Credit expansions to the non-tradable sector systematically predict growth slowdowns & financial crises; credit expansions to the tradable sector are associated with sustained output & productivity growth without a higher risk of a financial crisis

Credit Allocation and Macroeconomic Fluctuations. Karsten Müller & Emil Verner. NBER Working Paper 31420, Jun 2023. DOI 10.3386/w31420

Abstract: We study the relationship between credit expansions, macroeconomic fluctuations, and financial crises using a novel database on the sectoral distribution of private credit for 117 countries since 1940. We document that, during credit booms, credit flows disproportionately to the non-tradable sector. Credit expansions to the non-tradable sector, in turn, systematically predict subsequent growth slowdowns and financial crises. In contrast, credit expansions to the tradable sector are associated with sustained output and productivity growth without a higher risk of a financial crisis. To understand these patterns, we show that firms in the non-tradable sector tend to be smaller, more reliant on loans secured by real estate, and more likely to default during crises. Our findings are consistent with models in which credit booms to the non-tradable sector are driven by easy financing conditions and amplified by collateral feedbacks, contributing to increased financial fragility and a boom-bust cycle.

In the case of the Aztec Empire, high inequality predates the Spanish–Aztec War; the richest 1% earned 41.8% of the total income, while the income share of the poorest 50% was just 23.3%

Income and inequality in the Aztec Empire on the eve of the Spanish conquest. Guido Alfani & Alfonso Carballo. Nature Human Behaviour, June 26 2023. https://www.nature.com/articles/s41562-023-01636-3

Abstract: Today, Latin American countries are characterized by relatively high levels of economic inequality. This circumstance has often been considered a long-run consequence of the Spanish conquest and of the highly extractive institutions imposed by the colonizers. Here we show that, in the case of the Aztec Empire, high inequality predates the Spanish conquest, also known as the Spanish–Aztec War. We reach this conclusion by estimating levels of income inequality and of imperial extraction across the empire. We find that the richest 1% earned 41.8% of the total income, while the income share of the poorest 50% was just 23.3%. We also argue that those provinces that had resisted the Aztec expansion suffered from relatively harsh conditions, including higher taxes, in the context of the imperial system—and were the first to rebel, allying themselves with the Spaniards. Existing literature suggests that after the Spanish conquest, the colonial elites inherited pre-existing extractive institutions and added additional layers of social and economic inequality.

People prefer natural medicines more when treating psychological than physical conditions, because they perceive natural drugs to be less likely than synthetic drugs to alter their true selves

Consumers prefer natural medicines more when treating psychological than physical conditions. Tianyi Li, David Gal. Journal of Consumer Psychology, June 24 2023. https://doi.org/10.1002/jcpy.1371

Abstract: Consumers generally prefer natural to synthetic drugs; a phenomenon known as the “natural preference”. Through six experiments and one archival study, the current research shows that while consumers have a general preference for natural drugs over synthetic drugs, this preference is stronger when the goal is to treat psychological rather than physical conditions. Process evidence indicates an important mechanism that explains the amplified natural preference for treating psychological conditions: consumers are more concerned about their true selves being altered when treating psychological conditions, and they perceive natural drugs to be less likely than synthetic drugs to affect their true selves. The current research provides novel insights into the natural preference. It also offers policy and managerial implications for marketing natural remedies and pharmacological treatments for mental health conditions.

Self-reported pro-environmental behavior was highly exaggerated, especially by environmentalists

Identifying bias in self-reported pro-environmental behavior. Katharina Koller, Paulina K. Pankowska, Cameron Brick. Current Research in Ecological and Social Psychology, Volume 4, 2023, 100087. https://doi.org/10.1016/j.cresp.2022.100087

Abstract: Research on pro-environmental behavior (PEB) informs social policies and interventions, so the quality of PEB measurement is critical. Self-reported PEB measures in surveys often contain non-negligible measurement error that can bias estimates and lead to incorrect findings. Given the potential presence of error, we hypothesize that changes to the way self-reported PEB is measured might lead to systematic measurement errors that affect the validity of results. Study 1 (N = 951) showed that priming participants with related scales like environmentalist identity did not substantively change reported behavior (all ds ≤ 0.12). To investigate the possibility of overreporting without priming, Study 2 (N = 385) measured littering prevention behavior using the Unmatched Count Technique. A standard questionnaire format led to much higher reported behavior compared to the more anonymous covert condition, d = 0.53, and this effect appeared driven by participants who reported a stronger environmentalist identity. These results may help to explain some of the observed error in PEB measures. We suggest that researchers could reduce measurement bias with indirect questioning techniques.

Keywords: Pro-environmental behavior; Measurement error; Question-behavior effect; Social identity; Social norms; Social desirability bias

The contribution of work experience and education to human capital accumulation and economic development might be equally important

Jedwab, Remi, Paul Romer, Asif M. Islam, and Roberto Samaniego. 2023. "Human Capital Accumulation at Work: Estimates for the World and Implications for Development." American Economic Journal: Macroeconomics, 15 (3): 191-223. DOI: 10.1257/mac.20210002

Abstract: We (i) study wage-experience profiles and obtain measures of returns to potential work experience using data from about 24 million individuals in 1,084 surveys and census samples across 145 countries; (ii) show that workers in developed countries accumulate twice as much human capital at work as those in developing countries; (iii) use a simple accounting framework to find that the contribution of work experience and education to human capital accumulation and economic development might be equally important; and (iv) employ panel regressions to investigate how changes in the returns over time correlate with several factors such as economic recessions, transitions, and human capital stocks.

Consistent with a plausible cultural mechanism, individuals whose origin place a high value on autonomy hold a comparative advantage in positions characterized by a low degree of routinization; this persists among immigrants' children

Cultural Values and Productivity. Andreas Ek. Journal of Political Economy, Jun 2023. https://doi.org/10.1086/726239

Abstract: This paper estimates differences in human capital as country-of-origin specific labor productivity terms, in firm production functions, making it immune to wage discrimination concerns.  After accounting for wage and experience, estimated human capital varies by a factor of around 3 between the 90th and 10th percentile.  When I investigate which country-of-origin characteristics correlate most closely with human capital, cultural values are the only robust predictor.  This relationship persists among children of migrants.  Consistent with a plausible cultural mechanism, individuals whose origin place a high value on autonomy hold a comparative advantage in positions characterized by a low degree of routinization.

