The aim of this study is to analyze investor behavior towards socially responsible mutual funds. The analysis is based on an experimental study where a sample of individuals takes investment decisions under different parameters of information about the investment alternatives and expected returns. In the experiment, each participant decides how to distribute an investment budget between two funds, returns on which are uncertain and change over time. Two treatments are conducted, each providing a different degree of information on the socially (...) responsible (SR) character of one of the two investment alternatives. The results obtained suggest that although individuals’ criteria for investment are essentially guided by returns and diversification, participants invest significantly more in a fund when they are explicitly informed about its SR nature. In particular, participants who declare being concerned about SR actually invest significantly more in the SR alternative. Furthermore, the level of SR faithfulness among a small group of investors is such that they invest the main share of their budget in the SR fund, even when the return differential is highly unfavorable. Providing clear information about the SR characteristics of an investment is crucial to help investors express their preferences. (shrink)

Cognitive biases that affect decision making may affect the decisions of citizens that influence public policy. To the extent that decisions follow principles other than maximizing utility for all, it is less likely that utility will be maximized, and the citizens will ultimately suffer the results. Here I outline some basic arguments concerning decisions by citizens, using voting as an example. I describe two types of values that may lead to sub-optimal consequences when these values influence political behavior: moralistic values (...) (which people are willing to impose on others regardless of the consequences) and protected values (PVs, values protected from trade-offs). I present evidence against the idea that voting is expressive, i.e., that voters aim to express their moral views rather than to have an effect on outcomes. I show experimentally that PVs are often moralistic. Finally, I present some data that citizens’ think of their duty in a parochial way, neglecting out-groups. I conclude that moral judgments are important determinants of citizen behavior, that these judgments are subject to biases and based on moralistic values, and that, therefore, outcomes are probably less good than they could be. (shrink)

Cognitive biases that affect decision making may affect the decisions of citizens that influence public policy. To the extent that decisions follow principles other than maximizing utility for all, it is less likely that utility will be maximized, and the citizens will ultimately suffer the results. Here I outline some basic arguments concerning decisions by citizens, using voting as an example. I describe two types of values that may lead to sub-optimal consequences when these values influence political behavior: moralistic values (...) (which people are willing to impose on others regardless of the consequences) and protected values (PVs, values protected from trade-offs). I present evidence against the idea that voting is expressive, i.e., that voters aim to express their moral views rather than to have an effect on outcomes. I show experimentally that PVs are often moralistic. Finally, I present some data that citizens’ think of their duty in a parochial way, neglecting out-groups. I conclude that moral judgments are important determinants of citizen behavior, that these judgments are subject to biases and based on moralistic values, and that, therefore, outcomes are probably less good than they could be. (shrink)

Neuroenhancement involves the use of neurotechnologies to improve cognitive, affective or behavioural functioning, where these are not judged to be clinically impaired. Questions about enhancement have become one of the key topics of neuroethics over the past decade. The current study draws on in-depth public engagement activities in ten European countries giving a bottom-up perspective on the ethics and desirability of enhancement. This informed the design of an online contrastive vignette experiment that was administered to representative samples of 1000 respondents (...) in the ten countries and the United States. The experiment investigated how the gender of the protagonist, his or her level of performance, the efficacy of the enhancer and the mode of enhancement affected support for neuroenhancement in both educational and employment contexts. Of these, higher efficacy and lower performance were found to increase willingness to support enhancement. A series of commonly articulated claims about the individual and societal dimensions of neuroenhancement were derived from the public engagement activities. Underlying these claims, multivariate analysis identified two social values. The Societal/Protective highlights counter normative consequences and opposes the use enhancers. The Individual/Proactionary highlights opportunities and supports use. For most respondents these values are not mutually exclusive. This suggests that for many neuroenhancement is viewed simultaneously as a source of both promise and concern. (shrink)

The phenomenon of base-rate neglect has elicited much debate. One arena of debate concerns how people make judgments under conditions of uncertainty. Another more controversial arena concerns human rationality. In this target article, we attempt to unpack the perspectives in the literature on both kinds of issues and evaluate their ability to explain existing data and their conceptual coherence. From this evaluation we conclude that the best account of the data should be framed in terms of a dual-process model of (...) judgment, which attributes base-rate neglect to associative judgment strategies that fail to adequately represent the set structure of the problem. Base-rate neglect is reduced when problems are presented in a format that affords accurate representation in terms of nested sets of individuals. (shrink)

