February 27, 2010
Nudges.wordpress.com has been a great home for the Nudge blog over the past year and a half, but it’s time to move on. Where to? www.nudges.org. That’s right, we’re taking over our first home and revamping it for the future. We’ve added new social media capabilities that let you share our posts on facebook and twitter more easily. And you guessed it, we’ve got a facebook page and a twitter handle now. Finally, yes. We hope you’ll friend us and follow us as we try to use these platforms for our insights and content.
For the time being, nudges.wordpress.com will remain active with our old posts. We’ve imported all of that content to the new site where you can search our archives and find any old post you’re interested in. Eventually we will redirect traffic from this site to www.nudges.org, but we hope you’ll be out in front of us by bookmarking www.nudges.org in your browser or adding our feed www.nudges.org/feed to your RSS reader. If you continue to use our old feed, you won’t receive any of our new content, unfortunately. If you’ve been getting updates to your inbox, we’re asking you to switch over and follow us via the new page or the new feed. Your inbox is a busy place already, no doubt.
Say goodbye to nudges.wordpress.com and hello to www.nudges.org. Thanks for keeping up with us so far. We hope you’ll continue to do so at our new home.
February 25, 2010
In terms of recognition and respect, behavioral economics has certainly come a long way in the last 25 years. But it is still a Hibernian outpost in the great Roman Economics empire. One of the newest metrics for evaluating its impact is the auto-suggest feature in many search engines that has become quite popular since Google aired its ode to the long-distance romance during the Super Bowl.
In order to compare regular economics and behavioral economics, the Nudge blog typed in the first word of a few major concepts from each field into Google.
From economics, there is “supply and demand,” “opportunity cost,” and “economies of scale,” all of which appear to be quite popular. Notice that the phrases themselves are popular, as well as ones that add “examples” to the end of the phrase.
From behavioral economics, there is “prospect theory,” “endowment effect,” and “bounded rationality.” The first two still have a ways to go before becoming part of everyday parlance. Bounded rationality, on the other hand, looks potentially well positioned to make it. Of course, how many phrases out there start with “Bounded”? More or less than phrases that have “ou” as the second and third letters in the first word? (That’s a behavioral economics special for all the careful readers out there.)
February 24, 2010
UCLA economist Matthew Kahn picks up on a neat little story about Los Angeles Lakers coach Phil Jackson’s use of psychology in his NBA locker rooms. Ever the behavioralist, Jackson fined his players tiny amounts – $10 and $20 – for being late to games by a few minutes.
Jackson has found that players are more grudging about having to pull cash out of their own pocket on the spot, than having a larger fine deducted from a paycheck, as is the usual practice.
February 23, 2010
Bank of Italy Governor Mario Draghi says “the variety of new (bank) fees makes it difficult for customers to compare the different offers.” He then seems to propose a RECAP-style system of simplification and disclosure.
Within days we will submit to the Government a comprehensive regulatory proposal that can lead to clearly stated charges, so that all customers can compare different banks and competition can operate freely, without the impediment of opacity.
A pdf of the full speech is here. Hat tip: Amol Agrawal.
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February 23, 2010
1) The equity premium puzzle refers to the outperformance of stocks versus bonds over the last hundred years. An economist proposes an equivalent in the NFL. The passing premium puzzle, where teams look for a balanced offensive attack when the return to a pass is larger than that of a run. Hat tip: The Frontal Cortex.
2) Daniel Kahneman at TED. “‘Happiness levels increase up to the $60K mark, but “above that it’s a flat line,’ (Kahneman) says. ‘Money does not buy you experiential happiness but lack of money certainly buys you misery’…But the real trick, Kahneman said, is to spend time with people you like.”
To Kanheman, happiness does not mean life satisfaction as it does to some other happiness researchers.
3) Are medicine spoons the new dinner plates? Hat tip: Tristan Cooke.
4) Expiration date labels don’t seem to mean anything.
February 22, 2010
If you work in an office, you probably get an annual allotment of days off every year. Depending on where you work, those vacation days may carry over to the next year. In many places they don’t, though. So what happens in a use-them-or-lose-them office? Everyone takes their unused vacation days at the end of the year, leaving offices so empty that even the few people working are less productive because they can’t complete any task that depends on their vacationing colleague’s input.
December is probably going to be a slow month regardless, but is there a way to improve productivity at the margin with some better choice architecture? Yes, says reader Clare Chamberlain who sends along an interesting solution devised by an unnamed British government department. An employee’s annual leave for the calendar year starts in their birth month. So if you were born in May, your 2010 vacation days would start on May 1, 2010. Right now, you’d still be using 2009 vacation days. Assuming your office isn’t populated by former professional athletes, the result is employee leave that is more evenly distributed throughout the year.
Addendum: The U.K. department is the Crown Prosecution Service.
February 18, 2010
Type “OIRA dashboard” into Google. The first hit? RegInfo.gov, a new web site that demystifies the opaque subject of rules and regulation in Washington by enabling people to track their progress throughout a review process.
The site’s launch coincides with Nudge co-author Cass Sunstein’s first public remarks since taking over the Office of Information and Regulatory Affairs (OIRA), the office in charge of reviewing, developing, and overseeing regulations across the federal government. Speaking at an American University law school conference, Sunstein emphasized that OIRA’s goal is to create regulatory policy for Humans, not Econs; “homo sapiens rather than homo economicus,” he explained.
As an example, he cited a set of recently released rules intended to discourage airlines from pulling away from the gate and sitting near a runway, essentially trapping people on planes for unknown periods of time.
The basic idea is if you’re flying domestically, and you can’t be kept on the tarmac for more than three hours, and you get food and water and medical care if you need it within two hours. That rule is accompanied by an extremely disciplined analysis of its cost and benefits. If we’re imposing financial burdens on airlines, we want to catalog them as best we can, and make sure the benefits justify the action.
You can listen to Sunstein’s remarks here.
February 16, 2010
Dan Goldstein at Decision Science News recounts a wonderful little story featuring Shlomo Benartzi.
Decision Science News was having dinner with Shlomo Benartzi recently, not far from his beloved Four Seasons Hotel in New York. At the end of the meal, a chocolate souffle was ordered. Halfway through the souffle, Benartzi asked “would you like any more of this?” Decision Science News declined and watched as Benartzi took the peppermill in hand and peppered the souffle. The website was thinking that this might be interesting to taste, but then salt was added to the mix.
“There,” grinned Shlomo, “now we won’t eat too much. A little trick I learned.”
February 15, 2010
How do you help people fight petty corruption in their country? An NGO called 5th Pillar has come up with an ingenious idea that works in India: A zero rupee note. More than one million have been given out. Public officials recoil when citizens hand them one.
(5th Pillar President Vijay) Anand explained that a number of factors contribute to the success of the zero rupee notes in fighting corruption in India. First, bribery is a crime in India punishable with jail time. Corrupt officials seldom encounter resistance by ordinary people that they become scared when people have the courage to show their zero rupee notes, effectively making a strong statement condemning bribery. In addition, officials want to keep their jobs and are fearful about setting off disciplinary proceedings, not to mention risking going to jail. More importantly, Anand believes that the success of the notes lies in the willingness of the people to use them. People are willing to stand up against the practice that has become so commonplace because they are no longer afraid: first, they have nothing to lose, and secondly, they know that this initiative is being backed up by an organization—that is, they are not alone in this fight.
The full story over at the World Bank’s Public Sphere blog is definitely worth a read.
Hat tip: Ana Nelson