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- March 29, 2009
- 10:43 AM
- 764 views
Poor Blacks 'Envy' Rich Whites
by Simon Halliday in Amanuensis
Here I report briefly on a recent paper in the Cambridge Journal of Economics by Haile, Sadrieh and Verbon. I appreciate the intentions of the paper, but I believe that it was poorly executed and, consequently, their results are unconvincing. As the authors state, "[N]o study so far has attempted to disentangle the ethnicity effects from the income inequality effects." (705) Their study fails to disentangle the effects too.The authors ran trust games in two South African universities: The Universities of Potchefstroom and Mafikeng. (Clarification: They are now both campuses of North-West University.) They say the University of Potchefstroom is predominantly White, it is not. In 2003 the university had 41% White students, and the majority of students were Black (47%) with the remainder Coloured, Asian and Other (report here). For Mafikeng the statistics in 2003 were 0.5% White and 98.5% Black with the remainder Coloured and Asian (report here).The authors ran anonymous control experiments in which no information was revealed. In the treatment experiment both race and income level were revealed. They revealed race and income by telling subjects directly whether their partner had reported themselves as White or Black, and also whether their partner had reported their perceived income as above average or below average. There are thus four potential categories: {Black-Low, Black-High, White-Low, White-High}.The first problem is with their racial categorization. In South Africa people report whether they are White, African, Coloured, or Asian with the three final groups all counting as 'Black' (see the CEE report here). The authors assumed that all subjects would know what was meant by 'Black'. I did not see evidence that they tested this. Moreover, as shown by Tyson et al (1988), the levels of prejudice within Whites varies dramatically with significantly lower levels of prejudice (towards non-whites) among English home language Whites than among Afrikaans home language Whites. Furthermore, when the researchers provided the racial information in this way it erased any possibility to understand the underlying mechanisms to identify ingroup and outgroup membership. Why not use names (Bertrand and Mullainathan 2004, Van der Merwe and Burns 2008)? photographs (Eckel and Wilson 2002, Burns 2004, 2006)? cartoons (can't remember the reference)?Second, their experimental design was poor. To separate the effects of race and income, and to postulate about combined effects we need experiments on each of these separately. What this means is that they ran an insufficient number of treatments. We not only need race treatments alone, but also income treatments alone for a full complement of treatments that would allow valid interpretations of their results, i.e., we need {(black, white) (white, black), (black, black) (white, white)} treatments, and {(high, low) (high, high), (low, low), (low, high)} treatments. Once these have been run then you can do Haile, Sadrieh and Verbon's experiment. Their experiment does not actually isolate what they say it does.Third, saying that low income Blacks don't give to high income Whites is because of 'envy' may be inaccurate. Though the behaviour is exhibited for low income blacks towards high income whites only they may feel resentment, spite, or hatred towards this group for reasons correlated with high income and whiteness (say, family complicity with apartheid, perceptions of persistent racism, political inclinations, undeserved benefits - on average Whites more likely to be employed and have higher income in North-West than Blacks). Black people in Potchefstroom, for example, may hate the (predominantly Afrikaans?) richer Whites. I understand that saying hatred motivates people is not politically correct, but saying that the Haile, Sadrieh and Verbon result is a consequence of envy without admitting other possibilities is speculation. What about disgust? spite? anger?Fourth, why do they not present any independent evidence from the sampled students, or perceptions by other students at the universities, on socio-economic data about black, white, high income and low income individuals? If we had more information about these factors then we might have greater insight into the factors underlying the 'envy' result.Lastly, the sample does not contain a sufficient number of wealthy Blacks. I believe this to be a consequence of where the authors chose to run the experiments. Had they chosen to run the experiments in Cape Town, Johannesburg or Pretoria they would probably have found more (though not many) wealthier Blacks. Instead, they chose areas that were particularly unsuited to their needs. North-West is one of the poorer South African provinces (see basic provincial information).There are several other points worthy clarifying, but the points I raise were those that came to mind. I hope that more and similar work is carried out in South Africa, particularly work that "[attempts] to disentangle ethnicity effects from income inequality effects." With this work as a baseline I think that a substantial amount of research can proceed and clarify the results that Haile, Sadrieh and Verbon present.Point of clarityI have tried twice to contact Prof Verbon as the contact author listed on the paper to obtain additional information not listed in the paper. I have not received any responses.ReferenceD. Haile, A. Sadrieh, H. A. A. Verbon (2008). Cross-racial envy and underinvestment in South African partnerships Cambridge Journal of Economics, 32 (5), 703-724 DOI: 10.1093/cje/ben011Additional Sources: SouthAfrica.info The all-in-one official guide and web portal to South Africa.A StatsSa (2002) report on North West from 2000 data.... Read more »
D. Haile, A. Sadrieh, & H. A. A. Verbon. (2008) Cross-racial envy and underinvestment in South African partnerships. Cambridge Journal of Economics, 32(5), 703-724. DOI: 10.1093/cje/ben011
- October 8, 2008
- 05:25 AM
- 718 views
Egalitarians behave 'trustworthily', Egotists don't
by Simon Halliday in Amanuensis
Ok, so the title of the post gives the paper more pizzazz than it really has, but hey? Today, a little discussion about Nava Ashraf, Iris Bohnet and Nikita Piankov's (2006) paper 'Decomposing Trust and Trustworthiness'.The main reason that it is of interest to me is that it used a sample of students from South Africa in Cape Town (which somehow was spelt Capetown in the paper, ATROCIOUS editing!), along with students from Boston, US and Moscow, Russia.The next point of interest is that, unlike many economic experiments, it assesses within-subject variation across two different games, the dictator game and the trust or 'investment' game.The authors had 4 main hypotheses that they wished to test:Trust is only based on expectations of trustworthiness.Trust is only based on unconditional kindness.Trustworthiness is only based on reciprocity.Trustworthiness is only based on unconditional kindness.The results from the paper for the dictator game and trust game do not differ significantly from conventional results as reported by Camerer (2003) on a survey of experimental results. Pertinently, non-white South Africans in the sample were significantly less trusting than white South Africans using an index of trust that included 'trust'-probing questions such as “Generally speaking, would