Handpicked to satisfy your intellectual curiosity!
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Important Must Read:
2011 : What Scientific Concept Would Improve Everybody’s Cognitive Toolkit – via Edge.org-
Understanding the Brain: A Work in Progress - via Fora.Tv- How billions of interconnected cells in the brain can interpret and regulate all our bodily functions as well as mediate our experiences of interactions with and responses to the world around us is a huge and fascinating question that many different disciplines have attempted to tackle. This lecture will consider what we have learned so far about the principles of neural encoding and how they may begin to explain our memories, emotions and conscious awareness.
Moral Markets: Paul Zak discusses Oxytocin, Trade, and Human Nature – via Finance Professor
Building Open Societies: Soros in Conversation - via Fora.tv- George Soros, the Founder of the Open Society Foundations, joins OSF President Aryeh Neier and Gara LaMarche of the Atlantic Philanthropies for a conversation to mark the publication of The Philanthropy of George Soros: Building Open Societies.
Carmen Reinhart: The Liquidation of Government Debt - via Empirical Finance- “Historically, periods of high indebtedness have been associated with a rising incidence of default or restructuring of public and private debts. A subtle type of debt restructuring takes the form of “financial repression.” Financial repression includes directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, regulation of cross-border capital movements, and (generally) a tighter connection between government and banks…Inflation need not take market participants entirely by surprise and, in effect, it need not be very high (by historic standards)…We describe some of the regulatory measures and policy actions that characterized the heyday of the financial repression? e era.
Miguel’s Link Fest:
Beliefs Gone Wild - via Philosophy Talk – Where do all these false beliefs come from? Why are so many of our beliefs out of sync with reason, evidence, and argument? And, what, if anything, can we do to guard against falsehood, while at the same time increasing the stock of the true things we believe? This is an age-old question — one taken up by Socrates, Plato, Descartes, Hume, James, Dewey — to name just a few. With all that accumulated philosophical wisdom — not to mention the advances of science, the decline of superstition, the fall of tyrannical regimes that tried to bludgeon their citizens into believing lies — with all that intellectual progress, you might think that nowadays we believe a lot more truth and a lot less falsehood than we used to.
Prophecy Fail: What happens to a doomsday cult when the world doesn’t end? - via Slate – Preacher and evangelical broadcaster Harold Camping has announced that Jesus Christ will return to Earth this Saturday, May 21, and many of his followers are traveling the country in preparation for the weekend Rapture. They’re undeterred, it seems, by Mr. Camping’s dodgy track record with end-of-the-world predictions. (Years ago, he argued at length that the reckoning would come in 1994.) We’ve yet to learn what motivates people like him to predict (and predict again) the end of the world, but there’s a long and unexpected psychological literature on how the faithful make sense of missed appointments with the apocalypse.
Black Swan Technology – via Deric Bownds- Vinod Khosla’s answer to the Edge.org question “What scientific concept would improve everybody’s cognitive toolkit?:
Age and Great Invention: Scientists who make breakthroughs are older than ever - via Kellogg Insight- Year after year, the machine of scientific enterprise becomes ever more vast—but is it more productive? If the measure of innovation is the rate of economic growth that results from new discoveries, the answer is no. If we are throwing more resources than ever at the problem of innovation, but are only maintaining the status quo, it would seem that at some point our ability to invent and discover new things might decline. Before we reach that point, is there a “science of science” that can tell us how to accelerate the production of knowledge, or at least arrest its tendency to deliver diminishing returns?
The Hot-Money Cowboys of Baghdad - via NYT-“My friend, Iraq is a rich, virgin country!” one of its richest men, Namir al-Akabi, told me with a startling enthusiasm when I met him earlier this year at his office in Baghdad. Akabi is the chairman of the Almco Group of Companies, a conglomerate he built from nothing in the wake of the American invasion in 2003. What makes Iraq’s economic potential so great, he explained, despite everything, is not just its abundant natural resources — it is the shattered state of Iraq itself: the damage done by the American war, but also the long, steady decay under Saddam Hussein, from the war with Iran that began in 1980 through the invasion of Kuwait a decade later and the crushing international sanctions that followed the first gulf war. The country has been decimated, and therein lies its potential.
Why Bayes Rules: The History of a Formula That Drives Modern Life - via SciAm- Google has a small fleet of robotic cars that since autumn have driven themselves for thousands of miles on the streets of northern California without once striking a pedestrian, running a stoplight or having to ask directions. The cars’ ability to analyze enormous quantities of data—from cameras, radar sensors, laser-range finders—lies in the 18th-century math theorem known as Bayes’ rule. The formula has survived decades of controversy and marginalization to emerge as the cornerstone of some of the most sophisticated robotics projects now under way around the world.
