Frictions or Mental Gaps: What’s Behind the Information We (Don’t) Use and When Do We Care?
On the Relationship between Cognitive Ability and Risk Preference
Many decisions of individuals involve a combination of internal preferences and mental processes related to cognitive ability. As Frederick (2005) argued in this journal, "there is no good reason for ignoring the possibility that general intelligence or various more specific cognitive abilities are important causal determinants of decision making." Since then, a number of empirical studies have focused on the relationship between cognitive ability and decision-making in different contexts. This paper will focus on the relationship between cognitive ability and decision-making under risk and uncertainty. Taken as a whole, this research indicates that cognitive ability is associated with risk-taking behavior in various contexts and life domains, including incentivized choices between lotteries in controlled environments, behavior in nonexperimental settings, and self-reported tendency to take risks. We begin by clarifying some important distinctions between concepts and measurement of risk preference and cognitive ability. In particular, complexity and possible confusions arise because observed measures of risk preference and cognitive ability are used to represent the latent characteristics of these concepts. We discuss the substantial (and somewhat implausible) range of assumptions that need to be satisfied in order to be able to interpret a correlation between measures of risk preference and cognitive ability as a relationship between latent risk preference and latent cognitive ability. Drawing causal inferences from such relationships raises additional challenges. We go on to argue that it is nevertheless important and valuable to study whether cognitive ability is related to measured risk preference (see also Dohmen, Falk, Huffman, and Sunde 2010). Risk preference is typically measured by risky behavior (actual or self-reported). If risky behavior varies systematically with cognitive ability, this may reinforce or counteract the impact of cognitive ability on life outcomes, depending on the nature of the correlation. If there is a relationship, it also becomes important to control for cognitive ability when relating life outcomes to standard revealed preference measures of risk preference. If cognitive ability has a causal impact on measured risk preference, it is important to understand the mechanism, and some intriguing policy implications arise. We then take stock of what is known empirically on the connections between cognitive ability and measured risk preferences, looking at studies using real-world risky behavior, experimental measures of risky choice, and self-reported measures of willingness to take risks. One pattern that emerges frequently in these studies is that cognitive ability tends to be positively correlated with avoidance of harmful risky situations, but it tends to be negatively correlated with risk aversion in advantageous situations. This suggests that the relationship between cognitive ability and risk taking has a reinforcing effect on economic outcomes. There is also intriguing emerging evidence that measured risk preference is particularly strongly related to certain facets of cognitive ability, those that facilitate quantitative problem solving, with implications for understanding mechanisms and possibly for better targeting policy interventions. We conclude by discussing perspectives for future research, in particular the scope for the development of richer sets of elicitation instruments and measurement across a wider range of concepts. We also consider progress in neuroscience, but conclude that at present that field still seems relatively far from allowing definitive conclusions about latent risk preference and cognitive ability. Nevertheless, the existing empirical evidence suggests that interventions to influence cognitive ability, should they be possible, might have spillovers on risky choice.
The Economic Consequences of Family Policies: Lessons from a Century of Legislation in High-Income Countries
Inequality in Early Care Experienced by US Children
Using every major nationally representative dataset on parental and non-parental care provided to children up to age 6, we quantify differences in American children's care experiences by socioeconomic status (SES), proxied primarily with maternal education. Increasingly, higher-SES children spend less total time with their parents and more time in the care of others. Non-parental care for high-SES children is more likely to be in childcare centers, where average quality is higher, and less likely to be provided by relatives where average quality is lower. Even within types of childcare, higher-SES children tend to receive care of higher measured quality and higher cost. Inequality is evident at home as well: measures of parental enrichment at home, from both self-reports and outside observers, are on average higher for higher-SES children. We also find that parental and non-parental quality is reinforcing: children who receive higher quality non-parental care also tend to receive higher quality parental care.
Environmental Justice: the Economics of Race, Place, and Pollution
Selection in Health Insurance Markets and Its Policy Remedies
The globalization of postsecondary education: The role of international students in the US higher education system
In the four decades since 1980, U.S. colleges and universities have seen the number of students from abroad quadruple. This rise in enrollment and degree attainment affects the global supply of highly educated workers, the flow of talent to the U.S. labor market, and the financing of U.S. higher education. Yet, the impacts are far from uniform, with significant differences evident by level of study and type of institution. The determinants of foreign flows to U.S. colleges and universities reflect both changes in student demand from abroad and the variation in market circumstances of colleges and universities, with visa policies serving a mediating role. The consequences of these market mechanisms impact global talent development, the resources of colleges and universities, and labor markets in the U.S. and countries sending students.
The Declining Labor Market Prospects of Less-Educated Men
Mammograms and Mortality: How Has the Evidence Evolved?
Decades of evidence reveal a complicated relationship between mammograms and mortality. Mammograms may detect deadly cancers early, but they may also lead to the diagnosis and potentially fatal treatment of cancers that would never progress to cause symptoms. I provide a brief history of the evidence on mammograms and mortality, focusing on evidence from clinical trials, and I discuss how this evidence informs mammography guidelines. I then explore the evolution of all-cause mortality relative to breast cancer mortality within an influential clinical trial. I conclude with some responses to the evolving evidence.
Rising Geographic Disparities in US Mortality
The 21st century has been a period of rising inequality in both income and health. In this paper, we find that geographic inequality in mortality for midlife Americans increased by about 70 percent between 1992 and 2016. This was not simply because states like New York or California benefited from having a high fraction of college-educated residents who enjoyed the largest health gains during the last several decades. Nor was higher dispersion in mortality caused entirely by the increasing importance of "deaths of despair," or by rising spatial income inequality during the same period. Instead, over time, state-level mortality has become increasingly correlated with state-level income; in 1992 income explained only 3 percent of mortality inequality, but by 2016 state-level income explained 58 percent. These mortality patterns are consistent with the view that high-income states in 1992 were better able to enact public health strategies and adopt behaviors that, over the next quarter-century, resulted in pronounced relative declines in mortality. The substantial longevity gains in high-income states led to greater cross-state inequality in mortality.
Scaling for Economists: Lessons from the Non-Adherence Problem in the Medical Literature
The Questionable Value of Having a Choice of Levels of Health Insurance Coverage
Delivering Public Health Insurance Through Private Plan Choice in the United States
Mortality Inequality: The Good News from a County-Level Approach
Children and the US Social Safety Net: Balancing Disincentives for Adults and Benefits for Children
A hallmark of every developed nation is the provision of a social safety net-a collection of public programs that deliver aid to the poor. Because of their higher rates of poverty, children are often a major beneficiary of safety net programs. Countries vary considerably in both the amount of safety net aid to children and the design of their programs. The United States provides less aid to families with children as a share of GDP (0.6 percent) than most countries: Among 37 OECD countries, only Turkey provides less, as shown in Figure 1. Countries that provide less aid to families with children have higher rates of child poverty. Among these same 37 countries, only Turkey and Costa Rica have higher child poverty rates than the United States. Why does the United States appear to be such an outlier in terms of the amount of aid it provides to families and child poverty rates? While there are likely multiple reasons, in this paper we focus on one possible explanation: Past emphasis on the negative behavioral effects of safety net programs for families over the benefits of such programs for children.