Implications for Decision Making and Environmental Policy
- New Horizons in Environmental Economics series
Chapter 8: Results of the Application of the Shackle Model
8.1 INTRODUCTION This chapter presents evidence of whether the behaviour of the individuals interviewed is consistent with the key propositions of the model. These propositions centre on the evaluation of the outcomes in terms of degree of potential surprise as well as the existence of an ascendancy function. In terms of potential surprise the speciﬁc assumptions on which evidence is provided include: that potential surprise reﬂects the belief that the individual has in the occurrence of the outcome; the extent to which any of the axioms for potential surprise (as described in Section 18.104.22.168) are supported; and whether potential surprise was treated as a continuous or binary measure of uncertainty. In terms of the existence of the ascendancy function, evidence is provided on: the consistency of the coefﬁcients of the potential surprise and outcome variables with that of theory; the overall explanatory power of the ascendancy function; the difference between the ascendancy/weighting function over gains and losses; the difference of the coefﬁcients between the individuals; the signiﬁcance of the potential surprise and outcome variable; and the role of the ascendancy function as a sifting device by means of which the individual decision maker focuses on one gain and one loss outcome respectively. In Section 8.3 the Shackle model is then applied at a more general level in an attempt to explain the way that uncertainty is evaluated in institutions such as the Inter-American Development Bank and the World Bank. In this chapter the results from...
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