Abstract
Evolutionary models broadly support a number of social learning strategies likely important in economic behavior. Using a simple model of price dynamics, I show how prestige bias, or copying of famed (and likely successful) individuals, influences price equilibria and investor disposition in a way that exacerbates or creates market bubbles. I discuss how integrating the social learning and demographic forces important in cultural evolution with economic models provides a fruitful line of inquiry into real-world behavior.
Highlights
Cultural variation is widespread and important to economies [1]
Interactions across linguistic or ethnic groups influence fairness preferences [5], labor wage differentials, high communication costs may lead to bargaining breakdowns [6,7], and diverse ethnic groups may undermine political bargaining leading to gridlock [8]
Since much of the theory is about the evolution of learning, it offers a simultaneous appeal to the ultimate origins of behavior as well as the proximate mechanisms behind behavioral change as actors adopt behaviors from others
Summary
Cultural variation is widespread and important to economies [1]. Cultural-prescribed behavioral diversity in domains such as commons institutions [2], languages [3], and the formation of ethnic groups [4] provide challenges and opportunities to economic development and governance. After briefly reviewing the theoretical and empirical evidence for social learning biases, I show how actors engaging in a prestige bias, in particular, alter price equilibria using a stylized model of price dynamics. Evolutionary models suggest prestige biased learning as a broadly adaptive learning strategy as it provides a quick way for a naive learner to obtain optimal behaviors in the current environment (see [27] for a review of the theory and evidence).
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