Relevant and even prescient commentary on news, politics and the economy.

Oxytocin and lying from a psychology and ECONOMICS study center researcher

I am posting this because the source of this study caught my attention.  It is out of the  Ben-Gurion University of the Negev (BGU) and the University of Amsterdam, Psychologists Dr. Shaul Shalvi and Dr.  Carsten K. W. De Dreu respectfully.  Dr. Shalvi is the head of BGU’s Center for Decision- Making and Economic Psychology.

Who would have thought that there was economic related research happening which actually is looking into the thought process of all those free market agents with perfect knowledge?

The short of the study’s results:

Oxytocin is a hormone the body naturally produces to stimulate bonding and psychologists from Ben-Gurion University of the Negev (BGU) and the University of Amsterdam say it even causes participants to lie more to benefit their groups. People do so more quickly and without expectation of reciprocal dishonesty from their group…

“Together, these findings fit a functional perspective on morality revealing dishonesty to be plastic and rooted in evolved neurobiological circuitries, and align with work showing that oxytocin shifts the decision-maker’s focus from self to group interests,” Shalvi says.

“The results highlight the role of bonding and cooperation in shaping dishonesty, providing insight into when and why collaboration turns into corruption.”

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Economics an Almost Social Science

Peter Dorman at Econospeak discusses problems with microfoundations, and in a more thorough paper at Association Economique politique explores the Political Econonomic Outlook for Capitalism.

Mark Thoma had pointed to this Business/behavioral science can help guide economic-policy view notion of looking at incentives in an empirical way.

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Wiggle Room

By Noni Mausa

Wiggle Room

In a claustrophobic economy where the lions share of the fruit of citizens’ efforts is funneled to a small number of beneficiaries, where institutions intended to intervene on their behalf have been rejigged to work backwards, what can the little guy do to gain some wiggle room?

The poorest Americans have many strategies that provide small amounts of wiggle room, like working off-the-books, juggling several bank accounts or using payday lenders, locking kids in a closet so they can go to work, and stiffing landlords and various debtors when and as they can. Some are chosen strategies, some are just the result of not having enough tokens to satisfy all the turnstiles.

And these skills are ancient. Being dirt poor is a venerable world sport, and the tactics have been practiced since before written records.

But in the past century we seem to have entered a new situation, where the great majority of people are in a closed system with very little wiggle room, and most wiggle choices leading to less, not greater freedom and prosperity.

The bumper sticker used to say, “If you are not angry, you’re not paying attention.” But now it should read “If you are not claustrophobic, you don’t understand the situation.”

In my city, a man went missing a few years ago, and was finally found dead in a basement space behind a false wall – a space that was narrower at the bottom than the top. He hadn’t been shot or stabbed – in fact, he had fallen prey to his own efforts to escape. Every wiggle wedged him lower, and made it harder for him to breathe, until he suffocated.

The great question facing ordinary Americans is not how to find further wiggle strategies, to make do with less, to work harder to try to tread water under increasing burdens. That way lies less freedom.

In a way, Americans do understand this. Otherwise, why would they have disdain for the model of the immigrant many Americans scorn? – living ten to a room, on rice and beans, sleeping in shifts to make use of scarce bedspace, and all for wages that a babysitter would refuse? Americans scorn these living arrangements, but that’s where they’re heading.

And many of the wiggle strategies in use even 80 years ago (raising chickens, cutting firewood for heat) are impossible now. Urging the majority to do more with less, (“austerity”) while the 1% do less with far more, is not the solution. But what is?

Going Galt isn’t an option. The poor are their own hostages, and dropping out of the labour market in large numbers is what’s happening now, anyway. But would it be possible to move into the “rice and beans” model while concurrently building solid economic walls to provide breathing space and room for more effective wiggling?

Could the model of the Beguines show us a direction?

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I resemble those remarks!

By Daniel Becker (DOLB)

Following up on Robert’s post which at it’s core is discussing the article: Economic Enlightenment in Relations to College-going….

