"The ladders of life we scale merrily move mysteriously around. So that when you think you're climbing up, man, in fact you're climbing down"Having lived through a bubble, where we were ploughing headlong into a bloated finance and construction industry and using our new found financial windfall to accumulate large scale debt, the lyric rings very true.
Saturday, October 23, 2010
Behavioural Economics in Song - Nick Cave
"Oh My Lord" by Nick Cave and The Bad Seeds is going in the vaults. A classic in general (live youtube version here) it contains the following, which might simply refer to life containing unknown risks but I also think basically means we are overconfident and unaware, and blinded by temporary success.
Weekend Links
1. Economics, Psychology and the history of consumer choice theory Hands (2010). Cambridge Journal of Economics.
This paper examines elements of the complex place/role/influence of psychology in the history of consumer choice theory. The paper reviews, and then challenges, the standard narrative that psychology was ‘in’ consumer choice theory early in the neoclassical revolution, then strictly ‘out’ during the ordinal and revealed preference revolutions, now (possibly) back in with recent developments in experimental, behavioural and neuroeconomics. The paper uses the work of three particular economic theorists to challenge this standard narrative and then provides an alternative interpretation of the history of the relationship between psychology and consumer choice theory.
2. Zizzo (2010). Experimental Demand Effects in Economics
3. Harrison and Ross (2010). "The Methodologies of Neuroeconomics"- really interesting critique of aspects of neuroeconomic methodologies
4. Workplace Wellness Programmes Can Generate Savings - Health Affairs (2010)
1 Katherine Baicker (Kbaicker@hsph.harvard.edu) is a professor of health economics at the School of Public Health, Harvard University, in Boston, Massachusetts.
2 David Cutler is a professor of economics at Harvard University.
3 Zirui Song is a doctoral candidate at Harvard Medical School.
2 David Cutler is a professor of economics at Harvard University.
3 Zirui Song is a doctoral candidate at Harvard Medical School.
*Corresponding author
Amid soaring health spending, there is growing interest in workplace disease prevention and wellness programs to improve health and lower costs. In a critical meta-analysis of the literature on costs and savings associated with such programs, we found that medical costs fall by about $3.27 for every dollar spent on wellness programs and that absenteeism costs fall by about $2.73 for every dollar spent. Although further exploration of the mechanisms at work and broader applicability of the findings is needed, this return on investment suggests that the wider adoption of such programs could prove beneficial for budgets and productivity as well as health outcomes.
Key Words: Cost of Health Care • Health Promotion/Disease Prevention
5. Simolean Sense blog does a very nice weekly roundup of behavioural topic. In general, this blog is doing a very good job at harvesting relevant behavioural links from round the web.
6. Dan Gilbert NYT article on the psychology of numbers
Wednesday, October 20, 2010
Applications of set theory
While the use of mathematics in economics has been criticized by many it is hard to see how the discipline could advance without the use of at least some calculus, algebra and statistics. Set theory, on the other hand, would bore the pants off you. So it is nice to see a Venn Diagram being used for something interesting: a corn dog.I am indebted to another colleague (who shall remain nameless but it is not me) for this further contribution to applied mathematics:
Note that one cannot draw causal inferences from the negative correlation between being truly happy and wearing pants. Clearly one needs some good instrumental variables.
