Category Archives: Interdisciplinary approaches

Experimental Economics and Environmental Policy

In the weekly policy commentary by Resources for the Future October 15 John List discusses What Can Policymakers Learn from Experimental Economics?
Here is an excerpt:

“Experimental research now under way in the field demonstrates that there is much to be gained from designing economic experiments that span the bridge between the laboratory and the world outside, with important implications for economics. Examples include developing new auction formats to distribute pollution permits, exploring compensation mechanisms in social dilemmas, such as what is necessary for many endangered species cases, and examining efficient means to provide public goods. What has become clear in this process is that field experiments can play an important role in the discovery process by allowing us to make stronger inference than we could make from lab or uncontrolled data alone. Similar to the spirit in which astronomy draws on the insights from particle physics and classical mechanics to make sharper insights, field experiments can help to provide the necessary behavioral principles to permit sharper policy advice.

Do people have a taste for equality? Teaching cost-benefit analysis with a sprinkle of experimental economics

Apparently they do. In a recent article published in Nature (see the first paragraph)
Dawes et al (2007) found that in experimental settings:

Subjects reduce and augment others’ incomes, at a personal cost, even when there is no cooperative behaviour to be reinforced. Furthermore, the size and frequency of income alterations are strongly influenced by inequality. Emotions towards top earners become increasingly negative as inequality increases, and those who express these emotions spend more to reduce above-average earners’ incomes and to increase below-average earners’ incomes. The results suggest that egalitarian motives affect income-altering behaviours, and may therefore be an important factor underlying the evolution of strong reciprocity and, hence, cooperation in humans.

If you don’t have access to the article, you can read the excellent report by Inga Kiderra Economics Experiment Finds Taste for Equality. Here is the first paragraph:

According to a new study of behavioral economics, published in the April 12, 2007 issue of Nature, people will spend their own money to make the rich less rich and the poor less poor. They do so without any hope of personal gain, acting, it seems, out of a taste for equality and sense of fair play.

When teaching Cost-benefit analysis this spring, I presented to my students the main arguments for treating low- and high-income groups differently in CBA following the excellent presentation by Boardman et al. 2006 in Cost-Benefit Analysis – Concepts and Practice, 492 – 495. In addition to the “one person, one vote” principle and the standard argument of diminishing marginal utility of income, Boardman et al. (2006, 492) present the general argument that “income distribution should be more equal”. They write:

The second argument for giving dollars received or paid by the poor greater weight is CBA [cost-benefit analysis] than dollars received and paid by the rich is premised on the assertion that the current income distribution is less equal than it should be and social welfare would be higher if it were more equal“.

Dawes et al (2007) recent paper on Nature offers one possible base for argument that “income distribution should be more equal” and can be used as a reading to show students the importance of experimental economics for cost-benefit analysis.

References

Dawes, Christopher T. Fowler, James H. , Johnson, Tim, McElreath, Richard & Smirnov, Oleg (2007) Egalitarian motives in humans, Nature Volume 446 Number 7137, 794-796

Interdisciplinary Encounters – seminar

The Department of Philosophy of the University of Helsinki organizes a very interesting seminar on the horizontal interactions between social sciences as well as on the relationship between social sciences and cognitive and life sciences.

The theme for the next session 19 April will be Rational Choice and Political Science and Beyond. Session III 26 April will discuss the Cognitive Foundations of Social Science and session IV 3 May Economics Imperialism and Explanatory Unification.

If you wish to participate please contact the instructor Uskali Mäki, Academy Professor, Academy of Finland uskali.maki at helsinki.fi

The seminar meets Thursdays 13 – 16 at the Department of Philosophy, Siltavuorenpenger 20A, Room 334d.

Mirror Neurons and Economics

Brad De Long has an interesting post called Neurological Microfoundations for Adam Smith’s Theory of Moral Sentiments dealing with mirror neurons.

Ernst Fehr and Tania Singer also discuss mirror neurons in The Neuroeconomics of Mind Reading and Empathy, forthcoming in American Economic Review.

See also Robert Sugden’s Mirror Neurons and Adam Smith’s Theory of Sympathy, pp. 388-391 in Perspectives on Imitation: From Mirror Neurons to Memes, Volume 2: Imitation, Human Development, and Culture, eds Nick Chater and Susan Hurley, MIT Press, (2005).