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How to protect future generations using tax base restrictions
In: NBER working paper series 9179
How to Protect Future Generations Using Tax-Base Restrictions
In: American economic review, Volume 95, Issue 1, p. 314-346
ISSN: 1944-7981
This paper studies how to protect future generations from expropriation and to induce optimal investment in intergenerational public goods (IPGs), by introducing constitutional restrictions on the tax base. The type of tax-base restrictions that we consider places limits on the tax instruments that the government can use to raise revenue, but not on the level of expenditures or debt. We show that the introduction of a constitutional amendment requiring that IPGs and debt be financed with land taxes makes intergenerational expropriation impossible and, for many cases of interest, induces optimal investment in IPGs. We also show that a weaker constitutional amendment requiring that IPGs be financed with land taxes, but imposing no restrictions on how to finance the debt, has a positive impact on IPGs, but not on expropriation. The paper also studies the political feasibility of these reforms. We show that the first reform is not politically feasible since it hurts current generations, but the weaker reform can induce a Pareto improvement.
Forward and Backward Intergenerational Goods: Why Is Social Security Good for the Environment?
In: American economic review, Volume 93, Issue 3, p. 813-834
ISSN: 1944-7981
This paper studies the ability of nonmarket institutions to invest optimally in forward intergenerational goods (FIGs), such as education and the environment, when agents are selfish or exhibit paternalistic altruism. We show that backward intergenerational goods (BIGs), such as social security, play a crucial role in sustaining investment in FIGs: without them investment is inefficiently low, but with them optimal investment is possible. We also show that making the provision of BIGs mandatory crowds out the voluntary provision of FIGs, and that population aging can increase investment in FIGs.
Can Market and Voting Institutions Generate Optimal Intergenerational Risk Sharing?
In: Risk Aspects of Investment-Based Social Security Reform, p. 113-149
The Impact of Computation Time and Experience on Decision Values
In: American economic review, Volume 98, Issue 2, p. 163-168
ISSN: 1944-7981
Beyond Revealed Preference: Choice Theoretic Foundations for Behavioral Welfare Economics
In: NBER Working Paper No. w13737
SSRN
Toward Choice-Theoretic Foundations for Behavioral Welfare Economics
In: American economic review, Volume 97, Issue 2, p. 464-470
ISSN: 1944-7981
Addiction and Cue-Triggered Decision Processes
In: American economic review, Volume 94, Issue 5, p. 1558-1590
ISSN: 1944-7981
We propose a model of addiction based on three premises: (i) use among addicts is frequently a mistake; (ii) experience sensitizes an individual to environmental cues that trigger mistaken usage; (iii) addicts understand and manage their susceptibilities. We argue that these premises find support in evidence from psychology, neuroscience, and clinical practice. The model is tractable and generates a plausible mapping between behavior and the characteristics of the user, substance, and environment. It accounts for a number of important patterns associated with addiction, gives rise to a clear welfare standard, and has novel implications for policy.
Empathic choice involves vmPFC value signals that are modulated by social processing implemented in IPL
Empathic decision-making involves making choices on behalf of others in order to maximize their well-being. Examples include the choices that parents make for their children, as well as the decisions of a politician trying to make good choices on behalf of his constituency. We investigated the neurobiological and computational basis of empathic choice using a human fMRI task in which subjects purchased DVDs for themselves with their own money, or DVDs for others with the other's money. We found that empathic choices engage the same regions of ventromedial prefrontal cortex that are known to compute stimulus values, and that these value signals were modulated by activity from a region of inferior parietal lobule (IPL) known to play a critical role in social processes such as empathy. We also found that the stimulus value signals used to make empathic choices were computed using a mixture of self-simulation and other-simulation processes, and that activity in IPL encoded a variable measuring the distance between the other's and self preferences, which provides a hint for how the mixture of self- and other-simulation might be implemented.
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Non-Choice Evaluations Predict Behavioral Responses to Changes in Economic Conditions
In: NBER Working Paper No. w19269
SSRN
Working paper
Neural Activity Reveals Preferences Without Choices
In: NBER Working Paper No. w19270
SSRN
Working paper
Search Dynamics in Consumer Choice under Time Pressure: An Eye-Tracking Study
In: American economic review, Volume 101, Issue 2, p. 900-926
ISSN: 1944-7981
We study decisions that involve choosing between different numbers of options under time pressure using eye-tracking to monitor the search process of the subjects. We find that subjects are quite adept at optimizing within the set of items that they see, that the initial search process is random in value, that subjects use a stopping rule to terminate the search process that combines features of optimal search and satisficing, and that subjects search more often in certain focal regions of the display, which leads to choice biases. (JEL C91, D12, M31)
Using Neural Data to Test a Theory of Investor Behavior: An Application to Realization Utility
In: NBER Working Paper No. w18562
SSRN
Pavlovian Processes in Consumer Choice: The Physical Presence of a Good Increases Willingness-to-Pay
In: American economic review, Volume 100, Issue 4, p. 1556-1571
ISSN: 1944-7981
This paper describes a series of laboratory experiments studying whether the form in which items are displayed at the time of decision affects the dollar value that subjects place on them. Using a Becker-DeGroot auction under three different conditions—(i) text displays, (ii) image displays, and (iii) displays of the actual items—we find that subjects' willingness-to-pay is 40–61 percent larger in the real than in the image and text displays. Furthermore, follow-up experiments suggest the presence of the real item triggers preprogrammed consummatory Pavlovian processes that promote behaviors that lead to contact with appetitive items whenever they are available. (JEL C91, D03, D12, D87)