New directions in conflict research from an economics perspective - Conflicts Over Natural Resources in the Global South - page 45

local level within nation states are required. Average results that are determined from
a cross-section of countries in various parts of the world, combining Latin America,
Africa and Asia, may disguise what is salient to an individual conflict in a region
within a country. It is also often misleading, leading to one-size-fits-all types of policy
prescriptions that can backfire. For example, environmental conflict between different
groups over land, access to water and other natural resource based production inputs
yield different results when studied locally or in a large N-country cross-sectional
analysis. Environmental factors as a source of conflict are found more significant in
local case studies, whereas its importance diminishes when examined through the prism
of a cross-country analysis. Moreover, in many large developing countries, systematic
internal conflict is highly localised and confined to a few small geographical regions.
These do not necessarily seriously undermine the central authority of the state, but
continue to retard human development in various pockets, even when the nation as a
whole is making progress. The various Maoist insurgencies in India are a case in point.
A variety of methodologies can be employed to study local conflicts. One such tech-
nique is based on the analysis of household surveys. These are standard nowadays,
and among other things are used to gauge information on household consumption,
living standards and other socio-economic information, including questions about
identity. They are particularly useful in post-conflict settings in order to garner infor-
mation on household coping strategies, livelihood investment decisions, as well as the
salience of group identity based grievances in provoking future conflict. There have
been calls for a more microeconomic approach to the study of conflict (for example,
Verwimp, Justino and Brück 2009), and this essentially implies studying conflict in
particular localities. Another technique, used in geography, involves GIS mapping of
conflict flashpoints and the exact location of contested natural resource endowments.
For example, Cederman, Weidmann and Gleditsch (2011) find that group differences
in per-capita income along with political exclusion help to explain conflict.
Local level household surveys permit the gathering of information on aspects of
cognitive psychology involving trauma and some of the tenets of behavioural eco-
nomics in situations where there has been violence and conflict. This is important,
because household preferences may not be exogenous but endogenous to previous
experiences, including the trauma of conflict. For rural households and self-employed
informal sector workers, consumption and production decisions are inseparable
because production and consumption are closely related. Therefore, these households
are used to risky decisions and outlays. The presence of armed conflict can add new
dimensions into these risks and uncertainties, depending on the duration and inten-
sity of the conflict, as well as perceptions about conflict re-emerging if it has stopped.
Here prospect theory rather than expected utility may be more relevant following the
traumas of war (Kahnemann and Tversky 1979). Observed behaviour suggests that an
uncertain prospect is often judged by the overall prospect of loss or gain rather than its
strict pecuniary expected value; risk taking (rather than risk aversion) may be a more
common psychological response from positions of loss.
Prospect theory represents a departure from expected utility in that it is a two-
stage process, and risky ventures are weighted not just by (subjective) probability of
the different risky states, but by a more complicated 'decision weighting' process. The
first stage of the decision involves an editing phase where a reference point is chosen to
evaluate the likely effect of the actual risky investment and framed in terms of specific