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Heuristics are often characterized as rules of thumb that can be used to speed up the process of decision-making. They have been examined across a wide range of fields, including economics, psychology, and computer science. However, scholars still struggle to find substantial common ground. This study provides a historical review of heuristics as a research topic before and after the emergence of the subjective expected utility (SEU) theory, emphasising the evolutionary perspective that considers heuristics as resulting from the development of the brain. We find it useful to distinguish between deliberate and automatic uses of heuristics, but point out that they can be used consciously and subconsciously. While we can trace the idea of heuristics through many centuries and fields of application, we focus on the evolution of the modern notion of heuristics through three waves of research, starting with Herbert Simon in the 1950s, who introduced the notion of bounded rationality and suggested the use of heuristics in artificial intelligence, thereby paving the way for all later research on heuristics. A breakthrough came with Daniel Kahneman and Amos Tversky in the 1970s, who analysed the biases arising from using heuristics. The resulting research programme became the subject of criticism by Gerd Gigerenzer in the 1990s, who argues that an ‘adaptive toolbox’ consisting of ‘fast-and-frugal’ heuristics can yield ‘ecologically rational’ decisions.
In their seminal 1954 paper on the existence of competitive equilibrium, Arrow and Debreu state what they call an “important principle”, namely that it is necessary for the existence of equilibrium that every consumer has some asset or can supply some labour service which has a positive price at equilibrium. It does not seem to have been noticed that this claim is incorrect. We provide a very simple model of a private ownership economy with three goods where a competitive equilibrium exists, but consumers who have nothing to sell but their labour end up with zero wealth in equilibrium. As zero wealth must be taken to mean non-survival, and the Arrow–Debreu model is frequently interpreted as assuming that all consumers can survive without trade, we also briefly discuss the issue of non-survival in equilibrium. We finally point out that our example illustrates the possibility that technological progress may result in a situation where the value of work becomes negligible.
Stabilization of the economy through fiscal policies has been a broadly discussed subject over many decades. It gained momentum again after the 2008 global recession and is of utmost interest with regard to the COVID-19 crisis. The purpose of this paper is to examine the effects of fiscal policy on output and inflation. The data used to conduct the meta-analysis consist of empirical and calibrated fiscal impulse values of Dynamic Stochastic General Equilibrium studies and databases. An increase in fiscal policy shock by one percent leads to a one-period rise in output and inflation by 0.104 and 0.03 percent. Studies that employ the Bayesian method deliver higher effect. The interaction of fiscal impulse and interest jointly affect the output. Fiscal policy intervention in investment has more effect on growth than inflation-friendly government consumption. This study would help policy makers design stabilization strategies, and researchers to further investigate the subject matter and reconcile the contradictory conclusions of previous studies.
Heuristics are cognitive shortcuts or rules of thumb that can be used to speed up the process of decision-making. They have been examined across a wide range of fields like economics, psychology, computer science and technology. However, scholars still struggle to find substantial common ground. This study provides a historical overview of heuristics as a research topic emphasizing the evolutionary perspective that takes heuristics as resulting from the development of the brain. Unlike much of the literature, we find it useful to clearly distinguish between conscious heuristics and subconscious heuristics. While we can trace the idea of heuristics through many centuries and fields of application, we focus on the evolution of the “modern” notion of heuristics through three waves of research and theory development starting with Herbert Simon who introduced the inspiring theory of “bounded rationality”, thereby paving the way for all following researchers to dig deeper into heuristics. Then came the breakthrough of Daniel Kahneman and Amos Tversky who established a cognitive basis for human biases that arise from heuristics, and later the work of Gerd Gigerenzer who provided a practical “toolbox” consisting of “fast-and frugal” heuristics that are meant to yield “ecologically rational” decisions. This study aims to provide a comprehensive roadmap of what stages research on the notion of heuristics followed in an attempt to compile and explain the diversity of perspectives within the existing literature.
