The Murray Darling Basin Plan is not delivering - there\u27s no more time to waste

More than five years after the Murray Darling Basin Plan was implemented, it\u27s clear that it is not delivering on its key objectives. The Basin Plan, at its core, is about reducing the amount of water that can be extracted from its streams, rivers and aquifers. It includes an environmental water strategy to improve the conditions of the wetlands and rivers of the basin. The Productivity Commission will conduct a five-yearly inquiry into the effectiveness of the Basin Plan in 2018. It is high time to explain what is really going on in the Basin and water recovery. For this reason we have all signed the Murray-Darling Basin Declaration to explain what has gone wrong, to call for a freeze on funding for new irrigation projects until the outcomes of water recovery has been fully and independently audited, and to call for the establishment of an independent, expert body to deliver on the key goals of the Water Act (2007)

Optimal Resource Allocation over Networks via Lottery-Based Mechanisms

We show that, in a resource allocation problem, the ex ante aggregate utility of players with cumulative-prospect-theoretic preferences can be increased over deterministic allocations by implementing lotteries. We formulate an optimization problem, called the system problem, to find the optimal lottery allocation. The system problem exhibits a two-layer structure comprised of a permutation profile and optimal allocations given the permutation profile. For any fixed permutation profile, we provide a market-based mechanism to find the optimal allocations and prove the existence of equilibrium prices. We show that the system problem has a duality gap, in general, and that the primal problem is NP-hard. We then consider a relaxation of the system problem and derive some qualitative features of the optimal lottery structure

Reasons and Means to Model Preferences as Incomplete

Literature involving preferences of artificial agents or human beings often assume their preferences can be represented using a complete transitive binary relation. Much has been written however on different models of preferences. We review some of the reasons that have been put forward to justify more complex modeling, and review some of the techniques that have been proposed to obtain models of such preferences

The Affective Impact of Financial Skewness on Neural Activity and Choice

Few finance theories consider the influence of “skewness” (or large and asymmetric but unlikely outcomes) on financial choice. We investigated the impact of skewed gambles on subjects' neural activity, self-reported affective responses, and subsequent preferences using functional magnetic resonance imaging (FMRI). Neurally, skewed gambles elicited more anterior insula activation than symmetric gambles equated for expected value and variance, and positively skewed gambles also specifically elicited more nucleus accumbens (NAcc) activation than negatively skewed gambles. Affectively, positively skewed gambles elicited more positive arousal and negatively skewed gambles elicited more negative arousal than symmetric gambles equated for expected value and variance. Subjects also preferred positively skewed gambles more, but negatively skewed gambles less than symmetric gambles of equal expected value. Individual differences in both NAcc activity and positive arousal predicted preferences for positively skewed gambles. These findings support an anticipatory affect account in which statistical properties of gambles—including skewness—can influence neural activity, affective responses, and ultimately, choice

The role of information search and its influence on risk preferences

According to the ‘Description–Experience gap’ (DE gap), when people are provided with the descriptions of risky prospects they make choices as if they overweight the probability of rare events; but when making decisions from experience after exploring the prospects’ properties, they behave as if they underweight such probability. This study revisits this discrepancy while focusing on information-search in decisions from experience. We report findings from a lab-experiment with three treatments: a standard version of decisions from description and two versions of decisions from experience: with and without a ‘history table’ recording previously sampled events. We find that people sample more from lotteries with rarer events. The history table proved influential; in its absence search is more responsive to cues such as a lottery’s variance while in its presence the cue that stands out is the table’s maximum capacity. Our analysis of risky choices captures a significant DE gap which is mitigated by the presence of the history table. We elicit probability weighting functions at the individual level and report that subjects overweight rare events in experience but less so than in description. Finally, we report a measure that allows us to compare the type of DE gap found in studies using choice patterns with that inferred through valuation and find that the phenomenon is similar but not identical across the two methods

