Disgusting

How Disgust Influences Health Purity Attitudes 

Scott Clifford & Dane Wendell 
Political Behavior, forthcoming 

 Abstract: Food and health regulations are increasingly being pushed onto the political agenda, with rising concerns about genetically modified foods, obesity rates, and vaccination. Public beliefs and attitudes on these issues often conflict with the scientific evidence, yet we know relatively little about what influences opinion on these issues. The public lacks clear partisan cues, and many food and health attitudes cut across the ideological spectrum. We argue that these issues represent new 'purity' attitudes that are driven by the emotion of disgust. Across three studies, both by measuring individuals' trait disgust sensitivity and experimentally inducing an emotional state of disgust, we demonstrate the impact of disgust on food and health policy attitudes. Our results show that greater sensitivity to disgust is associated with support for organic foods, opposition to genetically modified foods, and anti-vaccination beliefs. However, we find only limited evidence that experimentally manipulated disgust affects attitudes toward genetically modified and organic foods. Overall, our results demonstrate that disgust plays an important role in attitudes regarding public health and broadens our understanding of purity attitudes.

Thanks to Kevin Lewis

Money For Nothing....

Would you Pay for Transparently Useless Advice? A Test of Boundaries of Beliefs in The Folly of Predictions 

Nattavudh Powdthavee & Yohanes Riyanto
Review of Economics and Statistics,
May 2015, Pages 257-272

 Abstract: Standard economic models assume that the demand for expert predictions arises only under the conditions in which individuals are uncertain about the underlying process generating the data and there is a strong belief that past performances predict future performances. We set up the strongest possible test of these assumptions. In contrast to the theoretical suggestions made in the literature, people are willing to pay for predictions of truly random outcomes after witnessing only a short streak of accurate predictions live in the lab. We discuss potential explanations and implications of such irrational learning in the contexts of economics and finance.

The Visible Dunk: Is Self-Interest Good for the Team?

Selfish Play Increases during High-Stakes NBA Games and Is Rewarded with More Lucrative Contracts

Eric Luis Uhlmann & Christopher Barnes

PLoS ONE, April 2014

Abstract: High-stakes team competitions can present a social dilemma in which participants must choose between concentrating on their personal performance and assisting teammates as a means of achieving group objectives. We find that despite the seemingly strong group incentive to win the NBA title, cooperative play actually diminishes during playoff games, negatively affecting team performance. Thus team cooperation decreases in the very high stakes contexts in which it is most important to perform well together. Highlighting the mixed incentives that underlie selfish play, personal scoring is rewarded with more lucrative future contracts, whereas assisting teammates to score is associated with reduced pay due to lost opportunities for personal scoring. A combination of misaligned incentives and psychological biases in performance evaluation bring out the “I” in “team” when cooperation is most critical.

Sport Stats

The contract year syndrome in the NBA and MLB: A classic undermining pattern  
Mark White & Kennon Sheldon
Motivation and Emotion, forthcoming

 Abstract: We assembled National Basketball Association and Major League Baseball player performance data from recent years, tracking 3 year periods in players’ careers: pre-contract year (baseline), contract year (CY; salient external incentive present), and post-contract year (salient external incentive removed). In both sports, we examined both individual scoring statistics (points scored, batting average) and non-scoring statistics (e.g. blocked shots, fielding percentage) over the 3 years. Using extrinsic motivation theories, we predicted and found a boost in some scoring statistics during the CY (relative to the pre-CY), but no change in non-scoring statistics. Using intrinsic motivation theories, we predicted and found an undermining of many statistics in the post-CY, relative to both the CY and the pre-CY baseline. Boosted CY scoring performance predicted post-CY salary raises in both sports, but salary raises were largely unrelated to post-CY performance. The CY performance boost is real, but team managers should know that it might be followed by a performance crash — the CY “syndrome.”

