Conceptual and empirical status of mental constructs in the analysis of action

A basic methodological difficulty in the study of psychological processes is how to conceptualize and observe mental events. Part of the difficulty resides in the terminology which frequently involved implicit transitions from one, general, usage to a very specific interpretation which may not be adequate to test the proposed hypotheses. Earlier denials of the possibility of studying such events have now been replaced by an eclectic, but little analyzed and articulated, attitude. As a consequence of this state of affairs it is not uncommon to encounter cases of models being widely accepted in spite of superficial handling of some of the key concepts and a lack of pertinent data to test the models. Several examples are discussed to illustrate these general propositions, taken from psychophysics, personality, judgement, attribution theory and the study of the effects of reward on intrinsic motivation.     

On the homogeneity of psychological processes

Quality & Quantity -     

Characteristic-based mean-variance portfolio choice

We study empirical mean-variance optimization when the portfolio weights are restricted to be direct functions of underlying stock characteristics such as value and momentum. The closed-form solution to the portfolio weights estimator shows that the portfolio problem in this case reduces to a mean-variance analysis of assets with returns given by single-characteristic strategies (e.g., momentum or value). In an empirical application to international stock return indexes, we show that the direct approach to estimating portfolio weights clearly beats a naive regression-based approach that models the conditional mean. However, a portfolio based on equal weights of the single-characteristic strategies performs about as well, and sometimes better, than the direct estimation approach, highlighting again the difficulties in beating the equal-weighted case in mean-variance analysis. The empirical results also highlight the potential for ‘stock-picking’ in international indexes using characteristics such as value and momentum with the characteristic-based portfolios obtaining Sharpe ratios approximately three times larger than the world market.     

On monopoly welfare gains,scale efficiency and the costs of decentralization

Inside the neoclassical framework a monopoly produces an unambiguous loss of social welfare. In this article some dynamic efficiency aspects of monopoly in connection with economies of scale are discussed. Two different cases of the costs of capacity expansion for a branch are compared: (1) the capacity expansion takes place with only one, multiplant, monopoly firm, (2) the capacity expansion takes place in a branch producing the same output but with two or more multiplant firms. It is argued that monopoly welfare gains are likely to arise for a centralized process of capacity expansion compared to a decentralized one.     

Efficiency and ownership in Swedish electricity retail distribution

This article examines the efficiency of electricity retail distributors in Sweden in a multiple output multiple input framework. Productive efficiency measures are calculated by use of different versions of the non-parametric Data Envelopment Analysis (DEA) method. Comparisons are made between different types of ownership and between different types of service areas.The study indicates a rather low level of technical efficiency, a high level of scale efficiency in urban service areas, but a fairly low level of scale efficiency in rural areas. The results show no significant differences in efficiency between different types of ownership or economic organization.Paper presented at ORSA/TIMS joint national meeting, Productivity and Global Competition, Philadelphia, October 29–31, 1990.     

On the shape of posterior densities and credible sets in instrumental variable regression models with reduced rank: An application of flexible sampling methods using neural networks

Likelihoods and posteriors of instrumental variable (IV) regression models with strong endogeneity and/or weak instruments may exhibit rather non-elliptical contours in the parameter space. This may seriously affect inference based on Bayesian credible sets. When approximating posterior probabilities and marginal densities using Monte Carlo integration methods like importance sampling or Markov chain Monte Carlo procedures the speed of the algorithm and the quality of the results greatly depend on the choice of the importance or candidate density. Such a density has to be ‘close’ to the target density in order to yield accurate results with numerically efficient sampling. For this purpose we introduce neural networks which seem to be natural importance or candidate densities, as they have a universal approximation property and are easy to sample from. A key step in the proposed class of methods is the construction of a neural network that approximates the target density. The methods are tested on a set of illustrative IV regression models. The results indicate the possible usefulness of the neural network approach.     

Consequences matter, ‘risk’ is marginal

Critical comments by Palm and Slovic on a previous article of mine (L. Sjöberg, Consequences of perceived risk: demand for mitigation, Journal of Risk Research 2, 129–149) are discussed. Palm’s arguments are largely based on misreading of my article, and her own studies, which she described in detail, are largely irrelevant in the present discussion. Slovic’s arguments are met by pointing out that the many references he cites in favour of his standpoint are mostly quite misleading and irrelevant. Furthermore, I present two new studies where the riskiness of activities was investigated, as well as the risk of unwanted events caused by such activities. All results very clearly support the conclusion that seriousness of consequences is a more important determinant of demand for risk mitigation than risk or probability of unwanted events, or riskiness of activities that can lead to such events.     

As Time Goes By: The Beginnings of Social and Behavioural Science Risk Research

Attempts at studying risk issues in the social and behavioural sciences have now been going on for about 30 years. A brief summary of the first Swedish project, launched in 1975, and now available on the Internet site www.dynam‐it.com/risk, is presented. It was a fairly large‐scale attempt to review work then available or in a start‐up phase in several disciplines, mainly in the social sciences, but also in some of the humanities and in technology. The usual problems of interdisciplinary work were met with, and are briefly noted here. However, there was also a philosophical rift between empirical and theoretical/conceptual approaches which surfaced in requirements of “a theory of risk” and an accompanying and integrated analysis of risk generation in society. These requirements are as difficult to meet today as they were in the 1970s, and in some quarters they are just as demanding. However, the quest for “a theory of risk” is arguably meaningless, and fruitful research on risk topics is hardly to be expected to be the result from merely analysing the meaning of the word. Risk is just a four‐letter word.     

The rise of risk: risk related bills submitted to the Swedish parliament in 1964-65 and 1993-95

Bills submitted to the Swedish parliament in 1964-65 and in 1993-95 were scored according to their major concern: risk, resource allocation or resource growth. It was found that risk related bills had increased strongly, from 11% to 28%, implying that currently almost a third of all bills in the Swedish parliament are related to risk issues. The absolute number of risk bills increased by a factor of four. Resource allocation bills, on the other hand, decreased strongly, and resource growth bills, a minority of bills, remained at a relatively low level. All parties except the Conservatives showed a strong trend towards increased risk concern, especially the Social Democrats. The most frequently encountered type of risks in the 60s were health related, while environmental risks predominated in the 90s. These changes are discussed in relation to the hypothesis that risks become more important during periods of slower economic growth. It is concluded that risk is currently a very important issue on the Swedish political agenda.