The paper points out that Adam Smith’s famous argument about the “iisible hand” (IH) of markets can be ierted. While the IH argument suggests that the baker and butcher do what is in their costumers’ interests not because they care for their costumers, but out of their own self-interest, one can also defend the coerse claim: if one cares for other people and finds a way to satisfy their needs, one can expect that those others will be willing to pay for the satisfaction of their needs. The paper argues that the IH argument has a strong link to the view that the ultimate goal of management should be “profit maximization” and to neo-liberalism’s tenet that in a market economy where companies attempt to maximize profits, a “socially optimal” allocation will be achieved. It is argued, however, that profit maximization is well-defined only within a mathematical model, while real-world decision-making requires one to choose the “relevant set” of options before any assessment of associated profits can be attempted. “Profit maximization” is therefore characterized as a heuristic for managerial decision-making, and it is pointed out that it is by no means essential for management to be successful and sustainable. The ierse IH argument supports natural alternatives, such as Prahalad and Hart’s “bottom-of-the-pyramid” and Yunus’s “social entrepreneurship” approach. Both require the manager to focus on people’s needs first, and regard the “money-making” aspect as secondary.
This paper provides deeper insights into consumer’s lower price limits for organically, locally and unlabelled food products. Behavioral experiments were conducted based on a representative sample of 606 German food buyers. Using van Westendorp’s price sensitivity meter, authors have iestigated the lower price limits for organic, local and unlabelled apples and eggs. Results indicate significant differences between labels but also between product categories. The lower price limit for organic food products is the highest, while lower price limits for local food differ between the product categories. The findings of the research are likely to have considerable importance for food producers and retailers’ optimal pricing for organic and local food products. Abstract in German: Dieser Artikel thematisiert die Bedeutung von Preisuntergrenzen bei biologischen, regionalen und koentionellen Lebensmitteln. Mittels eines umfangreichen verhaltenswissenschaftlichen Experiments untersuchen die Autoren auf Basis einer Stichprobe von 606 deutschen Lebensmittelkäufern mit repräsentativer Struktur die Preisuntergrenzen von koentionellen, biologischen und regionalen Äpfeln bzw. Eiern und vergleichen diese miteinander. Die Ergebnisse zeigen signifikante Unterschiede zwischen den unterschiedlichen Kennzeichnungen, aber auch zwischen den Produktkategorien. Bei biologischen Lebensmitteln ist die Preisuntergrenze verglichen mit den anderen Kennzeichnungen am höchsten, während es bei regionalen Lebensmitteln zwischen den Produktkategorien signifikante Unterschiede gibt. Die Ergebnisse der Studie sind besonders für Lebensmittelhersteller und Einzelhändler von großer Bedeutung für die optimale Preisgestaltung für biologische und regionale Lebensmittel.
Introduction
(2017)
This collection iestigates various issues of iestment and credit that are of importance to any developing economy. It uses micro- and macro-economic data from Ethiopia to analyse such topics as determinants of foreign direct iestment, of bank credit and trade credit, microfinance and poverty reduction, and rural credit issues. The book applies sophisticated, state-of-the-art statistical techniques to analyse the data and derive policy recommendations. To the extent that the Ethiopian economy shares many features and policy issues with other developing economies, the text will be of interest to academics working in the field of development economics, and also to policy makers and policy analysts in developing countries and in development agencies throughout the world.
Purpose – Against the background of still insufficient achievements of particular millennium development goals (MDGs), contributions of private business to the alleviation of poverty have been increasingly called for. The purpose of this paper is to address this issue and explore the CSR strategies of transnational corporations (TNCs) regarding their impact on poverty alleviation within the construction industry in India, in order to gain an insight on how business is engaged in the improvement of the situation of the poor, and to derive recommendations on how pertinent CSR strategies can be further developed._x000D_ Design/methodology/approach – The paper collects primary data for monitoring the CSR activities of the largest TNCs within the construction industry in India to conduct a CSR ranking of the sample TNCs in terms of CSR engagement with particular focus on poverty alleviation with respect to the MDGs._x000D_ Findings – The findings show that the core business-oriented focus of the CSR activities of the construction industry is mainly on MDG 1 and 7. Nevertheless, the construction industry still needs to gear its core business towards business models that enhance the housing conditions of the poor and to improve the general social conditions within this industry. Based on the findings the paper suggests a selected industry-specific governmental CSR guidance to propel the implementation of CSR as business case._x000D_ Practical implications – This work provides policy implications for the government and outlines the areas for business practitioners where CSR strategies should be enhanced to meet social needs and contribute to the alleviation of poverty._x000D_ Originality/value – First of its kind study in scrutinizing the contribution of CSR to the alleviation of poverty, particularly regarding TNCs of the construction industry in India.