Optimal contracts, adverse selection and social preferences: An experiment

It has long been standard in agency theory to search for incentive-compatible mechanisms on the assumption that people care only about their own material wealth. However, this assumption is clearly refuted by numerous experiments, and we feel that it may be useful to consider nonpecuniary utility in mechanism design and contract theory. Accordingly, we devise an experiment to explore optimal contracts in an adverse-selection context. A principal proposes one of three contract menus, each of which offers a choice of two incentive-compatible contracts, to two agents whose types are unknown to the principal. The agents know the set of possible menus, and choose to either accept one of the two contracts offered in the proposed menu or to reject the menu altogether; a rejection by either agent leads to lower (and equal) reservation payoffs for all parties. While all three possible menus favor the principal, they do so to varying degrees. We observe numerous rejections of the more lopsided menus, and approach an equilibrium where one of the more equitable contract menus (which one depends on the reservation payoffs) is proposed and agents accept a contract, selecting actions according to their types. Behavior is largely consistent with all recent models of social preferences, strongly suggesting there is value in considering nonpecuniary utility in agency theory.

Elicited beliefs and social information in modified dictator games: What do dictators believe other dictators do?

We use subjects actions in modified dictator games to perform a within-subject classification ofindividuals into four different types of interdependent preferences: Selfish, Social Welfaremaximizers, Inequity Averse and Competitive. We elicit beliefs about other subjects actions inthe same modified dictator games to test how much of the existent heterogeneity in others actions is known by subjects. We find that subjects with different interdependent preferences infact have different beliefs about others actions. In particular, Selfish individuals cannotconceive others being non-Selfish while Social Welfare maximizers are closest to the actualdistribution of others actions. We finally provide subjects with information on other subjects actions and re-classify individuals according to their (new) actions in the same modified dictatorgames. We find that social information does not affect Selfish individuals, but that individualswith interdependent preferences are more likely to change their behavior and tend to behavemore selfishly.

Gerontocracy, retirement, and social security

Why are the old politically successful? We build a simple interest group model in which political pressure is time-intensive, showing that in the political competitive equilibrium each group lobbies for government policies that lower their own value of time but the old do so to a greater extent and as a result are net gainers from the political process. What distinguishes the elderly from other political groups (and what makes them more succesful) is that they have lower labor productivity and/or that we are all likely to become elderly at some point, while we are relatively unlikely to change gender, race, sexual orientation, or even ocupation, The model has a variety of implications for the design of social security programs, which we test using data from the Social Security Administration. For example, the model predicts that social security programs with retirement incentives are larger and that the old are more "single-minded" in their politics, implications which we verify using cross-country government finance data and cross-country political participation surveys. Finally, we show that the forced savings programs intended to "reform" the social security system may increase the amount of intergenerational redistribution. As a model for evaluating policy reforms, ours has the attractive feature that reforms must be time time consistent from a political point of view rather than a public interest point of view.

A positive theory of geographic mobility and social insurance

This paper presents a tractable dynamic general equilibrium model thatcan explain cross-country empirical regularities in geographical mobility,unemployment and labor market institutions. Rational agents vote overunemployment insurance (UI), taking the dynamic distortionary effects ofinsurance on the performance of the labor market into consideration.Agents with higher cost of moving, i.e., more attached to their currentlocation, prefer more generous UI. The key assumption is that an agent'sattachment to a location increases the longer she has resided there. UIreduces the incentive for labor mobility and increases, therefore, thefraction of attached agents and the political support for UI. The mainresult is that this self-reinforcing mechanism can give rise to multiplesteady-states-one 'European' steady-state featuring high unemployment,low geographical mobility and high unemployment insurance, and one'American' steady-state featuring low unemployment, high mobility andlow unemployment insurance.

Housing’s Economic and Social Impacts, April 2007

Housing is an investment in Iowa’s communities and people. This report investigates the following questions: What impact does affordable housing have • on neighborhoods? • on local and state economies? • on expanding and stabilizing Iowa’s labor force? • on meeting social, individual and community needs?

Policy attitudes, ideological values and social representations

This article reviews research on policy attitudes and ideological values from the perspective of social representations theory. In the first part of the paper, key features of lay political thinking are presented, its pragmatic imperative, its focus on communication and the social functions of shared knowledge. Objectification transforms abstract and group-neutral ideological values into concrete and socially useful knowledge, in particular stereotypes of value-conforming and value-violating groups. Such shared understandings of intergroup relations provide citizens with common reference knowledge which provides the cognitive and cultural basis of policy attitudes. Social representations theory further suggests that lay knowledge reflects the social context in which it has been elaborated (anchoring), an aspect which allows conceptualising aggregate-level differences in policy attitudes. In the second part of the paper, a model of lay conceptions of social order is outlined which organises four shared conceptions of social order, along with the stereotype-based thinking associated with each conception: Moral order, Free Market, Social diversity and Structural inequality. We conclude by arguing that policy attitudes are symbolic devices expressed to justify or to challenge existing social arrangements.

