Sentiment indices, such as measures of consumer confidence, are often discussed as potential indicators of future investment, consumption and growth. However, documenting a causal relationship between consumer confidence and output — and understanding the precise nature of the relationship — using field data has been challenging. We rely on the high degree of control afforded by a laboratory setting to experimentally test a simple model of investment with complementarities and time-varying fundamentals. Our experiment manipulates the presence of aggregate confidence measures to test both how they reflect available information and how they influence future output. We find that an aggregate sentiment measure can be as effective as a highly precise exogenous public signal in coordinating behavior on more efficient equilibria. Furthermore, our analysis indicates that the confidence measure also impacts expectations by influencing beliefs about aggregate investment.
Can the adoption of labor-saving technology lead to social instability and unrest? We examine a canonical historical case, the so-called ‘Captain Swing’ riots in 1830s Britain. Variously attributed to the adverse consequences of weather shocks, the shortcomings of the Poor Law, or the after-effects of enclosure, we emphasize the importance of a new technology – the threshing machine. Invented in the 1780s, it spread during and after the Napoleonic Wars. Using farm advertisements from newspapers published in 66 English and Welsh towns, we compile a new measure of the technology’s diffusion. Parishes with ads for threshing machines had much higher riot probabilities in 1830 – and the relationship was even stronger for machine-breaking attacks. Threshing machines were mainly useful in wheat-growing areas. To establish a causal role for labor-saving technology, we instrument technology adoption with the FAO measure of soil suitability for wheat, and show that this in turn predicts unrest.
This paper estimates peer effects in a university context where students are randomly assigned to sections. While students benefit from better peers on average, low-achieving students are harmed by high-achieving peers. Analyzing students’ course evaluations suggests that peer effects are driven by improved group interaction rather than adjustments in teachers’ behavior or students’ effort. Building on Angrist’s research, we further show that classical measurement error in a setting where group assignment is systematic can lead to a substantial overestimation of peer effects. However, when group assignment is random—like in our setting—peer effect estimates are biased toward zero.
A positive relation between overconfidence and investment provision has been theoretically justified and practically assumed in the literature, but has not been thoroughly investigated. We test and confirm this positive relation between direct measures of overconfidence in one's financial knowledge and choice of investment. More precisely, strong overconfidence results in excess investment, underconfidence induces underinvestment, whereas moderate overconfidence leads to accurate investments. Our experimental results are based on different subject pools, financial professionals and students, and different media: computer-, paper-, and web-based. The degree of one's overestimation of one's individual financial knowledge relative to one's actual knowledge as well as relative to the knowledge of peers explains investment decisions better than one's actual knowledge. The relation between overconfidence and investment is robust to the degree of individual risk aversion, the riskiness of the investment projects, and to the changes in incentives structure.
Background: The waiting list for kidney transplantation is long. The creation of “vouchers” for future kidney transplants enables living donation to occur when optimal for the donor and transplantation to occur later, when and if needed by the recipient.
Methods: The donation of a kidney at a time that is optimal for the donor generates a “voucher” that only a specified recipient may redeem later when needed. The voucher provides the recipient with priority in being matched with a living donor from the end of a future transplantation chain. Besides its use in persons of advancing age with a limited window for donation, vouchers remove a disincentive to kidney donation, namely, a reluctance to donate now lest one’s family member should need a transplant in the future.
Results: We describe the first three voucher cases, in which advancing age might otherwise have deprived the donors the opportunity to provide a kidney to a family member. These 3 voucher donations functioned in a nondirected fashion and triggered 25 transplants through kidney paired donation across the United States.
Conclusions: The provision of a voucher to potential recipients whose need for a transplant makes them “chronologically incompatible” with their donors may increase the number of living donor transplants.
Many studies that aim to detect model-free and model-based influences on behavior employ two-stage behavioral tasks of the type pioneered by Daw and colleagues in 2011. Such studies commonly modify existing two-stage decision paradigms in order to better address a given hypothesis, which is an important means of scientific progress. It is, however, critical to fully appreciate the impact of any modified or novel experimental design features on the expected results. Here, we use two concrete examples to demonstrate that relatively small changes in the two-stage task design can substantially change the pattern of actions taken by model-free and model-based agents. In the first, we show that, under specific conditions, computer simulations of purely model-free agents will produce the reward by transition interactions typically thought to characterize model-based behavior on a two-stage task. The second example shows that model-based agents' behavior is driven by a main effect of transition-type in addition to the canonical reward by transition interaction whenever the reward probabilities of the final states do not sum to one. Together, these examples emphasize the benefits of using computer simulations to determine what pattern of results to expect from both model-free and model-based agents performing a given two-stage decision task in order to design choice paradigms and analysis strategies best suited to the current question.
Social decisions are among the most important choices in our life. They are often proposed to rely on functionally specialized neural circuitry, based on correlated neural activity observed with neuroimaging. However, neuroimaging studies usually do not allow conclusions about whether the identified neural activity causally controls behavior, rather than being a consequence of it. This gap is now being bridged by brain stimulation studies that test the causal relationship between neural activity and three different types of processes underlying social decisions: social emotions, social cognition, and social behavioral control. Here we critically review this evidence and propose future steps that may help to advance our understanding of how the brain implements social decisions.
This paper investigates how legal cannabis access affects student performance. Identification comes from an exceptional policy introduced in the city of Maastricht in the Netherlands that discriminated access via licensed cannabis shops based on an individual’s nationality. We apply a difference-in-difference approach using administrative panel data on course grades of local students enrolled at Maastricht University before and during the partial cannabis prohibition. We find that the academic performance of students who are no longer legally permitted to buy cannabis substantially increases. Grade improvements are driven by younger students and the effects are stronger for women and low performers. In line with how cannabis consumption affects cognitive functioning, we find that performance gains are larger for courses that require more numerical/mathematical skills. Our investigation of underlying channels using course evaluations suggests that performance gains are driven by an improved understanding of the material rather than changes in students’ study effort.
Der technische Fortschritt vernichtet Arbeitsplätze und schafft neue. Über die Entwicklung der Arbeitswelt sprachen Roger Nickl und Thomas Gull mit der Historikerin Brigitta Bernet und dem Ökonomen David Dorn.
