Monetary Outcomes Research Articles

Does the Allais paradox survive with non-monetary consequences?

The form of the Allais paradox known as the common ratio effect (CRE) is a violation of deterministic expected utility theory that has been widely replicated with monetary outcomes. Its robustness has stimulated the development of numerous alternative models of risky choice. However, much less is known about the prevalence of the CRE in decisions involving non-monetary outcomes. We conduct a controlled laboratory comparison of the CRE for money versus consumer goods. The CRE is very strong with money, but largely disappears for goods, primarily as a result of differences in risk attitudes between goods and money. We caution against assuming that findings from experiments involving monetary lotteries will reliably generalise to other types of consequences.

Labor market policies in high- and low-interest rate environments: Evidence from the euro area

Do labor market policies initiated in periods of loose monetary policy yield different outcomes from those introduced when monetary tightening prevails? Using data from 11 euro-area members up to 2010–and extending to 17 countries up to 2020–we analyze three labor market policies: replacement rates, spending on active labor market policies (ALMPs), and employment protection. We find that these policies deliver different macroeconomic outcomes in low- and high-interest rate environments. In particular, ALMPs reduce unemployment if implemented under a loose monetary policy but not otherwise, whereas higher employment protection delivers expansionary effects under a tight monetary policy. These findings highlight that the effectiveness of labor market policies is significantly influenced by the monetary policy environment, emphasizing the need for coordinated policy design. Methodologically, we contribute by proposing to average local projections using Mallow’s Cp criterion, allowing for inferences that are robust to mis-specification and accommodate non-linearities.

Belief elicitation under competing motivations: Does it matter how you ask?

Beliefs, alongside preferences, are an important driver of behaviour. While preferences are often inferred by the choices made, measuring beliefs is not straightforward. We design a giving experiment to compare different methods of measuring beliefs, with and without monetary incentives. Consistent with a simple theoretical framework, we find that elicited beliefs about the giving decisions of others are biased and self-serving when no incentive is offered, with non-donors reporting that giving is rare. Offering a simple incentive does not reduce the bias in beliefs; however, this bias is not observed when using an incentivised method which makes the monetary outcome associated with accurately predicting beliefs more prominent. Our findings suggest that when self-interested motivations compete with accuracy incentives, beliefs are sensitive to how they are measured.

Internal and External Factors on Profitability of Islamic Banks in Indonesia Mediated by Operating Expenses Operating Income (Period 2013 to 2023)

Lucrativeness is a vital element for evaluating Islamic banks' monetary achievement. It's critical to grasp the determinants that influence Indonesian Islamic banks' lucrativeness. The objective of this examination is to explore the factors—such as problematic financing, financing to store ratio, currency rates, price rises, and operational proceeds as an intermediary variable—that impact the productivity of Islamic banks in Indonesia. This research intends to provide choice makers in the Islamic fiscal industry a more comprehensive discernment of the budgetary operation of Islamic banks by scrutinizing these guidelines. This research methodology uses a panel data approach using secondary data from Islamic banks in Indonesia. Through panel data analysis, this study examines the effect of these variables on the profitability of Islamic banks. The conclusions showed that, in Sub-structural I, Financing to Deposit Proportion (FDR) favorably affects the productivity (ROA) of Indonesian Islamic banks, while Non-Performing Financing (NPF), Currency Ratios, and Rising Prices have no consequence on operational expenses operational proceeds (BOPO). As indicated by sub-structural II, profitability is impacted by inside factors (NPF and BOPO), outer variables (expansion and cash rates) have no significant effect on productivity, and financing to store proportion (FDR) has no impact on productivity. In this examination, the BOPO fills in as a mediating variable that just intercedes the effect of the Financing to Deposit Ratio on Lucrativeness. Concerning the other autonomous factors, it has no bearing. Other than featuring the significance of hazard relief and operational effectiveness in accomplishing positive monetary outcomes, this exploration illuminates the variables influencing the productivity of Islamic banks in Indonesia.

