Handpicked to satisfy your intellectual curiosity!
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Who Is (More) Rational? - via NBER – Revealed preference theory offers a criterion for decision-making quality: if decisions are high quality then there exists a utility function that the choices maximize. We conduct a large-scale field experiment that enables us to test subjects’ choices for consistency with utility maximization and to combine the experimental data with a wide range of individual socioeconomic information for the subjects. There is considerable heterogeneity in subjects’ consistency scores: high-income and high-education subjects display greater levels of consistency than low-income and low-education subjects, men are more consistent than women, and young subjects are more consistent than older subjects. We also find that consistency with utility maximization is strongly related to wealth: a standard deviation increase in the consistency score is associated with 15-19 percent more wealth. This result conditions on socioeconomic variables including current income, education, and family structure, and is little changed when we add controls for past income, risk tolerance and the results of a standard personality test used by psychologists.
Churnalism Exposed - via CJR- Churnalism has been around a long while. Back in the 1920s Edward Bernays was writing about “The conscious and intelligent manipulation of the organized habits and opinions of the masses” as an “important element in democratic society.” In the 1950s Vance Packard warned us about “the large scale efforts being made, often with impressive success, to channel our unthinking habits, our purchasing decisions and our thought processes,” typically “beneath our level of awareness.”
Kid Crazy: Why We Exaggerate the Joys of Parenthood – via Time- All parents know that having kids is a blessing except when it’s a nightmare of screaming fits, diapers, runny noses, wars over bedtimes and homework and clothes. To say nothing of bills too numerous to list. Some economists have argued that having kids is an economically silly investment; after all, it’s cheaper to hire end-of-life care than to raise a child. Now comes new research showing that having kids is not only financially foolish but that kids literally make parents delusional.
Debtor Nation: The History of America in Red Ink - via New History Books - Before the 1920s, most people could get no credit at all, least of all from a financial institution. But then, thanks to a confluence of odd interests, consumer credit expanded mightily. Companies that made expensive stuff (cars) and companies that handled large pools of idle money (banks) found, much to their surprise that if you lent ordinary folks large sums of money at moderate interest, they would pay it back. The producers and banks lent more; consumers borrowed and bought more; and, in turn, the producers and banks used higher profits to increase productivity, putting still more money in the pockets of consumers. And so the cycle continued, ultimately fostering the largest expansion in production and consumption the world had ever seen. Whether it will continue is a subject of some dispute today.
Popular Psychology Theories on Self-Esteem Not Backed Up by Serious Research – via Science Daily – Low self-esteem is associated with a greater risk of mental health problems such as eating disorders and depression. From a public health perspective, it is important for staff in various health-related professions to know about self-esteem. However, there is a vast difference between the research-based knowledge on self-esteem and the simplified popular psychology theories that are disseminated through books and motivational talks, reveals research from the University of Gothenburg.
Dan Ariely: The Magic of Natural - via Predictably Irrational- Our recent studies of medications labeled “natural” have yielded some interesting findings. First, most people prefer medications that are natural to medications that aren’t natural. Secondly, and perhaps most surprisingly, people do not see natural medications as being more effective than non-natural medications at attacking the disease at hand. So why do they prefer natural? It turns out that many people believe that natural medications have fewer unintended consequences in both short time and long term side effects. This stems from popular belief, sometimes called “caveman theory,” that our bodies are attuned for diets that were common thousands of years ago and thus might not react well to newer, synthetic products. Hopefully new, exciting research will shed light on the consequences, both positive and negative, of these beliefs.
M&A’s Overlooked Pitfall: The False Negative – via Wharton - Plenty of merger deals should never happen: Buyers are too often attracted to “false positives” in targets that are overvalued. Less noticed are the deals that get away, but shouldn’t, because of “false negatives” — an undervaluation based on outdated methodologies that leads to a losing bid. The true value of a target company can be determined only if the buyer looks beyond current core operations to include future potential, argue three M&A experts — Alexander B. van Putten, a principal of consulting firm Cameron & Associates and a lecturer at Wharton; Mehrdad Baghai, managing director of Sydney, Australia-based Alchemy Growth Partners, a boutique advisory and venture firm, and a co-author of the book The Alchemy of Growth; and Ian C. MacMillan, a professor of innovation, entrepreneurship and management at Wharton.