This paper merges the non-expected utility approach (Tversky and Kahneman, J Risk Uncertain 5:297–323, 1992 and Quiggin, J Econ Behav Organ 3:323–343, 1982) into Akerlof’s (Quart J Econ 84:488–500, 1970) model of Market for Lemons. We derive the results for different probability weighting functions and analyze the phenomenon of market failure in light of non-expected utility maximization. Our main finding suggests that when the proportion of traded lemons is high (low), the problem of market failure is mitigated (enhanced). In addition, (...) for the case of Cumulative Prospect Theory, we show that (a) the higher the loss aversion is, the more pronounced is the market failure; (b) gain-domain elevation is negatively related to the extent of market failure; and (c) the value function is (i) negatively monotonic in the gain-domain diminishing sensitivity parameter when the market is characterized by a high proportion of “peaches,” and (ii) positively monotonic in the loss-domain diminishing sensitivity parameter when the market is characterized by a high proportion of “lemons.”. (shrink)

In this paper, I examine the decision-theoretic status of risk attitudes. I start by providing evidence showing that the risk attitude concepts do not play a major role in the axiomatic analysis of the classic models of decision-making under risk. This can be interpreted as reflecting the neutrality of these models between the possible risk attitudes. My central claim, however, is that such neutrality needs to be qualified and the axiomatic relevance of risk attitudes needs to be re-evaluated accordingly. Specifically, (...) I highlight the importance of the conditional variation and the strengthening of risk attitudes, and I explain why they establish the axiomatic significance of the risk attitude concepts. I also present several questions for future research regarding the strengthening of risk attitudes. (shrink)

As part of the rationality debate, we examine the impact of deliberative and intuitive thinking styles on diversity preference behavior. A sample of 230 students completed the Rational Experiential Inventory and the Diversity Preference Questionnaire, an original measure of diversification behavior in different real-life situations. In cases where no normative solution was available, we found a clear preference for diversity-seeking in the gain domain and diversity-aversion in the loss domain, regardless of cognitive thinking style. However, in cases where one alternative (...) normatively dominated the other, participants high in deliberative thinking style were more calibrated to normative behavior, regardless of whether their intuitive tendency preference and the normative solution were contradictory or pointed in the same direction. Our findings support a model in which deliberative but not intuitive thinking style is the crucial predictor of rational behavior, since it enables people to better adjust their intuitive preference anchor when normative considerations require doing so. (shrink)

The paper presents a set of games of competition between two or three players in which reward is jointly determined by a stochastic biased mechanism and players’ choices. More specifically, a resource can be found with unequal probabilities in one of two locations. The first agent is rewarded only if it finds the resource and avoids being found by the next agent in line; the latter is rewarded only if it finds the former. Five benchmarks, based on different psychological and (...) game-theoretic assumptions are derived and their predictions compared to actual behavior of 120, 40, and 48 participants playing repeatedly. Of the five benchmarks—the unique (Nash) equilibrium, reinforcement learning, trust-based efficiency, maximum unpredictability, and regret-based (Impulse Balance) equilibrium—regret for missed opportunities best accounts for the qualitative aspect of participants’ behavior and regret attenuated by randomization best accounts for the quantitative aspect of behavior. (shrink)

We analyze the results from three different risk attitude elicitation methods. First, the broadly used test by Holt and Laury, HL, second, the lottery-panel task by Sabater-Grande and Georgantzis, SG, and third, responses to a survey question on self-assessment of general attitude towards risk. The first and the second task are implemented with real monetary incentives, while the third concerns all domains in life in general. Like in previous studies, the correlation of decisions across tasks is low and usually statistically (...) non-significant. However, when we consider only subjects whose behavior across the panels of the SG task is compatible with constant relative risk aversion, the correlation between HL and self-assessed risk attitude becomes significant. Furthermore, the correlation between HL and SG also increases for CRRA-compatible subjects, although it remains statistically non-significant. (shrink)

This paper describes a cross-cultural research project on the relation between how people conceptualize nature and how they act in it. Mental models of nature differ dramatically among and within populations living in the same area and engaged in more or less the same activities. This has novel implications for environmental decision making and management, including dealing with commons problems. Our research also offers a distinct perspective on models of culture, and a unified approach to the study of culture and (...) cognition. We argue that cultural transmission and formation does not consist primarily in shared rules or norms, but in complex distributions of causally-connected representations across minds in interaction with the environment. The cultural stability and diversity of these representations often derives from rich, biologically-prepared mental mechanisms that limit variation to readily transmissible psychological forms. This framework addresses a series of methodological issues, such as the limitations of conceiving culture to be a well-defined system or bounded entity, an independent variable, or an internalized component of minds. (shrink)

