Context-independent Preferences Research Articles

The contribution of plant spatial arrangement to bumble bee flower constancy.

Floral constancy of foraging bees influences plant reproduction. Constancy as observed in nature arises from at least four distinct mechanisms frequently confounded in the literature: context-independent preferences for particular plant species, preferential visitation to the same species as the previous plant visited (simple constancy), the spatial arrangement of plants, and the relative abundances of co-flowering species. To disentangle these mechanisms, we followed individual bee flight paths within patches where all flowering plants were mapped, and we used step selection models to estimate how each mechanism influences the probability of selecting any particular plant given the available plants in a multi-species community. We found that simple constancy was positive: bees preferred to visit the same species sequentially. In addition, bees preferred to travel short distances and maintain their direction of travel between plants. After accounting for distance, we found no significant effect of site-level plant relative abundances on bee foraging choices. To explore the importance of the spatial arrangement of plants for bee foraging choices, we compared our full model containing all parameters to one with spatial arrangement removed. Due to bees' tendency to select nearby plants, combined with strong intraspecific plant clumping, spatial arrangement was responsible for about 50% of the total observed constancy. Our results suggest that floral constancy may be overestimated in studies that do not account for the spatial arrangement of plants, especially in systems with intraspecific plant clumping. Plant spatial patterns at within-site scales are important for pollinator foraging behavior and pollination success.

On the possibility of an anti-paternalist behavioural welfare economics

ABSTRACT Behavioural economics has taught us that human agents don't always display consistent, context-independent and stable preferences in their choice behaviour. Can we nevertheless do welfare economics in a way that lives up to the anti-paternalist ideal most economists subscribe to? I here discuss Sugden's powerful critique of most previous attempts at doing so, which he dubs the ‘New Consensus’, as appealing to problematic notions of latent preference and inner rational agency. I elaborate on a fundamental rethinking of the normative foundations of anti-paternalist welfare measurement that often remains implicit in the behavioural welfare economics literature Sugden discusses, but which is required to make these accounts minimally plausible. I argue that, if we go along with this rethinking, Bernheim and Rangel's [(2007). Toward choice-theoretic foundations for behavioural welfare economics. American Economic Review, Papers and Proceedings, 97, 464–470. https://doi.org/10.1257/aer.97.2.464; (2009). Beyond revealed preference: Choice-theoretic foundations for behavioural welfare economics. Quarterly Journal of Economics, 124(1), 51–104. https://doi.org/10.1162/qjec.2009.124.1.51] choice-theoretic framework withstands Sugden's criticism. Sugden's own, more radical proposal is thus under-motivated by his critique of the ‘New Consensus’.

Dynamic preferences and the behavioral case against sin taxes

Traditionally, economists and tax theorists justify taxation by means of externalities. In recent years, both scholars and policymakers have begun advocating ‘sin taxes’ on goods whose consumption causes ‘internalities’: unaccounted-for costs that a person imposes on herself, not on others. In this paper, we argue that sin taxes rest on a static model of individual choice. They retain neoclassical rationality—with its endorsement of stable and context-independent preferences—as a normative benchmark for good, i.e., welfare-increasing choice. We contrast this model with a more dynamic understanding of choice in which preferences are context-dependent, evolving, and open to individual processes of experimentation. Such a dynamic understanding of choice is backed by recent findings in psychology and behavioral economics and is integral to the political economy of John Stuart Mill. Contributing to the most recent literature in behavioral welfare economics, we argue that the reality of dynamic and evolving preferences animates a contractarian perspective on public policy which, in turn, provides strong arguments against the sin-tax agenda and supports preference-neutral tax rules.

Dynamic Preferences and the Case Against Sin Taxes

Traditionally, economists and tax theorists justify taxation by means of externalities. In recent years, both scholars and policymakers have begun advocating ‘sin taxes’ on goods whose consumption causes ‘internalities’: unaccounted-for costs that a person imposes on herself, not on others. In this paper, we argue that sin taxes rest on a static model of individual choice. They retain neoclassical rationality — with its endorsement of stable and context-independent preferences — as a normative benchmark for good, i.e., welfare-increasing choice. We contrast this model with a more dynamic understanding of choice in which preferences are context-dependent, evolving, and open to individual processes of experimentation. Such a dynamic understanding of choice is backed by recent findings in psychology and behavioral economics and is integral to the political economy of John Stuart Mill. Contributing to the most recent literature in behavioral welfare economics, we argue that the reality of dynamic and evolving preferences animates a contractarian perspective on public policy which, in turn, provides strong arguments against the sin-tax agenda and supports preference-neutral tax rules.