The Chilling Story of Genius in a Land of Chronic Unemployment - via Tech Crunch- Like Levchin, he took advantage of being in the right place at the right time and having the right skills. Only most would say he met the wrong kind of people. At his peak he was making as much as $50,000 per day as a freelancer hacking into bank systems, stealing social security numbers and credit cards, and exposing the Web’s deepest vulnerabilities for Nigeria’s “Yahoo boys,” called that because they were known for using Yahoo email addresses.
Why We Don’t Take Care of Ourselves – via Paul Kedrosky – Many adults have an overly pessimistic view of old age because they fail to correctly predict their ability to hedonically adapt to old-age health related problems. A standard utility model where the marginal utility of health is higher at a lower level of health predicts that this overly pessimist view raises the incentive for healthy behavior. But this is at odds with empirical research that indicates that people with more negative aging stereotypes tend to adopt less healthy practices, transforming this negative view into a self-fulfilling prophecy. The aim of this note is to show that this fatalistic behavior can be explained through prospect theory by modelling this overly pessimistic view of old age as a failure to predict the change in the reference point due to hedonic adaptation. Given the diminishing sensitivity in the loss domain, people undervalue the future marginal value of health investment and may therefore underinvest in health as long as loss aversion is not too strong.
The Blind Spot: Science and the Crisis of Uncertainty - via Zocalo Public Square- William Byers opens his dense and detailed book on the philosophy of science with a provocative claim: Many of the most serious problems afflicting contemporary society have their roots in a fundamental misunderstanding of how science works. This misunderstanding is “the crisis of uncertainty” – the hyper-rational (yet impossible) expectation that science or mathematics can provide perfect knowledge and control over the world.
Dan Ariely – Depletion and Parole - via Predictably Irrational – It turns out that being tired isn’t just detrimental to exam performance. One theory in decision making that we are beginning to understand better, Depletion Theory, holds that our ability to make any type of difficult decisions are also adversely affected by fatigue. In most of our day to day lives, being tired at the end of a long work day doesn’t lead to too many terrible decisions, maybe a candy bar here or there, or fast food when we should go for a healthy wrap. However, sometimes the effects are more significant.
How TV Ruined Your Life - via Open Culture- The world is in shambles. Civilization is in free fall. And it’s all because of that ubiquitous electronic box spewing Snooki and Ozzy and The Donald into the homes of innocent people, polluting their minds and corrupting their souls. Or anyway, that’s what British comedian Charlie Brooker thinks.
Mental accounting: Gas edition - via Nudge Blog- Does this behavior go beyond the pump? Because some customers held retailer loyalty cards with the grocery store, Hastings and Shapiro were able to track other purchases. They looked at sales of half-gallon cartons of orange juice. They found that while customers were drastically scaling back from premium to regular gasoline, this behavior did not spill over into drastically different orange juice purchases. Gasoline prices affect orange juice purchases in the same way that changes in income do.
What makes us want to have more than others? Explaining relative consumption effects of public and private goods – va Econostor- We conduct a survey with 264 participants to test for relative consumption effects of national and local public goods as well as private goods. In contrast to previous results, we find that relative consumption effects are more pronounced for private goods than for public goods. Our second finding is that relative consumption effects are less pronounced for local public goods than for national public goods. We discuss and test different explanations for a good’s degree of positionality and find that these can, in part, account for our results very well.
Do Financial Analysts Read Anymore: No-one Reads Any More - via Paul Kedrosky – We present a new approach in financial content analysis to determine the strength of various words in conveying positive or negative tone. We apply our approach to quantify the tone of 10-K filings and find a significant relation between document tone and market reaction for both negative and positive words. Previous research has not been successful using positive words to quantify tone. We find that our measure of positive and negative tone is significantly related to filing period returns after controlling for factors such as earning announcement date return and accruals, while the earlier approaches in the literature are not. In addition, we find that the appropriate choice of term weighting in content analysis at least as important, and perhaps more important, than a complete and accurate compilation of the word list. We find that the market underreacts to the tone of 10-K’s, and this underreaction is corrected over the next two weeks.
Wisdom of Crowds Withers with Peeks - via SciAm- If you want to guess how many jelly beans are in a jar, you should ask your friends. Then average their answers. Because a group guess is often more accurate than that of any one individual. Just don’t let them peek at each other’s responses. Because a new study shows that social influence can sway people’s estimates and render the crowd incorrect.