Technology used in online marketing has advanced to a state where collection, enhancement and aggregation of information are instantaneous. This proliferation of customer information focused technology brings with it a host of issues surrounding customer privacy. This article makes two key contributions to the debate concerning digital privacy. First, we use theories of justice to help understand the way consumers conceive of, and react to, privacy concerns. Specifically, it is argued that an important component of consumers’ privacy concerns relates to (...) fairness judgments, which in turn comprise of the two primary components of distributive and procedural justice. Second, we make a number of prescriptions, aimed at both firms and regulators, based on the notion that consumers respond to perceived privacy violations in much the same way they would respond to an unfair exchange. (shrink)

The dominant theory of the evolution of moral cognition across a variety of fields is that moral cognition is a biological adaptation to foster social cooperation. This chapter argues, to the contrary, that moral cognition is likely an evolutionary exaptation: a form of cognition where neurobiological capacities selected for in our evolutionary history for a variety of different reasons—many unrelated to social cooperation—were put to a new, prosocial use after the fact through individual rationality, learning, and the development and transmission (...) of social norms. This chapter begins with a brief overview of the emerging behavioral neuroscience of moral cognition. It then outlines a novel theory of moral cognition that I have previously argued explains these findings better than alternatives. Finally, it shows how the evidence for this theory of moral cognition and human evolutionary history together suggest that moral cognition is likely not a biological adaptation. Instead, like reading sheet music or riding a bicycle, moral cognition is something that individuals learn to do—in this case, in response to sociocultural norms created in our ancestral history and passed down through the ages to enable cooperative living. (shrink)

Wearable self-tracking devices capture multidimensional health data and offer several advantages including new ways of facilitating research. However, they also create a conflict between individual interests of avoiding privacy harms, and collective interests of assembling and using large health data sets for public benefits. While some scholars argue for transparency and accountability mechanisms to resolve this conflict, an average user is not adequately equipped to access and process information relating to the consequences of consenting to further uses of her data. (...) As an alternative, this paper argues for fiduciary relationships, which put deliberative demands on digital health data controllers to keep the interests of their data subjects at the forefront as well as cater to the contextual nature of privacy. These deliberative requirements ensure that users can engage in collective participation and share their health data at a lower risk of privacy harms. This paper also proposes a way to balance the flexible and open-ended nature of fiduciary law with the specific nature and scope of fiduciary duties that digital health data controllers should owe to their data subjects. (shrink)

It is widely held that the influence of risk on rational decisions is not entirely explained by the shape of an agent’s utility curve. Buchak (Erkenntnis, 2013, Risk and rationality, Oxford University Press, Oxford, in press) presents an axiomatic decision theory, risk-weighted expected utility theory (REU), in which decision weights are the agent’s subjective probabilities modified by his risk-function r. REU is briefly described, and the global applicability of r is discussed. Rabin’s (Econometrica 68:1281–1292, 2000) calibration theorem strongly suggests that (...) plausible levels of risk aversion cannot be fully explained by concave utility functions; this provides motivation for REU and other theories. But applied to the synchronic preferences of an individual agent, Rabin’s result is not as problematic as it may first appear. Theories that treat outcomes as gains and losses (e.g. prospect theory and cumulative prospect theory) account for risk sensitivity in a way not available to REU. Reference points that mark the difference between gains and losses are subject to framing, many instances of which cannot be regarded as rational. However, rational decision theory may recognize the difference between gains and losses, without endorsing all ways of fixing the point of reference. In any event, REU is a very interesting theory. (shrink)