The Middle East in the American quest for world order : ideas of power, economics, and social development in United States foreign policy, 1953-1961

Doctoral dissertation, University of Tampere

Social dysfunctioning after mild to moderate first-ever stroke at vocational age.

BACKGROUND: With improvements in stroke treatments, the number of patients with dramatic recovery is increasing. However, many of them are still complaining of difficulties in returning to work and every day activities. The aim was to assess work and social dysfunctioning in patients with minor to moderate stroke and explore its contributing factors. METHODS: Consecutive patients were prospectively included at a median 7 months after a first-ever stroke. Scores on the Work and Social Adjustment Scale (WSAS), a generic self-reported scale for assessing social functioning, were correlated with scores on the National Institutes of Health Stroke Scale (NIHSS), activities of daily living, Hospital Anxiety and Depression scale (HAD) and MMSE, Iowa Scale of Personality Changes and return to work at 1 year. RESULTS: Among the 84 included patients (mean age 43.5 years), 57 (68%; 95% CI 57 to 78%) complained of significant perturbation of functioning attributed to stroke. WSAS was highly significantly related to modified Rankin scale, daily living activities, Iowa Scale of Personality Changes and return to work at 1 year. Using ordinal logistic regression, the contributors to WSAS were initial neurological severity (NIHSS at admission), HAD and MMSE. CONCLUSIONS: The study showed that up to 68% of our patients complained of significant work and social dysfunction due to stroke, despite a good clinical outcome. This self-estimation was correlated to external validation criteria, stressing the high burden of stroke from the patient's viewpoint. Moreover, when compared across diseases, social dysfunctioning after mild stroke was as important as in other major disabling diseases.

Gene by environment interaction: effects of a single-gene and social-environment on reproductive phenotypes of fire ant queens

1. The gene Pgm-3 (or a closely linked gene) influences the phenotype and reproductive success of queens in multiple-queen (polygynous) colonies but not single-queen (monogynous) colonies of the Fire Ant Solenopsis invicta. 2. We investigated the mechanisms of differential phenotypic expression of Pgm-3 in these alternate social forms. Mature winged queens with the homozygous genotype Pgm-3(a/a) averaged 26% heavier than queens with the genotypes Pgm-3(a/b) and Pgm 3(b/b) in the polygynous form. Heterozygotes were slightly heavier (2%) than Pgm-3(b/b) queens in this form, demonstrating that the allele Pgm-3(a) is not completely recessive in its effects on weight. 3. There was no significant difference in weight among queens of the three Pgm-3 genotypes in the monogynous form, with the mean weight of monogynous queens slightly greater than that of polygynous Pgm-3(a/a) queens. Differences in weight between queens of the two social forms and among queens of the three genotypes in the polygynous form are not evident at the pupal stage and thus appear to develop during sexual maturation of the adults. This suggests that some component of the social environment of polygynous colonies inhibits weight gains during queen maturation and that Pgm-(3a/a) queens are relatively less sensitive to this factor. 4. To test whether the high cumulative queen pheromone level characteristic of polygynous colonies is the factor responsible for the differential queen maturation, we compared phenotypes of winged queens reared in split colonies in which pheromone levels were manipulated by adjusting queen number. Queens produced in colony fragments made monogynous were heavier than those produced in polygynous fragments, a finding consistent with the hypothesis that pheromone level affects the reproductive development of queens. However, genotype-specific differences in weights of queens were similar between the two treatments, suggesting that pheromone level was not the key factor of the social environment responsible for the gene-environment interaction. 5. To test whether limited food availability to winged queens associated with the high brood/worker ratios in polygynous colonies is the factor responsible for this interaction, similar split-colony experiments were performed. Elevated brood/worker ratios decreased the weight of winged queens but there was no evidence that this treatment intensified differential weight gains among queens with different Pgm-3 genotypes. Manipulation of the amount of food provided to colonies had no effect on queen weight. 6. The combined data indicate that cumulative pheromone level and brood/worker ratio are two of the factors responsible for the differences in reproductive phenotypes between monogynous and polygynous winged queens but that these factors are not directly responsible for inducing the phenotypic effects of Pgm-3 in polygynous colonies.