Is Behavioral Economics Dead? Should It Be?

  Wow....Pretty harsh, from an insider of Behavioral Economics. 

But also this, rather embarrassing and even ironic since the study was "about" honesty... 

To be fair, Nassim Taleb and a few others have been very critical for a long time. But the collapse of house of behavioral cards is still pretty dramatic. 

Taleb's argument is very plausible: If human behaviors are evolved, then the existence of certain patterns cannot actually be "irrational," though it may be atavistic).

 

 

 

Angus gets nudged!

So Richard Thaler has an NYT op-ed, The Power of Nudges for Good and Bad

You can read it here.

I thought it was a bit unbalanced, and I tweeted the following:

Shorter version of @R_Thaler: Government nudge good, Private nudge bad. https://t.co/Trv12cjg8V

— kevin grier (@ez_angus) October 31, 2015

Richard was not pleased and tweeted back (he's pretty aggressive on Twitter):

Total and willful misread. Nudges can be good or evil from either source. https://t.co/oG6vAw6Yh7

— Richard H Thaler (@R_Thaler) October 31, 2015

"Total" is a matter of fact, and can be discussed "Willful" is just a cheap shot.

As to whether or not I misread it, here is Thaler in the piece:


"As far as I know, the government teams in Britain and the United States that have focused on nudging have followed these guidelines scrupulously. But the private sector is another matter. In this domain, I see much more troubling behavior."

So I tweeted a 140 character version of that quote back to him and dropped the mic.

But then Richard tweeted,

@FarmerHayek @ez_angus I have said the opposite dozens of times. Read the book!
— Richard H Thaler (@R_Thaler) October 31, 2015


And then I realized, "hey Angus, you got NUDGED"!!!

Though it's not clear to me how the first sentence in any way incentivizes me to follow the command in the second.

A picture of 100 words

Click for an even more educational image.

Nudging Students?

The Behavioralist Goes to School: Leveraging Behavioral Economics to Improve Educational Performance

UPDATE:  Mark S. sends this ungated version...

Steven Levitt et al.
NBER Working Paper, June 2012

Abstract: A long line of research on behavioral economics has established the importance of factors that are typically absent from the standard economic framework: reference dependent preferences, hyperbolic preferences, and the value placed on non-financial rewards. To date, these insights have had little impact on the way the educational system operates. Through a series of field experiments involving thousands of primary and secondary school students, we demonstrate the power of behavioral economics to influence educational performance. Several insights emerge. First, we find that incentives framed as losses have more robust effects than comparable incentives framed as gains. Second, we find that non-financial incentives are considerably more cost-effective than financial incentives for younger students, but were not effective with older students. Finally, and perhaps most importantly, consistent with hyperbolic discounting, all motivating power of the incentives vanishes when rewards are handed out with a delay. Since the rewards to educational investment virtually always come with a delay, our results suggest that the current set of incentives may lead to underinvestment. For policymakers, our findings imply that in the absence of immediate incentives, many students put forth low effort on standardized tests, which may create biases in measures of student ability, teacher value added, school quality, and achievement gaps.

Nod to Kevin Lewis...

Say Cheese

That pretty much says it all right there, no?

For a less concise, but no less heartfelt, critique, click here.

Political Economy Lecture Series Podcasts: Economics for Non-majors

So, here are the four podcasts from the PE lecture series from this fall. I put the name of the speaker, linked to his web page, and then a link to the podcast (in every case, an MP3). The sound quality is not always very good, because I was both the person in charge of recording and also the editor of final product.

Remember, the course that these podcasts come from is "Economics for Non-majors," a new but now permanent course being taught at Duke. (Syllabus for Fall 2011). Let me acknowledge the extremely helpful assistance of the Charles G. Koch Foundation and the Thomas W. Smith Foundation in getting this off the ground. We could not have done it without you, folks! There was nothing like this, and now there is a new permanent course, right here at Duke University. It will be offered at least twice a year from now on.

November 30, 2011: Professor Kevin B. Grier, University Professor and Professor of Economics, University of Oklahoma. (email him if you have questions!)

"MONETARY POLICY: PAST, PRESENT, AND FUTURE" (Link to mp3 file file)

November 2, 2011: Professor Timur Kuran, Professor of Economics and Political Science & Gorter Family Professor of Islamic Studies, Duke University. (email him if you have questions!)

"THE GREAT DIVERGENCE: WHY DO ISLAMIC COUNTRIES LAG ECONOMICALLY?" (Link to mp3 file)

October 12, 2011: Honorable William Gradison, US House of Representatives and PCAOB

"FINANCIAL REGULATION: CAUSES AND EFFECTS" (Link to mp3 file)

September 7, 2011: Professor John D. Lewis, Visiting Professor, PPE Program, Duke University. (email him if you have questions!)

