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Abstract:
Employees are motivated intrinsically as well as extrinsically. Intrinsic motivation is crucial when tacit knowledge in and between teams must be transferred. Organizational forms enable different kinds of motivation and have different capacities to generate and transfer tacit knowledge. Since knowledge generation and transfer are essential for a firm's sustainable competitive advantage, we ask specifically what kinds of motivation are needed to generate and transfer tacit knowledge, as opposed to explicit knowledge.

Motivation, Knowledge Transfer, Tacit Knowledge, Crowding Effects, Firm Theory, Resource-based View

Abstract:
The Motivation Crowding Effect suggests that external intervention via monetary incentives or punishments may undermine, and under different identifiable conditions strengthen, intrinsic motivation. As of today, the theoretical possibility of motivation crowding has been the main subject of discussion among economists. This study demonstrates that the effect is also of empirical relevance. There exist a large number of studies, offering empirical evidence in support of the existence of crowding-out and crowding-in exists. The study is based on circumstantial evidence, laboratory studies by both psychologists and economists, as well as field research by econometric studies. The pieces of evidence presented refer to a wide variety of areas of the economy and society and have been collected for many different countries and periods of time. Crowding effects thus are an empirically relevant phenomenon, which can, in specific cases, even dominate the traditional relative price effect.

Crowding effect, intrinsic motivation, principal-agent theory, economic psychology, experiments

Abstract:
The motivation crowding effect suggests that an external intervention via monetary incentives or punishments may undermine (and under different indentifiable conditions strengthen) intrinsic motivation. As of today, the theoretical possibility of crowding effects is widely accepted among economists. Many of them, however, have been critical about its empirical relevance. This survey shows that such scepticism is unwarranted and that there exists indeed compelling empirical evidence for the existence of crowding out and crowding in. It is based on circumstantial insight, laboratory studies by both psychologists and economists as well as field research by econometric studies. The presented pieces of evidence refer to a wide variety of areas of the economy and society and have been collected for many different countries and periods. Crowding effects thus are an empirically relevant phenomenon, which can, in specific cases, even dominate the traditional relative price effect.

Crowding Effect, Intrinsic Motivation, Principal-Agent Theory, Economic Psychology, Experiments

Abstract:
Over the past few years, there has been a steadily increasing interest on the part of economists in happiness research. We argue that reported subjective well-being is a satisfactory empirical approximation to individual utility and that happiness research is able to contribute important insights for economics. We report how the economic variables income, unemployment and inflation affect happiness as well as how institutional factors, in particular the type of democracy and the extent of government decentralization, systematically influence how satisfied individuals are with their life. We discuss some of the consequences for economic policy and for economic theory.

Economics, Economic Welfare, Subjective Well-Being, Utility

Abstract:
Corporate scandals, reflected in excessive management compensation and fraudulent accounts, cause considerable damage. Agency theory's insistence on linking the compensation of managers and directors as closely as possible to firm performance is a major reason for these scandals. They cannot be overcome by improving variable pay for performance, as selfish extrinsic motivation is reinforced. Based on the common pool approach to the firm, institutions are proposed which serve to raise intrinsically motivated corporate virtue. More importance is to be attributed to fixed pay and strengthening the legitimacy of authorities by procedural fairness, relational contracts and organizational citizenship behavior.

Agency theory, intrinsic motivation, crowding theory, management compensation, pay for performance, organizational citzenship

Abstract:
Deterrence has been a crucial element in fighting terrorism, both in actual politics and rational choice analyses of terrorism. But there are superior strategies to deterrence. One is to make terrorist attacks less attractive. Another to raise the opportunity cost - rather than the material cost - to terrorists. These alternative strategies effectively dissuade potential terrorists. The strategies suggested here build on the "benevolence" system and tend to produce a positive sum game among the interacting parties. In contrast, the deterrence system is based on "threats" and tends to produce a negative sum game interaction.

Terrorism, Deterrence, Decentralisation, Opportunity Cost, Rational Choice, Motivation

Abstract:
Most contracts, whether between voters and politicians or between house owners and contractors, are incomplete. "More law", it typically is assumed, increases the likelihood of contract performance by increasing the probability of enforcement and/or the cost of breach. This paper studies a contractual relationship where the first mover has to decide whether she wants to enter a contract without knowing whether the second mover will perform. We analyze how contract enforceability affects individual performance for exogenous preferences. Then we apply a dynamic model of preference adaptation and find that economic incentives have a non-monotonic impact on behavior. Individuals perform a contract when enforcement is strong or weak but not with medium enforcement probabilities. Trustworthiness is "crowded in" with weak and "crowded out" with medium enforcement. In a laboratory experiment we test our model's implications and find support for the crowding prediction. Our finding is in line with the recent work on the role of contract enforcement and trust in formerly Communist countries.

Abstract:
Happiness research in economics takes reported subjective well-being as a proxy measure for utility and has already provided many interesting insights about human well-being and its determinants. We argue that future research on happiness in economics has a lot of potential, but that it needs to be guided more by theory. We propose two ways to test theories of happiness, and illustrate them with two applications. First, reported subjective well-being can contribute towards a new understanding of utility in economics. Here, we study the introduction of income aspirations in individuals' utility functions in order to improve our understanding of how income affects individual well-being. Second, happiness data offers a new possibility of discriminating between different models of behavior. This is studied for theories of marriage, which crucially depend on auxiliary assumptions as to what contributes to well-being in marriage. Both applications are empirically tested with panel data for Germany.

aspiration level, marriage, relative income, subjective well-being, utility

Abstract:
In view of recent corporate scandals, it is argued that corporate governance can learn from public governance. Institutions devised to control and discipline the behavior of executives in the political sphere can give new insights into how to improve the governance of firms. Proposals in four specific areas are discussed: manager compensation, the division of power within firms, rules of succession in top positions, and institutionalized competition in core areas of the corporation.

corporate governance, public governance, agency theory, democratic institutions

Abstract:
Corporate scandals are reflected in excessive top management compensation and fraudulent accounts. These scandals cause an enormous amount of damage, not only to the companies affected, but also to the market economy as a whole. As a solution, conventional wisdom suggests more monitoring and sanctioning of management. We argue that these efforts will create a governance structure for crooks. Instead of solving the problem, they make it worse. Selfish extrinsic motivation is reinforced. We suggest measures which clash with conventional wisdom: selecting employees with pro-social intrinsic preferences, de-emphasizing variable pay for performance and strengthening the participation and self-governance of employees. These measures help to increase intrinsically motivated corporate virtue and honesty.

Corporate Virtue, fraud, intrinsic motivation, crowding theory, pay for performance, employee participation

Abstract:
This paper explores the determinants of survival in a life-and-death situation created by an external and unpredictable shock. We are interested in seeing whether pro-social behaviour matters in such extreme situations. We therefore focus on the sinking of the RMS Titanic as a quasi-natural experiment to provide behavioural evidence that is rare in such a controlled and life threatening event. The empirical results support that social norms such as "women and children first" survive in such an environment. We also observe that women of reproductive age have a higher probability of surviving among women. On the other hand, we observe that crew members used their information advantage and their better access to resources (e.g. lifeboats) to generate a higher probability of surviving. The paper also finds that passenger class, fitness, group size, and cultural background matter.

decision under pressure, altruism, social norms, interdependent preferences, excess of demand

Abstract:
This paper analyzes the causal relationships between marriage and subjective well-being in a longitudinal data set spanning 17 years. We find evidence that happier singles opt more likely for marriage and that there are large differences in the benefits from marriage between couples. Potential, as well as actual, division of labor seems to contribute to spouses' well-being, especially for women and when there is a young family to raise. In contrast, large differences in the partners' educational level have a negative effect on experienced life satisfaction.

division of labor, marriage, selection, subjective well-being

Abstract:
This paper intends to provide an evaluation of where the economic research on happiness stands and in which interesting directions it might develop. First, the current state of the research on happiness in economics is briefly discussed. We emphasize the potential of happiness research in testing competing theories of individual behavior. Second, the crucial issue of causality is taken up illustrating it for a particular case, namely whether marriage makes people happy or whether happy people get married. Third, happiness research is taken up as a new approach to measuring utility in the context of cost-benefit analysis.

