Ernst Fehr Trust

Ernst Fehr gave the EEA Presidential Lecture on the role of trust. He summarised the potential importance of trust in financial markets and international relations. He argued that trust involves risk attitudes but must be considered more than risk attitudes. One reason for this is that the biological foundations of how people make trust decisions have clear pathways beyond those seen in risky decisions. The role of oxytocin, in particular, was discussed as a biological foundation of trust. One key question raised in the talk was the extent to which trust could ever be causally related to outcomes in cross-country settings. Various instrumental variable approaches have been tried (e.g. using common religions as an instrument) but there is no widely accepted way of doing this.

Some illustrative papers are below and his IDEAS page is well worth looking at for those interested in areas such as trust and neuroeconomics.

http://ideas.repec.org/a/aea/aecrev/v95y2005i2p346-351.html

http://ideas.repec.org/p/iza/izadps/dp1641.html

European Economics Association Conference

The European Economics Association Conference is currently going on in Milan. The programme is below. It is worthwhile to go through this to get a feel for what people are researching. There are several sessions related to behavioural economics including sessions on time preferences, personality, risk attitudes and several papers on emerging areas in behavioural economics such as the use of reaction time and eye-tracking data.


http://www.eea-esem2008.org/

IZA Discussion Paper

Cooperativeness and Impatience in the Tragedy of the Commons
by Ernst Fehr, Andreas Leibbrandt
(August 2008)

Abstract:
This paper examines the role of other-regarding and time preferences for cooperation in the field. We study the preferences of fishermen whose main, and often only, source of income stems from using a common pool resource (CPR). The exploitation of a CPR involves a negative interpersonal and inter-temporal externality because individuals who exploit the CPR reduce the current and the future yield for both others and themselves. Accordingly, economic theory predicts that more cooperative and more patient individuals should be less likely to exploit the CPR. Our data supports this prediction because fishermen who exhibit a higher propensity for cooperation in a laboratory public goods experiment, and those who show more patience in a laboratory time preference experiment, exploit the fishing grounds less in their daily lives. Moreover, because the laboratory public goods game exhibits no inter-temporal spillovers, measured time preferences should not predict cooperative behavior in the laboratory. This prediction is also borne out by our data. Thus, laboratory preference measures are useful to capture important dimensions of field behavior.

http://ftp.iza.org/dp3625.pdf

Text: See Discussion Paper No. 3625

MESS/LISS

Ive blogged before about the Dutch Measurement and Experimentation in the Social Sciences programme. The panel that underlies this is called LISS. Details of this programme including how to submit proposals to have your questions included on their monthly panel are available below. You can also apply to use the data on their site. This is an absolutely amazing development in social sciences.

http://www.centerdata.nl/en/LISSpanel

Psychology and Biology of Time Preferences

Geary Institute Working Paper: 2008-18

Abstract
This paper considers the relationship between the economic concept of time preference and relevant concepts from psychology and biology. Using novel data from a time diary study conducted in Ireland that combined detailed psychometric testing with medical testing and realtime bio-tracking, we examine the distribution of a number of psychometric measures linked to the economic concept of time preferences and test the extent to which these measures form coherent clusters and the degree to which these clusters are related to underlying biological substrates. The paper finds that financial discounting is related to a range of psychological variables including consideration of future consequences, self-control, conscientiousness, extraversion, and experiential avoidance as well as being predicted by heart rate variability and blood pressure.

http://geary.ucd.ie/images/Publications/WorkingPapers/gearywp200819.pdf

Uninsured Get Less Health Care Than Insured

"In a report appearing in Monday's online edition of Health Affairs, Jack Hadley, of George Mason University, and John Holahan, Teresa Coughlin and Dawn Miller, of the Urban Institute, analyzed data on medical spending in people who are insured versus those who are uninsured. They found that people uninsured for any part of 2008 receive about half as much care as those who are fully insured. A person who is uninsured all year will average $1,686 in medical costs, while someone who is privately insured will average $3,915."


Excerpt from today's Washington Post - read the full story here.

Olympic performance of countries considering population and GDP

Behavioural Economics and Parenting

Stephen Kinsella has written a small piece on his blog (here) about using Nudge-inspired policies to improve the experience of first time parenting. Thought this might be of interest to the PFL team at Geary.

Data Archiving

Gary King has an interesting post on the IQSS blog for those who have collected research data and made it available to others. "Its nice when people thank you, but it would be nicer to receive formal scholarly citation credit and web visibility for your hard work. The Dataverse Network project is designed to get you that credit and visibility.

