some lessons from past experiments and some challenges for the future reading and rereading the other contributors pieces as they evolved during the production of this controversy the question i found myself coming back to most frequently was the issue of how far whatever we may observe in experiments can genuinely inform the way we model economic behaviour or formulate economic policy in the wider world surely or so some sceptics would argue the principles or processes governing the allocation of scarce resources in the world outside the laboratory are so complex that nothing that experimental economists can do on their shoestring budgets is likely to come anywhere close to usefully mimicking that reality one response to such a position is that it misses the point of most experiments which are not attempts to create faithful miniature replicas of parts of the outside world but rather aim to test certain theoretical models or to examine certain institutional constructs which are themselves abstracted from the welter of obfuscating detail out there the argument is that if the economics profession accords high status to these models accepting them for publication in mainstream journals incorporating them into the body of accumulated wisdom being passed on to fresh generations of students and so on then it would seem to be entirely legitimate if not a mandatory requirement of any discipline with pretensions to scientific rigour to try to test these models in an environment appropriate to the task if such a model performs acceptably in the laboratory that may still be no guarantee that it will hold up in a more complex natural environment but that is not in itself an argument against experimental tests of the theory alternatively if the model performs poorly even in an environment constructed to give it a fair trial this may well be grounds for being cautious about its more general viability though it may also happen that the data generated by such experiments can then provide some insights into where any weaknesses may lie and how the theory might usefully be modified or developed most experimenters and many others who do not run experiments themselves find such a defence of experimental methods both plausible and persuasive however much hinges on what counts as an appropriate environment and what constitutes a fair and relevant test in this paper i shall focus on those issues particularly with respect to individual decision making but also in a more cursory manner with some reference to games and market behaviour

risk perceptions and distributional judgments abstract we examine the role of laboratory questionnaire experiments and recent applied empirical research on attitudes in understanding the relationships between people s perceptions of inequality and their perceptions of risk we consider risk in three interpretations in vacuo in day to day life and in the original position

fairness versus efficiency abstract fairness is a strong concern as shown by dictator and ultimatum experiments efficiency measured by the sum of individual payoffs is a potentially competing concern in games such as the prisoners dilemma in our experiment the participants can increase efficiency by giving gifts in the one sided treatment this is only possible for one of the two partners the two sided treatment allows for mutual gift giving in both cases decisions can be conditioned on whether there is or there is not an efficiency gain by gift giving our results indicate that efficiency concerns are dominated by fairness concerns that are less stringent in mutual exchanges than in one sided gift relationships

a note on the estimation of the equity efficiency trade off for qalys abstract in this note the veil of ignorance approach is tested as a basis for empirically determining the shape of the social welfare function for qalys an experiment is carried out where the participants choose between different societies that differ with respect to per capita qalys and the distribution of qalys the answers are analyzed using logistic regression analysis according to the results the respondents are willing to give up 1 qaly in the group with more qalys to gain 0 45 qalys in the group with fewer qalys but this trade off is independent of the size of the difference in qalys between the groups

project evaluation with democratic decision making what does cost benefit analysis really measure abstract it is often argued that projects involving public good changes should be chosen on the basis of monetary valuation and cost benefit analysis cba however cba is not value free when used to measure welfare it is based on highly controversial value judgements when used to measure efficiency it is based on assumptions of limited relevance to democratic decision making processes cba measures total net willingness to pay neither more nor less while interesting in its own right the normative significance of this indicator is not obvious

are women more risk averse we find that single women exhibit relatively more risk aversion in financial decision making than single men using u s sample data we examine household holdings of risky assets to determine whether there are gender differences in financial risk taking as wealth increases the proportion of wealth held as risky assets is estimated to increase by a smaller amount for single women than for single men gender differences in financial risk taking are also influenced by age race and number of children greater financial risk aversion may provide an explanation for women s lower levels of wealth compared with men s jel j16 d81 g11

measuring attitudes towards inequality individuals attitudes to inequality aversion are measured using survey data based on the leaky bucket experiment for several groups of students in australia and israel three forms of social welfare function are estimated it is found that measures of inequality aversion can be obtained with some precision and that these estimates are substantially lower than the values typically used by those measuring inequality and examining optimal tax structures furthermore a welfare function based on the gini inequality measure is generally found to give a better fit than forms based on constant relative or constant absolute inequality aversion jel classification c91 d63

