Universitat Pompeu Fabra

Facultat de Cincies Econmiques i Empresarials. Curs 2016/2017

Economic Organizations, Institutions and Markets

Problem set no.: .................. 1

Topic .................................. 1. New Cognitive Perspectives
Seminar week: .................... January 30 to February 3, 2017
References .......................... ARRUADA, B. (2008), Human Nature and Institutions, in Eric
Brousseau and Jean-Michel Glachant, eds., New Institutional
Economics: A Guidebook, Cambridge: Cambridge University Press,
pp. 81-99.
Irrationality: Rethinking thinking, The Economist, 18 December
1999, pp. 69-71.

Rules: You should abstain from applying concepts and theories unrelated to topic 1. Answers
must not exceed 1,500 words. (Use the integrated word count tool.) Any text exceeding the
first 1,500 words will not be considered.

I. REVIEW QUESTIONS:
1. Schematically explain the organization of economic activity of our hunter-gathering
ancestors.
2. What does it mean that we have an ecological mind for our rationality and
cooperation? Briefly explain the maladaptation hypothesis in terms of cooperation and
rationality, and provide an example of each case.
3. What is the role of the emotions in human behavior?
4. Provide several examples in which emotionsyours or of somebody you knowhave
brought to a less rational and cooperative behavior.
5. Provide several examples in which emotionsyours or of somebody you knowhave
brought to a more rational and cooperative behavior.
6. How would you make sense of the discussion about to what extent our behavior is
determined by our biology and to what extent by our culture?
7. What is the function of culture and institutions from an evolutionary point of view?

1
 II. CASES AND EXERCISES

1. The Structure of Beliefs

What are your views on race and gender? Are you a racist? A feminist or a male chauvinist?
Please, take some minutes to run these two implicit association tests in order to corroborate
how strong these beliefs are held: http://www.understandingprejudice.org/iat/index2.htm. You
will be presented with words or images and asked to respond as quickly as possible. At the end,
your responses will be tallied so that you can see how your score compares to others and to your
expectations.
Are you far or close to the average? Why? Do these results substantially differ for women and
men? Why most subjects obtain such results?
Complementary activity: if interested in exploring and building your morality profile, you
may visit and run additional related tests at http://www.yourmorals.org/explore.php.

2. Gossip
Why is gossip prevalent in all types of cultures and societies? Could you provide an explanatory
hypothesis rooted in natural selection? Why does gossip focus on sex, power, relatives, power,
health and similar issues? What do they have in common? Does it makes sense to gossip about
movie stars? And about soap opera characters? How can these ideas be applied to advertising?
Illustrate your answers with examples from current advertising campaigns for popular products.
How do advertisers select public figures for this gossip-based advertising? How would you
apply this theory of gossip to the use and abuse of social networks?

3. Withholding taxes
First, using some of the models of human rationality, analyze these features, common of many
income tax codes: (a) Most of the taxes to be paid are collected by income payers (employers,
banks) by withholding an estimation of the tax due by the taxpayer before the net income tax is
paid to the taxpayer, instead of paying the taxpayer the gross income and having him or her
paying the precise tax due afterwards. (b) Tax withholding is structured usually in such a way
that most citizens get a positive refund or tax rebate once a year.
Second, discuss the welfare consequences of a constitutional rule preventing the government
from using withholding taxes.

4. The value of patience

Researchers offered adults in two villages of hunter-gatherers a choice between (1) receiving a
small amount of money or food immediately, (2) getting a larger amount if they were willing to
wait for a week, and (3) getting an even larger amount if they were willing to wait for several
months. How would you expect willingness to wait to change with education? How should this
affect individual incomes?