farming efficiency and the determinants of multiple job holding by farm operators the extent to which farm families engage inoff farm employment activities is a topic ofcentralimportancetounderstandingthe nan cial well being of farm households the degreeof nancial stress experienced by u s farmfamilies is always a concern to policy makers yet policyconsiderationsoftenignorethesub stantial involvement of most farm householdsin nonfarm labor markets it has been shownthat whentheentirefarmhouseholdisconsid ered the average u s farm household hasa higher total income and much greater assetholdings than is the case for nonfarm house holds see e g goodwin mishra et al pre sented data for 2000 suggesting that when allfarms are considered 92 of total householdincomecamefromnonfarmsources ofcourse such gures depend on how one chooses to de neafarm whenoneconsiderslargeandverylarge commercial farms the share of farm in come in total household income ranges from50 to 75

off farm work decisions of husbands and wives joint decision making theoretical and econometric models are developed to examine joint wage labor participation and hours decisions of a husband and wife in farm households the econometric model is multiple equation and recursive the specification of the off farm labor supply equation of the husband wife depends on whether his her wife husband does or does not work off the farm and this structure is endogenous the model is fitted to data for iowa farm households the main conclusion is that the off farm labor supply equation of a married individual differs significantly depending on whether his or her spouse also works for a wage copyright 1989 by mit press

quantifying the black economy measurement without theory yet again i shall argue that measurement without theory is a fair description of the published empirical work aimed at guestimating the size of the hidden or black economy i shall also argue that a mere guestimate of the overall size of the black economy is of limited value for the policy maker it is also important to know who is doing what where how and why then we can see what should and or can be done about legislating for or against the black economy in assessing the various attempts to measure the size of the black economy one should also be aware of a political dimension to some of this work perhaps a large and growing black economy is an indication that the economy is overtaxed and over regulated and a neo liberal adjustment is needed to free it up if a large part of the black economy is social security fraud then maybe unemployment is not really as bad as it looks clearly such political conclusions depended on having good theoretical as well as sound quantitative foundations and both these components were generally missing

a biological basis for expected and non expected utility abstract a biological model is developed here to determine the fittest attitude to risk with a fixed environment the type maximizing expected offspring is selected this yields the expected utility theorem when translated into a criterion for evaluating gambles over commodities with a random environment however the type selected is strictly less averse to idiosyncratic risk than to risk which is correlated across all individuals the implied criterion for choice over gambles does not satisfy the expected utility theorem and may induce choice of a gamble which is first order stochastically dominated journal of economic literature classification number d81

learning and risk aversion we study how learning shapes behavior towards risk when individuals are not assumed to know or to have beliefs about probability distributions in any period the behavior change induced by learning is assumed to depend on the action chosen and the payoff obtained we characterize learning processes that in expected value increase the probability of choosing the safest actions and provide sufficient conditions for them to converge to the choices of risk averse expected utility maximizers we provide a learning theoretic motivation for long run risk choices such as those in expected utility theory with known payoff distributions

on the convergence of reinforcement learning abstract this paper examines the convergence of payoffs and strategies in erev and roth s model of reinforcement learning when all players use this rule it eliminates iteratively dominated strategies and in two person constant sum games average payoffs converge to the value of the game strategies converge in constant sum games with unique equilibria if they are pure or if they are mixed and the game is 2 2 the long run behaviour of the learning rule is governed by equations related to maynard smith s version of the replicator dynamic properties of the learning rule against general opponents are also studied

on the evolution of attitudes towards risk in winner take all games abstract a long standing conjecture is that winner take all games such as patent races lead to the survival of risk takers and the extinction of risk averters in many species a winner take all game determines the males right to reproduce and the same argument suggests that males will evolve to be risk takers psychological and sociological evidence buttresses the argument that males are more risk taking than females using an evolutionary model of preference formation we investigate to what extent evolution leads to risk taking in winner take all environments journal of economic literature classification numbers c7 d8

