Welfare Tradeoff Research Articles

The Optimal Quantity of CBDC in a Bank-Based Economy

We show that the estimated effect of digital euro news on bank stock valuations and lending depends on the bank’s deposit reliance and the central bank digital currency (CBDC) design features. Using a quantitative DSGE model calibrated to the euro area economy that replicates such evidence, we find that CBDC issuance yields nontrivial welfare trade-offs between, on one side, the positive expansion of liquidity services and the improved stabilization of deposit funding and lending and, on the other side, a negative bank disintermediation effect. The optimal amount of CBDC lies between 15 and 45 percent of quarterly GDP. (JEL E23, E42, E58, F33, G14, G21)

Do Grateful People Protect Their Benefactors at the Expense of Other People? Implications From Loss‐Framed Welfare Tradeoff Ratios

Do Grateful People Protect Their Benefactors at the Expense of Other People? Implications From Loss‐Framed Welfare Tradeoff Ratios

A Macroeconomic Model of Central Bank Digital Currency

We develop a quantitative New Keynesian DSGE model to study the introduction of a central bank digital currency (CBDC): government-backed digital money available to retail consumers. At the heart of our model are monopolistic banks with market power in deposit and loan markets. When a CBDC is introduced, households benefit from an expansion of liquidity services and higher deposit rates as bank deposit market power is curtailed. However, deposits also flow out of the banking system and bank lending contracts. We assess this welfare trade-off for a wide range of economies that differ in their level of interest rates. We find substantial welfare gains from introducing a CBDC with an optimal interest rate that can be approximated by a simple rule of thumb: the maximum between 0% and the policy rate minus 1%.

The Politics of Non‐Existence

This article argues that the representation of future generations is likely to remain inadequate because of the lack of accountability mechanisms characteristic of representative relations among contemporaries. Two problems pertaining to the representation of future generations and their interests are distinguished, namely misrepresentation and negligence. Misrepresentation refers to ill-informed, biased, and purposive interpretations regarding the interests of future generations, whereas negligence involves future interests not being properly considered in policymaking. While these two problems are often intertwined, misrepresentation is a problem of epistemic and normative judgments, whereas negligence is a motivational problem. The interests of future generations are especially likely to be neglected in cases of so-called intergenerational conflict, that is, situations of welfare tradeoffs between present and future generations. Inclusive democratic deliberation is a remedy for misrepresentation, but its capacity to address negligence may be more limited. Finally, the article remarks on the role of future-regarding deliberation in representative democratic systems.

Disciplinary welfare and the punitive turn in criminal justice: Parallel trends or communicating vessels?

When it comes to the relationship between social policy and penal policy, existing scholarship often focuses on the penal–welfare tradeoff, according to which countries with large and generous welfare states tend to have lower incarceration rates and less harsh treatment of offenders. We know much less about the relationship between the punitive turn in criminal justice and the use of discipline within social policy. Has there been a parallel trend of law-and-order policies and stricter benefit conditionality, a kind of ‘criminalization’ of welfare beneficiaries, as critical scholarship suggests? We test this idea for the first time with quantitative data, using public spending on public order and safety and unemployment benefit conditionality data for 18 rich democracies between 1990 and 2012, that is, the period when a punitive turn as well as the rise of activation and workfare is said to have taken place. Contrary to the critical literature, we do not find evidence of parallel trends toward more discipline in both areas, but rather a negative relationship of ‘communicating vessels’, where a greater use of disciplinary tools in social policy is associated with stagnating or even shrinking spending on police and prisons. Moreover, this pattern tends to emerge under conditions of higher welfare state generosity. These findings have important implications about the role of state ‘discipline’ in contemporary policymaking.

Screening and the Welfare Trade-offs of Privacy

Screening and the Welfare Trade-offs of Privacy

Cognitive foundations for helping and harming others: Making welfare tradeoffs in industrialized and small-scale societies

For many abilities, such as vision or language, our conscious experience is one of simplicity: We open our eyes and the world appears; we open our mouths and grammatical sentences tumble out. Yet these abilities rely on immensely complex, unconscious computations. Is this also true of abilities related to cooperation or competition, like deciding whether to share food or spread gossip? We tested whether decisions like these are guided by precise psychological variables, called welfare tradeoff ratios. Welfare tradeoff ratios summarize information about multiple sources of social value (such as whether a specific other person is kin or is generous with the self) along with information about the situation (such as what's at stake or who else is watching). We evaluated these hypothesized variables in four societies: among college students in the USA and Argentina and among two groups of Amazonian forager-horticulturalists, the Shuar of Ecuador and the Tsimane of Bolivia (ns = 167, 131, 73, 23). In all societies people made a series of hypothetical decisions where they had to weigh help or harm for themselves versus others. We found strong evidence that people trade off their welfare for others with consistency—a signature of decisions being guided by precise variables in the mind. We also found evidence in three of the societies that people discriminate among different categories of others in their welfare tradeoffs (e.g., friends versus acquaintances). Although most decisions about helping or harming feel simple and intuitive, they appear to be underwritten by precise computations.

