Current IFREE-Funded Research Projects

IFREE Research Grants

FDA Dual Track program
Methods Grant
Mysteries of Morality
Software to Support Studies in Financial Economics
The Alliance Hypothesis for Human Friendship

FDA Dual Track program
Stephen Rassenti and Dan Houser teamed with Bart Madden to propose experiments on the novel "Dual Tracking" approach Madden advocates for reforming the FDA drug approval process. While the FDA currently has absolute control of access to drugs, Madden's idea is to provide an access-to-drugs path around the FDA where patients, advised by their doctors, would take responsibility for deciding if late-stage experimental drugs offer a better opportunity for them compared to FDA-approved drugs.

This new path is Dual Tracking. The aim of the team's research proposal is to demonstrate why and how dual tracking makes things better. The research team has developed sophisticated software that places participants within a complex dynamic system that allows experimenters to discover relationships between information flows and health-related decisions.

Methods Grant
Daniel Houser's Report

One of the issues that interests me is knowing how to know – scientifically – that a particular type of market institution is more likely than others to achieve our goals, say for pollution abatement. We know how to obtain scientific data from the laboratory, but how can we learn from that data what works best? With luck it is easy when one of the markets far outperforms the others. Sometimes, though, the differences can be subtle. When they are, experimental economists have a set of standard tools they use to determine which market performs the best. As part of the IFREE methods grant, my student Li Hao and I (both at George Mason University) have recently developed new formal approaches to determining which market works best, not only between two but also among many, and have further demonstrated that this new approach is better – by quite some distance – than the standard approaches in use today. In light of the importance of knowing which market-oriented institution performs best in relation to the goal, and in view of the substantial improvements in accuracy and reliability offered by our new procedure, we are highly optimistic that our approach will be rapidly embraced by not only experimental economists but also the broader scientific community.

Another important topic is in understanding how humans’ use of language has impacted economic discovery, particularly as it relates to specialization and exchange. In a recent paper published in the American Economic Review, Erik Kimbrough, Bart Wilson and Vernon Smith (all scholars at Chapman University) provide evidence that the use of language – even the appearance of particular words – can have dramatic implications for the economic discovery process. This fascinated me, and in my own work with former-student Erte Xiao (now a professor at Carnegie Mellon University) we developed a new approach to classifying natural language. Our idea is related to so-called “human-computing”, used for example by Google to help label the internet with their “image labeling” game. The idea behind the game is simple: two people are anonymously matched and cannot communicate, but are shown the same picture. They are then told to start entering possible labels for the picture. If the two people come up with the same label, it is used as a “keyword” for that picture. Our approach for the classification of natural language messages is similar in spirit, and we find that this approach to learning about natural language messages generates systematically more reliable information than other leading alternatives. It is an exciting approach and, joined by my student Jason Aimone, we continue to develop its extensions. We are optimistic that our approach is valuable and its use will become widespread.

Mysteries of Morality
Peter DeScioli, Robert Kurzban

Evolutionary theories of morality, beginning with Darwin, have focused on explanations for altruism. More generally, these accounts have concentrated on conscience (self-regulatory mechanisms) to the neglect of condemnation (mechanisms for punishing others). As a result, few theoretical tools are available for understanding the rapidly accumulating data surrounding third-party judgment and punishment. Here we consider the strategic interactions among actors, victims, and third-parties to help illuminate condemnation. We argue that basic differences between the adaptive problems faced by actors and third-parties indicate that actor conscience and third-party condemnation are likely performed by different cognitive mechanisms. Further, we argue that current theories of conscience do not easily explain its experimentally demonstrated insensitivity to consequences. However, these results might be explicable if conscience functions, in part, as a defense system for avoiding third-party punishment. If conscience serves defensive functions, then its computational structure should be closely tailored to the details of condemnation mechanisms. This possibility underscores the need for a better understanding of condemnation, which is important not only in itself but also for explaining the nature of conscience. We outline three evolutionary mysteries of condemnation that require further attention: third-party judgment, moralistic punishment, and moral impartiality.

Read full paper here.

Software to Support Studies in Financial Economics
David Porter

Much of the software that we have been using for the past 20 years to examine price behavior in financial markets is now outdated. The standard software for call markets in bubble environments no longer operates with the XP operating system used in our labs. In addition, we do not have a standard double auction for the asset trading (“bubbles”) environment that allows for forecasting and information conditions (sunspot messages). Lastly, extending the market software to micromarket structure conditions with noise traders, liquidity traders and earnings surprises is crucial for future experiments.

We are now embarking on a series of experimental inquiries that requires resuscitating the old software design and also requires a serious update of its capabilities. In particular, we are planning to investigate:

• The effect of naked short sales on price volatility, and bubble phenomena.
• Using call markets to clear trades, with continuous double auction trading in futures on the call price.
• Passive vs active investing style management of funds

The Alliance Hypothesis for Human Friendship
Peter DeScioli, Robert Kurzban

Exploration of the cognitive systems underlying human friendship will be advanced by identifying the evolved functions these systems perform. Here we propose that human friendship is caused, in part, by cognitive mechanisms designed to assemble support groups for potential conflicts. We use game theory to identify computations about friends that can increase performance in multi-agent conflicts. This analysis suggests that people would benefit from: 1) ranking friends, 2) hiding friend-ranking, and 3) ranking friends according to their own position in partners’ rankings. These possible tactics motivate the hypotheses that people possess egocentric and allocentric representations of the social world, that people are motivated to conceal this information, and that egocentric friend-ranking is determined by allocentric representations of partners’ friend-rankings (more than others’ traits).

Read full paper here.