the evolution of attitudes to risk lottery tickets and relative wealth abstract individual attitudes to risk are examined in an evolutionary model males obtain more offspring as a consequence of greater wealth both directly and because this attracts more mates the second effect induces gambling driven by relative wealth and can create pareto inefficiency fair bets involving small losses and large gains are taken if any fair bets at all are taken altogether the model accords with observations concerning bets taken and declined by typical individuals despite settings of widely varying per capita wealth journal of economic literature classification numbers c72 d81

estimating the size of the danish shadow economy using the currency demand approach an attempt the currency demand approach provides some insight into the size and development of the shadow economy in denmark currency demand is statistically affected by tax rates the difference in currency demand is calculated by comparing the actual tax burden over time to the lowest tax burden in the period 1952 82 the shadow economy grew steadily to 10 per cent of gnp in 1977 and then fluctuated between 7 10 per cent of gnp for the period 1978 82 the calculated size fits nicely with the results obtained using the same

adaptive learning models of consumer behavior abstract in a model of dynamic duopoly optimal price policies are characterized assuming consumers learn adaptively about the relative quality of the two products a contrast is made between belief based and reinforcement learning under reinforcement learning consumers can become locked into the habit of purchasing inferior goods such lock in permits the existence of multiple history dependent asymmetric steady states in which one firm dominates in contrast belief based learning rules must lead asymptotically to correct beliefs about the relative quality of the two brands and so in this case there is a unique steady state

naive reinforcement learning with endogenous aspirations this article considers a simple model of reinforcement learning all behavior change derives from the reinforcing or deterring effect of instantaneous payoff experiences payoff experiences are reinforcing or deterring depending on whether the payoff exceeds an aspiration level or falls short of it over time the aspiration level is adjusted toward the actually experienced payoffs this article shows that aspiration level adjustments may improve the decision maker s long run performance by preventing him or her from feeling dissatisfied with even the best available strategies however such movements also lead to persistent deviations from expected payoff maximization by creating probability matching effects

uses and abuses of estimates of the underground economy ered valuable by at least a part of society narcotics production and distribution prostitution gambling these activities can be large in some countries and should be counted in the national accounts of all countries although they rarely are their omission affects the comparability of data across countries the incomes generated by illegal activities are rarely taxed many other activities such as those associated with the subsistence or informal sectors are estimated rather than measured and are generally not taxed because of the low value they generate to those who engage in them in conclusion there are many reasons beside the ones discussed in this paper why the measurements of national output may not be complete about two decades ago a few economists became convinced that many normal economic activities that should be measured and taxed were taking place underground or in the shadow thus presumably escaping the attention of the statistical offices of the tax authorities and more generally of the government regulators some of these economists also claimed that like alice in wonderland these hidden activities were growing in a ridiculous fashion see gutmann 1977 and feige 1979 by the late 1970s the role of government had grown enormously so that the level of taxation and the tax rates had risen sharply and regulations had proliferated in many countries see tanzi and schuknecht 1997 these developments had created strong incentives for individuals and enterprises to go underground to avoid taxes and regulatory restrictions thus a good case could be made that what came to be called the underground economy was a phenomenon to worry about newspaper articles were ready to accept the

the hard shadow of the greek economy new estimates of the size of the underground economy and its fiscal impact this article presents new estimates of the greek underground economy and explores the link between the underground economy and aggregate debt we show that the greek underground economy has been underestimated heavily and has been on a rising trend again since greece adopted the euro we also present evidence that the size of the underground economy is positively related to the debt to gdp ratio implying that fighting the underground economy is also conducive to financial and macroeconomic stability our results suggest that for our sample of 11 emu member countries the loss of the inflation tax as an economic policy instrument had drastic consequences while the underground economy did not have a statistically significant impact on aggregate debt before the introduction of the euro it has pushed up the debt to gdp ratio in our sample since