The idea is to give you a free "dataverse" (your view of the universe of data) -- which is a virtual archive where you can store, permanently preserve, and distribute your data (or list data from other dataverses) with everyone or only those you approve. Your dataverse is branded as yours, with the look and feel of your web site and on your web site, but since it is served out by an installation of the Dataverse Network at Harvard you needn't install any software or hardware."

For an example, go to King's homepage at http://gking.harvard.edu and click on dataverse. To get your own dataverse, go to the IQSS Dataverse Network, http://dvn.iq.harvard.edu. For more information, see http://TheData.org.

What Are Obama and McCain Reading?

It is reported on the Google blog here, that www.google.com/powerreaders can now be used to track the news sites and blogs that Barack Obama and John McCain read.

"Both the McCain and Obama presidential campaigns and leading political journalists are using Google Reader to keep up with their favorite new sites and blogs as well as share articles that interest them. You can follow shared articles and blog posts, or you can add participants' reading lists or shared news feeds to your own Reader account."

Google Reader, available here, is a great way of managing information and keeping tabs on news feeds. Other useful RSS feedreaders are Newzcrawler and Feed-Demon. Both are set up to look like Outlook. Newzcrawler has a ticker-tape option for the bottom of your computer screen and feeds from Reuters. This makes it somewhat similar to the Reuters and Bloomberg services used on the trading and research desks of major banks. Unfortunately, Newzcrawler only has a trial period of 14 days.

As Fast As You Can

There's an interesting article in today's New York Times about American college students trying to finish honours degrees in three years. There seems to be an imperative to study faster due to worsening economic conditions in the US.

Here.

Obamanomics

There's an 8,000 word article on Barrack Obama's economic policy agenda here, forthcoming in this Sunday's New York Times.

As anyone who has spent time with Obama knows, he likes experts, and his choice of advisers stems in part from his interest in empirical research... James Heckman, a Nobel laureate who critiqued the campaign’s education plan at (Austin) Goolsbee’s request, said, “I’ve never worked with a campaign that was more interested in what the research shows.”

Barnet to trial "nudge" theory

"A London council is to pilot policies based on a new theory of behavioural economics in a bid to tackle litter, reduce carbon emissions and increase recycling rates, it has emerged. The London Borough of Barnet has been given a reported £100,000 by the Department of Communities and Local Government to try out new nudge economics policies."

Read more on Regen.net here.

Xycoon

Xycoon is a useful website offering many resources related to Descriptive Statistics, Continuous Statistical Distributions, Hypothesis Testing, Econometrics, and Time Series Analysis.

Program Evaluation

Recent Developments in the Econometrics of Program Evaluation

NBER Working Paper No. 14251 by Guido M. Imbens and Jeffrey M. Wooldridge (August 2008)

Abstract:

Many empirical questions in economics and other social sciences depend on causal effects of programs or policiy interventions. In the last two decades much research has been done on the econometric and statistical analysis of the effects of such programs or treatments. This recent theoretical literature has built on, and combined features of, earlier work in both the statistics and econometrics literatures. It has by now reached a level of maturity that makes it an important tool in many areas of empirical research in economics, including labor economics, public finance, development economics, industrial organization and other areas of empirical micro-economics. In this review we discuss some of the recent developments. We focus primarily on practical issues for empirical researchers, as well as provide a historical overview of the area and give references to more technical research.

How Can Behavioural Economics Improve Policies Affecting Consumers?

This conference is being organised by the European Commission (DG Health and Consumer Affairs) and is due to be held on the 28th November 2008. The conference presentations and discussions will tackle several key questions, among which are:

1. Do the insights from behavioural economics call for a more or less interventionist policy to influence consumer behaviour?

2. Are modern, ever more complex markets generating more choice that consumers can cope with?

3. Should policy aim to protect consumers against their own behavioural biases?

4. Are behavioural biases more significant in service markets, especially financial services?

For more information, follow this link.

Behavioural Economics and Higher Education

One point about the current debate is whether a model of human capital investment where students are making forward looking choices on the basis of achieving a return is sufficient to capture the complexity of their decision. A number of points below would be interesting to examine further:

As Kevin pointed out, it is quite possible that students may give too much weight to current market conditions when evaluating the decision to participate in college and course choice. In general, we dont know enough about how irrelevant factors enter in to course choice. To what extent are course choices driven by insufficient information, focusing illusions, hyperbolic time preferences, peer effects and other potential sources of "sub-optimal" decision making? Would it matter much from a welfare perspective if it was shown that all of the above were the real drivers of course choice?

