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Publication date: 23 October 2023

Glenn W. Harrison and Don Ross

Behavioral economics poses a challenge for the welfare evaluation of choices, particularly those that involve risk. It demands that we recognize that the descriptive account of…

Abstract

Behavioral economics poses a challenge for the welfare evaluation of choices, particularly those that involve risk. It demands that we recognize that the descriptive account of behavior toward those choices might not be the ones we were all taught, and still teach, and that subjective risk perceptions might not accord with expert assessments of probabilities. In addition to these challenges, we are faced with the need to jettison naive notions of revealed preferences, according to which every choice by a subject expresses her objective function, as behavioral evidence forces us to confront pervasive inconsistencies and noise in a typical individual’s choice data. A principled account of errant choice must be built into models used for identification and estimation. These challenges demand close attention to the methodological claims often used to justify policy interventions. They also require, we argue, closer attention by economists to relevant contributions from cognitive science. We propose that a quantitative application of the “intentional stance” of Dennett provides a coherent, attractive and general approach to behavioral welfare economics.

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Models of Risk Preferences: Descriptive and Normative Challenges
Type: Book
ISBN: 978-1-83797-269-2

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Book part
Publication date: 10 June 2009

John B. Davis

Recent work on the theory of teams and team reasoning in game interactive settings is due principally to the late Michael Bacharach (Bacharach, 2006), who offers a conception of…

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Recent work on the theory of teams and team reasoning in game interactive settings is due principally to the late Michael Bacharach (Bacharach, 2006), who offers a conception of the individual as a team member, and also to Martin Hollis (1998) and Robert Sugden and Natalie Gold (Sugden, 2000; Gold & Sugden, 2007), and is motivated by the conflict between what ordinary experience suggests people often to do and what rationality prescribes for them, such as in prisoner's dilemma games where individuals can choose to cooperate or defect. The source of the conflict, they suggest, is an ambiguity in the syntax of standard game theory, which is taken to pose the question individuals in games ask themselves as, “what should I do?,” but which might be taken to pose the question, particularly when individuals are working together with others as, “what should we do?” When taken in the latter way, each individual chooses according to what best promotes the team's objective and then performs the role appropriate as a member of that team or group. Bacharach understood this change in focus in terms of the different possible cognitive frames that individuals use to think about the world and developed a variable frame theory for rational play in games in which the frame adopted for a decision problem determines what counts as rational play (Janssen, 2001; Casajus, 2001).In order to explain how someone acts, we have to take account of the representation or model of her situation that she is using as she thinks what to do. The model varies with the cognitive frame in which she does her thinking. Her frame stands to her thoughts as a set of axes does to a graph; it circumscribes the thoughts that are logically possible for her (not ever, but at that time). (Bacharach, 2006, p. 69)Sugden understands this framing idea in terms of the theory of focal points following Thomas Schelling's emphasis on the role of salience in coordination games (Schelling, 1960), and his theory similarly ties decision-making to the way the game is understood (Sugden, 1995). This all recalls what Tversky and Kahneman (1981, 1986) termed standard's theory's description invariance assumption, whose abandonment makes it possible to bring a variety of the insights from psychology to bear on rationality in economics.

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A Research Annual
Type: Book
ISBN: 978-1-84855-656-0

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Book part
Publication date: 23 October 2023

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Models of Risk Preferences: Descriptive and Normative Challenges
Type: Book
ISBN: 978-1-83797-269-2

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Book part
Publication date: 23 October 2023

Glenn W. Harrison and Don Ross

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Models of Risk Preferences: Descriptive and Normative Challenges
Type: Book
ISBN: 978-1-83797-269-2

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Article
Publication date: 1 June 2005

Georgi Dimitrov

The very headline of this presentation hints at least two things. First, what is meant is the history of American sociology, though it is some what awkward to say so outright…

220

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The very headline of this presentation hints at least two things. First, what is meant is the history of American sociology, though it is some what awkward to say so outright. Second, the history of American sociology is accomplished, in an impor tant sense, but one should not say that so out‐right, either. In philosophy, as Wittgenstein advised, whereof we can not speak, thereof we must be silent. A different rule reigns in sociology: whereof we can hint at, thereof we must prove. My first task, there fore, is to prove that no matter how embarrassing it may seem one canspeak of a his tory of American sociology after all. My second task is to prove that it has already been on a course of development specifically characteristic of it. And, finally, my last point will be that this specific course is brought to its desired end. Every thing in its own time. Talking about the history of American sociology is extremely risky. But it is the risk that it makes it worth trying. Part of the risk stems from the issue if there is a history of sociology at all, as well as from the issue if there is American sociology in the proper sense of the word. Apart from this, there is the consideration that it may be the American nature proper of that sociology that makes it the least likely to have its own history. First things first.

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Managerial Law, vol. 47 no. 3/4
Type: Research Article
ISSN: 0309-0558

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Book part
Publication date: 6 December 2011

Don Ross

Purpose – To review the significance of Hayek's argument, in The Sensory Order, from a connectionist theory of mental architecture to descriptive and normative…

Abstract

Purpose – To review the significance of Hayek's argument, in The Sensory Order, from a connectionist theory of mental architecture to descriptive and normative individualism.

Methodology/approach – The chapter reconstructs Hayek's argument, then replaces Hayek's premises about mental architecture with premises derived from the recent neuroscience of reward and consumption, and then explains why the argument no longer goes through.