 The Hot Hand Fallacy: Cognitive Mistakes or Equilibrium Adjustments? Evidence from Baseball 
Brett Green & Jeffrey Zwiebel
Stanford Working Paper, November 2013

Abstract: We test for a 'hot hand' (i.e., short-term streakiness in performance) in Major League Baseball using panel data. We find strong evidence for its existence in all ten statistical categories we consider. The magnitudes are significant; being 'hot' corresponds to roughly a one quartile increase in the distribution. Our results are in notable contrast to the majority of the hot hand literature, which has found little to no evidence for a hot hand in sports, often employing basketball shooting data. We argue that this difference is attributable to endogenous defensive responses: basketball presents sufficient opportunity for defensive responses to equate shooting probabilities across players whereas baseball does not. As such, prior evidence on the absence of a hot hand (despite widespread belief in its presence) should not be interpreted as a cognitive mistake -- as it typically is in the literature -- but rather as an efficient equilibrium adjustment. We provide a heuristic manner for identifying a priori which sports are likely to permit an equating endogenous response response and discuss potential implications for identifying the hot hand effect in other settings.

Nod to Kevin Lewis

Policy Uncertainty

Why Has U.S. Policy Uncertainty Risen Since 1960? 

Scott Baker et al.
NBER Working Paper, January 2014

Abstract: There appears to be a strong upward drift in policy-related economic uncertainty after 1960. We consider two classes of explanations for this rise. The first stresses growth in government spending, taxes, and regulation. A second stresses increased political polarization and its implications for the policy-making process and policy choices. While the evidence is inconclusive, it suggests that both factors play a role in driving the secular increase in policy uncertainty over the last half century.

Wiping Out Chavismo?

There are so many things to like about this story.

We think sometimes about the face of socialism, but it turns out the problem is cleaning the other end.  How can you have a toilet paper shortage?  And, if you DO have a toilet paper shortage, how can you believe that nationalization of the toilet paper factory is going to make things BETTER?  Excerpt:

The Venezuelan government has taken over a toilet paper factory to avoid any scarcity of the product. 

The National Guard has taken control of the plant, and officers will monitor production and distribution. Earlier this year officials ordered millions of toilet rolls to be imported to counter a chronic shortage. 

Last week President Nicolas Maduro created a special committee to tackle the problem, which the government blames on unscrupulous traders. The government ordered the temporary occupation of the Manpa plant in the northern state of Aragua, state-run Radio AVN reported. In a tweet on Thursday, Venezuela's Vice President, Jorge Arreaza, said authorities would "not permit hoarding of essential commodities, or any faults in the production and distribution process." 

Nod to Tommy the Tenured Brit

More on the story, sent by Anonyman...

Asked and Answered

So, LeBron asks (as always) a good question, in this post.  "How might democracy disappear?"

But I think there may be an answer, here, from my guy W.E. English.

What do YOU think?

Prices

House price dynamics with dispersed information 

Giovanni Favara & Zheng (Michael) Song
Journal of Economic Theory, forthcoming

Abstract: We use a user-cost model to study how dispersed information affects the equilibrium house price. In the model, agents are disparately informed about local economic conditions, consume housing services, and speculate on price changes. Optimists, who expect high house price growth, buy in anticipation of capital gains; pessimists, who expect capital losses, prefer to rent. Because of short-selling constraints on housing, pessimistic expectations are not incorporated in the price of owned houses and the equilibrium price is higher and more volatile relative to the benchmark case of common information. We present evidence supporting the modelʼs predictions in a panel of US cities.

Ownership and Physical Currency

Money is essential: Ownership intuitions are linked to physical currency 

 Eric Luis Uhlmann & Luke (Lei) Zhu Cognition, May 2013, Pages 220–229

Abstract: Due to basic processes of psychological essentialism and contagion, one particular token of monetary currency is not always interchangeable with another piece of currency of equal economic value. When money loses its physical form it is perceived as “not quite the same” money (i.e., to have partly lost the original essence that distinguished it from other monetary tokens), diminishing its intuitive link with its original owner. Participants were less likely to recommend stolen or lost money be returned when it had been subsequently deposited in an electronic bank account, as opposed to retaining its original physical form (Studies 1a and 1b). Conversely, an intuitive sense of ownership is enhanced through physical contact with a piece of hard currency. Participants felt the piece of currency a person had originally lost should be returned to him rather than another piece of currency of equivalent value, even when they did not believe he would be able to tell the difference and considered distinguishing it from other money illogical. This effect was reduced when the currency had been sterilized, wiping it clean of all physical traces of its previous owner (Studies 2a, 2b, and 3).