Gerd Gigerenzer and Thomas Sturm have recently proposed a modest form of what they describe as a normative, ecological and limited naturalism. The basic move in their argument is to infer that certain heuristics we tend to use should be used in the right ecological setting. To address this argument, we first consider the case of a concrete heuristic called Take the Best (TTB). There are at least two variants of the heuristic which we study by making explicit the choice (...) functions they induce, extending these variants of TTB beyond binary choice. We argue that the naturalistic argument can be applied to only one of the two variants of the heuristic; we also argue that the argument for the extension requires paying attention to other “rational” virtues of heuristics aside from efficacy, speed, and frugality. This notwithstanding, we show that there is a way of extending the right variant of TTB to obtain a very well behaved heuristic that could be used to offer a stronger case for the naturalistic argument (in the sense that if this heuristic is used, it is also a heuristic that we should use). The second part of the article considers attempts to extending the naturalistic argument from algorithms dealing with inference to heuristics dealing with choice. Our focus is the so-called Priority Heuristic, which we extend from risk to uncertainty. In this setting, the naturalist argument seems more difficult to formulate, if it remains feasible at all. Normativity seems in this case extrinsic to the heuristic, whose main virtue seems to be its ability to describe actual patterns of choice. But it seems that a new version of the naturalistic argument used with partial success in the case of inference is unavailable to solve the normative problem of whether we should exhibit the patterns of choice that we actually display. (shrink)

This paper examines issues of ontology and methodology in behavioral economics: the attempt to increase the explanatory and predictive power of economic theory by providing it with more psychologically plausible foundations. Of special interest is the epistemological status of neoclassical economic theory within behavioral economics, the runaway success story of contemporary economics. Behavioral economists aspire to replace the fundamental assumptions of orthodox, neoclassical economic theory. Yet, behavioral economists have gone out of their way to praise those very assumptions. Matthew Rabin, (...) for example, writes that behavioral economics “is not only built on the premise that [orthodox] economic methods are great, but also that most mainstream economic assumptions are great.” These apparently contradictory attitudes toward neoclassical theory raises the question of what, exactly, its epistemological status within behavioral economics is. This paper argues that the paradox can be resolved, and the question answered, by thinking of the epistemological status of neoclassical theory within behavioral economics in terms of Max Weber’s ideal types: analytical constructs that are not intended to be descriptively true of anything but which nevertheless can be used for a variety of theoretical purposes. The analysis is consistent with many of the insights from the philosophical literature on models in science and has important implications for the practice of economics—behavioral and neoclassical—as well as for the very nature of rationality. (shrink)

Uncertainty and affect are fundamental and interrelated aspects of the human condition. Uncertainty is often associated with negative affect, but in some circumstances it is associated with positive affect. In this paper, we review different explanations for the varying relationship between uncertainty and affect. We identify “mental simulation” as a key process that links uncertainty to affective states. We suggest that people have a propensity to simulate negative outcomes, which results in a propensity towards negative affective responses to uncertainty. We (...) also propose the existence of several important moderators of this process, including context and individual differences such as uncertainty tolerance, as well as emotion regulation strategies. Finally, we highlight important knowledge gaps and promising areas for future research, both empirical and conceptual, to further elucidate the relationship between uncertainty and affect. (shrink)

In this paper, an integrated, cognitive view of different mechanisms, reasons and pathways to norm compliance is presented. After a short introduction, theories of norm compliance are reviewed, and found to group in four main typologies: the rational choice model of norm compliance; theories based on conditional preferences to conformity, theories of thoughtless conformity, and theories of norm internalization. In the third section of the paper, the normative architecture EMIL-A is presented. Previous work discussed the epistemic module of this normative (...) architecture, allowing for the generation of normative beliefs being formed. The fourth and fifth sections present the pragmatic modules of EMIL-A, i.e. norm adoption—leading to normative goals—and norm compliance—leading to their execution. Not only are several alternative reasons for norm adoption shown, but also several pathways to norm compliance are identified. Finally, a summary and ideas for future works conclude the paper. (shrink)

The last 25 years have seen advances in our understanding of the neuroscience and neuropsychiatry of fear. From the basic brain mechanisms of fear to new evidence-based treatments for the pathologies of fear, the field has experienced progress towards an understanding of the underpinnings of fear in the brain and its influence on behaviors. Yet, to date, there has been less than ideal incorporation of these new findings, insights and models into the public policy and economic domains. Even when notions (...) of risk, uncertainty, and emotional decision-making are discussed, these discussions may not access insights from the latest contemporary neuroscience of fear, or clinical techniques in changing pathological fear responses. This paper will explore how a more complete incorporation of these advances may contribute to our understanding of fear and its management. Applying these advances in specific amenable policy areas may lead to new, more effective approaches to public and economic policies. (shrink)

