Behavioral economics of death and dying decisions: Both rational and irrational approaches

A decision to accept death and forego life-extending medical procedures can be both rational and irrational. This article reviews perspectives on death from the viewpoint of behavioral economics, which relies on psychology as the basis of decision-making in this regard. According to behavioral economics, both the benefits of living and the costs of death should be emphasized so that a person who is thinking about suicide reconsiders that option and, hopefully, changes his or her mind and tries to safeguard life and avoid life-threatening risks. One way to make dying decisions more rational is to write out a living will or advance directives to help doctors understand a patients’ intentions with regard to decisions about dying should they become unable to articulate that intention at some later, critical, life-or-death situation. Living wills and advance directives can therefore reduce the chances of mercy killing or euthanasia, especially in the context of a developing country, especially when life-extending technologies are limited.     

The economics of altruism: The old,the rich,the female

This study examines whether people of different observed characteristics exhibit different degree of altruism. The article utilizes a National Mental Health Survey that gathered questions about respondents’ self-reported altruism along with their demographic, labor force, and income information. The empirical results revealed the following: (1) Older people are more altruistic. This could potentially be explained by the Socioemotional Selectivity Theory (SST) that the older people shift towards emotion-related goals that can be internally rewarding in the present. (2) Higher-income people are more altruistic. This could potentially be explained by the fact that higher-income people could better afford to be more altruistic compared to lower-income people. (3) Women are more altruistic. This could potentially be explained by either biological evolution or social imposition. The main results are robust once the potential endogeneity problem of the income variable is mitigated by the use of the instrumental variable estimation method.     

Empathy,sympathy, and tax compliance

This paper examines the effect of “empathy” and “sympathy” on tax compliance. We run a series of laboratory experiments in which we observe the subjects’ decisions in a series of one-shot Tax Compliance Games presented at once and with no immediate feedback. Importantly, we employ methods to identify subjects’ sympathy, such as the Davis Empathic Concern Scale and questions about frequency of prosocial behaviors; we also use priming in order to promote subjects’ empathy. Our results suggest that the presence of sympathy in most cases encourages more tax compliance. Our results also suggest that priming to elicit empathy also has a positive impact on tax compliance. These results support the inclusion of noneconomic factors in the analysis of tax compliance behavior.     

Reciprocal relationships in tax compliance decisions

Reciprocity considerations are important to the tax compliance problem as they may explain the global dynamics of tax evasion, beyond individual tax evasion decisions, toward a downward or upward spiral. To provide evidence on reciprocity in tax compliance decisions, we have conducted a laboratory experiment in which we introduced two types of inequities. The first type of inequity is called vertical, because it refers to inequities introduced by the government when it sets different fiscal parameters for identical taxpayers, while the second type of inequity is called horizontal because it refers to the fact that taxpayers may differ in tax compliance decisions. In this setting, taxpayers may react to a disadvantageous or advantageous inequity through negative or positive reciprocal behaviors, respectively. Our results support the existence of negative and positive reciprocity in both vertical and horizontal cases. When both inequities come into play and may induce reciprocal behaviors in opposite directions, the horizontal always dominates the vertical.     

Uncertainty: the Curate's egg in financial economics

Economic theories of uncertainty are unpopular with financial experts. As sociologists, we rightly refuse predictions, but the uncertainties of money are constantly sifted and turned into semi‐denial by a financial economics set on somehow beating the future. Picking out ‘bits’ of the future as ‘risk’ and ‘parts’ as ‘information’ is attractive but socially dangerous, I argue, because money's promises are always uncertain. New studies of uncertainty are reversing sociology's neglect of the unavoidable inability to know the forces that will shape the financial future. ¹      

Psychic distance, psychic distance paradox and behavioral economics: Modeling MNC entry behavior in foreign markets