you say that most people can be trusted or that you can’t be too careful in dealing with people?”With respect to their hypotheses, they find that, "trustors derive satisfaction from trusting independent of amounts expected back and unconditional kindness" (201). This dismisses hypotheses 1 and 2. With respect to hypotheses 3 and 4, they find that "[In] contrast to trust, unconditional kindness accounts for most of the variance explained while reciprocity plays a comparatively small role" (202-204) but, "Overall, we reject both our hypotheses" (202) they do this because their results seem to explain approximately 20% of variation, which they do not feel is sufficient to 'prove' their final hypothesis.This doesn't give us much insight, however their one conclusion is quite interesting, in response to the question posed by Camerer “What game do people think they are playing?”, they argue that:Our results suggest that many people may play a different game than researchers thought they were playing when confronted with the “investment game.” Only 36 percent of the 159 trustors who decided to send any money in our “investment game” expected to make money (204). Moreover, one of their final points is that:Our design allowed us to solve one of the important trust puzzles, namely that people trust even though hardly anyone makes money by doing so. We found that generally, people are aware of this. They trust even though they know it does not pay monetarily. They enjoy the act of trusting and being kind to others, even to anonymous strangers (204).This paragraph makes sense to me, up to the point when they say 'enjoy'. In a world where people get windfall cash (as that is basically how experimental money often is thought of, see John List, 2007) people might behave as if they enjoy giving away money to others or as if they 'enjoy' trusting others, but I remain unconvinced that they actually derive 'joy' from such acts in the real world.Which makes me speculate. What if you could run experiments, and then have a 'beggar' set up outside the experiment (not actually a beggar but an actor, or something) and you gave the individuals the money and then you observed, after the experiment how many individuals chose to give to the 'beggar'. Apart from the 'deceiving the experimental subjects' problem, this might be interesting to observe and to see whether individuals behave consistent with their experimental generosity and 'enjoyment' of giving. It is this correspondence of field observation and experimental economics that requires propagation and increased funding in order for us to validate within subject variation and validity of our laboratory results.ReferenceNava Ashraf, Iris Bohnet, Nikita Piankov (2006). Decomposing trust and trustworthiness Experimental Economics, 9 (3), 193-208 DOI: 10.1007/s10683-006-9122-4... Read more »
Nava Ashraf, Iris Bohnet, & Nikita Piankov. (2006) Decomposing trust and trustworthiness. Experimental Economics, 9(3), 193-208. DOI: 10.1007/s10683-006-9122-4
- September 14, 2008
- 05:41 PM
- 699 views
Egalitarianism in Young Children
by Simon Halliday in Amanuensis
Children develop into (parochial) egalitarians, at least according to a recent study by Ernst Fehr, Helen Bernhard and Bettina Rockenbach. Children start out as selfish homo economicus style agents and turn into inequality averse parochialists. But the problem is that these aren't just any children, they are Swiss children and the cultural relevance of being Swiss has been seen in Ernst Fehr's own labs...The experiments on which the paper was based were run with children ranging from 3 to 8 years of age where children would choose allocations of jellytots, smarties or fizzers for themselves and a partner. There partner could be from their kindergarten or playschool (in-group), or from another (out-group). There were three treatments in the experiments.'Prosocial Treatment' choosing between a (1,1) and a (1,0) allocation. 'Envy Treatment' choosing between a (1, 1) and a (1,2) allocation. 'Sharing Treatment' choosing between a (1,1) and a (2,0) allocation. Children aged 3-4 are indifferentiable from homo economicus, even so much so that the (1,1) allocation does not occur significantly more than 50% thus not differentiating it from the (1,0) allocation. Prosocial behaviour increases with age, as can be seen in the graph adjacent, with the 'most' prosocial behaviour occurring in the 7-8 year old cohort.In terms of parochialism (or in-group vs, out-group motives) there was significant evidence to indicate that the children favoured in-group members, as the authors comment: "The egalitarian choice is 15-20% more likely in the prosocial game if the partner is an in-group member" (1081). Moreover, parochialism seems to develop concurrent with egalitarian motives, as the favouring of in-group members was much greater amongst the 7-8 year olds than for the younger participants.The authors also note an interesting gender disparity with boys seeming to be more parochially inclined than girls were, quoting again, "boys seem to be much less averse against disadvantageous inequality if the partner is an ingroup member [...] In contrast, girls do not differentiate in their choices between ingroup and outgroup partners" (1081). This seems to be in line with modeling that considers the coevolution of altruism and parochialism, with men going to war against the outgroup and possible selection for in-group favouring males being active.The authors also make some attempts at interpreting 'birth order' and 'only child' effects. The evidence indicating that only children are more likely to share than others and that youngest children in sets of siblings are less likely to share than others. They also make some comparisons of the evidence they have with evidence from chimps and marmosets, the implications of which I am not going to consider here.What, for me, is a crucial flaw in the 'child egalitarianism' that they propose is that it is probably in no way as universal as they make it sound to be. This is a nuanced point. They don't state outright that their theory universalizes to most of humanity, but it seems to be tacit in their phrasing. Why is this a problem for me? Well, the sample is entirely made up of Swiss children. According to studies by a co-author of Fehr's, Simon Gaechter (along with Benedikt Herrmann and Christian Thoni), altruistic punishment is culturally conditioned and anti-social punishment seems to be a prevalent worldwide adult phenomenon (I blogged on the impacts of the Herrmann, Thoni & Gaechter paper here and here). In fact, in the Herrmann, Thoni and Gaechter paper the Swiss sample of individuals were among the most likely to act prosocially in the worldwide sample (actually and anecdotally, one of the reasons for the research in the first place was that the Swiss seemed abnormally cooperative to the authors relative to others). This is bound to affect the ways in which children in Swiss society are socialised.The only deference Fehr et al. are willing to give this concept is captured in the single sentence: "The children probably acquire some of the normative rules of the society which surrounds them during the age period on which we focused" (1082). So they admit that children can be socialised, and that theirs might be, but they don't discuss the ways in which this could jeopardize the generalisation of their theory. Obviously, the problem is that we cannot know whether the tendencies towards inequality aversion and parochialism that they discuss are universal and genetically driven unless studies are undertaken that use cross-country and cross-cultural comparisons with children so that we can capture cultural differences versus inherent dispositions.Notwithstanding this criticism, I believe strongly that this paper takes a step in the right direction. As much as the Herrmann, Thoni and Gaechter work originated in the labs in Switzerland and from their went on to test prosociality worldwide, this work could also go in that direction to test the origins of prosociality (antisociality) and parochialism.ReferencesErnst Fehr, Helen Bernhard, Bettina Rockenbach (2008). Egalitarianism in young children Nature, 454 (7208), 1079-1083 DOI: 10.1038/nature07155B. Herrmann, C. Thoni, S. Gachter (2008). Antisocial Punishment Across Societies Science, 319 (5868), 1362-1367 DOI: 10.1126/science.1153808... Read more »
