RE: Evolution of Beliefs and Preferences

From: Lee Corbin (lcorbin@tsoft.com)
Date: Sun Jun 15 2003 - 12:59:39 MDT

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    Robin writes

    > What beliefs and preferences will our descendants have? If they are determined
    > by a evolutionary selection process, this paper generalizes previous results to
    > suggest that they will be Bayesians who do not discount future consumption.

    I'm interested in knowing how strongly you (and others) rate
    various assumptions here. Two immediate questions are

    1. To what degree would you say that the current world sample
       of humanity arose via evolutionary selection processes?

    2. What proportion of human beings in the United States would
       you guess to be Bayesians?

    Thanks,
    Lee
     
    > -----------------------------------------------------------------------------
    > http://econpapers.hhs.se/paper/cwlcwldpp/1319.htm
    >
    > If You're So Smart, Why Aren't You Rich?
    > Belief Selection in Complete and Incomplete Markets
    > by Lawrence Blume and David Easley
    >
    > This paper provides an analysis of the asymptotic properties of consumption
    > allocations in a stochastic general equilibrium model with heterogeneous
    > consumers. In particular we investigate the market selection hypothesis,
    > that markets favor traders with more accurate beliefs. We show that in any
    > Pareto optimal allocation whether each consumer vanishes or survives is
    > determined entirely by discount factors and beliefs. Since equilibrium
    > allocations in economies with complete markets are Pareto optimal, our
    > results characterize the limit behavior of these economies. We show that,
    > all else equal, the market selects for consumers who use Bayesian learning
    > with the truth in the support of their prior and selects among Bayesians
    > according to the size of the their parameter space. Finally, we show that in
    > economies with incomplete markets these conclusions may not hold. Payoff
    > functions can matter for long run survival, and the market selection
    > hypothesis fails.
    > -----------------------------------------------------------------------------
    >
    >
    >
    > Robin Hanson rhanson@gmu.edu http://hanson.gmu.edu
    > Assistant Professor of Economics, George Mason University
    > MSN 1D3, Carow Hall, Fairfax VA 22030-4444
    > 703-993-2326 FAX: 703-993-2323
    >
    >

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