Reference-dependent discounting

Reference-dependence has become a widely established phenomenon in decision making under risk, not only for monetary outcomes but also for other outcomes, e.g., related to health. However, when the prospects involve risk about timing (the time of receipt of outcomes), rather than the outcomes themselves, much less is known about reference-dependence. This study extends discounted utility to incorporate reference-dependence and is the first to test it in timing prospects. We are also the first to estimate the probability weighting function for timing prospects. For both timing and outcome risk tasks, we replicate the typical fourfold pattern of risk attitudes: risk seeking for low-probability gains, risk aversion for high-probability gains, risk aversion for low-probability losses and risk seeking for high-probability losses. In other words, we find substantial pessimism with regard to high probabilities in the gain domain and low probabilities in the loss domain, and probabilistic optimism for low probabilities in the gain domain and high probabilities in the loss domain. Furthermore, we report loss aversion for outcome risks, while for timing risks, we find the opposite result, which we term earliness seeking. In sum, we find substantial empirical support for reference-dependent discounting. Our results show that psychological biases are also important when timing is risky, although the direction of bias may differ.

Michael Scriven and “The Missing Half of Quantitative Evaluation”

Although Michael Scriven is one of the most recognized parents of program evaluation in general, it may be surprising to learn that he also was a founder of cost-inclusive evaluation (CIE) in particular. CIE incorporates into evaluations information on the amounts, types, and monetary values of resources used by programs to achieve outcomes, and, increasingly, the monetary value of those outcomes (Herman et al., 2009; Persaud & Yates, 2023; Yates, 1996). Michael Scriven blazed a trail toward routine use of cost, cost-effectiveness, and cost-benefit analyses by emphasizing that evaluations should measure costs as well as nonmonetary and monetary outcomes, and should compare costs and outcomes for alternative programs in cost-effectiveness and cost-benefit analyses. Scriven also was emphatic that CIE be recognized as a core evaluator competency. Noting that “cost analysis” in evaluation was “the missing half of quantitative evaluation” (Scriven, 2008a, p. iii), he did not immediately succeed in convincing most evaluators that program costs, and monetary program outcomes, were essential to assess. However, his publications, his supervision, and his encouragement of junior colleagues legitimized and recognized CIE as nothing else could.

Cryptocurrency: Still a Cause for Concern

The article presents an original critique of cryptocurrencies, contesting claims made by the originators and many supporters of cryptocurrencies that they are future and that future is liberating, and contesting arguments made by opponents which downplay cryptocurrencies’ significance. While unlikely to simply replace the existing money of leading states, cryptocurrencies are likely to become enduringly important within complex monetary hierarchies, further removing money from critical scrutiny and democratic control. Following a brief summary of the claims of libertarian supporters, the article considers critics’ arguments and warns of too easy a dismissal of the social threat posed by cryptocurrency. Monetary outcomes are ultimately determined by social power not by the requirements of an abstract economic rationality. The shortcomings of monetary forms need not preclude their extension. Powerful backers resource cryptocurrencies and blockchain technologies and it is likely that applications will continue to grow within complex, hierarchical and ever-changing monetary systems.

Now or Later? Examining Social and Financial Decision-Making in Middle-to-Older Aged Adults.

Contextually driven decision-making is multidimensional, as individuals need to contend with prioritizing both competing and complementary demands. However, data is limited as to whether temporal discounting rates vary as a function of framing (gains vs. loss) and domain (monetary vs. social) in middle-to-older aged adults. It is also unclear whether socioaffective characteristics like social isolation and loneliness are associated with temporal discounting. Temporal discounting rates were examined across monetary gain, monetary loss, social gain, and social loss conditions in 140 adults aged 50-90 during the Omicron stage of the pandemic. Self-report measures assessed loneliness and social isolation levels. Results found evidence of steeper temporal discounting rates for gains as compared to losses in both domains. Social outcomes were also more steeply discounted than monetary outcomes, without evidence of an interaction with the framing condition. Socioeconomic and socioaffective factors were unexpectedly not associated with temporal discounting rates. Community-dwelling middle-to-older aged adults showed a preference for immediate rewards and devalued social outcomes more than monetary outcomes. These findings have implications for tailoring social and financial incentive programs for middle to later adulthood.