We explored the relationship between qualities of victims in hypothetical scenarios and the appearance of framing effects. In past studies, participants’ feelings about the victims have been demonstrated to affect whether framing effects appear, but this relationship has not been directly examined. In the present study, we examined the relationship between caring about the people at risk, the perceived interdependence of the people at risk, and frame. Scenarios were presented that differed in the degree to which participants could be expected (...) to care about the group and the extent to which the group could be construed as interdependent. A framing effect was found only for the scenario describing the victims as the participants’ friends who did not know each other (high caring/low interdependence), and this went in the opposite direction from typical framing effects. Finally, perceived interdependence and caring affected choice both within and across scenarios, with more risky choices made by participants with high interdependence ratings and high caring ratings. (shrink)

Conventional theory assumes that economic agents perform at optimal levels of efficiency by definition and this is achieved when individuals behave in a particular fashion. Moreover, neoclassical production theory masks the process by which optimal output can be achieved. I argue that economic theory should be revised to incorporate some key findings of behavioural economics, while retaining the conventional theory’s normative ideal of optimum output whilst rejecting its normative procedural ideals of how to achieve optimality in production. I argue that (...) neoclassical procedures can be expected to yield sub-optimal levels of output and therefore should not be benchmarks for procedural rationality. I present an alternative more realistic and analytically precise specification of the production function related to the fast and frugal heuristics narrative pioneered by Gigerenzer and Leibenstein’s x-efficient theory. This approach incorporates an understanding of the appropriate procedures, psychological and organization variables, decision-making capabilities and end-goals required to achieve optimality in production and, thereby, grow the wealth of nations, thereby enhancing the material wellbeing of the population at large. This also provides us with the tools to better identify economic inefficiency and the conditions that contribute to it. (shrink)

In this article we argue that puzzle of tax compliance can be explained, at least in part, by recognizing the typically neglected role of ethics in individual behavior; that is, individuals do not always behave as the selfish, rational, self-interested individuals portrayed in the standard neoclassical paradigm, but rather are often motivated by many other factors that have as their main foundation some aspects of “ethics.” We argue that it is not possible to understand fully an individual’s compliance decisions without (...) considering in some form these ethical dimensions. Specifically, we argue here that there is much direct and indirect evidence that ethics differ across individuals and that these differences matter in significant ways for their compliance decisions. We then put this in the larger context of the inability of the standard neoclassical paradigm to explain compliance of at least some individuals, and we suggest several possible avenues by which theory can be expanded to incorporate ethics. We conclude by arguing that a full house of compliance strategies is needed to combat tax evasion, strategies that include the traditional “enforcement” paradigm suggested by and consistent with neoclassical theory, a less traditional “service” paradigm that recognizes the important role of a “kinder and gentler” tax administration in encouraging compliance, and, importantly, a new “trust” paradigm that is built on the foundation of ethics, in which the tax administration must recognize that it can erode the ethics of taxpayers by its own decisions. (shrink)

The use of language and images in the media may have a strong effect on people’s political cognition. In this regard, conspiracy theories and misinformation about the COVID-19 vaccine can lead to reluctant uptake of the vaccine even among medical staff. In two experiments, this article tests the hypothesis that the public’s willingness to get vaccinated against the novel coronavirus depends on the framings they are presented with. Two hundred thirty-two female Saudi students are exposed to either pro- or anti-vaccination (...) messages. In Experiment 1, they are asked to read semi-artificial news stories, and in Experiment 2 political cartoons. The results show that readers of the news articles, but not of the cartoons, are susceptible to framing effects. We consider the implications of how issues are framed for journalists and health professionals. (shrink)

I propose an account of how our forward-looking moral and epistemic responsibility practices arose, how they related to backward-looking responsibility practices, and what makes them stable. This account differs in several ways from prominent theories already in the literature. Traditionally, forward-looking accounts of responsibility are framed third-personally in terms of social control and neglect the perspective and agency of the responsible person. The account I develop allows that there are third-personal, control-based aspects of our responsibility practices, but it also makes (...) room for the first-personal perspective of the responsible agent and emphasizes the role of partner choice and cooperative planning and action. Whereas existing research focuses on forward-looking accounts of the practice of holding others responsible, I offer an account of forward-looking practices of taking responsibility and assigning responsibility. I hope thereby to provide a richer and more plausible framework in which to think about responsibility and our practices related to it. (shrink)