I find it interesting (not alarming at all, at least not regarding the data) that the following combination is the ultimate economically enlightened member of society if you are:

very likely to vote next time, voted for McCain, libertarian, white, not Hispanic/Latino, a suburbanite, atheist/realist/humanist, born again, attend church multi times/ week, non union, married, consider America you residence, are military (or family in military), NASCAR fan, think your in the investor class, shop every week at Walmart, earn over $100K/yr, male.

One more thing based on their figure 2 chart: high school education or less. That group of educated had the highest economic enlightenment score.  That group of educated had the highest economic enlightenment score. There is a bit of concern with this data piece considering two of their sited points:

The caveat that we see as most significant as pertains to the education variable is that the survey procedure likely tended to discourage low-IQ individuals from participation, thus artificially raising the observed economic enlightenment scores of the less educated groups…

And:

Meanwhile, Caplan and Miller (2006)…find that “the estimated effect of education sharply falls after controlling for IQ. In fact, education is driven down to second place, and IQ replaces it at the top of the list of variables that make people ‘think like economists.’”

Do I dare suggest that they are finding that the most economically enlightened are the smartest people who never finished high school? You know, when I asked 2 years ago if we could try a different school of economic’s I did not realize the one we needed was the non-schooled school.

Interestingly enough, you are most unenlightened if you are

progressive and college educated along with being: not likely to vote, voted green party, identify Green, African American, Hispanic/Latino, large city dweller, no religious affiliation, not born again and never attend church, union, civil union/domestic partner, consider your home the planet earth (no other planet offered), not military, not a fan of NASCAR (should have asked about horse racing), not of the investor class, never shop at Walmart (guess the other big boxes don’t count), $25K or less/yr (and they don’t shop at Walmart?), female.

This is an amazing study. It managed to show that there are two groups of people in this nation whose thinking regarding money is totally reflective of the common cliche’s heard during the political season (which is a season with no ends) and are often applied slanderously. They have proven that the cliche’s are true!  But, then why would I expect anything else from this considering the following commentary from their “scholarly” piece of work:

At least since the days of Frédéric Bastiat, many have said that people of the left often trail behind in incorporating basic economic insight into their aesthetics, morals, and politics. We put much stock in Hayek’s theory (Hayek 1978, 1979, 1988) that the social-democratic ethos is an atavistic reassertion of the ethos and mentality of the primordial paleolithic band, a mentality resistant to ideas of spontaneous order and disjointed knowledge. Our findings support such a claim,

Ok, this economic ignoramus needs to go to his flower shop now. God help me if it goes under. I should have never gone to college. It’s my mom’s fault too.

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This is your Brain on Rose-Coloured Glasses

by Noni Mausa

“Rose coloured glasses” has long been used to imply an optimistic view of the world makes people stupidly cheerful.

Turns out, the real case may be exactly the opposite. Good mood produces better attention and better problem solving.

From the CBC science program “Quirks and Quarks:”

This is your Brain on Rose-Coloured Glasses:

http://www.cbc.ca/quirks/archives/08-09/qq-2009-06-20.html

http://www.cbc.ca/quirks/media/2008-2009/mp3/qq-2009-06-20_04.mp3

Sure, being in a good mood changes the way you see the world, but it also looks like it changes the way the brain works. Dr. Adam Anderson, an Assistant Professor of Psychology at the University of Toronto, has been using functional MRI to look at how the mood we’re in affects the way the brain works. Anderson had people look at a picture that either put them in a good mood or a bad mood, and then had them do a simple task that measured their attention.

At the same time, he looked at their brain activation levels with the fMRI scans. It turns out that people in a positive mood took in more information about the world around them, while people in a negative mood took in less. Anderson says the brain is like a camera and the particular mood we’re in is kind of like a lens that determines how much of the world we see. The idea is that the way we perceive the world — and therefore think about it — is heavily influenced by our emotional state.

