Implications for Public Policy

The failure of higher private consumption to increase happiness significantly due to environmental disruption, relative competition, adaptation, our materialistic bias, etc. are relevant for public policy, especially in making higher public spending in the right areas like environmental protection, research, poverty elimination, etc. more welfare-improving than a ‘big society, small government’. Some soft paternalistic measures such as nudging people to save adequately for old age may also be needed in the widespread presence of imperfect rationality and foresight.

Happiness Versus Preference

The preference of an individual may differ from her happiness due to imperfect information, a true concern for the welfare of others (non-affective altruism), and imperfect rationality. In some exceptional circumstances, such as the traditional Chinese custom of giving the deceased parent a decent burial and not to disturb them by re-burial, some measures (like banning slavery and using a cemetery for essential developments) may improve social welfare, even if against the preferences of most, and perhaps all, people.

Happiness as the Only Intrinsic Value

As happiness is directly experienced by the individual as valuable, its normative value needs no additional justification. Things like institutions and moral principles may be used to promote happiness directly and indirectly. In time, they may be mistakenly valued for their own sake, while ultimately their values should be based on their contribution to happiness. We are born, brought up, and socially influenced to have certain preferences which are largely consistent with our own happiness. Where they diverge, then apart from the effects on the happiness in the future and of others (hence really no divergence in the longer/wider perspective of happiness), ultimately it is happiness that is really consistent with rationality. Arguments for happiness as the only intrinsic value are made and defended against objections or opposite arguments (including ‘Rather be unhappy Socrates than a happy pig’, Kant's categorical imperatives, Rawls’ maximin, etc.). The apparent acceptability of these opposing positions is due either to our imperfect rationality and/or inadequate account on the effects in the future and on others.

Behavioral modelling of subjects in legal cases-games with imperfect rationality

Game theory, applied in various fields, including in law, studies conflict game models and searches for their formatted solutions, makes it possible to solve many tasks and problems, predict the behaviour of subjects in various situations, thereby explaining the behavior logic of the individuals in conflict of interests. However, human behavior is not always rational (reasonable), moreover, it can be difficult to predict which strategy the player will choose when making his move in the game. In this regard, it is advisable to consider rational behavior as an accepted and reasonable behavior of game participants and irrational behavior as deviant, unpredictable behavior of players, which relies on the internal regulation of a person (beliefs, intuition, creativity, feelings, emotions, etc.) and which studies one of the developing directions of game theory in modern science – evolutionary game theory. The study aims to determine the types of irrational behavior of players, which puts other players in a difficult position and precludes from determining each other’s optimal strategies for mutual benefit and stability, using the example of legal incidents modeling through games with imperfect rationality. The authors believe, that to achieve this goal using the methods of analysis and modeling, the imperfections of rationality can be considered and studied, the types of irrational behavior of players can be defined using the games with imperfect calculation of the game, imperfect information and changes in goals during the game (with a multipersonal representation of the game) and a complete absence of rationality.

Aspiration dynamics of multi-player games in finite populations

On studying strategy update rules in the framework of evolutionary game theory, one can differentiate between imitation processes and aspiration-driven dynamics. In the former case, individuals imitate the strategy of a more successful peer. In the latter case, individuals adjust their strategies based on a comparison of their pay-offs from the evolutionary game to a value they aspire, called the level of aspiration. Unlike imitation processes of pairwise comparison, aspiration-driven updates do not require additional information about the strategic environment and can thus be interpreted as being more spontaneous. Recent work has mainly focused on understanding how aspiration dynamics alter the evolutionary outcome in structured populations. However, the baseline case for understanding strategy selection is the well-mixed population case, which is still lacking sufficient understanding. We explore how aspiration-driven strategy-update dynamics under imperfect rationality influence the average abundance of a strategy in multi-player evolutionary games with two strategies. We analytically derive a condition under which a strategy is more abundant than the other in the weak selection limiting case. This approach has a long-standing history in evolutionary games and is mostly applied for its mathematical approachability. Hence, we also explore strong selection numerically, which shows that our weak selection condition is a robust predictor of the average abundance of a strategy. The condition turns out to differ from that of a wide class of imitation dynamics, as long as the game is not dyadic. Therefore, a strategy favoured under imitation dynamics can be disfavoured under aspiration dynamics. This does not require any population structure, and thus highlights the intrinsic difference between imitation and aspiration dynamics.

Preferencias sociales y egoísmo racional

RESUMENLos economistas experimentales han demostrado que algunos humanos cooperan con base en preferencias sociales, pero el modelo de agente racional conocido como Homo oeconomicus no incluye preferencias sociales como causas de la conducta cooperativa. ¿Qué implica su existencia para el egoísmo racional defendido en los modelos microeconómicos dominantes y en la teoría de juegos? Se describen tres posibles respuestas: 1) preferencias sociales como mecanismos redundantes de reserva; 2) preferencias sociales para remediar la racionalidad imperfecta y 3) preferencias sociales como motor primario de la cooperación, porque el egoísmo racional no recomienda cooperar en dilemas de prisionero iterado con información imperfecta. Defiendo la tercera opción: agentes que carecen de preferencias sociales ven el engaño y la coerción como opciones racionales.PALABRAS CLAVECOOPERACIÓN, DILEMA DE PRISIONEROS, EGOÍSMO RACIONAL, EXPLICACIÓN Y JUSTIFICACIÓNABSTRACTExperimental economics provides evidence that social preferences drive human cooperation in the lab, but the dominant microeconomic model of a rational agent, Homo oeconomicus, denies such preferences. Assuming the evidence is cogent, what follows for the claim that humans cooperate on the basis of rational egoism? I describe three possible answers: 1) social preferences are backup mechanisms for rational egoism; 2) social preferences are required to remedy for imperfect rationality; and 3) social preferences are the primary motives for cooperation, because rational egoism does not recommend cooperation in the iterated prisoner’s dilemma with imperfect or private information. I argue for option 3): rational egoists without social preferences see deception and coercion as rational options.KEYWORDS:COOPERATION, PRISONER’S DILEMMA, RATIONAL EGOISM, EXPLANATION AND JUSTIFICATION

Imperfect rationality and inflationary inertia: a new estimation of the Phillips Curve for Brazil

This paper presents some new estimates for the relationship between inflation and unemployment in Brazil based on a new Keynesian hypothesis about the behavior of the economy. Four main hypotheses are tested and sustained throughout the study: i) agents do not have perfect rationality; ii) the imperfection in the agents expectations generating process may be an important factor in explaining the high persistence (inertia) of Brazilian inflation; iii) inflation does have an autonomous inertial component, without linkage to shocks in individual markets; iv) a non-linear relationship between inflation and unemployment is able to provide better explanations for the inflation-unemployment relationship in the Brazilian economy in the last 12 years. While the first two hypotheses are tested using a Markov Switching based model of regime changes, the remaining two are tested in a context of a convex Phillips Curve estimated using the Kalman filter. Despite the methodological and estimation improvements provided in the paper, the impulse-response functions for the monetary policy presented the same properties shown in the literature that uses Brazilian data.