Ernst Fehr, Helen Bernhard, & Bettina Rockenbach. (2008) Egalitarianism in young children. Nature, 454(7208), 1079-1083. DOI: 10.1038/nature07155
B. Herrmann, C. Thoni, & S. Gachter. (2008) Antisocial Punishment Across Societies. Science, 319(5868), 1362-1367. DOI: 10.1126/science.1153808
- July 24, 2008
- 04:08 AM
- 663 views
Diversity and Cooperation
by Simon Halliday in Amanuensis
Diversity facilitates cooperation according to research published in the latest Nature. The paper fits well into the literature in evolutionary game theory on the prisoner's dilemma and public goods games. I'll give a very brief look at some of the points I found pertinent in the paper.Santos, Santos and Pacheco's main assertion is that diversity promotes cooperation, specifically:[C]ooperation is promoted by the diversity associated with the number and size of the public goods game in which each individual participates and with the individual contribution to each such game... Read more »
Francisco Santos, Marta D Santos, & Jorge M Pacheco. (2008) Social diversity promotes the emergence of cooperation in public goods games. Nature, 454(7201), 213-216. DOI: 10.1038/nature06940
- August 6, 2008
- 08:23 AM
- 660 views
Moral Sentiments and Mechanism Design
by Simon Halliday in Amanuensis
Adam Smith, in his Theory of Moral Sentiments, considered how an individual's moral sentiments affect their acts in the world in ways that are contrary to self-interest. Smith's first sentence sets up his thinking, How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it. (Smith, 1790: I.I.1)Let me be up front and acknowledge that I am only now reading The Theory of Moral Sentiments (I am currently a graduate student). Nevertheless, this first quote is intended to give a frame for the paper by Sam Bowles, who, in the title of his paper, 'Policies designed for Self-Interested Citizens may Undermine the "Moral Sentiments" makes an obvious allusion to this text. I cover Bowles's main theses and offer some additional points. Sam Bowles's recent paper (gated) in Science focuses on exactly these "moral" imperatives in humans, the likes of which, he argues, have remained neglected in mainstream economics during the past half century. Bowles reviews economic experiments carried out all over the world, from Bogotà, Colombia to Zurich, Switzerland. His unifying theme is that individual "moral sentiments" matter and the self-interest of neoclassical economics is not as all-encompassing, or welfare promoting, as one might be led to believe. He argues instead for the acknowledgment of other-regarding preferences that operate in the economic realm and affect how individuals interact. At the core of his argument is the intuition that incentives that target individuals who are assumed to be solely self-interested will often fail because of this misunderstanding of human nature. Bowles opens the paper with the example of the, now infamous, Haifa daycare centres in which the centres implemented a fine for late arrival of parents. Following this the incidence of lateness increased and did not return to the pre-fine levels after the fine policy was rescinded /Gneezy and Rustichini, 2000). Bowles defines several ideas, using them as a basis to motivate a departure from self-interested behaviour. They are: FramingEndogenous preferencesSelf-determination Information conveyed by incentivesHe argues that "incentives are part of a decision situation and may signal appropriate behaviour" (1606). In the Haifa daycare centre example, individuals did not engage in market interactions originally they would have experience 'shame' for arriving late. However, it became a market interaction in which 'lateness' was a consumer product that parents could pay for. Thus, the centres had 'framed' the policy such that it became a market interaction. Daniel Kahneman and Amos Tversky championed the understanding of framing, Kahneman was awarded the Nobel Memorial Prize in Economics for this and other work. Additionally, Bowles refers to work in Colombia by Juan-Camilo Cardenas which replicates a framing problem in public goods games. He contrasts 'communication' and 'government regulation' frames. It turned out that individuals, when 'regulated', were more likely to behave self-interestedly than in either the control or the 'communication' treatment. Cooperation broke down as a consequence. Hence, incentives, and the mechanisms that we use to implement them, need to be structured such that we are aware of the frames that they present, else behaviour could go in unpredictable directions. Endogenous preferences are preferences that have been altered as a consequence of the experience of some state. The intuition here is that the experience of some specific incentive structure could permanently change the preferences of the individual. Public goods experiments revealed that individuals, who previously acted cooperatively in public goods games, begin to act self-interestedly after the application of a treatment and continue to behave self-interestedly after the treatment has ended. Hence, Bowles proposes that, "economies structures by differing incentives are likely to produce people with differing preferences" (1607). Self-determination, or "control aversion", was one reason I found to be one of the most interesting reponses to incentive structures. In principal-agent experiments (similar to employer-employee relationships) individual agents selected a level of production that was non-zero even though their payoff was highest when they 'produced' nothing. The principal could choose to leave the agent free to choose an effort level, or impose a lower bound on effort. By standard economic theory the first treatment should produce zero production, the second treatment - production at the lower bound. Production was higher in the 'free' control experiment than it was in the 'bounded' treatment. It seems as though humans value autonomy highly and are willing to act against individuals who retract autonomy. Note however that it does not seem (by Bowles account) as though the experimenters attempted the counter-example, a situation when there would have been a fixed lower bound, which was then rescinded and allowed the principal to choose to impose a lower bound or not. The results of this could provide an interesting contrast to those above. Lastly, in reference to information conveyed by incentives, Bowles describes a 'trust' investment game, in which pairs of individuals act as investors and trustees. The investors could choose to 1) 'trust' the individual for back