Causality, cost-benefit analysis, happiness research, life satisfaction approach

Abstract:
The trends and consequences of terrorist activities are often captured by counting the number of incidents and casualties. More recently, the effects of terrorist acts on various aspects of the economy have been analyzed. These costs are surveyed and put in perspective. As economic consequences are only a part of the overall costs of terrorism, possible approaches for estimating the utility losses of the people affected are discussed. Results using the life satisfaction approach, in which individual utility is approximated by self-reported subjective well-being, suggest that people's utility losses may far exceed the purely economic consequences.

Abstract:
The trends and consequences of terrorist activities are often captured by counting the number of incidents and casualties. More recently, the effects of terrorist acts on various aspects of the economy have been analyzed. These costs are surveyed and put in perspective. As economic consequences are only a part of the overall costs of terrorism, possible approaches for estimating the utility losses of the people affected are discussed. Results using the life satisfaction approach, in which individual utility is approximated by self-reported subjective well-being, suggest that people's utility losses may far exceed the purely economic consequences.

Terrorism, subjective well-being, life satisfaction, utility loss

Abstract:
The most influential theory of corporate governance, principal agency theory, does not take into consideration that the key task of modern corporations is to generate and transfer firm-specific knowledge. It proposes that, in order to overcome the widespread corporate scandals, the interests of top management and directors should be increasingly aligned to shareholder interests by making the board more responsible to shareholders, and strengthening the monitoring of top management by independent outside directors. Corporate governance reform needs to go in another direction altogether. Firm-specific knowledge investments are, like financial investments, not ex ante contractible, leaving investors open to exploitation by shareholders. Employees therefore refuse to make firm-specific investments. To gain a sustainable competitive advantage, there must be an incentive to undertake such firm-specific investments. Three proposals are advanced to deal with this conflict: (1) The board should rely more on insiders. (2) The insiders should be elected by those employees of the firm making firm-specific knowledge investments. (3) The board should be chaired by a neutral person. These proposals have major advantages: they provide incentives for knowledge investors; they countervail the dominance of executives; they encourage intrinsic work motivation and loyalty to the firm by strengthening distributive and procedural justice, and they ensure diversity on the board while lowering transaction costs. These proposals for reforming the board may help to overcome the crisis corporate governance is in. At the same time, they connect agency theory with the knowledge-based theory of the firm.

Conflict management, corporate governance, agency theory, firm-specific investment, knowledge capital

Abstract:
The measurement of individual happiness challenges the notion that revealed preferences only reliably and empirically reflect individual utility. Reported subjective well-being is a broader concept than traditional decision utility; it also includes concepts like experience and procedural utility. Micro- and macroeconometric happiness functions offer new insights on determinants of life satisfaction. However, one should not leap to the conclusion that happiness should be maximised, as was suggested for social welfare function maximisation. In contrast, happiness research strengthens the validity of an institutional approach, such as reflected in the theory of democratic economic policy.

Abstract:
Due to its formality and highly analytic thinking, economics is often attributed a leading role among the social sciences and a prominent position as contributor to economic or social issues in the real world. Fact is, however, that the empirical proof for such a claim is either missing or anecdotal. This paper aims to outline the ?economics of economics?. It surveys and compares approaches of impact measurement such as a production function of economics or the demand and supply of trained economists and discusses the determinants of the strength of the influence of economics. It furthermore discriminates between the impact of economic ideas versus that of economists as scientists or politicians.

Abstract:
Survival in academia depends on publications in refereed journals. Authors only get their papers accepted if they intellectually prostitute themselves by slavishly following the demands made by anonymous referees without property rights on the journals they advise. Intellectual prostitution is neither beneficial to suppliers nor consumers. But it is avoidable. The editor (with property rights on the journal) should make the basic decision of whether a paper is worth publishing or not. The referees only give suggestions on how to improve the paper. The author may disregard this advice. This reduces intellectual prostitution and produces more original publications.

academic market, publications, economics of economics, intellectual prostitution

Abstract:
Economics and psychology are both sciences of human behaviour. This paper gives a survey of their interaction. First, the changing relationship between the two sciences is discussed: while economics was once imperialistic, it has become a science inspired by psychological insights. In order to illustrate this, recent developments and evidence for three major areas are presented: bounded rationality, non-selfish behaviour, and the economics of happiness.

Abstract:
People spend a lot of time commuting and often find it a burden. According to economics, the burden of commuting is chosen when compensated either on the labor or on the housing market so that individuals' utility is equalized. However, in a direct test of this strong notion of equilibrium, we find that people with longer commuting time report systematically lower subjective well-being. Additional empirical analyses do not find institutional explanations of the empirical results that commuters systematically incur losses. We discuss several possibilities of an extended model of human behavior able to explain this 'commuting paradox'.

location theory, commuting, compensating variation, subjective well-being

Abstract:
People not only care about outcomes, they also value the procedures which lead to the outcomes. Procedural utility is a potentially important source of human well-being. This paper aims at introducing the concept of procedural utility into economics, and argues that it should be incorporated more widely into economic theory and empirical research. Three building blocks of a concept of procedural utility are outlined and it is suggested how procedural utility can be fruitfully integrated. Evidence from a broad range of social sciences is reviewed in order to show that procedural utility is a relevant concept for economics.

Procedural utility, outcome utility, institutions

Abstract:
Present anti-terrorist policy concentrates almost exclusively on deterrence. It seeks to fend off terrorism by raising the cost of undertaking terrorist acts. This paper argues that deterrence policy is less effective than generally thought and induces in some cases even more terrorism. This is, in particular, the case if deterrence policy induces a centralisation of decision-making in the polity and economy. Therefore, an effective anti-terrorist policy should focus more on reducing the expected benefits of terrorist acts to prospective terrorists. Such a policy is based on strengthening rather than weakening decentralised decision-making.

Terrorism, Deterrence, Decentralization, Democracy, Federalism, Market Economy, Rational Choice, Motivation

Abstract:
The standard model of tax evasion based on the subjective expected utility maximization does not perform particularly well in econometric analyses: It predicts too little evasion and produces unsatisfactory econometric parameter estimates. The model is extended by looking at how the tax authority deals with the taxpayers. Based on econometric estimates, it is shown that taxpayers' tax morale is raised when the tax officials treat them with respect. In contrast, when tax officials solely rely on deterrence taxpayers tend to respond by actively trying to avoid taxation.

Abstract:
Museums are more important than ever before. They play a substantial role in people's leisure activities and belong to one of the most important tourist attractions. Substantial amounts of money are spent when visiting museums both in terms of entry fees and expenditures in museum restaurants and shops. The visitors have a strong effect on local economies, especially in touristic locations. Not surprisingly, therefore, more and more museums are founded usually in spectacular new buildings.

Abstract:
According to the widely used Managerial Power Model, a higher hierarchical position with associated higher power leads to higher compensation. In contrast, the Compensating Wage Differentials Model argues that there is a non-positive relationship between positional power and total compensation. Both power and income yield utility and in equilibrium managers are prepared to trade-off the two elements. The two opposing propositions are tested using a large survey data set from Switzerland. The results suggest that power positions do not yield higher compensation. Rather, there is a non-positive relationship between power position and compensation, if one takes into account all relevant factors influencing total compensation.

