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Nikolaus Robalino

Simon Fraser University, Burnaby, BC, Canada

Authors: Erik O. Kimbrough, Nikolaus Robalino, and Arthur J. Robson

Abstract: “Theory of Mind” (ToM) refers to our ability to attribute mental states, such as belief, desire, knowledge, and intent, to ourselves and to others. Such an ability plays a central role in game theory. This paper then asks: What is the evolutionary impetus for “Theory of Mind”? We argue that ToM allows organisms to efficiently modify their behavior in strategic environments with a persistent element of novelty. In particular, we consider an evolutionary environment in which players interact with one another while the set of games that they might face becomes larger and larger with time. We then compare two types of agents–a naïve type that adapts to each particular game through repeated exposure to it–as in reinforcement learning–and a ToM type that knows his opponents have preferences and can infer these from observed behavior. We show that ToM yields a sharp and unambiguous advantage over naivete when novel games are introduced at an intermediate rate. The edge to ToM arises because a ToM type can acquire opponent preferences by observing behavior in previous games and can then use this knowledge to make the correct choice in novel circumstances, while the naïve type requires direct exposure to each new game in order to learn how to behave appropriately. We conduct closely related experiments that test subjects' ability to acquire others' preferences through interacting in laboratory games. We observe, in these experiments, statistically and quantitatively significant learning of preferences. Moreover, we find that the subscale for social skills in standard tests for autism is a significant determinant of the speed of learning others' preferences.

Full Text:  “The Evolution of “Theory of Mind”: Theory and Experiments”

Prof. Pierpaolo Benigno

LUISS (Libera Università Internazionale degli Studi Sociali) Guido Carli, Roma, Italy

Authors: Pierpaolo Benigno and Salvatore Nisticò

Abstract: This paper studies monetary policy in models where multiple assets have different liquidity properties: safe and "pseudo-safe" assets coexist. A shock worsening the liquidity properties of the pseudo-safe assets raises interest-rate spreads and can cause a deep recession cum deflation. Expanding the central bank's balance sheet fills the shortage of safe assets and counteracts the recession. Lowering the interest rate on reserves insulates market interest rates from the liquidity shock and improves risk sharing between borrowers and savers.

Full Text:  “Safe assets, liquidity and monetary policy”