Findings – Hayek's abstract mental architecture was closer to adequacy than most subsequent competing alternatives produced by philosophers. His argument from this architecture to individualism is valid. However, we must now supplement the abstract architecture with complexities drawn from recent neuroscience. These show the argument to be unsound. However, if commitment to descriptive individualism is abandoned, then a new argument from psychological premises to normative individualism is available.

Social implications – There is a good argument from psychological premises to normative individualism; but normative individualists should not try to defend their position by resting it on the supposed truth of descriptive individualism.

Originality/value – All the main arguments of the chapter are new to the literature.

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Hayek in Mind: Hayek's Philosophical Psychology
Type: Book
ISBN: 978-1-78052-399-6

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Book part
Publication date: 23 October 2023

Glenn W. Harrison and J. Todd Swarthout

We take Cumulative Prospect Theory (CPT) seriously by rigorously estimating structural models using the full set of CPT parameters. Much of the literature only estimates a subset…

Abstract

We take Cumulative Prospect Theory (CPT) seriously by rigorously estimating structural models using the full set of CPT parameters. Much of the literature only estimates a subset of CPT parameters, or more simply assumes CPT parameter values from prior studies. Our data are from laboratory experiments with undergraduate students and MBA students facing substantial real incentives and losses. We also estimate structural models from Expected Utility Theory (EUT), Dual Theory (DT), Rank-Dependent Utility (RDU), and Disappointment Aversion (DA) for comparison. Our major finding is that a majority of individuals in our sample locally asset integrate. That is, they see a loss frame for what it is, a frame, and behave as if they evaluate the net payment rather than the gross loss when one is presented to them. This finding is devastating to the direct application of CPT to these data for those subjects. Support for CPT is greater when losses are covered out of an earned endowment rather than house money, but RDU is still the best single characterization of individual and pooled choices. Defenders of the CPT model claim, correctly, that the CPT model exists “because the data says it should.” In other words, the CPT model was borne from a wide range of stylized facts culled from parts of the cognitive psychology literature. If one is to take the CPT model seriously and rigorously then it needs to do a much better job of explaining the data than we see here.

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Models of Risk Preferences: Descriptive and Normative Challenges
Type: Book
ISBN: 978-1-83797-269-2

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Publication date: 23 October 2023

Brian Albert Monroe

Risk preferences play a critical role in almost every facet of economic activity. Experimental economists have sought to infer the risk preferences of subjects from choice…

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Risk preferences play a critical role in almost every facet of economic activity. Experimental economists have sought to infer the risk preferences of subjects from choice behavior over lotteries. To help mitigate the influence of observable, and unobservable, heterogeneity in their samples, risk preferences have been estimated at the level of the individual subject. Recent work has detailed the lack of statistical power in descriptively classifying individual subjects as conforming to Expected Utility Theory (EUT) or Rank Dependent Utility (RDU). I discuss the normative consequences of this lack of power and provide some suggestions to improve the accuracy of normative inferences about individual-level choice behavior.

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Models of Risk Preferences: Descriptive and Normative Challenges
Type: Book
ISBN: 978-1-83797-269-2

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Article
Publication date: 9 January 2018

Helen Elliott, Belinda Winder, Ellie Manby, Helen Edwards and Rebecca Lievesley

The purpose of this paper is to explore the views and experiences of probation staff working with individuals convicted of a sexual offence who have been prescribed medication to…

181

Abstract

Purpose

The purpose of this paper is to explore the views and experiences of probation staff working with individuals convicted of a sexual offence who have been prescribed medication to manage sexual arousal (MMSA).

Design/methodology/approach

Semi-structured interviews were utilised with a sample of probation staff (offender supervisors and managers, n=12), who supervise individuals convicted of a sexual offence, either in prison, or post-release in the community. Data were analysed using thematic analysis.

Findings

Two main themes emerged: barriers for probation staff and suspicious but hopeful. Theme 1 encapsulates factors that prevent probation staff from engaging with MMSA; theme 2 highlighted the samples’ uncertainty and mistrust of the use of medication as a potential tool for risk management and scepticism about individuals’ motivations, particularly in the community.

Research limitations/implications

The main limitation of this study was the differing levels of knowledge the sample had about MMSA and their subsequent ability to discuss MMSA other than in a theoretical sense.

Practical implications

Practical implications include the need for further training for probation staff, improved collaboration between departments and ongoing support for staff to support the success of the MMSA intervention.

Originality/value

This study offers a novel perspective on MMSA – that of the probation staff supervising prisoners taking MMSA. This has not been explored before, and the findings and associated implications are of importance for the treatment and care of those convicted of sexual offences.

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Book part
Publication date: 23 October 2023

Morten I. Lau, Hong Il Yoo and Hongming Zhao

We evaluate the hypothesis of temporal stability in risk preferences using two recent data sets from longitudinal lab experiments. Both experiments included a combination of…

Abstract

We evaluate the hypothesis of temporal stability in risk preferences using two recent data sets from longitudinal lab experiments. Both experiments included a combination of decision tasks that allows one to identify a full set of structural parameters characterizing risk preferences under Cumulative Prospect Theory (CPT), including loss aversion. We consider temporal stability in those structural parameters at both population and individual levels. The population-level stability pertains to whether the distribution of risk preferences across individuals in the subject population remains stable over time. The individual-level stability pertains to within-individual correlation in risk preferences over time. We embed the CPT structure in a random coefficient model that allows us to evaluate temporal stability at both levels in a coherent manner, without having to switch between different sets of models to draw inferences at a specific level.

Details

Models of Risk Preferences: Descriptive and Normative Challenges
Type: Book
ISBN: 978-1-83797-269-2

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