Nod to Kevin Lewis

Something New, Under the Sun

This makes perfect sense.  But it never occurred to me that it would be true.  Very interesting.  People feel bad about "wasting" resources (killing trees) when they use paper.  Of course, that's like feeling bad about eating corn, or beets, or squash, or (fill in other plants here), since trees are just plants and we can grow more.  So the whole "don't kill trees" thing is pretty dumb.

Nonetheless, to continue.  SINCE people (rightly or wrongly) feel bad about wasting trees, they self-control their actions, and conserve.

But....if the opportunity to recycle presents itself--given that the market to recycle used paper towels is so efficient--not--people drop the self-regulation and use lots more paper!  It's as if they say to themselves, "Since I'm recycling it, I'm not really wasting it, and I can use all I want!"  (MORE AFTER THE BREAK!!)

Do Violent Video Games Make Violent People?

Violent Video Games Stress People Out and Make Them More Aggressive

Youssef Hasan, Laurent Bègue & Brad Bushman
Aggressive Behavior, forthcoming

Abstract:
It is well known that violent video games increase aggression, and that stress increases aggression. Many violent video games can be stressful because enemies are trying to kill players. The present study investigates whether violent games increase aggression by inducing stress in players. Stress was measured using cardiac coherence, defined as the synchronization of the rhythm of breathing to the rhythm of the heart. We predicted that cardiac coherence would mediate the link between exposure to violent video games and subsequent aggression. Specifically, we predicted that playing a violent video game would decrease cardiac coherence, and that cardiac coherence, in turn, would correlate negatively with aggression. Participants (N = 77) played a violent or nonviolent video game for 20 min. Cardiac coherence was measured before and during game play. After game play, participants had the opportunity to blast a confederate with loud noise through headphones during a reaction time task. The intensity and duration of noise blasts given to the confederate was used to measure aggression. As expected, violent video game players had lower cardiac coherence levels and higher aggression levels than did nonviolent game players. Cardiac coherence, in turn, was negatively related to aggression. This research offers another possible reason why violent games can increase aggression — by inducing stress. Cardiac coherence can be a useful tool to measure stress induced by violent video games. Cardiac coherence has several desirable methodological features as well: it is noninvasive, stable against environmental disturbances, relatively inexpensive, not subject to demand characteristics, and easy to use.

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The More You Play, The More Aggressive You Become: A Long-Term Experimental Study of Cumulative Violent Video Game Effects on Hostile Expectations and Aggressive Behavior

Youssef Hassan et al.
Journal of Experimental Social Psychology, forthcoming

Abstract:
It is well established that violent video games increase aggression. There is stronger evidence of short-term violent video game effects than of long-term effects. The present experiment tests the cumulative long-term effects of violent video games on hostile expectations and aggressive behavior over three consecutive days. Participants (N = 70) played violent or nonviolent video games 20 minutes a day for three consecutive days. After gameplay, participants could blast a confederate with loud unpleasant noise through headphones (the aggression measure). As a potential causal mechanism, we measured hostile expectations. Participants read ambiguous story stems about potential interpersonal conflicts, and listed what they thought the main characters would do or say, think, and feel as the story continued. As expected, aggressive behavior and hostile expectations increased over days for violent game players, but not for nonviolent video game players, and the increase in aggressive behavior was partially due to hostile expectations.

Nod to Kevin Lewis

Regulating Lobbyists? Maybe Not...

