Prospect Theory and risk aversion in peasant economies

Oplægget ved Emil Skaarup finder sted mandag den 9. oktober i lokale 12-0-35 på Søndre Campus kl. 17.15.

In the economic history of pre-modern Europe peasants have often been assigned a special role. Peasant societies are claimed to have followed more conservative, moral and communitarian economic motives than modern, “capitalistic” economic agents. These theories of peasant economy have been challenged by modern micro-historical studies that have revealed pre-modern peasants as all too familiar with modern concepts of profit, wage labour and economic optimization. But strikingly absent in these discussions of economic behaviour are the insights from behavioural economics. I will try to show how the discipline’s “founding theory”, the prospect theory of Kahneman and Tversky, gives fresh theoretical backing to certain claims of the theories of peasant economy. I will argue that we cannot expect pre-modern peasants to have acted as the optimizing agent of classical economics, not because they were more moral or more conservative than us, but because they were exactly like us. Prospect theory has showed modern economic agents to demonstrate an irrational aversion towards risk. How much more would we expect this behaviour to play out on the limits of subsistence?

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