payments, 2) propose a back payment level and choose to impose a fine if the back-transfers was below this level, or 3) propose a back payment level and drop the option to use the fine. The situation in which the fine was available, but dropped as an option by the principal resulted in the highest levels of back transfers, the straight fine treatment resulted in the lowest level of back transfers. Bowles segues into a brief discussion of social preferences, I couldn't find a definition in the paper, so I went to his textbook, Microeconomics, wherein he defines social preferences as follows, "in choosing to act, individuals commonly take account not only of the consequences of their actions for themselves but for others as well" (Bowles, 2006: 96).Typically social preferences include reciprocity motives and altruism. Hence, he establishes that, "Incentives imposed by peers who do not stand to benefit personally do not social preferences and are often synergistic with them" (1608). For this he brings support from experiments in public goods games in which punishment curtails self-interested behaviour and reinforces cooperation. At this juncture I think it pertinent to introduce evidence from Herrmann et al's (2008) paper on antisocial punishment across societies. They introduce the 'dark side' of punishment, showing that individuals who contribute 'too much' are punished (hence the term 'antisocial punishment') in certain cultures (I blogged on this previously here). Bowles briefly refers to Herrman et al.'s paper, but I think that the social preferences involved here are definitely as exciting as those discussed by Bowles generally, and, in fact, provide further evidence for the dynamic nature of social norms. With the international evidence that they provide (experiments with fifteen societies across the globe) there are dramatically different norms when it comes to punishment. Spitefulness and angry retaliation are as much a part of the human emotional arsenal as the beneficial and prosocial preferences are. It is important therefore that these antisocial preferences are also taken into account when policymaking: when deciding on incentive structures. Bowles summarizes a few points on problems of efficiency and self-interest. If a principal is able to introduce an incentive structure and increase their own payoffs, then they will do so, regardless of whether the entire surplus diminishes as a consequence. Contrary to commonly held views, individuals interacting together who are not self-interested can produce a higher total surplus (through, say cooperating in a public goods game). Thus, although agents respond particularly negatively to certain incentive structures, some self-interested profit-maximising principals will introduce these incentive structures to maximise their own payoffs, while the pie itself diminishes is size. This is not the kind of world many of us woud like to work in, most economists would promote the 'efficient solution'. Bowles maintains then that moral sentiments and material interests are 'nonseparable'. The problem being that behaviour is not only 'acquisitive', but 'constitutive'. He argues furthermore that these interests can act synergistically, especially in instances where there is substantive rule of law and other strong institutional frameworks. Individuals supposedly wish to be cooperative, but also want to ensure that they are not the only cooperator in a world of defectors. Their cooperation is conditional. Contingent on strong rule of law, individuals' social preferences are maintained and they uphold cooperative behaviour. Bowles's 'take home message' is that policy makers need to take consideration of the experimental evidence that is presented to them. They should be aware of the prosocial behaviours that policies to promote self-interest might undermine, else the total social surplus might diminish: unintended consequences have been the undoing of many a well-intended policy. The good news though for market-minded individuals is that good institutions can act synergistically with social preferences to produce good consequences from the market. It seems as though individuals who "interact in market-oriented economies are more likely to be fair-minded" (1607). Capitalism has not lost the day, it simply needs to rethink some of its economic models for policy-making. References:Smith, Adam. The Theory of Moral Sentiments. Library of Economics and Liberty. Retrieved July 12, 2008 from the World Wide Web:http://www.econlib.org/Library/Smith/smMS1.htmlBowles, S. (2006), Microeconomics: Behavior, Institutions and Evolution, Russell Sage Foundation and Princeton University Press, New York, US. Bowles, S. (2008). Policies Designed for Self-Interested Citizens May Undermine "The Moral Sentiments": Evidence from Economic Experiments. Science, 320(5883), 1605-1609. DOI: 10.1126/science.1152110Gneezy, U., Rustichini, A. (2000). A Fine Is a Price. The Journal of Legal Studies, 29(1), 1.Herrmann, B., Thoni, C., Gachter, S. (2008). Antisocial Punishment Across Societies. Science, 319(5868), 1362-1367. DOI: 10.1126/science.1153808______Aside: Two comments on Bowles' article are offered by Gavin Kennedy here and here. Another in reason magazine here.... Read more »
S Bowles. (2008) Policies Designed for Self-Interested Citizens May Undermine "The Moral Sentiments": Evidence from Economic Experiments. Science, 320(5883), 1605-1609. DOI: 10.1126/science.1152110
- January 27, 2009
- 01:11 PM
- 566 views
Transitive Brains
by Simon Halliday in Amanuensis
A recent paper by Camillo Padoa-Schioppa and John Assad investigates the encoding of value in the brain for rhesus monkeys, a renewal of efforts to understand how and whether the assumption of transitivity, so crucial to the behavioral sciences, is in fact an accurate description of how individuals act when making choices. It builds on a previous paper (2006) of theirs in Nature, 'Neurons in the orbitofrontal cortex encode economic value.' The novelty in their (2008) research is that they provide evidence for value-encoding of juice consumption as menu-invariant, i.e. invariant to changes in the goods that are rank-preferred by the monkeys. I'm going to give you a brief summary and then make some points on where I'd be interested in seeing future research go.There are three basic characteristics that they define. First, offer value responses which encode quantity or value of one or two offered juices (products). Second, chosen value responses which encode the value of the chosen juice (product) independent of the juice (product) type. Third, taste responses which are binary responses reflecting which one of two juices (products) are chosen independent of the amount of the juice (product). I have highlighted the notion of juice as product to foreground the idea of parallels between monkey juice consumption and the consumption of products by humans. Padoa-Schioppa and Assad assert that the second response, the chosen value response, is the most interesting because it is subjective and it ``represents a common unit for qualitatively different goods.'' (95) Their experimental methods are, thus, engaged with unearthing and isolating this chosen value effect. It is on this basis that we must assess their experimental methods and design. The ExperimentThe authors ran experiments with two (a male and a female) rhesus monkeys, measuring the neuronal output in the orbitofrontal cortex (OFC). The monkeys were prepared for the