Archive for August, 2008

A traffic light you will not miss

August 29, 2008

It’s a nudge straight out of the future, or at least a science fiction fantasy: Designer Hanyoung Lee’s “Virtual Wall,” a ten-foot high curtain of plasma laser beams. At the moment, there are no plans to produce these on a mass scale. In fact, it hasn’t even gotten off the drawing board.

Hat tip: Sendhil Mullainathan

California does it again

August 28, 2008

When it comes to making government accessible to the public, California is showing itself to be among the leaders in the U.S. First there was Ready Return, and now along comes the equally innovative, although less creatively named, School Finder. The online tool allows people to search and compare up to three neighborhood schools along the dimensions of academic performance, graduation and dropout rates, student-teacher ratios, per-student-spending, and course offerings. Information from as many as three schools can be compared side by side.

Compiling all of this data into one site in impressive, although not unique. The U.S. government’s Medicare site features a tool for comparing hospitals that features a surfeit of detail, right down to survey results about whether doctors and nurses “communicated well” with patients. What makes School Finder stand out is its ease-of-use, which may not come as a huge surprise since the state partnered with Google and Microsoft. Users will instantly recognized the Google Earth satellite photos, which are supplemented with Microsoft GIS technology, to help time-pressed, keyboard-averse users easily find and compare schools with the click of a mouse.

Assorted links

August 28, 2008

More college cafeterias are eliminating trays. Unfortunately, Time Magazine decided to call this decision an act of “war,” vitiating the editorial judgment of its headline writers.

Tim Harford and Pete Lunn debate the impact of behavioral economics in the Prospect (the U.K. version), which reviewed the book in July. Harford says behavioral economics isn’t a big deal; Lunn says it is.
Addendum: Harford also wrote a column for the Financial Times cautioning Tories about their eager embrace of “nudging,” and distinguishing it from libertarian paternalism.

Do behavioral biases affect the macroeconomy? The punch line: “Collectively, our evidence indicates that the high risk sharing potential of financial markets is not fully realized because the aggregate behavioral biases of individual investors impede state-level risk sharing.” (Hat tip: Mostly Economics)

One of the cheapest ways to channel your anger at the IRS.

Can grocery delivery be greener than walking to a store yourself?

August 27, 2008

Food conservation is a national issue in the U.K., with its own awareness week and a prime minister who wants to end buy-one-get-one-free marketing. Ocado, the grocery delivery company that gave customers the option of scheduling a delivery when a van is already planning to be in the neighborhood, has another nudge for eliminating some of the waste that analysts say would feed 19 million people.

According to a press release, Ocado’s research into the reasons behind food waste indicates that “forgetting to check when a product needs to be used by” is the third most common reason for wasting food (“cooking too much” is the top reason). Along with every delivery, the company is now printing up a new receipt that lists all fresh foods – from single ingredients to prepared meals – by best before dates.

Ocado says having your groceries delivered by its vans produces a lower carbon footprint than if you walked to the store and bought them yourself. How is that possible? In part, by building warehouses that are much greener than traditional stores and sending groceries out in bio diesel trucks.

Tom Peters interviews Richard Thaler

August 27, 2008

At tompeters!:

Tom Peters: Did somebody nudge you into writing this book?

Richard Thaler: My coauthor, Cass Sunstein, who’s a great friend of mine. He’s one of the leading constitutional scholars of our generation. He likes writing books; I think he could write a book in a long weekend if he were pressed to do it…

TP: You say you can give us some help in making better decisions about money or wealth. There have been a number of articles recently about personal debt in this country. It’s escalating wildly. What are some nudges in this area?

RT: Both Cass and I are great procrastinators. Our bills get paid on time only if we make them automatic. I think the best thing people can do is set up a system where their credit cards get paid off automatically, and in full.

Now, of course, that’s not possible for people who have six month’s income worth of credit card debt. I think those people have to get on a plan to stop using their credit cards. I would suggest for people who have a big credit card balance that they stop using them, start paying them off, and get a debit card. Get a debit card without a credit line. Turn the credit line down. Then you’ve got a self-control device.

I heard a story about a woman who had a credit card with a credit limit. She discovered that she had spent one thousand dollars over the limit, which she didn’t think she could do. It turns out the credit card company was just being “accommodating.” They said they didn’t want to embarrass her by declining the card. Instead, they let her run up an extra thousand dollars, stuck her with a penalty, and raised her interest rate.

So in some cases, what we would like is for the credit card companies to enforce the limits. That’s another thing you could do—call your credit card company and say, “I want you to enforce my limit. Don’t let me spend any more than that.”

Cass Sunstein on Open Source

August 26, 2008

Over the weekend, Cass Sunstein spoke with Open Source’s Christopher Lydon. In the 30-minute conversation, Sunstein describes the arc of behavioral psychology as it has traveled to the fields of law, economics, and public policy. One tidbit: A behavioral explanation for why employers lay people off during recessions rather than cut their wages. People can’t stand wage cuts, just like they can’t stand higher prices. Cutting wages would induce greater employee shirking. Employers recognize this and trim the workforce instead. In the final half of the interview, Sunstein comments extensively on Barack Obama and the 2008 campaign.

Portion control in 68 words

August 26, 2008

Next time you sit down to dinner, dim the lights – but not too much. Both bright light and dim light may make you eat more. Watch the background music, too. If it’s too fast, you’ll eat fast, and therefore more; too slow and you’ll keep eating. And think small for plates – a portion that looks skimpy on a dinner plate looks ample on a salad plate.

From the Boston Globe.

David Plouffe, choice architect

August 26, 2008

Obama’s campaign was proud not only of what it had but also of what it lacked: drama. When David Plouffe, the campaign manager, ordered that all the printers be set up to print on both sides of each page, that was considered a dramatic moment at headquarters. (Hey, figure it out: You use half as much paper that way.)

From Roger Simon’s article, “Relentless,” on the Democratic race between Hillary Clinton and Barack Obama.

Why the best-laid plans go awry

August 25, 2008

Daniel Kahneman and Amos Tversky first proposed the term “planning fallacy” in their paper “Intuitive Prediction: Biases and corrective procedures” to describe the overoptimistic beliefs and procrastination that prevent people from doing all kinds of things on time like writing reports, filing taxes, or tackling do-it-yourself home projects. Economists Markus Brunnermeier, Filippos Papakonstantinou, and Jonathan Parker develop a theory to explain the planning fallacy in which people make poor predictions and procrastinate because the ex-ante benefit…s of anticipating that a task will be easy to complete are larger than the ex-post costs of planning poorly.

Without an intermediate deadline, two features of the model lead a person to exhibit the planning fallacy. First, the person has anticipatory utility. Thus a person who initially believes that the task will be easy to complete has higher expected utility because he anticipates less work in the future. This fi…rst ingredient provides an ex ante anticipatory benefit of overly optimistic beliefs. Second, the person optimizes given his beliefs. Thus a person with optimistic beliefs does little work in the present and ends up poorly smoothing work over time. This second ingredient implies an ex post cost of optimism on average: optimistic assessments lead to potentially costly delays and/or rushing at the end. Given these two ingredients, it is natural for people to exhibit the planning fallacy because a little optimism has fi…rst-order ex ante anticipatory benefits and, by the envelope theorem, only second-order ex post behavioral costs.

The trio tests their theory with observational data from experiments, and find that “monetary incentives for accurate prediction ameliorate the planning fallacy while incentives for rapid completion aggravate it.”


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