Minimum wage increases lead to increased point-in-time homeless population counts; further analysis suggests disemployment and rental housing prices, but not migration, as mechanisms

Hill, Seth J. 2023. “Minimum Wages and Homelessness.” OSF Preprints. June 5. doi:10.31219/osf.io/z2fqj.

Abstract: America's cities continue to struggle with homelessness. Here I offer a factor, the minimum wage, that adds to existing individual and structural explanations. If there are negative distributional consequences of minimum wages, they most likely harm the lowest-skill workers many of whom already face housing insecurity. To evaluate this argument, I study minimum wage changes in American cities and states 2006 to 2019. Using difference-in-differences methods for staggered treatments I find that minimum wage increases lead to increased point-in-time homeless population counts. Further analysis suggests disemployment and rental housing prices, but not migration, as mechanisms. Scholars and policymakers who aim to understand and combat homelessness should consider labor market opportunities. Distributional consequences of minimum wage laws also merit further inquiry.

Game Theory and the First World War

Myerson, Roger B. 2023. "Game Theory and the First World War." Journal of Economic Literature, 61 (2): 716-35. DOI: 10.1257/jel.20211571

Abstract: Books by Scott Wolford and Roger Ransom show how economic theories of games and decisions can be fruitfully applied to problems in World War I. This vital application offers fundamental insights into the analytical methods of game theory. Public random variables may be essential factors in war-of-attrition games. An assumption that nations can coordinate on Pareto-superior equilibria may become less tenable when nations are at war. Interpreting a surprising mistake as evidence of an unlikely type can have serious consequences. The ability of leaders to foster consistent beliefs within a cohesive society can create inconsistency of beliefs between nations at war.

Mineral and material commodities are essential inputs to economic production, but there have been periodical concerns about mineral scarcity

Pretis, Felix and Hepburn, Cameron and Pfeiffer, Alexander and Teytelboym, Alexander, Are We Running Out of Exhaustible Resources? (May 24, 2023). SSRN: http://dx.doi.org/10.2139/ssrn.4457854

Abstract: Mineral and material commodities are essential inputs to economic production, but there have been periodical concerns about mineral scarcity. However, there has been no systematic recent study that has determined whether mineral commodities have become scarcer over the longer run. Here we provide systematic evidence that worldwide, near-term exhaustion of economically valuable commodities is unlikely. We construct and analyse a new database of 48 economically-relevant commodities from 1957–2015, including estimates of worldwide production, reserves and reserve bases, prices, and production, using publicly-available data and further data requested from the United States Geological Survey. We explore trends in prices, reserves-to-production ratios, and production itself, on a commodity-by-commodity basis, using econometric techniques allowing for structural changes, and further estimate overall trends robust to outlying observations. For almost all commodities, we cannot reject the null hypothesis of no trend in prices and exhaustion, while production has increased. Price signals appear to have guided consumption and provided incentives for innovation and substitution. Concerns about mineral depletion therefore appear to be less important than concerns about externalities, such as pollution and conflict, and ecosystem services (e.g. climate stability) where price signals are often absent.

Keywords: Resource extraction, resource price, reserves-to-production, trend, exhaustion

JEL Classification: Q02, Q30, Q32

Exposure to and engagement with partisan or unreliable news on Google Search are driven not primarily by algorithmic curation but by users’ own choices

Users choose to engage with more partisan news than they are exposed to on Google Search. Ronald E. Robertson, Jon Green, Damian J. Ruck, Katherine Ognyanova, Christo Wilson & David Lazer. Nature, May 24 2023. https://www.nature.com/articles/s41586-023-06078-5

Abstract: If popular online platforms systematically expose their users to partisan and unreliable news, they could potentially contribute to societal issues such as rising political polarization1,2. This concern is central to the ‘echo chamber’3,4,5 and ‘filter bubble’6,7 debates, which critique the roles that user choice and algorithmic curation play in guiding users to different online information sources8,9,10. These roles can be measured as exposure, defined as the URLs shown to users by online platforms, and engagement, defined as the URLs selected by users. However, owing to the challenges of obtaining ecologically valid exposure data—what real users were shown during their typical platform use—research in this vein typically relies on engagement data4,8,11,12,13,14,15,16 or estimates of hypothetical exposure17,18,19,20,21,22,23. Studies involving ecological exposure have therefore been rare, and largely limited to social media platforms7,24, leaving open questions about web search engines. To address these gaps, we conducted a two-wave study pairing surveys with ecologically valid measures of both exposure and engagement on Google Search during the 2018 and 2020 US elections. In both waves, we found more identity-congruent and unreliable news sources in participants’ engagement choices, both within Google Search and overall, than they were exposed to in their Google Search results. These results indicate that exposure to and engagement with partisan or unreliable news on Google Search are driven not primarily by algorithmic curation but by users’ own choices.

Diversity, Equity, and Inclusion has low correlation with gender and ethnic diversity in the boardroom, in senior management, and within the workforce; DEI exhibits no link with future stock returns

Diversity, Equity, and Inclusion. Alex Edmans, Caroline Flammer & Simon Glossner. NBER Working Paper 31215. May 2023. DOI 10.3386/w31215

Abstract: This paper measures diversity, equity, and inclusion (DEI) using proprietary data on survey responses used to compile the Best Companies to Work For list. We identify 13 of the 58 questions as being related to DEI, and aggregate the responses to form our DEI measure. This variable has low correlation with gender and ethnic diversity in the boardroom, in senior management, and within the workforce, suggesting that DEI captures additional dimensions missing from traditional measures of demographic diversity. DEI is also unrelated to general workplace policies and practices, suggesting that DEI cannot be improved by generic initiatives. However, DEI is higher in small growth firms and firms with high financial strength. DEI is associated with higher future accounting performance across a range of measures, higher future earnings surprises, and higher valuation ratios, but demographic diversity is not. DEI perceptions among professional workers, such as R&D employees, are significantly correlated with the number and quality of patents. However, DEI exhibits no link with future stock returns.

