Conflicted Minds: Recalibrational Emotions Following Trust-based Interaction.

Consistent with a modular view of the mind, both short-sighted and long-sighted programs may be simultaneously active in the mind and in conflict with one another when individuals face choice dilemmas in trust-based economic interactions. Recalibrational theory helps us identify the adaptive design features shared among subsets of superordinate emotion programs. According to this design logic and the computation of adaptive problem features produced by Trust games, we predict the activation of emotions after Trust games. While this study successfully predicts reports of twenty distinct emotional states, further studies are needed to demonstrate ultimate recalibrational functions of emotions.emotions, recalibrational theory, modularity, Trust game, experiments

Extended Inclusive Fitness Theory bridges Economics and Biology through a common understanding of Social Synergy

Inclusive Fitness Theory (IFT) was proposed half a century ago by W.D. Hamilton to explain the emergence and maintenance of cooperation between individuals that allows the existence of society. Contemporary evolutionary ecology identified several factors that increase inclusive fitness, in addition to kin-selection, such as assortation or homophily, and social synergies triggered by cooperation. Here we propose an Extend Inclusive Fitness Theory (EIFT) that includes in the fitness calculation all direct and indirect benefits an agent obtains by its own actions, and through interactions with kin and with genetically unrelated individuals. This formulation focuses on the sustainable cost/benefit threshold ratio of cooperation and on the probability of agents sharing mutually compatible memes or genes. This broader description of the nature of social dynamics allows to compare the evolution of cooperation among kin and non-kin, intra- and inter-specific cooperation, co-evolution, the emergence of symbioses, of social synergies, and the emergence of division of labor. EIFT promotes interdisciplinary cross fertilization of ideas by allowing to describe the role for division of labor in the emergence of social synergies, providing an integrated framework for the study of both, biological evolution of social behavior and economic market dynamics.Comment: Bioeconomics, Synergy, Complexit

A Framework for Computational Strategic Analysis: Applications to Iterated Interdependent Security Games

Past work on tournaments in iterated prisoner’s dilemma and the evolution of cooperation spawned by Axelrod has contributed insights about achieving cooperation in social dilemmas, as well as a framework for strategic analysis in such settings. We present a broader, more extensive framework for strategic analysis in general games, which we illustrate in the context of a particular social dilemma encountered in interdependent security settings. Our framework is fully quantitative and computational, allowing one to measure the quality of strategic alternatives across a series of measures, and as a function of relevant game parameters. Our special focus on performing analysis over a parametric landscape is motivated by public policy considerations, where possible interventions are modeled as affecting particular parameters of the game. Our findings qualify the touted efficacy of the Tit-for-Tat strategy, demonstrate the importance of monitoring, and exhibit a phase transition in cooperative behavior in response to a manipulation of policy-relevant parameters of the game

Socially Responsible Investment in General Equilibrium

Socially responsible investment in analyzed in a general equilibrium context. This is important in order to understand the ultimate consequences of SRI on the decisions of economic agents. Building on models by Brock (1982) and Merton (1987), SRI is modelled as the choice to voluntarily give up investment in stocks and bonds issues by a firm producing an externality. The model is used to analyze the utility costs of SRI to the responsible investor and the impact on the price of the stock issued by the firm which is responsible for the externality. The results shed light on the factors which may magnify or reduce the impact of SRI, among which are crucial the wealth commended in relative terms by the responsible agents and the diversification possibilities offered by the firms which are excluded from the investment opportunity set. A set of firms targeted by SRI may be seriously affected by SRI only if the responsible investors command a large portion of overall wealth; moreover the same firms are more likely to be hit by SRI behavior if they do not represent important diversification instruments. Firms with unique characteristics from the point of view of overall diversification are less likely to be the target of SRI.General equilibrium, Redistributive effects, Public goods

To trust or not to trust: evolutionary dynamics of an asymmetric N-player trust game