A neurocomputational variable on welfare tradeoffs explains the function and form of cyberaggression.

A neurocomputational variable on welfare tradeoffs explains the function and form of cyberaggression.

Rational inferences about social valuation

The decisions made by other people can contain information about the value they assign to our welfare—for example how much they are willing to sacrifice to make us better off. An emerging body of research suggests that we extract and use this information, responding more favorably to those who sacrifice more even if they provide us with less. The magnitude of their trade-offs governs our social responses to them—including partner choice, giving, and anger. This implies that people have well-designed cognitive mechanisms for estimating the weight someone else assigns to their welfare, even when the amounts at stake vary and the information is noisy or sparse. We tested this hypothesis in two studies (N=200; US samples) by asking participants to observe a partner make two trade-offs, and then predict the partner’s decisions in other trials. Their predictions were compared to those of a model that uses statistically optimal procedures, operationalized as a Bayesian ideal observer. As predicted, (i) the estimates people made from sparse evidence matched those of the ideal observer, and (ii) lower welfare trade-offs elicited more anger from participants, even when their total payoffs were held constant. These results support the view that people efficiently update their representations of how much others value them. They also provide the most direct test to date of a key assumption of the recalibrational theory of anger: that anger is triggered by cues of low valuation, not by the infliction of costs.

Social bias, not time bias

People seem to have pure time preferences about trade-offs concerning their own pleasures and pains, and such preferences contribute to estimates of people's individual time discount rate. Do pure time preferences also matter to interpersonal welfare trade-offs, including those concerning the welfare of future generations? Most importantly, should the intergenerational time discount rate include a pure time preference? Descriptivists claim that the intergenerational discount rate should reflect actual people's revealed preferences, and thus it should include a pure time preference. Prescriptivists claim that the intergenerational discount rate should be based on moral analysis, and thus they (often) claim that the rate of pure time preference should be zero. I argue that regardless of which view is correct, a focus on pure time preference is misplaced. First, the most plausible interpretation of descriptive preferences for intergenerational trade-offs is that people are socially biased and not time biased. Second, social bias is superior to time bias as a prescriptive reason to discount the welfare of future people. Third, recent advances in measuring social bias as a social discount rate make social bias a viable replacement for time bias in economic analyses of intergenerational welfare trade-offs.

The evolution of theory of mind on welfare tradeoff ratios

People seem to attribute beliefs and desires to another person when interacting with them. Such a “theory of mind” capacity is essential for complex and uniquely human behavior such as language, but its evolutionary origin remains elusive. Using the formal tools of evolutionary game theory, we asked what environmental properties are necessary to select for a basic form of theory of mind—the ability to infer the prosociality, quantified by the welfare tradeoff ratio, of another person toward oneself. We found that none of the environments studied in classical or evolutionary game theory give an advantage to this form of theory of mind capacities; theory of mind is advantageous only in a new class of environments with stable opponents and variable payoff structures. In two behavioral experiments ( n = 91) we verified that people can, and do use theory of mind in such an environment. These results suggest that some features of early humans’ social environment that were previously neglected in evolutionary game theory may be responsible for the evolution of people’s complex social capacities.

Baseline Behavioral Data and Behavioral Correlates of Disturbance for the Lake Oku Clawed Frog (Xenopus longipes)

Animal behavior and welfare science can form the basis of zoo animal management. However, even basic behavioral data are lacking for the majority of amphibian species, and species-specific research is required to inform management. Our goal was to develop the first ethogram for the critically endangered frog Xenopus longipes through observation of a captive population of 24 frogs. The ethogram was applied to produce a diurnal activity budget and to measure the behavioral impact of a routine health check where frogs were restrained. In the activity budget, frogs spent the vast majority of time swimming, resting in small amounts of time devoted to feeding, foraging, breathing, and (in males) amplexus. Using linear mixed models, we found no effect of time of day or sex on baseline behavior, other than for breathing, which had a greater duration in females. Linear mixed models indicated significant effects of the health check on duration of swimming, resting, foraging, feeding, and breathing behaviors for all frogs. This indicates a welfare trade-off associated with veterinary monitoring and highlights the importance of non-invasive monitoring where possible, as well as providing candidates for behavioral monitoring of acute stress. This investigation has provided the first behavioral data for this species which can be applied to future research regarding husbandry and management practices.

