Behavioral & Experimental Economics 

The Political Gender Gap: Do Women Care More About Fairness?

In experiments, males more overconfident, favor weaker social safety nets.

Blog posted on Psychology Today (2016)

Numerous factors may lie behind the gender gap in American presidential politics. One of these, which gets little attention, may be that men and women tend to differ in their views of the desirability of a more equal distribution of income. In the American National Elections Studies of 1992 – 2012, women answered a variety of questions—about the desirability of aiding the poor, whether federal spending on welfare should increase, and whether government has pushed too far on equality of rights—with significantly more pro-poor and pro-equality answers, on average, than men.

 

Responses in the World Values Survey, a large scale social survey now conducted in more than sixty countries, suggest that the U.S. is far from unique in this respect. Respondents in the WVS are asked to indicate where their own view lies on a scale from 1 = “We need larger income differences as incentives for individual effort” to 10 = “Incomes should be made more equal.”  Based on versions of the survey conducted between 2005 and 2014, women’s responses tended towards significantly higher numbers in both Western Europe and China, and likewise (although to lesser degrees) in Eastern Europe, Central Asia, sub-Saharan Africa, and Latin America and the Caribbean.

Click here to see the blog originally posted on Psychology Today or click here to access the paper published in the Journal of Economic Behavior & Organization.

Starting Over: When wising up means learning to be nice

Blog posted on Psychology Today

(2013)

In the early years of experimental economics, some were skeptical that the cooperative behaviors often displayed by university student subjects were representative of a broader population including older, non-student adults.  Perhaps students at a given school share a sense of camaraderie.  And maybe students are more idealistic and fair-minded than older adults.

Yet most attempts to see whether the “pro-social” behaviors displayed in economics experiments by university students would stand up when the subjects were “grown-ups” found that those older subjects were if anything more pro-social (more trusting, more cooperative) than the student ones.  Something about their experiences seemed to be teaching people to be nicer, not more selfish, with the passage of time. 

 

This post concerns one recent attempt to see what people take from their experiences of social interaction.

In my earlier post When Nice Guys Finish First, I described a decision experiment in which subjects interact in a dilemma situation called a voluntary contribution game.  In each of a series of periods or rounds, each subject receives several units of experimental currency and has to decide what to keep for herself and what to put in a group fund.  The dilemma is that all group members earn more if all put all of their money into the group fund, but if what others have put in is taken as given, each earns more the more she keeps for herself.  Since the experiment prevents the subjects from entering into enforceable agreements, traditional economic reasoning predicts that self-interest will drive them toward a worse outcome than is available to them via moral norms, trust, or cooperation

Click here to see the original blog on Psychology Today or click here to see the academic paper published on The Economic Journal. 

Gauging Trust as the Pandemic Continues:

Has trust been further frayed, or has lock-down made Americans more empathetic?

Blog posted on Psychology Today (2020)

Three years ago, researchers working with the Paris-based Organization for Economic Cooperation and Development (OECD), conducted representative surveys in the U.S. and other countries to test a new methodology and gauge people’s levels of trust in each other and in their governments. 

Click here to see the blog originally posted on Psychology Today.  What are your views on the trustworthiness of the American government?

 
 
 
 
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Economics, Values, and Organization

Cambridge University Press (1998)

This extraordinary collection of essays by leading scholars in several sub-fields of the economics profession helped to launch the revolution in behavioral economics and economics of values. It remains a touchstone of economists’ pivot towards including human values in their studies and thinking. It begins with a foreword by the economics discipline’s most influential philosophical thinker, Amartya K. Sen (winner of the 1998 Nobel Prize in Economics), and ends with an epilogue by the economic historian and leading thinker on the economics of institutions, Douglass C. North (winner of the 1993 Nobel Prize in Economics). It includes the introductory essay “Values and Institutions in Economic Analysis” by Ben-Ner and Putterman, and has contributions by numerous important economists including Ken Binmore, Robert Sugden, Samuel Bowles and Herbert Gintis, Robert H. Frank, and Ernst Fehr and Simon Gächter. Provocative essays include “Institutions and crowding out” by Bruno Frey and “The joyless market economy” by Robert E. Lane. With book jacket endorsements by two additional Nobel laureates in economics, Robert Solow and George Akerlof, as well as the seminal figure in the theory of trust, Harvard political scientist Robert Putnam.

“The contributors to this book have both guts and brains. They are tackling deep issues that most of us just wave at. No reflective reader will want to miss this.”

– Robert M. Solow, MIT

“Economists have the right methodology, but sociologists have the right variables, or so it is sometimes said. This mismatch has begun to be corrected, as rigorous, interdisciplinary work has begun on the connection between values, institutions, and economics. This important collective volume harvests some of the first fruits of this new work. It should be of wide interest throughout the social sciences.”

– Robert Putnam, Harvard University

“This is an extremely valuable collection on the ‘hottest’ topic in economic theory: how values shape institutions and institutions shape values. This is probably the single most important question that economists have left unanswered – until now.”

– George Akerlof, University of California Berkeley

 

What Makes Us Human (Is Our Need to Connect):

Becoming Human shows that our innate need to reach out is crucial to who we are

Blog posted on Psychology Today (2019)

In The Secret of Our Success (2015), anthropologist Joseph Henrich shows convincingly just how dependent human technological and social progress has been on the cooperative creation and accumulation of know-how over the course of many generations. In The Social Conquest of Earth, biologist and originator of sociobiology E.O. Wilson showed equally convincingly that it’s the unusually social nature of humans that accounts for their spread from Africa to every continent and their ever-greater (and ultimately endangering) domination of earth’s resources. Earlier, Robert Wright, in The Moral Animal, and Matt Ridley, in The Origin of Virtue, provided excellent lay scientific takes on the evolution of human morality using mainly evolutionary psychological lenses. Good Natured and Our Inner Ape are a few of the wonderful books by primatologist Franz de Waal which explore the emotional, social and cognitive similarities between humans and our closest primate relatives. These are some of the books that a lowly behavioral economist like myself has learned most from about human nature and its origins, and that I never tire of recommending to students who want to go beyond the stick figure Economic Man and a still somewhat inward-looking behavioral economics.