The original paper (with a much less interesting title) is here:

Opposing Influences of Affective State Valence on Visual Cortical Encoding

Taylor W. Schmitz,1,2 Eve De Rosa,1,2,3 and Adam K. Anderson1,2,3

In the study distressed people, when asked to do a simple attention task, literally did not perceive visual information presented at the same time as the information involved in their task. In contrast, people in a good mood saw the task and non-task information. (Neither group was asked about this — the perception or non-perception was gaged via MRI tracking.) The interview is well worth a listen.

The researcher also mentions that people with a wider grasp of data have been shown to be better at arriving at novel solutions to problems.

My take-away from this is that anxiety makes people “stupid,” leads to poor decisions, and gives them tunnel vision. Therefore, I would say that anyone who stirs up your anxiety is not doing you a favour, whether that’s what they attend or not.

Today we have an America full of stressed and anxious citizens. No wonder we have tea parties and rallies with people screaming about health care. And no wonder there’s such right-wing and business opposition to measures that would both save money, and also relieve citizens’ worries. Relaxed, smart Americans are bad for the business model, don’cha know?
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by Noni Mausa

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Possibly a Great Paper.

I subscribe to too many RSS blog feeds. So everyone once in a while one pops up and I think, “Should I drop this”?

And so it is with Evolutionary Economics, which occasionally seems like a self-parody of what would happen if you recited Economics 101 cant with an added, even-less-scientific, “evolutionary psychology” glean to it.

However, they occasionally publish interesting work, such as this.

And then there’s the paper they describe as “in Japanese.” Unfortunately, they mean Hiragana script, which thoroughly defeated my efforts in the early 1990s. And while Babel Fish is willing to try, the result is less than encouraging:

ら哲学者や為政者を解放した。また,顕示選好理論によれば,個人の選択を観察すれば,
そのような行動が導かれる効用関数が存在する。効用の個人間比較が問題にならない状況

becomes

…[a]nd others the philosopher and the administrator were released. In addition, according to revelation preference theory, if selection of the individual is observed, the use function where that kind of conduct is led exists. The circumstance where comparison between the individuals of use does not become problem

which has a few verb problems, I suspect.

Anyone want to read and translate and do a guest-post about this one?

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Hello My Name is Robert Waldmann

Hi I am Robert Waldmann. rdan has very kindly invited me to guest post here some. I have a blog of my own (to which he kindly linked in the announcement). I am officially an economist, but tend to blog about politics at my home blog. Here I will try to fit the interest in, you know economics.

I wasn’t always like this. Until age 25 I was a biologist. I currently live in Rome Italy. I am irrational and like to write about irrationality. I am also egalitarian.

My latest effort, which is a joint paper with Emanuele Millemaci is about relatively rational people who have dynamically inconsistent preferences. It is strictly empirical. Our hypothesis is that people with more severe dynamic inconsistency would hold less of their wealth as checking account balances, because it is too easy to spend.

This appears to actually be true (Oh I love to blatantly split infinitives)

Dynamically Inconsistent Preferences and Money Demand

Emanuele Millemaci and Robert J. Waldmann

This research wouldn’t have been possible without CentER at the University of
Tilburg which designed the survey and collected the the data.

This paper focuses on two main issues. First, we find that, on average,
households’ discount rates decline. This implies dynamically inconsistent
preferences. Second, we calculate an indicator of the degree of dynamic
inconsistency that may help us to understand how households overcome their
self-control problems. We use a micro dataset containing households’ reports
on the compensation for receiving hypothetical rewards with delays. We find
that individuals with more severely dynamically inconsistent preferences on
average hold a statistically significantly lower share of their total wealth
in checking accounts. A possible interpretation is that subjects use
precommitment strategies to limit their temptation to consume immediately.
(JEL classification: D11, D12, D90)

Comments very welcome. If you want the pdf ask in comments.

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