Dynamic livelihoods, gender and poverty in marine protected areas: Case study from Zanzibar, Tanzania

Livelihood initiatives are common within marine protected areas (MPAs) aiming for poverty alleviation or higher income opportunities. However, results can be mixed in reality, as well as change over time. Furthermore, who benefits is a key consideration, as results can vary based on inequalities, including gender. Here, the monetary outcomes of different livelihood strategies were investigated across three MPA regions in Zanzibar, Tanzania. Using a quantitative approach, the results show that livelihoods have shifted in a six-year period, with livelihood strategies differing in poverty incidence and income. Livelihood initiatives, namely seaweed farming and tourism, did not provide significantly higher monetary returns compared to long-standing livelihoods, such as fisheries. Seaweed farming showed income stability but a high poverty incidence predominantly within women-headed households. During the study period, men primarily remained in fisheries, whilst women shifted to small-scale businesses and fisheries, largely exiting seaweed farming. This underscores a need for adaptive, gender sensitive management within fast changing coastal contexts.

An Analysis of Medical Malpractice Litigation Involving Orbital Fractures.

Orbital fractures frequently require operative management by a plastic and reconstructive surgeon. Due to the proximity to the globe and complexity of the reconstruction, orbital fractures, and related procedures have the potential to be a source of medical litigation. The aim of the present study was to review orbital fracture malpractice litigation, including case outcomes and compensatory damages. The Westlaw and Lexis Nexis databases were queried for jury verdicts and settlements related to orbital fracture malpractice lawsuits. The Boolean terms included "orbit! /10 fracture," "orbit! & fracture," and "ocular & fracture" for both databases. Cases were included if they were state or federal cases related to both orbital fracture and medical malpractice involving surgical or medical mismanagement or misdiagnosis of orbital fracture. A total of 49 cases from 1994 to 2018 met inclusion criteria between the databases. The most common legal complaint was the defendant's failure to make a diagnosis either by not ordering the proper radiological tests or by not interpreting radiological tests correctly, seen in 35% of cases. In 57% of the cases, the defendant was a surgeon, 46% of which involved a plastic surgeon specifically. Cases were resolved in favor of the defendant 49% of the time. Most cases (57%) resulted in a monetary outcome of $0. However, cases that were decided in favor of the plaintiff had significant compensatory damages with the majority being over $100,000, and 1 case as high as $8 million. Although almost half of the orbital fracture malpractice cases resulted in an outcome favoring the defendant, significant monetary consequences against the defendant were possible in cases when the plaintiff prevailed.

Monetization of Ecosystem Services from Nature-Based Solutions for Agricultural Diffuse Pollution Control: Simplified Value Transfer Method at European Scale

When nature-based solutions (NBS) are developed with a primary scope, they also provide simultaneous additional economic, social, and environmental benefits, i.e., Ecosystem Services. A monetary assessment that accounts for these additional benefits is provided by this work, with a focus on Europe. Specifically, this is intended to evaluate nine identified benefits of those wetlands and buffer strips designed to primarily address agricultural diffuse pollution, which must surely be listed among the negative externalities of economic activities that NBS can help resolve. The aim of developing a simplified value transfer methodology for a rapid evaluation of NBS benefits with the adjusted unit Value Transfer method is to create an accessible solution when time, funding, or other constraints prevent the use of highly technical primary monetization approaches. The developed exercise allows us to gather insights from several primary valuation studies and to appropriately transfer the monetary valuation outcomes to new policy sites. In order to reduce the distance from the expected and required concrete achievements of the economic valuations, the study has been integrated with an case study located in the Venice lagoon catchment in Northwestern Italy. The results obtained are to be considered sound, with existing evidence showing that the most valuable benefits of the considered NBS are both water quality and recreation and tourism, to which is added, in the case of wetlands, water supply.