January 2019 strikes me as a milestone in our emerging understanding of these topics thanks to the publication that month of Michael Tomasello’s new book Becoming Human: A Theory of Ontogeny. I had encountered Tomasello’s student and collaborator, Felix Warneken, and had learned a bit about their research on the emergence of altruism in young children—but I had not recognized the breadth and fundamental importance of Tomasello’s research to the scientific understanding of human sociality until Becoming Human arrived.

Tomasello is the child development scholar who puts toddlers in labs doubling as safe, pleasant environments for play, then sends adult collaborators into the room to drop a wad of papers or a pencil, fumble with opening a cabinet door, or engage in a similar ruse, whereupon he observes that the toddler tries to help the adult even if the adult pays no attention to the toddler. 

Click here to see the blog originally published on Psychology Today.

Basic Math Shows How the Corporate Tax Cut Gives a Quantum Boost to Inequality:

Why would the bottom 80% of the U.S. income and wealth distributions put up with this?

Evonomics.com

(1998)

Polls showed that the bad shake the American working class had been getting from global competition and the influence of Wall Street on American politics had been major drivers behind both the competitiveness of Bernie Sanders in the Democratic primaries and the success of Donald Trump in the Republican primaries and general election in 2016. Yet Trump and the Republicans have just delivered America’s rich what may well be the biggest one-time shot in the arm ever, in the form of a 14-point cut in the corporate tax rate with no countervailing high-end income tax increase.

Did you know that all on its own, the corporate tax rate cut can account for an increase of 21.5% in the value of the stock market? With the top 20% of Americans, by wealth, already controlling more than 70% of household wealth in the U.S., the top 1% controlling about 40% of total wealth, and the lion’s share of traded equities being in the hands of these groups’ members, this means a huge boost to U.S. wealth inequality. Those in the top 1% by wealth have about 27% of their assets in the form of stock, with the next 19% by wealth having about 16% in that form, while the middle 60% of households by wealth have only about 3% of their net worth in stock, and the bottom 20% have negative net worth. A 21.5% increase in the value of their stock thus implies a roughly 6% increase in the overall wealth of the top 1%, a 3½% increase in the wealth of the next 19%, and a roughly a half-percent increase in wealth for the middle 60%, further exacerbating the wealth gap.

Why would the bottom 80% of the U.S. income and wealth distributions put up with this? Part of the answer is probably that very few understand the principles of finance. I wager that even most of the congressmen who voted for the recent tax reform can’t follow the simple logic of the next paragraphs. 

Click here to see the blog on Evonomics.com. Other blog posts on Evonomics include Do You Care Enough About Future People to Leave Them a Liveable Planet?; Why Are Some Countries Poor and Others Rich?; and Why IQs Rise When Nations Experience Rapid Economic Development?.

Self-Organization for Collective Action:

An experimental study of voting on sanction regimes

The Review of Economic Studies (2014)

Entrusting the power to punish to a central authority is a hallmark of civilization, yet informal or horizontal sanctions have attracted more attention of late. We study experimentally a collective action dilemma and test whether subjects choose a formal sanction scheme that costs less than the surplus it makes possible, as predicted by standard economic theory, or instead opt for the use of informal sanctions (IS) or no sanctions. Our subjects choose, and succeed in using, IS surprisingly often, their voting decisions being responsive to the cost of formal sanctions. Adoption by voting enhances the efficiency of both IS and non-deterrent formal sanctions. Results are qualitatively confirmed under several permutations of the experimental design.

Classic social thought emphasizes two responses to the possible tensions between the collective interests of groups or societies and the private interests of individuals or families. First, it argues that in many market interactions, the pursuit of private interests serves the general good without actors’ conscious intent (Smith, 2003 (1776)). Second, it concludes that where private and collective interests clash—the domain of “social dilemmas”—the greater good is served by ceding some authority to the state which, for example, can fund public goods provision by tax collection (Hobbes 1996 (1651), Locke 2005 (1689)). Economists also devote attention to social dilemmas that groups navigate without the aid of formal authority, for instance the elicitation of effort in work teams and partnerships, and small-scale collective action in communities and organizations. Still, the state enjoys pride of place, where thinking about social dilemmas is concerned, in both received economic theory and classical social thought. It seems odd, then, that while dozens of recent studies (beginning with Fehr and Gächter, 2000, and surveyed by Chaudhuri, 2010) have considered the mitigation of voluntary collective action problems by informal sanctioning mechanisms, almost no attention has been paid to the comparison of informal sanctions with the formal sanctions characteristic of the state.

Click here to access the article with your existing Oxford Academic log in credentials for the Review of Economic Studies. Or click here to download the pre-print manuscript as a PDF file. 

 
 

Preferences for Redistribution and Perception of Fairness:

An experimental study

The Review of Economic Studies (2014)

We conduct a laboratory experiment to study how demand for redistribution of
income depends on self-interest, insurance motives, and social concerns relating to inequality and efficiency. Our choice environments feature large groups of subjects and real world framing, and differ with respect to the source of inequality (earned or arbitrary), the cost of taxation to the decision maker, the dead-weight loss of taxation, uncertainty about own pre-tax income, and whether the decisionmaker is affected by redistribution. We estimate utility weights for the different sources of demand for redistribution, with the potential to inform modeling in macroeconomics and political economy.

 

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