Abstract:
This chapter discusses the role of environmental morale and environmental motivation in individual behavior from the point of view of economics and psychology. It deals with the fundamental public good problem, and presents empirical (laboratory and field) evidence on how the cooperation problem can be overcome. Four different theoretical approaches are distinguished according to how individuals' underlying environmental motivation is modeled. Specifically, we look at the interaction between environmental policy and environmental morale through the lens of cognitive evaluation theory (also known as crowding theory).

environmental morale, environmental policy, motivation crowding, pro-social preferences, public good problem

Abstract:
The idea that there is a uniformly "optimal" governance structure for corporations features prominently in current debates and policy proposals. In this paper, we propose a different, constitutional theory of corporate governance: the criterion for a good corporate governance structure is whether it is freely chosen by the shareholders. We illustrate our approach by comparing the constitutional rights of shareholders under US corporate law and Swiss corporate law. Moreover, we discuss the mandatory provisions that shareholders would likely include in corporate law at a constitutional stage, behind the veil of ignorance.

corporate governance

Abstract:
The self-employed are substantially more satisfied with their work than employed persons. We document this relationship for 23 countries and show that the higher job satisfaction can directly be attributed to the greater autonomy that self-employed persons enjoy. "Being your own boss" seems to provide non-pecuniary benefits from work that point to the existence of procedural utility: autonomy is valued beyond outcomes as a good decision-making procedure. The results hold not only for Western European, North American and former communist Eastern European
countries, but largely also for countries with a non-western cultural background.

self-employment, autonomy, job satisfaction, procedural utility

Abstract:
Terrorism will be high on the political agenda for many years to come. Various policies are open to a government fighting terrorism but, in any case, considerable costs are involved. In the competition for political support, the costs and benefits of anti-terrorism policies will be debated. Better information about terrorism and its consequences can improve policy outcome if there is electoral competition. Over the last few years, economic scholars have analysed the effects terrorist acts have on various aspects of the economy. The findings of these impact studies are summarised in this paper. They capture, however, only part of the overall utility losses. Hence, several approaches to value public goods and conceptual issues concerning their application to terrorism are discussed. In particular, the hedonic market approach, the averting behaviour method, the contingent valuation method and vote and popularity functions are reviewed. Further, an exploratory analysis of estimating individuals' utility losses using life satisfaction or happiness data is presented.

This paper also discusses a substantially different approach combining measurement and decision-making, namely popular referenda.

Abstract:
A cross-regional econometric analysis is conducted suggesting that institutional factors in the form of direct democracy (via initiatives and referenda) and of federal structure (local autonomy) systematically and sizeably raise self-reported individual well-being. This positive effect can be attributed to political outcomes closer to voters' preferences as well as to the procedural utility of political participation. Moreover, the results of "standard" microeconometric well-being functions previously published are supported. Unemployment among economic variables and bad health among demographic variables have a strongly depressing effect on happiness. Income only significantly raises happiness for higher income groups.

Abstract:
The paper takes a closer look at cultural festivals such as musical or operatic festivals. From an economic viewpoint the paper shows that such festivals offer great artistic and economic opportunities, but that at the same time these opportunities are also easy to destroy. Empirical evidence from the Salzburg Festival show that government support can have negative effects on the innovative and economically success of festivals by introducing distorting incentives and imposing all sorts of restrictions. The paper draws policy suggestions on how the state can support art festivals.

Cultural Economics, Festivals, Opera, Government Support, Subsidies, Regulation

Abstract:
Publication and citation rankings have become major indicators of the scientific worth of universities and countries, and determine to a large extent the career of individual scholars. We argue that such rankings do not effectively measure research quality, which should be the essence of evaluation. For that reason, an alternative ranking is developed as a quality indicator, based on membership on academic editorial boards of professional journals. It turns out that especially the ranking of individual scholars is far from objective. The results differ markedly, depending on whether research quantity or research quality is considered. Even quantity rankings are not objective; two citation rankings, based on different samples, produce entirely different results. It follows that any career decisions based on rankings are dominated by chance and do not reflect research quality. Instead of propagating a ranking based on board membership as the gold standard, we suggest that committees make use of this quality indicator to find members who, in turn, evaluate the research quality of individual scholars.

rankings, universities, scholars, publications, citations

Abstract:
Publication and citation rankings have become major indicators of the scientific worth of universities and countries, and determine to a large extent the career of individual scholars. We argue that such rankings do not effectively measure research quality, which should be the essence of evaluation. For that reason, an alternative ranking is developed as a quality indicator, based on membership on academic editorial boards of professional journals. It turns out that especially the ranking of individual scholars is far from objective. The results differ markedly, depending on whether research quantity or research quality is considered. Even quantity rankings are not objective; two citation rankings, based on different samples, produce entirely different results. It follows that any career decisions based on rankings are dominated by chance and do not reflect research quality. Instead of propagating a ranking based on board membership as the gold standard, we suggest that committees make use of this quality indicator to find members who, in turn, evaluate the research quality of individual scholars.

Rankings, Universities, Scholars, Publications, Citations

Abstract:
This paper discusses a novel approach to elicit people's preferences for public goods, namely the life satisfaction approach. Reported subjective well-being data are used to directly evaluate utility consequences of public goods. The strengths of this approach are compared to traditional approaches and identification issues are addressed. Moreover, it is applied to estimate utility losses caused by terrorist activities in France, the UK and the Republic of Ireland. Terrorism in these countries depresses life satisfaction in a sizeable and robust way. However, the calculation of the trade-off between terrorism and income requires improved measurement of the marginal utility of income.

life satisfaction approach, non-market valuation, cost-benefit analysis, subjective well-being, and terrorism

Abstract:
The standard principal agent model considers monetary incentives only. It is assumed that money is more efficient than other forms of material, non-monetary compensation. Awards in the form of titles, orders, medals and honors (prizes) - though almost omnipresent - have so far escaped the attention of economists. They present extrinsic, non-monetary incentives that operate through the innate desire of human beings for recognition and status. In this paper, we analyze the differences between monetary incentives and awards: in general, awards are cheap, lead to interpersonal relationships, are not directly related to performance and have a signaling value. In addition, they support intrinsic motivation, may increase social welfare and are exempt from taxation. Awards present an important additional instrument to be considered in principal agent theory. In many contexts they are superior to monetary compensation.

incentives, motivation, non-monetary compensation, awards, orders

Abstract:
The most influential approach of corporate governance, the view of shareholders' supremacy does not take into consideration that the key task of modern corporations is to generate and transfer firm-specific knowledge. It proposes that, in order to overcome the widespread corporate scandals, the interests of top management and directors should be increasingly aligned to shareholders' interests by making the board more responsible to shareholders, and monitoring of top management by independent outside directors should be strengthened. Corporate governance reform needs to go in another direction altogether. Firm-specific knowledge investments are, like financial investments, not ex ante contractible, leaving investors open to exploitation by shareholders. Employees therefore refuse to make firm-specific investments. To gain a sustainable competitive advantage, there must be an incentive to undertake such firm-specific investments. Three proposals are advanced to deal with this dilemma: (1) The board should rely more on insiders. (2) The insiders should be elected by those employees of the firm who are making firm-specific knowledge investments. (3) The board should be chaired by a neutral person. These proposals have major advantages: they provide incentives for knowledge investors; they countervail the dominance of executives; they encourage intrinsic work motivation and loyalty to the firm by strengthening distributive and procedural justice, and they ensure diversity on the board while lowering transaction costs. These proposals for reforming the board may help to overcome the crisis corporate governance is in. At the same time, they provide a step in the direction of a more adequate theory of the firm as a basis for corporate governance.

Corporate governance, shareholders, board directors, insiders, firm-specific knowledge

Abstract:
A crucial aspect of constitutional design is the provision of rules on how a constitution is to be amended. If procedures for constitutional amendment are very restrictive, changes will take place outside the constitution. These changes are likely to be against the citizens' interests and their ability to influence the political process. We argue that the development of the constitution must be based on the rule of law. We propose direct democratic rights that allow citizens to participate in the amendment process. The direct democratic process of institutional change is theoretically and empirically analyzed. A number of counter arguments and issues for a gradual introduction are discussed.

collective decision-making, constitutional design, constitutional economics, direct democracy

Abstract:
We normally take it for granted: a government or state has its corresponding territory. This paper shows that government need not have a territorial monopoly. The paper advances a practical, constitutional proposal, based on the notion that there are meaningful government units, whose major characteristic is not the terrritorial extension but ist function. The constitution proposal allows for the emergence of governmental organisations, which will be called FOCJ according to the acronym for "Functional, Overlapping, Competing Jurisdictions". Their territory is variable, and they do not have a territorial monopoly over it. Rather, they are in competition with other such FOCJ, and they are, moreover, exposed to political competition.