experiments using normal surgical procedures in preparation for neuronal recording. Juice was delivered to the monkeys in specifically measured quanta. The instructions, as such, that the monkeys were given were consistent with previous literature on the subject, with the monkeys selecting from a set of coloured squares indicating type and quantity of juice. The monkeys had an initial fixation point, after which a `go' signal was given: the introduction of two saccade targets adjacent to the coloured squares. Once the monkey had maintained fixation on the saccade target that they chose, juice would be delivered to them. Trials were aborted if the monkey broke fixation before the `go' signal. This procedure is highly detailed and thus easily replicable with appropriate resources.ResultsThe theory was that there are three potential neuronal responses: offer value, chosen value and taste responses. The argument was that the Orbitofrontal Cortex (OFC) neurons have previously responded to delivery of a given juice depending on the context (Tremblay & Schultz1999). However, that study did not assess whether these encoded responses were invariant to changes in menu. They designed an experiment in which they could isolate whether preference encoding is independent of menu choice and thus whether any (A,B,C) triple selected for an experimental session would allow for valid encoding of value in the OFC, value which would be consistent across menus. The crucial underlying distinction though is that the set of juices given fits the ranking A B C, with any one juice falling into a class A, B or C. This brings us to the question of how the juice rankings are derived, for which we do not have the data. Nevertheless, the final result was that 1 unit of an A class juice was equivalent to 1.3 units of a B class juice and one unit of a class B juice was approximately equivalent to 3 units of a class C juice. Finally, they showed that 1 unit of a class A juice was roughly equivalent to 4 units of a class C juice. Hence you have approximate value indifference (1 unit A = 1.3 x 3 ~= 4).Thus the authors cover a broad base of theory related to preference transitivity and show that with distinct and well-defined preferences, values are encoded and the structure of these values reflects the mathematical conditions of value transitivity and indifference transitivity. This is very interesting and definitely warrants further research in other monkeys and for a larger sample of individuals, rather than it being some quirk of the two monkeys in the experiment. Random ReflectionWould it not be cool, ladies and gentlemen, if instead of using disjoint sets of ranked goods they doing something that attempted to replicate what Simonson and Tversky (1992) (and most recently reinvigorated in Dan Ariely's book Predictably Irrational) discussed in house choice - seeing two potential consumption goods and then introducing what would be called an 'irrelevant alternative' in economic theory and seeing how the type of 'irrelevant alternative' (or the degree of similarity of the irrelevant alternative to one of the actual choices) affected value encoding. To me, this would bridge the gap from what would be a traditionally 'behavioral economics' assertion (for which we require, I believe, more evidence) and that of a good neurocellular economics discussion. A question for further research I suppose. ReferenceCamillo Padoa-Schioppa, John A Assad (2007). The representation of economic value in the orbitofrontal cortex is invariant for changes of menu Nature Neuroscience, 11 (1), 95-102 DOI: 10.1038/nn2020... Read more »
Camillo Padoa-Schioppa, & John A Assad. (2007) The representation of economic value in the orbitofrontal cortex is invariant for changes of menu. Nature Neuroscience, 11(1), 95-102. DOI: 10.1038/nn2020
- August 6, 2008
- 03:48 AM
- 559 views
Giving and Taking
by Simon Halliday in Amanuensis
Are economic experiments representative of underlying sentiments, or social preferences? This was the topic of a recent series of posts I did on articles by John List two of which were in collaboration with Steven Levitt (you can find them here, here and here). One of the main papers to which List referred was a paper by Nicholas Bardsley, then a working paper, and recently published in Experimental Economics. So that's what I'm reviewing today: Nicholas Bardsley's 'Dictator Game Giving: altruism or artefact'. Bardsley's main thesis is that altruistic giving, and by extension much of social preference theory, are artefacts of the way in which the dictator game is traditionally constructed: the 'proposer' gets some sum of money, they choose to give some of it to their partner, the 'responder'. The giving act can either be one to one in money terms, or it can be multiplied by some factor (generally two). Hence 'giving' $1 means that the 'responder' receives $2. But, if social preference theory predicts that people should give why doesn't this occur more regularly in everyday life. As Bardsley points out:A common concern is that people could always make anonymous donations to random strangers in everyday life, for example by mailing cash to persons sampled from the telephone directory, but few if any choose to do so. Transfers are made instead to family members, specific organisations or face-to-face to people requesting money. (123)His analysis therefore is based on the fact that our lives involve interactions with many different individuals, some of whom we interact regularly and some we shall never meet again. What would happen, therefore, if we introduce an option that allows us to 'take' resources from others into the dictator game?By standard theory of social preferences (inequity aversion, altruism, reciprocity), it would be argued that individuals would 'give' some positive amount to the other individual, because the benefits to the other enter into our own utility functions. Grossly simplified, we care about other people's material interests. If social preference theory is accurate, Bardsley reflects, then introducing taking should not affect giving behaviour. He argues that allowing taking can assist us in identifying our theory more accurately. Hence, in these experimental variations, as the proposer not only do I have the option to give money to the responder, but I can take money away from them at some rate - Bardsley proposes the inverse of the giving rate (i.e. 1 to 1 or 1/2 to 1).The results of the experiments are fairly stark: when 'taking' is introduced into the action set, the number of individuals who choose to give drops dramatically. This is the case for all the constructions of the game in which the taking treatment is applied. I'll leave it to you to read the paper for specific nuances of this. What does this mean? Is dictator game giving simply a result of say, a "Hawthorne Effect" (response to experimental demand characteristics): individuals give when giving is an option and take when taking is an option to be "good experimental subjects". Alternatively, is giving subject to a "range effect" where taking $1 could be seen as kind when you have the option to take $2 (this is still consistent with Rabin's reciprocity models). A third option includes stochastic choice models, which he duly dismisses. Bardsley believes that either Hawthorne effects, or range effects are predominantly 'to blame' and proposes more research in these areas.Thus, for Bardsley,[T]he results confirm that dictator game giving provides