Assuming that MNCs face a much more complex environment that local enterprizes, the paper begins by discussing what economist Beckerman called psychic distance. After a historical discussion of this concept, I also discuss what O’Gardy and Lane called psychic distance paradox. Then, I argue that these two concepts have a great deal of relevance beyond their original intent of international trade-they are also relevant to FDI and all other formas of international production and exchange. Next, I argue, as I have done in several previous papers, that behavioral economics has a great deal of relevance to FDI and international productive activity; I also argue that behavioral economics can be utilized to describe the concepts of psychic distance and psychic distance paradox. Then, I develop a behavioral economics-based model that can explain the concepts of psychic distance and psychic distance paradox, and their relevance to the modes of entry of MNCs in international markets. In doing so, I argue that FDI and MNC behavior in general need not be explained outside of economics, since, in contrast to neo-classical economics, behavioral economics is capable of capturing the complexities of global markets.     

Stigma mitigation and the importance of redundant treatments

Disgust can evoke strong behavioral responses. Sometimes these extreme visceral responses can lead to stigmatization—an overreaction to a risk. In fact, disgust may be so inhibiting that it leads people to refuse to consume completely safe items, such as treated drinking water, leading to important economic and policy implications. Using economic experiments, we provide a measure of the behavioral response to disgust. Our findings suggest that when monetary incentives are provided, the behavioral response may have been exaggerated by previous studies that have relied on survey methods. Furthermore, mitigation steps successfully reduce the stigma behavior. In fact, the results suggest that stigma is primarily reduced not by a specific mitigation step taken but by how many steps are taken consecutively. These results have important implications for policies addressing issues such as the global shortage of drinking water. Some efforts to resolve the shortage have involved recycled water that is completely safe to drink but is often rejected because of reactions of disgust.     

Behavioral economics: implications for economic theory and policy

The concerns of behavioral economics are considered in the context of the decentralized, private ownership market economy. Modes of adaptive economizing behavior are outlined and their implications for augmenting the classical paradigm outlined. The role of viability mechanisms that indirectly and adaptively coordinate producers and consumers out of equilibrium is emphasized. The destabilizing nature of the creative intelligence and adaptive economizing transforms the world. The example of internal combustion, its effect on agriculture and transportation and the corollary use of resources provides a timely example.     

A psychological, attitudinal and professional profile of Irish economists

This paper provides the first psychological and attitudinal profile of the Irish economics profession. The aspects covered fall into three broad categories: the first category relates to the attitudes of the respondents to issues relating to the economy and the role of government; the second set seeks responses regarding perceptions of the economics profession and professional economists in Ireland; the third set of questions are drawn from various international survey programmes and survey social, political, ethical and psychological attributes and attitudes. The results display a picture of a group who believe their discipline to be relevant to policy and society, who are outward looking in terms of international collaboration, who perceive the discipline to be somewhat stale and who desire a greater focus on interdisciplinary work.     

Depressive Symptomatology and Child Abuse in Adolescents with Behavioral Problems

This study focused on the self-reported experience of depressive symptomatology and child abuse in a sample of adolescents with severe behavioral problems. The sample comprised 81 adolescents, from 11 to 18 years of age: 46 boys (56.8%) and 35 girls (43.2%), who at the time of the study were placed under supervision of a Family Supervision Agency or were receiving Youth After-Care and Resettlement Service. An anonymous questionnaire was used, measuring reports of experiences of child abuse (physical abuse, sexual abuse, low care), and reports of depressive symptoms, generally consistent with the criteria listed in the DSM IV for the diagnosis of a Major Depressive Episode (MDE). It was shown that a considerable proportion of the behavioral-problem adolescents reported depressive symptoms and/or had experienced child abuse. Furthermore it appeared that most of the experiences of child abuse in the group with depressive symptomatology referred to multiple forms of child abuse rather than to a single form of abuse. The results suggest that in the group of behavioral-problem adolescents a subgroup of youngsters exists that is characterized by concurrent depressive symptomatology, which can be clearly distinguished from those without concurrent depressive symptomatology, by their reports of child abuse. Implications for prevention and intervention for this subgroup of adolescents with multiple problems are discussed.     