When people must either save a greater number of people from a smaller harm or a smaller number from a greater harm, do their choices reflect a reasonable moral outlook? We pursue this question with the help of an experiment. In our experiment, two-fifths of subjects employ a similarity heuristic. When alternatives appear dissimilar in terms of the number saved but similar in terms of the magnitude of harm prevented, this heuristic mandates saving the greater number. In our experiment, this (...) leads to choices that are inconsistent with all standard theories of justice. We argue that this demonstrates the untrustworthiness of distributive judgments in cases that elicit similarity-based choice. (shrink)

Good’s theorem is the apparent platitude that it is always rational to ‘look before you leap’: to gather information before making a decision when doing so is free. We argue that Good’s theorem is not platitudinous and may be false. And we argue that the correct advice is rather to ‘make your act depend on the answer to a question’. Looking before you leap is rational when, but only when, it is a way to do this.

Libertarian paternalism is a concept derived from cognitive psychology and behavioural science. It is behind policies that frame information in such a way as to encourage individuals to make choices which are in their best interests, while maintaining their freedom of choice. Clinicians may view their clinical consultations as far removed from the realms of cognitive psychology but on closer examination there are a number of striking similarities.

Several decision rules, including the minimax regret rule, have been posited to suggest optimizing strategies for an individual when neither objective nor subjective probabilities can be associated to the various states of the world. These all share the shortcoming of focusing only on extreme outcomes. This paper suggests an alternative approach of ‘tempered regrets’ which may more closely replicate the decision process of individuals in those situations in which avoiding the worst outcome tempers the loss from not achieving the best (...) outcome. The assumption of total ignorance of the probabilities associated with the various states is maintained. Applications and illustrations from standard neoclassical theory are discussed. (shrink)

Risk attitude is known to be a key determinant of various economic and financial choices. Behavioral studies that aim to evaluate the role of risk attitudes in contexts of this type, therefore, require tools for measuring individual risk tolerance. Recent developments in decision theory provide such tools. However, the methods available can be time consuming. As a result, some practitioners might have an incentive to prefer “fast and frugal” methods to clean but more costly methods. In this article, we focus (...) on a tractable procedure initially proposed by Holt and Laury (2002) to elicit risk attitude. We generalize this method to measure utility and risk aversion as follows. First, we allow measurement of probabilistic risk attitude through violations of expected utility due to probability weighting. Second, we use the outcome scale rather than the probability scale in the menu of choices. Third, we compare sure payoffs with lotteries instead of comparing non-degenerate lotteries. A within-subject experimental study illustrates the gains in tractability and bias minimization that can result from such an extension. (shrink)

In this article, we elicit both individuals’ and couples’ preferences assuming prospect theory (PT) as a general theoretical framework for decision under risk. Our experimental method, based on certainty equivalents, allows to infer measurements of utility and probability weighting at the individual level and at the couple level. Our main results are twofold. First, risk attitude for couples is compatible with PT and incorporates deviations from expected utility similar to those found in individual decision making. Second, couples’ attitudes towards risk (...) are found to be consistent with a mix of individual attitudes, women being more influent on couples’ preferences at low probability levels. (shrink)

Prospect theory is increasingly used to explain deviations from the traditional paradigm of rational agents. Empirical support for prospect theory comes mainly from laboratory experiments using student samples. It is obviously important to know whether and to what extent this support generalizes to more naturally occurring circumstances. This article explores this question and measures prospect theory for a sample of private bankers and fund managers. We obtained clear support for prospect theory. Our financial professionals behaved according to prospect theory and (...) violated expected utility maximization. They were risk averse for gains and risk seeking for losses and their utility was concave for gains and convex for losses. They were also averse to losses, but less so than commonly observed in laboratory studies and assumed in behavioral finance. A substantial minority focused on gains and largely ignored losses, behavior reminiscent of what caused the current financial crisis. (shrink)

Institutional economics and discourse theory stand unconnected next to each other, in spite of the fact that they both ask for the legitimacy of institutions (normative) and the functioning and effectiveness of institutions (positive). Both use as theoretical constructions rational individuals and the concept of consensus for legitimacy. Whereas discourse theory emphasizes the conditions of a legitimate consensus and could thus enable institutional economics to escape the infinite regress of judging a consensus legitimate, institutional economics has a tested social science (...) paradigm (rational choice) of explaining and predicting the functioning of institutions. The article outlines a theoretical synthesis of the two theories by finding points in common and possibilities of fruitful combinations concerning the problem of legitimacy, institutional design and effectiveness of legal norms. (shrink)

A substantial body of empirical evidence shows that individuals overweight extreme events and act in conflict with the expected utility theory. These findings were the primary motivation behind the development of a rank-dependent utility theory for choice under uncertainty. The purpose of this paper is to demonstrate that some simple empirical rules of thumb for choice under uncertainty are consistent with the rank-dependent utility theory.

