ECONOMIC ORGANIZATIONS, INSTITUTIONS AND MARKETS Rubn Lpez Jimnez/ SEM.
101
PROBLEM SET 1
REVIEW QUESTIONS:
1. In a hunter-gatherer tribe, the organization of economic activity consisted on small bands
containing an extended family or two or more families. Hunter-gatherers tended to be quite
egalitarian and they did not have a complex social stratification. By definition, they dont
produce food, they gather and hunt which is a feature of a nomad society.
2. The concept of maladaptation refers to the fact that humans have changed their environment
at a higher pace than themselves. As a consequence, our species continue to have the
characteristic of our ancestor who lived 10000 years ago, however we live in an environment
completely modified by technologies, we have more complex societies, food abundance,
longevity to which we are maladapted. This sudden modification on our environment is caused
by our specialization in producing knowledge.
In addition, the ecological mind describes the situation when our emotions are not adapted to
our current environment, however they were perfectly fitted to our ancestral environment. For
this reason, we have weakness of will because most of the time we think about the current
happiness but we have trouble to postpone this joy for the good of the future or our goals in
life. The previous maladaptation has a well-linked relation with the discount rate due to the fact
that we live longer and our life expectancy has been enlarged remarkably. Moreover, because
of having a riskier environment, we are risk averse. This previous fact can be well-proven since
a loss in our ancestral environment could be as prominent as life or death. Conversely, ecological
cooperation refers to a maladaptation itself but it also comment that instinctive cooperation
only tends to be applied to small group of people, generally close friends or family. Whats more,
we are not get used to dealing with international impersonal transactions, probably because
we are risk averse and we do not feel secure.
3. It is universally acknowledge that both rationality and emotions play a crucial role in our daily
decisions. Moreover, they are complementary and necessary in order to solve fundamental
problems although some emotions might be useful nowadays, other can be damaging or
maladapted to the current society.
4. An example in which emotions can lead to a less rational or cooperative behaviour could be
when you loath someone and you want to damage his or her reputation by risking yours.
Consequently, it is well-described as a lose-lose situation in which both individuals might end up
damaged anyway. Another exemplification could be when someone who has had a quarrel with
his/her neighbour, commence a costly legal procedure in order to take revenge instead of
solving the issue diplomatically.
5. For instance, we might find work-team with close friends a challenge since you try to work as
much as you can so as to avoid being criticize or deteriorating your friendship. Another obvious
example is when your family ask you to do a task and you decide to cooperate so as to maintain
the family bound.
6. In this case, although I would say that in some extent we are determined by our genetics or
personality which is mostly fixed when you are born, it has been well-proven that culture and
our social environment notoriously influence us in every stage of our daily life. It might be true
ECONOMIC ORGANIZATIONS, INSTITUTIONS AND MARKETS Rubn Lpez Jimnez/ SEM. 101
that your ideas about life, morals or habits are partially determined by your social circle.
Moreover, the culture to which we belong might play a crucial role in our social or work habits.
7. The function of culture and institutions is essential to fix this maladaptation to our current
environment. Firstly, we can comment that instincts are considered a building block with
which we create and develop our institutions. Consequently, some emotions are believed to be
active in different kinds of enforcement mechanism in countries legislations. The role of
institutions rely on ensuring that opportunistic behaviour, perverse incentives or actions
ethically disapproving are not permitted by means of a pertinent punishment (ex post
retaliation). In addition, it impede private retaliation restrain asymmetric relational contracting.
Moreover, they also introduce a defined moral code, whose violation might cause a sentiment
of guilt or shame.
II. CASES AND EXERCISES
1. THE STRUCTURE OF BELIEFS
Having taken the test, I would say that I am a far from the average because I am located in the
neutral zone when it comes to the test of gender and, in the race test, I am in the slight automatic
preference for white people stage. At first sight, I would say that we have not solved the social
problem of racism and male chauvinist and the test corroborate this fact: strong automatic
preference for white men (48%) and, in the case of gender, association with men and career
(40%).
I believe that this results do not differ for women and men. The result showed in the test might
be caused to a well-stablished idea of difference between male and women through
generations, for instance, our hunter-gatherer ancestors had been assigned different tasks
depending on their gender. For this reason and that the evolution process has endowed women
and men with different instincts. Nowadays, this maladaptation can be showed up in the biased
society perspective of different roles between genders. I would say that men and women are
very different but both should have equal rights to obtain a job in accordance to her or his
abilities or skills.
On the other hand, in the case of the race test, I would say that, from an evolutionary point of
view, we tend to refuse or discriminate the stranger or the foreigner because it is seem to
compromise our survival. Although our current opinions about races could be caused by
maladaptation, I have to comment that people perspective can be biased or influenced by
culture or social interactions.
2. GOSSIP
It is well-known that gossip accomplished a survival function in the hunter-gatherer world.
Undoubtedly, acquiring as much information as possible about your social environment might
come as a crucial knowledge and it definitely increase our chances to survive. Gossip focus on
the important issues, the ones that guaranteed survival or decadence. Nowadays, we might find
foolish to gossip about movie stars or opera characters but it is in our evolution as chosen specie
to rule the world. Advertising campaigns become extremely popular simply showing famous
people recommending products. It is on our DNA to imitate the crowd and this crowd is
influenced by successful people. Nowadays, there are a lot of adverts such as football players
advertising trainers or other sport accessories.
ECONOMIC ORGANIZATIONS, INSTITUTIONS AND MARKETS Rubn Lpez Jimnez/ SEM. 101
This can definitely be applied to social networks, we have the strong need to know all about our
social circle. Consequently, we feel that we belong to a social group which gives us the chance
to show off status, even if our life is not that good, so as to stand out of the crowd in the society,
indeed in order to survive indirectly.
3. WITHHOLDING TAXES
Withholding taxes are an optimal way of collecting taxes because the employee might receive
more utility from earning a net income instead of having to give up a part of his income. This is
due to the fact that we are lose averse, we loath having to renounce to a part of our income and
we consider it a loss. Moreover, it is remarkably good in terms of utility if you are given an
unexpected tax rebate, because you receive it as an income but in reality it is a part of your gross
income that you overpaid.
4. THE VALUE OF PATIENCE
In this case, it is explained a scenario in which willpower is a crucial aspect. In this situation the
individual is asked to postpone gratification so as to be able to enjoy a better outcome. Although
it may be true that willingness to wait will increase the more education you have received, I
would say that it partially depends on more variables such as personality and to what extent we
are self-controlling. However, I believe that generally the more educated a person is, the more
capable is to control himself or herself. In conclusion, the individual will receive more income
because they are able to control themselves and postpone gratification.