Towards a Unity of the Human Behavioral Sciences / Growth Is Good for the Poor

Towards a Unity of the Human Behavioral Sciences

"For example, consider the discount rate—the rate at which individuals are willing to sacrifice present for future gains. In economics, “rationality” in the form of consistency of preferences across time implies that individuals use exponential discounting, in which the discount rate is constant across all periods. Assuming this consistency, the discount rate can be estimated empirically at about 3% per year (Huang and Litzenberger 1988, Rogers 1994). Animal studies find that non-human species have discount rates that are several orders of magnitude higher than this (Stephens, McLinn and Stevens 2002). Humans and other animals exhibit hyperbolic discounting, according to which discount rates for present versus near-future are much are much higher than discount rates for similar time periods starting in the more distant future (Herrnstein 1961, Ainslie 1975, Ainslie and Haslam 1992, Laibson 1997). This finding corresponds to the everyday notion that we are subject to “temptation” and “failure of will,” leading us to accept high long term penalties for small short-term pleasures (smoking, overeating, procrastinating). Formally, this means that preferences are not transitive across time, and most observers of this phenomenon (including the agents who are subject to this inconsistency) agree that the ‘distant future’ discount rates more closely conform to the agent’s welfare. Consonant with these findings, sociological theory stresses that impulse control—learning to favor long-term over short-term gains—is a major component in the socialization of youth (Strotz 1955, Ainslie 1975, Power and Chapieski 1986, Grusec and Kuczynski 1997). Time inconsistency does not imply that the rational actor model be rejected, but we must include parameters to deal analytically with preferences across time (Laibson 1997)...

To expand the diversity of cultural and economic circumstances of experimental subjects, Joseph Henrich, Samuel Bowles, Robert Boyd, Colin Camerer, Ernst Fehr, Herbert Gintis, and Richard McElreath (2001) undertook a large cross-cultural study of behavior in various games including the ultimatum game. Twelve experienced field researchers, working in twelve countries on four continents, recruited subjects from fifteen small-scale societies exhibiting a wide variety of economic and cultural conditions. These societies consisted of three foraging groups (the Hadza of East Africa, the Au and Gnau of Papua New Guinea, and the Lamalera of Indonesia), six slash-and-burn horticulturists (the Aché, Machiguenga, Quichua, and Achuar of South America, and the Tsimané and Orma of East Africa), four nomadic herding groups (the Turguud, Mongols, and Kazakhs of Central Asia, and the Sangu of East Africa) and two sedentary, small-scale agricultural societies (the Mapuche of South America and Zimbabwe farmers in Africa)... The canonical model of self-interested behavior is not supported in any society studied. In the ultimatum game, for example, in all societies either respondents, or proposers, or both, behaved in a reciprocal manner...

Since fining costs the individual who uses it, but the benefits of increased compliance accrue to the group as a whole, the only Nash equilibrium in this game that does not depend on incredible threats is for no player to pay the fee, so no player is ever punished for defecting, and all players defect by contributing nothing to the common pool. However the authors found a significant level of punishing behavior...

The sociologist’s notion of internalization of norms is generally rejected by the other behavioral disciplines because the ease with which diverse values can be internalized depends on human nature (Cosmides and Tooby 1992, Pinker 2002), and the rate at which values are acquired and abandoned depends on their contribution to fitness and well-being (Gintis 2003b, Gintis 2003a). Finally, there are often swift society-wide value changes that cannot be accounted for by socialization theory (Wrong 1961, Gintis 1975). When properly qualified, however, and appropriately related to the general theory of cultural evolution and strategic learning, the socialization theory is considerably strengthened."

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Growth Is Good for the Poor (2000 version)

"Income of the poor rises one-for-one with overall growth. This general relationship between income of the bottom fifth of the population and per capita GDP holds in a sample of 80 countries covering four decades. Although there is a fair amount of variation around this general relationship, a number of popular views about the poverty-growth relationship are not true. The effect of growth on income of the poor is no different in poor countries than in rich ones. Incomes of the poor do not fall more than proportionately during economic crises. The poverty-growth relationship has not changed in recent years. We also show that policy-induced growth is as good for the poor as it is for the overall economy. Openness to foreign trade benefits the poor to the same extent that it benefits the whole economy. Good rule of law and fiscal discipline are other factors that benefit the poor to the same extent as the whole economy. Avoidance of high inflation in fact is “super-pro-poor”: that is, high inflation is more harmful to the income of the poor than to GDP overall. In contrast we find no evidence that formal democratic institutions or public spending on health and education have systematic effects on incomes of the poor."