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We also study future innovation performance, since one of the main financial arguments for DEI is that it allows for a broader consideration of perspectives and stimulation of ideas which, in turn, may be driving increased innovativeness and financial performance. We find that DEI is unrelated to either the number of future patents or patent citations. However, the granular nature of our data allows us to stratify the survey responses by job category. We find that DEI perceptions of professionals, a job category that includes R&D staff, are positively and significantly correlated with both innovation measures, but there is no positive link with the responses from the three other categories: executives, managers, and hourly workers. This is consistent with the fact that innovation is most likely to stem from professionals.

Finally, we study future stock returns. Somewhat surprisingly, given prior results on profitability, innovation, and earnings surprises, we find no link between DEI and stock returns, after controlling for either firm characteristics in firm-level regressions or risk in portfolio regressions. 

Manager quality in retail is generally hard to explain with the observables in our data, but is correlated with the ratio of full-time to part-time workers

Managers and Productivity in Retail. Robert D. Metcalfe, Alexandre B. Sollaci & Chad Syverson. NBER Working Paper 31192. April 2023. https://www.nber.org/papers/w31192

Abstract: Across many sectors, research has established that management explains a notable portion of productivity differences across organizations. A remaining question, however, is whether it is managers themselves or firm-wide management practices that matter. We shed light on this question by analyzing store-level data from two multibillion-dollar retail companies. In this setting, managers move between stores but management practices are set by firm policy and largely fixed, allowing us to hone in on managers’ personal roles in determining store performance. We find: (i) managers affect and explain a large share of the variance of store-level productivity; (ii) negative assortative matching between managers and stores, which may reflect both firms’ decisions and a selection-driven bias that we characterize and argue might apply in other settings using movers designs; (iii) managers who move do so on average from less productive to more productive stores; (iv) female managers are less likely to move stores than male managers; (v) manager quality is generally hard to explain with the observables in our data, but is correlated with the ratio of full-time to part-time workers; (vi) managers who obtain high labor productivity also tend to obtain high energy productivity, revealing some breadth in managers’ skills applicability; (vii) high-performing managers in stable growth times are also high-performing during turbulent times; and (viii) exogenous productivity shocks improve the quality of initially low quality managers, suggesting managers can learn. We explain implications of these findings for productivity research.

In Defense of Merit in Science

In Defense of Merit in Science. D. Abbot et al. Journal of Controversial Ideas, Apr 28 2023. https://journalofcontroversialideas.org/article/3/1/236

Abstract: Merit is a central pillar of liberal epistemology, humanism, and democracy. The scientific enterprise, built on merit, has proven effective in generating scientific and technological advances, reducing suffering, narrowing social gaps, and improving the quality of life globally. This perspective documents the ongoing attempts to undermine the core principles of liberal epistemology and to replace merit with non-scientific, politically motivated criteria. We explain the philosophical origins of this conflict, document the intrusion of ideology into our scientific institutions, discuss the perils of abandoning merit, and offer an alternative, human-centered approach to address existing social inequalities.

Keywords: STEM; Enlightenment; meritocracy; critical social justice; postmodernism; identity politics; Mertonian norms

4. The Perils of Replacing Merit with Social Engineering and Ideological Control

4.1. Lessons from History

The universalism of science does not preclude culture and politics from being involved in funding priorities. Funders, whether government or private, expect to receive a return on their investment. Yet politicians should not dictate how science is done, and political agendas should not replace Mertonian norms. History demonstrates the dangers of replacing merit­based science with ideological control and social engineering.16,17,19 In the Soviet Union (USSR), the aberrations of Trofim Lysenko had catastrophic consequences for science and society.17 An agronomist and “people’s scientist” who came from the “superior” class of poor peasants, Lysenko rejected Mendelian genetics because of its supposed inconsistency with Marxist ideology. Dissent from Lysenko’s ideas was outlawed and his opponents were fired or prosecuted. Lysenko’s ideologically infused agricultural ideas were put into practice in the USSR and China, where, in both countries, they led to decreased crop yields and famine.17 Today, biology is again being subjugated to ideology—medical schools deny the biological basis of sex, biology courses avoid teaching the heritability of traits, and so on.29,30 More examples of ideological subversion of science, relevant to physics and chemistry, were discussed in a recent viewpoint.19 Such analysis19 is often dismissed with vague deflections such as “everything is political” and “everyone is biased.” There is an element of truth to these declarations, which can help raise awareness of the potential of scientists to have biases, including biases on politicized topics, and help minimize such biases. However, those making these arguments often use them to impose their own ideological agendas on what can be studied and what kind of answers are permissible.31 It is this sense of the politicization of science that we categorically oppose.

