Weekly Roundup 109: A Curated Linkfest For The Smartest People On The Web

Dear Readers,


Next weekend Dec 25-26 I will be on a long transatlantic flight. So, I have decided to post twice as many links in this weekends roundup. Below is part 1 of our roundup, tomorrow I will post part 2. Cheers!

Happy Holidays,
Miguel

If you like this roundup or plan on linking to it (or from it) kindly include a reference to SimoleonSense Thanks.

Weekly Cartoon:


Must Read Articles:

Meet the woman without fear – via Discover- Kentucky, USA. A woman known only as SM is walking through Waverly Hills Sanatorium, reputedly one of the “most haunted” places in the world. Now a tourist attraction, the building transforms into a haunted house every Halloween, complete with elaborate decorations, spooky noises and actors dressed in monstrous costumes. The experience is silly but still unnerving and the ‘monsters’ often manage to score frights from the visitors by leaping out of hidden corners.

“He Loves Me, He Loves Me Not . . . ” Uncertainty Can Increase Romantic Attraction – via Sagepub – This research qualifies a social psychological truism: that people like others who like them (the reciprocity principle). College women viewed the Facebook profiles of four male students who had previously seen their profiles. They were told that the men (a) liked them a lot, (b) liked them only an average amount, or (c) liked them either a lot or an average amount (uncertain condition). Comparison of the first two conditions yielded results consistent with the reciprocity principle. Participants were more attracted to men who liked them a lot than to men who liked them an average amount. Results for the uncertain condition, however, were consistent with research on the pleasures of uncertainty. Participants in the uncertain condition were most attracted to the men—even more attracted than were participants who were told that the men liked them a lot. Uncertain participants reported thinking about the men the most, and this increased their attraction toward the men.

Can everyone be better than average? - via Bakadesuyo- We predicted, and found, evidence for self-enhancement, as most participants regarded themselves superior to ‘most others’ at all points in time. We also found a better than average improvement effect, as participants considered themselves more superior now, than they were in the past, and expected to become even more superior in the future. Expected improvement in the future was larger than improvement over an equal span of time in the past.

Does Envy Makes Us Better People? - via Psych Science – Success is sweet, but it can also make you wary of people who might be jealous of you and who could even try to bring you down. New research in Psychological Science found that the fear of being the target of malicious envy makes people act nicer to people they think might be jealous of them.

We really do believe we’ve got more free will than the other guy - via Neurotic Physiology – I tweeted this link all over the internets the other day, and not surprisingly, it got picked up a lot. And why not? Free will is one of those subjects that is particularly interesting to, well, just about everyone. It’s one the deep philosophical questions pondered by philosophers, and high people everywhere: DO we really have final control over our own actions? Or are we just meaningless automatons carrying out predictable sequences of events, who just walk around thinking we’re so clever?

Why, beyond middle age, people get happier as they get older - via The Economist – ASK people how they feel about getting older, and they will probably reply in the same vein as Maurice Chevalier: “Old age isn’t so bad when you consider the alternative.” Stiffening joints, weakening muscles, fading eyesight and the clouding of memory, coupled with the modern world’s careless contempt for the old, seem a fearful prospect—better than death, perhaps, but not much. Yet mankind is wrong to dread ageing. Life is not a long slow decline from sunlit uplands towards the valley of death. It is, rather, a U-bend.

We Hold These Truths To Be Universal - via Freakonomics- The article is also nice in that it presents evidence that some traits/biases are more universal than others. It is an excellent entre into much larger literature. And the response articles which go on for 40 pages are a rich and interesting feast in and of themselves. Overall, the article has me rethinking the universality of bedrock principles of both neoclassical and behavioral economics. It’s good to destabilize your cherished beliefs now and again.

Group IQ: What makes one team of people smarter than another? A new field of research finds surprising answers- via Boston.com – But separating the spectacularly bright from the merely average may not be quite as important as everyone believes. A striking study led by an MIT Sloan School of Management professor shows that teams of people display a collective intelligence that has surprisingly little to do with the intelligence of the team’s individual members. Group intelligence, the researchers discovered, is not strongly tied to either the average intelligence of the members or the team’s smartest member. And this collective intelligence was more than just an arbitrary score: When the group grappled with a complex task, the researchers found it was an excellent predictor of how well the team performed.