Federalism, Constitutional Economics, Public Choice, Monopoly On Territory

Abstract:
Research evaluation is praised as the symbol of modern quality management. We claim firstly, performance evaluations in research have higher costs than normally assumed, because the evaluated persons and institutions systematically change their behavior and develop counter strategies. Moreover, intrinsic work motivation is crowded out and undesired lock-in effects take place. Secondly, the benefits of performance evaluations are questionable. Evaluations provide too little information relevant for decision-making. In addition, they lose importance due to new forms of scientific cooperation on the internet. Thirdly, there exist superior alternatives. They consist in careful selection and supportive process coaching - and then leave individuals and research institutions to direct themselves.

Evaluation, rankings, hidden costs, multi taskng, intrinsic motivation, control

Abstract:
One can be independent, or subject to decisions made by others. This paper empirically tests whether individuals attach an intrinsic value to the institutional difference between independence and hierarchy. Taking self-employment as an important case of independence, it is shown that the self-employed derive more utility from their work than people employed by an organization, irrespective of income gained or hours worked. This is evidence for procedural utility: people do not only value outcomes, but also the conditions and processes leading to these outcomes.

Procedural Utility, Institutions, Hierarchy, Self-Employment, Job Satisfaction

Abstract:
Neoclassical economic theory rules out systematic errors in consumption choice. According to the basic view, individuals know what they choose. They are able to predict how much utility an activity or a good produces for them now and in the future and they can maximize their utility. This implies that behavior reveals consistent preferences. This approach makes it impossible to detect and understand sub-optimal consumption decisions, due to problems of self-control and the misprediction of utility. We propose the economics of happiness as a methodological approach to study these phenomena. Based on proxy measures for experienced utility, it is, in principle, possible to directly address whether some observed behavior is sub-optimal and is therefore reducing a person's well-being. We discuss recent evidence on smoking and eating habits, TV viewing and commuting choice.

adaptation, individual decision-making, revealed preference, self-control, subjective well-being, utility misprediction

Abstract:
Empirical evidence is provided for the importance of non-reciprocal pro-social behavior of individuals in an anonymous, n-person pure public good setting. A unique panel data set of 136,000 observations is matched with an extensive survey. Even under anonymous conditions, a large number of individuals are prepared to donate quite a significant sum of money. Cooperation conditional on giving by specific other persons (reciprocity) is present, but the causal relationship is ambiguous. The manner in which one is asked to donate is crucial. Identification with the organization is also important.

Public Goods, Pro-social behavior, Reciprocity, Donation

Abstract:
The traditional economic approach to tax evasion does not appear to be particularly successful in explaining the extent of tax compliance. We argue instead that a psychological tax contract which establishes a fiscal exchange between the state and the citizens shapes tax compliance to a large extent. In that respect, a case study of Switzerland is useful because the small size of the cantons and their direct democratic political systems procedurally establish a close exchange relationship between taxpayers and tax authorities. In this paper, evidence is discussed on how tax evasion and tax morale in Switzerland evolved over time. In addition, the impact of economic, legal, socio-demographic, psychological and institutional factors on Swiss tax evasion is discussed.

Tax Evasion, Tax Morale, Deterrence, Responsive Regulation

Abstract:
This paper considers the European countries' output of eminent economists, i.e. the 160 most often cited academics in the period 1993-96. The influence of the size of the population and GNP is analyzed, and a ranking of the top-20 scholars is provided. The United Kingdom outperforms: it is leading with respect to the absolute number, per capita, and GNP per capita. More surprisingly, most small countries do very well if size is accounted for. The four large Continental countries only do well according to the absolute number of eminent economists. But weighted by population and GNP they chop back dramatically.

Abstract:
This paper looks at changes in financial values as reflections of historical events. More specifically, the historical events considered here refer to World War II and the period immediately preceding it. In particular, the time span between Hitler?s rise to power (with his appointment as chancellor of the Reich on 30 January 1933) and the redevelopment of Europe after the war (with the two Marshall-Plan-Conferences in September 1947 held at Paris) is taken into consideration. We analyze the change in the values of national government bonds issued in Swiss Francs and traded on the Swiss bourse during the period 1933 to 1946. While all the nations directly or indirectly involved in WW II heavily interfered in, or closed, their stock and bond exchanges, the Swiss government, for reasons of neutrality, refrained from doing so (except for the two months following the German attack against the West in May and June 1940, when the Swiss bourse did close). The government bond market in Switzerland involved five countries: Germany, Austria, France and Belgium, as well as Switzerland itself.

Abstract:
Non-monetary incentives in the form of awards have so far escaped the attention of economists despite their widespread use. This paper presents an experiment conducted online at IBM to assess the impact of these kinds of extrinsic incentives. Introducing a hypothetical award has statistically significant effects on stated contributions to a public good. Our design allows the estimation of the impact of different award characteristics related to, for example, how public or how valuable the award is. We illustrate these findings by providing predictions about the behavior induced by a new award at IBM.

incentives, non-monetary compensation, awards, motivation, experiment

Abstract:
The corporate governance structure of monasteries is analyzed to derive new insights into solving agency problems of modern corporations. In the long history of monasteries, some abbots and monks lined their own pockets and monasteries were undisciplined. Monasteries developed special systems to check these excesses and therefore were able to survive for centuries. These features are studied from an economic perspective. Benedictine monasteries in Baden-Württemberg, Bavaria and German speaking Switzerland have an average lifetime of almost 500 years and only a quarter of them broke up as a result of agency problems. We argue that this is due to an appropriate governance structure, relying strongly on the intrinsic motivation of the members and on internal control mechanisms.

Corporate Governance, Principal-Agency-Theory, Psychological Economics, Monasteries, Benedictine Order

Abstract:
Academic economists today are caught in a "Publication Impossibility Theorem System" or PITS. To further their careers, they are required to publish in A-journals, but this is impossible for the vast majority because there are few slots open in such journals. Such academic competition is held to provide the right incentives for hard work, but there may be serious negative consequences: the wrong output may be produced in an inefficient way, the wrong people may be selected, and the losers may react in a harmful way. The paper suggests several ways for improvement.

academia, economists, publication, journals, incentives, economic methodology

Abstract:
Academic economists today are caught in a "Publication Impossibility Theorem System" or PITS. To further their careers, they are required to publish in A-journals, but for the vast majority this is impossible because there are few slots open in such journals. Such academic competition maybe useful to generate hard work, however, there may be serious negative consequences: the wrong output may be produced in an inefficient way, the wrong people may be selected, and losers may react in a harmful way. This paper suggests several ways to remedy this situation.

Academia, economists, publication, journals, incentives, economic methodology

Abstract:
We propose that outcome utility and process utility can be distinguished and empirically measured. People gain procedural utility from participating in the political decision-making process itself, irrespective of the outcome. Nationals enjoy both outcome and process utility, while foreigners are excluded from political decision-making and therefore cannot enjoy the corresponding procedural utility. Utility is measured by individuals' reported subjective well-being or happiness. We find that participation rights provide more procedural utility in terms of a feeling of self-determination and influence than actual participation.

Procedural Utility, Subjective Well-Being, Political Participation, Participation Rights

Abstract:
A psychological tax contract goes beyond the traditional deterrence model and explains tax morale as a complicated interaction between taxpayers and the government. As a contractual relationship implies duties and rights for each contract party, tax compliance is increased by sticking to the fiscal exchange paradigm between citizens and the state. Citizens are willing to honestly declare income even if they do not receive a full public good equivalent to tax payments as long as the political process is perceived to be fair and legitimate. Moreover, friendly treatment of taxpayers by the tax office in auditing processes increases tax compliance.