no evidence of context-free pro-social behaviour or, therefore, orthodox social preferences. (130)Bardsley's attack is thus routed in the claim that social preferences, if existent, must be everywhere applied, i.e. if we have deep-seated inequity aversion then that should be our main influence when making choices. My interpretation is that he has misunderstood the nuances of social preferences - do 'context-free' preferences of any sort exist? In my reading, the idea is that social preferences can be looked at as 'general rules' of behaviour that can, in fact, be undermined by all kinds of things. For example, when offered enough money for themselves, people don't care as much about inequality. Incentives can alter the 'general rule'. The argument for this, as proposed in say, Bowles's recent paper (on which I blogged here) is that several factors can activate different underlying motivations. When we allow individuals to 'take' we 'frame' the problem differently. I believe strongly that introducing new actions changes the ways in which we understand problems. Actions alter the state in which we make choices. However, my defence is also problematic. Basically, I have said that theories of social preferences are nigh on unfalsifiable: certain frames will highlight certain actions and social preferences can be activated or deactivated depending on the frame. The inclusion of certain actions in the action set acts as a frame and therefore we cannot tell whether social preferences exist (in general) or whether individuals are rational altruists (in general). I can't really think of a way to get around this in terms of the current research. Nevertheless, I think that this idea of framing is distinct from the idea of the Hawthorne effect that Bardsley identifies and needs to be kept in mind regardless - research must be dedicated to differentiating the two and trying to get our experimental results to be robust to these effects. Moreover, experimental economists and social psychologists should definitely dedicate a greater amount of research to range effects and to the ways in which nuanced ranges can affect experimental outcomes.[On this last point, Dan Ariely has an entertaining Authors@Google talk where he briefly discusses range effect experiments on 'incidence of flossing'.]ReferencesBardsley, N. (2008). Dictator game giving: altruism or artefact?. Experimental Economics, 11(2), 122-133. DOI: 10.1007/s10683-007-9172-2... Read more »
Nicholas Bardsley. (2008) Dictator game giving: altruism or artefact?. Experimental Economics, 11(2), 122-133. DOI: 10.1007/s10683-007-9172-2
- March 12, 2010
- 03:40 PM
- 398 views
Explain your total sheep played
by Simon Halliday in Amanuensis
When you come across a line like this in a paper, you can't help but laugh, "We now discuss and explain the cumulative number of sheep played in all rounds of the game." Yes, subjects played sheep. You may wonder how. I shall attempt to explain.In three papers based on work in South Africa and Namibia, Bjørn Vollan and, in one paper, his co-author Bernd Hayo investigate several different experiments with the Nama people. They ran trust games, trust games with third party punishment, and common pool resource games with groups of villagers in the Northern Cape Province of South Africa and the southern region of Namibia. Their work was supported by BIOTA, a biodiversity and conservation project.So what kinds of things did they find out? And how on earth were sheep involved? Well, the Nama people spend substantial amounts of time on subsistence herding of goats and sheep. Consequently, when they played the common pool resource game, the game was framed as though the subjects were exploiting common grazing ground by choosing a number of 'sheep' to 'graze' the resource. The game works like a multi-player prisoner's dilemma where the self-interested thing for a subject to do is to 'defect' by having as many sheep as possible in the hope that no one else will choose lots of sheep, but everyone chooses lots of sheep. The social optimum occurs when people exercise self-restraint and jointly have several sheep, but not too many such that the common resource vanishes. Strangely enough, people often don't play completely self-interestedly, instead they choose something in between the individual optimum and the social optimum (see Cardenas and Carpenter, 2008 and Velez et al, 2006). In Bjørn Vollan's work, we see that the Nama also cooperate to some extent with the option to exploit the resource, and, after several rounds, they also are able to vote on adopting a self-regulating policy of punishment, reward or communication, any of which seem to result in a higher degree of cooperation. The experiments were run with groups of five. In the control, when the subjects were given the choice of between 10 and 90 sheep(in tens), 51.6% of people chose the less cooperative options of 60-90 sheep. When, in the latter rounds, a treatment for reward, punishment, or communication, could be voted on the amount of outright defection decreased to 30.7% of the sample, with 46.5% of the sample choosing the highly cooperative 10, 20 or 30 sheep (everyone choosing 20 would be the social optimum).So we know that introducing some kind of voted rule works, but does any one rule work better? Does 'buy-in' matter? One problems is that the rankings were different in South Africa and Namibia. In the South African community, punishment resulted in lower numbers of sheep chosen with the choice stabilising at around 4 sheep on average; it worked best of all when more people in the group participating in the experiment voted for it. So a community with 'buy-in' to norms could operate more effectively (interesting enough, in the Hayo and Vollan paper there's a strong correlation between voting for punishment and being a Lutheran, one of the few religious affiliation effects they found in the subjects' behavior). Conversely, in Namibia rewards work much better, though the positive effect of decreasing the number of sheep chosen peter off. Vollan argues that this can be explained by rewards 'crowding out' intrinsic motivations to cooperate (read his paper for the full argument).So, we know what's happened in the CPR game, but what about the trust game and the trust game with third party punishment? Recall that the trust game is a bargain between two subjects: a Trustor and a Trustee. The Trustor chooses some fraction of an endowment to give to the Trustee, the total amount of which is multipled by 3 (this act is called 'trust' below). The Trustee may then send an amount back to the Trustor. In the third party punishment (TPP) variation, a Third Party is introduced with the power to 'punish' the other players: the Third Party can pay to reduce the payoffs of players whose behavior she did not like, either the Trustor, the Trustee or both. In Vollan's results, and moving from sheep to money, we see that South African Nama trust 20% of their endowment to their partner, whereas Namibian Nama trust 40% of their endowment to their partner. The South African group is at the bottom end of all results of trust games internationally (see Cardenas and Carpenter, 2008, Camerer, 2003). Then, in the second set of experiments examing trust, punishment and relatedness, Vollan finds the results presented in the table below.The paper presents the aggregated results and I could not dis-aggregate them for South Africa and Namibia as in Vollan's other paper. Nevertheless, the