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Behavioral Economics

The title is Behavioral Economics. But I am really using to post anything that I find interesting or useful, not necessarily related to behavioral economics, or economics at all. However, this being hosted by the university, I don't expect posting anything too personal here.

  • Princeton President on what constitutes an effective test

    http://www.zaobao.com/sp/sp080322_516_2.shtml (普林斯顿大学校长-测试科学家潜力的最有效测验)

    她认为测试科学家潜力的最有效测验,是提供学生一个他们完全没接触的处境,要求他们运用所学的知识理解它。

    Translation: The most effective test is done by providing the students with a situation that they have had no experience with, and asking them to apply the knowledge that they had learnt to understand it.

  • Extra cash from government program linked to better child development, new study says

    Children in impoverished families that received an extra amount of cold, hard cash from a government support program were taller, less likely to be overweight, and scored higher on cognitive, motor and language tests, compared with kids in families that received less money, says a new UC Berkeley-led study.

    The full story is online at http://www.berkeley.edu/news/media/releases/2008/03/06_conditionalcash.shtml

  • Want people to like you more on facebook or friendster? Try being abstract and provide less info?

    I made up that title.  It could be a completely inaccurate description of the study below. W Wink

    http://query.nytimes.com/gst/fullpage.html?res=9C05E0DC113EF93AA35751C1A9619C8B63&sec=&spon=&pagewanted=all

    A team of researchers, led by Michael I. Norton of Harvard Business School, looked at online daters' opinions of people they were about to meet for the first time and compared those ratings with another group's post-date impressions. Before the date, based on what little information the daters saw online, most participants rated their prospective dates between a 6 and a 10 on a 10-point scale, with nobody giving a score below a 3. But post-date scores were lower, on average, and lots of people deemed their date a total dud.

    Why? For starters, initial information is open to interpretation. ''And people are so motivated to find somebody they like that they read things into the profiles,'' Norton says. If a man writes that he likes the outdoors, his would-be mate imagines her perfect skiing companion, but when she learns more, she discovers ''the outdoors'' refers to nude beaches. And ''once you see one dissimilarity, everything you learn afterward gets colored by that,'' Norton says.

    The letdown from getting more information isn't true just for romance. In one experiment, the researchers showed college students different numbers of randomly selected traits and asked them to rate how much they'd like the person described. For the most part, the more traits participants saw, the less they said they would like the other person. But another group of students had overwhelmingly said they would like people more after learning more about them.

    We make this mistake, the researchers say, largely because we can all recall cases of more knowledge leading to more liking. ''You forget the people in your third-grade class you didn't like; you remember the people you're still friends with,'' Norton explains.

     

    http://www.predictablyirrational.com/?page_id=17 (from one of the author's (Dan Ariely) blog)

    The paper itself is about the idea that although people expect that the more they get to know about another person the more they will like this person, in reality familiarity breeds contempt!

    Why is this the case? When we get partial information about others we tend to fill the gaps optimistically, assuming that they are just like us and that they like the same things we like. However, when we learn more about that other person we can no longer hold this optimistic interpretation, the disappointment begins, and from there on the disappointments escalate. For example, imagine that someone writes that they like music. You assume that it is the same music you like (blues) and you immediately like this blues-music-lover. But when you learn more, you discover that in fact they like jazz, and once you see one dissimilarity, everything you learn afterward is colored by that.

    What is the lesson here? Sure there are some people that are worth knowing very well, but in the process of finding these individuals we will encounter a lot of heartache and disappointments.

  • Why is it important for economists to study psychology - From Dan Ariely's blog

    http://www.predictablyirrational.com/?p=90&date=1

    In conventional economics it is assumed that we are all rational — meaning that the decisions we make are the perfect decision for us. How do we achieve this feat? What standard economics assumes is that every time we face a choice we consider all the available options, compute the value of all the options, perform a cost benefit analysis, and then follow the best possible path of action. What if we make a mistake and do something irrational? Here, too, traditional economics has an answer: “market forces” will sweep down on us and swiftly set us back on the path of righteousness and rationality.

    But, what if we are really far less rational than standard economic theory assumes. What if we can’t compute the discounted value of money, consider all the possible options, or figure out how much a new car is really worth to us? Shouldn’t our models of individual behavior, and more importantly our recommendations for new policies and practices, be based on what people actually do rather than what they are supposed to be doing?

    More...The desire to base the models that guide policies and business practice on the way people actually behave seem to make intuitive sense, but nevertheless, behavior is largely ignored by standard economics. And what are the implications of this for economics? As the economist, John Maurice Clark noted many years ago:

    “The economist may attempt to ignore psychology, but it is sheer impossibility for him to ignore human nature… If the economist borrows his conception of man from the psychologist, his constructive work may have some chance of remaining purely economic in character. But if he does not, he will not thereby avoid psychology. Rather, he will force himself to make his own, and it will be bad psychology.”

    This is what behavioral economics is all about. The desire to modify standard economics to take behavior into account. To move it away from naive psychology (which often fails the tests of reason, introspection, and-most importantly-empirical scrutiny), and turn it into a study that encompasses the complexity of human behavior, and more importantly making it better suited to make recommendations that would help saving, education, healthcare etc.

  • Does Movie Violence Increase Violent Crime?

    http://www.econ.berkeley.edu/~sdellavi/wp/moviescrime07-12-20.pdf

    by Gordon Dahl and Stefano DellaVigna

     

    Abstract

    Laboratory experiments in psychology find that media violence increases aggression in the short run. We analyze whether media violence affects violent crime in the field. We exploit variation in the violence of blockbuster movies from 1995 to 2004, and study the effect on same-day assaults. We find that violent crime decreases on days with larger theater audiences for violent movies. The effect is partly due to voluntary incapacitation: between 6PM and 12AM, a one million increase in the audience for violent movies reduces violent crime by 1.1 to 1.3 percent. After exposure to the movie, between 12AM and 6AM, violent crime is reduced by an even larger percent. This finding is explained by the self-selection of violent individuals into violent movie attendance, leading to a substitution away from more volatile activities. In particular, movie attendance appears to reduce alcohol consumption.  Like the laboratory experiments, we find indirect evidence that movie violence increases violent crime; however, this effect is dominated by the reduction in crime induced by a substitution away from more dangerous activities. Overall, our estimates suggest that in the short-run violent movies deter almost 1,000 assaults on an average weekend. While our design does not allow us to estimate long-run effects, we find no evidence of medium-run effects up to three weeks after initial exposure.

     

     

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