Abstract:
In this paper, we develop the concept of a psychological tax contract that goes beyond the traditional deterrence model and explains tax morale as a complicated interaction between taxpayers and the government. Based on crowding theory, the impact of deterrence and rewards on tax morale is discussed. As a contractual relationship implies duties and rights for each contract partner, sticking to the fiscal exchange paradigm between citizens and the state increases tax compliance. Citizens are willing to honestly declare income even if they do not receive a full public good equivalent to their tax payments as long as the political process is perceived to be fair and legitimate. At the procedural level, a friendly treatment of taxpayers by the tax office in auditing processes increases tax compliance.

Tax Compliance, Positive and Negative Incentives, Responsive Regulation

Abstract:
Why so many people pay their taxes, although fines and audit probability are low, has become a central question in the tax compliance literature. A homo economicus, with a more refined motivation structure, helps us to shed light on this puzzle. This paper provides empirical evidence for the relevance of conditional cooperation, using survey data from 30 West and East European countries. We find a high correlation between perceived tax evasion and tax morale. The results remain robust after exploiting endogeneity and conducting several robustness tests. We also observe a strong positive correlation between institutional quality and tax morale.

tax morale, tax compliance, tax evasion, pro-social behavior, institutions

Abstract:
An economic analysis of fakes differs substantially from the legal and the art historic views which both tend to propose repressive policies against imitations. But there are large economic benefits from copying. In particular, the "propagation effect" yields utility to both consumers and creators of the original. In contrast, the harmful effects of fakes are small and are mitigated by emerging institutions (guarantees, sellers with reputation). The paper suggests "art quotations" (similar to academic quotations) as a beneficial solution to creators of originals and consumers. "Art quotations" are applicable to many art forms.

Abstract:
Rational Choice Theory is often criticized to indoctrinate students in a negative, which is supported by some laboratory experiments. But do students of Rational Choice Theory really behave more selfishly? This paper presents evidence from a natural decision on voluntary donation at the University of Zurich. The analysis of the very large panel data set reaches significant different results than previous studies: Rational Choice Theory does not indoctrinate students. However, there are good other reasons to criticize Rational Choice Theory. The paper argues that ideas from other social sciences should be imported to improve the theory. Three elements are presented which lead to new and different policy conclusions.

Rational Choice, Public Goods, Giving Behavior, Education, Behavioral Economics

Abstract:
Tax compliance has been studied in economics by analysing the individual decision of a representative person between paying and evading taxes. A neglected aspect of tax compliance is the interaction of taxpayers and tax authorities. The relationship between the two actors can be understood as an implicit or "psychological" contract. The more strongly the political participation rights are developed, the more important this contract is, and the higher tax morale is. In this paper, empirical evidence based on a survey of tax authorities of the 26 Swiss states (cantons) is presented, indicating that the differences in the treatment of taxpayers by tax authorities can be explained by differences in political participation rights.

Tax evasion, tax authority, tax compliance, direct democracy

Abstract:
Many studies have established that people care a great deal about their relative economic position and not solely, as standard economic theory assumes, about their absolute economic position. However, behavioral evidence is rare. This paper provides an empirical analysis on how individuals' relative income position affects their performance. Using a unique data set for 1114 soccer players over a period of eight seasons (2833 observations), our analysis suggests that the larger the income differences within a team, the worse the performance of the soccer players is. The more the players are integrated in a particular social environment (their team), the more evident this negative effect is.

Relative Income, Positional Concerns, Envy, Performance, Social Integration

Abstract:
Most professional economists believe that economists in general are more selfish than other persons and that this greater selfishness is due to economic education. In this paper we offer empirical evidence against this widely held belief. Using a unique data set about donating to two social funds at the University of Zurich, it is shown that economic training does not make people act selfishly. However, the 'natural experiment' supports the hypothesis that the different behavior of economists can be explained by a selection effect.

Economists, Public Good, Giving Behaviour, Education, Selection

Abstract:
Awards in the form of orders, medals, decorations and titles are ubiquitous in monarchies and republics, private organizations, not-for-profit and profit-oriented firms. Nevertheless, economists have disregarded this kind of non-material extrinsic incentive. The demand for awards relies on an individual's desire for distinction, and the supply of awards on the provision of incentives. Relative price and income effects are shown to be identifiable and strong. A number of empirically testable propositions are formulated. As awards are (at least so far) impossible to measure adequately, empirical tests are carried out using the technique of analytic narratives.

Incentives, motivation, awards, orders, distinction, principal-agent

Abstract:
"Evaluitis" - i.e. ex post assessments of organizations and persons - has become a rapidly spreading disease. In addition to the well-known costs imposed on evaluees and evaluators, additional significant costs are commonly disregarded: incentives are distorted, ossification is induced and the decision approach is wrongly conceived. As a result, evaluations are used too often and too intensively. A viable and often superior alternative to evaluations is a careful selection of persons and afterwards leaving them to pursue their assigned tasks.

Evaluation, Performance, Selection, Research, Incentives

Abstract:
Cross-disciplinary 'happiness research' has made big progress in the measurement of individual welfare. This development makes it tempting to pursue the old dream of maximizing aggregate happiness as a social welfare function. However, we postulate that the appropriate approach is not to maximize aggregate happiness in seeking to improve outcomes by direct policy interventions. The goal of happiness research should rather be to improve the nature of the processes through which individuals can express their preferences. Individuals should become better able to advance their idea of the good life, both individually and collectively.

Economic policy, happiness, life satisfaction, political economy, social welfare

Abstract:
Individuals make systematic mistakes in their decisions, because they mispredict utility from choice options. When deciding, extrinsic attributes of choice options are more salient than intrinsic attributes. Adaptation is neglected, recollection of feelings is distorted, decisions are rationalized and wrong intuitive theories of happiness are applied. People overestimate extrinsic attributes and therefore put too much emphasis on acquiring income and gaining status. In contrast, they underestimate intrinsic attributes and devote too little time to their family, friends or hobbies, which lowers their utility level. The theoretical analysis is consistent with an econometric study on commuting decisions using reported subjective well-being data.

Adaptation, extrinsic/intrinsic attributes, individual decision-making, misprediction, subjective well-being, time allocation

Abstract:
Recently, the problems associated with the existing journal review process aroused discussions from seasoned management researchers, who have also made useful suggestions for improving the process. To complement these suggestions, we propose a more radical change: a manuscript should be reviewed on an as is basis and its fate be determined in one round of review. The as-is review process shortens the time period from submission to final acceptance, reduces the workload of editors, referees and authors, provides frank author feedback to referees, and, most important, lets authors own all of the ideas in their publications.

Journals, reviews, authors, submissions

Abstract:
In Europe, ever more private museums are now entering the field. This paper investigates the behavior of one of these private museums, using an institutional approach of cultural economics. The Beyeler museum in Basle, Switzerland, is a privately founded art museum with an extraordinary collection of art works. Though less than five years old, it is acknowledged to be the most successful museum in Switzerland in terms of number of visitors. However, the Beyeler museum is not completely private but receives public support. We analyze how this influences the museum's behavior: (1) The directorate of the Beyeler museum stays away from the art market with its collection as public institutions do. (2) The museum embarks on a self-propelling process concerning special exhibitions, therewith losing some of its uniqueness. (3) Concerning visitors' amenities, differences between private and public museums emerge but to a lesser extent than expected according to theory.

Museums, special exhibitions, state support, cultural economics

Abstract:
How are political events reflected in financial asset prices? Break points in sovereign debt prices are analyzed for Denmark, Norway, Finland, Sweden, Germany and Belgium during 1930-1948, using unique data from the Stockholm Stock Exchange. Unlike in countries involved in WWII, this market was unregulated. The outbreak of World War II heavily depressed prices of government bonds. Countries which were occupied (Belgium, Denmark and Norway) or under attack (Finland) saw their debt depreciate substantially. The battle of Stalingrad turns out indeed to be a turning-point of the war. This approach represents a complementary quantitative method to analyze the impact of political events.