Lunch with the FT: Sean Parker - via Financial Times- Since he disputes his portrayal in the film, I ask him about what drives him and how he defines his job. “Solving specific problems is what drives me. I am not interested in having a career. I never have been,” he says. “This in no way resembles a career. I think a career is something your father brings home in a briefcase every night, looking kind of tired.”
Therapist-free therapy: Cognitive-bias modification may put the psychiatrist’s couch out of business - The Economist- The treatment, in the early 1880s, of an Austrian hysteric called Anna O is generally regarded as the beginning of talking-it-through as a form of therapy. But psychoanalysis, as this version of talk therapy became known, is an expensive procedure. Anna’s doctor, Josef Breuer, is estimated to have spent over 1,000 hours with her.
Behavioral finance on the King of Queens - via Nudge Blog- An entire King of Queens episode devoted to behavioral finance and economics. Doug gets a Christmas bonus. He and Carrie decide not to spend their windfall (mental accounting). Doug wants to put it in the bank, while Carrie pushes for a high-flying internet stock (herd behavior). The stock goes up for one day, but quickly falls. They don’t sell because it’s too painful. They hold out, hoping the stock will recover (loss aversion). The stock continues to fall and they finally sell at the bottom. Then they notice news about government approval, the stock rallies, and they buy back in (availability bias). It’s all wrapped up in a syrupy sitcom message about the meaning of Christmas.
Social psychology of the internet and how it affects our lives - via MindHacks -The Guardian has an excellent ongoing series called ‘Untangling the Web’ that examines the social psychology of the internet and how it affects our lives.
Scaling of Prosocial Behaviors in Cities - Via Infectious Greed – Previous research has examined how various behaviors scale in cities in relation to their population size. Behavior related to innovation and productivity has been found to increase per capita as the size of the city increases, a phenomenon known as superlinear scaling. Criminal behavior has also been found to scale superlinearly. Here we examine a variety of prosocial behaviors (e.g., voting and organ donation), which also would be presumed to be categorized into a single class of scaling with population. We find that, unlike productivity and innovation, prosocial behaviors do not scale in a unified manner. We argue how this might be due to the nature of interactions that are distinct for different prosocial behaviors.
Energy, complexity, and sustainability – via ScienceDirect – The common view of history assumes that complexity and resource consumption have emerged through innovation facilitated by surplus energy. This view leads to the supposition that complexity and consumption are voluntary, and that we can therefore achieve a sustainable future through conservation. Such an assumption is substantially incorrect. History suggests that complexity most commonly increases to solve problems, and compels increase in resource use. This process is illustrated by the history of the Roman Empire and its collapse. Problems are inevitable, requiring increasing complexity, and conservation is therefore insufficient to produce sustainability. Future sustainability will require continued high levels of energy consumption to address converging problems.
The Cloud: Battle of the Tech Titans - via Business Week – Amazon, Google, and Microsoft are going up against traditional infrastructure makers like IBM and HP as businesses move their most important work to cloud computing, profoundly changing how companies buy computer technology
What is the definition of green? - via Policy pointers – The modern North American consumer faces increasingly challenging choices in today’s marketplace. Products claiming to be “green,” local, fair trade, or otherwise ethical are on the rise. While eco-logos and green claims are proliferating, it isn’t necessarily clear to the consumer, procurement officer, or seller what the claim to being green is based on, according to whom, or using what criteria. How is a “green” product defined, and by extension, who determines what constitutes a “green” product? If all goods and services have some impact on the environment, then the greenest product may be no product at all. Yet not only are some goods inherently necessary for human survival, all cultures and civilizations confer and derive meaning through material objects. This meaning, like art and culture, is to be celebrated. As modern sustainability and equity pressures increase, the meaning and value of goods is increasingly being modified by “green” qualifiers, with significant cultural, socio-economic and institutional implications.
Is Counterfeiting Good for Business? - via Organization & Markets – In some cases, counterfeiting constitutes advertising that increases sales of the original product. It makes sense; how many buyers of faux Rolex watches or Gucci purses would have bought the authentic items if the fakes were banned? I suppose there’s a negative externality (more fakes means less exclusivity means a lower equilibrium price) that must be taken into account as well. An interesting analysis, in any case. Applications to digital media are left as an exercise for the reader.
A Pill to Remember – via Scientific American – Memory is easily disrupted—a bump on the head will do it. Despite the need for a drug to treat amnesia and memory loss accompanying many forms of dementia, scientists have been stymied to find a way to strengthen the formation of new memories or to improve recall of memories that have faded. Many drugs prevent memories from sticking, and there are even drugs to “erase” powerful memories of traumatic events, but so far the highly desired “smart pill” has remained elusive. Scientists reporting in the March 4, 2011 edition of Science claim to have found a new way to boost the formation of memories and to enhance recall of existing memories that have weakened.
