Economists typically assume people behave in a rational and self-interested way, making standard models limited in their explanatory power. This column argues that psychological and sociological factors – though usually ignored in economic models – affect decision-making. The findings, drawn from the World Development Report, further suggest that better behavioural understanding could subsequently aid development efforts.
Allison Demeritt, Karla Hoff, James Walsh, Wednesday, May 20, 2015
Christine L. Exley, Saturday, December 27, 2014
Decisions involving charitable giving often occur under the shadow of risk. A common finding is that potential donors give less when there is greater risk that their donation will have less impact. While this behaviour could be fully rationalised by standard economic models, this column shows that an additional mechanism is relevant – the use of risk as an excuse not to give. In light of this finding, this column also discusses how charities may benefit from structuring their donation requests in particular ways.
Raj Chetty, Emmanuel Saez, László Sándor, Monday, August 11, 2014
Peer review is at the heart of academic economics, but there are few professional rewards for submitting detailed referee reports on time. This column reports the results from an experimental study of referee motivation. Shorter deadlines ‘nudged’ referees to submit reports earlier. Cash incentives also reduced turnaround times, suggesting that any ‘crowding out’ of intrinsic motivation is small. Social incentives – publication of turnaround times – were more effective for tenured referees than shorter deadlines or cash incentives.
John Komlos, Thursday, July 24, 2014
Many quantities fail to respond smoothly to price changes. This column stresses that the ‘endowment effect’ – a well-known behavioural economics concept – implies kinks in indifference curves at the current consumption bundle price. Such kinks may account for the stickiness of prices, wages, and interest rates.
Ben Ho, Tuesday, May 13, 2014
Apologies are often hard – that’s the point. An apology is due when trust is broken, and to restore trust the apology must be hard. This column discusses a model of apologies as costly signals with some recent experimental evidence.
Paul Seabright, Friday, May 18, 2012
Paul Seabright of the Toulouse School of Economics talks to Viv Davies about his book, "The War of the Sexes: how conflict and cooperation have shaped men and women from pre-history to the present”. He explains how game theory can shed light on the complex dynamics that create both conflict and cooperation between the sexes. They discuss the connection between the rise of modern capitalism and the rise of feminism, monogamy and marriage and whether there will ever be sexual equality.
James Choi, Emily Haisley, Jennifer Kurkoski, Cade Massey, Wednesday, March 28, 2012
As if today’s problems aren’t enough, in the coming years Europe faces what economists are calling a ‘demographic timebomb’, with ageing populations placing an unsustainable burden on already precarious public finances. In order to encourage more people to save for themselves, this column argues that using a psychological intervention can increase contributions to retirement savings accounts by up to 2.9% of income.
Jesús Fernández-Villaverde, Nezih Guner, Jeremy Greenwood, Thursday, January 19, 2012
Does shame impact teenage sexual behaviour in modern times, when contraception is readily available? Do peers matter for this behaviour? What is the relative importance of each of these forces? This columns aims to answer these questions using a survey covering 90,000 US high-school students. It argues that shame is an important driver of sexual behaviour among teenagers even when peer-group effects are considered.
Gábor Kézdi, Robert J. Willis, Monday, December 19, 2011
How to ordinary people form their beliefs about the economy? These beliefs then shape the decisions they make and can, if widely held, prove to be self-fulfilling. This column looks at surveys of ordinary people in the US and finds that the beliefs people hold and the reasons behind them vary almost as much as the outcomes they try to predict.
Andrew Healy, Friday, December 9, 2011
At this week’s summit on the future of the euro, Angela Merkel will be one of few women in a room full of men. This column provides experimental evidence to suggest that women are often less driven by the desire to compete and have less belief in their abilities than men. The result is that even the highest ranks of power may be bereft of the most able of candidates.
Diane Coyle, Saturday, December 3, 2011
Have economists been asleep at the wheel? This column reports from a conference on the psychology and economics of ‘scarce attention’. Among the ideas discussed is whether too much information can blind decision-making and whether this can explain why so many economists missed the warning signs of a crisis.
Chris Ellis, John Fender, Wednesday, October 26, 2011
For the Arab Spring it was Twitter; for the summer riots in London it was BlackBerry Messenger. This column explores how the latest technology is helping to accelerate ‘information cascades’, where people make decisions based on what they see other people doing – and getting away with.
Giacomo Calzolari, Mattia Nardotto, Monday, September 19, 2011
Do 'nudges' help people stick to their goals? The authors of CEPR DP8571 find that quick reminders can promote virtuous behaviour without the need for monetary incentives.
Stefan Trautmann, Razvan Vlahu, Sunday, August 28, 2011
One of the most iconic images from the subprime mortgage crisis in 2007 was the queue of people outside the British bank Northern Rock demanding their deposits back. This column uses experimental evidence to discuss another type of bank run – a borrower run – when mortgage holders strategically default on their loans.
Claus Bjørn Jørgensen, Sigrid Suetens, Jean-Robert Tyran, Friday, April 22, 2011
Japan’s trio of tsunami, earthquake, and nuclear disaster has left the world stunned. As this column points out, even the experts were shocked. But while these events were highly unlikely, they were still possible. This column uses evidence from the Danish lottery to show that people tend to adjust their expectations of future events based on only small pockets of recent experience, often at their cost.
Jeremy D Goldhaber-Fiebert, Alan M Garber, Tuesday, February 22, 2011
Obesity – and its related illnesses – endangers the lives of millions across the world. While healthier, more physically active lifestyles can mitigate this, the question remains of how policymakers can get people to switch from being couch potatoes to keen runner beans. This column presents new evidence suggesting that for many even a nudge may suffice.
James Andreoni, Justin M Rao, Thursday, December 16, 2010
At a time when many people are asking themselves what to give their friends and family for Christmas, this column asks why we bother to give anything at all. In the economic laboratory, subjects exhibit significant levels of altruistic giving and aversion to unfairness. Outside the laboratory however, we encounter vast amounts of poverty and inequality and yet only give a tiny fraction of our income to charity.
Juan D. Carrillo , Isabelle Brocas, Thursday, March 18, 2010
Why do people persistently make seemingly irrational decisions? This column introduces neuroeconomic theory, which uses neuroscience and neurobiology to try to shed light on the black box of human decision-making.
Dimitri Vayanos, Paul Woolley, Monday, October 5, 2009
Have capital market booms and crashes discredited the efficient market hypothesis? This column says yes and suggests a new model that explains asset pricing in terms of a battle between fair value and momentum driven by principal-agent issues. Investment agents’ rational profit seeking gives rise to mispricing and volatility.
Anne Sibert, Monday, May 18, 2009
Greedy bankers are getting most of the blame for the current financial crisis. This column explains bankers did behave badly for mainly three reasons. They committed cognitive errors involving biases towards their own prior beliefs; too many male bankers high on testosterone took too much risk, and a flawed compensation structure rewarded perceived short-term competency rather than long-run results.