Related to this, the extent to which features of the higher education system create unnceccessary form-filling and confusion should be looked at. Martin blogged before about a paper by Dynarski and Scott-Clayton that examined the potential for simplifying student aid formulas (see below). There is a large amount of evidence from the pensions literature (e.g. the Save More Tomorrow Work) that cognitive features of pension and savings options can have strong effects on decision making in that domain. If fees were to return in any form, it would be extremely important to take this literature in to account and to ensure that any complexity would not cause a distortion (though it may already be causing a distortion!)

http://ksgnotes1.harvard.edu/research/wpaper.NSF/rwp/RWP07-014

Fees - Blast from the Past

I was looking for the email of an old colleague of ours, Gavan Conlon, when I came across this on the BBC website which relates to work he did with Arnaud Chevalier when Arnaud was at UCD.   The paper referred to is also linked.   The then Minister for Higher Education in the UK said at the time that 'if potential students thought and acted rationally, then they would be willing to invest more in universities that offered a better return on their investment'.    This point seems a critical one to zone in on as this debate unfolds - I thought the article by HEA Chief Executive Tom Boland in the today's Irish Examiner was a really nice contribution I think, nailing the key issue of this all being 'both/and' and not 'either/or' in terms of the mix of government and student funding. See http://news.bbc.co.uk/2/hi/uk_news/education/3046985.stm and the LSE paper at http://eprints.lse.ac.uk/19477/

Pro-Social Behaviour and Public Services

I have blogged before about some papers that examine the role of intrinsic motivation in public services delivery. This is examined in the context of pro-social motivation and public service delivery by Gregg et al below. This is the latest in a series of papers examining the role of intrinsinc motivation, perceptions of autonomy and other non-financial aspects in driving labour supply.


How important is pro-social behaviour in the delivery of public services?
Date: 2008-05
By: Paul Gregg
Paul A. Grout
Anita Ratcliffe
Sarah Smith
Frank Windmeijer

URL: http://d.repec.org/n?u=RePEc:bri:cmpowp:08/197&r=cbe

A number of papers have posited that there is a relationship between institutional structure and pro-social behaviour, in particular donated labour, in the delivery of public services, such as health, social care and education. However, there has been very little empirical research that attempts to measure whether such a relationship exists in practice. This is the aim of this paper. Including a robust set of individual and job-specific controls, we find that individuals in the non-profit sector are significantly more likely to donate their labour, measured by unpaid overtime, than those in the for-profit sector. We can reject that this difference is simply due to implicit contracts or social norms. We find some evidence that individuals differentially select into the non-profit and for-profit sectors according to whether they donate their labour.

Keywords: pro-social behaviour; public services; donated labour; motivation
JEL: H11 J32 J45 L31 L32

Does Private Tutoring Pay Off?

One large feature of the education debate is the perception that richer students can "buy" increments in their college entry examinations through extra spending by their parents on private tuition. One issue with this argument is that there may be a selection effect in to private tuition with more motivated and exam-focused students selecting themselves into taking tuition. Also, the fact that their parents can afford and are willing to pay for tuition will generally correlate with other potentially beneficial background factors such as peer expectations. In the extreme case, the tuition does not add anything at all. The best students simply select this and this becomes self-reinforcing over time. On the other hand, the very best students may not need it or want it so this could lead a simple analysis to potentially underestimate the effect.

As far as I am aware this has not been tested in Ireland but a recent IZA discussion paper (below) tests it for Turkey. Their results are not glowing in terms of the effectiveness of private tuition on placement, actually finding a negative effect in some of the tighter models. Their overall conclusion for Turkey is that large amounts of spending can have an effect on placement in to college but that the decision to take tutoring itself does not have a positive effect. How this applies to other countries is clearly difficult to tell but the idea of taking out the selection bias before making an overall assessment of the effectiveness of private tuition is a good one.



Does Private Tutoring Payoff?
by Ayfer Gurun, Daniel L. Millimet
(August 2008)

Abstract:
We assess the causal effect of private tutoring on the probability of university placement in Turkey. We find that tutoring increases the probability of being placed in a university when non-random selection is ignored. Moreover, among those utilizing private tutoring, greater expenditure on tutoring is also positively associated with university placement. However, we find evidence of positive selection into tutoring, but negative selection into greater expenditures among those receiving tutoring. Accounting for this pattern of non-random selection, we conclude that private tutoring has a negative causal effect on university placement overall, but conditional on receiving any tutoring, spending more on tutoring has a positive causal effect on university placement.
Text: See Discussion Paper No. 3637

Are students' college choices irrational ?