You Owe Me

Ulrike Malmendier, Klaus Schmidt

NBER Working Paper No. 18543
Issued in November 2012
NBER Program(s):   HC   HE   LS

In many cultures and industries gifts are given in order to influence the recipient, often at the expense of a third party. Examples include business gifts of firms and lobbyists. In a series of experiments, we show that, even without incentive or informational effects, small gifts strongly influence the recipient’s behavior in favor of the gift giver, in particular when a third party bears the cost. Subjects are well aware that the gift is given to influence their behavior but reciprocate nevertheless. Withholding the gift triggers a strong negative response. These findings are inconsistent with the most prominent models of social preferences. We propose an extension of existing theories to capture the observed behavior by endogenizing the “reference group” to whom social preferences are applied. We also show that disclosure and size limits are not effective in reducing the effect of gifts, consistent with our model. Financial incentives ameliorate the effect of the gift but backfire when available but not provided. 

Corporations and Politics

Corporate Politics, Governance, and Value Before and After Citizens United

John Coates
Journal of Empirical Legal Studies, December 2012, Pages 657–696

Abstract:
How did corporate politics, governance, and value relate to each other in the S&P 500 before and after Citizens United? In regulated and government-dependent industries, politics is nearly universal, and uncorrelated with shareholder power, agency costs, or value. However, 11 percent of CEOs in 2000 who retired by 2011 obtained political positions after retiring and, in most industries, political activity correlates negatively with measures of shareholder power, positively with signs of agency costs, and negatively with shareholder value. The politics-value relationship interacts with capital expenditures, and is stronger in regressions with firm and time fixed effects, which absorb many omitted variables. After the shock of Citizens United, corporate lobbying and PAC activity jumped, in both frequency and amount, and firms politically active in 2008 had lower value in 2010 than other firms, consistent with politics at least partly causing and not merely correlating with lower value. Overall, the results are inconsistent with politics generally serving shareholder interests, and support proposals to require disclosure of political activity to shareholders.

_____________________________________________

Corporate Policies of Republican Managers

Irena Hutton, Danling Jiang & Alok Kumar
University of Miami Working Paper, December 2011

Abstract:
This paper examines the relation between the personal political orientation of firm managers and corporate policies. Motivated by the theory of behavioral consistency, we conjecture that Republican managers who are more likely to follow conservative personal ideologies would choose more conservative corporate policies. Consistent with our conjecture, we find that firms with Republican managers have lower levels of corporate debt, lower capital and R&D expenditures, less risky investments, but higher levels of dividend payouts, higher retained earnings, and higher profitability. Republican managers are matched with firms that have conservative political environments, but even among those firms, higher levels of managerial conservatism are associated with more conservative policies. Further, around managerial turnover including CEO deaths, corporate policies become more conservative as managerial conservatism increases. In addition, following the 9/11 terrorist attacks, corporate policies of Republican managers become more conservative as aggregate uncertainty increases. Overall, we show that Republican managers maintain and implement less risky and more profitable policies but the choice of lower R&D expenditures may dampen innovation.
_______________________________________________

Nod to Kevin Lewis

Income and Democracy

Income and democracy: Revisiting the evidence

Enrique Moral-Benito & Cristian Bartolucci
Economics Letters, December 2012, Pages 844–847

Abstract: In an influential paper, Acemoglu et al. (2008) find that the positive correlation between income per capita and the level of democracy across countries vanishes once country-specific effects are accounted for. In this paper, we find evidence of a non-linear effect from income to democracy even after controlling for country-specific effects. In particular, our findings point to the existence of a positive effect only in low-income countries.

