Published Papers
Looming Large or Seeming Small? Attitudes Towards Losses in a Representative Sample.
Forthcoming at The Review of Economic Studies, with Erik Snowberg, Stephanie Wang, and Colin Camerer.
Idea: Around half of the U.S. population downweight losses relative to gains. Loss tolerance is correlated with individual characteristics and behaviors.
Abstract
We measure individual-level loss aversion using three incentivized, representative surveys of the U.S. population (combined N=3,000). We find that around 50% of the U.S. population is loss tolerant, with many participants accepting negative-expected-value gambles. This is counter to earlier findings—which mostly come from lab/student samples—and expert predictions that 70-90% of participants are loss averse. Consistent with the difference between our study and the prior literature, loss aversion is more prevalent in people with high cognitive ability. Loss-tolerant individuals are more likely to report recent gambling and to have experienced financial shocks. These results support the general hypothesis that individuals value gains and losses differently, although the tendency in a large proportion of the population to emphasize gains over losses is an overlooked behavioral phenomenon.
Econographics.
Journal of Political Economy Microeconomics 1(1), with Mark Dean, Pietro Ortoleva, Erik Snowberg, and Colin Camerer.
Idea: Clear patterns of correlations betweeen behavioral economic measures in a large-scale representative-sample incentivized survey.
Abstract
We study the pattern of correlations across a large number of behavioral regularities, with the goal of creating an empirical basis for more comprehensive theories of decision-making. We elicit 21 behaviors, using an incentivized survey on a representative sample (n=1,000) of the US population. Our data show a clear and relatively simple structure underlying the correlations between these measures. Using principal components analysis, we reduce the 21 variables to six components corresponding to clear clusters of high correlations. We examine the relationship between these components, cognitive ability, and demographics. Common extant theories are not compatible with all the patterns in our data.
Gradual Franchise Extensions and Government Spending in Nineteenth-Century England
Journal of Politics, January 2024.
Idea: After a certain point extending voting rights to poorer citizens leads to lower spending on public goods.
Published Version , 2020 Long-Version Working Paper
(Originally: Extension of the Franchise and Government Expenditure on Public Goods: Evidence from Nineteenth-Century England)
Abstract
This paper investigates the effect of extending the franchise on government spending on public goods in nineteenth-century England and Wales. The effect of franchise extension is identified by exploiting extensive regional and temporal variation in the right to vote in municipal elections between 1867 and 1900. Semi-parametric regressions show robust evidence of an inverted-U-shaped relationship: extending the right to vote from the rich to the middle class led to increased spending, but further franchise extensions—beyond around 50% of the adult male population—led to lower expenditure. Further, government spending was lower in towns where the poor were enfranchised by national reforms. A simple model shows that the inverted-U-relationship can be explained by the trade-offs between public spending and private consumption faced by poor voters. These results suggest that enfranchising the poor may lead to smaller government, in contrast to the predictions of many theoretical models.
Interest Rates, Sanitation Infrastructure, and Mortality Decline in Nineteenth-Century England and Wales.
Journal of Economic History, March 2022.
Idea: High costs of borrowing deterred investment in sanitation infrastructure such as sewer systems and clean water supply, and hence delayed Britain’s mortality decline.
Working Paper (Previously: Financing Sanitation Infrastructure in Nineteenth-Century England and Wales)
Abstract
This paper investigates whether high borrowing costs deterred investment in sanitation infrastructure in late nineteenth-century Britain. Town councils had to borrow to fund investment, with considerable variation in interest rates across towns and over time. Panel regressions, using annual data from over eight hundred town councils, indicate that higher interest rates were associated with lower levels of infrastructure investment between 1887 and 1903. Instrumental variable regressions show that falling interest rates after 1887 stimulated investment and led to lower infant mortality. These findings suggest that Parliament could have expedited mortality decline by subsidizing loans or facilitating private borrowing.
Saving Face Through Preference Signaling and Obligation Avoidance.
Journal of Economic Behavior & Organization, with Matthew Chao, August 2020.
