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The Economics of Moral Uncertainty
PhD Thesis in Economics, Paris School of Economics, 2023
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Abstract
This thesis, rooted in experimental economics, political behavioral economics, and macroeconomic behavioral economics, tackles diverse topics concerning the decision-making processes of economic agents. In the first chapter, we conduct an incentivized experiment on a nationally representative US sample (N=708) to test whether people prefer to avoid ambiguity even when it means choosing dominated options. In contrast to the literature, we find that 55% of subjects prefer a risky act to an ambiguous act that always provides a larger probability of winning. Our experimental design shows that such a preference is not mainly due to a lack of understanding. We conclude that subjects avoid ambiguity per se rather than avoiding ambiguity because it may yield a worse outcome. Such behavior cannot be reconciled with existing models of ambiguity aversion straightforwardly. In the second chapter, in an incentivized online social media experiment (N = 706), we show that different digital storytelling formats – different visual designs and writing styles to present the same set of facts – affect the intensity at which individuals become critical thinkers. Intermediate-length designs (Facebook posts) are most effective at triggering individuals into critical thinking. Individuals with a high need for cognition mostly drive the differential effects of the treatments. We further explore the implications of such results for the welfare and political economy. Particularly, we establish that increasing the share of critical thinkers – individuals who are aware of the ambivalent nature of a certain issue – in the population increases the efficiency of surveys (elections) but might increase surveys’ bias. In the third chapter, we present a novel climate-macroeconomic model, Nested Inequalities Climate-Economy with Risk, and Inequality Uncertainty (NICERIU). We also introduce a social welfare function, the Worldview-Inclusive Welfare. This latter incorporates heterogeneous worldviews regarding welfare and uncertainty about inequality, proposing redistributive economic policies based on equality-distributed equivalence and a novel axiom of minimal comparability of worldviews. NICERIU has been calibrated using a representative sample from the US population (N=500), and the calibration outcomes reveal intriguing insights. With symmetrically weighted distinct world-views, the optimal taxation policy closely approximates conservatively the taxation policy based on a particular worldview but differs in specific ways. In summary, this thesis explores various often overlooked aspects within traditional approaches to economics. It challenges models of ambiguity aversion, highlights the impact of narrative formats on critical thinking, and proposes a climate-economic model that incorporates uncertainty about inequality. The obtained results call for profound reflection and underscore the importance of integrating diverse aspects of decision-making processes into economic analyses.