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The equity premium puzzle refers to the observation that people invest far less in the stock market than is implied by measures of their risk aversion in other contexts. Here, we argue that light on this puzzle can be shed by the hypothesis that human risk attitudes were at least partly shaped by our evolutionary history. In particular, a simple evolutionary model shows that natural selection will, over the long haul, favor a greater aversion to aggregate than to idiosyncratic risk. We apply this model--via both a static model of portfolio choice and a dynamic model that allows for intertemporal tradeoffs--to show that an aversion to aggregate risk that is derived from biology may help explain the equity premium puzzle. The type of investor favored in our model would indeed invest less in equities than other common observations of risk-taking behavior from outside the stock market would imply, while engaging in reasonable tradeoffs over time. [ABSTRACT FROM AUTHOR]

See Harris ([12] chapter 13) for data on indirect infanticide in modern societies and Hausfater and Hrdy ([16]) on infanticide in animals and humans. Keywords: human self domestication; infanticide; pleistocene; reactive aggression; violence EN human self domestication infanticide pleistocene reactive aggression violence N.PAG N.PAG 5 05/08/21 20210505 NES 210505 Introduction The notion of domestication has played a role in attempts to understand human evolution going right back to Darwin ([8]) (see Hare, [10]). Hare ([10]) lays out his account in "Survival of the Friendliest" and Wrangham has done much of the recent work on HSD; see Wrangham ([31]) and references there. Evidence On Infanticide And Child Homicide In The Pleistocene Empirical evidence of infanticide has been documented in both human societies and in non-humans. [Extracted from the article]

Understanding the purpose of sex is a fundamental unresolved problem in evolutionary biology. The difficulty is not that there are too few theories of sex, the difficulty is that there are too many and none stand out. To distinguish between theories, we ask: Why are there no triparental species with offspring composed of the genetic material of three individuals? A successful theory should confer an advantage to biparental sex over asexual reproduction without conferring an even greater advantage to triparental sex. Of two leading theories (red queen and mutational), we show that only one is successful in this sense. [ABSTRACT FROM AUTHOR]

In response to the question in the title, Does Altruism Exist?, David Sloan Wilson argues forcefully that altruism exists and that the biological mechanism of group selection is responsible. He argues that group selection should be taken especially seriously for humans, since cultural evolution is especially important for us. Economists' view of basic human motivations should then include altruism. Wilson promotes a strong form of pervasive altruism, which seems bound to be inconsistent with many economic phenomena. Although a moderate version of the position he advocates is not easily dismissed, it is unclear what such an extended theory would look like. (JEL D64, Z13) [ABSTRACT FROM AUTHOR]

We consider a growth model in which intergenerational transfers are made via stocks of private and public capital. Private capital is the outcome of individuals' private savings while decisions regarding public capital are made collectively. We hypothesize that private saving choices evolve through individual selection while public saving decisions are the result of group selection. The main result of the paper is that the equilibrium rate of return to private capital is at least 2-3 percent more than the rate of return to public capital. In other words, social choices involving intertemporal trade-offs exhibit much more patience than individual choices do. (JEL D11, D71, D91, H43) [ABSTRACT FROM AUTHOR]

Copyright of Canadian Journal of Economics is the property of Wiley-Blackwell and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

We examine the evolutionary foundations of intertemporal preferences. When all the risk affecting survival and reproduction is idiosyncratic, evolution selects for agents who maximize the discounted sum of expected utility, discounting at the sum of the population growth rate and the mortality rate. Aggregate uncertainty concerning survival rates leads to discount rates that exceed the sum of population growth rate and death rate, and can push agents away from exponential discounting. (JEL D11, D81, D91) [ABSTRACT FROM AUTHOR]

We reexamine Alan R. Rogers' (1994) analysis of the biological basis of the rate of time preference. Although his basic insight concerning the derivation of the utility function holds up, the functional form he uses does not generate equilibrium evolutionary behavior. Moreover, Rogers relies upon an interior solution for a particular kind of intergenerational transfer. We show such interior solutions need not generally arise. Hence Rogers most striking prediction, namely that the real interest rate should be about 2 percent per annum, does not follow. ( JEL D11, D91) [ABSTRACT FROM AUTHOR]

The article reports on the use of evolutionary models by economists to determine the source of intertemporal preferences. Evolution will select the reproductive strategies, or life histories, that will lead to larger growth for a group of individuals. From equations regarding both semelparous and iterparous entities, it is shown that evolution induces entities to behave in a certain manner through exponential discounting at the sum of the death and optimal growth rates, which identifies the optimal strategy to survive and continue the population. The transition of preference over births to preference over consumption in the equation can be made by assuming births are a function of consumption where preferences over consumption are induced by preferences over births.