"MORALITY OF EXCHANGE IN GREECE AND ROME" (Link to mp3 file)

Getting the incentives right

I can understand Chavez getting his medical treatment in Cuba. After all, the Castro brothers have the most to lose if Chavez is not longer in power. Cuba gets $3 billion plus in annual subsidies from Venezuela.

One Venezuelan blogger considers his country to be a Cuban colony:

"Cuba is very worried about its colonial outpost in South America. Things are not going well there. The Viceroy is ailing just as the province is having serious difficulties in providing the monthly stipends due to the imperial metropolis, Havana. Thus measures had to be taken before the natives become more restless than what they already are."

More here.

Four Terrific Podcasts

For my class this spring, the TW Smith Foundation was kind enough to provide generous support for some outside speakers.

With the permission of those speakers, I have created podcasts of their lectures to the class. Here they are. A note of warning: I did the recording and production. So the sound quality is something less than perfect, even though the speeches themselves were first rate.

John David Lewis: Podcast (Professor at Duke's PPE Program)
"The Role of Commerce in the Ancient World"

Timur Kuran: Podcast (Professor at Duke in Economics and Political Science)
"The Long Divergence: Economic Institutions in the Islamic World"

William Dougan: Podcast (Professor in the John E. Walker Department of Economics at Clemson University)
"The Economist and the State: The Chicago View"

Kevin Grier: Podcast (Professor in the Department of Economics at University of Oklahoma)
"U.S. Monetary Policy: Past, Present, and Future"

.
(UPDATE: A reader was kind enough to point out that one might look here for 19 other useful podcasts on economics. And I have to (blush) agree.)

How Germans make lemonade

When Regina Mayer's parents dashed her hopes of getting a horse, the resourceful 15-year-old didn't sit in her room and sulk. Instead, she turned to a cow called Luna to make her riding dreams come true.

Hours of training, and tons of treats, cajoling and caresses later, the results are impressive: not only do the two regularly go on long rides through the southern German countryside, they do jumps over a makeshift hurdle of beer crates and painted logs.

"She thinks she's a horse," the golden-haired Mayer joked on a recent sunny afternoon as she sat atop the impassive brown-and-white, grass-munching cow.

The whole story is here and is self-recommending. Regina still wants a horse though!

Hat tip to Mrs. Angus.

Where have you been all my life?

Great story about the precariousness of coaching in the NBA:

According to the Boston Herald, Celtics coach Doc Rivers was quite impressed with the debut of former Thunder starting center Nenad Krstic.

When Krstic pulled down two offensive rebounds on the team's first possession, Rivers reportedly turned to assistant coach Lawrence Frank and asked, “Does he do that all the time?”

Frank, who coached Krstic during his early days, replied: “If he did, I'd still be in New Jersey.”

I enjoyed the Nenad Krstic era in the OKC, even though he always seemed slightly bemused/confused on the court.

Paradoxically, getting Perkins and losing Nenad might make Scott Brooks' job LESS secure. Now with a real center (assuming he gets and stays healthy), the Thunder have one less excuse and lack of results now will cause the fickle finger to more likely be pointed at Scotty.

And, make no mistake about it, the Thunder coaching staff are either weak on the Xs and Os or else weak on getting the players to execute the Xs and Os.

The Culture that is Korea: Economies of scope in the Korean banking industry

In the R.O.K., banks will pay you a higher interest rate on your deposits, the more weight you lose!

Really:

SEOUL (Reuters) – Park Keun-jun is determined to fulfill two resolutions this year: bulk up his bank account but slim down himself.

Enter South Korean banks, with plans to help with both.

"I'd like to bet my money on a bank's savings plan if the bank gives credits to me for not giving up on my New Year's resolutions," said Park, a 32-year-old car designer.

Hana Bank, the banking arm of Hana Financial Group, sells an installment savings product called "S-Line," a Korean word that means an hourglass figure -- just one reflection of the current Korean obsession with being slim and in shape.

The more calories a customer burns, the higher interest rate the bank gives. If a customer loses more than five percent of their weight within a year, or holds a gym membership, the bank grants special rates...For Park, who wants to save money for several years but fears burning a hole in his wallet by following his fitness resolution since many gym memberships in Seoul are expensive, such banks' plans give him guarded hope.

Now I am waiting for the gyms to retaliate by letting you use more or better equipment as you progressively dis-intermediate your funds.

Markets in Everything: Principles texts for under $250

I guess NGM didn't get the memo that his taxes were NOT going up, because he's charging $238.95 for the new edition of his principles text.