Power, sex and conventional wisdom – via Reuters- “Power … increases infidelity among women as it does among men,” according to the study, by a team from the universities of Tilburg and Groningen. Its findings suggest that “women in high-power positions are as likely to engage in infidelity than men.”
The Risks of Quantification- via HBS-What we misunderstand is that introducing mathematics and quantification into any situation subtly changes that situation and this needs to be taken into account. We are attached to our analytic and computational tools and have become blind to their limitations.
Sexual Fidelity = Brand Loyalty? - via Freakonomics- Much research shows that if there are no consequences to cheating, or if we can get away with it, we are very likely to do so. However, brand conversion is more than having the user cheat on their product once. We want them to understand that they are trading up to the new brand. It’s always possible to convert someone to your brand permanently. This can be achieved if the right environmental pressures are in place to do so
What Loyalty? High-End Customers are First to Flee - via HBS- These findings suggest that before mounting a counterattack on a competitor’s incursion, it’s important to understand your customer priorities and your business’s place along the service cost continuum. In some cases it can be advisable or even necessary to invest in a response. In other cases, you may as well save your money, according to the researchers.
Wealthy Hesitate to Take a Break on Estate Taxes - via NYT – “I’m more worried about ruining my kids and grandkids,” he said. “What I’m planning on doing is trying to keep incentivizing the kids to do well. I want them to believe that from the time they get out of college until they’re 45, they have to swim in the big business ocean, and I want to reward them with some sort of matching program.”
The Neuro-Situation of Shopping Choices - via Situationist- According to neuromarketers this growing industry has the potential to significantly increase the effectiveness of advertising and marketing campaigns. They claim that neuromarketing will provide detailed knowledge about customer preferences and what marketing activities will stimulate buying behaviour, and make promotional campaigns more effective. It will be valuable in providing cues for the best place and prices in advertisements, and should cut the risk of marketing products that are doomed to fail. In the experts’ view, instead of relying on focus groups, neuromarketing offers the promise of ‘objective neurological evidence’ to inform organisations’ marketing campaigns.
Public but not private ego threat triggers aggression in narcissists - via EJSP- One line of research indicates that people are more aggressive when they are insulted publicly rather than privately, whereas another indicates that subclinical narcissism predicts aggression. Drawing on these lines of research, we predicted that aggression would be increased among participants who scored higher on narcissism (as opposed to lower), received negative (as opposed to positive) self-relevant feedback, and did so in public (as opposed to private). The findings supported that prediction and further confirmed that narcissism was only predictive of aggression in the negative-public condition. The findings thus indicate that aggression is influenced by the interaction of situational and dispositional factors.
Importance: Fact-checking medical claims – via Decision Tree- In 2007/08, the work of Nicholas Christakis and James Fowler revealed that human behaviors, and even states of mind, tracked through social networks much like infectious disease. But according to a new research study, incorrect medical facts may be no different, galloping from person to person, even within the confines of the revered peer-reviewed scientific literature. And by looking at how studies cite facts about the incubation periods of certain viruses, a new study in PLoS ONE has found that quite often, data assumed to be medical fact isn’t based on evidence at all.
Want to be happier: Buy Less Insurance – via There are Free Lunches – If the bad news is that we adapt to good things. The good news is that we adapt to bad things as well. Research on how well people cope with a wide variety of traumas and tragedies—from heart attacks to terrorist attacks—suggests that people are not the emotionally fragile creatures they often imagine themselves to be (Bonanno, 2004; Ubel, 2006). Just as the physical immune system wards off maladies, the “psychological immune system” wards off malaise by marshalling the remarkable human capacities of reconstrual and rationalization (Gilbert, 2006). But research suggests that people don’t know much about their own psychological immune systems (Gilbert, Pinel, Wilson, Blumberg, & Wheatley, 1998), and as a result they overestimate their vulnerability to negative affect. Businesses often trade on that ignorance by offering various forms of insurance against unhappiness, from extended warranties to generous return policies. With price tags reaching as high as 50% of a product’s original cost, extended warranties sold by retailers and manufacturers provide huge benefits to the seller and are widely acknowledged to be “bad bets” for the buyer (Berner, 2004; Chen, Kalra, & Sun, 2009).
Why are both exercise and religion so good at increasing happiness? – via Barking Up The Wrong Tree- We suggest that while major events may not provide lasting increases in well-being, certain seemingly minor events – such as attending religious services or exercising – may do so by providing small but frequent boosts: if people engage in such behaviors with sufficient frequency, they may cumulatively experience enough boosts to attain higher well-being.