This morning's papers report big falls in the points requirements for construction related degrees like architecture. No surprise there. But hang on a minute: it should have been obvious for some time that the property market was crashing.More importantly the current state of the market should have little or nothing to do with career choice. For a start they would not be graduating for 4 years by which stage the market will probably be very different - think it was different it was 4 years ago. Anyway the human capital model assumes people maximize the present value of lifetime earnings. So is it myopia, some other form of irrationality, a very high discount rate or something else ? ( oh no, is it hyperbolick discounting?)

Fees set to return by 2010

According to the Sunday Independent, the Minister has told them that fees may be returned by 2010:

link here

A few points that are worth making at this stage include (and i am working with limited time on a document that will put some figures on some of this).

- Are we talking about only the universities or is it proposed to bring fees or contribution for the Institutes of Technology also? If the latter, then this debate becomes very different. If just the universities, then are the IT's going to end being favoured by students over the universities? Has anyone thought about this and the potential positive and negative aspects?

- Does anyone actually know the income distribution of households who have a member in college? Within our discussion, we have made various guestimates but a hard number would help this discussion particularly if, as the Minister has said often, this is just going to be restricted to high income earners.

- Are there any problems with basing fees on parents income? Most students are over the age of 18. Should assessment not be on their own means?

- The only real international alternative that anyone has suggested is the income-contingent loan system so I am assuming that this is the main method being considered. The articles posted in the last week here outline the main issues with this system including the administrative and default costs and the extent to which the government subsidises the scheme

- Is anyone going to give a coherent defence of the current system? The main defenders today are still using the line that the free fees system is good from a distributional perspective which is plainly absurd. This does not mean that free fees do not have other arguments in their defence. For example, some of the following arguments could be examined. I am not advocating any of these and feel free to savage them but they are closer to logical arguments in favour of the status quo than the plainly wrong argument that free fees are a redistributive tool.

(a) Free fees are a subsidy to human capital investment which in general increases economic growth

(b) Free fees are a reward for effort. By removing this scheme and leaving expenditure constant we will be effectively shifting tax burden from those who take higher degrees to those who dont thus disincentivising effort.

(c) Free fees are a powerful behavioural signal removing the uncertainty surrounding educational investments. Though the US and Australian experiences dont bear this out strongly.

(d) Added to this, there is behavioural evidence that young people find it difficult to process debt and this made lead to overly present focused decisions in the face of uncertainty. Again, the fact that rates of participation did not go down in the UK points against the argument.

(e) While middle class parents benefit disproportionately, they also pay more tax. The students going to college will also pay more tax, on average. Thus the "middle class hand-out" argument is unfair.

NBER Paper on Evolution and Time Preferences

From the NBER site.

http://papers.nber.org/papers/w14185

The Evolutionary Theory of Time Preferences and Intergenerational Transfers

At each age an organism produces energy by foraging and allocates this energy among reproduction, survival, growth, and intergenerational transfers. We characterize the optimal set of allocation decisions that maximizes reproductive fitness. Time preference (the discount rate) is derived from the marginal rate of substitution between energy obtained at two different times or ages in an individual’s life, holding reproductive fitness constant. We show that the life history may have an initial immature phase during which there is body growth but no fertility, and a later mature phase with fertility but no growth, as with humans. During the immature phase, time preference depends only on the compounding effect of body growth, much like returns on a capital investment, but not on fertility, or the intrinsic population growth rate. During the mature phase, time preference depends on the costliness of fertility, and on endogenous survival and intrinsic growth rate, and not at all on body growth. During the transition between the two phases, fertility, mortality, body growth, and intrinsic growth rate all matter. Using these results, we conclude that time preference and discount rates are likely to be U-shaped across age. We compare our results to Hansson and Stuart (1990), Rogers (1994, 1997) and Sozou and Seymour (2003). Wastage and inefficiencies aside, in a single sex model a system of intergenerational transfers yields Samuelson’s (1958) biological interest rate equal to the population growth rate. When the rate of time preference exceeds this biological rate, inter- generational transfers will raise fitness and evolve through natural selection, partially smoothing out the age variations in time preference.