Triadic conflict "primitives" can be reduced to welfare trade-off ratios.

Pietraszewski proposes four triadic "primitives" for representing social groups. We argue that, despite surface differences, these triads can all be reduced to similar underlying welfare trade-off ratios, which are a better candidate for social group primitives. Welfare trade-off ratios also have limitations, however, and we suggest there are multiple computational strategies by which people recognize and reason about social groups.

The coronavirus pandemic: exploring expectant fathers’ experiences

ABSTRACT The Coronavirus pandemic raises significant concerns about pervasive social inequities and disparate gender relations, particularly between mothers/fathers. Indeed, the pandemic engendered a general retreat into traditional parenting roles across myriad, everyday, institutional, spaces, including workplaces, homes, and welfare/healthcare services. These effects have been especially marked for couples expecting a child. Visitor-restriction policies, implemented to curb viral-spread within healthcare settings, effectively ‘barred’ many expectant fathers in the UK (and elsewhere) from attending antenatal appointments, and even the birth of their child; milestone moments widely regarded as significant socio-cultural ‘rites-of-passage’ in fathers’ transition to parenthood. Many pregnant women had to face these moments alone, sparking campaigns including #ButNotMaternity. This paper critically examines how such institutional responses exhibit a complex ‘welfare trade-off’ effectively (re)positioning fathers as spectators, rather than participants, in pregnancy/parenthood and risk embodying a potential U-turn to recent decades’ emphasis on involved, equitable fatherhood. Drawing upon the accounts of expectant mothers/fathers in the UK reported in the popular press since March 2020 and the #ButNotMaternity campaign, it employs thematic social-media analysis to explore the emotional impacts of visitor-restrictions and the gendered, emotional governance of parenting amidst the pandemic through the exclusion of particular (fathers’) bodies within maternity care spaces.

Animal Harms and Food Production: Informing Ethical Choices.

Simple SummaryConsideration of animal welfare in food choices has become an influential contemporary theme. Traditional animal welfare views about food have been largely restricted to direct and intentional harms to livestock in intensive animal agriculture settings. However, many harms to animals arising from diverse food production practices in the world are exerted indirectly and unintentionally and often affect wildlife. Here we apply a qualitative analysis of food production by considering the breadth of harms caused by different food production systems to wild as well as domestic animals. Production systems are identified that produce relatively few and relatively many harms. The ethical implications of these findings are discussed for consumers concerned with the broad animal welfare impacts of their food choices.Ethical food choices have become an important societal theme in post-industrial countries. Many consumers are particularly interested in the animal welfare implications of the various foods they may choose to consume. However, concepts in animal welfare are rapidly evolving towards consideration of all animals (including wildlife) in contemporary approaches such as “One Welfare”. This approach requires recognition that negative impacts (harms) may be intentional and obvious (e.g., slaughter of livestock) but also include the under-appreciated indirect or unintentional harms that often impact wildlife (e.g., land clearing). This is especially true in the Anthropocene, where impacts on non-human life are almost ubiquitous across all human activities. We applied the “harms” model of animal welfare assessment to several common food production systems and provide a framework for assessing the breadth (not intensity) of harms imposed. We considered all harms caused to wild as well as domestic animals, both direct effects and indirect effects. We described 21 forms of harm and considered how they applied to 16 forms of food production. Our analysis suggests that all food production systems harm animals to some degree and that the majority of these harms affect wildlife, not livestock. We conclude that the food production systems likely to impose the greatest overall breadth of harms to animals are intensive animal agriculture industries (e.g., dairy) that rely on a secondary food production system (e.g., cropping), while harvesting of locally available wild plants, mushrooms or seaweed is likely to impose the least harms. We present this conceptual analysis as a resource for those who want to begin considering the complex animal welfare trade-offs involved in their food choices.

