Ok, so the title of the post gives the paper more pizzazz than it really has, but hey? Today, a little discussion about Nava Ashraf, Iris Bohnet and Nikita Piankov's (2006) paper 'Decomposing Trust and Trustworthiness'.

The main reason that it is of interest to me is that it used a sample of students from South Africa in Cape Town (which somehow was spelt Capetown in the paper, ATROCIOUS editing!), along with students from Boston, US and Moscow, Russia.

The next point of interest is that, unlike many economic experiments, it assesses within-subject variation across two different games, the dictator game and the trust or 'investment' game.

The authors had 4 main hypotheses that they wished to test:

1. Trust is only based on expectations of trustworthiness.
2. Trust is only based on unconditional kindness.
   
3. Trustworthiness is only based on reciprocity.
4. Trustworthiness is only based on unconditional kindness.
   

Our results suggest that many people may play a different game than researchers thought they were playing when confronted with the “investment game.” Only 36 percent of the 159 trustors who decided to send any money in our “investment game” expected to make money (204).

Our design allowed us to solve one of the important trust puzzles, namely that people trust even though hardly anyone makes money by doing so. We found that generally, people are aware of this. They trust even though they know it does not pay monetarily. They enjoy the act of trusting and being kind to others, even to anonymous strangers (204).

Experimenter bias is not a well-covered topic in the area of experimental economics, either because those who decide to test it don't find anything worth reporting, or those who do attempt to test it struggle to be published. Who knows?

Nevertheless, a 2004 working paper by Alessandro Innocenti and Maria Grazia Pazienza addresses the question of experimenter bias with respect to the gender of the experimenter. They used the trust game with various treatments to check whether the gender of the experimenter changed any of the responses by the subjects. The trust game involves a pairing of two individuals (a sender and a receiver), the sender chooses to 'invest' an amount in the other person (trust element), this amount is then tripled in value and the receiver may then choose to send some money back to the sender (reciprocity element).

There results were as follows:

1. There was no evidence that the gender of the experimenter affected the degree of trust.
   
2. The presence of a female experimenter was correlated with a statistically significant higher degree of reciprocity.
   
3. The effect (of female experimenter reciprocity inflation) occurred across the genders of the subjects, i.e. it was not a 'correspondence' effect of woman-to-woman as some might argue.
   

As the token economist amongst friends and family, I thought I would recommend the following links on the current financial crisis.

First, Wikipedia has a fantastic timeline of the current crisis, under the title 'Subprime Crisis Impact Timeline'.

Second, you can peruse these useful notes by Roger Congleton of GMU (they follow the GMU line somewhat, so take the ideology of them with a pinch of salt, but read them anyway).

Third, there is a new blog documenting the financial crisis: The Money Meltdown.

Fourth, there are several blogs that I read with commentary on the crisis that I would recommend: Marginal Revolution, The Semi-daily Journal of Brad DeLong, Greg Mankiw, Paul Krugman and Mark Thoma's Economist's View. Mankiw regularly gives interesting and brief insights, as well as giving links to good articles by prominent individuals. Thoma cites articles at length and gives his own commentary.

Fifth, don't believe what everyone has to tell you about Adam Smith and the financial crisis. Read what Gavin Kennedy has to say here, here and here on his blog 'Adam Smith's Lost Legacy'.

Sixth, Duncan Green, the head of research for Oxfam, maintains a blog and has couple of posts on the topic of the financial crisis and development, the most interesting post of which is a discussion of what $700bn would do for global development.

Lastly, some audio and video stuff. EconTalk host Russ Roberts chats with Arnold Kling on the role of Fannie Mae and Freddie Mac. I found this very useful for helping me to understand what exactly they did and, thus, how they impacted on the financial crisis. Roberts also interviewed Robert Shiller (of the Case-Shiller (housing) index fame) on housing bubbles, which I found interesting. UChannel, another audio and film 'academic' web resource, has a discussion featuring Paul Krugman and Alan Blinder, both of whom have been quite outspoken on the crisis and its possible solutions. Krugman especially is a fan of nationalizing Fannie and Freddie.

Ok, that's enough for now and should sate any financial crisis appetite for the moment.

...to those at Intrade. It looks like Obama has overtaken McCain substantially once more. Ahhh... the effects of Pa(l)in bring me joy.

This article-post on the Freakonomics blog was indicative of the poverty of reporting on psychological and economics findings. I found it dreadfully uninformative. How can it simply be said that 'chauvinists are more likely to earn more'? Could it not be that individuals who are successful end up as chauvinists, rather than that chauvinists end up successful? What were the other controls? What other variables did they consider? What did they rule out? Why did the article adopt causative language? In my opinion, there is probably so much going on in the formation of beliefs about 'gender' that just isolating one belief is basically arbitrary. I turned to the original article to find out more.