Max Bazerman: Cognitive Barriers to Environmental Action: Problems and Solutions – via Harvard – Researchers have long studied the cognitive barriers that cloud our thinking and decision-making. In a recent book chapter, HBS doctoral student Lisa L. Shu and professor Max H. Bazerman look at three barriers that can prevent clear decision-making, specifically on environmental issues. They also propose ways in which these biases could be put to advantage in promoting sound environmental policy and practice.

Huge Collection of Papers on Game Theory - via Ideas Repec

Leverage, Moral Hazard, and Liquidity - via HLS – the authors argue that the buildup of leverage in the financial sector in good economic times helps explain why adverse asset shocks in such times are associated with a severe drying-up of liquidity and deep discounts in asset prices. We illustrate that while the incidence of financial crises is lower when expectations of fundamentals are good, their severity can in fact be greater in such times due to greater system-wide leverage.

Video Gamers Use as Much Energy as San Diego – via Scientific American – U.S. homes have about 63 million video game consoles, and together they use about as much energy as San Diego does in a year, according to a 2008 study by the Natural Resources Defense Council

A new twist on the Visionary Heuristic - via Wray Herbert – In the book, I devote a chapter to the Visionary Heuristic, which is our tendency to link work and vision, effort and spatial perception: We see hills as steeper than they really are if we’re tired, or if we must carry something heavy up the hill. Here is a new and interesting twist on this heuristic, linking perception of effort to perceptions of time–a link that get’s twisted by our life of deadlines. It’s a good lesson for the hectic holiday season

Claimed vs. Actual: real and present dangers - via Herd – Interesting example of the huge gap between what people claim to do and what folk actually do. Of course, the difference is not always so obvious or so large as it is here but some kind of difference there is likely to be.

Miguel’s Weekly Favorites:


Do they (i.e. economists) know its Christmas?
-
via Geary Behaviour Center – Its the season of goodwill. People are looking forward to a bit of a break over Christmas after a fairly depressing year and with a pretty uncertain outlook for the New Year. Time then to revisit Joel Waldfogel’s piece on the Deadweight Loss of Christmas.

Richard Thaler: It’s Time to Rethink the Charity Deduction - via NYT- NOW that Congress has actually managed to enact tax legislation, it may be time to consider some bigger issues. I hope that broad-based tax reform will be high on the list of both major parties.

Video: Ted Talk – The case for collaborative consumption - Rachel Botsman says we’re “wired to share” — and shows how websites like Zipcar and Swaptree are changing the rules of human behavior.

Your Apps Are Watching You - via WSJ- An examination of 101 popular smartphone “apps”—games and other software applications for iPhone and Android phones—showed that 56 transmitted the phone’s unique device ID to other companies without users’ awareness or consent. Forty-seven apps transmitted the phone’s location in some way. Five sent age, gender and other personal details to outsiders.

The science of a good first impression - via Pop Economics – You’ve heard that old yarn about only having one chance to make a good impression. You might have even heard that first impressions happen fast. Maybe you didn’t know they happened this fast.

Human Networking Theory Gives Picture of Infectious Disease Spread - via NSF – It’s colds and flu season, and as any parent knows, colds and flu spread like wildfire, especially through schools. New research using human-networking theory may give a clearer picture of just how, exactly, infectious diseases such as the common cold, influenza, whooping cough and SARS can spread through a closed group of people, and even through populations at large

Nice probability puzzle – via Understanding Uncertainty – For the last few weeks, Chris Maslanka’s excellent maths puzzle column in the Guardian has been running variants on the following problem. Fred and Sam play a game in which the winner is the first to flip a head. They take in turns, Fred starting. What’s the chance that Fred wins? I have been asking this to 6th form audiences and the general response is 2/3 or 3/4, but nobody can say why. Here is the solution I have been using.

Harder-to-read fonts boost student learning – via BPS Research – Making learning materials more difficult to read can significantly improve student performance. Yes, you read that correctly. Connor Diemand-Yauman and his colleagues think the effect occurs because fonts that are more awkward to read encourage deeper processing of the to-be-learned material.

The plant of human puppets – via MindHacks – I’ve made a radio programme with ABC Radio National’s All in the Mind about burundanga, a mysterious street drug used in South America which is widely believed to remove free will.

Ten Psychology Studies from 2010 Worth Knowing About - via NeuroNarrative – Around this time of year, I like to take a tour of psychology studies from the last twelve months and pick out those that I think are really worth knowing about. There are, of course, several others that deserve mention, but the ten below are those that struck me as especially intriguing, with the added benefit of also being useful.

