In a recent video Gulnara gave us some background of haggling in the former Soviet Union, and we tried to understand some of the way we could evaluate whether it is “good or bad” beyond the standard “haggling allows for optimal price discovery” vs “haggling adds transaction costs to trading”. The video can be found here.
For those who don’t like video and just want to read the text, it can be found below.
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A fascinating talk by psychologist, Dan Gilbert. Ten years old but worth watching if you haven’t seen it before.
The core point is that people get buyer’s remorse when choices are reversible and become increasingly unhappy with their decision. When choices are irreversible, endowment effects kick in and they become happier with their choice over time. Importantly, most people do not realise that this effect exists.
Earlier this year Raj Chetty gave the keynote address at the annual AEA meeting. He discussed the role of behavioural economics for public policy, giving examples of successful nudges such as a change in defaults for retirement saving. Unusually, he took the goal of policy as given and spent his lecture talking about how behavioural economics can help achieve those goals. Read more
There were a bunch of excellent comments on yesterday’s food post. I thought I could answer them by adding a bit of clarity here.
After reading both the Stuff article and the initial article on Gareth Morgan’s blog and the follow up, I am convinced both Gareth and Geoff Simmons (GG) have inadvertently become extreme social constructivists – but may not realise it yet.
Now I hate it when people just whip out rhetoric like “social constructivist” and don’t explain it – so what do I mean, how have they gone this way, and what do we know about this type of framework so we can analyse it?
As the world starts to move from focusing on growth to wellbeing a group of neuroscientists decided to test people’s brains to check whether ‘happiness’ occurred as predicted. The BBC reports that they found
“We can look at past decisions and outcomes and predict exactly how happy you will say you are at any point in time,” said lead author Dr Robb Rutledge from University College London.
The experiment tested decisions under uncertainty, which is a well-researched topic in economics. The best model we have at the moment derives from Kahneman and Tversky’s development of prospect theory. Read more