Barring the comment in the post on the fact that the sample was constituted of Americans, most of the subsequent phrasing makes it seem as though, in general, it 'pays' to be chauvinistic. This is not necessarily a general relationship as it is for a specific sample of US individuals. See my correlation-causation fallacy comment above.

Next point, in the paper the range of ages is 8 years (those 14-22 in 1979) because of the way the sample is constructed. Thus this is a measure of gender bias for this specific generation, but does not necessarily inform us as to the gender bias of later generations or age cohorts. Again, generalizing from this age cohort is perilous. Thus, the above shouldn't say 'Men' it should say, 'Men in the US who are currently between the ages of 43 and 51'. The Freakonomics post wasn't specific at all. The article was substantially more specific, though it too over-generalized on occasion.

Also, don't forget that the paper reports how, '[M]ore educated people and more intelligent individuals were less likely to have a traditional gender role orientation' (p.1002) and that 'individuals raised in religious households were more likely to have a traditional gender role orientation' (ibid). Which, to me, indicates that there are, quite possibly, problems of endogeneity in the model. What does this mean? Well, the consequence of this kind of thing is that the standard errors of the coefficients (the betas) are meaningless. Why? Well, if you have a variable which is meant to be measuring some effect, but there is a relationship between this variable and the error term in your regression (through bidirectional causality, simultaneity, or missing variables) then what you are actually measuring is the bias as a consequence of one of these effects. I, for one, do not believe that the index constructed in the paper actually identifies anything [see this wiki article on instrumental variables, 2SLS and identification for basic econometric protocols in this kind of situation].

Consequently, we do not know whether the coefficients are actually significant. What does this imply? For one, that the actual end result is meaningless - we don't know whether there is a positive and strong relationship involved because we could be measuring anything that is related to the index that they construct and the error term. What does this mean? Well, a host of other variables could actually be driving the higher income variable any of which could be itself correlated with chauvinism. So they are not identifying anything causative!

Now, why does this kind of reporting incense me? The main reason is that an uninformed and unskeptical chauvinist pratt could read the article and use it as justification for their own behaviour. They could internalize the idea that 'chauvinists earn more' (when we can't actually conclude anything of the sort from this research) and they walk away believing their chauvinism justified. Notwithstanding this, scientifically the article was a mess. It was unspecific, it overgeneralized and it misrepresented the outcomes from the article. It reminds me, once again, that so much education is needed for the populace at large in order to ensure that readers of such a post don't get dumbed down by it and read it at face value.

Wim Louw over at the little book of capoeira is hosting the second Carnival of the Africans, to which I contributed three pieces, my piece on having a large disadvantaged (I forgot the final d in the original piece's title, silly typo!) populace but wanting to create equality, my piece on herbal remedies and my piece on Egalitarianism in young children.  

South Africa's current account is not as disease-ridden as some might argue, but some of the 'solutions' as proposed by individuals such as Zwelinzima Vavi to 'discipline' businesses are bound to do more damage than good.  This is the main thrust of this recent Vox EU article from Peter Draper and Andreas Freytag.  

Lane Kenworthy, a professor at the University of Arizona, Tucson, spoke at the CRISS workshop which I attended this last weekend in Rome. I will comment briefly on one of the concepts, marital homogamy, that he introduces in the first chapter of his book Jobs With Equality which is available online. I know that this concept is not new, I know that my discussion of it is not revelatory, I just wonder what people think about the problems that such a phenomenon creates.

Marital Homogamy, which I think is becoming more and more important Worldwide, and will probably become an increasing problem in South Africa. So what is marital homogamy? It is the tendency for individuals of similar levels of eduction to pair up as life-partners, i.e. that those with high education tend to marry or cohabit, and those with low education tend to marry or cohabit. This has persistent and damaging effects to equality. Now let us consider too that there are peer, neighborhood and heritability effects going on (through genetics, or upbringing, what you will). Thus, it is quite feasible that there will be even stronger persistence of inequality over time.

I know that this blog traditionally deals with economics, but I felt I needed to comment on this subject. In the South African news today there are reports of a herbal medicine mixed by a trainee traditional healer resulting in the deaths of the trainee healer's entire family. My condolences go out to the family and friends of those who have passed away.

However, this opens up one of the many areas in which progress needs to occur in South Africa. I understand and respect the fact that there are cultural differences between groups and individuals. I acknowledge too that there should be autonomous choices made when individuals engage in cultural practices. However, taking 'herbal mixtures' that could result in the deaths of the individuals involved does no seem, to me, to be a 'good' outcome of such cultural practices.