Intrinsic and extrinsic effects on behavioral tax biases in risky investment decisions

Individuals often do not take taxes correctly into account, which results in distorted or unexpected investments. We shed further light on the discussion of such behavioral tax perception biases by analyzing intrinsic and extrinsic effects on investment decisions. We study two dimensions: (1) the influence of emotions and perceived risk (individual dimension, intrinsic effects) and (2) the influence of available tax information by varying tax complexity and salience (tax system dimension, extrinsic effects). In our laboratory experiment, we construct the payoff structure such that the subjects are confronted with exactly the same choices in net terms in a situation with or without a capital gains tax. This design allows us to identify pure tax perception biases. We show that both dimensions are able to explain tax perception biases. In particular, we find evidence that perceived risk is lower and consequently willingness to take risk is higher with a capital gains tax (with full loss offset provision) than without taxation. Furthermore, this positive effect on risky investment is higher in a situation with a rather low level of tax information in which tax complexity is high and tax salience is low.     

Because they were there: Access,deliberation, and the mobilization of networks for support

When people need help, what is the process through which they decide whom in their network to turn to? Research on social support has described a process that is deliberative in nature: people determine their needs, assess who in their network has the needed attributes—such as skill, trustworthiness, intimacy, and accessibility—and then activate that tie. Nevertheless, research in behavioral economics and other fields has shown that people make many decisions not deliberatively but intuitively. We examine this possibility in the context of social support by focusing on one factor: accessibility. Although researchers have argued that people weigh the accessibility of potential helpers as they do any other attribute, accessibility may be not only an attribute of the helper but also a condition of the situation. We develop a framework to make this question tractable for survey research and evaluate competing hypotheses using original data on an analytically strategic sample of ∼2000 college students, probing concrete instances of social support. We identify and document not one but three decision processes, reflective, incidental, and spontaneous activation, which differ in the extent to which actors had deliberated on whether to seek help and on whom to approach before activating the tie. We find that while the process was reflective (consistent with existing theory) when skill or trustworthiness played a role, it was significantly less so (consistent with the alternative) when accessibility did. Findings suggest that actors decide whom in their network to mobilize through at least three systematically different processes, two of which are consistent less with either active “mobilization” or explicit “help seeking” than with responsiveness to opportunity and context.     

Teaching economics across cultures: challenges and lessons learned in Tajikistan and Kyrgyzstan

Nine years of experience teaching economics in the Tajikistan and Kyrgyzstan provides knowledge on the nuances and challenges of teaching economics across cultures. Particular categories and difficulties are presented with some examples of how to address them. Conclusions and findings are used to form general guiding principles for teaching economics in the increasingly diverse US classroom. The principles offered in the paper are valuable to English speakers providing economic teaching and training in post-Soviet nations and, more broadly, to anyone teaching economics across cultures. Finally, suggestions based these principles are offered to encourage all professors of economics to carefully consider language, illustrations, diversity of views regarding economics and the multi-cultural nature of university classrooms to better relate to students and be more effective teachers.     

Poverty identity and preference for challenge: Evidence from the U.S. and India

One’s personal identity can play an important role in decision-making. We propose that a key identity that shapes behavior among poor populations is conceptualizing oneself as financially insecure, which we term “poverty identity.” Two experiments suggest that this identity can influence one’s propensity to engage in challenging tasks. We first demonstrate in a lab experiment with students that making financial insecurity temporarily salient can reduce preference for challenging tasks. Subsequently, in a lab-in-field experiment conducted in Dharavi, a slum in Mumbai, India, we show that a verbal self-affirmation intervention involving simple, one-on-one conversations with each individual can counteract the effects of persistent identity salience for the poor by fostering greater preference for more challenging labor tasks. We suggest that the persistence of scarcity can make poverty a continually salient characteristic by which the truly impoverished define who they are. Further, we outline an identity-based theoretical framework that explains behavior among people who temporarily feel poor but also suggests that similar perturbations in identity salience may have a negligible impact on behavior among the very poor. These findings have important implications for models of identity and policy design aimed at improving well-being for disadvantaged populations.     