Tuesday, October 19, 2010
Warriors Against Rational Choice - Kangaroo Edition
Every once in a while, something appears on the scene that really makes you stop and wonder what on earth could have gotten into someone to do something like that. Most people in Ireland will have seen the story at this stage of the kangaroo let loose in a Dublin nightclub as "Skippy" plays on the sound system. This is just baffling. Like the recent incident of the people who stole a penguin from Dublin Zoo and released it in O'Connell street, it looks very much like something that people thought of as funny while stoned. However, particularly in the case of the Kangaroo, they would have had to follow up and execute the plan. Think of the possible chain of events. Some guy is sitting staring vacantly into space when his eyes light up and he starts to laugh. The basic germ of an idea has been established. "I will steal a kangaroo and let it loose in a nightclub". I can see at first glance why this fleeting thought might be humorous for a minute but surely then it must just pass off into the realm where all such ideas usually dwell. It is very unlikely that the person could have executed this idea alone. So the person formulates the idea in a little more detail and then explains it to someone else. This is when the amazing thing happens - the other person (possibly people) agrees that this is a good idea. They then have to actually precure a kangaroo, which I know is not as impossible at it first appears as it seems we do have some kangaroos in Ireland. But surely it is not completely trivial both to find one and to devise a method of claiming it, transporting it and so on - it is trickier than letting the neighborhood dog loose. All of this process must have taken sufficient time for at least some doubts to be raised about whether this was a sensible thing to do e.g. its cruel to the animal, the animal might go mental and really hurt someone, its illegal and we might get arrested, its a lot of bloody hassle and its not that funny a joke. Yet still they bring the full plan to fruition, culminating in the release of an unfortunate animal into a Dublin nightclub, which are disturbing enough places to be for humans never mind the poor kangaroo. The serious side of the story is that it appears from reports to RTE that the animal died afterwards and it is plainly bloody stupid on an amount of levels to do something like that. Whoever they are, perhaps we are fulfilling their wishes by even focusing on them but they have definitely earned a place in the WARC archives.
Suicide in Ireland: The Influence of Alcohol and Unemployment
Brendan Walsh, Dermot Walsh
In this paper we model the behaviour of the Irish suicide rate over the period 1968‐2009 using the unemployment rate and the level of alcohol consumption as explanatory variables. It is found that these variables have significant positive effects on suicide mortality in several demographic groups. Alcohol consumption is a significant influence on the male suicide rate up to age 64. Its influence on the female suicide rate is not as well‐established, although there is evidence that it is important in the 15‐24 and 25‐34 age groups. The unemployment rate is also a significant influence on the male suicide rate in the younger age groups. The behaviour of suicide rates among males aged 55 and over and females aged 25 and over is largely unaccounted for by our model. These broad conclusions hold when account is taken of a structural break in the 1980s, with the response to unemployment being greater in the earlier period and that to alcohol greater in the later period. The findings suggest that higher alcohol consumption played a major role in the increase in suicide mortality among young Irish males between the late 1960s and the end of the century. In the early twenty first century a combination of falling alcohol consumption and low unemployment led to a marked reduction in suicide rates, although there is some evidence that the suicide rate is being increasingly under‐reported in recent years. The recent rise in the suicide rate may be attributed to the sharp increase in unemployment, especially among males, but it has been moderated by the continuing fall in alcohol consumption. Some policy implications of the findings are discussed.
In this paper we model the behaviour of the Irish suicide rate over the period 1968‐2009 using the unemployment rate and the level of alcohol consumption as explanatory variables. It is found that these variables have significant positive effects on suicide mortality in several demographic groups. Alcohol consumption is a significant influence on the male suicide rate up to age 64. Its influence on the female suicide rate is not as well‐established, although there is evidence that it is important in the 15‐24 and 25‐34 age groups. The unemployment rate is also a significant influence on the male suicide rate in the younger age groups. The behaviour of suicide rates among males aged 55 and over and females aged 25 and over is largely unaccounted for by our model. These broad conclusions hold when account is taken of a structural break in the 1980s, with the response to unemployment being greater in the earlier period and that to alcohol greater in the later period. The findings suggest that higher alcohol consumption played a major role in the increase in suicide mortality among young Irish males between the late 1960s and the end of the century. In the early twenty first century a combination of falling alcohol consumption and low unemployment led to a marked reduction in suicide rates, although there is some evidence that the suicide rate is being increasingly under‐reported in recent years. The recent rise in the suicide rate may be attributed to the sharp increase in unemployment, especially among males, but it has been moderated by the continuing fall in alcohol consumption. Some policy implications of the findings are discussed.
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