The skeptic in me rears its head and says, "What would happen if these people did not believe that these herbal mixtures were necessary as part of some religious ritual?" Well, my pat answer is that they wouldn't be dead. They could also be ostracised from their communities, thought of as wrongheaded or counter-cultural on account of having chosen to reject their religion, or their 'cultural practice' (what you will), they could be spending their time doing something else. They could, too, have chosen to join some other religious group and have other, hopefully less lethal, religious or cultural practices.

Ultimately, what it comes down to for me is the fact that, once more, lack of belief in science, belief in witchcraft, or the supernatural, or something entirely not based in science which should have been based on science (being a medicinal herbal mixture, i.e. with visible outcomes). Instead they were based on 'cultural' practices that are, by their nature, not allowed to be touched by scientific practices because of the fact that they are meant to be thought of as 'autonomous', that the 'paternalism' of science will 'damage' the experience of practices that allow scientific intervention or verification of outcomes. This is downright silly. But such silliness seems endemic to supernatural belief, especially supernatural beliefs that claim authority that is independent of scientific verification. As such, people will end up dead. It is a great pity. My condolences go out to the families once more. I am sad that their relatives have passed away, sadder still that it was as a consequence of herbalism

For the past couple of days I was attending a workshop at the University of Rome, `La Sapienza', hosted by CRISS, a cross-university research group investigating dynamics of inequality, poverty and welfare.

My notes from some of the sessions are available online:

• Ravi Kanbur
• Jeff Madrick
• Miles Corak
• Lane Kenworthy

Sarah Palin - potential vice president of the US - and her church. 


Sarah Palin's Churches and The Third Wave from Bruce Wilson on Vimeo.

An Economics Research Southern Africa (ERSA) working paper by Wilhelm Gerhard van der Merwe and Justine Burns uses the dictator game to test altruistic motives in the students. As I have already sent the authors an email with some of my concerns, I am not worried at all about discussing some points about the paper, in fact I hope that more discussion about the paper will improve it prior to its (hopeful) publication. In the spirit of full disclosure: Justine Burns was my 'supervisor' for my MComm in Economics, her husband Malcolm Keswell was my 'boss' when I worked for SALDRU; they are now my 'friends'.

Anyway, back to altruism in UCT students. The authors are very careful in annunciating that the sample that they study should not be seen as generalizable. This is meritorious indeed as far too many people don't make this kind of point sufficiently strongly in their research (including Ernst Fehr on whose recent work I commented a couple of days ago).

The construction of their experiment is as follows. It uses a classic dictator game with samples of students who are randomly paired. They run a control dictator game and then introduce a treatment that reveals the surname of their opponent in order to convey their racial/ethnic group. Their results indicate that the introduction of this information, in general, increases, i.e. simply knowing something about the partner increases the payoffs in general. White proposers make significantly higher offers than Black proposers. White proposers also seem to favour insiders with the median offer in a white-white pairing being double the offer in a white-black pairing. There does not seem to be insider bias for black individuals.

I have one or two concerns, which, as I said, I mentioned to the authors. The main one is about the inclusion of 'altruism' in their title and in the text. I don't believe that the patterns that are observed should be discussed as necessarily altruistic, but could, instead, be indicative of a host of differing theories see Bardsley, 2008; List, 2007 and Levitt and List, 2007 on this. The authors don't place too great a weight on the term altruism, so I don't think that it will be a problem for them to negotiate this problem.

Otherwise, I don't have any major methodological issues with the study and I believe that it is informative and should be replicated, eventually with a more representative sample of the population (this is something I'm particularly interested in seeing, or even doing at a later date). There are one or two issues in how things are presented, but they will be ironed out as the paper goes through iterations of review I am sure.

Please read the paper it is quite short and I think that Justine and Wilhelm would appreciate any feedback I could give them from anyone who reads this blog. It is available free of charge from the link in the first line of the post.

Children develop into (parochial) egalitarians, at least according to a recent study by Ernst Fehr, Helen Bernhard and Bettina Rockenbach. Children start out as selfish homo economicus style agents and turn into inequality averse parochialists. But the problem is that these aren't just any children, they are Swiss children and the cultural relevance of being Swiss has been seen in Ernst Fehr's own labs...

The experiments on which the paper was based were run with children ranging from 3 to 8 years of age where children would choose allocations of jellytots, smarties or fizzers for themselves and a partner. There partner could be from their kindergarten or playschool (in-group), or from another (out-group). There were three treatments in the experiments.

1. 'Prosocial Treatment' choosing between a (1,1) and a (1,0) allocation.
2. 'Envy Treatment' choosing between a (1, 1) and a (1,2) allocation.
3. 'Sharing Treatment' choosing between a (1,1) and a (2,0) allocation.