4.2. The Damage Inflicted by Today’s Politicization of Science

The lessons from history are clear: ideological control of the scientific enterprise leads to its decline. The ongoing ideological subversion of STEMM (science, technology, engineering, mathematics, and medicine) education is particularly worrying. Ideological changes in the U.S., Canada, and New Zealand are already under way32–34 and are quickly influencing other democracies. The worst excesses of CSJ ideology are spreading to medicine, psychology, and global public health with worldwide implications.25,26,35–37 For example, in global public health, the ideology manifests in the Decolonize Global Health movement, which calls for dismantling global health, questions research­based knowledge, emphasizes intergroup and international antagonisms, and challenges universalism as an ideal for global health, humanitarian aid, and development assistance.37 CSJ­driven pedagogy can be pernicious, even when proposed innovations appear benign. For example, the proposed curriculum decolonization in pharmacology38 involves teaching about drugs developed from folk remedies and focusing on the contributions of non­Europeans. While such topics might be appropriate for a history of medicine course, centering the curriculum around them, as has been proposed, would be detrimental to training health professionals. The vast majority of today’s pharmacopeia is derived from the research and development efforts of the modern pharmaceutical industry; effective treatments derived from traditional medicine are rare, especially in the era of bio­ and immunotherapies. For example, of the over 150 anti­cancer drugs available today, only three are of natural origin (trabectedin, taxanes, and vinca­alkaloids).39 Decolonizing pharmacology also contributes to the public’s infatuation with traditional medicine, while health agencies report numerous therapeutic accidents involving herbal products not validated following “colonial” standards.40 Such pedagogy also reinforces mistrust toward “white medicine,” feeding conspiracy theories against the pharmaceutical industry, as exemplified by campaigns against COVID vaccines, which, sadly, disproportionately impacted minority groups.41 Scientific research requires dedication, intensive technical training, and a commitment to rigor and truth­seeking. Weakening merit­based admissions, created to identify and cultivate the best and brightest, will have long­lasting consequences for the scientific workforce, discouraging or preventing many promising students from entering the field. Signs of this are already evident. The weakening of the workforce in the U.S. has contributed to that country’s recent fall from the position of world leader in science.15 If the movement in North America to replace merit with ideology in funding42–45 and faculty hiring46–50 progresses, further deterioration in the ability to foster excellence in research in the U.S. is all but inevitable. This does not bode well for the future of science and society globally. Enforcing identity­based hiring is discriminatory,51–53 as it deprives some high­achieving individuals, including economically disadvantaged individuals who are not members of politically favored identity groups, of opportunities they have earned,54–57 thereby potentially damaging morale and engagement. In the U.S., this has resulted in the unfair treatment of Asian­American, Jewish, white, male, and foreign students.32,52,53,56–59 Ironically, replacing universalist principles with identity­based selection risks ultimately harming qualified underrepresented researchers by introducing doubt as to whether they merited their position or were hired for ideological reasons. Attempts to demonize, inflict reputational damage, or silence critics of social engineering practices by characterizing them as racists, white supremacists, or worse46,60–63 is particularly detrimental to the open intellectual environment in which scientific inquiry into difficult social problems thrives. For every incident in which a scientist is targeted, thousands get the message and self­censor.60,61,63 Besides directly impacting the scientific enterprise, the ideological capture of scientific institutions19,31,64 has broad consequences for society. Scientists and scientific institutions have a responsibility to enhance understanding and acceptance of the scientific consensus on matters of public importance. As seen with climate change and COVID­19, once a scientific topic becomes politicized, trust in science diminishes, laying the groundwork for science denial, conspiracy theories, and political opportunism.37 Research has consistently shown that public acceptance of a scientific consensus is driven not by scientific literacy (accepters are no more knowledgeable than deniers) but by political ideology and trust in scientific institutions.65 When scientific institutions issue political position statements and adopt identity­based policies, they alienate and lose the trust of large dissenting segments of the public.66 When prominent scientific journals promote these ideologies through editorials and perspective pieces, they magnify the alienation. Conflicting with the Mertonian principles of disinterestedness and universalism, these manifestos undermine the credibility of science as an objective, disinterested, and truth­seeking enterprise.67

5. The Genesis of the Current Attacks on Merit­based Science The ideological basis of the current attacks on science emanates from certain veins of postmodernism and the identity­based ideologies they have spawned: various CSJ theories, including Critical Race Theory (CRT), related theories of structural racism, and postcolonial theory.3–6,14 These ideologies are increasingly finding their way into politics, culture, and education and are negatively affecting science, medicine, technology, psychology, and global health.15,25,26,34,37 They are not imposed by totalitarian regimes, but spread by activists and abetted by university administrators and business leaders who fail to protect their institutions from these illiberal, regressive ideas.60,63,68 The genesis of these ideologies is often obscure to the public or even to their bearers—e.g., administrators trained in Diversity, Equity, and Inclusion (DEI)—who are unlikely to have read Gramsci, Derrida, Foucault, Bell, Crenshaw, and Delgado. But just as a Soviet apparatchik need not have read Das Kapital to have been an agent ensuring conformity to Marxist doctrine, one need not be fully versed in postmodern or CRT­inspired scholarship to be implementing the ideology. The problems emerge from doctrinaire implementation, not from deep knowledge of the scholarship. Critical Theory and CSJ conflict with the liberal Enlightenment. According to Delgado and Stefancic,5 their characteristic elements include anti­rationalism; anti­enlightenment; rejection of equal treatment, philosophical liberalism, and neutrality in law; standpoint epistemology and subjectivism as the basis of knowledge; and intersectionality. Recently, ideas that emerged from Critical Theory have been aggressively disseminated to the public, notably in books by DiAngelo and Kendi,69,70 now promoted as essential reading in many schools and universities. Critical Theories seek to fundamentally change the practice of science.10,14 Figure 3 contrasts CSJ epistemology with the ideas of the liberal Enlightenment.