Old Chicago Against Static Welfare Economics

Although behavioral economics has criticized the empirical accuracy of the neoclassical rationality assumption, it supports the normative view that welfare-increasing choice presupposes stable and context-independent preferences. We argue that this position neglects important features of decisionmaking that were essential to the thinking of Frank H. Knight and James M. Buchanan (“Old Chicago” Economics). Knight and Buchanan embrace the idea that well-integrated preferences are an intellectual construct that cannot be the normative basis for welfare assessments. They argue that the only trait that is stable in real time and across individuals is their urge to have some vaguely-defined better preferences. In other words, exploring, learning, being contradictory, and ambivalence are all part of the process both prior to and after a temporary maximization. We illustrate their view, present some empirical evidence and discuss the normative implications especially for the character of a liberal social order such as Richard Epstein has advocated.

Preference purification and the inner rational agent: a critique of the conventional wisdom of behavioural welfare economics

Neoclassical economics assumes that individuals have stable and context-independent preferences, and uses preference satisfaction as a normative criterion. By calling this assumption into question, behavioural findings cause fundamental problems for normative economics. A common response to these problems is to treat deviations from conventional rational choice theory as mistakes, and to try to reconstruct the preferences that individuals would have acted on, had they reasoned correctly. We argue that this preference purification approach implicitly uses a dualistic model of the human being, in which an inner rational agent is trapped in an outer psychological shell. This model is psychologically and philosophically problematic.

Reconciling normative and behavioural economics

The aim of this thesis is to address from a methodological, philosophical and theoretical perspective the problem of how to reconcile normative and behavioural economics — the “reconciliation problem”. The first part develops a methodological assessment of behavioural welfare economics (and more specifically of libertarian paternalism), which currently constitutes the most accepted approach to deal with the reconciliation problem. We argue that behavioural welfare economics is in the direct continuation of neoclassical welfare economics, and that its conception of individual behaviour is tightly connected to Pareto’s reductionist model of the Homo economicus. It is assumed that an individual can be defined by “true” preferences — distinct from her revealed preferences — and that those preferences are consistent and context-independent. The satisfaction of those true preferences is taken as the normative criterion. The existence of true preferences requires accepting that people have access to a latent mode of reasoning able to generate consistent and context-independent preferences, and to treat individual decision-making as if it was the result of an optimisation problem faced by an inner rational agent trapped in an outer psychological shell. We argue on the contrary that we cannot define unambiguously such true preferences. We then argue that the normative challenge raised by behavioural economics is that individuals may lack of autonomy: rather than focusing on the satisfaction of one’s preferences, we argue that what matters is the ability to choose one’s own preferences. Since we suggest that the difficulties of behavioural welfare economics are related to its commitment to an implausible model of individual preferences, we provide in the second part of the thesis a model of preferences compatible with our methodological analysis: we take Bacharach’s variable frame theory as the primitive of our analysis, and build a model of endogenous preferences, in which individuals can choose to some extent their own preferences. The main contributions of this model are that (i) it does not require the existence of latent true preferences, and (ii) the individuals are allowed to team reason. We assume that collective preferences are strategically chosen, and show that team reasoners tend to be aggressive (cooperative) with other teams in submodular (supermodular) games. We finally show that team reasoning can be empirically justified as an ecologically rational heuristic.

Alternative experimental design paradigms in choice experiments and their effects on consumer demand estimates for beef from endangered local cattle breeds: An empirical test

In this paper we empirically validate the hypothesis of context independent preferences in choice experiments under different experimental design approaches. Two alternative paradigms for constructing designs are analysed in this study under a simple Multinomial Logit (MNL) framework: optimal orthogonal in the differences (OOD) and D-efficient (EFD) designs. Once having taken into account potential differences in scale (inversely proportional to the variance of the random term in random utility models), preference estimates for beef attributes are found to be sensitive to the design generation process.

