Measuring Constructed Preferences: Towards a Building Code

A “building code” for preference measurement is needed in a world in which many expressions of preference are constructed when people are asked a valuation question. Construction of preferences means that preference measurement is best viewed as architecture (building a set of values) rather than as archaeology (uncovering existing values). We describe potential faults in the process of preference construction, offer guidelines for measuring constructed preferences (a “building code”) to mitigate these faults, and discuss how the code must be sensitive to the purpose of the valuation (design vs. prediction).     

The strength of sensitivity to ambiguity

We report an experiment where each subject’s ambiguity sensitivity is measured by an ambiguity premium, a concept analogous to and comparable with a risk premium. In our design, some tasks feature known objective risks and others uncertainty about which subjects have imperfect, heterogeneous, information (“ambiguous tasks”). We show how the smooth ambiguity model can be used to calculate ambiguity premia. A distinctive feature of our approach is estimation of each subject’s subjective beliefs about the uncertainty in ambiguous tasks. We find considerable heterogeneity among subjects in beliefs and ambiguity premia; and that, on average, ambiguity sensitivity is about as strong as risk sensitivity.     

Measuring ambiguity attitude: (Extended) multiplier preferences for the American and the Dutch population

Empirical studies of ambiguity aversion often use measures that are not grounded in theory. This paper shows how a theoretically-founded measure of ambiguity aversion can be derived from Hansen and Sargent’s theory of multiplier preferences. Multiplier preferences are used in macroeconomics to capture model uncertainty. At the micro level, they have not been applied yet, because they do not permit ambiguity seeking, which is usually observed for a substantial proportion of subjects. We give a preference foundation for (extended) multiplier preferences accommodating both ambiguity aversion and ambiguity seeking and we propose a simple method to measure them using matching probabilities. We illustrate our method in two large representative samples (Dutch and American) and obtain the first micro estimates of multiplier preferences.     

《老子》“宠辱若惊”章新诠

郭店简《老子》“”仍应释读为“惊”,它本作“惊”并非误读。“宠辱”不是并列关系,不是动宾结构,不是偏义复词,不是特有概念。“宠辱”实意为宠即辱,“宠为下也”进一步说明得宠乃卑辱之事。正如“大患”是对“贵”的价值判断,“辱”“下”都是对“宠”的价值判断（“下”即“辱”）,故章首两命题宜断句为“宠,辱若惊;贵,大患若身”,郭店楚简本将“人”字断在本章章首乃误点句读。老子在此是做价值重估,从而颠覆以“宠”“贵”为上的世俗价值观。     

Feddersen and Pesendorfer meet Ellsberg

The Condorcet Jury Theorem formalises the “wisdom of crowds”: binary decisions made by majority vote are asymptotically correct as the number of voters tends to infinity. This classical result assumes like-minded, expected utility maximising voters who all share a common prior belief about the right decision. Ellis (Theor Econo 11(3): 865–895, 2016) shows that when voters have ambiguous prior beliefs—a (closed, convex) set of priors—and follow maxmin expected utility (MEU), such wisdom requires that voters’ beliefs satisfy a “disjoint posteriors” condition: different private signals lead to posterior sets with disjoint interiors. Both the original theorem and Ellis’s generalisation assume symmetric penalties for wrong decisions. If, as in the jury context, errors attract asymmetric penalties then it is natural to consider voting rules that raise the hurdle for the decision carrying the heavier penalty for error (such as conviction in jury trials). In a classical model, Feddersen and Pesendorfer (Am Politi Sci Rev 92(1):23–35, 1998) have shown that, paradoxically, raising this hurdle may actually increase the likelihood of the more serious error. In particular, crowds are not wise under the unanimity rule: the probability of the more serious error does not vanish as the crowd size tends to infinity. We show that this “Jury Paradox” persists in the presence of ambiguity, whether or not juror beliefs satisfy Ellis’s “disjoint posteriors” condition. We also characterise the strictly mixed equilibria of this model and study their properties. Such equilibria cannot exist in the absence of ambiguity but may exist for arbitrarily large jury size when ambiguity is present. In addition to uninformative strictly mixed equilibria, analogous to those exhibited by Ellis (Theor Econo 11(3): 865–895, 2016), there may also exist strictly mixed equilibria which are informative about voter signals.

     

Determinants of stated willingness to pay for public goods: A study in the headline method

Respondents were shown brief statements (“headlines”) referring to various threats to the environment or to public health, and other public issues. An intervention to deal with each problem was also introduced by a single sentence. Some respondents were asked to indicate their willingness to pay for the interventions by voluntary contributions. Others indicated their opinion of the intervention on a conventional rating scale, rated the personal satisfaction of contributing to it, or rated the importance of the problem. Group averages of these response measures were obtained for a large set of issues. Computed over issues, the rank-order correlations between the different measures were very high, suggesting that group averages of WTP and of other opinion statements are measures of the same public attitudes. Observed preference reversals and violations of monotonicity in contributions are better explained by a concept of attitude than by the notion of economic value that underlies the contingent valuation method. Contributions and purchases do not follow the same logic. Possible implications for the contingent valuation method are discussed.     

