Findings

Give and Take

Kevin Lewis

July 16, 2010

The Endowment Tax Puzzle

Kristi Olson
Philosophy & Public Affairs, Summer 2010, Pages 240-271

"Suppose you could be a corporate lawyer with an annual income of $500,000, but you choose instead to pursue a career as a philosophy professor, despite the much smaller income. If the state imposes an earnings tax, you will be taxed according to your actual income as a philosophy professor. In contrast, if the state imposes an endowment tax, you will be taxed according to your maximum potential income as a corporate lawyer. In this scenario, the endowment tax seems likely to have a significant effect on your freedom. The worry is not merely that, under the endowment tax, you will have to pay a much greater percentage of your salary as a philosophy professor in taxes. Rather, the more troubling worry is that, in order to pay your taxes, you might have to forgo your career as a philosophy professor altogether. Indeed, depending upon how lucrative your other career options are and how high the tax is, you might have no choice but to work as a corporate lawyer - no matter how much you despise it. And this seems to be an impermissible intrusion on your freedom. For libertarians who believe that all taxation is impermissible, the conclusion that the endowment tax is morally impermissible presents no difficulties at all. But for those of us who believe that taxation is sometimes morally permissible, the conclusion that the endowment tax is impermissible gives rise to the following puzzle: If the endowment tax is impermissible but other forms of taxation are permissible, we need a principle capable of explaining the difference...And libertarians who oppose all forms of taxation ought to insist on such an account...According to my solution to the endowment tax puzzle, the endowment tax is objectionable because it disregards the moral distinction between options. But, since the earnings tax as it is currently implemented also disregards the moral distinction between options, in order to adopt my solution we must reject the moral sanctity of the earnings tax as it is currently implemented...In contrast, taxing all of the talent rent before imposing a tax on any non-rent is sensitive to the moral distinction between options."

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Objectivism Versus Subjectivism: A Market Test

Peter Calcagno, Joshua Hall & Robert Lawson
Journal of Economic Behavior & Organization, forthcoming

Abstract:
The terms objective and subjective are considered antonyms, and yet "objectivists", associated with the ideas of Ayn Rand, and "subjectivists", associated with the ideas of Ludwig von Mises, are both associated with the same political philosophy: classical liberalism. There are however important apparent differences between the "objectivist" approach of Rand and the "subjectivist" approach of Mises. Who is right? And which intellectual has the greater place in the classical liberal tradition? We propose to test these questions using data from a unique housing development in Charleston, South Carolina. We find objective evidence in favor of Mises's subjectivism.

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Hayek's 'Great Society': On civilization and its savages

David Bholat
Journal of Political Ideologies, June 2010, Pages 175-188

Abstract:
Friedrich Hayek is widely viewed as a key intellectual source of neo-liberalism. Taking issue with the conventional view that Hayek's philosophy is, above all, concerned with individual freedom, this article argues that his foundational category is civility. Civility encompasses sensibilities and structures that restrict the liberties we take in our interpersonal relations and channel individual efforts to building what Hayek calls the 'Great Society'. For instance, Hayek endorses subordinating persons to price signals on the assumption that the market efficiently maximizes individual and social returns. However, Hayek's claim about the wisdom of market prices is contradicted by his own arguments about the limitations of human knowledge, individual or aggregate. Overall, I claim that the individual freedom Hayek's philosophy grants is quite limited and that the continued activism of neo-liberal governments is not an ideological contradiction, but actualizes the 'civilizing mission' demanded by one of its most important intellectual figures. Consequently, Hayek's philosophy invites broader reflection about the primacy of individual freedom in political thought and suggests civility as an alternative starting point. The way Hayek shifts the philosophical conversation, from theorizing conditions for the autonomy of individuals to the ideal qualities of relations adhering between them, may also explain his increasing attractiveness to thinkers on the Left.

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Having less, giving more: The influence of social class on prosocial behavior

Paul Piff, Michael Kraus, Bonnie Cheng & Dacher Keltner
Journal of Personality and Social Psychology, forthcoming

Abstract:
Lower social class (or socioeconomic status) is associated with fewer resources, greater exposure to threat, and a reduced sense of personal control. Given these life circumstances, one might expect lower class individuals to engage in less prosocial behavior, prioritizing self-interest over the welfare of others. The authors hypothesized, by contrast, that lower class individuals orient to the welfare of others as a means to adapt to their more hostile environments and that this orientation gives rise to greater prosocial behavior. Across 4 studies, lower class individuals proved to be more generous (Study 1), charitable (Study 2), trusting (Study 3), and helpful (Study 4) compared with their upper class counterparts. Mediator and moderator data showed that lower class individuals acted in a more prosocial fashion because of a greater commitment to egalitarian values and feelings of compassion. Implications for social class, prosocial behavior, and economic inequality are discussed.

