Psychology Implies Paternalism? Bounded Rationality may Reduce the Rationale to Regulate Risk-Taking

Behavioral economists increasingly argue that violations of rationality axioms provide a new rationale for paternalism – to “de-bias” individuals who exhibit errors, biases and other allegedly pathological psychological regularities associated with Tversky and Kahneman’s (in Science 185:1124–1131, 1974) heuristics-and-biases program. The argument is flawed, however, in neglecting to distinguish aggregate from individual rationality. The aggregate consequences of departures from normative decision-making axioms may be Pareto-inferior or superior. Without a well-specified theory of aggregation, individual-level biases do not necessarily imply losses in efficiency. This paper considers the problem of using a social-welfare function to decide whether to regulate risk-taking behavior in a population whose individual-level behavior may or may not be consistent with expected utility maximization. According to the social-welfare objective, unregulated aggregate risk distributions resulting from non-maximizing behavior are often more acceptable (i.e., lead to a weaker rationale for paternalism) than population distributions generated by behavior that conforms to the standard axioms. Thus, psychological theories that depart from axiomatic decision-making norms do not necessarily strengthen the case for paternalism, and conformity with such norms is generally not an appropriate policy-making objective in itself.     

Equality of Opportunity versus Equality of Opportunity Sets

We characterize two different approaches to the idea of equality of opportunity. Roemer’s social ordering is motivated by a concern to compensate for the effects of certain (non-responsibility) factors on outcomes. Van de gaer’s social ordering is concerned with the equalization of the opportunity sets to which people have access. We show how different invariance axioms open the possibility to go beyond the simple additive specification implied by both rules. This offers scope for a broader interpretation of responsibility-sensitive egalitarianism.     

Welfarist evaluations of decision rules for boards of representatives

We consider a decision board with representatives who vote on proposals on behalf of their constituencies. We look for decision rules that realize utilitarian and (welfarist) egalitarian ideals. We set up a simple model and obtain roughly the following results. If the interests of people from the same constituency are uncorrelated, then a weighted rule with square root weights does best in terms of both ideals. If there are perfect correlations, then the utilitarian ideal requires proportional weights, whereas the egalitarian ideal requires equal weights. We investigate correlations that are in between these extremes and provide analytic arguments to connect our results to Barberà and Jackson (J Polit Econ 114(2):317–339, 2006) and to Banzhaf voting power.     

The Number of Times an Anonymous Rule Violates Independence in the 3 × 3 Case

If an anonymous rule f always outputs a transitive relation and satisfies Pareto, then, by Arrow’s theorem, f violates the condition of independence. We give lower and upper bounds for the number of times an anonymous rule violates independence in the case of three alternatives and three voters.     

Social decisions about risk and risk-taking

There has been very little contact between risk studies and more general studies of social decision processes. It is argued that as a consequence of this, an oversimplified picture of social decision processes prevails in studies of risk. Tools from decision theory, welfare economics, and moral theory can be used to analyze the intricate inter-individual relationships that need to be treated in an adequate account of social decision-making about risk. However, this is not a matter of simple or straightforward application of existing theory. It is a challenging area for new theoretical developments.     

Social welfare functions that satisfy Pareto,anonymity, and neutrality,but not independence of irrelevant alternatives

In the presence of Pareto, non-dictatorship, full domain, and transitivity, an extremely weak independence condition disallows both anonymity and neutrality.     

Gender Differences in Pay of Young Management Professionals in the United States: A Comprehensive View

We conduct a comprehensive examination of the gender differences in pay focusing on multiple perspectives emanating from economics, social psychology, and gender studies. Data are drawn from surveys of MBA students conducted by the Graduate Management Admissions Council. Although women in both samples earn significantly less on average than men, when the effects of the study's variables are considered via multiple regression analysis, no significant difference in annual salary is observed. Our results show the importance of simultaneously considering the impact of human capital, job and firm characteristics, demographics, and cognitive skills. Structural differences are noted in the models estimated separately for men and women. However, the results from decomposing salary differentials are quite consistent with estimates from the single-equation models.     

The Nature and Consequences of Organization-Employee and Union-Member Exchange: An Empirical Analysis

Drawing on a study of 423 union members in a UK Primary Care Trust, we use structural equation modeling to investigate the extent to which organizational and union commitment and citizenship behaviors are a function of economic and social exchange. Findings suggest that the organization-employee and union-member exchanges are distinct, with organizational commitment a function of organization-employee exchange and union commitment and citizenship behaviors (UCB) a function of union-member exchange. Findings also suggest that union commitment and UCB are motivated primarily by social exchange, with economic exchange playing a supporting role. In addition, for organizational commitment, social exchange also seemed to be relatively more important. There was no evidence that perceived industrial relations climate moderates these relationships. Implications for industrial relations and workplace social partnerships are considered.