Archive for June, 2009

Answering a question? Think what would a crowd would say?

June 29, 2009

Crowds can be smarter than individuals. Especially on questions with historical dates! So how can one person become many (or at least two)? The British Psychological Society Research Digest comes across a suggestion.

The next time you’re asked to estimate a historical date, for example, try doing the following: make your first estimate; then pause and assume your first guess was off the mark. Consider why, then use this new perspective to make a second estimate. Average your two estimates and, chances are, this newly calculated date will be more accurate than your original answer.

What if a speed limit sign told you the most efficient speed to drive?

June 25, 2009

Econs don’t always drive the speed limit. They know that sometimes driving the limit (or over it) can get you stuck behind slower cars or always stopping and restarting at red lights. Gridlock guru Tom Vanderbilt recently came across something called the TrafficFlow Manager that tries to help Humans drive more like Econs.

(It is) a driver alert display that works with traffic signal timing to alleviate traffic congestion. When mounted along a route with timed traffic signals, the display informs drivers that the lights are synchronized and lets them know the proper speed they must maintain in order to avoid having to stop for a red light.

Traffic engineers already try to set lights to improve traffic flow patterns. This “smart” device links the lights to the signs. The sign’s manufacturer says this kind of synchronization reduces delays and saves fuel.

What would it take to get you to take the stairs more? How about music and a view?

June 23, 2009

The stairs between the upper floors of the University of Chicago’s Booth School of Business are made to be used. They are placed smack in the middle of blocks of faculty offices. They zigzag back and forth up open columns, allowing people to see easily between floors. They have plenty of light, are carpeted, and blend into the design of the building.  By placing the stairs in a common area (the elevators are a longer walk away) and making them inviting, the architect created a nudge to encourage a smudge of healthier behavior in the work place.

Creating more accessible staircases through public policy and physical architecture is one way to promote an active lifestyle, say Dr. Ishak Mansi of Louisiana State University, and his wife, Nardine Mansi, an architect, in the Southern Medical Journal. A small 2.8 percent increase in stair use would cut 300 grams of weight from a typical person, they say.

So how does one design a building where people actually use the stairs? There are three key features.

1) Fewer turns between the stairs and the closest entrance.
2) Stairs with large surface areas (not too narrow and steep).
3) Create a view, either up, down, or across, from the stairwell. No one wants to walk up a tiny, white box.

The Booth School of Business staircases meet all of these requirements (perhaps it’s no surprise the building won a major design award last year). For those who can’t build new stairwells, there are a few other nudges to try. Displaying motivational signs in the lobby and throughout the building, and playing music in the stairwell can increase stair use. Together, these two nudges can increase usage by as much as 9 percent. Hanging artwork on the stairwell walls, closing elevators occasionally, and offering incentives like fruit are also known to work.

The journal article is gated, but a short news summary is here.

Does Hyundai have a bunch of behavioral economists on its staff?

June 18, 2009

Wharton’s journal of management explains how car maker Hyundai pulled off the remarkable feat of selling more cars in 2008 than it did in 2007. When the economic downturn hit, Hyundai came up with a marketing strategy that a behavioral economist would admire. The promotion that has gotten the most attention (and has been copied by other companies in and out of the auto industry) allows you to return a car if you lose your job. This strategy is particularly appropriate for Hyundai, whose customer base is most affected by the recession. But Hyundai also unveiled another marketing strategy that has gotten less attention.

In another surprising marketing move, the company last month offered to send buyers of some Hyundai models up to $333 a month for six months. The catch: The deal applies only to cars on which Hyundai is offering rebates. Buyers may opt for either the rebate or the monthly check (not both), and the value of the two offers is about equal. But such programs tend to generate consumer buzz.

Amol Agrawal says this offer seems to fly in the face of a classic behavioral economics finding. Behavioral economics has shown that people are impatient. Very impatient. They will take much smaller amounts now (say $10) rather than wait a week for an amazing return on their money ($20). Factoring in interest, Hyundai is offering more money to people who want it all up front. In this uncertain economic environment, Hyundai thinks some patient people will choose the option of a steady cash flow even if it costs a little dough. Why? Well, plenty of lottery winners faced with this very choice opt for the stream of payments. But they are dealing with millions of dollars in winnings. This is much less. Are people tempted to spend the single lump sum payment? People tend to save windfalls of this size, which is why the tax breaks in the recent stimulus bill are being given out in small chunks in order to spur spending. But car rebates don’t come as large checks in the mail two months after you buy a car. They get subtracted from the purchase price at the dealership so they don’t seem like a windfall. It’s too early to know how many car buyers will bite on Hyundai’s offer. If lots do, behavioral economists and marketers might have a new factor to think about in their studies of human decision making.