Ellsberg paradox: Ambiguity and complexity aversions compared

We present a simple model where preferences with complexity aversion, rather than ambiguity aversion, resolve the Ellsberg paradox. We test our theory using laboratory experiments where subjects choose among lotteries that “range” from a simple risky lottery, through risky but more complex lotteries, to one similar to Ellsberg’s ambiguity urn. Our model ranks lotteries according to their complexity and makes different—at times contrasting—predictions than most models of ambiguity in response to manipulations of prizes. The results support that complexity aversion preferences play an important and separate role from beliefs with ambiguity aversion in explaining behavior under uncertainty.     

Optimal allocation mechanisms with type-dependent negative externalities

I analyze optimal auction design in the presence of linear type-dependent negative externalities. I characterize the properties of the optimal mechanism when externalities are “strongly decreasing” and “increasing” in the agent’s valuation and I discuss its implementation with sealed-bid auctions. Interestingly, bidding strategies are not necessarily increasing in valuations, and the optimal mechanism can be implemented by setting a price ceiling instead of a reserve price.     

Aberration of the Citation

Multiple inherent biases related to different citation practices (for e.g., self-citations, negative citations, wrong citations, multi-authorship-biased citations, honorary citations, circumstantial citations, discriminatory citations, selective and arbitrary citations, etc.) make citation-based bibliometrics strongly flawed and defective measures. A paper can be highly cited for a while (for e.g., under circumstantial or transitional knowledge), but years later it may appear that its findings, paradigms, or theories were untrue or invalid anymore. By contrast, a paper may remain shelved or overlooked for years or decades, but new studies or discoveries may actualize its subject at any moment. As citation-based metrics are transformed into “commercial activities,” the “citation credit” should be considered on a commercial basis too, in the sense that “citation credit” should be shared out as a “citation dividend” by shareholders (coauthors) averagely or proportionally to their contributions but not fully appropriated by each of them. At equal numbers of citations, the greater number of authors, the lower “citation credit” should be and vice versa. Overlooking the presence of distorted and subjective citation practices makes many people and administrators “obsessed” with the number of citations to such an extent to run after “highly cited” authors and to create specialized citation databases for commercial purposes. Citation-based bibliometrics, however, are unreliable and unscientific measures; citation counts do not mean that a more cited work is of a higher quality or accuracy than a less cited work because citations do not measure the quality or accuracy. Citations do not mean that a highly cited author or journal is more commendable than a less cited author or journal. Citations are not more than countable numbers: no more, no less.     

Models of supranational policymaking and the reform of the EMU

Under what conditions do sovereign governments agree to create a common policy institution? And what model of supranational policymaking may be preferable? To answer these questions, we introduce a policy game of two interdependent countries with reciprocal negative externalities created by shocks to a socially relevant variable. Depending on national preferences over policy options and their outcomes, both countries incur welfare losses if governments pursue non-cooperative policy choices. Then we examine what kind of supranational policy regimes may be endorsed by both governments according to the Pareto criterion. Two regimes are “technocratic” (they do not take national preferences into account), two are “political” (they do). One political regime that we call “union” aggregates the national preferences additively. The thrust of our analysis is that the technocratic regimes are dominated by non-cooperation, so that the single alternative is between the union and non-cooperation. Yet an important point is that the union is the Pareto-dominant regime only within a limited range of asymmetry between countries’ preferences. This result has notable implications for the debate on the reform of the European Economic and Monetary Union (EMU) facing the challenge of further integration of member countries. Application to the EMU case is assisted by numerical simulations based on empirical parameters drawn from qualified external sources, which show that aymmetries in national attitudes towards policies that “Europe wants” may jeopardize the creation of a union in alternative to non-cooperation.     

What Makes a Good Decision? Robust Satisficing as a Normative Standard of Rational Decision Making

Most decisions in life involve ambiguity, where probabilities can not be meaningfully specified, as much as they involve probabilistic uncertainty. In such conditions, the aspiration to utility maximization may be self‐deceptive. We propose “robust satisficing” as an alternative to utility maximizing as the normative standard for rational decision making in such circumstances. Instead of seeking to maximize the expected value, or utility, of a decision outcome, robust satisficing aims to maximize the robustness to uncertainty of a satisfactory outcome. That is, robust satisficing asks, “what is a ‘good enough’ outcome,” and then seeks the option that will produce such an outcome under the widest set of circumstances. We explore the conditions under which robust satisficing is a more appropriate norm for decision making than utility maximizing.     

Ambiguity framed

In his exposition of subjective expected utility theory, Savage (1954) proposed that the Allais paradox could be reduced if it were recast into a format which made the appeal of the independence axiom of expected utility theory more transparent. Recent studies consistently find support for this prediction. We consider a salience-based choice model which explains this frame-dependence of the Allais paradox. We then derive the novel prediction that the presentation format responsible for reductions in Allais-style violations of expected utility theory will also reduce Ellsberg-style violations of subjective expected utility theory. This format makes the appeal of Savage’s “sure thing principle” more transparent. We design an experiment to test this prediction and find strong support for such frame-dependence of ambiguity aversion in Ellsberg-style choices. In particular, we observe markedly less ambiguity-averse behavior in Savage’s matrix format than in a more standard “prospect” format. This finding poses a new challenge for the leading models of ambiguity aversion.     