Evaluating the Influence of Musical and Monetary Rewards on Decision Making through Computational Modelling.

A central question in behavioural neuroscience is how different rewards modulate learning. While the role of monetary rewards is well-studied in decision-making research, the influence of abstract rewards like music remains poorly understood. This study investigated the dissociable effects of these two reward types on decision making. Forty participants completed two decision-making tasks, each characterised by probabilistic associations between stimuli and rewards, with probabilities changing over time to reflect environmental volatility. In each task, choices were reinforced either by monetary outcomes (win/lose) or by the endings of musical melodies (consonant/dissonant). We applied the Hierarchical Gaussian Filter, a validated hierarchical Bayesian framework, to model learning under these two conditions. Bayesian statistics provided evidence for similar learning patterns across both reward types, suggesting individuals' similar adaptability. However, within the musical task, individual preferences for consonance over dissonance explained some aspects of learning. Specifically, correlation analyses indicated that participants more tolerant of dissonance behaved more stochastically in their belief-to-response mappings and were less likely to choose the response associated with the current prediction for a consonant ending, driven by higher volatility estimates. By contrast, participants averse to dissonance showed increased tonic volatility, leading to larger updates in reward tendency beliefs.

Processing abnormalities in monetary outcome evaluations among male individuals with opioid use disorder: evidence from feedback-related negativity

ABSTRACT Background: Numerous studies have highlighted the pivotal role of alterations in the monetary reward system in the development and maintenance of substance use disorder (SUD). Although these alterations have been well documented in various forms of SUD, the electrophysiological mechanisms specific to opioid use disorder (OUD) remain underexplored. Understanding these mechanisms is critical for developing targeted interventions and advancing theories of addiction specific to opioid use. Objectives: To explore abnormalities in monetary reward outcome processing in males with OUD. We hypothesized that control individuals would show higher feedback-related negativity (FRN) to losses, unlike those in the OUD group, where FRN to losses and gains would not differ significantly. Methods: Fifty-seven participants (29 male individuals with OUD [heroin] and 28 male controls) were evaluated. A combination of the monetary incentive delay task (MIDT) and event-related potential (ERP) technology was used to investigate electrophysiological differences in monetary reward feedback processing between the OUD and healthy control groups. Results: We observed a significant interaction between group (control vs. OUD) and monetary outcome (loss vs. gain), indicated by p < .05 and η2 p = 0.116. Specifically, control participants showed stronger negative FRN to losses than gains (p < .05), unlike the OUD group (p > .05). Conclusion: This study’s FRN data indicate that males with OUD show altered processing of monetary rewards, marked by reduced sensitivity to loss. These findings offer electrophysiological insights into why males with OUD may pursue drugs despite potential economic downsides.

Expectations for the MPC chair and interest rate persistence

This paper examines how the public’s expectations for the chair of the monetary policy committee influence policy outcomes. We show that the expectation that the chair will propose their ideal policy at the meeting can lead a majority of the committee to reject the policy change. The result suggests that the expectation of the chair’s agenda setting is a determinant of interest rate persistence.