Trusting others and reciprocating the received trust with trustworthy actions are fundaments of economic and social interactions. The trust game (TG) is widely used for studying trust and trustworthiness and entails a sequential interaction between two players, an investor and a trustee. It requires at least two strategies or options for an investor (e.g.to trust versus not to trust a trustee). According to the evolutionary game theory, the antisocial strategies (e.g.not to trust) evolve such that the investor and trustee end up with lower payoffs than those that they would get with the prosocial strategies (e.g.to trust). A generalisation of the TG to a multiplayer (i.e.more than two players) TG was recently proposed. However, its outcomes hinge upon two assumptions that various real situations may substantially deviate from: (i) investors are forced to trust trustees and (ii) investors can turn into trustees by imitation and vice versa. We propose an asymmetric multiplayer TG that allows investors not to trust and prohibits the imitation between players of different roles; instead, investors learn from other investors and the same for trustees. We show that the evolutionary game dynamics of the proposed TG qualitatively depends on the nonlinearity of the payoff function and the amount of incentives collected from and distributed to players through an institution. We also show that incentives given to trustees can be useful and sufficient to cost-effectively promote trust and trustworthiness among self-interested players

Risk-reducing design and operations toolkit: 90 strategies for managing risk and uncertainty in decision problems

Uncertainty is a pervasive challenge in decision analysis, and decision theory recognizes two classes of solutions: probabilistic models and cognitive heuristics. However, engineers, public planners and other decision-makers instead use a third class of strategies that could be called RDOT (Risk-reducing Design and Operations Toolkit). These include incorporating robustness into designs, contingency planning, and others that do not fall into the categories of probabilistic models or cognitive heuristics. Moreover, identical strategies appear in several domains and disciplines, pointing to an important shared toolkit. The focus of this paper is to develop a catalog of such strategies and develop a framework for them. The paper finds more than 90 examples of such strategies falling into six broad categories and argues that they provide an efficient response to decision problems that are seemingly intractable due to high uncertainty. It then proposes a framework to incorporate them into decision theory using multi-objective optimization. Overall, RDOT represents an overlooked class of responses to uncertainty. Because RDOT strategies do not depend on accurate forecasting or estimation, they could be applied fruitfully to certain decision problems affected by high uncertainty and make them much more tractable

Impact of Short Social Training on Prosocial Behaviors: An fMRI Study

Efficient brain–computer interfaces (BCIs) are in need of knowledge about the human brain and how it interacts, plays games, and socializes with other brains. A breakthrough can be achieved by revealing the microfoundations of sociality, an additional component of the utility function reflecting the value of contributing to group success derived from social identity. Building upon our previous behavioral work, we conduct a series of functional magnetic resonance imaging (fMRI) experiments (N = 10 in the Pilot Study and N = 15 in the Main Study) to measure whether and how sociality alters the functional activation of and connectivity between specific systems in the brain. The overarching hypothesis of this study is that sociality, even in a minimal form, serves as a natural mechanism of sustainable cooperation by fostering interaction between brain regions associated with social cognition and those related to value calculation. We use group-based manipulations to induce varying levels of sociality and compare behavior in two social dilemmas: Prisoner’s Dilemma and variations of Ultimatum Game. We find that activation of the right inferior frontal gyrus, a region previously associated with cognitive control and modulation of the valuation system, is correlated with activity in the medial prefrontal cortex (mPFC) to a greater degree when participants make economic decisions in a game with an acquaintance, high sociality condition, compared to a game with a random individual, low sociality condition. These initial results suggest a specific biological mechanism through which sociality facilitates cooperation, fairness and provision of public goods at the cost of individual gain. Future research should examine neural dynamics in the brain during the computation of utility in the context of strategic games that involve social interaction for a larger sample of subjects

The naturalistic turn in economics: implications for the theory of finance

Economics is increasingly adopting the methodological standards and procedures of the natural sciences. The paper analyzes this 'naturalistic turn' from the philosophical perspective on naturalism, and I discuss the implications for the field of finance. The theory of finance is an interesting case in point for the methodological issues, as it manifests a paradigmatic tension between the pure theory of finance and Behavioral Finance. I distinguish between three kinds of naturalism: mark I, the reduction of behavior on psychoneural phenomena, mark II, the transfer of patterns of causal explanations from the natural sciences to the social sciences, mark III, the enrichment of the ontology from observer-independent to observer-relative facts. Building an integrated naturalistic paradigm from these three ingredients, I show that naturalism in economics will only be completed by a simultaneous linguistic turn, with language being analyzed from the naturalistic viewpoint. I relate this proposition with recent results of research into finance, especially connecting Behavioral Finance with the sociology of finance. --Naturalism,causation in economics,neuroeconomics,behavioral finance,social ontology,sociology of finance