Is trusting people the secret to detecting lies? - via Bakadesuyo – Contrary to lay wisdom, high trusters were significantly better than low trusters were at detecting lies. This finding extends a growing body of theoretical and empirical work suggesting that high trusters are far from foolish Pollyannas and that low trusters’ defensiveness incurs significant costs.

Why do firms exist? - via Economist – For philosophers the great existential question is: “Why is there something rather than nothing?” For management theorists the more mundane equivalent is: “Why do firms exist? Why isn’t everything done by the market?”


Want to Help a Friend? Give Them Invisible Support
- via PsychScience – When you are having a bad day, often you want support from your friends–but at the same time you just want to be left alone. New research published in Psychological Science shows that social support benefits are maximized when provided “invisibly”—that is without the support recipient being aware that they are receiving it.

Video: The Story of Cornelia Sorabji: India’s 1st female Lawyer – via Fora.tv – Richard Sorabji throws new light on the life of the extraordinary woman who was his aunt as well as India’s first woman lawyer. With the special insight and knowledge he possesses as Cornelia’s nephew, and through scrupulous research in her unpublished papers, he explains her involvement with Katherine Mayo, her disagreements with Gandhi, her disappointments in her career and other crucial aspects of her life. Moving between Britain (Oxford and London in particular), and India, Professor Sorabji gives us a vivid larger picture of the influential worlds Cornelia inhabited which is interesting on many levels. Richard Sorabji does not just tell the story of a woman who will wake up historians; he provides a startling example of biography through history and history through biography.

How To Think Less And Do More: Turning Life Into Flow – via Emotion Machine -Have you ever seen a professional baseball player before a big world series game? There is an intensity in the air; the crowd is roaring, fans are begging for autographs, reporters are bombarding with questions, yet the player is calm and focused. When the pitcher first steps onto the mound, he shows no signs of being nervous – he is in the zone – there is just pure, collected attention on the task at hand and what needs to be done. This marks the character of a disciplined and skilled individual. An individual with flow.


Where There’s Smoking, There’s Fire:
- via SSRN – Fires and burns are among the top ten leading causes of unintentional death in the United States, with thousands of deaths occurring annually. The majority of these deaths and injuries occur in residential fires, and cigarettes have been identified as one of the leading causes of these fire-related deaths. In this paper, I explore the relationship between cigarette smoking and fires caused by cigarettes in the United States. As fewer people smoke, there is less opportunity for fires to start as a result of cigarettes. However, the magnitude of any reduction is in question as it is not obvious that the people who quit smoking are the ones who start fires. I also examine the contribution of tobacco-related public policies in influencing the incidence of cigarette-related fires. I use a state-level panel of reported fires over time to estimate both the structural and reduced form equations for cigarette fires. Results indicate that reductions in smoking and increases in cigarette prices are associated with fewer fires. However, laws regulating indoor smoking are associated with increases in some types of fires. Specifically, workplace restrictions and bans are associated with increases in fires in all locations and in residential units. Restaurant and bar bans are associated with increases in fires in restaurants and all eating/drinking establishments.

Recency Effects in U.S. Snow Cover- via Infectious Greed – One of the more entertainingly troublesome effects in investment behavior is that of recency bias. It describes how we humans over-weight recent effects, and under-weight similar things that happened serially before them. For example, if something dramatic has happened in a commodity recently, we might not remember something similar just a few weeks earlier.


Can Asthma Inhalers Enhance Athletic Performance?
– via Decision Tree- My latest story for Wired Playbook highlights new research that investigates whether the common asthma medication, salbutamol/albuterol, could enhance athletic performance when taken in extremely large doses.


Brain only fully ‘matures’ in middle age, claims neuroscientist
- via Independent – You might think that you become fully mature when you turn 21 but new research suggests that your brain does not stop developing until your late 40s.

Finance/Investing:

Cash Cow Disease: The Cognitive Decline of Microsoft and Google: - via Finance Professor – “Cash cow disease arises when a public company has a small number of products that generate the lion’s share of profits, but lacks the discipline to return those profits to the shareholders. The disease can progress for years or even decades, simply because the cash cow products produce enough massive revenues to distract shareholders from the smaller (but still massive) amounts of waste….”

