Causal Entropic Forces, Narratives and Self-organisation of Capital Markets

The intersubjective markets hypothesis is revisited with respect to causal entropic principles. While the financial system is assumed to naturally evolve towards uncertainty, a spontaneous and unstable form of order emerges, thanks to narratives, leading to self-organised criticality. This article also includes a discussion about main hypotheses in finance, about the link between volatility spikes and entropy, and, finally, about the important role of narratives as forms of collective intelligence. JEL: D40, D50, D53, D70, D80

How A Social Enterprise Wanes: The Transaction Costs of Credible Commitments at Etsy.com

This article fathoms how a social enterprise wanes by applying the construct of imperative credible commitments from transaction cost economics to the case of Etsy.com, an online marketplace created to connect artisans and craftwork enthusiasts. In the absence of imperative credible commitments, Etsy’s social mission was bound to change, leaving the company’s major stakeholders without safeguards to protect the perpetuation of the transactions that Etsy was created to serve. The construct of credible commitments has proved to be fertile in understanding issues of political and economic transition, yet its relevance to puzzle out the corporate world has been underestimated. To bridge this gap, we have recourse to the analogy between disabling the discretion of monarchs and executives to prevent them from reneging on commitments. Hence, by building on political economy academics’ attention is drawn to strategies that, despite existing in the corporate world, have rarely been perceived as important by management and economics scholars.

A Concept of Two Authors: Commons and Williamson on Transactions

The idea of transactions in social sciences was conceived by John Rogers Commons in the beginning of the 1920s, representing a mental instrument capable of describing capitalism and its peculiarities. On the other hand, Oliver Williamson’s approach in late 1970s reduced the concept to the mere transfer of goods and services in institutions that are or are not guided by the price system. The aim of this article is to present the characteristics of these two different approaches to the concept of transactions, evidencing the role of epistemological aspects and investigative purposes (referred to relevant research context and problem originated in it) as the causes of its metamorphosis. John Commons’ effort to build up a concept not only capable of transcending the idea of exchange but also of giving a totalising perspective to the interpretation of capitalism is emptied in Williamson’s appropriation of the term. By utilising Commons’ conception of transactions and trying to subsume it to his ‘general theory of transaction costs’, Williamson limits its scope and meaning, adjusting it without producing rupture with the neoclassical economy. This article tries to catch the vicissitudes of this concept found in both authors. JEL: B15, B25, B31

A New Institutional Economic Perspective on Alternative Governance Mechanisms at the Local Government Level

The ‘new institutional economics’ (NIE) can go a long way towards comprehending the emerging complexities of local government. As local bodies seek to forge collaborative partnerships with other organisations, they have to decide whether to solve horizontal co-ordination problems through market, hierarchy or network mechanisms. NIE can show that where other governance mechanisms are incomplete or subject to high transaction costs, trust and co-operation can informally develop through the process by which network interactions become embedded within each other. We show how this approach can be revised to take into account the expressive dimension of behaviour in hope-based networks whose members are bound together not so much by structures of resource dependence as by the hope and trust they place in the advancement of common goals. JEL: L38

Separation Theorems in Econometrics and Psychometrics: Rasch, Frisch, Two Fishers and Implications for Measurement

In 1959, Ragnar Frisch prompted Georg Rasch to formalise a separability theorem that continues today to serve as the basis of a wide range of theoretical and applied developments in psychological and social measurement. Previously unnoted are the influences on Rasch exerted by Frisch’s concerns for data autonomy, model identification and necessary and sufficient conditions. Although Rasch acknowledged Frisch’s prompting towards a separability theorem, he did not acknowledge any substantive, intellectual debt to him, nor to Irving Fisher, but only to Ronald Fisher. Rasch appears to have developed a special interest in sufficiency and identified models when studying with Frisch in 1935, and in 1947, when Rasch accompanied Tjalling Koopmans to the University of Chicago and the Cowles Commission for Research in Economics. I. Fisher’s separation theorem continues to be relevant in econometrics, and interest in Rasch’s separability theorem is growing as the measurement models based on it are adopted in metrological theory and practice. The extensive interrelations between measurement science, metrological standards and economics suggest paths towards lower transaction costs and more efficient markets for individualised exchanges of human, social and natural capital. Equally, if not more, surprising are the implications for a poetic art of complex, harmonised relationships played out via creative improvisations expressed using instruments tuned to shared scales. JEL: B41, C10, C13, C20, C42, D70, E60, H54, I11, I21, I31, P11