Econ Academics Blog

Christian Zimmerman, who has driven REPEC and related economics databases, has set up an aggregator blog for Academic Economics. The website link is below. He is asking for people to email him with suggestions of academic blogs that discuss economic research.

http://econacademics.org/

Learning to Live with Loans

A relatively recent paper that argues that the income-contingent loan financing mechanism offers an international model that can be transferred to other countries. A sister paper argues that such arrangements do not discourage access among marginal choosers

http://ideas.repec.org/a/eee/ecoedu/v24y2005i5p491-512.html



Learning to Live with Loans? International Policy Transfer and the Funding of Higher Education

Bruce Chapman
David Greenaway

http://ideas.repec.org/a/bla/worlde/v29y2006i8p1057-1075.html

Abstract

Over the last decade or so a number of OECD economies have migrated from providing higher education free at the point of consumption to levying user charges. However, rather than charges for tuition being paid up-front, contributions have taken the form of income-contingent loans. Graduates therefore contribute to the costs of their education, after they have graduated and when they are earning. The earliest example of this instrument was in Australia, with the introduction of the Higher Education Contributions Scheme (HECS). This paper argues that following their successful introduction in Australia, income-contingent loans offer a good example of successful international policy transfer, with elements of that scheme being adopted and modified for use in New Zealand, South Africa and the United Kingdom. The paper reviews the conditions for successful policy transfer and discusses the reasons why the arrangements have not proliferated in non-OECD countries.

Copyright 2006 The Author Journal compilation 2006 Blackwell Publishing Ltd. .

Swan Group

Below is the first abstract from the group that I blogged about earlier in the week. I hope they havent already come to conclusions before starting the project though, given how bright the people involved are, I am sure they will give equal consideration to all sides of the argument.

In the course of the debate about fees, research is in danger of being set up as the bad guy. Some commentators during the week fell in to the usual fallacy of claiming that universities are either/or and must focus on teaching undergraduates rather than researching. This is just plainly wrong. In a good system, research supports teaching if for no other reason that we surely want students (particularly advanced students) to be lectured by people who are actually part of their fields. Issues such as the efficiency of the admin system were also brought out as arguments against research but this is not an argument against funding research but instead an argument for reforming the funding system.

"Abstract:
Since the early 1990s Ireland has experienced an economic boom. One of the reasons given for this rapid expansion in the gross domestic product has been the increase in foreign direct investment. The attraction of Ireland for foreign direct investment, it has been argued, has been the quality of the human capital located in the Republic. The expansion of persons holding Leaving Certificate or Third Level qualification has expanded dramatically. Recent proposals by the Department of Education and Science, Higher Education Authority and Enterprise Trade & Employment have suggested that Ireland become a “Research Knowledge Economy” but we hypothesise that this may not the case. The development of “Fourth Level Ireland” is taking away scarce resources from Third, Second and Primary Level education. Existing economic research illustrates that these funds are better spent on the development of skills at the foundation levels of education allowing the workforce to be more flexible and allow for fluid entry and exit from the education system over a citizen’s life-cycle. Further, we investigate the potential areas for continued Irish economic development, such as financial services and other high value-added activities that can be delivered through low-cost information communication technology (ICT). Our group will attempt to investigate the linkages between education and continued economic growth in the unique Irish situation of a small open economy driven by trade. To this effect the group will provide a series of recommendations in their final statement of findings. Interim reports and media statements are added to this site as they are produced."

What is a Recession Anway?

Edward Leamer, a well-known econometrician takes a step back to ask a fundamental question. he finds that not enough has yet gone wrong in the US to meet the historical pattern of what a recession should look like. in the unlikely event that any macro-people read this blog you can tell us what all this implies for this side of the world. It certainly contains the most references to pornography that i have seen in a forecasting paper in a long while so at least the people who come on to the blog looking for magic mushrooms will have something to read (from the stat counter, it seems that our post on magic mushrooms scientific literature generates a lot of search hits from people searching for magic mushrooms in Ireland - you can supply your own joking comment!)

here (from the forecasting group site)

Alan Krueger on terrorism

from the Princeton website

http://uc.princeton.edu/main/index.php?option=com_content&task=view&id=2722

"Many popular ideas about terrorists and why they seek to harm us are fuelled by falsehoods and misinformation. Leading politicians and scholars have argued that poverty and lack of education breed terrorism, despite the wealth of evidence showing that most terrorists come from middle-class, and often college-educated, backgrounds. In What Makes a Terrorist, Alan Krueger argues that if we are to correctly assess the root causes of terrorism, and successfully address the threat, we must think more like economists do."

