JUST A BIG MISUNDERSTANDING? BIAS AND BAYESIAN AFFECTIVE POLARIZATION

I present a model of affective polarization—growth in hostility over time between two parties—via quasi-Bayesian inference. In the model, two agents repeatedly choose actions. Each choice is based on a balance of concerns for private interests and the social good. More weight is put on private interests when an agent's character is intrinsically more self-serving and when the other agent is believed to be more self-serving. Each agent Bayesian updates about the other's character, and dislikes the other more when she is perceived as more self-serving. I characterize the effects on growth in dislike of three biases: a prior bias against the other agent's character, the false consensus bias, and limited strategic thinking. Prior bias against the other's character remains constant or declines over time, and actions do not diverge. The other two biases cause actions to become more extreme over time and repeatedly be “worse” than expected, causing mutual growth in dislike, that is, affective polarization. The magnitude of dislike can become arbitrarily large—even when both players are arbitrarily “good” (unselfish). The results imply that seemingly irrelevant cognitive biases can be an important cause of the devolution of relationships, in politics and beyond, and that subtlety and unawareness of bias can be key factors driving the degree of polarization.     

Local Content Requirements Versus Tariff Equivalents: How We Measure Matters

This article develops a mechanism to measure the impact of local content requirements as quantitative restrictions. We compare effects of the novel quantitative approach to the effects of a tariff equivalent, which is more traditionally used to analyse these types of policies. Local content requirements increase output and value added in the affected sector, but at the expense of other sectors, leading to declines in GDP and trade across the economy. Comparing the two modelling approaches, the differences in outcomes are shown to be significant.     

Readability of accountants’ communications with small business—Some Australian evidence

This paper explores the readability of a new and non-corporate narrative area, accountants’ communications with small business. The distinctive motivations, agendas and interests of small business managers are considered. The findings are informed by rationales from Shearer's (2002) thesis on the influence of neoclassical economics on accounting discourse. The study finds low readability accentuated by potentially low reader interest with accounting documents composed according to conventional accounting's rules and statutory requirements. Higher readability and document content which informs small business managers’ interests is evident when accountants are not compelled to author documents with reference to these professional rules and legislation.     

Identifying and Developing Measures of Information Technology Ethical Work Climates

A model of information technology (IT) ethical work climates is presented. Using these ethical work climates and data collected from a national mail survey of Association for Computing Machinery (ACM) members, empirical measures were developed and evaluated. A mailing of 2446 questionnaires was sent to ACM members and 136 usable responses were returned (5.6%). Using these data, an exploratory factor analysis was performed using principle components analysis to identify the IT ethical work climates from the data. Six of these work climates were identified as predicted by the model. Two ethical work climates that were combinations of the proposed climates were also identified.From the results of the exploratory factor analysis, a confirmatory factor analysis was performed using Calis in PC SAS version 8. The purpose of this analysis was to evaluate the overall fit of these measures to the data and evaluate the psychometric properties of the measures. The fit of the IT ethical work climates model was acceptable. The psychometric properties of these measures were good. Based on these results, conclusions, limitations of the study, and directions for future research are proposed.     

Work experiences,work adjustment and psychological well-being of expatriate employees in Hong Kong

This study replicated and extended research on expatriate work adjustment by examining the antecedents of work adjustment and its outcomes in terms of psychological well-being. Data were obtained from a nationally heterogeneous sample (N = 184) of expatriate employees in Hong Kong using a structured questionnaire. Results of regression analysis revealed role conflict to be significantly negatively related to work adjustment, while role discretion, co-worker support and work-method ambiguity (clarity) were significantly positively related to work adjustment. Of the three hypothesized outcomes, work adjustment was significantly positively related only to job satisfaction but not to quality of life and marital adjustment. Though not the focus of this study, interaction adjustment was found to be significantly positively related to quality of life. Limitations of the study and implications of the findings are discussed.     

Lessons from the global financial crisis

Our system of banking is fragile. Banks that appear to be well-capitalised one day are not the next. Banks that borrow short and lend long are subject to runs that threaten the payments system. The current regulation of financial services is damaging and unsustainable. Regulators must decide on the appropriate amount of equity capital, but it is almost impossible to define an “optimal” capital ratio. A resolution mechanism for banks is unlikely to be a solution to a system-wide loss of confidence. We need to design a credible ex ante framework for liquidity provision. My proposal would require banks to pre-position collateral, making the central bank a pawnbroker for all seasons. On regulation, we need simple robust principles to guide us, not tens of thousands of pages of detailed rules.     

A pigovian rule for the optimum provision of public goods

The integrated treatment of optimal taxation and public expenditure presented here is based on the dual relationship between the prices of private goods and the quantities of public goods. The conditions for optimum public good provision can be expressed as a modification of the Samuelson conditions with extra terms representing (a) the distortionary effect of taxes on the willingness to pay for the public good, and (b) distributional effects. The former captures Pigou's notion of the indirect damage caused by the need to finance public expenditure out of distortionary taxes, and we call this the ‘Pigou term’. In certain cases a very simple benefit-cost ratio for public projects emerges that is equivalent to measuring benefits as if they were taxed.