The article considers the relations between economics, aging, mortality and biology. The goals and intent of the paper are to offer a theory of optimal aging with mortality rates that increase endogenously with age, and to present a connection between biology and economics. William D. Hamilton's classical biological theory on aging is refuted. The authors' theory is built, in part, off of Thomas B. L. Kirkwood's "disposable soma" theory. An analysis of somatic cells, germ cells, cell quality, and the cost of mutations is presented.

Copyright of Canadian Journal of Economics is the property of Wiley-Blackwell and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Some of the most obvious complex adaptive systems are biological. A key concern in biology is how the overall properties of systems relate to the behaviour of their components. Competition between these components in the form of an arms race, the ‘Red Queen effect’, helps explain the trend towards more complex organisms. This effect helps explain why these biological systems became and remained complex. It may well also have driven the most distinctive and economically relevant of human biological characteristics – high intelligence. Analogously, competition in the form of the Red Queen effect is a promising avenue of research within economics. [ABSTRACT FROM AUTHOR]

The economics of hunting and gathering must have driven the biological evolution of human characteristics, since hunter-gatherer societies prevailed for the two million years of human history. These societies feature huge intergenerational resource flows, suggesting that these resource flows should replace fertility as the key demographic consideration. It is then theoretically expected that life expectancy and brain size would increase simultaneously, as apparently occurred during our evolutionary history. The brain here is considered as a direct form of bodily investment, but also crucially as facilitating further indirect investment by means of learning-by-doing. (JEL A12, J10, P00) [ABSTRACT FROM AUTHOR]

Examines the coevolution of intelligence and longevity with intergenerational transfers. Presence of the life-cycle transfer between age groups on a population; Relationship between the brain and longevity; Expansion of the cerebral cortex among higher primates.

The article focuses on the characteristics of human beings from the economic perspective on individual decision making. The characteristics include preferences, beliefs and rationality. Beliefs are the probabilities with which people think various outcomes will occur. Preferences are the rankings over the set of gambles that are based on such beliefs over the outcomes. Economists impose only rather weak assumptions on preferences. The economist's basic picture of preferences, beliefs and rationality has been subject to challenges from a growing number of empirical anomalies. Although many of these challenges to the common assumptions of economists have merit, it can be difficult to differentiate large and systematic anomalies. These three characteristics are viewed as the joint outcome of a principal-agent problem, where Nature is the principal and the individual is the agent. It is intriguing that this notion of Nature and individual choice locked together in the decision-making process mirrors some structural features of the brain.

Consider the possible biological origin of the expected utility criterion. On the one hand, if individuals possess a utility function stemming from the rate of production of expected offspring, they can rapidly adapt to arbitrary unknown distributions in a bandit problem. Embedding such a utility function in a simple rule of thumb involving no beliefs about probabilities leads to evolutionary optimality. On the other hand, if any rule whatever yields evolutionary optimality for all distributions, this precise utility function must be implicit, in a revealed preference sense. [ABSTRACT FROM AUTHOR]

This article advocates consideration of the biological basis of economic behavior. Although human evolutionary history is inherently fascinating and logically must be the foundation of economic behavior, the case is not limited to these observations. Neither do these observations flatly contradict the usual view in economics that preferences can be taken as primitive and that behavior is fully rational. Reductionism for its own sake is not advocated, rather it seems that the marginal product of work on biological foundations now exceeds that of work on more elaborate higher level models of economic behavior. Topics in the present paper will be treated in the rough order in which these phenomena might have evolved. Most importantly, utility is taken to have arisen prior to a high degree of intelligence or rationality. That is, although evolution might have substantially modified utility payoffs after their initial appearance and a vestige of rationality is needed to model how preferences first evolved, it is difficult to contemplate increasing rationality without preexisting preferences.

Presents a selective survey of work on evolutionary models of games. Evolution's generation of the attitudes to risk that are the basis of strategic behavior; Attitudes to risk's possible conformation to the expected utility theorem; Applications to various coordination games.