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Shared Social Responsibility: A Field Experiment in Pay-What-You-Want Pricing and Charitable Giving

Ayelet Gneezy, Uri Gneezy, Leif Nelson & Amber Brown
Science, 16 July 2010, Pages 325-327

Abstract:
A field experiment (N = 113,047 participants) manipulated two factors in the sale of souvenir photos. First, some customers saw a traditional fixed price, whereas others could pay what they wanted (including $0). Second, approximately half of the customers saw a variation in which half of the revenue went to charity. At a standard fixed price, the charitable component only slightly increased demand, as similar studies have also found. However, when participants could pay what they wanted, the same charitable component created a treatment that was substantially more profitable. Switching from corporate social responsibility to what we term shared social responsibility works in part because customized contributions allow customers to directly express social welfare concerns through the purchasing of material goods.

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Warm glow, information, and inefficient charitable giving

C. Null
Journal of Public Economics, forthcoming

Abstract:
More than 200 donors participated in a framed field experiment which consisted of a series of decisions about how to divide a gift between a set of similar charities. Most subjects simultaneously gave to multiple charities even when the social benefit of gifts to different charities were not equal, as proxied by the matching rates applied to subjects' gifts. Taking each subject's preferences over the set of charities as given, these choices resulted in substantial inefficiencies: subjects forfeited social surplus (matching funds) equal to 25% of the value of their gifts. Suggestive evidence indicates that warm glow utility derived from the act of making a gift, which can lead to a love of variety even among similar charities, and risk aversion over the social value of charitable gifts are both important factors motivating donors who make socially inefficient gifts. Additionally, few subjects were willing to pay for information that could have enabled them to increase the social benefit of their gifts, although many of these subjects also forfeited potential personal gains in an investment decision, casting some doubt on the results. This possibility that the personal value of information might not be equal to the social value might help explain why there are so few rigorous evaluations of aid programs: such evaluations are costly to charities and might not be valued by donors.

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Meritocracy, Modernization and Students' Occupational Expectations: Cross-National Evidence

Gary Marks
Research in Social Stratification and Mobility, forthcoming

Abstract:
The meritocracy thesis argues that ability is the dominant influence on educational and other social outcomes in contemporary societies. The broader and related modernization thesis contends that as societies modernize the influence of ascriptive criteria, such as socioeconomic background and gender, decline. This paper informs on both theses by examining the effects of ability (measured by test scores), socioeconomic background and gender on the socioeconomic level of expected occupation at age 30 of approximately 170,000 15-year-old students in 30 countries. In almost all countries, ability was a stronger influence. Consistent with the modernization thesis, the effects of ability relative to socioeconomic background were stronger in more economically developed societies. The effects of both ability and socioeconomic background are partially mediated by national school systems. Ability also had a stronger influence on between-school differences in occupational expectations and negatively on 'not having an expected occupation'. However, a strong version of the meritocracy thesis was not supported by the significant, albeit often small, effects of socioeconomic background on occupational expectations observed in most countries.

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How History and Convention Create Norms: An Experimental Study

Francesco Guala & Luigi Mittone
Journal of Economic Psychology, forthcoming

Abstract:
According to a tradition that goes back to David Hume, social conventions have a natural tendency to turn into norms. Normativity increases compliance and stabilizes individual behaviour in spite of changes in incentives. In this paper we report experimental data that confirm this insight and encourage mildly optimistic conclusions regarding human sociality: habits provide extra glue that keeps individuals together, and prevents them from succumbing to anti-social temptation even when punishment is unlikely.

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No excuses for good behavior: Volunteering and the social environment

Sera Linardi & Margaret McConnell
Journal of Public Economics, forthcoming

Abstract:
We study the effect of the social environment on the quantity and quality of voluntary labor contributions. By extending Benabou and Tirole's (2006) image signaling framework, we derive theoretical predictions on time volunteered given (1) the availability of excuses to stop volunteering and (2) the presence of an authority figure. We test these predictions in an experiment where laboratory subjects are directly involved in a local nonprofit operation. We find that in the absence of excuses to stop volunteering, subjects volunteer longer without working less productively. This increase is partially driven by subjects' reluctance to be the first to stop volunteering. The presence of an authority figure has little impact, but the presence of peers hasa positive and significant impact.

