The successful acquisition of arithmetic skills is an essential step in the development of mathematical competencies and has been associated with neural activity in the left posterior parietal cortex (PPC). It is unclear, however, whether this brain region plays a causal role in arithmetic skill acquisition and whether arithmetic learning can be modulated by means of non-invasive brain stimulation of this key region. In the present study we addressed these questions by applying transcranial direct current stimulation (tDCS) over the left PPC during a short-term training that simulates the typical path of arithmetic skill acquisition (specifically the transition from effortful procedural to memory-based problem-solving strategies). Sixty participants received either anodal, cathodal or sham tDCS while practising complex multiplication and subtraction problems. The stability of the stimulation-induced learning effects was assessed in a follow-up test 24 h after the training. Learning progress was modulated by tDCS. Cathodal tDCS (compared with sham) decreased learning rates during training and resulted in poorer performance which lasted over 24 h after stimulation. Anodal tDCS showed an operation-specific improvement for subtraction learning. Our findings extend previous studies by demonstrating that the left PPC is causally involved in arithmetic learning (and not only in arithmetic performance) and that even a short-term tDCS application can modulate the success of arithmetic knowledge acquisition. Moreover, our finding of operation-specific anodal stimulation effects suggests that the enhancing effects of tDCS on learning can selectively affect just one of several cognitive processes mediated by the stimulated area.
It is widely known that financial markets can become dangerously unstable, yet it is unclear why. Recent research has highlighted the possibility that endogenous hormones, in particular testosterone and cortisol, may critically influence traders’ financial decision making. Here we show that cortisol, a hormone that modulates the response to physical or psychological stress, predicts instability in financial markets. Specifically, we recorded salivary levels of cortisol and testosterone in people participating in an experimental asset market (N = 142) and found that individual and aggregate levels of endogenous cortisol predict subsequent risk-taking and price instability. We then administered either cortisol (single oral dose of 100 mg hydrocortisone, N = 34) or testosterone (three doses of 10 g transdermal 1% testosterone gel over 48 hours, N = 41) to young males before they played an asset trading game. We found that both cortisol and testosterone shifted investment towards riskier assets. Cortisol appears to affect risk preferences directly, whereas testosterone operates by inducing increased optimism about future price changes. Our results suggest that changes in both cortisol and testosterone could play a destabilizing role in financial markets through increased risk taking behaviour, acting via different behavioural pathways.
Important decisions are often made under stressful circumstances that might compromise self-regulatory behavior. Yet the neural mechanisms by which stress influences self-control choices are unclear. We investigated these mechanisms in human participants who faced self-control dilemmas over food reward while undergoing fMRI following stress. We found that stress increased the influence of immediately rewarding taste attributes on choice and reduced self-control. This choice pattern was accompanied by increased functional connectivity between ventromedial prefrontal cortex (vmPFC) and amygdala and striatal regions encoding tastiness. Furthermore, stress was associated with reduced connectivity between the vmPFC and dorsolateral prefrontal cortex regions linked to self-control success. Notably, alterations in connectivity pathways could be dissociated by their differential relationships with cortisol and perceived stress. Our results indicate that stress may compromise self-control decisions by both enhancing the impact of immediately rewarding attributes and reducing the efficacy of regions promoting behaviors that are consistent with long-term goals.
Do people intuitively favour certain actions over others? In some dual-process research, reaction-time (RT) data have been used to infer that certain choices are intuitive. However, the use of behavioural or biological measures to infer mental function, popularly known as ‘reverse inference’, is problematic because it does not take into account other sources of variability in the data, such as discriminability of the choice options. Here we use two example data sets obtained from value-based choice experiments to demonstrate that, after controlling for discriminability (that is, strength-of-preference), there is no evidence that one type of choice is systematically faster than the other. Moreover, using specific variations of a prominent value-based choice experiment, we are able to predictably replicate, eliminate or reverse previously reported correlations between RT and selfishness. Thus, our findings shed crucial light on the use of RT in inferring mental processes and strongly caution against using RT differences as evidence favouring dual-process accounts.
