Comment on Ken Arrow: The social determination of behavior. Karla Hoff

Transcription

1 Comment on Ken Arrow: The social determination of behavior Karla Hoff

2 The standard model assumes a rational actor Stable & autonomous preferences

3 Autonomous people Market

4 Under some conditions: Perfect competition No missing markets No asymmetric information

5 The Fundamental Theorems of Welfare Economics The 1 st theorem The competitive economy is always Pareto efficient. The 2 nd theorem Every Pareto efficient allocation is a competitive equilibrium for some distribution of purchasing power. Arrow 1951

6 The assumptions in economics about how individuals make decisions have become contested

7 --Kahneman 2011

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9 Thinking fast & neglect of ambiguity Kahneman 2011

10 1990s Psychology departs from universals in cognition The human mind is a pattern-matching machine Categories and other mental models help us process information and sort the world into easer-to-read patterns Definition of culture: the set of mental models that we use to process information: They shape attention, construal, memory, & emotion responses They include inconsistent representations.

11 Example from Brazil: Soap operas of societies with low fertility A company deliberately crafted soap operas with characters who had few or no children The fertility decline in a municipality began after the first year the municipality had gained access to the TV soap operas. The decline was greatest for respondents close in age to the leading female character For women of age 35 44, the decrease was 11% of mean fertility. Causal identification: based on the arguably random timing when different parts of Brazil obtained access to the TV emissions La Ferrara et al. 2012

12 Jensen (2012) hired 8 call center recruiters and sent them to 80 villages

13 Randomized controlled trial in 160 villages in India One day per year, for 3 years, one information session was held 3 years of continuous placement support to women, by phone 11 job matches on average per village over 3 years Proportion of young women with call center jobs increased from 0 to 5.6 points

14 Social impact on women of age Markets with call center recruiters in the village Proportion married drops (71% control, 66% treatment) Proportion with children drops (from 43% to 37%) Recruiter Sellers

15 Social impact on women of age & on girls Markets with call center recruiters in the village Proportion married drops (71% control, 66% treatment Proportion with children drops (from 43% to 37%) Recruiter Sellers BMI of girls The treatment closed 30% of the gap between village girls and the wealthiest residents in Delhi

16 Social rigidity Because social experience shapes stereotypes, prototypes, and other mental models, society can be rigid.

17 Example: 2 mental models of parents utilty gains from educating a daughter, V P & V A. Hoff and Stiglitz 2016

18 Distribution of benefits to parents from an uneducated daughter.

19 ..

20 Market outcomes can affect who we are. Markets shape how we think they have a schematizing role

21 Standard Economics The rational actor Guided by Incentives

22 Standard Economics Behavioral Economics The rational actor The quasi-rational actor Guided by Incentives Also guided by Context in the moment of decision under fast thinking Source: Kahneman 2011

23 Standard Economics Strand One Behavioral Economics Strand Two The rational actor The quasi-rational actor The enculturated actor Endogenous preferences Endogenous cognition Endogenous perceptions Guided by incentives Also guided by context in the moment of decision (primes, frames) & also guided by experience & exposure that create mental models, e.g. Prototypes Narratives Concepts Identities

24 Thank you.

25 Extra slides

26 New paradigm with the enculturated actor Preferences & cognition depend on Primes & frames Experiences/exposure that shape the tools with which we process information A big social change can happen if enough people change their way of look at things at about the same time from, e.g. Shocks to demand Soap operas & theater for development;