adaptation as information restriction the hot stove effect individuals and social systems are often portrayed as risk averse and resistant to change such propensities are characteristically attributed to individual organizational and cultural traits such as risk aversion uncertainty avoidance discounting and an unwillingness to change this paper explores an alternative interpretation of such phenomena we show how the reproduction of successful actions inherent in adaptive processes such as learning and competitive selection and reproduction results in a bias against alternatives that initially may appear to be worse than they actually are in particular learning and selection are biased against both risky and novel alternatives because the biases are products of the tendency to reproduce success that is inherent in the sequential sampling of adaptation they are reduced whenever the reproduction of success is attenuated in particular when adaptation is slowed made imprecise or recalled less reliably the propensity to engage in risky and new activities is increased these protections against the error of rejecting potentially good alternatives on inadequate experiential evidence are costly however they increase the likelihood of persisting with alternatives that are poor in the long run as well as in the short run

learning to play games in extensive form by valuation abstract game theoretic models of learning which are based on the strategic form of the game cannot explain learning in games with large extensive form we study learning in such games by using valuation of moves a valuation for a player is a numeric assessment of her moves that purports to reflect their desirability we consider a myopic player who chooses moves with the highest valuation each time the game is played the player revises her valuation by assigning the payoff obtained in the play to each of the moves she has made we show for a repeated win lose game that if the player has a winning strategy in the stage game there is almost surely a time after which she always wins when a player has more than two payoffs a more elaborate learning procedure is required we consider one that associates with each move the average payoff in the rounds in which this move was made when all players adopt this learning procedure with some perturbations then with probability 1 there is a time after which strategies that are close to subgame perfect equilibrium are played a single player who adopts this procedure can guarantee only her individually rational payoff

the monetary method to measure the shadow economy the forgotten problem of the initial conditions abstract we show that when the money demand function used to estimate the size of the shadow economy includes the lagged dependent variable the need to assume a known initial condition reappears as it was the case in the early monetary methods

case based decision theory this paper suggests that decision making under uncertainty is at least partly case based we propose a model in which cases are primitive and provide a simple axiomatization of a decision rule that chooses a best act based on its past performance in similar cases each act is evaluated by the sum of the utility levels that resulted from using this act in past cases each weighted by the similarity of that past case to the problem at hand the formal model of case based decision theory naturally gives rise to the notions of satisficing decisions and aspiration levels

the off farm labor supply of farmers theoretical and empirical models are developed to examine the off farm wages labor force participation and hours of work of farmers econometric estimates use data from a 1971 survey of illinois farmers the off farm wage depends on farmer human capital and the local labor market the major result confirms the sensitivity of off farm work to economic incentives a 10 increase in the off farm wage entails an 11 increase in hours of off farm work holding farm characteristics constant results also indicate effects of seasonality risk and life cycle factors on off farm work

experiential learning competitive selection and downside risk a new perspective on managerial risk taking it is part of managerial wisdom that managers need to take risks in order to succeed this is in stark contrast to the prominent agent based theories of experiential learning and competitive selection that are known to be biased against risky alternatives in the long run how can the positive managerial view on risk taking prevail given these results qualitative surveys of managers suggest risks to be acceptable if their outcome distribution meets certain criteria we argue in this paper that these criteria are widely congruent with low downside risk using a novel simulation design we analyze the effects of experiential learning and competitive selection on downside risk preferences in an ecology of agents in the long run experiential learning implies weak downside risk seeking whereas competitive selection leads to strong downside risk aversion furthermore competitive selection leads to the prevalence of outcome distributions with low downside risk in an ecology even if they have a significantly higher level of total risk than comparable distributions with more downside risk we draw implications for empirical studies on managerial behavior the online appendix is available at https doi org 10 1287 orsc 2017 1149

the evolution of cooperation in infinitely repeated games experimental evidence 1 for example in infinitely repeated prisoner s dilemma games with patient agents both cooperate and defect may be played in equilibrium even though the theory of infinitely repeated games has been used to explain cooperation in a variety of environments no definitive solution has been provided to the problem of equilibrium selection when both cooperation and defection are possible equilibrium outcomes which one should we expect to prevail previous experimental evidence has shown that subjects often fail to coordinate on a specific equilibrium when they play a small number of infinitely repeated games some subjects attempt to establish cooperative agreements while others defect but how would behavior evolve as subjects learn from previous repeated games would cooperation prevail when it can be supported in equilibrium or will subjects learn