Nod to Kevin Lewis

Public Choice Papers

My two papers for Public Choice. What a long strange trip it's been. We submitted the papers to the PC Society, but they just disappeared. At last check, after submitting the paper more than three weeks ago, they STILL have not been put up on the PCS web site. So, here they are:

William Keech, Michael Munger, and Carl Simon: Market Failure and Government Failure

Abstract: We distinguish two settings for market processes: The first is the "invisible hand" world of private goods, decreasing returns, and full information where general equilibrium and the fundamental theorems of welfare economics are well defined. The second is the "pin factory" world of increasing returns and creative destruction arising from innovation, technological change, and entrepreneurship. Then we note the differences in the application of "market failure" in these two settings. Building on the well-known "anatomy" of market failure in welfare economics, we develop an anatomy of government failure, confronting government with the more realistic and dynamic world of pin-factory type market processes. This anatomy distinguishes passive and active government failure, and it links market and government failure with the core functions of aggregation, incentives, and information, and with problems of agency, rent-seeking and time consistency.

John Aldrich, Michael Munger, and Jason Reifler: Institutions, Information, and Faction: An Experimental Test of Riker’s Federalism Thesis for Political Parties

Prepared for Special Issue of Public Choice, “Empirical Issues in Public Choice,” edited by Peter Kurrild-Klitgaard. In this thirtieth anniversary year of the publication of LAP, we are glad to take the opportunity to look back at some of the questions and insights that had shaped Prof. Riker’s interests in institutions. In particular, we will examine some of Riker’s earlier work on federalism, and the political bargaining that resulted in a federal system for the U.S. This bargain still has important implications today, especially for party organizations, which operate at the national, state, and local levels with goals that sometimes coincide and sometimes conflict. We then test a Rikerian thesis about an implication of the “federal bargain.” Having power shared by states and federal governments also means that party organizations are obliged to serve multiple masters with conflicting goals. To put it differently, federalism is a bargain between national and local interests. Any party system must likewise constantly negotiate conflicts between national and local interests. In a number of his early writings (Riker, 1955; Riker and Schaps, 1957; Riker, 1964), William Riker explored the stresses and cracks in partisan institutional structures. Focusing on the American system, and to a greater extent under the Constitution than under the Articles, Riker concluded that the decentralization of the party system effectively blocks presidents from being able to control partisans, using either ideology or organizational tools.

Entrepreneurship, Change, and Extreme Events

A recent empirical study. Don't get me wrong, empirical studies are good. Here is the summary (courtesy of new papers superstar Kevin Lewis):

Entrepreneurship: The role of extreme events

Tilman Brück, Fernanda Llussá & José Tavares, European Journal of Political Economy, forthcoming

Abstract: We use aggregate country data as well as individual surveys to uncover, for
the first time, the effect of extreme events such as natural disasters and terrorist attacks on entrepreneurial activity. We find that natural disasters and terrorist attacks influence individual perceptions of the rewards to entrepreneurship and, more surprisingly, extreme events affect entrepreneurship rates positively in a robust and significant way.

"More surprisingly"? Really? Consider what Hayek said about information and change:

If it is fashionable today to minimize the importance of the knowledge of the particular circumstances of time and place, this is closely connected with the smaller importance which is now attached to change as such. Indeed, there are few points on which the assumptions made (usually only implicitly) by the "planners" differ from those of their opponents as much as with regard to the significance and frequency of changes which will make substantial alterations of production plans necessary. Of course, if detailed economic plans could be laid down for fairly long periods in advance and then closely adhered to, so that no further economic decisions of importance would be required, the task of drawing up a comprehensive plan governing all economic activity would be much less formidable.

It is, perhaps, worth stressing that economic problems arise always and only in consequence of change. So long as things continue as before, or at least as they were expected to, there arise no new problems requiring a decision, no need to form a new plan. The belief that changes, or at least day-to-day adjustments, have become less important in modern times implies the contention that economic problems also have become less important. This belief in the decreasing importance of change is, for that reason, usually held by the same people who argue that the importance of economic considerations has been driven into the background by the growing importance of technological knowledge.

"Extreme events," by definition (I think) are unexpected changes. Of COURSE entrepenership increases in the aftermath of extreme events. The "more surprising" bit can only be explained, as Hayek explained it, by the nonsensical insistence that technological knowledge and not entrepreneurship is the driving force of capitalist economies.