Embedding multiple heuristics into choice models: An exploratory analysis

Contrary to the usual assumption of fixed, well-defined and context independent preferences, individuals are likely to approach a choice task using rules and heuristics that are dependent on the choice environment. More specifically, heuristics that are defined by the local choice context, such as the gains or losses of an attribute value relative to the other attributes, seem to matter significantly. Recent empirical findings also demonstrate that previous choices made by respondents and previous choice tasks shown to respondents can affect the current choice outcome, indicating a form of inter-dependence across choice sets.This paper reviews some of the key findings about heuristics and decision rules across the psychology, marketing, transport and environmental disciplines. Using experimental data in the context of a proposed toll road, we find that for certain components of the time and cost attributes, allowing for non-linearity and for referencing to the least desired attribute level in the local choice set offers improvement over the standard linear-in-the-attributes and linear-in-the-parameters specification. Other heuristics, including the majority of confirming dimensions and reference point revision can also be embedded into the model. An alternative approach to identifying and weighting multiple heuristics in a utility function by means of a logit-type specification for the weights is then introduced. While acknowledging the need for more work in this area, we suggest that such an approach may be a useful way of testing what happens when multiple heuristics are “mixed” in the model.

Valuing Intellectual Property: An Experiment

In this article we report on the results of an experiment we performed to determine whether transactions in intellectual property (IP) are subject to the valuation anomalies commonly referred to as “endowment effects”. Traditional conceptions of the value of IP rely on assumptions about human rationality derived from classical economics. The law assumes that when people make decisions about buying, selling, and licensing IP they do so with fixed, context-independent preferences. Over the past several decades, this rational actor model of classical economics has come under attack by behavioral data showing that people do not always make strictly rational decisions. Perhaps the most important research in this field is that related to the “endowment effect” – the discovery that, contrary to economic predictions, people value the same object more when they own it than when they do not. To date, the endowment effect has been observed for a variety of goods including mugs, lottery tickets, and hunting permits. Our experiment establishes a substantial valuation asymmetry between authors of poems and potential purchasers of them. As we explain in detail in the article, we constructed a market for the poems that was modeled on a market for licensing IP. The observed differences in valuation indicate that IP licensing markets may be substantially less efficient that previously believed. Our results suggest that (1) the preferences of IP creators, owners, and purchasers are unstable and dependent on the initial distribution of property rights in creative works, and (2) large gaps arise between purchasers’ willingness to pay and sellers’ willingness to accept even though the poems are non-rival property and the contemplated alienation of the property is therefore only partial. Our findings suggest that private transactions in creative goods may face significant transaction costs arising from cognitive biases that drive the price that creators and owners of IP are likely to demand for transfers considerably higher than what buyers will, on average, be willing to pay. This does not mean, of course, that transactions in IP will not take place – we see such transactions happening out in the world every day. Our research suggests, however, that IP transactions may occur at a level that is significantly suboptimal, and that the baleful effect of cognitive and affective biases is likely to be more serious for transactions in works of relatively low commercial value, or for which no well-established custom or pattern helps to inform valuation. These results have considerable implications for the structuring of IP rights, IP formalities, IP licensing, and fair use.

Identification of Efficiently Cleaved Substrates for HIV-1 Protease Using a Phage Display Library and Use in Inhibitor Development

The recognition sequences for substrate cleavage by aspartic protease of HIV-1 are diverse and cleavage specificities are controlled by complex interactions between at least six amino acids around the cleavage site. We have identified 45 efficiently cleaved peptide substrates of HIV-1 protease (PR) using substrate phage display, an approach that can elucidate both context-dependent and context-independent preferences at individual subsites of a protease substrate. Many of the selected peptides were cleaved more efficiently and had lower Km values than physiologically relevant substrates of HIV-1 PR. Therefore, mutations occurring in the cleavage sites of the Gag and Gag-pol polyproteins of HIV-1 could significantly lower the Km values to better compete against drugs for protease binding while maintaining cleavage rates necessary for viral replication. The most efficiently cleaved peptide substrate derived from these phage, Ac-GSGIF*LETSL-NH2, was cleaved 60 times more efficiently and had a Km approximately 260 times lower than a nine-amino-acid peptide based on the natural reverse transcriptase/integrase cleavage site when assayed at pH 5.6, 0.2 M NaCl. The peptide substrates selected served as frameworks for synthesis of tight binding reduced amide inhibitors of HIV-1 PR. The results show that the most efficiently cleaved substrates serve as the best templates for synthesis of the tightest binding inhibitors. Thus, defining changes in substrate preferences for drug-resistant proteases may aid in the development of more efficacious inhibitors.