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Macroeconomics 1H
While such a reductionist approach can quickly degenerate into useless generalities, e.g., the
molecular biology of economic behavior, nevertheless, there are valuable insights to be gained
from the broader biological perspective. Specifically, this perspective implies that behavior is not
necessarily intrinsic and exogenous, but evolves by natural selection and depends on the
particular environmental through which selection occurs. That is, natural selection operates not
only upon genetic material, but also upon social and cultural norms in Homo sapiens, hence
Wilson’s term “sociobiology”.
Note that the results of Ai et al. are obtained based on “trimmed samples” in the sense that, when
calculating the bias, SD, and RMSE, they discard samples in which the mean of the estimated
ratios is not included in [0.5, 2] to eliminate the impact of numerical instability. In contrast, the
mean of the estimated ratios in our (non-regularized) estimator is always one because of its
construction. Even though that is not true for our regularized estimator, we observe that the mean
of the estimated ratios is included in [0.9, 1.1] for all the Monte Carlo replications and it does not
need such a trimming. In this sense, our estimators are more tractable than the one by Ai et al.