Of course, it would be possible to document that the relationship between large unexpected shocks and entrepreneurship is direct and predictable, from many works by Kirzner, or Mises, and others. But Hayek's paper was in the A.E.R. Don't you people read? I recognize that it is easier to claim your theory is novel if you constantly pretend that all previous work doesn't exist. But this is egregious.

Sustainable Marriage

Interesting article in the NYTimes, about marriage.

Quotes our longtime friend Caryl Rusbult, who was at UNC Chapel Hill for years (she was married to David Lowery, ex-editor of JOP and well-known political scientist).

The article actually does not do Caryl's theory justice. Caryl saw marriage as an institution that helped capture gains from exchange, and rewarded "investment." The NYTimes reporter is just genetically incapable of using a market metaphor in a positive way, and so ignored that part.

Caryl Rusbult died almost exactly a year ago. She is missed.

Eric Posner on Roman Constitution

Political Economy of the Roman Constitution, by Eric Posner

Nod to Angry Alex

Ignore Hayek at Your Peril!

Referencing a piece by Amar Bhide, Robert E writes:

The paper discusses specifically how we've moved away from decentralized home loan lending: "Home buyers would apply for loans from their local bank, with which they often had an existing relationship. A banker would review each application and make a judgment, taking into account what the banker knew about the applicant, the applicant’s employer, the property, and conditions in the local market. The banker would certainly consider history—what had happened to housing prices, and the track record of the borrower and other similarly situated individuals."

... towards a more centralized system: "The brokers’ role in the credit process is mainly to help applicants fill out forms. In fact, hardly anyone now makes case-by-case mortgage credit judgments. Mortgages are granted or denied (and new mortgage products like option ARMs are designed) using complex models that are conjured up by a small number of faraway rocket scientists and take little heed of the specific facts on the ground."

And the author argues that this centralization is in conflict with Hayek's thesis (It was the Hayek shout-out that kept me reading the piece):

"The great twentieth-century thinker Friedrich Hayek made the classic argument for decentralized choice in his essay “The Use of Knowledge in Society.” The stability of the economy depends on constant adjustments to small changes, he believed—“B stepping in at once when A fails to deliver.” No single individual has the knowledge to make those adjustments; rather, it is widely dispersed across many individuals. But information about “the circumstances of the fleeting moment” cannot be quickly and accurately communicated to a central planner. Therefore, individuals who have on-the-spot knowledge must be allowed to figure out what to do."

Anyway this idea of a non-coercive or autocratic centralization was a little new to me (I hear mostly of centralization by the state, or perhaps by the firm to lower transaction costs) and I wondered if there is merit to it. After all, the decision of Finance to resort to more models with simplifying assumptions at the expense of - perhaps costlier in the short run? - case-by-case and on-the-ground assessments by lenders was completely voluntary as far as I can tell.

Interesting. I had not seen that paper. Please discuss.

Misallocation and Productivity

I just read two interesting papers that highlight how market distortions like labor market regulations or capital subsidies can affect both actual productivity in a country and also our attempts to measure productivity in a country.

First is Hseih & Klenow's MISALLOCATION AND MANUFACTURING TFP
IN CHINA AND INDIA (QJE 2009, ungated version here). They use firm level data and estimate that if resources were allocated across sectors in China and India the same way they are in the USA, that manufacturing productivity could rise 40% or more!

No word on how eliminating distortions in the USA would raise our productivity though.

Second is a new NBER paper (ungated version here) by Fernald & Neiman entitled Growth Accounting with Misallocation: Or, Doing Less with More in Singapore. They set up a model which shows how having a sector of the economy that has preferential access to resources and earns a pure profit can cause different techniques for measuring productivity growth (i.e. using quantities vs. prices) can produced answers that disagree with each other and fail to capture actual productivty growth.

Interestingly, their case study of Singapore shows that the subsidized sector of the economy their had negative productivity growth even more severe than that estimated by Young in his classic piece.