I am recruiting two post-docs to join us (in the Evolution and Social Cognition team, based in the Institut Jean Nicod, in the garden of the Ecole Normale Supérieure, here in Paris) for a new project called THRESHOLD. The advert is here. The deadline for applications is 11 December 2024. This blog post gives some more information about the projet.
Theories of human economic decision making are based on a simple model called a value function, or utility function; a mapping between the amount of money people have (or will receive), and their valuation of the situation. The typical function assumed is the dotted line in figure 1: the function is smooth; people like having more money better than less; but the amount of extra value they get with each additional euro is less than the last (aka diminishing returns). This means that people should always be risk-averse, since dropping down from where you currently are is always worse than going up by an equivalent number of euros.
In recent work, we’ve been considering the consequences of entertaining an alternative model, where the value function is more jagged: more like a cliff-edge than Pareto’s smooth hills of pleasure. For example, you need to make rent, so you need say 600 euros on the 1st of the month. As long as you have the 600, it’s ok; the difference between 601 and 610 is not a big deal. But the difference between 601 and 599 is a huge deal. It could be the difference between keeping your apartment and losing it, which would mean a huge bump in your welfare. If you do lose the apartment, things could not be much worse: missing paying your rent by 10 euros or 200 euros might have much the same welfare consequence. In other words, there might be abrupt steps in the value function, and other bits where it is more or less flat; like the solid line in figure 1.
If there are abrupt steps – which we call desperation thresholds – then we would expect people’s behaviour to be rather variable (see the paper for the full set of predictions). With resources just above a threshold, people should be super risk-averse, because their main preoccupation should be not to fall down the cliff. This might mean they fail to take risks it would otherwise be rational to take. On the other hand, if their resources are currently below a desperation threshold, they may become super risk-prone, and take risks it is otherwise irrational to take. This is because those risks hold a small chance of moving them into a state where their immediate welfare would be enormously improved.
In the project, we want to apply this kind of thinking to the decision making of people living in conditions of resource scarcity (urban poverty, in particular). In essence, we want to understand the paradox of poverty. On the one hand, many studies show that people with lower incomes are more risk averse than those with higher incomes. On the other hand, all the gambling shops and fixed-odds betting terminals are in the places where the people on lowest incomes live. And a lot of really risky (and low yield) crime is committed by people at the bottom end of the income distribution. How can we square this paradox? People in poverty are both the most risk averse and the most risk prone? Desperation threshold models suggest that people might undergo quite rapid flips in behaviour – from risk averse to risk prone – due to very small fluctuations in the resources available to them, if those fluctuations move them over a threshold of urgent need in either direction. This would give life near the threshold an unpredictable and volatile quality.
The project, funded by the ANR, will run from January 2024 and last for four years. It will have three work packages. Work package 1 will be a community study of a population living in challenging economic circumstances, using mixed methods. We want to understand what material resources mean to people. In particular, we want to understand how people represent their material situation, and how they understand its possible changes and their possible responses to those changes.
Work package 2 will take an experimental approach. We want to investigate whether, when you confront people with a desperation-threshold situation, they respond in the ways the theoretical models predict they will. Moreover, by creating multi-participant experimental microsocieties, we can try to understand what the emergent consequence will be for an interacting network if some of its members are facing desperation. Work package 2 will build on this already published work that lays out the experimental paradigm.
Finally, work package 3 will apply the insights of the other two packages to public policy and institution design. How would you design a welfare system if your goal was to make sure no-one would ever face desperation (as opposed, for example, to channeling resources to those you deem most deserving, or those for whom the productivity benefit would be greatest)? Can we predict the consequences of distributional changes and economic shocks for societal indicators like crime and addiction, by taking desperation thresholds into account?
The people I am looking for are, specifically: a researcher to concentrate on the field study for work package 1; and a researcher who will lead the experimental program of work package 2. For work package 1, the ideal would be someone with community research experience, good enough French to work in France, and maybe even existing community relationships. However, I can work around any of these three (for example, we could do the study in a different country for someone whose experience is elsewhere). The main criterion is skill in, and commitment to, working in the field in a community facing economic adversity. For work package 2, the person would need to be excited by the design and analysis of experimental studies. The two researchers would work together and would be able to gain experience in the other’s work package too.
The two positions could start as early as April 2024, but it can wait until later in the year two. Please circulate the link if you think there are people who should see it; and please apply!