Social choice theory

I am just learning:

An excellent summary

How do people choose?

We like to believe that we are rational, and what is called as the neoclassical theory of
economics is based on the assumptions, that humans have fixed preferences, and these preferences are transitive. Transitivity means, for example, if you decide about the dessert to complete your dinner in a fine-dining restaurant, if you prefer key lime pie to caramel fudge cheesecake, and these cheesecake to chocolate mousse, than you will prefer this pie to the chocolate mousse, too. So, the choice of a dessert is a rational activity, but in a restricted sense of the world. We would not tell somebody that she is crazy by still choosing chocolate mousse to key lime pie.

Neoclassical economic theories are based on the concept that we are rational in a sense that during decision making we are maximizing our expected gain expressed by the utility function. However, if we want to make a mathematical analysis, say to maximize the utility function for the dessert selection, we should be able to assign numerical values to our desire to consume pie, cheesecake or mousse. The rational choice theory made possible to represent and solve problems of choice in a formal manner, and was the basis of many results in decision theory, game theory, and microeconomics. While probably the even the most dogmatic mainstream economist believed that ”hyperrational” utility maximizing agent is a plausible model for describing human behavior, and the rational choice theory was attacked from different angles, still the new paradigm is being emerged slowly. Herbert Simon, who worked far from the mainstream, somewhat unexpectedly got the Nobel prize in economics in 1978, for introducing and propagating the concept of bounded rationality. A satisfactory, even not optimal solution is good. We have to accept that our ability of making decisions is limited by a number of constraints, such as the complexity of a problem, limits on resources (such as time and money), limited available information, our limited cognitive skills, values, influence by our feelings etc. With the words of the political scientist Bryan D Jones:

             “As Herbert Simon . . . notes, homo politicus is not irrational. He seems to behave
purposefully, adopting strategies that are relevant to general goals, given the limits of cognitive capacity and the complexity of the political world. But these facets to try to make it impossible to maximize and often inappropriate maximize. Homo politicus seems to Simon to operate according to the model of bounded rationality, that is, adopting means that are relevant to goals within environmental and cognitive processing limits.”

Cognitive bias makes us ”predictably irrational”, by using with a fashionable expression. (Dan Ariely). It frequently blocks people from making rational decisions, even they try to do their best. But what is rationality behavior? Is it true that we always behave in favor of our narrow economic interest? A counterexample is the Ultimatum Game There are two players, the proposer and the responder, who have to agree on how to split a certain amount of money. The proposer makes an offer. The responder has two possibilities, to accept or reject. If she accepts, the deal has been done, If she rejects neither player gets even a single penny. Rationality would require to accept any positive offer, even the smallest one. In this case, the proposer would obtain the overwhelming majority of the entire sum. Studies with humans across different cultures showed that often the responders reject offers below 30% . Still we may say the expected utility concept
works, but we should take into account the psychological benefit for being able to reject an offer just to penalize the miserly proposer.

Richard Thaler, Amos Tversky and Daniel Kahneman not only revolutionized behavioral
economics, but also wrote best-seller books. The takeaway is that we should understand and accept that we humans are evolutionary wired to make errors in judgment (including ranking) and we need a nudge to make decisions that are in our own best interest. The understanding our own fallibility can help us to bring better decisions. The behavioral economists’ approach enhances the rational choice model.

 

Ranking the Places with the Most (and Least) Fast Food in America

“Close to a quarter of adults in American eat fast food *every single day*. The popularity of the drive-through window is a good indicator that we like to eat on the go, or at least that we are too busy to stop for a meal. It’s not surprising then, that fast food restaurants are in every city in America. “

Read Ranking the Places with the Most (and Least) Fast Food in America

 

Happiness:… and now Finland is the first

World Happiness Report 2018:

”The World Happiness Report is a landmark survey of the state of global happiness. The World Happiness Report 2018, ranks 156 countries by their happiness levels, and 117 countries by the happiness of their immigrants.

The main focus of this year’s report, in addition to its usual ranking of the levels and changes in happiness around the world, is on migration within and between countries.

The overall rankings of country happiness are based on the pooled results from Gallup World Poll surveys from 2015-2017, and show both change and stability. There is a new top ranking country, Finland, but the top ten positions are held by the same countries as in the last two years, although with some swapping of places. Four different countries have held top spot in the four most recent reports- Denmark, Switzerland, Norway and now Finland….”.

”… Perhaps the most striking finding of the whole report is that a ranking of countries according to the happiness of their immigrant populations is almost exactly the same as for the rest of the population. The immigrant happiness rankings are based on the full span of Gallup data from 2005 to 2017, sufficient to have 117 countries with more than 100 immigrant respondents….:

Best States ranking of U.S. states

Best States Overall Ranking has been published today. Iowa. Minnesota, Utah top the list.

What Goes Into the Overall Score?

Health Care 16%

Education 16%

Economy 14%

Opportunity 13%

Infrastructure 12%

Crime & Corrections 11%

Fiscal Stability 10%

Quality of Life 8%

If you are interested in the methodology, read the link here.

Measuring dominance and understanding the formation of hierarchies

Measuring dominance

There is a long tradition to observe animal behavior. Cave painters liked to illustrate animals. According to the archaeologists the oldest date animal cave painting identified so far, is a pig that has a minimum age of 35,400 years old was found in Indonesia. It is known that the most common subjects in cave paintings are large wild animals.
The History of Animals by Aristotle (384–322 BCE) contains many accurate eye-witness observations. However, the continuous observation of the social behavior of animal groups in their natural environment with the smallest possible intervention proved to be very difficult. Ecologists and ethologists use wireless sensors and Global Positioning System (GPS) to track and monitor the behavior and interaction of freely moving animals.

The emergence of dominance hierarchy

Linear dominance hierarchies proved to be very efficient for resource management in the community of social animals. Since more and more data have been accumulated, it is possible to test hypotheses about the possible mechanisms of the formation have. Within the framework of the Amboseli Baboon Research Project data on the behavior of wild baboon has been obtained and and analyzed. Ten thousands observation of agonistic encounters have been made. The encounters have \dots winners and losers, so basically the individuals participated in a tournament. Guess what is the method animal behavior researcher use to analyze the results of past ”games” and predict the outcome of the future ones? The Elo rating method! The so-called ”winner and loser effects” seems to be convincing. It describes the phenomenon in which winners tend to become more likely to win in subsequent encounters, and losers tend to become more likely to lose.

Self-organizing dominance hierarchies in a wild primate population