Base rate neglect for the wealth of populations

Base rate neglect has been shown to be a very robust bias in human information processing. It has also been show to be ecologically rational in some environments. However, when arguing about base rate neglect usually isolated individuals are considered. I complement these results by showing that in many scenarios of social learning a base rate neglect increases a population's wealth. I thereby strengthen the argument that the presence of base rate neglect could be evolutionary stable. I pick up a model of social learning that has been used to demonstrate the potential benefits of overconfidence. Individuals are confronted with a safe and a risky option. They receive a private signal about the risky option's outcome, they decide in an exogenously given sequence, and they observe decisions of preceding individuals. I first deviate from the original model by incorporating base rates that differ from fifty-fifty and show that under weighting this base rate can be for the wealth of a population. Then I analyse how the optimal base rate neglect reacts to changes in payoffs. I show that for large set of settings under weighting the base rate is still positive, but for a smaller subset it decreases wealth insteadcognitive biases, base rate neglect, social learning, ecological rationality

Maps of Bounded Rationality

The work cited by the Nobel committee was done jointly with the late Amos Tversky (1937-1996) during a long and unusually close collaboration. Together, we explored the psychology of intuitive beliefs and choices and examined their bounded rationality. This essay presents a current perspective on the three major topics of our joint work: heuristics of judgment, risky choice, and framing effects. In all three domains we studied intuitions - thoughts and preferences that come to mind quickly and without much reflection. I review the older research and some recent developments in light of two ideas that have become central to social-cognitive psychology in the intervening decades: the notion that thoughts differ in a dimension of accessibility - some come to mind much more easily than others - and the distinction between intuitive and deliberate thought processes.behavioral economics; experimental economics

Understanding the nature and etiology of intimate partner violence and

Theoretical perspectives underlying hypotheses about the nature and etiology of intimate partner violence are important as they inform professionals how they should best respond to reduce or eliminate this social problem. Therefore, it is crucial that practice led initiatives are driven by theory that is supported by good quality empirical evidence. This review aims to provide a synthesis of methodologically sound research to understand how intimate partner violence is best conceptualized, and what the implications of this evidence based theory hold for practice and policy. A wealth of evidence supporting the need to further explore and respond to the spectrum of partner violence from a gender inclusive perspective is demonstrated. Implications of the evidence for multidisciplinary work, prevention, assessment, treatment, and policy related to intimate partner violence are discussed

Wealth, income, earnings and the statistical mechanics of flow systems

This paper looks at empirical data from economics regarding wealth, earnings and income, alongside a flow model for an economy based on the general Lotka-Volterra models of Levy & Solomon. The data and modelling suggest that a simple economic system might provide a tractable model for giving an exact statistical mechanical solution for an 'out of equilibrium' flow model. This might also include an exact mathematical definition of a 'dissipative structure' derived from maximum entropy considerations. This paper is primarily a qualitative discussion of how such a mathematical proof might be achieved

Who gets paid to save?

Thanks to recent changes in the tax law, people can contribute more to their tax-deductible and non-tax-deductible savings plans, including 401(k) and Roth IRAs. But should they? The myriad interacting provisions of the tax code make it difficult to predict who will gain from government savings incentives and by how much. This study examines how new legislation affects the lifetime tax gains (or losses) of low, middle, and high lifetime earners if they contribute the maximum to 401(k) accounts, traditional IRA accounts, and Roth IRA accounts. The study finds that the new legislation changes little for low- and middle-income earners, who paid higher lifetime taxes under the old tax law if they participated fully in tax-deferred plans and would still do so under the new law. If a new tax credit created by the legislation were extended and indexed to inflation, low earners would break even, but middle earners would still lose. In contrast, participating in a Roth IRA provides a guaranteed and nontrivial lifetime tax saving; however, one need not contribute the maximum to receive the full benefit.Saving and investment

Information Technology in The Learning Economy -Challenges for Developing Countries

This paper inquires how the concept of the "learning economy" can be applied to the requirements of developing countries. The main purpose is to develop an analytical framework to better understand how learning and capability formation can foster industrial upgrading. Special emphasis is given to te spread of information technology (IT). We inquire under what conditions developing countries can use this set of generic technologies to improve their learning capabilities. We argue that information technology should not be regarded as a potential substitute for human skills and tacit knowledge. Instead, its main role should be to support the formation and use of tacit knowledge. In the paper we compare two stylised models of the learning economy, the Japanese versus the American model. The Japanese model is explicit in its promotion and exploitation of tacit knowledge, while the American model is driven by a permanent urge to reduce the importance of tacit knowledge and to transform it into information - that is into explicit, 4 well structured and codified knowledge. We show that each of these models has peculiar strengths and weaknesses. Developing countries need to develop their own hybrid forms of institutions that combine the advantages of both models in a way that is appropriate to their idiosyncratic needs and capabilities.information technology; learning; learning economy; knowledge; capabilities; networks; developing countries; economic development; industrial upgrading