In this issue we feature 5 current papers on the theme of social capital:

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In this issue we have:

1. Does empathy Beget Guile? Chen, Daniel L.
2. Social networks and informal financial inclusion - Chai, Shijun; Chen, Yang; Huang, Bihong; Ye, Dezhu
3. A needs theory of governance - Silvia Sacchetti; Ermanno Tortia
4. Acquiring information through peers - Bernard Herskovic; Joao Ramos
5. Identifying Peer Effects Using Gold Rushers - John Lynham

1. Does empathy Beget Guile?

   Chen, Daniel L.

 Some theories about the positive impact of markets on morality suggest that  competition increases empathy, not between competitors, but between them and  third parties. However, empathy may be a necessary evolutionary antecedent to  guile, which is when someone knows what the other person wants and  intentionally deceives him or her, and deception may have evolved as a means  of exploiting empathy. This paper examines how individuals primed for empathy  behave towards third parties in a simple economic game of deception. It  reports the results of a data entry experiment in an online labor market.

 Individuals enter data randomized to be a prime for empathy, for guile, or a  control. Empathy is then measured using a Reading the Mind in the Eyes Test  and guile is measured using a simple economic game. Individuals primed for  empathy become less deceptive towards third parties. Individuals primed for  guile become less likely to perceive that deceiving an individual is unfair  in a vignette. These results are robust to a variety of controls and to  restricting to workers who entered the prime accurately. These findings are  inconsistent with the hypothesis that empathy causes guile and suggests that  empathy may cause those who are making judgements to become less deceptive.

   Keywords: Normative Commitments, Other-Regarding Preferences, Empathy,

    Deception, Guile

   JEL: D03 D64 K00

URL: http://d.repec.org/n?u=RePEc:tse:wpaper:30579&r=soc

2. Social networks and informal financial inclusion

   Chai, Shijun (School of Economics, Xinyang Normal University)

   Chen, Yang (Division of Economics, Xi'an Jiaotong-Liverpool University)

   Huang, Bihong (Asian Development Bank Institute)

   Ye, Dezhu (School of Economics, Jinan University)  Using the 2011 China Household Finance Survey (CHFS) database, this article  explores the heterogeneous impacts of social networks on informal financial  inclusion for rural and urban households and identifies two mechanisms  through which the informal institution changes households’ financial market  decisions. The IV-Probit and IV-Tobit estimation results indicate that social  networks significantly increase the probability of the household’s informal  financial market participation, the size of informal lending and financing  and the ratio of informal lending over the total household assets. By  reducing risk aversion and the precautionary saving, we find social networks  play a larger role in the urban area of China compared to the rural  counterpart. And notably, the effects of informal institution, shaped by  various cultural factors and kinships, remain strong and persistent even with  formal institutions being firmly established.

   Keywords: Social Networks, Informal financial inclusion, Risk attitude, Precautionary saving, Formal institutions

   JEL: G21 O16 P34 Z13

URL: http://d.repec.org/n?u=RePEc:xjt:rieiwp:2016-04&r=soc

3. A needs theory of governance

   Silvia Sacchetti (The Open University)

   Ermanno Tortia (University of Trento)  New-institutional economics hypothesizes imperfect rationality, self-seeking  preferences, monetary-related needs, and opportunism as fundamental features  of human behavior. Consistently, new-institutionalist models of governance  highlight the efficiency and transaction costs minimizing features of control  rights and governance. Differently, needs theory of governance, as here  presented, hypothesizes imperfect rationality, multiple needs, and  reciprocity, in which case opportunism is reduced to an exception to  individual behavior. Consistently, it presents a theory that links production  governance with the wellbeing of those partaking in production. Building on  Maslow’s human psychology, the governance model suggested in this paper is  aimed at evidencing the self-actualization potential of control rights,  organizational structures and practices. The application of Maslow’s theory  to the institutional structure of organizations suggests that the deepest  organizational layers (control rights and governance) broadly correspond to  the most basic needs in Maslow’s theory (survival, security and belonging),  while the outer layers (managerial models and employment relations)  correspond to the fulfillment of the highest needs (self-esteem and  self-actualization). Cooperative firms are used as an illustration of  governance solutions consistent with needs theory in human psychology

   Keywords: new-institutional economics; opportunism; governance; needs theory; human psychology; self-fulfillment; cooperative firms; inclusive governance

URL: http://d.repec.org/n?u=RePEc:ent:wpaper:wp59&r=soc

4. Acquiring information through peers

   Bernard Herskovic (UCLA Anderson School of Management)

   Joao Ramos (NYU)

 We study information acquisition from peers when agents’ actions balance  adaptation and coordination motives. Agents acquire information personally  and may obtain additional information by connecting to other agents. Although  equally informative regarding adaptation, the source’s relative position in  the information structure is relevant to form expectations about actions of  other players. In our setting, information sources are not perfectly  substitutable, and the information of an “opinion maker†—an agent whose  information is more public—is more informative of how others act. We show  that, when players choose their connections, (i) it is always preferable to  connect to opinion makers, and (ii) opinion makers have less incentives to  form links. These two results characterize the endogenous shape of the network: Any strict equilibrium of the network formation game generates a  hierarchical information structure. Furthermore, if the marginal cost of  acquiring information is increasing, the information structure is  “core-periphery†. We take advantage of the simplicity of the equilibrium  information structure to provide two applications. First, we analyze how much  of the aggregate volatility of forecast can the information structure account  for. Second, we study the origins of leadership: how individual  characteristics influence the role of the agent in the information structure.

URL: http://d.repec.org/n?u=RePEc:red:sed016:248&r=soc

5. Identifying Peer Effects Using Gold Rushers

   John Lynham (Department of Economics, University of Hawaii) 

Fishers pay attention to where other fishers are fishing, suggesting the  potential for peer effects. But peer effects are difficult to identify  without an exogenous shifter of peer group membership. We propose an  identification strategy that exploits a shifter of peer group membership: gold rushes of new entrants. Following an exchange-rate-induced gold rush in  an American fishery, we find that new entrants are strongly influenced by the  location choices of their peers. Over-identification tests suggest that the  assumptions underlying identification hold when new entrants are  inexperienced but identification is lost as new entrants start to potentially  influence their peers.

   Keywords: Peer Effects, Gold Rushes, Resource Extraction

   JEL: J0 Q0 D8

URL: http://d.repec.org/n?u=RePEc:hai:wpaper:201609&r=soc

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