Amazon is offering it to me at 20% off plus free shipping! A mere $191.16.

The comparable edition of LeBron and Alex's book is "only" $168.95, which Amazon is willing to give me for $132.03, a 22% discount.

So at the Amazon prices, Lebron & Alex are 31% cheaper, but still pretty steep.

The previous edition of Mankiw's text did have a Kindle edition for $149, no word about whether the new edition will or if so, at what price. Surprisingly, LeBron and Alex do not have a Kindle edition (at least that I could find).

These days, given that you could make yourself a pretty good free principles text just by downloading relevant Wikipedia entries, I don't see how these rents can be sustained over the long run (I am aware that not all or perhaps not even a majority of the rents are going to the authors).

Fubarak's new Cabinet: A Photo Essay

In Socialist Sweden, Piano Plays YOU!

Maybe Cass Sunstein can make the cap & trade bill look like a jack-in-the-box??

Game of the year so far

Amazing NBA game in the OKC last night. Thunder led wire to wire and beat Orlando 125-124. Durant won it at the end by absolutely abusing Turkoglu, who he outscored 36-7. Howard had 39 points and 18 boards and the Magic shot 14-28 on threes, but all in vain.

Besides the game itself, two things stood out. First Stan Van Gundy is an absolute jerk. He is down on everyone and everything all the time. I think he will lose that team.

Second, Dwight Howard absolutely does not give a F**K about his chosen profession. He's talking to the crowd, clowning around with the ball, yakking to his opponents, and just acting like a goofball while his team is losing. He has to be so incredibly frustrating to coach.

I guess he and Stanvan deserve each other.

My favorite short poems about prison

Prison Ball

They don't negotiate if you are held
Hostage. Don't attempt to take a charge.
If you find a point guard who'll pass the rock,
Help him escape. Let him fastbreak at large.

-Sherman Alexie



Christmas in Prison

It was Christmas in prison
and the food was real good.
We had turkey and pistols
carved out of wood.

-John Prine

Roubini vs. Roubini

Or, saying things are bad has been very very good.

Item 1: Nouriel gives an interview on December 28th with CNBC saying housing prices can "only move down".

Item 2: Earlier this month, Nouriel bought a $5.5 million apartment in Manhattan! He got a $2.99 million dollar ARM (so I guess he made a $2.51 million down payment??)!

Grandma got run over... by my final exam?

I have often joked that grandparents should strive to keep low achieving grandkids out of college because it can be very very bad for the grandparents' health, especially around exam times. I guess the poor seniors just can't take the stress of worrying about their progeny's academic progress.

Well, it turns out that the full extent of this insidious problem has been scientifically investigated, in a classic research paper entitled "The Dead Grandmother/Exam Syndrome and the Potential Downfall Of American Society" (ungated version available here).

Here is one of the many "shout it from the rooftops" results:

"The FDR (family death rate) is climbing at an accelerating rate. Extrapolation of this curve suggests that 100 years from now the FDR will stand at 644/100 students/exam. At that rate only the largest families would survive even the first semester of a student's college career."

The Tao of Don

LA Clippers owner Donald Sterling is many things, slumlord, racist, sexual harasser, astute business man (he bought the Clips for 12.5 mil, now worth over 200 mil).

Now we can add performance artist to the mix. He's taken to heckling his premier free agent acquisition during games from his courtside seat:

It’s not uncommon to hear Los Angeles Clippers fans heckle Baron Davis. Of late, however, the jeers directed at the team’s struggling point guard are coming from a far more surprising source: The man paying Davis, Clippers owner Donald Sterling.

Sterling has expressed his displeasure about Davis’ play by taunting him from his courtside seat at Clippers’ home games, several sources told Yahoo! Sports. Among Sterling’s verbal barbs:

– “Why are you in the game?”

– “Why did you take that shot?”

– “You’re out of shape!”

While Sterling has also taunted other Clippers players since the middle of last season, none have received it worse than Davis, the sources said.

Why?

Sterling “started getting a lot more vocal during the second half of last season,” one team source said. “He never had done that before at games. Baron’s his pet project. He absolutely hates Baron. He wants to get his money back.”

Now it's true that B-Dizzle has been a big fizzle for the Clips, but heckling him during the game seems like a move designed to make sure he won't get any better.

They know what boys like

Harry Reid and the Senate democrats think they know what President O and the Republicans evidently don't: how to lure the House Dems into supporting the tax deal.

And their answer is........

PORK!!!!

A few billion here and there for ethanol subsidies and wind and solar subsidies is all they figure it'll take to get the bill past the opposition of the Democratic Caucus in the House.

I bet it works, but I'm surprised they didn't throw in a lil bit more high speed rail money just to clinch it.