Loans

I mentioned student loan systems on the blog about a month ago (here). In particular, I mentioned a very useful IZA working paper by Shen and Ziderman (July 2008), which compares student loans systems from around the world. The paper is available here: here

This paper would be an excellent starting-point for anyone starting to look at the issue of student loan systems in depth. I read in the Irish Times today that part of the Minister's strategy is to look at the Australian system of student loans. In fact, student loans schemes are in operation in more than seventy countries around the world. According to Shen and Ziderman, "Most loans schemes benefit from sizeable built-in government subsidies and, in addition, are subject to repayment default and administrative costs that are not passed on to student borrowers." The authors focus on two particular issues:

(i) How much of the original loan is an individual student required to repay? (the repayment ratio), and
(ii) What percentage of the total costs of loans schemes can the lending body expect to receive back in repayments? (the recovery ratio)

Loan schemes are viewed favourably by many economists because borrowing to invest in human capital is one of the best investments that anyone can make. Some studies have shown that the returns to human capital are greater than on any other investment, and it is well-established that there are sizeable financial returns to education (in addition to social, cultural and career-based benefits). It has also been suggested that loan schemes may make the cost of higher education more salient to students and therefore encourage them to study harder and get more value from their investment.

An interesting article on debt aversion and higher ed participation is available here (and free-to-access here); this is something that I am keen to read more about.

It strikes me that debt aversion should not be a deterrent for any student considering higher education in the UK, if the student has been made fully aware of the full details surrounding the loan scheme in operation there. This Wikipedia page provides a very succint overview of the system. One major point is that the loan system is managed by the UK Student Loans Company (UK SLC). The SLC impose an interest rate matching inflation and this is a fair deal but it has to be communicated properly. Other details of the UK student loan system are that:

- repayments do not start until April of the year after students have completed their course
- repayments do not start until the student is earning more than 15,000 pounds
- the repayment is 9% of gross salary
- the repayment is transacted as an automatic deducation (through PAYE though this could as easily be a direct debit)
- there is no particular schedule for clearing the debt, but, if it has not been cleared 25 years after repayment began, or if the student turns 65 years old ---- then the remaining debt will be cancelled

A finance package like this is really a great deal, and the pay-off to not working during college (while financed under this package) could result in students attaining earning power much higher than they otherwise would have done.

Finally, to get some macro-facts it is worth noting that The UK Student Loans Company publishes Statistical First Releases (SFRs) which include information on Student Finance awards (loan rates, loan take up, grants awarded, etc) and Student Loans debt and repayment. Some interesting facts are the following:

• The table on this page shows that take-up of the scheme has increased from 28% in 1990/91 to 79% in 2004/05

• The total amount lent to eligible HE students during financial year 2007-08 was £3,905.0m, a rise of 32.2% compared to 2006-07

• Repayments posted to customer accounts amounted to £633.5m (including £194.4m paid earlier than required) in the financial year 2007-08.

College Fees

Starting from today, we will post relevant literature on this topic and I strongly encourage people to either post good links on the mainpage or the comment box or send me material and I will post it (attributed or not as you prefer!). Also, if you are a journalist or policy maker and would like questions to be addressed please feel free to get in contact publicly in the comments or privately through email and I will make sure the questions are communicated on this forum (again attributing them or not). I have a very short amount of time for this and will do my best to give a good account of the issues but remember this is a blog not an official publication so I take no responsibility for errors that may creep in.

Below are some links that Colm Harmon sent on that form a good backdrop to this debate.

Nicolas Barr at the LSE has written several articles on options for financing higher education that are available on his page below:

http://econ.lse.ac.uk/staff/nb/index_own.html#hef

The Higher Education Funding and Reforms project at the LSE is another useful resource. The paper linked below is entitled The Role of Credit Constraints in Educational Choices: Evidence from NCDS and BCS70

http://cee.lse.ac.uk/research/06.asp

Two recent IFS papers examine the issues around student financing. These are hugely valuable contributions outlining the issues involved and essential reading for people who intend writing about this topic in the upcoming weeks.

http://www.ifs.org.uk/bns/05ebn13.pdf

http://www.ifs.org.uk/bns/bn45.pdf

Maths for Fees

There are approximately 70,000 undergraduate students in the seven Irish Universities. One proposal is to bring back fees for students whose parents earn 100k plus as a way of securing the financing of the universities in the future

(i) this assumes you can use the parents income for asssessing an adult for eligibility which is not without precedent but also not without problems.

(ii) Lets say 10 per cent of these families earn 100k per year plus and you can identify all of them and all of them decided not to study abroad (all optimistic assumptions). Of the 60 thousand or so Irish students, this would mean about 6,000 students eligible to pay fees.