Given free Internet to the unemployed - via Economic Logic – by looking out the availability of the Internet impacts job search. They highlight one particular aspect of job search: discouragement. Indeed, nothing is worse than someone who is not even trying to find a job. Well, it turns out that having Internet access at home reduces the occurrence of discouragement in job search. Internet access at public locations like libraries have a similar effect. This is not unimportant, because becoming unemployed, especially a longer time where you may become tempted to abandon, lets you rethink budget priorities and Internet access may be among the first items to go. In such circumstances, it may make sense to offer free Internet access.

The psychology of bank bonuses - via Knowing & Making – The FSA is expected over the next few days to publish published yesterday its new rules on bank bonuses, broadly in line with the guidelines announced by CEBS, the pan-European committee of regulators. It’s likely that, fFrom 1 January, banks will only be allowed to pay a third 40% of bonuses in cash, with the rest paid as deferred claims of one kind or another – debt, preference shares or equity – which can be drawn down over three to five years.


Do Investors See Through Mistakes in Reported Earnings?
– via HBS – Overall our evidence suggests that investors are initially misled by misstated earnings but start seeing through mistakes as the restatement date approaches. When anticipation of a restatement is taken into account, the effect of the restatement is more than three times its announcement effect. Our results support the view that better quality of financial information could benefit investors.

Love Your Kids, Not Your Stocks - via PsyFi Blog – Psychologists have about as many theories about love as economists have about investing, and they have about the same success in making predictions based on their ideas. Still, both sets of social scientists plod on regardless, presumably on the basis that if there’s a market for oddball ideas they might as well try and serve it. Or maybe they’re just hoping for a date.

Marketplace Institutions Related to the Timing of Transactions - via NBER – This note describes the unraveling of transaction dates in several markets, including the labor markets for new lawyers hired by large law firms and for gastroenterology fellows, and the market for post-season college football bowls. Together these will illustrate that unraveling can occur in markets with competitive prices, that it can result in substantial inefficiencies, and that marketplace institutions play a role in restoring efficiency. I’ll conclude with open questions about the role of marketplace institutions and the timing of transactions.

Academic:

Social Cuing of Guilt by Anger and of Shame by Disgust - via Sagepub – Scholars have proposed a conceptual structure for the self-critical moral emotions of guilt and shame and the other-critical emotions of anger and disgust. In this model, guilt is linked with anger and shame with disgust. This relationship may express itself in asymmetrical social cuing between emotions: In a social context, other people’s angry facial expressions may communicate that the target should feel guilty, and other people’s disgusted facial expressions may communicate that the target should feel ashamed. We conducted two experiments, one in the United Kingdom and the other in Spain, in which participants were shown pictures of faces expressing either anger or disgust. Participants rated the degree to which the faces would make them feel guilt or shame in a casual social encounter, and they answered questions about inferences concerning the emotional expressions. In both studies, angry expressions led to greater guilt and less shame than did disgusted expressions. This relationship was explained better by the type of norm violation inferred than by whether the violation was thought to involve the target’s action or personality versus the target’s character.

Language Style Matching Predicts Relationship Initiation and Stability - via Sagepub – Previous relationship research has largely ignored the importance of similarity in how people talk with one another. Using natural language samples, we investigated whether similarity in dyads’ use of function words, called language style matching (LSM), predicts outcomes for romantic relationships. In Study 1, greater LSM in transcripts of 40 speed dates predicted increased likelihood of mutual romantic interest (odds ratio = 3.05). Overall, 33.3% of pairs with LSM above the median mutually desired future contact, compared with 9.1% of pairs with LSM at or below the median. In Study 2, LSM in 86 couples’ instant messages positively predicted relationship stability at a 3-month follow-up (odds ratio = 1.95). Specifically, 76.7% of couples with LSM greater than the median were still dating at the follow-up, compared with 53.5% of couples with LSM at or below the median. LSM appears to reflect implicit interpersonal processes central to romantic relationships.

The Psychological Costs of Pay-for-Performance: Implications for Strategic Compensation - via Harvard – An organization’s compensation strategy plays a critical role in motivating workers and attracting high-performing employees. Most of the research linking compensation to strategy relies on the principal-agent model of economics, a model that has been largely unsuccessful in predicting the extent to which companies use performance-based pay. We argue that while agency theory provides a useful framework to analyze strategic compensation, it fails to consider a host of psychological factors that affect employee motivation and attraction. This paper examines how psychological costs from social comparison, overconfidence, and loss aversion reduce the viability of individual performance-based compensation systems, and provides a framework that integrates insights from psychology and decision research into the traditional compensation framework of agency theory. The paper also discusses empirical implications and possible theoretical extensions.

Infographics:


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