results are instructive. We can see, first, that there are substantially different results between villagers, friends and family. Moreover, introducing punishment substantially increases the likelihood that subjects act 'trustingly' (send money to the Trustee) and 'trustworthily' (send money back to the Trustor). But the effect of punishment differs greatly: villagers behave 48.4% more trustingly, friends behave 44.2% more trustingly, and family only 21.9% more trustingly. The relationship is different for trustworthiness: friends come out on top, behaving 65% more trustworthily, villagers 50% more trustworthily, and family 37% more trustworthily. Obviously these rankings occur because family members behave the most trustingly and trustworthily from the outset, but it goes to show that third party punishment may be its most effective between non-relatives in promoting trusting and trustworthy behavior.The papers are all fascinating, particularly for a South African interested in doing similar work. I hope that the few results I have shown might have piqued your interest enough for you to go and read the papers. I presented what I perceived as the most interesting results without critiquing Vollan's methods too much. That said, Vollan could have done one or two things to improve his methods. For example, and somewhat pettily, with translation into Afrikaans (the language in which the experiments were conducted), Vollan should have translated and back-translated for consistency. Also, we could be given some additional ethnographic information about the Nama's particular institutional structures of third party punishment, though Vollan does provide information about reciprocity, gift-giving, and trusting/trustworthy behavior. He also finds (2008, 16) that the subject display inequity aversion, so I'd think that given the prevalence literature on this topic it would be worth investigating this idea more and offering some insights in the conclusion after the later results. Overall, they're a good contribution to the experimental economics, resource economics and behavioral economics literature and I thoroughly enjoyed reading them.ReferencesHayo, Bernd & Bjørn Vollan. 2009. "Individual Heterogeneity, Group Interaction, and Co-operative Behaviour: Evidence from a Common-Pool Resource Experiment in South Africa and Namibia." Philipps-Universitt Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).Vollan, Bjørn. 2008a. "Kinship and friendship in a trust game with third party punishment." Philipps-Universitt Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).... Read more »
Vollan, B. (2008) Socio-ecological explanations for crowding-out effects from economic field experiments in southern Africa. Ecological Economics, 67(4), 560-573. DOI: 10.1016/j.ecolecon.2008.01.015
- April 13, 2010
- 05:42 AM
- 398 views
The Parochial and the Cosmopolitan - Globalization helps cooperation
by Simon Halliday in Amanuensis
Continuing my trend of reporting on papers about cooperation, I thought I'd comment on a recent paper by Nancy Buchan and co-authors about human cooperation and globalization. I've argued previously about the role of parochialism in punishment and in theories about the evolution of war and cooperation, today, though, the theme is the extent to which more cosmopolitan countries tend to foster individuals who are more willing to cooperate globally. Sounds intuitive, but how does it work experimentally?Consider a prisoner's dilemma in the form of a multi-layer public goods game (PGG). A basic PGG works as follows: each player is given some money to contribute to a communal pot, that amount is multiplied by some factor (rate of return), but everyone gets a share of the total minus what they initially contributed. Therefore, I do my 'best' if everyone cooperates fully and contributes all their money, while I free ride and contribute nothing. It's a prisoner's dilemma in action - everyone sees this and they shouldn't cooperate. Consider a similar game, but with two communal pots: one 'local' where only people from my area can contribute to, the amount of which is then doubled and of which I receive 1/4 (3 other people in my group can contribute to it), and one 'global' or 'world' account that I and others can contribute to, the total amount of which is tripled, and of which I receive 1/12 (11 other people can contribute to it) . The tension is the following: the direct return is 0.5 from the local account and 0.25 from the world account. But if everyone contributes a maximal amount to the world account, then we all make off with the most money rather than if we had all defected and not made any contributions. This is also a prisoner's dilemma, but with more layers of complexity.Buchan et al ran this experiment in 6 countries: the US, Italy, Russia, Argentina, South Africa and Iran, looking specifically at large cities in each of the countries. They made two hypotheses. First, globalization could lead to greater parochialism by emphasizing ethnic, local or national groupings. Conversely, globalization could have a palliative effect on parochialism and perhaps enable and sustain greater tolerance. They indexed a country level globalization index (CGI), an index produced by the University of Warwick. They also constructed an individual level globalization index (IGI) based on questions that each subject answered. The authors used quota sampling methods for gender, age and socioeconomic status (though not for rural-urban, which I comment on later).Now we come to the reason I'm interested in the research. When the authors ran the experiments, they showed that South Africans ranked 5th out of the 6 countries in the CGI: above Iran, but below Argentina. Considering the experimental results, South Africa also ranked 4th or 5th below Italy, Russia and the United States, but almost exactly equal to Argentina in terms of probability of allocating resources to a global account. Iran came in lowest . Globalization at the individual and country seemed a good predictor of international cooperation. If you're sceptical of the globalization result, the authors also point out that:"analysis of the CGI along with a host of macroindicators such as the rule of law, generalized trust, per capita income, and norms of civic cooperation shows that the CGI is the only macrovariable that is significantly correlated with mean cooperation rates at the world level." (4140)So, it seems as though the second hypothesis is supported by the authors results: globalization may make people less parochial and more cosmopolitan. But one problem emerges, as the authors chose to do the experiments in large cities, it is possible that they have a biased sample. There may be an underlying correlation between a person's choice to live in a big city and a person's cosmopolitanness - more cosmopolitan people may choose to live in big cities, less cosmopolitan people may choose to live outside of cities. Consequently, in the paper we may be observing an upper bound on a nation's tendency to cooperativeness because the subjects are drawn from inherently more cosmopolitan (and maybe more internationally cooperative) people. I'd like to see this research replicated with rural and urban samples to see what the differences might be. I'd suspect that rural individuals would be more likely to cooperate locally, whereas urban individuals would be more likely to cooperate globally. Thus, globalization might predict urban 'world' cooperation, but not rural as there might be differences across countries over rural behaviour. Apart from potential rural-urban differences that might exist among countries, I could not fault the experiment's design. Moreover, the fascinating research exemplified by this paper tends to make me slightly more optimistic about multilateralism and the benefits of globalization in the 21st century, though that could just be confirmation bias.ReferencesBuchan, N., Grimalda, G., Wilson, R., Brewer, M., Fatas, E., & Foddy, M. (2009). Globalization and human cooperation Proceedings of the National Academy of Sciences, 106 (11), 4138-4142 DOI: 10.1073/pnas.0809522106... Read more »