The Situation of “Natural Talent” – via Situationist – Fields such as music, math, and chess have had a predilection for a long time to seek out the youngest and most accomplished among them. According to Chia-Jung Tsay, this is because “we want to seek something that’s inherent to us. We associate accomplishment at a young age with something that comes effortlessly.” But does this desire to seek out “natural” talent eventually skew our view of what talent is?
Magical Elixirs and Beneficial Bracelets - via Miller McCune- A few days ago I was walking through the local shopping mall and a salesperson staffing one of those ubiquitous kiosks approached me with an intriguing offer. He claimed I could improve my balance, brain functioning and stamina — for only $30 — by wearing a special wristband. Somehow this silicone bracelet with two “ionized holograms” harnesses our natural energy flow and restores our electrical fields, which may have become unbalanced.
How Do Consumers Respond to Gasoline Price Shocks? Heterogeneity in Vehicle Choice and Driving Behavior – via Econ Davis – This paper develops a structural econometric model of vehicle choice and subsequent driving decisions to examine the consumer responsiveness to gasoline price changes on both margins. Consumer decisions are modeled in a dynamic setting that explicitly accounts for selection on unobserved driving preference. The model leverages a unique and extremely rich dataset of all vehicle registrations in California in 2001-2009, which are matched at the vehicle-level with smog check data that include odometer readings at the time of the test. Results suggest that consumers are responsive to gasoline prices in both vehicle choice and driving decisions, with a medium-run (roughly two years) elasticity of fuel economy and driving for personal vehicles around 0.09 and -0.15 respectively. These responses vary by income, geographic, and demographic groups. Both a gasoline tax that raises the gasoline price by $1 per gallon and a revenue-neutral rebate policy on new vehicles lead to a relatively small welfare loss to consumers, but each policy works on very different time scales to reduce the demand for gasoline. The results provide important insights into the long run short-run determinants of the gasoline price elasticity. They also have key implications for the effectiveness and consequences of policies to reduce emissions from the transportation sector.
In the Trenches of Real-World Self-Control - via Sagepub- Successful goal pursuit involves repeatedly engaging self-control against temptations or distractions that arise along the way. Laboratory studies have identified the brain systems recruited during isolated instances of self-control, and ecological studies have linked self-control capacity to goal outcomes. However, no study has identified the neural systems of everyday self-control during long-term goal pursuit. The present study integrated neuroimaging and experience-sampling methods to investigate the brain systems of successful self-control among smokers attempting to quit. A sample of 27 cigarette smokers completed a go/no-go task during functional magnetic resonance imaging before they attempted to quit smoking and then reported everyday self-control using experience sampling eight times daily for 3 weeks while they attempted to quit. Increased activation in right inferior frontal gyrus, pre-supplementary motor area, and basal ganglia regions of interest during response inhibition at baseline was associated with an attenuated association between cravings and subsequent smoking. These findings support the ecological validity of neurocognitive tasks as indices of everyday response inhibition.
“Mispredicting Happiness Across the Adult Lifespan: Implications for the Risky Health Behaviour of Young People,” Journal of Happiness Studies - via Boston.com – That young men think of themselves as indestructible is seen as a prime cause of risky behavior. However, a recent study exposes a somewhat darker explanation for such behavior. Researchers surveyed people in Northern Ireland and found that young people generally doubted they would be as happy in old age, and, for young men, this attitude was associated with binge drinking. However, it’s not like old people actually reported being less happy. This suggests a need for promotional campaigns “to counter the ‘live hard, die young’ mentality” and let young people know that old people are happy too.
The Neuroeconomics of Learning and Information Processing; Applying Markov Decision Process – via MPRA – This paper deals with cognitive theories behind agent-based modeling of learning and information processing methodologies. Herein, I undertake a descriptive analysis of how human agents learn to select action and maximize their value function under reinforcement learning model. In doing so, I have considered the spatio-temporal environment under bounded rationality using Markov Decision process modeling to generalize patterns of agent behavior by analyzing the determinants of value functions, and of factors that modify policy- action-induced cognitive abilities. Since detecting patterns are central to the human cognitive skills, this paper aspires at uncovering the entanglements of complex contextual pattern identification by linking contexts with optimal decisions that agents undertake under hypercompetitive market pressure through learning which have however, implicative applications in a wide array of social and macroeconomic domains.