Testosterone and economic risk aversion - via Deric Bownds – Testosterone is positively associated with risk-taking behavior in social domains (e.g., crime, physical aggression). However, the scant research linking testosterone to economic risk preferences presents inconsistent findings. We examined the relationship between endogenous testosterone and individuals’ economic preferences (i.e., risk preference, ambiguity preference, and loss aversion) in a large sample (N = 298) of men and women. We found that endogenous testosterone levels have a significant U-shaped association with individuals’ risk and ambiguity preferences, but not loss aversion. Specifically, individuals with low or high levels of testosterone (more than 1.5 SD from the mean for their gender) were risk and ambiguity neutral, whereas individuals with intermediate levels of testosterone were risk and ambiguity averse. This relationship was highly similar in men and women. In contrast to received wisdom regarding testosterone and risk, the present data provide the first robust evidence for a nonlinear association between economic preferences and levels of endogenous testosterone.
Identifying Overvalued Equity - via Empirical Finance- “We develop a profile of overvalued equity, and show that firms meeting this profile experience abnormal stock returns net of transaction costs of -22 to -25 percent over the twelve months following portfolio formation. We show our model is distinct from predictors proposed in prior work, and our results robust to alternative measurements of expected returns. We also show that overvaluation is not confined to small firms and that institutions do not trade as if they identify overvalued equity. The profitable predictability we document suggests a pricing anomaly relating to the 2.5% of the firms in the population that our model identifies as substantially overvalued. Although we believe markets are generally efficient within the bounds of transaction costs, our evidence suggests that violations of minimally rational use of publicly available information do occur. To the extent that anomalies disappear or attenuate once documented in the literature(Doukas et al. 2002, Schwert 2003), our results are of interest to financial economists and investors.”
How to Make a 29% Increase Look Bigger: Numerosity Effects in Option Comparisons -via Feb- As a consumer, would you prefer a dishwasher that expresses its warranty levels in months rather than years? Would you be more likely to choose an option that indicates its superior quality in units of 1,000 rather than 10? We argue herein that you would, in both cases. That is, for most consumers, the units in which most attribute information appears affect perceptions of various options. For example, consumers tend to perceive the same attribute differences as larger on scales that have many units than on scales with fewer units, such that the difference between ratings of 7 and 9 on a 1– 10 scale appear smaller than the difference between 700 and 900 on a 0–1000 scale. This scale dependent perception of attribute differences may induce increased preferences for the product with the superior score.
How You Think About Death May Affect How You Act - via Aps – How you think about death affects how you behave in life. That’s the conclusion of a new study which will be published in an upcoming issue of Psychological Science, a journal of the Association for Psychological Science. Researchers had people either think about death in the abstract or in a specific, personal way and found that people who thought specifically about their own death were more likely to demonstrate concern for society by donating blood.
A race to the bottom: Understanding the US housing boom – via Vox.eu- At the centre of the global financial crisis was a housing boom and bust. A New York University team has produced an excellent book on the flaws in the design of US housing finance that opened the door for the mayhem that followed. This column, the first of a series of two, describes the race to the bottom that occurred among Fannie Mae, Freddie Mac, and the too-big-to-fail private financial institutions.
Do people ever engage in “magical thinking” ? – via Cognition & Culture – One solid result of cognitive psychology, or so it would seem, is that most people, regardless of education, opinion or personality, can be induced to think in magical terms given the appropriate stimuli and conditions. People will be reluctant to don a sweater if told that it used to belong to Adolf Hitler. They resist drinking from a glass of water in which an experimenter has briefly dunked a plastic cockroach. There is a great variety of such effects, initially demonstrated by Paul Rozin and Carol Nemeroff and replicated by many others, including Paul Harris in developmental studies.
A Paper On : The Boom and Bust of the Spanish Economy – via Upenn- Spain has experienced many financial crises through its history. These financial crises have varied origins. However, they do have common threads. The current recession and subsequent debt crisis follow the same pattern. The fiscal and monetary policies of the Spanish government have played a role in creating and prolonging the boom and bust cycles. Government spending, government regulation, credit institutions, budget deficits, the political climate, and international trade are discussed to illuminate the causes and effects of these business cycles. The Spanish government can take action to improve the economy and to lessen the effects of its financial crises.
Should we stop pursuing happiness? - via APS- The “pursuit of happiness” has been something Americans have valued ever since the founding fathers inserted it into the Declaration of Independence. Yet some psychologists now question whether happiness is, indeed, a worthwhile goal, since new findings suggest the pursuit could actually make us more unhappy.