Social Capital and the Growth of the Nonprofit Sector*

Objectives. This article examines the extent to which nonprofit organizational foundings are determined by various forms of social capital. Our hypothesis is that, controlling for other relevant social, political, and economic factors, communities with higher levels of social capital should experience more extensive growth in their nonprofit sectors. Methods. Using data derived from the Social Capital Community Benchmark Survey and the IRS “charitable organization” Business Master Files, we test our hypothesis using a negative binomial event count regression on nonprofit organization foundings in 284 U.S. counties in the year 2001. Results. We find that two core dimensions of social capital—political engagement and “bridging” social ties—have a significant impact on county‐level nonprofit foundings. Surprisingly, a key element of social capital in the literature, the level of interpersonal trust, does not lead to an increase in foundings of new not‐for‐profit organizations. Conclusions. This study provides further evidence of the strength of political engagement and bridging ties for the vitality of the community. It also shows that the different dimensions of social capital do not manifest a uniform effect on nonprofit sector growth. These results further demonstrate that the growth of a community's not‐for‐profit sector is dependent on a mix of ecological and environmental factors, especially preexisting organizational density, median household income, unemployment, and levels of governmental spending. Overall, social capital can usefully be seen as another key “environmental” factor in explanations of organizational foundings.     

The Myth of “Security Moms” and “NASCAR Dads”: Parenthood,Political Stereotypes,and the 2004 Election*

Objective. The objective of this article is to explore the impact of being a parent on political views and to test the accuracy of the “Security Mom” and “NASCAR Dad” labels that were pervasively applied in the context of the 2004 presidential election. Methods. The methods we employed consist of using data primarily from the 2004 National Election Study to determine whether parents differ from nonparents in terms of their political attitudes on a wide range of issues. We argue that parenthood affects women and men differently, so we analyze the sexes separately. Results. Mothers have important political distinctions from women without children, mostly in the case of social welfare issues. They do not, however, appear to be “Security Moms” in the post‐9/11 world. As for fathers, for the most part it makes little sense to talk about dads as a distinct voting bloc, as in very few cases do their political attitudes differ from men without children. Conclusions. The media's use of the labels “NASCAR Dad” and Security Mom” promoted an inaccurate understanding of the political preferences of parents. Beyond debunking these media myths, our results provide one of the first comprehensive looks at the impact of parenthood on political attitudes, an overlooked area in the adult socialization literature.     

Learning to play chess: How to make sense of a politics of representation with people in poverty

Despite the growing involvement of people in poverty in social policy, their participation does not necessarily take place on a par with policymakers, as the latter often do not really embrace their demands for social justice. It is, therefore, argued that social work has a role to play in the process of merging knowledge of people in poverty with that of policymakers and other stakeholders by representing their perspectives in public debate. By drawing on an in‐depth qualitative research of five “Associations where People in Poverty Raise their Voice” (Belgium), the complexity of the direct participation of people in poverty in such a politics of representation is analyzed, as well as the different roles social work practitioners can take on in dealing with this complexity. Here, two roles are distinguished: “a guardian of collective and transformative elements”; and “a strategical chess player.” We conclude that practitioners need to reflect critically on participatory premises and practices and consider whether these strategies actually contribute to societal change. However, the ideal of parity of participation entails that such strategic considerations should always be collaboratively discussed with people in poverty.     

Experimental evidence on valuation with multiple priors

Popular models for decision making under ambiguity assume that people use not one but multiple priors. This paper is a first attempt to experimentally elicit the min and the max of multiple priors directly. In an ambiguous scenario we measure a participant’s single prior, her min and max of multiple priors, and the valuation of an ambiguous asset with the same underlying states as the ambiguous scenario. We use the min and the max of multiple priors to directly test two popular multiple priors models: the maxmin model and the α maxmin model. We find more support for the α maxmin model: although people put about twice the weight on the minimum of multiple priors, they also consider the maximum. Furthermore, we indirectly elicit confidence weights over the whole set of multiple priors and test two additional models: variational preferences and the smooth model of ambiguity. Two particular versions of the variational preferences model explain less than the α maxmin but more than the maxmin model. Overall, the smooth model of ambiguity performs best among all models tested.     

No-betting Pareto under ambiguity

It has been argued that Pareto-improving trade is not as compelling under uncertainty as it is under certainty. The former may involve agents with different beliefs, who might wish to execute trades that are no more than betting. In response, the concept of no-betting Pareto dominance was introduced, requiring that putative Pareto improvements must be rationalizable by some common probabilities, even though the participants’ beliefs may differ. In this paper, we argue that this definition might be too narrow for use when agents are not Bayesian. Agents who face ambiguity might wish to trade in ways that can be justified by common ambiguity, though not necessarily by common probabilities. We accordingly extend the notion of no-betting Pareto dominance to characterize trades than are “no-betting Pareto” ranked according to the maxmin expected utility model.