This paper investigates conditions ensuring uniqueness of the pattern of endogenous strategic timing. A given normal form game, G, is embedded in an extensive form game, H, possessing two explicit periods. Choice of the earlier time is costlier than is choice of the later. With two players, the results here reinforce the validity of an approach due to D'Aspremont and Gérard-Varet. With three players, however, an example demonstrates that H can have another completely distinct equilibrium from that defined by these two authors. This new equilibrium involves two 'leaders' and a single 'follower.' [ABSTRACT FROM AUTHOR]

Demand uncertainty is introduced into a dynamic model of duopoly. In the face of this uncertainty each firm is unable to observe its rival's previous period's output. Its strategy is contingent, therefore, on its own last period's output and on the last period's price. The sole Nash equilibrium is a repetition of the equilibrium in the one-period problem. [ABSTRACT FROM AUTHOR]

Abstract. Building on the recent literature in the 'new' urban economics, this paper develops a theoretical model of the recreational land market. The model indicates how changes in gasoline prices (e.g. the energy 'crunch') and changes in urban land prices (e.g. the recent urban land price 'boom') affect recreational land prices. Using the model and data on Ontario cottage lots, an attempt is made to quantify the effects of the energy crunch and urban land price boom on the Ontario recreational land market. The results indicate that the crunch and the boom have both had a significant impact on the price of recreational land in Ontario. [ABSTRACT FROM AUTHOR]

Examines the argument based on population growth to bolster marginal productivity theory. Example of illuminates and intimate relationship between growth and the distribution of income; Existence of significant mobility in modern society; Division of norms into output according to marginal productivity.

This paper analyzes a simple model of price-selling duopoly in which strategic timing is endogenous. Each firm chooses, in addition to a price, a time at which this price is fixed. Simultaneous moves are permitted, but the only subgame perfect equilibria are more reminiscent of Stackelberg than of Bertrand. For example, if one firm prefers leading and the other prefers following, precisely this pattern results. An asymmetry is uncovered between the case where both prefer to follow and that where both prefer to lead. [ABSTRACT FROM AUTHOR]

Examines the existence of Nash equilibrium in reaction functions for dynamic models of oligopoly. James Friedman's definition of a Nash equilibrium in reaction functions; Assumptions in the Friedman's work; Condition for the restoration of equilibrium.

Presents a model for depletion of natural resources. Assumptions of the model; Optimality conditions for the model; Consideration of the Rawlsian criterion to be a limiting case.

This paper advocates a generalized N-firm Stackelberg model as a plausible testable alternative description of oligopoly. A pure-strategy equilibrium must exist for this model. The main result is that efficiency obtains in the limit as the scale of each firm is shrunk relative to demand This is demonstrated for the case of U-shaped average cost and also for that of natural monopoly. [ABSTRACT FROM AUTHOR]

Examined the consequences of the valuation of status for risk taking. Explanation of the fundamental phenomenon addressed by economists Friedman and Savage; Efficiency implications of the valuation of status; Criterion of the Pareto efficiency.

This article discusses the notion of a consistent conjectural equilibrium for duopoly. Researcher, Timothy Bresnahan defines the notion of a consistent conjectural equilibrium for duopoly. Within the class of conjectural variation equilibria, equilibria with the following property are sought, like the conjectural variation function and the derived reaction function should be locally identical for each of the two firms. To quote researcher, William Fellner, firms are then "right for the right reason." This concept of a consistent conjectural equilibrium (CCE) has inherent interest and holds out the prospect of reducing the "embarrassment of riches" resulting from the great multiplicity of conjectural variation equilibria. Bresnahan is able to find a CCE when demands and marginal costs are linear. Furthermore, he shows that this CCE is unique within the class of polynomials. CCE continue to exist with nonlinear demands and marginal cost. It is necessary, first of all, to reformulate Bresnahan's problem. This is shown to involve the solution of an (ominously) unusual type of differential-difference equation.

The article presents a reply to a commentary on the development of the biological basis of modern economic behavior. The author states that he is gratified that authors of the commentary share his enthusiasm for developing the biological basis of modern economic behavior. Both the authors of the article argue that this approach may lead to preferences that differ from those that are standard in economics. The author agrees, while also suggesting that an evolutionary perspective should be used to maintain restrictions on the resulting theory. He adds that it could then perform "triage" on aspects of economic theory that empirical testing calls into question. That is, an evolutionary perspective could help decide which aspects of this theory should be saved and which should be modified. The author states that it is first worth emphasizing that in his article, he showed how the distinction between idiosyncratic and aggregate risk led to attitudes to risk that were interdependent in a related but distinct sense.