A Theory of Chosen Preferences

We propose and develop a dynamic theory of endogenous preference formation in which people adopt worldviews that shape their judgments about their experiences. The framework highlights the role of mindset flexibility, a trait that determines the relative weights the decision-maker places on her current and anticipated worldviews when evaluating future outcomes. The theory generates rich behavioral dynamics, thereby illuminating a wide range of applications and providing potential explanations for a variety of observed phenomena. (JEL D11, D81, D91, Z13)

Agricultural Returns to Labour and the Origins of Work Ethics

We examine the historical determinants of differences in preferences for work across societies today. Our hypothesis is that a society’s work ethic depends on the role that labour has played in it historically, as an input in agricultural production: societies that have for centuries depended on the cultivation of crops with high marginal returns to labour effort will work longer hours and develop a preference for working hard. We formalise this prediction in the context of a model of endogenous preference formation, with altruistic parents who can invest in reducing their offsprings’ disutility from work. To empirically found our model, we construct an index of potential agricultural labour intensity, that captures the suitability of a location for the cultivation of crops with high estimated marginal returns to labour in their production. We find that this index positively predicts work hours and attitudes towards work in contemporary European regions. We investigate various mechanisms of persistence, including cultural transmission, as well as a society’s production structure and institutions.

The Limits of Rational Choice: New Institutionalism in the Test Bed of Central Banking Politics in Australia

This paper tests the explanatory capacities of different versions of new institutionalism by examining the Australian case of a general transition in central banking practice and monetary politics: namely, the increased emphasis on low inflation and central bank independence. Standard versions of rational choice institutionalism largely dominate the literature on the politics of central banking, but this approach (here termed RC1) fails to account for Australian empirics. RC1 has a tendency to establish actor preferences exogenously to the analysis; actors' motives are also assumed a priori; actor's preferences are depicted in relatively static, ahistorical terms. And there is the tendency, even a methodological requirement, to assume relatively simple motives and preference sets among actors, in part because of the game theoretic nature of RC1 reasoning. It is possible to build a more accurate rational choice model by re-specifying and essentially updating the context, incentives and choice sets that have driven rational choice in this case. Enter RC2. However, this move subtly introduces methodological shifts and new theoretical challenges. By contrast, historical institutionalism uses an inductive methodology. Compared with deduction, it is arguably better able to deal with complexity and nuance. It also utilises a dynamic, historical approach, and specifies (dynamically) endogenous preference formation by interpretive actors. Historical institutionalism is also able to more easily incorporate a wider set of key explanatory variables and incorporate wider social aggregates. Hence, it is argued that historical institutionalism is the preferred explanatory theory and methodology in this case.

From Here to There; or, If Cooperative Ownership Is So Desirable, Why are There So Few Cooperatives?

In this paper I want to discuss a well-known but poorly understood problem: how can socialists reconcile the observed paucity of cooperatives in capitalist societies with their alleged superiority on normative grounds? If cooperatives are so desirable, why don't workers desire them? If one's ideal of socialism is central planning, it is clear enough that it cannot emerge gradually within the womb of the capitalist economy. If instead it is something like market socialism, it is not clear that a discontinuous transformation of society is required. If workers want (market) socialism, they can start up here and now. If they don't, doesn't it prove that they do not want it?I shall proceed as follows. Section I argues that the usual explanation - that cooperatives are not economically viable or that workers prefer working in capitalist firms – is not necessarily correct. The explanation may lie elsewhere, in endogenous preference formation, adverse selection, discrimination, or externalities.Section II is concerned with the variety of cooperative arrangements. Only rarely do we find cooperatives in their pure form, with all workers and only workers having equal ownership rights. Non-working owners, non-owning workers and unequal distribution of shares are frequent. When the deviations become sufficiently large, the firms cease to become cooperatives in any meaningful sense.Section III extends the argument of Section I by surveying the causes of cooperative failure. Some fail by success: profitable cooperatives often attract or turn into private ownership. Others fail outright, partly because they tend to be established under unfavorable circumstances and partly because of intrinsic difficulties of management.