CSJ is not an empirical theory, because its tenets are maintained despite their being either demonstrably false or unfalsifiable.3,6,7,10,14 The existence of objective reality, for example, which CSJ denies, is attested to by every successful engineering project, from bridges to satellites, from cell phones to electric cars, ever conducted. The fallibility of “lived experience” is attested to by a wealth of psychological research demonstrating errors and biases in self­reports.71 Yet, CSJ has found its way into STEMM, evoking parallels with the ideological corruption of science of past totalitarian regimes.19 As an illustration, The Lancet published a paper in 2020 titled “Adopting an Intersectionality Framework to Address Power and Equity in Medicine”72—a call to adopt CSJ ideology in medical education and practice. This is reminiscent of the ideological control of science16,17,19 and medicine18 in the USSR. In medicine, Marxist ideology manifested itself in “‘workerizing’ ... [the] apparatus [of medical care]” (i.e., selecting future doctors from the working class, rather than the intelligentsia by means of class­based quotas) and prioritizing medical care for citizens based on class (the proletariat was to be given higher priority than the farm workers; the farm workers, higher priority than the intelligentsia; and so on).18 The CSJ view—that institutions of knowledge, art, and law perpetuate systemic racism and, therefore, must be dismantled, and that merit­based criteria in hiring, publishing, and funding must be replaced with CSJ criteria—has been aggressively advanced by many of our academic leadership—university administrators, executive bodies of professional societies, publishers, etc. A search for “racism” in the titles of papers published by the Science and Nature Publishing groups returns hundreds of hits such as “NIH Apologizes for ‘Structural Racism,’ Pledges Change,”73 “Dismantling Systemic Racism in Science,”74 and “Systemic Racism in Higher Education.” This reflects the axiomatic ideological perspective of CSJ that systemic racism is indelibly etched into every Western institution. The perspective is taken as an article of faith, which is why some have argued that CSJ is more a secular religion than an evidence­based science.75 Below we discuss publications making unsupported claims of systemic injustices and attacking merit. Such publications rarely, if ever, provide evidence that observed disproportionalities in the race or gender distribution of a scientific field are the result of present­day structural or systemic racism. Whereas historical events, such as apartheid, slavery, and Jim Crow, are beyond dispute, the extent to which systemic racism influences STEMM or academia today is a contested question.76 Its existence cannot be established by proclamation. In the absence of compelling evidence, these assertions are not scientific; they are dogma. In his book Discrimination and Disparities, 76 Sowell takes to task the central axiom of CSJ—that disparate outcomes for various social groups emerge as a result of discrimination—and presents ample evidence illustrating its fallacy. Sowell’s arguments present compelling counterpoints to the standard set of arguments against meritocracy, such as those presented in The Tyranny of Merit 77 and The Meritocracy Trap.78 Space considerations do not permit a full evaluation of the arguments, many of which boil down to merit systems being imperfect; that is, that there are biases in judgments of merit, that they are not always implemented as promised, and that they risk creating hubris in the successful and despair among the unsuccessful. Our perspective is that, however valid these criticisms, merit­based systems are still immensely superior to alternatives that have either been tried before or are being proposed now.77 Communist systems, for example, which are vastly more egalitarian, produced misery on an unimaginable scale. Can newly proposed alternatives deliver better results? Let us consider an example. In The Tyranny of Merit, 77 Sandel proposes the following approach: identify some minimum standard that constitutes “qualified” for admission to Harvard or Stanford and use a lottery system to select among those. Specifically, he mentions cutoffs that would treat 50–75% of applicants as “qualified,” which stops short of abandoning merit altogether. He justifies these cutoff points by using anecdotal data about athletes who were overlooked by professional teams in early draft rounds, but who went on to have highly successful careers in their sport. But examples of a few overlooked individuals do not imply that merit­based selection is ineffective—indeed, players drafted early are much more likely to go on to professional careers.79 Sandel also seems to presume that identically capable college applicants will suffer if some end up attending lesser schools. However, in STEM (science, technology, engineering, and mathematics), where education provides objectively assessable technical skills, attendance at a top university provides little advantage in students’ earnings potential. Measured 10 years post­graduation, a top­tier education provided no significant earnings advantage for science majors and at best a marginally significant one for engineering majors.80 Moreover, Sandel seems to be unaware that his strategy, by nature of being based on a lottery, guarantees that many candidates will end up in lesser schools than their equally qualified counterparts, an outcome that a merit system, by its nature, aims to minimize. 

Income raises human well-being indefinitely, but the impacts gradually become marginal with higher income; age consistently slashes well-being

Income raises human well-being indefinitely, but age consistently slashes it. Chao Li & Shunsuke Managi. Scientific Reports volume 13, Article number: 5905. Apr 11 2023. https://www.nature.com/articles/s41598-023-33235-7

Abstract: The relationships among human well-being, income, and age have long been debated. The association between human well-being and income is believed to be U-shaped, although the reasons remain elusive. A recent study shows a turning point in the link between human well-being and income; that is, increased income does not always improve well-being. However, the mechanisms of the effects of income and age on human well-being are unknown. Here, we illustrate the total cumulative effects of income and age on evaluated well-being through all observed causal pathways based on a 1.6-million-observation global dataset and the structural causal model. This is the first study to investigate those casual relationships globally. We find that an increase in age always reduces evaluated well-being, and the adverse effects are aggravated with age. Furthermore, increased income continuously improves human well-being, but the impacts gradually become marginal with higher income. Our results demonstrate that physical health improvement in older people is the most effective way to intervene against the harmful effects of age on well-being. Moreover, increased income may dramatically enhance the well-being of people living close to the poverty line.

Conclusion

This is the first study to investigate the causal relationships among human well-being, income, and age using a global dataset. Intervention for gradually deteriorating health in an aging society is the most effective way to maintain or improve human well-being. While increasing age is not inherently detrimental to human well-being, it can lead to various physical and mental health issues that ultimately harm overall well-being. Additionally, the effectiveness of an increase in income is typically most pronounced when individuals initially have low incomes. Although a turning point in the relationship between well-being and income, such as 60,000 to 75,000 USD/year, regarding life evaluation was not detected, the contribution of increased income to life evaluation beyond these amounts is marginal. Increased income always leads to human well-being improvement because its effects on the direct and indirect factors are always positive in most pathways observed in this study.

Participants had better memory for tweets than news headlines

Memory for tweets versus headlines: Does message consistency matter? Tori Peña, Raeya Maswood, Melissa Chen, Suparna Rajaram. Applied Cognitive Psychology, April 13 2023. https://doi.org/10.1002/acp.4068

Abstract: People routinely use news outlets and social media platforms to keep up with recent events. While information from these common sources often aligns in the messages conveyed, news headlines and microblogs on social media also frequently provide contradictory messages. In this study, we examined how people recall and recognize tweets and news headlines when these sources provide inconsistent messaging. We tested this question in person (Experiment 1) and online (Experiment 2). Participants studied news headlines and tweets that provided either consistent messaging or inconsistent messaging, then completed a free recall and recognition memory task sequentially, and provided confidence ratings for recognition judgments. Findings were similar across memory tasks and experiments: Participants had better memory for tweets than news headlines regardless of message consistency. We discuss the implications of these findings for understanding memory in the digital age where social media use is widespread and messaging across sources is often inconsistent.