risk versus social preferences under the veil of ignorance abstract this paper reports experimental evidence from dictator game experiments in which subjects choose repeatedly one out of four options involving a pair of monetary prizes one for them one for another anonymously matched participant in some sessions there is no uncertainty about the player position i e the identity of the best paid agent constant across all options in other sessions subjects choose under the veil of ignorance not knowing in advance to which player position they will be eventually assigned but only that either possibility is equally likely finally we also collect evidence from additional sessions in which the same options correspond to binary lotteries in which subjects may win the high or the low prize with equal probability but their decisions do not affect other participants we frame subjects decisions within the realm of a simple mean variance utility maximization problem in which the parameter associated to the variance is interpreted depending on the treatment as a measure of pure risk aversion pure inequality aversion or some combination of the two our estimates suggest that we can simply rely on risk aversion to explain subjects behavior under the veil of ignorance

economic growth inequality and well being in advanced industrial societies rising levels of inequality have contributed strongly to the observed gap that has emerged between per capita income and the index of sustainable economic welfare isew which in its current versions is known as the genuine progress indicator gpi yet the isew gpi approach to measuring the social costs of inequality has been criticized as ad hoc the present paper reviews the literature on this topic and efforts to resolve it based on the construction of indicators grounded in a a classical utilitarian ethical framework and b empirical evidence on the relationship between income and well being in the united states after tax income per capita grew at an annual rate of 1 7 between 1979 and 2011 a growth rate of 1 2 per year arises when income is adjusted to account for the social costs of inequality the most common adjustment used in isew gpi studies yields a similar growth rate despite much smaller subtractions from baseline income

entrepreneurship social mobility and income redistribution in south india development economists have been preoccupied with the problem of increasing the size of the gnp pie to the relative neglect of its distribution despite the recent disenchantment with the viewpoint that all classes share in the benefits of industrial growth empirical data on the distribution of income business opportunity and economic power are in short supply many of the studies on entrepreneurship and economic development when they are not apologetics for ruthless capitalist exploitation as paul baran suggests extol the achievements of the capitalist entrepreneur without examining class origins and monopoly advantage joseph schumpeter sees entrepreneurs irrespective of class origin as heroic figures with the dream and will to found a private kingdom to conquer adversity to achieve success for its own sake and to experience the joy of creation for gustav papanek 1967 the private entrepreneur who is frugal diligent far sighted remarkably able and willing to take political risks is in large part responsible for the success of pakistan in achieving rapid industrialization

inequality aversion versus risk aversion inequality aversion and risk aversion are widely assumed in economic models however existing economic literature fails to distinguish between the two this paper presents methodology and a laboratory experiment which separates inequality aversion from risk aversion in a set of laboratory experiments subjects had to choose between two risky alternatives which pay meaningful prizes with the same individual risk but different levels of egalitarianism thus the choice of the more egalitarian alternative implies a higher level of inequality aversion the experiment was conducted among children some of whom live on a communal system kibbutz and some in the city

population consumption and resources ethical issues abstract this article is about the concept of optimum population and consumption even though it is primarily concerned with foundational issues the various ideas that have been discussed in the literature are tested in the context of economic models with limited resources it is argued that broadly speaking existing theories of optimum population and consumption are variants of average and what is often termed classical utilitarianism respectively both classes of theories are shown to have deficiencies in great measure because of their reliance on a defective concept of personhood it is also argued that contractual theories are of little use because potential people as opposed to future people cannot be parties to any contract a generation relative ethics is developed and is put to work in an overlapping generations model it is shown that generation relative ethics even when it is a variant of classical utilitarianism can prescribe a considerably lower population than classical utilitarianism

why is automobile insurance in philadelphia so damn expensive the authors document and attempt to explain the observation that automobile insurance premiums vary dramatically across cities the authors argue that high premiums can be attributed at least in part to large numbers of uninsured motorists in some markets while uninsured motorists can be attributed to high premiums the authors construct a simple noncooperative equilibrium model that can generate inefficient equilibria with uninsured drivers and high yet actuarially fair premiums for certain parameterizations an efficient full insurance equilibrium and inefficient high price equilibria with uninsured drivers exist simultaneously helping to explain price variability across otherwise similar cities policy implications are discussed