Financial Markets, Economic History, WWII, Europe, Cliometrics

Abstract:
This paper tests the effect of a matching mechanism on donations in a controlled field experiment. We match the donations of students at the University of Zurich who, each semester, have to decide whether they wish to contribute to two Social Funds. Our results support the hypothesis that a matching mechanism increases contributions to a public good. However, the effect depends on the extent to which the contributions are matched. Whereas a 25 percent increase of a donation does not increase the willingness to contribute, a 50 percent increase does have an effect. In addition, people need to be socially inclined to react to the matching mechanism. The field experiment provides some evidence suggesting that the matching mechanism crowds-out the intrinsic motivation of giving.

Public Goods, Field Experiment, Matching Mechanism, Donations

Abstract:
Theoretical arguments and empirical evidence are advanced to bolster the claim that direct political participation via referenda and initiatives constitutes an advanced form of democracy with beneficial effects on Transition Countries. Direct democracy raises trust and honesty and improves social outcomes. Per capita incomes and subjective well-being are raised. Standard arguments against direct democracy (citizens' incompetence and lacking interest, danger of manipulation and emotionality, hindering progress and destroying civil rights, high cost) are rejected. Elements of direct democracy can be introduced at the national and local levels, and then proceeding further. Citizens should have the right to govern this process.

Direct democracy, referenda, initiatives, political participation, citizens, democratic rights, transition economies

Abstract:
This paper advances two propositions, one concerning content, the other concerning research strategy. (1) The advent of widespread internet publishing reduces the stifling impact of the refereeing process on the papers accepted and submitted to journals. Economics scholars are less bound to devoting a large part of their time and effort on formalisms. They have more leeway to concentrate on matters of content. This greater freedom also improves the chances of the advice and suggestions proposed by economic methodologists being put into practice. (2) Economic methodology is only able to influence the practice of economics if it takes into account the incentives to which scholars are subjected when they want to pursue an academic career and become prominent. Incentives are transmitted by institutions; it is therefore necessary for economic methodology to analyse how institutions work and how they may change in the future.

Abstract:
The paper studies a major human activity - that of watching TV - where many individuals have incomplete control over, and foresight into, their own behavior. As a consequence, they watch more TV than they consider optimal for themselves and their well-being is lower than what could be achieved. Mainly people with significant opportunity costs of time regret the amount of time spent watching TV. They report lower subjective well-being when watching TV for many hours. For others, there is no negative effect on life satisfaction from watching TV. Long hours spent in front of a TV are linked to higher material aspirations and anxiety and therewith lower life satisfaction.

Life satisfaction, mispredicting utility, revealed behavior, self-control problem, TV consumption

Abstract:
People not only obtain utility from actual outcomes but also from the conditions which lead to these outcomes. The paper proposes an economic concept of this notion of procedural utility. Preferences beyond outcome can be manifold. We distinguish procedural utility people get from institutions as such, i.e., from how allocative and redistributive decisions are taken, procedural utility from activities towards which people have an intrinsic attitude and procedural utility from the way being treated in interaction with other people. In an empirical application, it is studied whether people gain procedural utility from participating in the political decision-making process itself, irrespective of the outcome. Utility is measured by individuals' reported subjective well-being. We find that participation rights provide procedural utility in terms of a feeling of self-determination and influence. In contrast, actual participation and use of participation rights does not.

Abstract:
People not only obtain utility from actual outcomes but also from the conditions which lead to these outcomes. The paper proposes an economic concept of this notion of procedural utility. Preferences beyond outcome can be manifold. We distinguish procedural utility people get from institutions as such, i.e. from how allocative and redistributive decisions are taken, procedural utility from activities towards which people have an intrinsic attitude and procedural utility from the way being treated in interaction with other people. In an empirical application, it is studied whether people gain procedural utility from participating in the political decision-making process itself, irrespective of the outcome. Utility is measured by individuals' reported subjective well-being. We find that participation rights provide procedural utility in terms of a feeling of self-determination and influence. In contrast, actual participation and use of participation rights does not.

Procedural utility, subjective well-being, political participation, participation

Abstract:
Distortions in memory impose important bounds on rationality but have been largely disregarded in economics. While it is possible to learn, it is more difficult, and sometimes impossible, to unlearn. This retention effect lowers individual utility directly or via reduced productivity, and adds costs to principal-agent relationships. The imprinting effect states that the more one tries to forget a piece of information the more vivid it stays in memory, leading to a paradoxical outcome. The effects are based on, and are supported by, psychological experiments, and it is shown that they are relevant in many economic situations and beyond.

Memory, bounded rationality, learning, retention, ironic process theory, principal agency

Abstract:
In many countries, TV viewers have access to more and more TV channels. We study whether people can cope with this and watch the amount of TV they find optimal for themselves or whether they are prone to over-consumption. We find that heavy TV viewers do not benefit, but instead report lower life satisfaction when exposed to more TV channels. This finding runs counter to the standard economic prediction that a larger choice set does not make people worse off. It suggests that an identifiable group of persons experience a self-control problem when it comes to TV viewing.

Self-control, over-consumption, life satisfaction, experienced utility, TV viewing

Abstract:
Many people believe that economists in general are more selfish than other people and that this greater selfishness is due to economics education. This paper offers empirical evidence against this widely held belief. Using a unique data set on giving behaviour in connection with two social funds at the University of Zurich, it is shown that economics education does not make people act more selfishly. Rather, this natural experiment suggests that the particular behaviour of economists can be explained by a selection effect.

Economists, Public Good, Giving Behaviour, Education, Selection

Abstract:
Economics and psychology are both sciences of human behaviour. This paper gives a survey of their interaction. First, the changing relationship between the two sciences is discussed: while economics was once imperialistic, it has become a science inspired by psychological insights. In order to illustrate this, recent developments and evidence for three major areas are presented: bounded rationality, non-selfish behaviour, and the economics of happiness.

Economics and psychology, behavioral economics, social science paradigm

Abstract:
Alienation to politics weakens political competition and can undermine the acceptance and legitimacy of democracy as a political system. Governance and representation problems at the local level cause part of citizens' lack of power and political alienation. Citizens have local power if they can influence the political process so that its outcomes are closer to their preferences and if they feel to be effective in the political sphere. In order to increase citizens' local power, we emphasize the role of institutions of local governance. Local democratic governance is concerned about the relationship between citizens and local government institutions, political representatives and officials. This relationship is fundamentally shaped by the federal structure of a nation's government and by the scope and depth of citizens' participation possibilities in the political process.

Collective decision-making, constitutional design, constitutional economics, direct democracy, fiscal federalism, local governance, local power, participation

Abstract:
Historical events are reflected in asset prices. In this paper, we analyse government bond prices of Germany and Austria traded on the Swiss bourse during WWII. Some war events that are generally considered crucial are clearly reflected in government bond prices. This holds, in particular, for the official outbreak of the war and the loss and gain of national sovereignty. Other events to which historians attach great importance are not reflected in bond prices: The most prominent example is Germany?s capitulation in 1945. The analysis of financial markets provides a fruitful method to evaluate the importance contemporaries attached to historical events.

Financial markets, economic history, WWII, Europe, cliometrics

Abstract:
It has often been pointed out in the literature that a symbiotic relationship exists between terrorist groups and the media. As yet, however, no formal model has been built based on this issue and only very little empirical research has been done in this field. The present contribution builds a simple game theoretic model, focussing on the social interactions between terrorists and the media. The model has features of a common-interest-game and results in multiple equilibria. After a discussion of the policy implications of the model, an empirical analysis is performed. Using newspaper coverage, terror incidents and terror fatalities data, it is shown that media attention and terrorism do mutually Granger cause each other, as predicted by the model. Moreover, it is explained why terror attacks tend to be "bloodier" in developing countries than in Europe and the United States.

Terrorism, media, common-interest-game, coordination, conflict.

Abstract:
States are ill equipped to meet the challenges of a globalized world. The concept of citizenship with its rights and obligations, including the allegiance owed, is too narrowly defined to exist only between individuals and a state. Today, people identify with, and pay allegiance to, many organizations beyond the state. This paper suggests that citizenship could be extended further and be possible between individuals and quasi-governmental organizations, as well as non-governmental organizations, such as churches, clubs, interest groups, functional organizations and profit firms. Due to the larger set of types of citizenship individuals could choose from, their preferences would be better fulfilled and, due to the competition for citizens induced among organizations, the efficiency of public activity would be raised.