Inequity in Washington state covid-19-related crowdfunding

The first seven months of the US COVID-19 pandemic saw a massive increase in COVID-19-related crowdfunding campaigns. Despite their popularity, these campaigns were rarely successful in reaching their monetary goals, with nearly 40% of them not receiving a single donation. Previous research has indicated that crowdfunding has increased inequities and disparities in wealth, and this study set out to examine the situation in Washington State, an area greatly divided socio-economically, culturally, and geographically. Using GIS-based Multi-Criteria Evaluation (MCE) models with Quantile classification, we created geospatial representations of composite independent variables representing the impacts of COVID-19 and social marginalization on Washington state counties. We then examined the relationships between these variables with the dependent variables, campaign prevalence and outcome (campaign median amount raised), and assessed for relationships through ANOVA tests. These representations allowed us to assess the possibility that both COVID-19 impact and social marginalization may be amplifying already present inequities in Washington state by influencing crowdfunding monetary outcomes and prevalence. Our research indicates that county-wide social marginalization is associated with COVID-19-related crowdfunding campaign prevalence, generally pointing towards counties with lower social marginalization producing more campaigns. We also found that COVID-19 impact is, surprisingly, not associated with campaign prevalence, and that there was no relationship between campaign outcome and marginalization or COVID-19 impact. These findings indicate that inequitable access to, and use of, technologies like crowdfunding may be further contributing to COVID-19 inequities within Washington state. Policy-makers should be advised to use crowdfunding information with extreme caution when considering it as a useful tool in assessing community needs within counties and allocating resources, because those with the highest need likely are not being represented in this data due to lack of access.

MEDICAL VERSUS FINANCIAL RISKY DECISION MAKING IN OLDER AND YOUNGER ADULTS

Abstract While risky decision making is often tested using monetary outcomes in the laboratory, many decisions in the real-world elicit considerable levels of affect––for example, when deciding about a medical treatment that has bodily consequences, such as side effects to a medication. Previous research suggests that choices systematically diverge between these more “affect-rich” medical decision problems and economically equivalent “affect-poor” monetary problems, leading to what is called an ‘affect gap’ in risky choice. However, it is unknown to what extent this pattern holds in older adults, who make some of the most consequential medical and financial decisions among the population, and for whom it has been hypothesized that affect may be a more important guide. Thus, in the present, preregistered study, we examined age-related differences in the affect gap of risky decision making. We compared decision quality and risk attitude between affect-rich (medical side effects) and structurally identical affect-poor (monetary losses) decisions in 100 older (aged 65-80, M=69.7) and 100 younger (aged 18-29, M=23.5) adults. In line with previous findings, we found that individuals were more risk-averse (Odds Ratio (OR) = 1.52) and made worse quality decisions (OR = 2.13) for affect-rich, compared to affect-poor, problems and this did not differ between younger and older adults. Follow-up work using computational modeling will reveal if decision strategy differed between age groups. These findings indicate that the affect gap is also present in older adults, which has serious implications for risk communication in medical decision making

AGING AND DECISION MAKING: THE ROLES OF AFFECTIVE AND SOCIAL CONTEXT

Abstract Age differences in many facets of decision making are well-established. However, a growing literature suggests that the occurrence and strength of these age effects are moderated by contextual factors. The individual talks in this symposium exemplify how age differences in decision making vary by domain, affective intensity, and social distance. First, Nolte and Löckenhoff demonstrate age-related increments in the avoidance of health-based and consumer choices, finding that perceived difficulty, but not affective responses to choice, increase avoidance. Frank and Pachur highlight that affective responses to choice differ across contexts: Younger and older adults exhibit “affect gaps” by making less beneficial, more risk-averse choices in “affect-rich” (health-based) versus “affect-poor” (consumer) contexts. Contrasting monetary and temporal outcomes, Strough, Bruine de Bruin, and Parker illustrate that the tendency to continue failing investments is more pronounced after investing money than time. Moreover, older adults’ decreased susceptibility to this “sunk cost bias” is more evident when making choices about their own investments versus others’ investments. Lu and Löckenhoff report age differences in how decision makers discount other’s financial well-being as social distance increases: Older adults’ willingness to share money with others declines more with increasing social distance than is the case for younger adults. Finally, Wild and Löckenhoff demonstrate that across domains, older versus younger decision makers are less willing to consult with distant social partners or experts and consult fewer people fewer times. To identify directions for future research, Seaman will contextualize the five presentations against the extant aging and decision-making literature.