Pro-social behavior in the TV show “Come Dine With Me”: An empirical investigation

We investigate the influence of social approval, reputation, and individual characteristics on voting behavior in the German version of the TV show “Come Dine With Me”. Five contestants prepare a dinner for each other during the course of a week and evaluate each other’s performance. The winner receives a monetary prize. Evaluations remain concealed until the show is broadcast. Because actual voting behavior remains concealed during the show, a contestant could evaluate his/her opponents as zero in an effort to increase his/her own chances of winning, without risking later punishment in the form of low scores. However, this behavior is not observed in our dataset, which runs from 2006 to 2011. We find that all of the following have a significant influence on the evaluating behavior: the objective sophistication of a meal; the order of cooking; whether a person has already cooked; and the social similarity between contestant and evaluator. These findings help to improve understanding of the impact that reputation and social approval have on economic decision making.     

Reflections on rational choice—The existence of systematic irrationality

The behavioral challenge to the rational choice paradigm is oriented toward individual decision-making. Behavioral irrationality does not mean chaos. Most irrational behavior involves the exercise of reasoning. In reality, decision makers do not behave with full knowledge and/or optimal computational power in pursuit of maximizing expected utility. Besides reviewing critiques to the rationality paradigm for judgments and preferences and exploring the impact of culture on people's economic behavior, this paper is the first to call the attention of researchers to the phenomenon of systemic irrationality. Irrationality may exist at the aggregate or societal level, a conclusion based on the observation that large segments of the population are incapable of making decisions in accord with traditional rationality—groups such as those who have a psychiatric disorder, those who are taking medications, those with limited intelligence, those from the lower social classes, children and adolescents, and the elderly. Even those who are not included in the aforementioned groups, but who take medications for medical conditions may have their decision-making impaired to some extent. Therefore, it is argued that rationality in economic decision-making may be the exception rather than the norm.     

Economic sociology as disequilibrium economics: a contribution to the critique of the new economic sociology

This paper analyses the problem of the asocial view of the market at the theoretical core of contemporary economic sociology. Despite much emphasis on the apparent interpenetration of society and the economy, contemporary economic sociology is rooted in an analytical distinction between the two spheres. The implicit reliance on the neoclassical economic conception of the market helps to explain why the ‘new economic sociology’ often collapses into disequilibrium economics, where disequilibrium becomes the central but unstated prediction of a good deal of the work in the paradigm. Using a sample of contributions from the field, I demonstrate that a strong tendency running through much of the new economic sociology tends to understand society as a fundamentally distortionary force. To resolve this problem, I argue that an independent field of economic sociology necessitates a distinction between social relationships and social relations.     

Give your child and adolescent mental health service a health economics makeover

Specialist child and adolescent mental health services (CAMHS) must make decisions about what treatments to provide to whom, when, where and how, within limited budgets. This raises questions about how services make such decisions, to best meet the mental health needs of their catchment. The methods and practices of Health Economics, a field with considerable expertise in measuring performance in health systems, can help CAMHS make better informed decisions regarding service provision. This paper identifies a process through a set of focused questions to help CAMHS examine and improve their performance. The aspects covered are service profile, costs, conceptualisation of outcomes and identification of value for money. The recommended approach should help CAMHS redirect resources to maximise benefits for their catchment population.     

Incentivising trust

We argue that trust can be incentivised by measures which increase the ability of trusters to protect themselves against risk. We work within the framework originally established by Berg, Dickhaut, and McCabe (1995) in which trust is measured experimentally as the ability to generate reciprocity in response to an initial offer of money within a two-person game. An incentive is conveyed both by means of variations in the multiplier applied to the first player’s initial offer and by giving the first player the opportunity to insure themselves against the possibility that the second player will fail to reciprocate their initial offer. Measured trust is strongly responsive to both these incentives. Thus third parties have the ability to influence the outcome of the game, not only, as in the analysis of Charness, Cobo-Reyes, and Jimenez (2008), by punishing failure to reciprocate and rewarding ‘good’ initial offers, but also by offering protection which strengthens the first player’s risk efficacy, or ratio of assets to risk.