Idea: Some individuals pay to publically signal reciprocity, even at the cost of the person they are reciprocating to.
Abstract
Many individuals act more selfishly in games when actions are hidden and their image is not at risk. However, some individuals may still desire to publicly signal reciprocity or other socially desired behavior in these contexts. These individuals may view hidden actions not as an opportunity to act selfishly, but rather as an obstacle to signaling preferences or type. Study 1 tests this by implementing a trust game where nature stochastically intervenes and allocates nothing in place of the second-mover’s choice. When nature intervenes, many second-movers choose to sacrifice pay in order to truthfully signal that they attempted to allocate more, and that they therefore tried to reciprocate. Since signaling can be costly, Study 2 tests whether some individuals strategically reject interactions that could necessitate this type of signaling response. Players play two rounds of dictator games of increasing size, swapping roles in between. In treatments that allow it, many players reject allocations from their partner in the first round; they then act more selfishly as the dictator in the subsequent, higher-stakes round. Together, these results emphasize that the need to signal reciprocity or other socially desired behavior can influence how people engage with and respond to others in strategic contexts.
The Contribution of Infrastructure Investment to Britain’s Urban Mortality Decline 1861-1900.
Economic History Review, February 2019.
Awarded 2020 T.S. Ashton Prize for best paper in the Economic History Review by a junior scholar.
Idea: Sanitation infrastructure significantly reduced urban mortality from waterborne, and maybe airborne, disease.
Abstract
It is well-recognized that both improved nutrition and sanitation infrastructure are important contributors to mortality decline. However the relative importance of the two factors is difficult to quantify, since most studies are limited to testing the effects of specific sanitary improvements. This paper uses new historical data regarding total investment in urban infrastructure, measured using the outstanding loan stock, to estimate the extent to which the mortality decline in England and Wales between 1861 and 1900 can be attributed to government investment. Fixed effects regressions indicate that infrastructure investment explains approximately 22-25% of the decline in mortality between 1861 and 1900, once time trends are accounted for. Since these specifications may not fully account for the endogoneity between investment and mortality, I perform additional specifications using lagged investment as an instrument for current investment. These estimates suggest that government investment was the major contributor to mortality decline, explaining up to 60% of the reduction in total urban mortality between 1861 and 1900 and 88% between 1861 and 1890. Additional results indicate that investment in urban infrastructure led to declines in mortality from both waterborne and airborne diseases.
Democratic Reform and Opposition to Government Expenditure: Evidence from Nineteenth-Century Britain.
Quarterly Journal of Political Science, October 2018.
Idea: Spending on public goods higher where elites are middle class. Test using 1894 legislation as a natural experiment.
Abstract
Several theories have argued that democratic reform will lead to higher government spending. However, these theories have generally focused on expenditure on redistribution rather than expenditure on public goods. This paper presents a model predicting that democratization leads to lower government expenditure on infrastructure if the median pre-reform voter is middle class. This prediction is tested using a new panel dataset of town council infrastructure spending and revenue in nineteenth-century Britain. An 1894 national reform implementing a system of “one-household-one-vote” and the secret ballot is used as the treatment event in a difference-in-difference analysis. The results show that democratic reform slowed the growth of town council investment in public goods, including water supply and other public infrastructure. In line with the theoretical prediction, this negative effect was strongest when democratic reform transferred power from the middle class to the poor.
Working Papers
Willingness to Accept, Willingness to Pay, and Loss Aversion.
with Mark Dean, Pietro Ortoleva, Erik Snowberg, and Colin Camerer.
(Envelops: “On the Relation between Willingness to Accept and Willingness to Pay”; and “Willingness-To-Pay and Willingness-To-Accept are Probably Less Correlated than You Think”.)
Idea: Loss aversion does not explain the endowment effect. We use this fact, and three further findings, to point to alternative theories.