Priority for the Worse Off and the Social Cost of Carbon

The social cost of carbon (SCC) is a monetary measure of the harms from carbon emission. Specifically, it is the reduction in current consumption that produces a loss in social welfare equivalent to that caused by the emission of a ton of CO2. The standard approach is to calculate the SCC using a discounted-utilitarian social welfare function (SWF)—one that simply adds up the well-being numbers (utilities) of individuals, as discounted by a weighting factor that decreases with time. The discounted-utilitarian SWF has been criticized both for ignoring the distribution of well-being, and for including an arbitrary preference for earlier generations. Here, we use a prioritarian SWF, with no time-discount factor, to calculate the SCC in the integrated assessment model RICE. Prioritarianism is a well-developed concept in ethics and theoretical welfare economics, but has been, thus far, little used in climate scholarship. The core idea is to give greater weight to well-being changes affecting worse off individuals. We find substantial differences between the discounted-utilitarian and non-discounted prioritarian SCC

Measuring loss aversion under ambiguity: a method to make prospect theory completely observable

We propose a simple, parameter-free method that, for the first time, makes it possible to completely observe Tversky and Kahneman’s (1992) prospect theory. While methods exist to measure event weighting and the utility for gains and losses separately, there was no method to measure loss aversion under ambiguity. Our method allows this and thereby it can measure prospect theory’s entire utility function. Consequently, we can properly identify properties of utility and perform new tests of prospect theory. We implemented our method in an experiment and obtained support for prospect theory. Utility was concave for gains and convex for losses and there was substantial loss aversion. Both utility and loss aversion were the same for risk and ambiguity, as assumed by prospect theory, and sign-comonotonic trade-off consistency, the central condition of prospect theory, held

Operator theory and function theory in Drury-Arveson space and its quotients

The Drury-Arveson space $H^2_d$, also known as symmetric Fock space or the $d$-shift space, is a Hilbert function space that has a natural $d$-tuple of operators acting on it, which gives it the structure of a Hilbert module. This survey aims to introduce the Drury-Arveson space, to give a panoramic view of the main operator theoretic and function theoretic aspects of this space, and to describe the universal role that it plays in multivariable operator theory and in Pick interpolation theory.Comment: Final version (to appear in Handbook of Operator Theory); 42 page

Truth or precision? Some reflections on the economists’ failure to predict the financial crisis

The failure of professional economic forecasters to predict the financial crises has led many to question the credibility of modern economics as a reliable foundation for economic policy. If economists were unable to foresee so big a crisis, how can they be trusted to cure or prevent it? Several accounts of this failure exist. The paper offers a tentative answer based on the lessons that may be drawn from the wisdom of a short list of past and present economists: Hayek, Neville Keynes, Mankiw, Tinbergen, Maynard Keynes and Lucas. The glue to keep such an odd bunch together is the distinction between truth and precision provided by science historian Ted Porter

Cowries in the archaeology of West Africa: the present picture

Despite the perceived importance of cowrie shells as indicators of long-distance connections in the West African past, their distribution and consumption patterns in archaeological contexts remain surprisingly underexplored, a gap that is only partly explicable by the sparse distribution of archaeological sites within the sub-continent. General writings on the timeline of importation of cowries into West Africa often fail to take into account the latest archaeological evidence and rely instead on accounts drawn from historical or ethnographic documents. This paper is based on a first-hand assessment of over 4500 shells from 78 sites across West Africa, examining chronology, shell species and processes of modification to assess what distribution patterns can tell us about the history of importation and usage of cowries. These first-hand analyses are paralleled by a consideration of published materials. We re-examine the default assumption that two distinct routes of entry existed — one overland from North Africa before the fifteenth century, another coming into use from the time sea links were established with the East African coast and becoming predominant by the middle of the nineteenth century. We focus on the eastern part of West Africa, where the importance of imported cowries to local communities in relatively recent periods is well known and from where we have a good archaeological sample. The conclusion is that on suitably large assemblages shell size can be an indication of provenance and that, while the present archaeological picture seems largely to confirm historical sources, much of this may be due to the discrepancy in archaeological data available from the Sahara/Sahel zone compared to the more forested regions of the sub-continent. Future archaeological work will clarify this matter