Television is the dominant entertainment medium for hundreds of millions. This chapter surveys the economic forces that determine the production and consumption of this content. It presents recent trends in television and online video markets, both in the US and internationally, and describes the state of theoretical and empirical research on these industries. A number of distinct themes emerge, including the growing importance of the pay-television sector, the role played by content providers (channels), distributors, and negotiations between them in determining market outcomes, and concerns about the effects of market power throughout this vertical structure. It also covers important but unsettled topics including the purpose for and effects of both the old (Public Service Broadcasters) and the new (online video markets). Open theoretical and empirical research questions are highlighted throughout.
Social segregation is a ubiquitous feature of human life. People segregate along the lines of income, religion, ethnicity, language, and other characteristics. This study provides the first experimental examination of decentralized matching with search frictions and institutionalized segregation. The findings indicate that, without a segregation institution, high types over-segregate relative to the equilibrium prediction. We observe segregation attempts even when equilibrium suggests that everyone should accept everyone else. In the presence of a segregation institution, we find that, while the symmetric segregation institution increases matching success rate and efficiency in one environment, it has weak or no effect in a steep-incentive environment. By adding an entry cost to a flat-incentive market, however, the asymmetric segregation institution leads to an increased matching success rate and efficiency in both environments, which underscores the importance of a coordination device.
Powerful, centralized states controlling a large share of national income only begin to appear in Europe after 1500. We build a model that explains their emergence in response to the increasing importance of money for military success. When fiscal resources are not crucial for winning wars, the threat of external conflict stifles state-building. As finance becomes critical, internally cohesive states invest in state capacity while divided states rationally drop out of the competition, causing divergence. We emphasize the role of the “Military Revolution”, a sequence of technological innovations that transformed armed conflict. Using data from 374 battles, we investigate empirically both the importance of money for military success and patterns of state-building in early modern Europe. The evidence is consistent with the predictions of our model.
We examine the asset pricing implications of a neoclassical model of repeated investment and disinvestment. Prior research has emphasized a negative relation between productivity and equity risk that results from operating leverage when capital adjustment is costly. In general, however, expansion and contraction options affect risk in the opposite direction: they lower equity risk as profitability declines. The general prediction is a non-monotonic overlay of opposing real option and operating leverage effects. For parameters chosen to match empirical firm characteristics, the predicted non-monotonicities are quantitatively important, and are detectable in the data. The calibrated model implies that real option effects dominate operating leverage effects, and the average firm is best described by an increasing risk profile, a conclusion supported by conditional beta estimates. The baseline calibration helps explain the profitability premium in the cross-section, but makes the value puzzle worse. Panels with heterogeneous firms can deliver simultaneous profitability and value effects that match empirical levels.
In a recent experimental study of intertemporal risky decision making, Andreoni and Sprenger (2012) find that subjects exhibit a preference for intertemporal diversification, which is inconsistent with discounted expected utility theory. It was claimed that their results are also at odds with models involving probability weighting, such as rank-dependent utility and cumulative prospect theory. Here we demonstrate, however, that rank-dependent probability weighting explains intertemporal diversification if decision makers care about portfolio risk. Moreover, we provide a unified account of all of Andreoni and Sprenger's key findings.
We juxtapose the effects of trade and technology on employment in US local labour markets between 1980 and 2007. Labour markets whose initial industry composition exposes them to rising Chinese import competition experience significant falls in employment, particularly in manufacturing and among non-college workers. Labour markets susceptible to computerisation due to specialisation in routine task-intensive activities instead experience occupational polarisation within manufacturing and non-manufacturing but do not experience a net employment decline. Trade impacts rise in the 2000s as imports accelerate, while the effect of technology appears to shift from automation of production activities in manufacturing towards computerisation of information-processing tasks in non-manufacturing.
