NUS Module Blogs

http://www.american.com/archive/2006/november/the-young-economist-1

If Ulrike Malmendier were rational, she wouldn’t have so many degrees. “My problem is whatever I’m working on right now I think is the most important topic in the world,” she says. “I’m totally absorbed.”

It’s a puzzle she knows well. Malmendier’s wandering path through law, economics, and psychology, from Bonn to Boston to Berkeley, earning six university diplomas in the space of seven years, has made her a leader in the field of behavioral economics. She is an authority on the gap between our most rational courses of action and the things we actually do.

It would have been much easier to pick a traditional economics topic, rather than looking into the mess of human irrationality. “Back in Germany, at least at the time when I studied, the people who were able to do very advanced economics, very technical and mathematical stuff, would not at all connect to real-world problems,” says Malmendier, who now teaches economics at the University of California at Berkeley. “There was just a big gap.”

She was drawn across the Atlantic to Harvard, where economists are more open to thinking about human psychology. Studying there—and ultimately earning a second doctorate—turned her view of economics upside down.

“The people at Harvard were motivated by what was happening out there in the economy. How are markets functioning? How do people make decisions? I woke up and realized there are all these super-interesting questions we can answer,” she says. “It really made me much more interested in economics.”

"How are markets functioning? How do people make decisions? I woke up and realized there are all these super-interesting questions we can answer."

At the core of behavioral economics—a field that has become popular over the last ten years or so—is the study of how people’s biases, errors, and nonrational behavior affect their decision-making. Those decisions range from how high an eBay user is willing to bid for a trinket (we will overpay, it turns out, for the thrill of winning an auction) to whether one multimillion-dollar corporation will acquire another.

“Emotions get in the way. People are tempted. They’re overconfident. They’re underconfident. We used to think we can neglect that. But now we think, well, it happens sort of systematically,” says Malmendier. “And as soon as it’s systematic, we economists have to take it seriously because it affects the design of products, of advertising, of contracts, and purchasing decisions.”

“Paying Not to Go to the Gym,” a recent paper, won her public attention. Of the thousands of health club members Malmendier studied, most chose to subscribe on a monthly basis rather than paying for each visit. But 85 percent of those who chose a monthly contract didn’t attend the gym enough to justify the cost. “It seems that people,when they enroll in the gyms, are systematically overestimating how often they are going to attend in the future,” says Malmendier. The health club industry has known about this pattern for years, she explains, but it is only recently that economists and their models have caught up.

Health clubs are a natural topic for Malmendier. Thirty-three years old, athletic, and outgoing, she is often taken for a student on campus. She is pleasantly surprised by how little discrimination she has faced. “I think it’s probably very different from even ten years ago. There are a few women who are now senior professors and they tell me stories of what they had to fight and I really realize that it’s changed a lot—probably thanks to them.”

Malmendier has extended her method well beyond the weight room—notably, into the boardroom. In her paper “Who Makes Acquisitions? CEO Overconfidence and the Market’s Reaction,” she asked why so many corporate CEOs, in making acquisitions, “overpay for target companies and undertake value-destroying mergers.” The study looked at simple overconfidence, especially when companies have abundant internal funding, as the answer.

“If you’re CEO of a top company, you’ve had a lot of success in your life...otherwise you wouldn’t be there. So maybe you tend to overestimate that everything you touch turns to gold,” says Malmendier. “They just truly believe it’s a good merger, and it’s not surprising that they do, given that everything else went so well in the past.”

David Laibson, Malmendier’s adviser at Harvard, calls her “one of the most brilliant and productive researchers in the business.” He says she may spur a bidding war among top schools—a kind of irrationality Malmendier might want to encourage.

Lizbeth Scordo, formerly a staff reporter for Dow Jones VentureWire, is a writer in Los Angeles.

http://video.google.com/videoplay?docid=-1424079446171087119&q=user%3A%22Google+engEDU%22&hl=en

Former Institut Pasteur scientist and Buddhist monk, Matthieu Ricard, is often referred to as the 'happiest man in the world', following intensive clinical tests at the University of Wisconsin, where his brain patterns were tracked via hundreds of sensors attached to the skull and hours of MRI scanning.

With the scoring ranging from +3 to - 3 (the supposed maximum score for happiness) Ricard's scores were actually off the scale at more than - 4.

Turn the clock back 40 years and 20-year-old Ricard was tipped as one of the most promising biologists of his generation, beginning a PhD under Nobel prizewinner Francis Jacob at the Institut Pasteur. His mother, Yahne Le Toumelin, was an artist, a friend of André Breton and Leonora Carrington, his father Jean-François Revel a leading philosopher. When he was 16, he had lunch with Stravinsky.

By Yasmin Anwar, Media Relations | 16 January 2007

BERKELEY – One need not look far to find evidence of the stigma of mental illness, as can attest Andrea Stier, a graduate student in psychology at the University of California, Berkeley. She observed it in a recent clinical psychology class when a student made the frank disclosure that she suffered from bipolar disorder.