The Intersubjective Markets Hypothesis

This study aims to introduce a new theoretical framework for capital markets understanding, reconciling findings from various disciplines such as anthropology, psychology, biology, statistics and physics. Assuming intersubjectivity to be the main driver of interactions between participants, the concept of market narrative is defined as subculture (or ideology) that influences the way investors react to both external events and endogenous dynamics. The new hypothesis is consistent with properties such as self-organisation, speculation, dependency, unboundedness, nonlinearity, dialogic and criticality. JEL: D40, D50, D53, D70, D80

Tribalism and Finance

We assess the correlations between tribalism and financial development in 60 countries using data averages from 2000 to 2010. The tribalism index is used to measure tribalism whereas financial development is measured from perspectives of financial intermediary and stock market developments. The long-term finance variable is stock market capitalisation while short-run variable is private and domestic credit. We find that tribalism is negatively correlated with financial development and the magnitude of negativity is higher for financial intermediary development relative to stock market development. The findings are particularly relevant to African and Middle Eastern countries where the scourge of tribalism is most pronounced. JEL: E62, H11, H20, G20, O43

Demographic Variables, Delay Discounting Models and Dysfunctional Personality Traits as Predictors of Financial Risk-Tolerance Among Community-Dwelling Italian Adults

To evaluate the effect of demographic variables, delay discounting and dysfunctional personality traits on financial risk tolerance (FRT), 281 community-dwelling adults were administered the Italian translations of the Risk-Tolerance Scale (RTS), Monetary Choice Questionnaire, Probability Discounting Questionnaire, and Personality Inventory for DSM-5-Short Form (PID-5-SF) self-report questionnaires through an online platform. Hierarchical robust regression results showed that the linear combination of demographic variables (gender and active worker status), delay discounting measures and selected PID-5-SF trait scale scores (i.e., Attention Seeking and Risk Taking) explained roughly 39% of the RTS total score. As a whole, our findings underscore the role of demographic characteristics, dysfunctional personality traits and delay discounting in FRT expression. As a result, FRT is likely to represent the linear combination of several factors that should be assessed in order to understand FRT and prevent erroneous choices among lay investors.

Access to Information and Other Correlates of Vote Buying and Selling Behaviour: Insights from Philippine Data

Access to information is a key factor influencing political behaviour and decisions. Recent studies on vote buying and selling have tried to unpack the possible drivers behind this phenomenon; yet, few studies have empirically examined the role of different sources of information. This study contributes to the nascent literature in this area by turning to a unique dataset from a survey of low-income voters in Metro Manila, the Philippines. It empirically examined the relationship between access to information and vote selling behaviour by low-income voters. It also studied other correlates of vote selling and the possible factors linked to receiving an offer. The results suggest that the quantity of information has no significant relationship with the likelihood of accepting the offer and voting for the candidate for whom the offer was made. However, the quality of information does matter. In particular, access to sources of ‘good quality information’ is negatively associated with completing the vote selling transaction (i.e., accepting the offer and voting for the candidate). This study also found evidence that when money is used for vote buying, it appears to be targeted at those with greater needs, confirming the literature that vote buying activities tend to be well targeted at poor and low-income communities. Unsurprisingly, vote buying offers are more likely in areas where elections are closely contested, and they are also more likely in socially cohesive communities. Our findings also suggest that vote buying may not necessarily be effective in the sense that it encourages only few voters to change their candidate preference. This coheres with earlier studies suggesting that vote buying and selling merely caps a longstanding patron–client relationship between politicians and low-income voters. JEL: D72, D91, K49

Weight Status and Depression in Italy: Evidence from the Second Wave of the European Health Interview Survey

This study tests the association between weight status and depression in Italy using the Second Wave of the European Health Interview Survey (EHIS2) microdata, which also provide information on weight/height and eight depressive symptoms. Using a probit regression, the empirical results show a strong positive association between weight status, proxied by body mass index, and sleep troubles and eating disorders, with females suffering more than males. In addition, low interest is negatively associated with medium and high sources of income, while depressive mood and sense of failure are negatively associated with employment status. Individuals in midlife (45–54 years old) suffer from all depressive symptoms more than those in other age classes, with females suffering more than males, with the exception of low interest and depressive mood. Furthermore, individuals with a higher level of education have a lower likelihood of suffering from all depressive symptoms. These findings suggest that policies aimed at reducing obesity rates could also reduce new and emerging types of depressive symptoms correlated with overweight/obesity, such as sleep troubles and eating disturbances. JEL: J24, I12, I1, C25