Citizenship, Public Goods, Political Competition

Abstract:
The financial crisis is a crisis of governance as well. In search of answers and solutions many scholars and practitioners recommend improved output control, i.e. better external incentives or even stricter regulations. Monasteries demonstrate that alternative models may be more suitable to enhance sustainable governance quality and to reduce agency problems. In the long history of monasteries, some abbots and monks were known to line their own pockets and some monasteries were undisciplined. Monasteries developed special systems to combat these excesses thus ensuring their survival over centuries. We study these features from an economic perspective. Derived from an analysis of the Benedictine monastery of Engelberg we offer three improvements of applied governance designed to reduce agency problems. First, monastic governance emphasizes clan control rather than output control. Second, monasteries demonstrate that organizations can prevent agency problems by complementing external discipline with internal behavioral incentives, such as value systems and voice. Third, organization members who make firm-specific investments are motivated by broad participation rights and co-determination.

Corporate Governance, Financial Crisis, Psychological Economics, Monasteries, Principal Agency Theory, Benedictine Order

Abstract:
World governance today is characterized by international organizations lacking democratic legitimacy and control by the citizens they claim to represent. They are also criticized for being inefficient. This leads to violent protests and to NGOs having great influence. To address these problems, we propose international governance based on the democratic idea of citizen participation: All citizens of the member countries of international organizations have the potential right to participate in the decision-making of international organizations via initiatives, referendums and recalls. In order to reduce transaction costs, a representative group of citizens is randomly selected who can actually exercise their participation rights.

international organizations, initiative, random selection, recall, referendum

Abstract:
Why so many people pay their taxes, although fines and audit probability are low, has become a central question in the tax compliance literature. Concepts of Homo Economicus, endowed with a more refined motivation structure, help to shed light on the tax compliance puzzle. This paper provides empirical evidence for the relevance of conditional cooperation, using survey data from 30 European countries. The findings suggest that a higher perceived tax evasion leads to a lower tax morale, also when controlling for additional factors in a multivariate analysis.

Tax morale, tax compliance, tax evasion, pro-social behavior

Abstract:
Awards in the form of orders, decorations, prizes, and titles are ubiquitous in monarchies and republics, private organizations, not-for-profit, and profit-oriented firms. This paper argues that awards present a unique combination of different stimuli and that they are distinct and unlike other monetary and non-monetary rewards. Despite their relevance in all areas of life awards have not received much scientific attention. We propose to study awards and present results on a vignette experiment that quantifies and isolates the effects of different award characteristics such as the publicity associated with winning an award. Further, employing a unique data set, we demonstrate that there are substantial differences in the intensity of usage of awards across countries.

Awards, compensation, incentives, principal-agent, honors and distinctions

Abstract:
In the course of history, a large number of politicians have been assassinated. Rational choice hypotheses are developed and tested using panel data covering more than 100 countries over a period of 20 years. Several strategies, in addition to security measures, are shown to significantly reduce the probability of politicians being attacked or killed: extended institutional and governance quality, democracy, voice and accountability, a well functioning system of law and order, decentralization via the division of power and federalism, larger cabinet size and strengthened civil society. There is also support for a contagion effect.

assassinations, rational choice, governance, democracy, dictatorship, deterrence, protection

Abstract:
In the course of history, a large number of politicians have been assassinated. Rational choice hypotheses are developed and tested using panel data covering more than 100 countries over a period of 20 years. Several strategies, in addition to security measures, are shown to significantly reduce the probability of politicians being attacked or killed: extended institutional and governance quality, democracy, voice and accountability, a well functioning system of law and order, decentralization via the division of power and federalism, larger cabinet size and strengthened civil society. There is also support for a contagion effect.

Assassinations, rational choice, governance, democracy, dictatorship, deterrence, protection

Abstract:
Based on survey data for Switzerland, new empirical findings on direct democracy are presented. In the first part, we show that, on average, public employees receive lower financial compensation under more direct democratic institutions. However, top bureaucrats are more constrained in direct democracies and have to be compensated by higher wages for that loss of power. In the second part, we demonstrate that reported subjective well-being of the population is much higher in jurisdictions with stronger direct democratic rights. This is not only the case because people value political outcomes higher but they derive utility from the politcal process itself.

Direct democracy, power, compensating wage differentials, satisfaction with life, process utility

Abstract:
This paper discusses a novel approach to elicit people's preferences for public goods, namely the life satisfaction approach. Reported subjective well-being data are used to directly evaluate utility consequences of public goods. The strengths of this approach are compared to traditional approaches and identification issues are addressed. Moreover, it is applied to estimate utility losses caused by terrorist activities in France, the UK and the Republic of Ireland. Terrorism in these countries depresses life satisfaction in a sizeable and robust way. However, the calculation of the trade-off between terrorism and income requires improved measurement of the marginal utility of income.

Life satisfaction approach, non-market valuation, cost-benefit analysis, subjective well-being and terrorism

Abstract:
Awards play a large role in the economics profession, which is documented by the large variety and number of awards. However, little scientific attention has been devoted to them. This paper documents the prevalence of awards in the economics profession and analyzes the number and type of awards received by the 1,200 leading economists included in Who's Who in Economics. First steps towards integrating awards into economic theory are undertaken.

awards, non-monetary incentives, economics of economics

Abstract:
In the course of history a large number of politicians has been assassinated. A rational choice analysis is used to distinguish the expected marginal benefits of killing, and the marginal cost of attacking a politician. The comparative analysis of various equilibria helps us to gain insights into specific historical events.

The analysis suggests that - in addition to well-known security measures - an extension of democracy, a rule by a committee of several politicians, more decentralization via the division of power and federalism, and a strengthening of civil society significantly reduce politicians' probability of being attacked and killed.

Rational choice, democracy, dictatorship, assassination, deterrence

Abstract:
A central aspect of historical research is to provide explanations for the causes and effects of events that occurred in the past, in particular the Second World War. History can be analyzed and explained from different perspectives. Two such perspectives are considered, the first being the traditional historiographic approach, in which the main emphasis is on the qualitative analysis of various kinds of historical sources and documents, and the second being what we call the financial market approach, a recent methodology for linking significant changes in historical market prices to simultaneously occurring geopolitical events. The fundamental characteristics of the two approaches are identified and compared in answering some important historical questions concerning the Second World War. The financial market approach, as reflected in the secondary market for government bonds, is studied for various countries. Both approaches rely heavily on interpretation - but in different ways. They complement each other in a useful way.

financial markets, government bonds, history, World War II

Abstract:
Trends in arts and culture tend to be longer-lasting and less fragile than in other fields such as clothing design. Most herding models are not able to explain such stability, instead predicting informational cascades to be fragile and fads to be frequent. The present contribution is able to explain the hysterisis of trends in arts by incorporating the accumulation of consumption capital into a herding model. Further, the model is tested empirically by analyzing measures of relative and absolute concentration in the television business. It is concluded that by being exposed to art and culture people accumulate consumption capital for a particular style or artist and that this mechanism tends to make herding in arts stable over time.

Art, Culture, Herding, Consumption Capital, Concentration

Abstract:
This paper argues that politicians are overprotected. The costs of political assassination differ systematically depending on whether a private or a public point of view is taken. A politician attributes a very high (if not infinite) cost to his or her survival. The social cost of political assassination is much smaller as politicians are replaceable. Conversely, the private cost of the security measures is low for politicians, its bulk - including time loss and inconvenience - is imposed on taxpayers and the general public. The extent of overprotection is larger in dictatorial than in democratic countries.

Politicians, rational choice, assassination, security, democracy, dictatorship

Abstract:
Business students are portrayed as behaving too egoistically. The critics call for more social responsibility and good citizenship behavior on the part of business students. We present evidence of pro-social behavior in business students. Every student at the University of Zurich has to decide each semester whether he/she wants to contribute to two social funds administrated by the University. With this large panel data set, we can analyze whether business students indeed behave less pro-socially than other students. Two specific hypotheses are tested: do students select into business studies or does the training in business studies indoctrinate students in a negative way? The evidence suggests that there may be a selection effect going on. Therefore, economics education does not change the citizenship behavior of business students.