"Other students, who had previously been engaged and excited about learning about mental illness in the abstract, became extremely uncomfortable, refused to make eye contact with her, and were quiet and withdrawn," Stier says.

That enduring fear of mental illness is precisely what UC Berkeley psychologists - under the tutelage of Stephen Hinshaw, chair of the Department of Psychology - are working to combat. Indeed, Hinshaw's new book, "The Mark of Shame: Stigma of Mental Illness and an Agenda for Change" (Oxford University Press, 2007) could well boost compassion for the mentally ill from the grass roots to the U.S. Capitol.

As Congress considers legislation that would require the same health coverage for mental illness as for physical ailments, lawmakers are becoming more receptive to evidence of the injustices suffered by those with disorders ranging from depression and attention-deficit/hyperactivity disorder to schizophrenia and autism.

According to Hinshaw's book, those who suffer from mental illnesses continue to face housing and job discrimination, as well as hurdles when voting, obtaining a driver's license and maintaining child custody. "As a result, they lose out on major life opportunities," he says.

Indeed, the public perception of serious mental illness is more negative today than it was a half century ago, despite significant advances in education, medication and psychological therapies, says Hinshaw, who will give a public reading from his book at 7 p.m. on Monday, Jan. 29, at Cody's Books at 1730 Fourth St. in Berkeley.

In his book, Hinshaw uses scientific, cultural and qualitative evidence to explain the historical roots of the stigma of mental illness, how it plays out on a daily basis, and what can be done to remedy this continuing problem. He warns that the stigma of mental illness will persist until a "civil rights movement" establishes equality for the mentally ill.

As part of their research into the stigma of mental illness, Hinshaw's team of graduate psychology students are looking into how the mentally ill are depicted in the news media, public versus hidden attitudes about mental illness, and the responses of grade schoolers and their parents to film clips about mental illness. They are also studying how interpersonal dynamics change when one member of a group is led to believe that another has been referred for mental health care and may have a diagnosis of schizophrenia or depression

Meanwhile, studies show that the stigma of mental illness prevents tens of millions of Americans from seeking treatment. A 2005 government-funded study, the National Comorbidity Survey Replication, found that fewer than half of those who reported mental illnesses during that year sought treatment, and those who did waited at least a decade, by which time they were more likely to have developed additional problems. Comorbidity is the simultaneous occurrence of two or more illnesses.

"Given the negative perceptions of mental illness, and the shame, it is not surprising that people with mental disorders delay seeking help for decades," Hinshaw says. "Concealment remains a major means of coping."

Largely to blame, Hinshaw says, are primal human fears of members of an "outgroup" threatening stability and survival, alarmist portrayals of the mentally ill in the media, and the failure of politicians and the health care industry to give equal footing to mental health insurance coverage. While reports in newspapers and on television often depict the mentally ill as dangerous and unpredictable, the reality is that only a sub-group of people with mental illness are likely to be violent, Hinshaw argues. Indeed, people with mental illnesses are more likely victims than victimizers.

"Neglect and exclusion impede adequate research funding and clinical care, fueling the myth that mental illness is lifelong, hopeless and deserving of revulsion," Hinshaw writes in his book.

Hinshaw, who previously has written about his father's lifelong struggle with misdiagnosed bipolar disease and is a longstanding investigator of developmental psychopathology, is particularly committed to combating the sense of shame that prevents the mentally ill from seeking help.

"While there is a strong recognition that prejudice based on race, ethnicity and gender is a social problem that we need to understand and address, such recognition has not been given to prejudice - or its consequences - based on mental illness," says UC Berkeley psychology professor Rodolfo Mendoza-Denton, whose research also deals with stigma, but as it pertains to race and ethnicity. "This is why professor Hinshaw's book is so important."

"The Mark of Shame" demonstrates how mental illness has historically been marked with ignorance, superstition and even torture, from the early practice of boring holes in heads to release evil spirits to inhumane post-Renaissance asylums, to eugenics and Hitler's genocide programs.

Moreover, the deinstitutionalization strategies of the latter part of the 20th century, Hinshaw says, emptied most mental hospitals. As a result, huge numbers of the mentally ill today live on the streets or are warehoused in jails and prisons. Meanwhile, conditions in psychiatric wards at the few remaining public hospitals are plagued by understaffing, assaults, suicides, drug trafficking and the excessive disbursement of psychotropic medicines, he says.

"A far brighter future can and will emerge when knowledge replaces ignorance, when effective treatments supplant custodial care and inadequate community intervention, when legislation mandates equality and when contact with the realities, rather than the stereotypes of mental disorder, taps people's empathy," writes Hinshaw in the book.

http://www.berkeley.edu/news/media/releases/2007/01/16_stigma.shtml