are people inequality averse or just risk averse individuals preferences for risk and inequality are measured through choices between imagined societies and lotteries the median relative risk aversion which is often seen to reflect social inequality aversion is between 2 and 3 most people are also found to be individually inequality averse reflecting a willingness to pay for living in a more equal society left wing voters and women are both more risk and inequality averse than others the model allows for non monotonic swfs implying that welfare may decrease with an individual s income at high income levels which is illustrated in simulations based on the empirical results

is more always better a survey on positional concerns abstract we use survey data to provide some empirical information about concerns regarding relative standing respondents chose between a world where they have more of a good than others and one where everyone s endowment of the good is higher but the respondent has less than others questions asked about education attractiveness and intelligence for one s child and oneself income vacation time approval and disapproval from a supervisor and papers to write half of the respondents preferred to have 50 less real income but high relative income concerns about position were strongest for attractiveness and supervisor s praise and weakest for vacation time

monotonicity dominance and the pareto principle abstract we examine the implications of three similar criteria that are commonly used in welfare economics and the analysis of inequality and poverty income dominance monotonicity and the pareto principle within the context of income distribution comparisons we show that whilst there is a simple logical relationship between the first two criteria the third is neither implied by nor implies the other two unless an assumption of individual indifference to income distribution is made similar problems arise with a fourth criterion utility dominance that is a natural counterpart to income dominance

social mobility and the demand for redistribution the poum hypothesis this paper examines the often stated idea that the poor do not support high levels of redistribution because of the hope that they or their offspring may make it up the income ladder this prospect of upward mobility poum hypothesis is shown to be fully compatible with rational expectations and fundamentally linked to concavity in the mobility process a steady state majority could even be simultaneously poorer than average in terms of current income and richer than average in terms of expected future incomes a e rst empirical assessment suggests on the other hand that in recent u s data the poum effect is probably dominated by the demand for social insurance in the future everyone will be world famous for e fteen minutes andy warhol 1968

stock size harvesting costs and the potential for extinction the case of sealing starting in the 1960s considerable opposition to the canadian and norwegian harp seal hunt off newfoundland developed it was alleged that the seal hunt was unethical and that the seal population had been seriously depleted the purpose of this paper is to analyze the production function for the seal hunt based on data for the norwegian seal hunt particular attention is paid to the question whether free entry to the fishery will cause overexploitation this depends critically on the characteristics of the production function in particular the extent to which harvesting costs depend on stock size

prioritarianism and climate change prioritarianism is the ethical view that gives greater weight to well being changes affecting individuals at lower well being levels this view is influential both in moral philosophy and in theoretical work on social choice where it is captured by a social welfare function swf summing a concave transformation of individual well being numbers however prioritarianism has largely been ignored by scholarship on climate change this article compares utilitarianism and prioritarianism as frameworks for evaluating climate policy it reviews the distinctive normative choices that are required for the prioritarian approach specifying a ratio scale for well being if the prioritarian swf takes the standard atkinson form determining the degree of concavity of the transformation function i e the degree of social inequality aversion and choosing between ex ante and ex post prioritarianism under conditions of risk the article also sketches some of salient implications of a prioritarian swf for climate policy with respect to the social cost of carbon the social discount rate optimal mitigation and the dismal theorem finally it discusses the issue of variable population

economics and identity this paper considers how identity a person s sense of self affects economic outcomes we incorporate the psychology and sociology of identity into an economic model of behavior in the utility function we propose identity is associated with different social categories and how people in these categories should behave we then construct a simple game theoretic model showing how identity can affect individual interactions the paper adapts these models to gender discrimination in the workplace the economics of poverty and social exclusion and the household division of labor in each case the inclusion of identity substantively changes conclusions of previous economic analysis

measuring future grandparents preferences for equality and relative standing individuals aversion to risk and inequality and their concern for relative standing are measured through experimental choices between hypothetical societies it is found that on average individuals are both fairly inequality averse and have a strong concern for relative income the results are used to illustrate welfare consequences based on a utilitarian swf and a modified crra utility function it is shown that the social marginal utility of income may then become negative even at income levels that are far from extreme

inequality aversion in income health and income related health abstract based on a survey of a sample of the general public we estimate inequality aversion across income health and bivariate income health inequality aversion is domain specific mean inequality aversion is greater for income than for health but the underlying distributions of aversion attitudes differ with a highly bi modal distribution of inequality aversion values for health in which nearly half the participants display very low aversion and nearly half display very high aversion aversion to income related health inequality is greater than that to income or health alone consistent with previous literature we find only weak associations between aversion attitudes and individual characteristics the magnitude of the estimates implies potentially large gains in welfare from reducing inequality in these domains

