Report

Teaser, summary, work performed and final results

Periodic Reporting for period 2 - ECOSOCPOL (Social and Political Economics: Theory and Evidence)

Teaser

ECOSOCPOL addresses an under-researched issue in the social sciences, namely the interactions between material motives and social motives for decisions. Such interactions arise at all levels in society, from the micro level (single individuals, in their various roles), via the...

Summary

ECOSOCPOL addresses an under-researched issue in the social sciences, namely the interactions between material motives and social motives for decisions. Such interactions arise at all levels in society, from the micro level (single individuals, in their various roles), via the meso level (economic, political, or social organizations) to the macro level (governments, and ruling parties). Material motives can change quickly, while social motives – entailed in cultures, norms, and identities – often change slowly over time. The interaction between the two can either magnify or dampen how decisions respond to changing motives. Three examples, of this phenomenon among those studied in the project, are: At the micro level, we study the interaction between ethnic policy favors and the choice of ethnicity of children by hundreds of thousands of individual mixed-ethnicity couples in China. At the meso level, we study how strong organizational cultures and their interaction with organizational design can produce a lot of inertia in how well organizations cope with changes in their environment. At the macro level, we study how the interaction between policymaking and environmental values may alter the standard policy prescriptions for how to tax pollution.

Work performed

Two of the subprojects in the original research plan – on ethnicity choices for children in mixed ethnic Chinese families, and on tax avoidance in UK property taxation – have resulted in two academic papers. One of these is on its way to be published in a leading journal, the other is still in the submission stage. As explained in the previous report (in June 2018), resources have been reoriented from the other subprojects in the original plan – on US political contributions, Swedish tax avoidance, and Swedish fertility choices – towards new research, by Persson and Timothy Besley (LSE) on some other aspects of the interaction between individual and social motives in human decisions.

In fact, Persson chose to devote of his Munich Lectures in November 2018 to this new research and in due course Besley and Persson will write a monograph about it in the Munich Lectures in Economics series (published by MIT Press). The rationale for writing the book is that the same general idea can be used to make progress on a number of – seemingly very different – little-understood issues. The general idea is to study the two-way interaction between culture (modeled as values or social identities) and strategic choices at different levels in society. This interaction is currently explored in a number of subprojects, which all rely on a similar modeling strategy. The modeling allows a complete but simple characterization, not only of short-term outcomes, but also of dynamics as well as long-run outcomes. The theoretical results generate a range of new insights and testable predictions.

So far, the new arm of research has resulted in four academic papers, two of which have already been accepted for publication in top economics journals. One studies the interaction between democratic institutions and democratic values, marrying together insights from two existing literatures: a recent one in political economics on strategic choices of democratic institutions and an older one in sociology/political science on the importance of democratic values. This interaction can reproduce the pattern of democratic reforms observed in the data, and also produces new predictions for the distribution of democratic values across countries and cohorts of individual, which seem to fit the data.

A second paper analyzes the dynamic interactions between organizational design and organizational culture, again combining insights from two strands of research: the classical issue in microeconomics on decentralization of organizational decision-making and the classical issue in organization theory/business economics/public administration how an organizational culture may shape the organization’s performance. One of the key results is how the combination of a strong organizational culture and changes in the organization’s environment can produce inertia that prevent re-organization when it is needed the most.

A third paper studies the dynamic interaction of policymaking on redistribution and migration with the formation of identities cum policy preferences in the nationalistic/cosmopolitan dimension. This research marries together ideas in economics, political science, and sociology. It clarifies the conditions under which anti-migration policy preferences held by nationalist individuals take a hold in policymaking, and emerging anti-immigration sentiments are strengthened politically by the gradual emergence new social groupings or new nationalistically oriented political parties.

Finally, a fourth paper analyzes the interaction over time between politically determined policies to combat pollution and the formation of social values in the environmentalism/materialism dimension. A key result here is that these dynamic interactions can render obsolete, or at least importantly modify, the standard recipe issued by economists of how corrective taxes (emission quotas) ought to be designed so as to best fight pollution.

Final results

The new research and the methodologies developed in this project are truly interdisciplinary in that they draw – to an important degree – on ideas and insights from other social sciences than economics, including political science, business economics, sociology, social psychology, and (evolutionary) anthropology. Persson and his co-authors have already presented, and will continue presenting, this new research to mixed academic audiences, where political scientists, sociologist, and anthropologists make up significant parts of the audience.
Towards the end of the project, the main substantive findings and the methodological from advancements will be summarized in a monograph to be published by MIT Press in the series Munich Lectures in Economics.