Abstract:
The sinking of the Titanic in April 1912 took the lives of 68 percent of the people aboard. Who survived? It was women and children who had a higher probability of being saved, not men. Likewise, people traveling in first class had a better chance of survival than those in second and third class. British passengers were more likely to perish than members of other nations.

This extreme event represents a rare case of a well-documented life and death situation where social norms were enforced. This paper shows that economic analysis can account for human behavior in such situations.

decision under pressure, tragic events and disasters, survival, quasi-natural experiment, altruism

Abstract:
To overcome problems produced by globalization, some people see the solution in a World Government while others see it in an autarchic global market without any government intervention. Both solutions are rejected due to their major shortcomings. Two superior solutions are proposed: (1) A net of Functional, Overlapping Democratic Jurisdictions (FOCJ) confirming to a geography of problems; (2) The free choice of individuals to become citizens not only simultaneously in various nations but also in semi-public, non-governmental and private organizations as well as in private firms. The advantages and disadvantages of these proposals are discussed.

International Organizations, World Government, Autarchy, Globalization, Public

Abstract:
Behavioral economics documents the importance of status and self-image concerns in the workplace, but is largely silent about how to instrumentalize them to induce effort. Awards - widespread in the corporate sector and elsewhere - are motivators that derive their value from such social concerns. Panel data from the call center of a large international bank allow us to estimate the impact of receiving an award on effort. The performance of winners proves to be significantly higher than that of comparable nonrecipients after the award has been presented. This increase in work effort is sizeable, robust, and not driven by reverse causation.

Awards, Motivation, Non-monetary Compensation, Event-Study, Incentives

Abstract:
At present, new EU-members have to fully accept the "acquis communautaire" even if their economic and institutional development differs drastically from the EU-average. In contrast, we propose that there should be the possibility of partial entry into the EU. East European Countries should have the option of specifically entering with respect to functions where they expect positive net benefits. In order to enable such partial entry, a new type of jurisdiction called FOCJ (Functional, Overlapping and Competing Jurisdiction) is proposed between the EU, the CEECs, and beyond. Such FOCJ allows for partial integration based on economic efficiency and democratic rules.

Abstract:
Four types of 'economics' relevant for institutional analysis are distinguished: Standard Neoclassical Economics; Socio-Economics or Social Economics; New Institutional Economics; and Psychological Economics (often misleadingly called Behavioural Economics). The paper argues that an extension of Neoclassical Economics with elements from other social sciences (including political science, sociology, psychology, law and anthropology) is fruitful to explain institutions because it allows us to maintain the strength of that approach. Social Economics can play an important role helping to overcome the limitations of Neoclassics. However, it should become more concrete, integrate what is useful in Neoclassics, and should seriously engage in empirical research.

Institutional Economics, Neoclassics, Psychological Economics, Behavioural Economics, institutions

Abstract:
This paper argues that the “Economics of Crime” concentrates too much on punishment as a policy to fight crime, which is unwise for several reasons. There are important instances in which punishment simply cannot reduce crime. Several feasible alternatives to punishment exist, such as offering positive incentives or handing out awards for law abiding behavior. These alternative approaches tend to create a positive sum environment. When people appreciate living in a society that is to a large extent law abiding, they are more motivated to observe the law.

crime, punishment, incentives, motivation, framing, broken window theory

Abstract:
This paper explored the determinants of survival in a life and death situation created by an external and unpredictable shock. We are interested to see whether pro-social behaviour matters in such extreme situations. We therefore focus on the sinking of the RMS Titanic as a quasi-natural experiment do provide behavioural evidence which is rare in such a controlled and life threatening event. The empirical results support that social norm such as "women and children first" survive in such an environment. We also observe that women of reproductive age have a higher probability of surviving among women. On the other hand, we observe that crew members used their information advantage and their better access to resources (e.g. lifeboats) to generate a higher probability of surviving. The paper also finds that passenger class, fitness, group size, and cultural background matter.

Decision under Pressure, Altruism, Social Norms, Interdependent Preferences, Excess of Demand

Abstract:
Famous cultural monuments are often regarded as unique icons, making them an attractive target for terrorists. Despite huge military and police outlays, terrorist attacks on important monuments can hardly be avoided. We argue that an effective strategy for discouraging terrorist attacks on iconic monuments is for the government to show a firm commitment to swift reconstruction. Using a simple game-theoretic model, we demonstrate how a credible claim to rebuild any cultural monuments destroyed discourages terrorist attacks by altering the terrorists' expectations and by increasing the government's reputation costs if they fail to rebuild.

Terrorism, Culture, Monuments, Counter-terrorism, Deterrence

Abstract:
In many countries environmental policies and regulations are implemented to improve environmental quality and thus individuals’ well-being. However, how do individuals value the environment? In this paper, we review the Life Satisfaction Approach (LSA) representing a new non-market valuation technique. The LSA builds on the recent development of subjective well-being research in economics and takes measures of reported life satisfaction as an empirical approximation to individual welfare. Micro-econometric life satisfaction functions are estimated taking into account environmental conditions along with income and other covariates. The estimated coefficients for the environmental good and income can then be used to calculate the implicit willingness-to-pay for the environmental good.

life satisfaction approach, subjective well-being, non-market valuation, cost-benefit analysis, air pollution

Abstract:
In many countries environmental policies and regulations are implemented to improve environmental quality and thus individuals' well-being. However, how do individuals value the environment? In this paper, we review the Life Satisfaction Approach (LSA) representing a new non-market valuation technique. The LSA builds on the recent development of subjective well-being research in economics and takes measures of reported life satisfaction as an empirical approximation to individual welfare. Micro-econometric life satisfaction functions are estimated taking into account environmental conditions along with income and other covariates. The estimated coefficients for the environmental good and income can then be used to calculate the implicit willingness-to-pay for the environmental good.

life satisfaction approach, subjective well-being, non-market valuation, cost-benefit analysis, air pollution

Abstract:
In economics there is presently an almost revolutionary development. The direct measurement of subjective welfare challenges traditional economics, inspires it, and opens new avenues for scientific research. The approaches and possibilities of an economic analysis of happiness are shown and illustrated with two specific applications. The relationship between income and life satisfaction is strongly shaped by the aspiration level serving to evaluate life conditions. The aspiration levels are formed by social comparisons and adaptation processes. The Life Satisfaction Approach is a new method to capture the value of public goods. The short discussion of governmental „happiness policy“ from a constitutional viewpoint suggests a comparative institutional analysis of subjective well-being. The happiness revolution in economics is only at its beginning. More insights concerning institutions allowing people to pursue their own conception of a good life are to be expected.

happiness, life satisfaction, economics, income, terrorism

Abstract:
This paper analyzes awards as a means of motivation prevalent in the scientific community, but so far neglected in the economic literature on incentives, and discusses their relationship to monetary compensation. Awards are better suited than performance pay to reward scientific tasks, which are typically of a vague nature. They derive their value, for instance, from signaling research talent to outsiders. Awards should therefore be taken seriously as a means of motivating research that may complement, or even substitute for, monetary incentives. While we discuss awards in the context of academia, our conclusions apply to other principal-agent settings as well.

Awards, Money, Incentives, Academia, Research

Abstract:
Deterrence has been a crucial element in fighting terrorism, both in politics and in rational choice analyses of terrorism. However, there are two strategies that are superior to deterrence. The first one is to make terrorist attacks less devastating and less attractive to terrorists through decentralization. The second one is to raise the opportunity cost - rather than the material cost - for terrorists. These alternative strategies will effectively dissuade potential terrorists. It is here argued that they not only apply to society as a whole but can also usefully be applied by business enterprises.

Terrorism, Deterrence, Decentralization, Opportunity Cost, Business, Enterprises