Harbingers of failure do exist: Their positive (negative) pre-release movie reviews provide a strong predictive signal that the movie will turn out to be a flop (success)

What reviews foretell about opening weekend box office revenue: the harbinger of failure effect in the movie industry. Pantelis Loupos, Yvette Peng, Sute Li & Hao Hao. Marketing Letters, April 13 2023. https://link.springer.com/article/10.1007/s11002-023-09665-8

Abstract: We empirically investigate the harbinger of failure phenomenon in the motion picture industry by analyzing the pre-release reviews written on movies by film critics. We find that harbingers of failure do exist. Their positive (negative) pre-release movie reviews provide a strong predictive signal that the movie will turn out to be a flop (success). This signal persists even for the top critic category, which usually consists of professional critics, indicating that having expertise in a professional domain does not necessarily lead to correct predictions. Our findings challenge the current belief that positive reviews always help enhance box office revenue and shed new light on the influencer-predictor hypothesis. We further analyze the writing style of harbingers and provide new insights into their personality traits and cognitive biases.

5 Conclusions and discussion

Predicting a movie’s box office revenue is one of the most fundamental needs in the motion picture industry. This becomes even more challenging when someone tries to predict the opening weekend box office revenue since there is little to no information available about the wider audience’s reaction. As Cabral and Natividad (2016) show in their work, doing well at the box office during the opening weekend has an economically and statistically significant effect on the movie’s eventual performance. Prior research has explored how different attributes of a movie, such as star inclusion (Elberse, 2007; Karniouchina, 2011; Liu et al., 2014), the activity level of editors and viewers of the movie’s corresponding entry in Wikipedia (Mestyán et al., 2013), and competition among movies that are released at the same time (Ainslie et al., 2005; Hennig-Thurau et al., 2007; Delre et al., 2016), could predict the box office performance. With regard to online movie reviews, Moon et al. (2010) show that movie ratings from professional critics and viewers’ communities are predictive of total box office revenue. Moreover, Basuroy et al. (2003) find that both positive and negative reviews are significantly correlated with box office revenue with the impact of negative reviews (but not positive reviews) diminishing over time. We diverge from this research and propose that a distinction should be made among movie critics because as we demonstrate not all positive (negative) reviews are a signal for success (failure).

More specifically, we combine three different data sources to empirically investigate the harbinger of failure phenomenon in the motion picture industry. We analyze the pre-release reviews written on movies by film critics and find that harbingers of failure do exist. Their positive pre-release reviews provide a strong predictive signal that the movie will turn out to be a flop. Moreover, we find the harbinger effect to be symmetric. That is, there are harbinger critics who give negative reviews and the movie turns out to be successful. These findings shed new light on the influencer-predictor hypothesis. We document that in a pre-release setting, there is a portion of movie critics that neither influence nor predict the right outcome of a movie. On the contrary, the outcome of the movie turns out to be the exact opposite of their prediction.

We further analyze the writing style of film critics and connect them to potential cognitive biases that might give rise to the harbinger phenomenon. We find that harbinger critics engage in an analytical and formal style of writing and have a lower rate of self-reference pronouns compared to non-harbingers. These differences indicate that harbinger critics are less self-reflective about the audience’s opinion compared to non-harbingers and tend to show overconfidence in their abilities. When we stratify the analysis across the critic status category, we find the aforementioned differences between harbingers and non-harbingers to be even more significant. In the cohort of top critics, which usually consists of professional and experienced reviewers, we find that top critic harbingers are also using more adverbs than their counterparts in their positive reviews indicating that they are over-optimistic in their assessments of movies. In the case of negative reviews, we find that the top critic harbingers are significantly more analytical than their counterparts.

Our findings have important managerial implications for the motion picture industry and its key channel entities: movie studios, distribution companies, and movie theaters. First, our research provides a methodology based on pre-release film reviews that allows movie producers and distributors to identify early on which movies are going to perform badly. This will in turn allow them to make better pre-launch marketing decisions and save significant marketing costs on flop movies. It will also allow theaters to better allocate their theater space, a finite resource that is crucial to the success of theaters. Second, film studios can greatly benefit from identifying the harbinger critics and using them during the early stages of production. More specifically, movie studios can use harbinger critics to select the scripts that will maximize their box office revenue instead of using mere guesswork. Our approach complements that of Eliashberg et al. (2007), which uses natural-language processing to select the winning scripts. Third, our approach can potentially serve as a diagnostic for reviewers across fields. It is crucial for companies that employ reviewers to know whether their reviewers’ opinions can be used as a diagnostic tool to determine success or failure. Based on that, companies might want to reclassify who they designate as a “top reviewer” or create a new class of reviewers.

We should acknowledge here the limitations of this work and present potential future research avenues. The main limitation of our research, similar to Anderson et al. (2015) and Simester et al. (2019), is that we do not provide a causal explanation about where the harbingers’ preferences are coming from. However, we do provide insights into their personality traits and cognitive biases based on their writing style. This paves new avenues for further experimental behavioral research about the underlying mechanisms of the harbinger phenomenon. A second potential limitation of our research is that movie producers and distributors could potentially strategically pick which critics to invite to their pre-release screenings. However, there is no substantial evidence that this is happening in the movie industry, as it would jeopardize the reputation of, and confidence in, movie studios and movie critics alike. Last, another possibility, unobserved to the researcher, is that critics are getting influenced by other critics before they submit their review by either reading their reviews or talking to them. Future research might include further contextual variables, such as the choice of movies to review by harbingers, the timing of the reviews, and the lack of learning, to further the theoretical understanding of the harbinger phenomenon in the motion picture industry.

To conclude, does the positive (negative) feedback given by film critics before the release of a movie signal its financial failure (success) instead of its success (failure) as currently believed? Our findings document that this is not always the case. At least in a pre-release movie setting, a distinction should be made among film critics because of the existence of harbinger critics; their endorsement of a movie is a signal of the opposite outcome. 