The Good Fight: Some kinds of conflict can actually help us, research finds - via Boston.com- But what if we’re thinking about fighting wrong? What if, as counterintuitive as it seems, certain kinds of fighting are good for us? In a new paper drawn from the Early Years of Marriage study at the University of Michigan, which tracked newly married couples over 16 years, researchers examined whether conflict behaviors beyond obvious destructive patterns (shouting, name-calling) would predict divorce. Surprisingly, couples that included even one spouse who withdrew from fights using popular strategies like leaving a room to cool down had higher rates of divorce. When both partners found ways to hash out conflicts directly, they were far more likely to prevail.
Scraping by on $250k a year? - via information processing- But just how flush is a family of four with a $250,000 income? Are they really “rich”? To find the answer, The Fiscal Times asked BDO USA, a national tax accounting firm, to compute the total state, local and federal tax burden of a hypothetical two-career couple with two kids, earning $250,000. To factor in varying state and local taxes, as well as drastically different costs of living, BDO placed the couple in eight different locales around the country with top-notch public school districts, using national data on spending.
Your So-Called Education- via NYT- In a typical semester, for instance, 32 percent of the students did not take a single course with more than 40 pages of reading per week, and 50 percent did not take any course requiring more than 20 pages of writing over the semester. The average student spent only about 12 to 13 hours per week studying — about half the time a full-time college student in 1960 spent studying, according to the labor economists Philip S. Babcock and Mindy S. Marks.
Embracing what is, or how to fail like the world’s most successful creatives- via Brain Pickings- While failure may be an integral prerequisite for true innovation, the fact remains that most of us harbor a deathly fear of it — the same psychological mechanisms that drive our severe aversion to being wrong, only amplified. That fear is the theme of this year’s student work exhibition at Stockholm’s Berghs School of Communication and, to launch it, they asked some of today’s most beloved creators — artists, designers, writers — to share their experiences and thoughts on the subject. While intended as advice for design students, these simple yet important insights are relevant to just about anyone with a beating heart and a head full of ideas — a much-needed reminder of what we all rationally know but have such a hard time internalizing emotionally.
Malevolent Creativity: Does Personality Influence Malicious Divergent Thinking? - via CRJ- The purpose of this research was to examine the relationship between malevolent creativity and personality, with a specific focus on the traits of antagonism, aggression, and sympathy. Participants (N = 265) completed a series of personality measures and two divergent thinking tasks (uses for a brick and a pencil). Responses were coded for fluency and malevolent creativity. Hierarchical multiple regression analyses revealed that gender, conscientiousness, and trait physical aggression accounted for unique variability in malevolent creativity scores. These results confirm the link between personality and malevolent creativity, corroborating the General Model of Aggression and extending understanding of malevolent creativity, a new subfield of creativity research.
Age and the Better-Than-Average Effect – via JSP- People generally evaluate their own attributes and abilities more favorably than those of an average peer. The current study explored whether age moderates this better-than-average effect. We asked young (n = 87), middle-aged (n = 75), and older adults (n = 77) to evaluate themselves and an average peer on a variety of trait and ability dimensions. On most dimensions, a better-than-average effect was observed for young, middle-aged, and older adults. However, on dimensions for which older individuals have clear deficiencies (i.e., athleticism, physical attractiveness), a better-than-average effect was observed for young and middle-aged adults, while a worse-than-average effect was observed for older adults. We argue that egocentrism accounts for these age differences in comparative self-evaluations.
Nine Pictures Of The Extreme Income/Wealth Gap – via OurFuture – Many people don’t understand our country’s problem of concentration of income and wealth because they don’t see it. People just don’t understand how much wealth there is at the top now. The wealth at the top is so extreme that it is beyond most people’s ability to comprehend. If people understood just how concentrated wealth has become in our country and the effect is has on our politics, our democracy and our people, they would demand our politicians do something about it.
Welcome to the Brave New World of Persuasion Profiling - via Wired – Welcome, [FIRST NAME], to the era of personalization. Amazon.com recommends books you might like, Netflix tailors your movie menu, and Google customizes your news. And in exchange for this friendly algorithmic assistance, targeted ads follow you wherever you navigate online.
Why Can’t Law Firms Go Public? – via Freakonomics- The firm, which has more than 60 lawyers and specializes in personal-injury cases, claims that the restrictions have hurt its ability to raise capital to cover technology and expansion costs, and have hampered it in providing affordable legal services to its working-class clients.