A fact of life for farmers, hunter-gatherers, and fishermen in the rural parts of the world are that crops fail, wild resources become scarce, and winds discourage fishing. In this article we approach subsistence risk from the perspective of "coexistence thinking," the simultaneous application of natural and supernatural causal models to explain subsistence success and failure. In southwestern Madagascar, the ecological world is characterized by extreme variability and unpredictability, and the cosmological world is characterized by anxiety about supernatural dangers. Ecological (...) and cosmological causes seem to point to different risk minimizing strategies: to avoid losses from drought, flood, or heavy winds, one should diversify activities and be flexible; but to avoid losses caused by disrespected spirits one should narrow one's range of behaviors to follow the code of taboos and offerings. We address this paradox by investigating whether southwestern Malagasy understand natural and supernatural causes as occupying separate, contradictory explanatory systems (target dependence), whether they make no categorical distinction between natural and supernatural forces and combine them within a single explanatory system (synthetic thinking), or whether they have separate natural and supernatural categories of causes that are integrated into one explanatory system so that supernatural forces drive natural forces (integrative thinking). Results from three field studies suggest that (a) informants explain why crops, prey, and market activities succeed or fail with reference to natural causal forces like rainfall and pests, (b) they explain why individual persons experience success or failure primarily with supernatural factors like God and ancestors, and (c) they understand supernatural forces as driving natural forces, so that ecology and cosmology represent distinct sets of causes within a single explanatory framework. We expect that future cross-cultural analyses may find that this form of "integrative thinking" is common in unpredictable environments and is a cognitive strategy that accompanies economic diversification. (shrink)

Monetary intelligence theory asserts that individuals apply their money attitude to frame critical concerns in the context and strategically select certain options to achieve financial goals and ultimate happiness. This study explores the dark side of monetary Intelligence and behavioral economics—dishonesty. Dishonesty, a risky prospect, involves cost–benefit analysis of self-interest. We frame good or bad barrels in the environmental context as a proxy of high or low probability of getting caught for dishonesty, respectively. We theorize: The magnitude and intensity of (...) the relationship between love of money and dishonest prospect may reveal how individuals frame dishonesty in the context of two levels of subjective norm—perceived corporate ethical values at the micro-level and Corruption Perceptions Index at the macro-level, collected from multiple sources. Based on 6382 managers in 31 geopolitical entities across six continents, our cross-level three-way interaction effect illustrates: As expected, managers in good barrels, mixed barrels, and bad barrels display low, medium, and high magnitude of dishonesty, respectively. With high CEV, the intensity is the same across cultures. With low CEV, the intensity of dishonesty is the highest in high CPI entities —the Enron Effect, but the lowest in low CPI entities. CPI has a strong impact on the magnitude of dishonesty, whereas CEV has a strong impact on the intensity of dishonesty. We demonstrate dishonesty in light of monetary values and two frames of social norm, revealing critical implications to the field of behavioral economics and business ethics. (shrink)

Monetary Intelligence theory asserts that individuals apply their money attitude to frame critical concerns in the context and strategically select certain options to achieve financial goals and ultimate happiness. This study explores the bright side of Monetary Intelligence and behavioral economics, frames money attitude in the context of pay and life satisfaction, and controls money at the macro-level and micro-level. We theorize: Managers with low love of money motive but high stewardship behavior will have high subjective well-being: pay satisfaction and (...) quality of life. Data collected from 6586 managers in 32 cultures across six continents support our theory. Interestingly, GDP per capita is related to life satisfaction, but not to pay satisfaction. Individual income is related to both life and pay satisfaction. Neither GDP nor income is related to Happiness. Our theoretical model across three GDP groups offers new discoveries: In high GDP entities, “high income” not only reduces aspirations—“Rich, Motivator, and Power,” but also promotes stewardship behavior—“Budget, Give/Donate, and Contribute” and appreciation of “Achievement.” After controlling income, we demonstrate the bright side of Monetary Intelligence: Low love of money motive but high stewardship behavior define Monetary Intelligence. “Good apples enjoy good quality of life in good barrels.” This notion adds another explanation to managers’ low magnitude of dishonesty in entities with high Corruption Perceptions Index. In low GDP entities, high income is related to poor Budgeting skills and escalated Happiness. These managers experience equal satisfaction with pay and life. We add a new vocabulary to the conversation of monetary intelligence, income, GDP, happiness, subjective well-being, good and bad apples and barrels, corruption, and behavioral ethics. (shrink)