(iii) lets say 5k per year would be the average fee. this would generate approximately 30 million euro per year (so about 4.5 million on average for each university). This is not trivial in absolute terms but is a small percentage of total university finance and its not even clear how much of this would be lost in collection costs. Relatively speaking, it would have little bearing on the destiny of the universities.

(iv) So the argument that fees can be returned in a meaningful way in this fashion doesnt seem sensible.

(v) either fees are not coming back or they are coming back in a meaningless way like the above proposal or

(vi) there is a radical change in fees meaning fees for the majority of students and big changes in the structure of fees perhaps with some high demand course being charged at higher rates.

the problem with the current debate is that many families are now trying to make financial decisions on the back of a very uncertain policy environment. If (vi) is on the cards, it surely could not be done without warning people. if the debate is to be an honest one though (vi) is what should be debated and at least costed rather than putting out a fairytale.

Psychophysiology of Real-Time Risk Processing

Thanks to Christian for forwarding on these really interesting papers on psychophysiology and day-trading.




http://web.mit.edu/alo/www/Papers/lo_repin2002.pdf

http://web.mit.edu/alo/www/Papers/AERPub.pdf

Health Poverty Index in Ireland

Released Today - Good News for Roscommon

here

Fees?

The reintroduction of fees is back as a debating topic in Ireland -

here

Swan Group

Yesterdays Sunday Business Post carried a piece by Charles Larkin and Jacco Thijssen on Innovation that is worth reading

here

The recently formed Swan Group mentioned in the piece is described below:

"The Swan Group is an interdisciplinary research group formed in late 2007. Our research interests are in the areas of economic theory, education, legal systems, political economy and innovation policy. In January 2008 our group was granted funding support by the FBD Trust to investigate the Irish Government's policies in the areas of education and innovation. Our topic is "Education Policy and Economic Growth - Perspectives for Development & Reform". The group will be publishing a series of working papers on this website and will be delivering a final report in January 2009.

http://swangroup.org/

On our name...
The research group choose this name due to the popular appeal of what has been termed "Black Swan Theory". This is the theory of highly uncertain, unlikely events that have a significant impact on financial markets. The research team has a deep interest in the question of uncertainty versus risk in the area of innovation policy. Innovation policy in Ireland has had far-reaching educational and fiscal policy implications that are important to economic performance and the future development of Ireland.The Swan Group is an interdisciplinary research group formed in late 2007. Our research interests are in the areas of economic theory, education, legal systems, political economy and innovation policy. In January 2008 our group was granted funding support by the FBD Trust to investigate the Irish Government's policies in the areas of education and innovation. Our topic is "Education Policy and Economic Growth - Perspectives for Development & Reform". The group will be publishing a series of working papers on this website and will be delivering a final report in January 2009."

Most Highly Cited Papers on Repec

The 1000 most highly cited papers on the REPEC database are available below

http://ideas.repec.org/top/top.item.nbcites.html

Rubinstein on Neuroeconomics

"Lack of knowledge and uncertainty are swept under the rug. Colorful diagrams, which mean nothing to economists, are presented as clear evidence. To me, they look like a marketing gimmick like those used to sell a new product in the supermarket."


"A year ago, I challenged several ardent supporters of Neuroeconomics to show me even one Neuroeconomics paper that is likely to change Economics. I have yet to receive a satisfactory response."


"The grand vision of Neuroeconomics is to use the additional information obtained from brain studies, combined with the choice made by the decision maker, in order to better understand the deliberation process and to use the results to improve economic models. However, it is far from being clear if and how this can be accomplished."


http://arielrubinstein.tau.ac.il/papers/neuro.pdf

Third Year Students

For prospective third year students in UCD who want to know something further about behavioural economics below is the initial outline of my course beginning in January. This will evolve over the next few months but this gives you a good feel for what is going to be covered

http://www.ucd.ie/economics/staff/ldelaney/behavioral.pdf

Werewolves of London

Part of our group are currently in London and since they went i've had this song lodged squarely in my head. Its an awful thing when a song gets so lodged in your head. To the guys in London, i suggest this as your summer song, perhaps replacing the chorus as "Aahoo econometricians in London" or "Aahoo Irish guys in London" or my personal favourite (and the one lodged in my head) "Aahoo Martin in London"

"I saw a werewolf with a Chinese menu in his hand walkin through the streets of Soho in the rain. He was lookin for the place called Lee Ho Fooks, gonna get a big dish of beef chow mein. Aaahoo, werewolves of London"

http://www.youtube.com/watch?v=nhSc8qVMjKM

Positive Psychology and Happiness

TED recently made a talk by Martin Seligman available. See the link below. He discusses the development of positive psychology and the nature of happiness.