How Powerful is an Apology?- via Spring.org- In a strange twist, though, people are less able to detect insincerity when apologies are directed at them. According to a series of studies conducted by Risen and Gilovich (2007), observers are harsher on an insincere apology than the person at whom it is directed. Perhaps this helps explain why people almost always accept an apology aimed directly at them, whether it’s offered sincerely or not. We want to believe it’s sincere, however much we might feel afterwards that it hasn’t really worked.
Your Brain on Sex and Love – Can You Get Satisfaction? - via BrainBlogger- A satisfactory sexual life is an important component of an individual´s overall mental and physical health. However simple this may sound, it appears to be very hard to attain. Sexuality is a complex issue that involves many aspects of the human experience, from reproduction to physical appearance and fitness to self-image, performance, genre differences, and a whole variety of emotions.
Personality Psychology and Economics - via MPRA- This paper explores the power of personality traits both as predictors and as causes of academic and economic success, health, and criminal activity. Measured personality is interpreted as a construct derived from an economic model of preferences, constraints, and information. Evidence is reviewed about the “situational specificity” of personality traits and preferences. An extreme version of the situationist view claims that there are no stable personality traits or preference parameters that persons carry across different situations. Those who hold this view claim that personality psychology has little relevance for economics. The biological and evolutionary origins of personality traits are explored. Personality measurement systems and relationships among the measures used by psychologists are examined. The predictive power of personality measures is compared with the predictive power of measures of cognition captured by IQ and achievement tests. For many outcomes, personality measures are just as predictive as cognitive measures, even after controlling for family background and cognition. Moreover, standard measures of cognition are heavily influenced by personality traits and incentives. Measured personality traits are positively correlated over the life cycle. However, they are not fixed and can be altered by experience and investment. Intervention studies, along with studies in biology and neuroscience, establish a causal basis for the observed effect of personality traits on economic and social outcomes. Personality traits are more malleable over the life cycle compared to cognition, which becomes highly rank stable around age 10. Interventions that change personality are promising avenues for addressing poverty and disadvantage.
The Better Off Sleep Better - via Science Daily – The employed and self-employed enjoy much better sleep than those out of work, according to Understanding Society, the world’s largest longitudinal household study. Those who are unemployed are over 40% more likely to report difficulty staying asleep than those in employment (having controlled for age and gender differences). However, job satisfaction affects the quality of sleep with 33% of the most dissatisfied employees report poor sleep quality compared to only 18% of the most satisfied.
Why Speed Dating Rarely Works - via Discovery – Speed dating presents individuals with such an unnatural number of choices that people either usually avoid making selections or choose the wrong person, according to a study in the latest Royal Society Biology Letters.
Why do Narcissist use Social Networking Sites? - via Dr Shock -Narcissism did not predict more use of social networking sites compared to non-narcissists. This study doesn’t proof a causal relationship between use of social networking sites and narcissism in Millennials. The use of social networking sites might be just a product of the times. Previous generations might have used other means of communication for staying connected. Using social networking sites might be another outlet for narcissistic types.
The case for film subsidies (and other goodies) - via Interfluidity -Film subsidies and other state and local programs intended to promote economic and cultural activity are sometimes smart policy and sometimes corrupt boondoggles. I certainly don’t wish to argue that they are always and everywhere good. But Kinsley argues that they are always and everywhere bad, via arguments that are as compelling as they are false. Let’s try to understand the economics a bit.
Individual Differences in Recovery Time From Attentional Capture – via Sagepub- Working memory capacity reflects a core ability of the individual that affects performance on many cognitive tasks. Recent work has suggested that an important covariate of memory capacity is attentional control, and specifically that low-capacity individuals are more susceptible to attentional capture by distractors than high-capacity individuals are, with the latter being able to resist capture. Here, we tested an alternative account according to which all individuals are equally susceptible to attentional capture, but high-capacity individuals recover more quickly than low-capacity individuals. Using psychophysical and electrophysiological methods, we measured recovery time from attentional capture. In two experiments, we found that high- and low-capacity individuals showed equivalent attentional capture effects in the initial moments following capture, but that low-capacity individuals took much longer to recover than high-capacity individuals did. These results suggest that the poor attentional control associated with low capacity is due to slow disengagement from distractors.