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Encephalization and division of labor by early humans

John Hartwick
Journal of Bioeconomics, July 2010, Pages 77-100

Abstract:
We draw on Ricardian comparative advantage between distinct persons to map out the division of labor among proto-humans in a village some 1.7 million years ago. A person specialized in maintaining a cooking fire in the village is of particular interest (Ofek, Second nature, economic origins of human evolution, Cambridge University Press, New York, 2001). We are also interested in modeling hunting by village males in teams. The large issue is whether and how specialization (division of labor) and interpersonal trade might have driven brain-expansion in early humans. We emphasize the need for early humans to develop the capacity to see themselves in others' shoes (other-regardingness) in order for regularized trading to follow division of labor.

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Community Economic Identity: The Coal Industry and Ideology Construction in West Virginia

Shannon Elizabeth Bell & Richard York
Rural Sociology, March 2010, Pages 111-143

Abstract:
Economic changes and the machinations of the treadmill of production have dramatically reduced the number of jobs provided by extractive industries, such as mining and timber, in the United States and other affluent nations in the post-World War II era. As the importance of these industries to national, regional, and local economies wanes, community resistance to ecologically and socially destructive industry practices threatens the political power of corporations engaged in natural-resource extraction. Here we argue that to maintain their power (and profits) as their contribution to employment declines, extractive industries have increased their efforts to maintain and amplify the extent to which the "economic identity" of communities is connected with the industry that was historically an important source of employment. We fit this argument within the neo-Marxian theoretical tradition, which emphasizes the roles ideology and legitimation play in maintaining elite rule. We illustrate this theorized process by analyzing the efforts of the West Virginia coal industry, which, through its (faux) "grassroots" front group "Friends of Coal," attempts to construct the image that West Virginia's economy and cultural identity are centered on coal production. Our analysis relies on content analysis of various sources and on experience gained from field research. We find that key strategies of the Friends of Coal include efforts to become pervasively visible in the social landscape and the appropriation of cultural icons that exploit the hegemonic masculinity of the region. These findings have implications for how industries around the country, and the world, work to maintain their power through ideological manipulation.

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Social learning promotes institutions for governing the commons

Karl Sigmund, Hannelore De Silva, Arne Traulsen & Christoph Hauert
Nature, forthcoming

Abstract:
Theoretical and empirical research highlights the role of punishment in promoting collaborative efforts. However, both the emergence and the stability of costly punishment are problematic issues. It is not clear how punishers can invade a society of defectors by social learning or natural selection, or how second-order free-riders (who contribute to the joint effort but not to the sanctions) can be prevented from drifting into a coercion-based regime and subverting cooperation. Here we compare the prevailing model of peer-punishment with pool-punishment, which consists in committing resources, before the collaborative effort, to prepare sanctions against free-riders. Pool-punishment facilitates the sanctioning of second-order free-riders, because these are exposed even if everyone contributes to the common good. In the absence of such second-order punishment, peer-punishers do better than pool-punishers; but with second-order punishment, the situation is reversed. Efficiency is traded for stability. Neither other-regarding tendencies or preferences for reciprocity and equity, nor group selection or prescriptions from higher authorities, are necessary for the emergence and stability of rudimentary forms of sanctioning institutions regulating common pool resources and enforcing collaborative efforts.

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Reputation for reciprocity engages the brain reward center

Luan Phan, Chandra Sekhar Sripada, Mike Angstadt & Kevin McCabe
Proceedings of the National Academy of Sciences, forthcoming

Abstract:
Brain reward circuitry, including ventral striatum and orbitofrontal cortex, has been independently implicated in preferences for fair and cooperative outcomes as well as learning of reputations. Using functional MRI (fMRI) and a "trust game" task involving iterative exchanges with fictive partners who acquire different reputations for reciprocity, we measured brain responses in 36 healthy adults when positive actions (entrust investment to partners) yield positive returns (reciprocity) and how these brain responses are modulated by partner reputation for repayment. Here we show that positive reciprocity robustly engages the ventral striatum and orbitofrontal cortex. Moreover, this signal of reciprocity in the ventral striatum appears selectively in response to partners who have consistently returned the investment (e.g., a reputation for reciprocity) and is absent for partners who lack a reputation for reciprocity. These findings elucidate a fundamental brain mechanism, via reward-related neural substrates, by which human cooperative relationships are initiated and sustained.

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Maximum Effort in the Minimum-Effort Game

Dirk Engelmann & Hans Theo Normann
Experimental Economics, forthcoming

Abstract:
We report results from standard minimum-effort experiments conducted in Copenhagen (Denmark). Our subjects frequently coordinate on the Pareto-efficient equilibrium even in groups of six. This is in stark contrast to the previous literature, as we show in a detailed analysis of experiments which had the same design but were held in different countries. The subject-pool effect is substantiated by the finding that, the higher the share of Danish subjects in a group, the higher the minimum-effort levels. These findings suggest that the prevalent coordination failures previously observed are affected by significant subject-pool effects.


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