From unemployment to self-employment: what does it mean for an individual's satisfaction and economic self-sufficiency?

PurposeThis research extends the knowledge on the less-frequently explored outcomes of entrepreneurial endeavour. The study provides unique insights into the overall satisfaction of entrepreneurs with their life, job and financial situation, as well as perceived economic self-sufficiency and income. The obtained findings represent a specific group of Czech self-employed individuals who started their businesses while unemployed, with the help of public financial assistance.Design/methodology/approachThe presented contribution is based on a primary survey among those individuals (N = 128), conducted in 2022 and triangulated by insights from informal interviews with the respondents and earlier empirical evidence.FindingsThe main findings document that most of the surveyed entrepreneurs are overall satisfied with their lives and jobs, their incomes are above the minimum wage and, despite the challenges faced, they mainly benefit from autonomy associated with this career choice. The multivariate ordered logistic regression results highlight the significance of several previously identified variables, such as gender, health status, formal education, entrepreneurial self-efficacy and family situation, that influence the studied outcomes and provide opportunities and challenges for ongoing research.Originality/valueThe conducted study acknowledges the need to consider the whole picture of entrepreneurship success. Therefore, it provided insights into the monetary and non-monetary outcomes of the specific type of entrepreneurship.

Impact of global liquidity on Indian financial markets and monetary policy outcomes: An ARDL approach

Liquidity management is essential for the financial framework of any economy, especially for operationalizing monetary policy. The relatively resilient Indian financial system experiences the transmission of global liquidity shocks, which results in a reversal of portfolio flows from domestic markets resulting in central bank interventions. This paper examines the impact of global liquidity shocks on key financial and monetary variables of the Indian economy using quarterly data for the period 2000–2018 using an autoregressive distributed lags framework. We find the presence of long-run relationships between global liquidity variables (such as the US treasury bill rate, CBOE-VIX index, and US broad monetary aggregate) and the Indian financial markets (NSE Nifty index) and the monetary policy outcome (91-day Treasury bill rate). In the short run, the results were significant for the impact of the risk aversion measure on domestic policy rate in line with the expectations channel. The exchange rate channel and global money supply also significantly impacted the Indian policy rate. The results have significant policy implications as they indicate the most optimal transmission channels through which global liquidity affects the Indian economy.

Sex differences in the rapid detection of neutral faces associated with emotional value

BackgroundRapid detection of faces with emotional meaning is essential for understanding the emotions of others, possibly promoting successful interpersonal relationships. Although few studies have examined sex differences in the ability to detect emotional faces, it remains unclear whether faces with emotional meaning capture the attention of females and males differently, because emotional faces have visual saliency that modulates visual attention. To overcome this issue, we tested the rapid detection of the neutral faces associated with and without learned emotional value, which are all regarded as free from visual saliency. We examined sex differences in the rapid detection of the neutral female and male faces associated with emotional value.MethodsFirst, young adult female and male participants completed an associative learning task in which neutral faces were associated with either monetary rewards, monetary punishments, or no monetary outcomes, such that the neutral faces acquired positive, negative, and no emotional value, respectively. Then, they engaged in a visual search task in which previously learned neutral faces were presented as discrepant faces among newly presented neutral distractor faces. During the visual search task, the participants were required to rapidly identify discrepant faces.ResultsFemale and male participants exhibited comparable learning abilities. The visual search results demonstrated that female participants achieved rapid detection of neutral faces associated with emotional value irrespective of the sex of the faces presented, whereas male participants showed this ability only for male faces.ConclusionsOur results demonstrated that sex differences in the ability to rapidly detect neutral faces with emotional value were modulated by the sex of those faces. The results suggest greater sensitivity to faces with emotional significance in females, which might enrich interpersonal communication, regardless of sex.