The Experimental method and Rational Economic Man: A Perspective from Economic Psychology
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Transcript of The Experimental method and Rational Economic Man: A Perspective from Economic Psychology
The Experimental method and Rational Economic Man:
A Perspective from Economic Psychology
Alan LewisDepartment of Psychology
University of Bath
The empirical part of this paper is based on:
Individual, Cognitive and Cultural Differences in Tax Compliance: UK and
Italy compared (in preparation)
Alan Lewis, Sonia Carrera, John Cullis, Philip Jones
Questionnaire study based on 505 Italian psychology and economics students and 539 U.K. psychology and economics undergraduates.
Participants take on the role of a small trader declaring income of € 30,000.
Dependent Variable: amount of income declared
Independent Variables:1. Detection rates – Repeated measures 1%, 5%, 25%2. Instruction to maximise income or not (between subjects)3. Framing effects (between subjects)4. Degree studied5. Gender6. Country (culture)
The influence of detection rates, culture, framing, instrumentality, gender and degree choice on tax
compliance*
*Not to be reproduced without permission
ANOVA resultsa DF F Prob > F
Source Within subject factors
detection 2 231.95 <.000
detection x sex 2 12.07 <.000
detection x degree 2 6.47 .002
Detection x instrumentality
2 5.38 .005
Between subject factors
Country 1 10.31 .001
Degree 1 31.46 <.000
Framing 1 10.18 .001
Instrumentality 1 1.89 .169
Gender 1 15.82 <.000
Degree x instrumentality 1 4.12 .043
External Validity and Justifications
Tax evasion is covert Calculation of the extent of tax evasion is indirect Tax compliance is a mystery (given REM) Hypothetical experiments, simulations, self descriptions
of behaviour all become highly relevant in these contexts
I would not wish to claim the tax compliance figures derived from the study are a reflection of ‘reality’. Many reasons for this:
1. Hypothetical questions2. Nature of sample3. Repeated measures design for ‘detection’4. Perceptions of audit rate
What I would claim to be true (and I believe has external validity )is:
Audit rates influence tax compliance People and cultures are different Men and people who study economics are more
instrumental Framing effects work Instructions to maximise wealth encouraged
psychologists to declare less, while economists behaved instrumentally whether they were asked to or not. Instructions to maximise wealth will be asking many participants to behave unnaturally.
References
Lewis, A. (1982). The psychology of taxation. Oxford: Blackwell
Cullis, J., Jones, P., & Lewis, A. (2006). Tax framing, instrumentality and individual differences: are there two different cultures? Journal of Economic Psychology, 27, 304-320
Lewis A., Carrera S., Cullis J., Jones P. (2008). Individual, Cognitive and Cultural Differences in Tax Compliance: UK and Italy compared (in preparation)