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Sunday, January 21, 2007

Are Markets Driven by Positive Behavior?

Though this research is attempting to show otherwise, I don't think good behavior will prove to be to be a better foundation for markets and economic decision making than the standard assumption that individuals maximize their self-interest. I am going to leave it at that:

Testing the role of trust and values in financial decisions, by Evelyn Iritani, LA Times: Paul Zak scanned the UCLA computer lab where 18 young men were tapping away at keyboards. Some of the students had been administered a dose of testosterone... Now, Zak was monitoring their behavior as they played an experimental game designed to measure trust. ... Would they be more selfish or generous? Helpful or aggressive?

The Claremont Graduate University researcher was exploring new avenues ... in economics. Along with like-minded scholars, he is trying to prove that good behavior, rather than self-interest, "is really what makes the economy work." ... They want to demonstrate ... that markets are driven not by greed but by positive behavior. ...

With their findings, they hope to persuade political and business leaders to rethink the way they manage corporations and the marketplace. One goal is to reduce government regulation, which they believe has led people to rely too heavily on legal penalties and has discouraged them from adhering to their own sense of right and wrong.

"Free enterprise has been badly described and badly sold," said Monika Gruter Cheney, executive director of the Gruter Institute for Law and Behavioral Research. The think tank in Portola Valley, Calif., is sponsoring a project dubbed Free Enterprise: Values in Action, which supports research by Zak and others.

Its main financial backer is John Templeton, a British billionaire who founded one of the world's most profitable investment funds. He is a devout Christian whose foundation funds research on the science of spirituality, including the power of forgiveness, love and trust. The organization ... has drawn criticism for its early support of intelligent design...

The Templeton foundation, which boasts $1.1 billion in assets, has become a powerful force in the science world. Last year, it distributed about $55 million in grants, nearly $7 million of which was devoted to projects focusing on free enterprise, open markets and values.

Barnaby Marsh, director of venture philanthropy strategy for the Templeton foundation, denies that his group is pursuing a religious agenda. He said Templeton himself was interested in how science could be used to explain the forces that drive competition, innovation and wealth creation. "Is free enterprise driven by greed only, or are there other factors as well?" asked Marsh, an evolutionary biologist...

Some prominent academics have lent their support to the Gruter Institute's work. They include Nobel Prize-winning economist Vernon L. Smith and primatologist Frans de Waal of Emory University in Atlanta, who coined the phrase "primate economics" to describe the cooperative behavior he had observed in capuchins and chimpanzees. ...

One area of interest to the Templeton foundation and the Gruter project participants is neuroeconomics... Tyler Cowen, an economics professor at George Mason University ..., said some economists might be wary of this new discipline because it was "threatening to make traditional economics a little less important, a little less exalted." ...

For his part, Zak said he expected, and even welcomed, criticism of his work, which was why he had focused on delivering scientifically provable evidence to explain economic behavior. "I really want to shake up the economists," he said. ...

    Posted by on Sunday, January 21, 2007 at 12:15 AM in Economics | Permalink  TrackBack (0)  Comments (10)


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