Valuation mechanisms in moral cognition

Source: William Brady & Jay Van Bavel—New York University
In examining the roles of reason and emotion in moral judgments, psychologists and philosophers alike point to the trolley dilemma and the footbridge dilemma. With the trolley dilemma, most people say that it is appropriate to pull a switch to stop a train from hitting five people by diverting it to kill one person. However, with the footbridge dilemma, most people say it is inappropriate to push a large man off of a bridge in...

The value of a bond is determined as the sum of the present values of its future cash flows, which include periodic coupon payments and the repayment of the principal, or face value, at maturity.
These cash flows are discounted using the yield-to-maturity (YTM) rate, which reflects current market conditions and the bond's risk. The YTM represents the bond's total expected return if held until maturity, assuming all coupon payments are reinvested at the same rate.
A bond's coupon...

Social psychologists have documented that feeling good about ourselves and maintaining positive self-esteem is a powerful motivator of human behavior (Tavris & Aronson, 2008). In the United States, members of the predominant culture typically think very highly of themselves and view themselves as good people who are above average on many desirable traits (Ehrlinger, Gilovich, & Ross, 2005). Often, our behavior, attitudes, and beliefs are affected when we experience a threat to our...

Kohlberg's theory of moral development uses the Heinz dilemma — a thought experiment in which a man, Heinz, must decide whether to steal an unaffordable drug to save his dying wife — to illustrate the evolution of moral reasoning. This framework, divided into three levels with two stages, highlights how individuals' understanding of right and wrong becomes increasingly complex.
Pre-Conventional Level
At the pre-conventional level, morality is primarily driven by personal...

Moral hazards arise due to information asymmetry between buyers and sellers in a market. This occurs when one party cannot monitor the actions of the other. The emphasis on actions is important because moral hazard specifically results from the behavior of the party whose actions are not fully observable. In such situations, the party whose actions are not entirely observable may act less cautiously than they otherwise would, knowing their actions are only partially observed. This leaves...

Bonds are sought after for providing steady income and diversifying investment portfolios, but they face several risks that can affect returns and market value. Understanding and managing these risks is essential for effective investment decisions.
Default risk arises when a bond issuer fails to fulfill financial obligations, such as interest payments or principal repayment. This is more common with bonds from issuers with low credit ratings or unstable finances.
Interest rate risk occurs when...