrei and Vishny, Robert W., Finance and the Preservation of Wealth (June 2013). NBER Working Paper No. w19117. Available at SSRN: http://ssrn.com/abstract=2280969
macroeconomics  economic_growth  capital  institutional_investors  financialization  economic_history  20thC  21stC  economic_models  behavioral_economics  trust  EF-add 
july 2013 by dunnettreader
Money Doctors by Nicola Gennaioli, Andrei Shleifer, Robert W. Vishny :: SSRN June 2012
SSRN briefcase

Abstract:      We present a new model of money management, in which investors delegate portfolio management to professionals based not only on performance, but also on trust. Trust in the manager reduces an investor’s perception of the riskiness of a given investment, and allows managers to charge higher fees to investors who trust them more. Money managers compete for investor funds by setting their fees, but because of trust the fees do not fall to costs. In the model, 1) managers consistently underperform the market net of fees but investors still prefer to delegate money management to taking risk on their own, 2) fees involve sharing of expected returns between managers and investors, with higher fees in riskier products, 3) managers pander to investors when investors exhibit biases in their beliefs, and do not correct misperceptions, and 4) despite long run benefits from better performance, the profits from pandering to trusting investors discourage managers from pursuing contrarian strategies relative to the case with no trust. We show how trust-mediated money management renders arbitrage less effective, and may help destabilize financial markets.

Number of Pages in PDF File: 41

Gennaioli, Nicola, Shleifer, Andrei and Vishny, Robert W., Money Doctors (June 11, 2012). Chicago Booth Research Paper No. 12-39; Fama-Miller Working Paper. Available at SSRN: http://ssrn.com/abstract=2133429 or http://dx.doi.org/10.2139/ssrn.2133429
capital_markets  institutional_investors  institutional_economics  behavioral_economics  financialization  financial_system  trust  EF-add 
july 2013 by dunnettreader
Competition for Attention by Pedro Bordalo, Nicola Gennaioli, Andrei Shleifer :: SSRN May 2013
SSRN briefcase NBER $
Abstract:     
 We present a model of market competition and product differentiation in which consumers' attention is drawn to the products' most salient attributes. Firms compete for consumer attention via their choices of quality and price. With salience, strategic positioning of each product affects how all other products are perceived. With this attention externality, depending on the cost of producing quality some markets exhibit “commoditized” price salient equilibria, while others exhibit “de-commoditized” quality salient equilibria. When the cost of producing quality changes, innovation can lead to a radical change in markets. In the context of financial innovation, the model generates the well documented phenomenon of “reaching for yield”.

Number of Pages in PDF File: 59

Bordalo, Pedro, Gennaioli, Nicola and Shleifer, Andrei, Competition for Attention (May 2013). NBER Working Paper No. w19076. Available at SSRN: http://ssrn.com/abstract=2269529
markets  Innovation  competition  financial_system  capital_markets  behavioral_economics  financial_crisis  financialization  EF-add 
july 2013 by dunnettreader

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