The origin of pleasant sensations: insight from direct electrical brain stimulation

The origin of pleasant sensations: insight from direct electrical brain stimulation. Cécile Villard et al. Cortex, April 13 2023. https://doi.org/10.1016/j.cortex.2023.03.007

Abstract: Research into the neuroanatomical basis of emotions has resulted in a plethora of studies over the last twenty years. However, studies about positive emotions and pleasant sensations remain rare and their anatomical-functional bases are less understood than that of negative emotions. Pleasant sensations can be evoked by electrical brain stimulations (EBS) during stereotactic electroencephalography (SEEG) performed for pre-surgical exploration in patients with drug-resistant epilepsy. We conducted a retrospective analysis of 10 106 EBS performed in 329 patients implanted with SEEG in our epileptology department. We found that 13 EBS in 9 different patients evoked pleasant sensations (0.60% of all responses). By contrast we collected 111 emotional responses of negative valence (i.e., 5.13 % of all responses). EBS evoking pleasant sensations were applied at 50 Hz with an average intensity of 1.4 ± 0.55 mA (range 0.5−2 mA). Pleasant sensations were reported by nine patients of which three patients presented responses to several EBS. We found a male predominance among the patients reporting pleasant sensations and a prominent role of the right cerebral hemisphere. Results show the preponderant role of the dorsal anterior insula and amygdala in the occurrence of pleasant sensations.

Keywords:Brain stimulationPositive emotionstereoelectroencephalographyAmygdalaInsula

4. Discussion

To our knowledge, our study is the first to focus specifically on the generation of pleasant sensations, in the broad meaning of the term, from a large collection of EBS obtained during SEEG recordings (10 106 stimulations in 329 patients). We found that pleasant sensations were exceptional events during EBS, much rarer than negative sensations, as we observed only 13 positives sensations (0.55%, versus 5.13 % for negative feelings). This is possibly a particularity of the mammalian brain, which is more likely to generate negative emotions for rapid adaptive reactions favoring survival of species, e.g. when facing a danger(Phan et al., 2002). Another explanation lies in the largely subcortical and brainstem location of reward networks(Liu et al., 2011; Wise, 2002) when compared to the focus of EBS on cortical structures during SEEG for presurgical evaluation of epilepsy (see limitations).

4.1. Amygdala and anterior insula: two core regions for pleasant sensations

Our results identified two brain regions more frequently involved in pleasant sensations: the anterior insula (AI) and the amygdala. The AI is the source of heterogeneous clinical manifestations when it is involved in seizure or stimulated electrically as it can evoke gustatory, olfactory, auditory, somatosensitive, vestibular, viscerosensitive, visceromotor, experiential or emotional sensations(Mazzola et al., 2006, 2014, 2017, 2019). Functional neuroimaging highlighted the role played by the insula in the integration of information from our environment and the genesis of adapted emotions, showing the notable role of the AI(Kurth et al., 2010). Our data are congruent with previous EBS studies showing the involvement of AI in pleasant emotions and particularly ecstatic sensations (Bartolomei et al., 2019; Nencha et al., 2022a; Ostrowsky et al., 2000). Gschwind and Picard (2016), in a meta-analysis of ecstatic aura, defined ecstatic sensations as the association of "intense positive emotion (bliss)", "improved physical well-being", "increased self-awareness or increased perception of the external world (clarity)". According to a recent neurocognitive theory, the brain would operate on a prediction model (Clark, 2013), comparing real internal and external stimuli with reference theoretical patterns. The insula would be the key structure for processing the internal states of the body through interoceptive signals. Disruption of the predictive role of AI has been proposed as an explanation of the ecstatic auras(Picard et al., 2021). Recently a feeling of time dilation with a sense of pleasant eternity has been reported during AI stimulation (Sheikh et al., 2022).

The role of amygdala in generating negative emotions, especially fear, is well known both from animal and human studies(Davis & Whalen, 2001; LeDoux, 2003). However, the amygdala has also been involved in brain circuits related to happiness and pleasant sensations(Garavan et al., 2001; Hamann & Mao, 2002; Lanteaume et al., 2007; Sabatinelli et al., 2011). Animal studies showed that amygdala neurons respond to conditioning stimuli that have been associated with either appetitive or aversive outcomes (reviewed in Fernando et al., 2013). The activation of the amygdala in response to pleasant stimuli is suggested by human fMRI studies, notably when observing a pleasant image, face, word or scene(Garavan et al., 2001; Hamann & Mao, 2002; Sabatinelli et al., 2011), or during mental imagery of pleasant situations(Costa et al., 2010). On the other hand, only few publications reported pleasant sensations during EBS in the amygdala (see (Guillory & Bujarski, 2014) for review). Lanteaume et al. (2007) reported sensations of "joy" or "happiness" during left amygdala stimulation in a minority of patients, as most EBS resulted in negative sensations. This study quantified subjective responses using a basic emotion scale (Izard scale). A more recent study found that only one out of 150 amygdala stimulation resulted in a subjective feeling of joy (Inman et al., 2020).

Our study also shows that the anterior cingulate gyrus and the temporal pole may also contribute to pleasant sensations. These observations are consistent with some data from EBS of the temporal pole. Analyzing the semiological aspects of temporal pole stimulation, Ostrowsky et al. (2000) reported a sensation of happiness in 4 out of 150 temporal pole stimulation. Meletti et al. (2006) also described a pleasant and relaxing sensation during EBS in the temporal pole. Similarly, experiments involving recollection of positive autobiographical memories and positive emotions revealed the activation of hippocampus and temporo-polar regions(Markowitsch et al., 2003; Zotev et al., 2011)Concerning the anterior cingulate gyrus, in his work on the lateralization of affect, Smith et al. (2006a) described an euphoric sensation after its stimulation. Some functional imaging studies highlighted also the role of the anterior cingulate gyrus in the emotional mechanisms of happiness. Studies reported that when participants were asked to recall and attempt to re-experience and re-enact intense personal emotional episodes, there was an activation of the right insula, right somatosensory cortex, bilateral anterior cingulate cortex and right posterior cingulate cortex (Damasio et al., 2000; Suardi et al., 2016).