Health care reform ideas inspired by Nudge

June 16, 2009

Jeff Kling of Brookings slips on the cloak of a choice architect to design some innovative health care reforms. Kling makes the case for five nudges for the U.S. health care system.

  • Establishing automatic enrollment is valuable for any type of health insurance coverage expansion, regardless of whether there is an individual mandate
  • Allowing states to augment a national base of health care reforms would enable refinement of various approaches
  • Determining eligibility based on data collected through the tax system, either on tax forms or through data matching, would greatly facilitate automatic enrollment
  • Implementing collections of individual contributions to premiums through the tax withholding system may facilitate continued enrollment and reduce administrative costs
  • Creating a system in which third-parties provide enrollment advice to individuals and are rewarded for their performance may be preferable to legislating how to select a default plan

Figuring out how to simplify the sign-up process for the 47 million Americans without insurance would be one of the biggest challenges facing any new system. Like others who think there is great potential for the government to creatively use tax records, Kling says people might be required to use W4 withholding forms to pick a plan, states might make an initial rough estimate of those eligible for subsidies on the basis of last year’s tax returns, and the IRS might merge data on taxes and immigration status to better determine eligibility. Kling even has an idea for building social norms by creating special accounts for health insurance payments. Private employers providing insurance would deposit money in employees’ accounts, while those without insurance would be required to set aside money each month to pay for certain medical costs or premiums. The goal of these accounts would be to ensure that all Americans, without or without coverage, contribute to the costs of a product that ultimately benefits all of us.

Can a horoscope save a baby’s life?

June 11, 2009

An organization in India called the Deepak Foundation has used a deeply rooted cultural practice to come up with an interesting nudge for improving infant mortality. Numbers on infant deaths in rural areas are often low because the inaccessibility of health facilities hinders accurate reporting of vital health indicators like birth weight. In many of these areas, a horoscope – known as a Janmakshar – is used to determine a baby’s name based on date and times of birth. Janmakshar’s are typically provided by religious groups, which charge a fee for them. The Deepak Foundation thinks that offering families a free Janmakshar in exchange for birth information can produce better statistics and healthier babies. The hope is that by identifying low birth weight babies, medical advice referrals can be provided more quickly and early breastfeeding can be started. Currently, Project Janmakshar, as it is known, is in a pilot stage, with the hope of expanding it to a rural area of 2 million people soon. A video explaining how the process works is below.

Daniel Kahneman’s own experience with overconfidence from his days in the army

June 10, 2009

Richard Thaler and Daniel Kahneman are interviewed for an NPR story about lessons from behavioral economics. Long before he was a psychologist at Princeton, Kahneman was a psychologist in the Israeli army where one of his major tasks was evaluating soldiers and deciding which ones were likely to make good officers. To separate the good from the bad, Kahneman had groups of 8 soldiers figure out how to lift a giant telephone pole over a wall. The idea was that leaders, followers, and quitters would emerge. The telephone poll test turned out to be useless, however. There was no relationship between Kahneman’s evaluations and the evaluations at officer school based on six months of performance. Even after learning about the non-relationship, Kahneman initially didn’t believe it.

“The next day after getting those statistics, we put them there in front of the wall, gave them a telephone pole, and we were just as convinced as ever that we knew what kind of officer they were going to be.”

Listen to the story here.

Test yourself for investing overconfidence

June 8, 2009

Investors with an “overconfidence” bias often trade too much and manage their portfolio on a stock-by-stock basis—while assuming they can beat the market, which the University of Chicago’s Mr. Thaler says probably won’t happen.

Mr. Thaler recommends a little test for the presence of an overconfidence bias. “Write down 10 traits [such as ‘investment skill’ or ‘ability to make good stock picks’], then ask yourself how you rate compared to your co-workers. If you rate yourself above average on all of them, plead guilty,” he says.

From the Wall Street Journal

The dentist bib as choice architecture

June 7, 2009

Talya Miron-Shatz, a psychology post-doctorate at Princeton with Daniel Kahneman, recently received a crown and a root canal in the same sitting from two different dentists. Since the two procedures were separate from one another, neither dentist seemed to know the local anesthetic that the other was providing to Talya. With poor communication, Talya almost received a double dose of Novocaine (or something similar). There has to be a better way to prevent these kind of errors, she thought.

And here’s my two cents for human engineering. Dental patients wear a bib around their neck. How about if the (dental) office purchased a Sharpie, and had each doctor write down how many injections he/she gave the patient, and their exact location. Better still, how about if this was pre-marked on the bib?

Read the full post as Psychology Today.


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