consumer inequality aversion and risk preferences in community supported agriculture abstract in community supported agriculture csa consumers face a tradeoff between i the desire to support a csa farmer and obtain environmentally friendly goods and ii the risk associated with a long term commitment we elicit inequality aversion and risk preferences of a sample of 162 french csa consumers using incentivized field experiments we find that csa consumers are concerned about payoff inequalities while we obtain evidence of advantageous inequality aversion toward csa farmers we also find disadvantageous inequality seeking we find that csa consumers are risk averse and loss averse and distort probabilities we also observe that inequality and risk preferences in the loss domain might complement each other to strengthen consumers support for csa farmers

critical realism and the austrian paradox austrian economics provokes mixed reactions among critical realists it preaches methodological individualism marginalism and rational choice while embracing emergence open processes and error the austrian school stands paradoxically with one foot each in the mainstream marginalist tradition and heterodox social theory i argue that this paradox can be disentangled by appeal to the fundamental distinction between the logic of choice and the logic of action i then extend the analysis of the logic of action to the critical realist account of the basic ontology of social structures arguing that successful retroduction of social structures depends on marginalist insights

examining risk preferences under high monetary incentives experimental evidence from the people s republic of china several experimental sessions were conducted to elicit certainty equivalents for a sequence of lotteries involving real monetary outcomes the opportunity to conduct sessions in the people s republic of china afforded the ability to offer very large monetary incentives relative to subjects living costs in the highest payoff condition subjects earned three times their normal monthly revenue in the course of a two hour experiment results indicate a statistically significant impact of the level of monetary incentives on revealed risk preferences however even under extreme monetary incentives subjects demanded amounts well in excess of expected value for low probability gain prospects copyright 1992 by american economic association

social preferences self interest and the demand for redistribution preferences for redistribution may be influenced by values and beliefs about distributive justice as well as by self interest people may prefer more redistribution to the poor if they believe that poverty is caused by circumstances beyond individual control therefore beliefs about the causes of income may affect demand for redistribution alternatively the effect of these beliefs on redistributive preferences may be spurious if they are correlated with income and self interest is not properly controlled for they may also measure incentive cost concerns using social survey data i find that self interest cannot explain the effect of these beliefs on redistributive preferences 2001 elsevier science b v all rights reserved

the impact of climate change on the balanced growth equivalent an application of fund the stern review added balanced growth equivalents bge to the economic climate change research agenda we first propose rigorous definitions of the bge for multiple regions and under uncertainty we show that the change in the bge is independent of the assumed scenario of per capita income for comparable welfare economic assumptions as the stern review we calculate lower changes in bge between a business as usual scenario and one without climate impacts with the model fund than the stern review found with the model page we find that mitigation policies give even lower changes in bge and argue that those policy choices should be the focus of the research effort rather than total damage estimates according to our results the current carbon tax should be below 55 tc sensitivity analyses show that the stern review chose parameters that imply high impact estimates however for regionally disaggregated welfare functions we find changes in bge that are significantly higher than the results from the stern review both for total damage as for policy analysis with regional disaggregation and high risk aversion we observe fat tails and with that very high welfare losses

a leaky bucket in the real world estimating inequality aversion using survey data existing evidence of inequality aversion relies on data from class room experiments where subjects face hypothetical questions this paper estimates the magnitude of inequality aversion using representative survey data with questions related to the real economy situations the respondents face the results reveal that inequality aversion can be measured in a meaningful way using survey data but the magnitudes of the estimates depend dramatically on how inequality aversion is measured no matter how measured the revealed inequality aversion predicts opinions on a wide range of questions related to the welfare state such as the level of taxation tax progressivity and the structure of unemployment benefits

the nature of heterodox economics heterodoxy serves as an umbrella term to cover the coming together of separate projects or traditions in answering the question what distinguishes heterodoxy from the orthodoxy the author argues that matters of ontology are central in answering the question how are the various traditions that make up the modern heterodoxy to be distinguished from each other the author defends criteria other than varying commitments to specific substantive theories policy measures or techniques or basic units of analysis