While our study highlights the predominant role in the conscious expression of positive affect of the AI and amygdala, these structures are likely embedded in a network of neural structures and probably do not act in isolation. There is evidence that direct high-frequency EBS activates a network of regions depending on the stimulation site and the effect produced(Bartolomei et al., 2019; Perrone-Bertolotti et al., 2020). As such, a recent study on a manic state induced by EBS of the right lateral prefrontal cortex demonstrated significant increase of functional coupling between the right hemispheric limbic nodes, the temporal pole and the claustrum(Scholly et al., 2022). There is evidence that the genesis of emotions requires the interaction between several brain networks, widely distributed, although none of them seems to be specific to the "emotion function” (Morawetz et al., 2020; Pessoa, 2018). Among these networks, the "salience network", which has been widely studied, would be involved in a larger scale network leading to the generation of emotions. The salience network involves, among others, connections between the anterior cingulate gyrus, the AI, the amygdala and the hypothalamus (Kober et al., 2008; Lindquist et al., 2016; Pessoa, 2018). The relative contribution of each of these regions in positive emotion networks remains to be determined.

A network of brain areas underpinning the experience of positive emotions and pleasant sensations could explain why, in two patients, stimulating different structures evoked the same sensations, with for patient P4, stimulation of the right amygdala and temporal pole evoking a feeling of well-being and for patient P8, stimulation of the right amygdala and AI evoking a feeling of well-being and positive emotion. The dense bidirectional connections between the anterior ventral part of the insula and the amygdala(Jakab et al., 2012; Mesulam & Mufson, 1982) and between the AI and the anterior cingulate gyrus (Ghaziri et al., 2017) can account for similar sensations evoked by EBS in distant areas within the same functional network.

4.2. Effect of hemispheric laterality and sex

Our study revealed a right-sided predominance of pleasant sensations. A right-side predominance of negative emotional valence induction for right side stimulations has been reported in previous EBS studies (review in (Guillory & Bujarski, 2014)). A left lateralization of positive emotion during amygdala stimulation has been previously suggested (Lanteaume et al., 2007). This apparent contradiction could be linked to the underrepresentation in the previous studies of the anterior insula stimulation which is the prominent site in our experience for pleasant evoked sensations. Smith et al. (2006b) also reported dysphoric responses primarily during right stimulation, but no lateralization for pleasant emotional responses. No clear lateralization effect was found as a function of emotional valence in amygdala activation in a large neuroimaging meta-analysis(Baas et al., 2004).

There was a predominance of pleasant sensations in men in our study. No previous study using EBS has reported such a predominance of positive emotions, which could be related to the small number of patients in most EBS studies when compared to the large sample investigated here. However, regarding negative emotions Meletti et al. (2006) reported that the feeling of fear occurred significantly more in women than in men.

Data in the literature on gender differences in emotion are often inconsistent (Brody & Hall, 2000; Wester et al., 2002). There is evidence, primarily from self-report data, that women experience emotions with greater intensity than men(Whittle et al., 2011). Women have been found to be more reactive to emotional stimuli, and particularly to unpleasant, threatening, or traumatic stimuli. Research has also suggested that gender differences in self-report are greater for negative emotions such as fear and jealousy, and some neuroimaging studies support greater brain activation in women for negative stimuli (review in (Whittle et al., 2011)). There is also evidence that males may be physiologically more reactive to certain pleasurable stimuli, particularly erotic ones (Allen et al., 2007). A study reported that males exhibited greater activity than females in the frontal lobe and amygdala during exposure to photo stimuli with positive valence (Wrase et al., 2003).

Further studies are needed to better define the effects of these two factors in the genesis of pleasant sensations.

4.3. Limitations of the study

The first limitation of our study is its retrospective nature. Responses were systematically collected, but subjective reports may not have been exhaustive. Patients may have described their symptoms in a simplified way because of difficulties in expressing their feelings (Cirignotta et al., 1980). Moreover, how to perceive and express these sensations may depend on education, culture, information given to the patients, context of occurrence, the patients ability to introspection, their vocabulary and therefore vary between patients but also within the same patient (Williams, 1956). To overcome these difficulties, quantification by self-administered questionnaires (Lanteaume et al., 2007) is interesting but was not carried out in the majority of patients in the study. Prospective studies using standardized questionnaires will be particularly useful, especially if coupled with objective measures of the autonomic response, such as the electrodermal response(Inman et al., 2020; Lanteaume et al., 2007).

The second limitation is related to the spatial sampling of SEEG as it has been estimated that about 10,000 electrode contacts would be necessary to explore the brain volume covered by functional MRI(Lachaux et al., 2003). This limitation is partially counterbalanced by the large cohort of patients included and the large number of EBS considered in our analysis (the highest in the literature to date) that allow a large spatial sampling. In addition, the included patients cover a large temporal period with variations in the number of implanted electrodes and implanted sites. Insular implantations with orthogonal and especially oblique electrodes became more common from 2010 in our center. We can also note that, for feasibility and safety reasons, some regions cannot be explored, in particular the brainstem whose role in emotional processing is important (Venkatraman et al., 2017).

Third, SEEG was performed in patients with epilepsy, and seven of them reported positive sensations belonging to the subjective symptoms of their usual seizures. Moreover, the stimulated sites were part of the epileptogenic zone in 8 out of 13 cases. Indeed, the organization of brain networks and the excitability of the brain of patients with epilepsy may be different from a non-epileptic subject. Nevertheless, direct brain stimulation in the history of neuroscience has allowed progress in the knowledge of the role of certain regions in subjective phenomena generated by the human brain, such as psychosensory or emotional phenomena (reviewed (Trébuchon & Chauvel, 2016). Moreover, these phenomena can be obtained outside the usual clinical semiology of the patients (patients P1 and P7 in the present study) (Nencha et al., 2022b).