Buchan, N., Grimalda, G., Wilson, R., Brewer, M., Fatas, E., & Foddy, M. (2009) Globalization and human cooperation. Proceedings of the National Academy of Sciences, 106(11), 4138-4142. DOI: 10.1073/pnas.0809522106
- March 11, 2010
- 09:37 AM
- 362 views
Trusting and Bargaining in Africa
by Simon Halliday in Amanuensis
Are we Africans different to the rest of the world in our giving, punishing and trusting behaviour? Three remarkable economic anthropology studies try to examine this kind of question with several ethnic groups in four countries: the Pimbwe, Sukuma and Kahama in Tanzania, the Maasai of Kenya and the Ju/'hoan Bushmen of Namibia and Botswana. I can't to do any of the papers justice with my short comments, but I thought you might find them interesting nevertheless.The three papers take quite different approaches in their use of economic experiments. Paciotti and Hadley's paper with the Pimbwe and Sukuma looks at the institutional scope of interactions, that is the extent to which cultural practices and norms may imply differences in the ways people play. They show that the two ethnic groups live differently and respond dramatically differently in the experiments. The Sukuma are agro-pastoralists with pre-existing norms of within and between village cooperation, and justice institutions (sungusungu) that punish individuals for norm infringement. Their play in the ultimatum game was more generous than the Pimbwe, with very few rejections (most likely because the offers were fair or hyper-fair). Contrastingly, the Pimbwe do not have many institutions for between village cooperation, or any third party justice institutions and their grievances are often settled with personal violence. Their results are consequently unsurprising - much lower offers on average, with substantially lower offers to those of another village. The remarkable thing here is that even the Sukuma's offers to residents of another village were higher than the Pimbwe's offers to residents in their own village. Also, the Pimbwe rejected offers (which some call punishment) substantially more than the Sukuma. The authors therefore show that even within small geographical distances, differences in institutional backgrounds alter how people behave.Lee Cronk's study of the Maasai cultural norm of osotua fascinated me even more. Osotua is an often reciprocal relationship between male Maasai who call each other isotuatin. Osotua bonds isotuatin to each other so that they should provide for each other in times of great need, normally requiring assistance with food or gifts of livestock, or even revenge killing. So Cronk decided to see how Maasai subjects played the trust game in two settings: the first without any cultural frame, and the second where it was framed as 'an osotua game'. As you'd expect they played the game quite differently given the frame. In the control (no frame) and considering all transfers the subjects gave 35.3% vs. 28.2% in the framed condition. Considering player 1 (the 'trustor'), the transfers differ 38% (unframed) and 30.8% (unframed), though not statistically significantly so, and transfers by player 2 (the 'trustee') back to player 1 also differ: 32.5% (unframed) vs 25.5% (framed). But only in the framed condition did a strong correlation existed between the amounts given and the amounts returned show through, indicating the reciprocal nature of the osotua. Also, Cronk proposes, the lower amounts given in the osotua frame probably reflect the sense that osotua gifts are only given to assuage great need, and normally are not great amounts. Cronk argues forcibly that anthropologists and economists need to act carefully when they construct games within specific tribal and ethnographic contexts, investigating the norms that exist within a specific context, and ensuring that they tailor their studies accordingly, being careful of when they encounter norms that may alter the data that they find.Finally, Polly Wiessner's research into the Ju/'hoan bushmen looked at their behavior in the dictator game and the ultimatum game, after which Wiessner examined their behavior in everyday life to see whether experimental behavior and behavior outside the experiment were consistent. In the dictator game, the average offer was 20%, and in the ultimatum game the average offer was 16% with 4% refusals. These averages are the some of the lowest in the world (see Henrich et al, 2006, Barr et al 2009). Notwithstanding these low within game offers, outside the game the Ju/'hoansi share tobacco, pool food resources, ostracize those who had infringed social norms (those they ostracized possibly stole a goat) and act compassionately towards those who behaved unwisely with the money from the experiments (some went to the town, got drunk the so-called "fault of the beer"). As per experimental protocols, the subjects behavior was anonymous. Wiessner was asked repeatedly during the experiments if she was lying about this because the concept seemed quite foreign to the subjects whose behavior is normally socially embedded. Wiessner's work reinforces how researchers need to align laboratory and experimental protocols with the everyday lives of the people involved; though many of us are involved in anonymous market economies the distances that separate us from those who produce the goods we produce are immense, this is not always the case. Moreover, being able to understand the spillovers of anonymous behavior to social embedded behavior and the converse can enlighten the use of experiments in urban and rural, market-integrated and non-market-integrated societies.The papers serve as a reminder to economists (though how many economists read anthropology journals I do not know) that their work must take cognisance of cultural and institutional structures, of the frames that they introduce with experiments (think of harambee with Jean Ensminger's work), and of the parallelism between experimental behavior and behavior in parallel situations outside of the experiment. In this way, pairing laboratory experiments with field experiments and good ethnography could provide a better way to do things in future. Or so I hope. References:Cronk, Lee. 2007. "The Influence of Cultural Framing on play in the trust game: a Maasai example." Evolution and Human Behavior 28(5):352-358.Paciotti, Brian & Craig Hadley. 2003. "The Ultimatum Game in Southwestern Tanzania: Ethnic Variation and Institutional Scope." Current Anthropology 44(3):427-432.Wiessner, P. (2009). Experimental Games and Games of Life among the Ju/’hoan Bushmen Current Anthropology, 50 (1), 133-138 DOI: 10.1086/595622... Read more »
Wiessner, P. (2009) Experimental Games and Games of Life among the Ju/’hoan Bushmen. Current Anthropology, 50(1), 133-138. DOI: 10.1086/595622
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