- Oct 2023
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www.core-econ.org www.core-econ.org
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An individual’s income depends on things that they own, or are, or have that allow them to receive income. These things affecting a person’s income are called endowmentsendowment The facts about an individual that may affect his or her income, such as the physical wealth a person has, either land, housing, or a portfolio of shares (stocks). Also includes level and quality of schooling, special training, the computer languages in which the individual can work, work experience in internships, citizenship, whether the individual has a visa (or green card) allowing employment in a particular labour market, the nationality and gender of the individual, and even the person’s race or social class background. See also: human capital.close and include:
The statement "An individual’s income depends on things that they own, or are, or have that allow them to receive income. These things affecting a person’s income are called endowments" underscores the vital connection between income and personal endowments—assets, skills, or attributes enabling revenue. This perspective aligns with studies highlighting the tendency to value owned items more, echoing 'A bird in the hand is worth two in the bush.' This psychological phenomenon extends to both purchased and gifted possessions, illuminating behavioral aspects shaping wealth distribution, social mobility, and economic policies fostering equitable prosperity through bolstering endowments.(Ganti, 2023)
Source: https://www.investopedia.com/terms/e/endowment-effect.asp
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Their parents are an important difference in the hands that they drew. This starts with the fact that Yichen and Renfu were born in China, and Mark and Stephanie in the US. The parents of the two in China were likely to be equally poor, although Communist Party members enjoyed a higher level of social prestige and education. The gap in wealth between the two sets of American parents would probably have been larger. If Mark was black the gap would be greater than if he was white, but his family would still have been far better off in material terms than both the Chinese families.
The impact of free international financial markets on East Asia is a complex issue. The financial disparity between Chinese and American parents underscores economic differences. Free markets can offer opportunities, yet exacerbate inequalities. East Asia's experience with globalization reveals a mixed outcome: growth, but also vulnerability to global economic shifts. Balancing market advantages with social equity remains a challenge for the region.
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- Aug 2023
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www.core-econ.org www.core-econ.org
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A policy called cap and tradecap and trade A policy through which a limited number of permits to pollute are issued, and can be bought and sold on a market. It combines a quantity-based limit on emissions, and a price-based approach that places a cost on environmentally damaging decisions.close is a policy that combines a legal limit on the amount of emissions with an incentive-based approach
Cap and trade is an environmental policy that combines a legal emissions cap with incentives. According to the London School of Economics, it's a cost-effective method for curbing greenhouse gases. A government sets an emission cap and issues permits for allowable emissions. Companies exceeding their limits can buy allowances from those emitting less. This creates a market for trading emissions permits, promoting emission reductions in an economically viable manner. It's a strategic blend of regulation and market dynamics in combating pollution.
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By increasing the marginal productivity of abatement expenditure, it makes the feasible frontier steeper.
Analyzing marginal abatement cost curves reveals that as environmental regulations become more stringent, there is a clear and consistent increase in costs for polluting firms to reduce emissions at the margin. This highlights the direct impact of stricter regulations on the financial burden shouldered by these firms, underscoring the pivotal role of regulatory policies in influencing both environmental outcomes and corporate conduct.
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drive.google.com drive.google.com
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The statement "when failure affects the profit-making bottom line, product designers begin to pay close attention to how humans actually think and decide" highlights a significant aspect of business building and product development, particularly in terms of understanding user behavior and decision-making.
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One observation is that "People often behave as conditional cooperators—that is, individuals who prefer to cooperate as long as others are cooperating" highlights a key aspect of human decision-making relevant to development policy. It underscores the importance of social dynamics and reciprocity in shaping behavior. When designing development policies, understanding that individuals' willingness to cooperate depends on the behavior of others can lead to more effective strategies. By fostering an environment of mutual cooperation and trust, policies can harness this tendency for conditional cooperation, encouraging positive collective actions and facilitating sustainable development outcomes.
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highlights the dire financial circumstances of the poorest individuals, who resort to high-interest loans as a survival strategy. This phenomenon reflects the interplay between human decision-making and development policy. The decision to take such loans, driven by immediate needs, illustrates how cognitive biases and limited options impact choices. From a policy perspective, addressing this issue requires understanding these behavioral nuances and crafting interventions that provide sustainable alternatives, fostering financial inclusion and breaking the cycle of high-interest debt.
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"Most people think of themselves as primarily deliberative thinkers" is a statement that aligns with studies in psychology. For instance, the dual-process theory proposed by Nobel laureate Daniel Kahneman and Amos Tversky highlights two modes of thinking: System 1 (intuitive) and System 2 (deliberative). Studies by Kahneman and Tversky demonstrated that while people believe they engage in deliberate decision-making, cognitive biases often shape their choices, indicating the prevalence of intuitive, non-deliberative thinking. This divergence between self-perception and actual cognitive processes emphasizes the importance of understanding behavioral patterns to comprehend decision-making accurately.
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Adam Smith's work on Behavioral Economics aligns with the notion that individuals, driven by self-interest, shape economic interactions. However, it acknowledges that human behavior is often influenced by cognitive biases and emotions. Contrary to the traditional rational model, behavioral economics recognizes that individuals may not always make optimal choices due to these factors. Both ideas acknowledge self-interest as a driving force, but Behavioral Economics integrates psychological insights, acknowledging the limitations of purely rational behavior and the impact of cognitive biases on decision-making in economic contexts.
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What is the significance of distinguishing between fast, automatic, and unconscious thinking processes, as opposed to slow, deliberative, and conscious thinking processes, in the realm of psychology?
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How can development practitioners effectively incorporate psychological and social influences on behavior into policy design, embracing an empirical and experimental methodology to ensure policies are aligned with these influences?
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This summary sounds like the topic of demand and supply that we have learnt in Economics. This satement also adds relevance to the claim that the author(s) are trying to answer in this book
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How do these new approaches, built upon established systems, uniquely impact the ongoing battle against poverty?
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Freese's statement about the "messy and mysterious internal workings of actors" highlights the complexities of human decision-making. This contrasts with the models that assume rational decision-making in capitalism. The transition to capitalism revolutionized lives by fostering individualism, innovation, and economic growth. However, this shift oversimplifies human behavior, as real decisions involve intricacies beyond rational calculation. The tension between the assumptions of rationality and the multifaceted nature of decision-making underscores the challenge of understanding how capitalism reshaped society.
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This reminds me of an article by Bruce E. Kaufman named "Expanding the Behavioral Foundations of Labor Economics" in which examines, critiques, and suggests modifications to the psychological assumptions of the rational choice model of the human agent that underlies much of the theoretical work in modern, neoclassical labor economics.
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