Imprecise probabilities are often modelled with representors, or sets of probability functions. In the recent literature, two ways of interpreting representors have emerged as especially prominent: vagueness interpretations, according to which each probability function in the set represents how the agent's beliefs would be if any vagueness were precisified away; and comparativist interpretations, according to which the set represents those comparative confidence relations that are common to all probability functions therein. I argue that these interpretations have some important limitations. I (...) also propose an alternative—the functional interpretation—according to which representors are best interpreted by reference to the roles they play in the theories that make use of them. (shrink)

Proponents of political experiments in living, such as Elizabeth Anderson and Ryan Muldoon, often emphasize their potential to generate useful observational data about the relation between social rules and ethically desirable outcomes. This paper highlights another epistemic dimension of political experiments: their potential to transform the cognitive perspectives of participants. I argue that this transformative dimension of experimentation offers an endogenous societal mechanism for increasing perspectival diversity. I explore the implications of this mechanism for institutional design.

This book is concerned with helping you improve your approach to decision-making. The author examines judgement in a selection of managerial contexts and provides important understanding that can help you make better leadership decisions. The book also pinpoints the in-house politics of organisational decision-making. Drawing on the very latest research, it introduces practical techniques that show you how to analyse and develop your own decision-making style. It will help you to deliver sharp and insightful analyses of your business and develop (...) effective solutions. In addition, it presents simple checklists that will give you vital insights throughout the decision-making process. Students and practitioners of leadership, management, and allied fields will find this book useful in order to understand and implement useful methods. (shrink)

Consider a terrible situation that too many women find themselves in: 85,000 women are raped in England and Wales alone every year. Many of these women do not bring their cases to trial. There are multiple reasons that they might not want to testify in the courts. The incredibly low conviction rate is one. Another reason, however, might be that these women do not want the fact that they were raped to become the most salient thing about them. More specifically, (...) they do not want it to be the thing that others attend to the most—that others find most noticeable and memorable. In this paper, I introduce the notion of ‘harmful salience perspectives’ to help to explain this and related phenomena. This refers either to attention on things that should not be salient, or not enough attention on things that deserve to be made salient. Following ideas within the feminist literature on objectification, I argue that we can be harmed when aspects of our identity that do not reflect our personhood—our agency, rationality, personality, and so on—are more prominent in the minds of others than aspects that do reflect our personhood. Crucially, these ways of attending do not need to implicate false beliefs and harmful ideologies to be harmful, but can be harmful in their own right. (shrink)

Many who think that naked statistical evidence alone is inadequate for a trial verdict think that use of probability is the problem, and something other than probability – knowledge, full belief, causal relations – is the solution. I argue that the issue of whether naked statistical evidence is weak can be formulated within the probabilistic idiom, as the question whether likelihoods or only posterior probabilities should be taken into account in our judgment of a case. This question also identifies a (...) major difference between the Process Reliabilist and Probabilistic Tracking views of knowledge and other concepts. Though both are externalist, and probabilistic, epistemic theories, Tracking does and Process Reliabilism does not put conditions on likelihoods. So Tracking implies that a naked statistic is not adequate evidence about an individual, and does not yield knowledge, whereas the Reliabilist thinks it gives justified belief and knowledge. Not only does the Tracking view imply that naked statistical evidence is insufficient for a verdict, but it gives us resources to explain why, in terms of risk and the special conditions of a trial. (shrink)

When stripped to the bare bone, there are only 11 foundational paradigms in social sciences. These foundational paradigms are like flashlights that can be utilized to shed light on different aspects of human society, but each of them can only shed light on a limited area of human society. Different schools in social science result from different but often incomplete combinations of these foundational paradigms. To adequately understand human society and its history, we need to deploy all 11 foundational paradigms, (...) although more limited combinations of them may be adequate for understanding more specific social facts. (shrink)