More Like this

1. Economic Agents as Imperfect Problem Solvers

   https://doi.org/10.1093/qje/qjac027  

   Ilut, Cosmin; Valchev, Rosen (July 2022, The Quarterly Journal of Economics)

   Abstract We develop a novel bounded rationality model of imperfect reasoning as the interaction between automatic (System 1) and analytical (System 2) thinking. In doing so, we formalize the empirical consensus of cognitive psychology using a structural, constrained-optimal economic framework of mental information acquisition about the unknown optimal policy function. A key result is that agents reason less (more) when facing usual (unusual) states of the world, producing state- and history-dependent behavior. Our application is an otherwise standard incomplete-markets model with no a priori behavioral biases. The ergodic distribution of actions and beliefs is characterized by endogenous learning traps, where locally stable state dynamics generate familiar regions of the state space within which behavior appears to follow memory-based heuristics. This results in endogenous behavioral biases that have many empirically desirable properties: the marginal propensity to consume is high even for unconstrained agents, hand-to-mouth status is more frequent and persistent, and there is more wealth inequality than in the standard model. 

   more » « less
2. Data-driven synthesis of optimization-based controllers for regulation of unknown linear systems

   https://doi.org/10.1109/CDC45484.2021.9682795  

   Bianchin, Gianluca; Vaquero, Miguel; Cortés, Jorge; Dall'Anese, Emiliano. (December 2021, Proceedings of the IEEE Conference on Decision Control)

   This paper proposes a data-driven framework to solve time-varying optimization problems associated with unknown linear dynamical systems. Making online control decisions to steer a system to the solution trajectory of a time-varying optimization problem is a central goal in many modern engineering applications. Yet, the available methods critically rely on a precise knowledge of the system dynamics, thus requiring ad-hoc system identification and model refinement phases. In this work, we leverage tools from behavioral theory to show that the steady-state transfer function of a system can be computed from control experiments without knowledge or estimation of the system model. Such direct computation allows us to avoid the explicit model identification phase, and is significantly more tractable than the direct model-based computation. We leverage the data-driven representation to design a controller inspired from a gradient-descent method that drives the system to the solution of an unconstrained optimization problem, without any knowledge of time-varying disturbances affecting the model equation. Results are tailored to cost functions that are smooth and satisfy the Polyak-Lojasiewicz inequality. Simulation results illustrate the technical findings. 

   more » « less
3. The persistence of cognitive biases in financial decisions across economic groups

   https://doi.org/10.1038/s41598-023-36339-2  

   Ruggeri, Kai; Ashcroft-Jones, Sarah; Abate_Romero_Landini, Giampaolo; Al-Zahli, Narjes; Alexander, Natalia; Andersen, Mathias Houe; Bibilouri, Katherine; Busch, Katharina; Cafarelli, Valentina; Chen, Jennifer; et al (June 2023, Scientific Reports)

   While economic inequality continues to rise within countries, efforts to address it have been largely ineffective, particularly those involving behavioral approaches. It is often implied but not tested that choice patterns among low-income individuals may be a factor impeding behavioral interventions aimed at improving upward economic mobility. To test this, we assessed rates of ten cognitive biases across nearly 5000 participants from 27 countries. Our analyses were primarily focused on 1458 individuals that were either low-income adults or individuals who grew up in disadvantaged households but had above-average financial well-being as adults, known as positive deviants. Using discrete and complex models, we find evidence of no differences within or between groups or countries. We therefore conclude that choices impeded by cognitive biases alone cannot explain why some individuals do not experience upward economic mobility. Policies must combine both behavioral and structural interventions to improve financial well-being across populations. 

   more » « less
4. Economic system justification predicts muted emotional responses to inequality

   https://doi.org/10.1038/s41467-019-14193-z  

   Goudarzi, Shahrzad; Pliskin, Ruthie; Jost, John T.; Knowles, Eric D. (January 2020, Nature Communications)

   Abstract Although humans display inequality aversion, many people appear to be untroubled by widespread economic disparities. We suggest that such indifference is partly attributable to a belief in the fairness of the capitalist system. Here we report six studies showing that economic ideology predicts self-reported and physiological responses to inequality. In Studies 1 and 2, participants who regard the economic system as justified, compared with those who do not, report feeling less negative emotion after watching videos depicting homelessness. In Studies 3–5, economic system justifiers exhibit low levels of negative affect, as indexed by activation of the corrugator supercilii muscle, and autonomic arousal, as indexed by skin conductance, while viewing people experiencing homelessness. In Study 6, which employs experience-sampling methodology, everyday exposure to rich and poor people elicits less negative emotion among system justifiers. These results provide the strongest evidence to date that system-justifying beliefs diminish aversion to inequality in economic contexts. 

   more » « less
5. Equality of access and resilience in urban population-facility networks

   https://doi.org/10.1038/s42949-022-00051-3  

   Fan, Chao; Jiang, Xiangqi; Lee, Ronald; Mostafavi, Ali (March 2022, npj Urban Sustainability)

   Abstract While conceptual definitions have provided a foundation for measuring inequality of access and resilience in urban facilities, the challenge for researchers and practitioners alike has been to develop analytical support for urban system development that reduces inequality and improves resilience. Using 30 million large-scale anonymized smartphone-location data, here, we calibrate models to optimize the distribution of facilities and present insights into the interplay between equality and resilience in the development of urban facilities. Results from ten metropolitan counties in the United States reveal that inequality of access to facilities is due to the inconsistency between population and facility distributions, which can be reduced by minimizing total travel costs for urban populations. Resilience increases with more equitable facility distribution by increasing effective embeddedness ranging from 10% to 30% for different facilities and counties. The results imply that resilience and equality are related and should be considered jointly in urban system development. 

   more » « less