War exposure, altruism and the recalibration of welfare tradeoffs towards threatening social categories

How does war shape human altruism? Some find warfare increases generosity within groups only. Others maintain that war's prosocial effects extend to outgroup members as well. To make sense of these disparate findings, we offer a theoretical framework that highlights the role of threat sensitivity in altruism. Refugees from Syria and Iraq (N = 1521) completed a welfare tradeoff task and threat perceptions scale where the other's group identity, gender and age were experimentally varied. We found that individuals belonging to social categories associated with more threat (outgroup members, males, and younger individuals) were afforded less altruism compared to individuals belonging to non-threatening social categories (ingroup members, females and the elderly). War exposure enhanced bias against threatening social categories through increased threat-sensitivity. Our results have implications for understanding how warfare shapes altruism and welfare tradeoffs in light of cross-cutting social categories and for policies promoting post-conflict cooperation.

Altruism and Spite in Politics: How the Mind Makes Welfare Tradeoffs About Political Parties

How much will people sacrifice to support or oppose political parties? Extending previous work on the psychology of interpersonal cooperation, we propose that people’s minds compute a distinct cost–benefit ratio—a welfare tradeoff ratio—that regulates their choices to help or hurt political parties. In two experiments, participants decide whether to financially help and hurt the inparty and outparty. The results show that participants were extremely consistent (> 90%) while making dozens of decisions in a randomized order, providing evidence for tradeoff ratios toward parties. Moreover, participants’ ratios correlated in the expected directions with partisanship, political ideology, and feelings of enthusiasm and anger toward each party, corroborating that these ratios are politically meaningful. Generally, most participants were willing to sacrifice at least some money to help their inparty and hurt the outparty. At the same time, a sizable minority hurt their inparty and helped their outparty. Welfare tradeoff ratios push our understanding of partisanship beyond the classic debate about whether voters are rational or irrational. Underneath the turbulent surface of partisan passions hide precise calculations that proportion our altruism and spite toward parties.

Monetary policy, credit markets, and banks: A DSGE perspective

The monetary policy transmission mechanism changed after the 2008 crisis. Evidence shows that credit markets and the banking system play now a predominant role in the pass-through of monetary policy to the real economy. This paper examines the monetary transmission mechanism in a Dynamic Stochastic General Equilibrium (DSGE) model that; on the one hand, includes a financial accelerator that operates through collateral constraints in credit markets, and, on the other hand, also presents regulatory constraints on the banking sector. Results show that the financial accelerator effects make monetary policy more effective, in line with the rest of the literature. However, the introduction of banks reduces part of this effectiveness due to regulatory requirements on bank capital, as observed during the crisis time. Furthermore, an optimal monetary policy analysis concludes that when adding all these ingredients into the model, monetary policy should respond more strongly to output and less to inflation than in a standard model new Keynesian model, due to the inclusion of extra distortions that create welfare trade-offs among agents.

Moral elevation: Indications of functional integration with welfare trade-off calibration and estimation mechanisms

Moral elevation is a positive social emotion, which is triggered by observing third parties behaving benevolently, and which in turn triggers a motivation to behave benevolently towards others in general. It has been suggested that this relatively obscure emotion may be the output of a naturally selected cognitive adaptation which functions to help us retain our position in the competition for access to beneficial social relationships. This suggestion is here interpreted within the framework of ‘recalibrational emotions’. This framework offers the computational vocabulary necessary to understand how mental adaptations governing affect and motivation perform their functions at the cognitive level. Parallels are drawn between the suggested function and known phenomenological attributes of moral elevation, and the recently explicated functional operation of other social emotions (such as anger, guilt, and gratitude). Specifically, these other social emotions are thought to share a common computational pathway; recalibration of our welfare trade-off ratios (WTRs). WTRs are the computational element which dictate our willingness to benefit others at some cost to ourselves. A series of studies was conducted to explore whether a reliable relationship exists between moral elevation and WTRs. The results suggest that elevation does have a positive recalibrational effect on our WTRs, and that it may also be functionally integrated with a mental mechanism designed by natural selection to estimate the WTRs of other social actors.

Error Costs, Ratio Tests, and Patent Antitrust Law

This paper examines the welfare tradeoff between patent and antitrust law. Since patent and antitrust law have contradictory goals, the question that naturally arises is how one should choose between the two in instances where there is a conflict. One sensible approach to choosing between two legal standards—or between proof standards with respect to evidence—is to consider the relative costs of errors. The approach in this paper is to consider the ratio of false positives to false negatives in patent antitrust. We find that the relevant error-cost ratio for patent antitrust is the proportion of the sum of the monopoly profit and the residual consumer surplus to the deadweight loss. This error-cost ratio—for a wide range of deterministic demand functions—ranges from infinity to a low of roughly three. This suggests that patent antitrust law should err on the side of protecting innovation incentives.