Abstract
We study the endowment effect—the divergence between Willingness to Accept (WTA) and Willingness to Pay (WTP)—using three incentivized, representative surveys of 4,000 U.S. adults. We find that the endowment effect is uncorrelated with loss aversion for risky prospects, contrary to the prediction of leading theories, such as Prospect Theory. We then document three additional novel findings about the relationship between WTA and WTP, and use them to narrow the space of plausible theories of the endowment effect. First, WTA and WTP are, at best, weakly correlated. Second, around 30% of participants exhibit a negative endowment effect—WTP>WTA. Third, WTA and WTP for lotteries strongly relate to other aspects of risk preferences. Out of theories that cover both the endowment effect and risk preferences, only Cautious Utility is consistent with all of these findings.
Dynamically Optimized Sequential Experimentation (DOSE) for Estimating Economic Preference Parameters.
with Erik Snowberg, Stephanie Wang, and Colin Camerer.
October 2024 NBER Working Paper
November 2018 NBER Working Paper: “Loss Attitudes in the U.S. Population: Evidence from Dynamically Optimized Sequential Experimentation (DOSE)”
Idea: Introduces new technique (DOSE) to estimate economic preference parameters. Demonstrates effectiveness in measuring risk and time preferences in the general population.
Abstract
We introduce DOSE — Dynamically Optimized Sequential Experimentation — to elicit preference parameters. DOSE starts with a model of preferences and a prior over the parameters of that model, then dynamically chooses a customized question sequence for each participant according to an experimenter-selected information criterion. After each question, the prior is updated, and the posterior is used to select the next, informationally-optimal, question. Simulations show that DOSE produces parameter estimates that are approximately twice as accurate as those from established elicitation methods. DOSE estimates of individual-level risk and time preferences are also more accurate, more stable over time, and faster to administer in a large representative, incentivized survey of the U.S. population (N = 2,000). By reducing measurement error, DOSE identifies a stronger relationship between risk aversion and cognitive ability than other elicitation techniques. DOSE thus provides a flexible procedure that facilitates the collection of incentivized preference measures in the field.
Democracy, Redistribution, and Inequality: Evidence from the English Poor Law.
Under Review
Idea: Democratization led to higher welfare spending in high inequality areas, consistent with theoretical models.
Abstract
This paper tests the relationship between inequality, democratization, and expenditure on poor relief in England and Wales between 1885 and 1905. Poor relief served as the main form of social insurance at that time and, in contrast to modern-day welfare programs, was provided by elected local governments. As a result, policy varied substantially across the country in terms of both the magnitude and nature of the support provided. Prior to 1894, a number of institutional features —a graduated franchise, the absence of a secret ballot, and the participation of unelected magistrates—helped landowners to control these local councils, and hence poor law policy. These advantages were removed by a national reform in 1894, an event which serves as the treatment event in a difference-in-difference analysis. The analysis tests whether the effect of this reform varied according to the level of inequality in each district, as predicted by theoretical models of democratization. The results show that, consistent with these theories, unequal districts experienced greater increases in poor law expenditure following democratic reform.
Work in Progress
Justices of the Peace: Legal Foundations of the Industrial Revolution, with Tim Besley, Dan Bogart and Nuno Palma.
Government Austerity and the Anti-Vaccination movement in nineteenth-century England and Wales
Equality of Opportunity or Equality of Outcome?, with Matthew Chao
Time Stability of Econographics, with Colin Camerer, Pietro Ortoleva and Erik Snowberg.
International Econographics, with Colin Camerer, Salvatore Nunnari, Pietro Ortoleva, and Erik Snowberg.
Other Publications
Book Review of The River Pollution Dilemma in Victorian England: Nuisance Law Versus Economic E.fficiency. By Leslie Rosenthal. Farnham: Ashgate, 2014. Australian Economic History Review, November 2015.
Book Review of The Rise of a Victorian Ironopolis: Middlesbrough and Regional Industrialization. By Minoru Yasumoto. Woodbridge: Boydell, 2011. Published in the Journal of Economic History, September 2013.
An economic impact assessment of the CCPMO with Gavan Conlon and Patrice Muller (London: London Economics, 2008).