here

Also, Seligman's site on Authentic Happiness is a very useful resource with several self-administered questionnaires etc.,

http://www.authentichappiness.sas.upenn.edu/Default.aspx

Economics Working Paper - Bargain and Spadaro

Optimal taxation, social contract and the four worlds of welfare capitalism

Abstract

http://www.ucd.ie/economics/research/papers/2008/WP08.16.pdf

Drawing from the formal setting of the optimal tax theory (Mirrlees 1971), the paper identifies the level of Rawlsianism of some European social planner starting from the observation of the real data and redistribution systems and uses it to build a metric that allows measuring the degree of (dis)similarity of the redistribution systems analyzed. It must be considered as a contribution to the comparative research on the structure and typology of the Welfare State (Esping-Andersen, 1990). In particular we consider the optimal taxation model that combines both intensive (Mirrlees) and extensive (Diamond) margins of labor supply, as suggested by Saez (2002) in order to assess the degree of decommodification of seven European welfare systems. We recover the shape of the social welfare function implicit in taxbenefit systems by inverting the model on actual effective tax rates, as if existing systems were optimal according to some Mirrleesian social planner. Actual distributions of incomes before and after redistribution are obtained using a pan-European tax-benefit microsimulation model. Results are discussed in the light of standard classifications of welfare regimes in Europe. There appears to be a clear coincidence of high decommodification and high Rawlsianism in the Scandinavian, social-democratically influenced welfare states (Denmark). There is an equally clear coincidence of low decommodification and utilitarianism in the Anglo–Saxon liberal model (UK) and in the Southern European welfare states (Italy and Spain). Finally, the Continental European countries (Finland, Germany and France) group closely together in the middle of the scale, as corporatist and etatist.

Wu-Index

A new method for ranking scientists called the Wu-Index (where an author has written w papers that have been cited at least 10w times) applied to economists is linked below. Andrei Schliefer scores highest with a Wu-Index of 14. So all you've got to do is write 15 papers that get cited 150 times each and you too can be the world's most high-impact economist! The more traditional way of ranking economist called the h-index (where an author has written h papers that have been cited h-times) is linked below that

http://ideas.repec.org/top/top.person.windex.html

http://ideas.repec.org/top/top.person.hindex.html

Health Warnings and Economic Sentiment

I thought this was very good from the Turbulence Ahead blog:

"the vast majority of people now in jobs will still be in jobs in five year's time. I'm beginning to think we should have something equivalent to the Government health warning on cigarettes included with all releases of unemployment statistics by the CSO. Something like":

Warning: a rise in the number of people in unemployment does not necessarily mean an increase in the unemployment rate (as there may also be a rise in the numbers employed); and when there is a rise in the unemployment rate it does not mean an instant return to the 1980s.

'Random' Chats 'In Between' Classes

I have been immersing myself in panel data for the last two days over here at LSE. Given this, it was good timing this afternoon when one of my class-mates mentioned an interesting company called "Research Now". With my familiarity of panel-data econometrics at its peak, I was suitably interested to read about this company --- which maintains research-only online panels in 31 countries -- including Europe, North & Latin America, Asia and Australia-Pacific.

The compnay also runs a panel in Ireland --- "it has extensively profiled information on a range of subjects e.g. respondent region, age, social class, household size and status, cars owned... bank and financial products used... ailments suffered..." A more comprehensive list of the information gathered in the Ireland panel is available here. I was particularly interested in the structure of the "occupational group" and "industry sctor" variables. There are also some questions that would interest economists who might want to do empirical work on intra household-bargaining.

Finally, I also saw on the Research Now website that there is a a conference on panel data coimg up in Dublin in October: "ESOMAR Panel Research Conference, Oct 21-23, Dublin". Its organised by ESOMAR, who are "the world organisation for enabling better research into markets, consumers and societies." Although the focus at this event is not academic, it may interest some blog readers --- particularly those looking for a wide range of applications using panel-data analysis techniques.

Neuroeconomics and the Firm

Angela Stanton from the Max Planck Institute has issued a 'call for chapters' for a new book on "Neuroeconomics and the Firm". I'll put more details in a comment on this post.

What life will be like in 2050 for a middle-class Irish family

The above is the title of an article that Stephen Kinsella had published in the Irish Times on Wednesday. The article is available here for those with access to the Irish Times online service. The article focuses a lot on the need for future generations to navigate more complexity in their decision-making.

You can read an unedited version of the Kinsella article on his blog here. This has been the most popular article to read and email from IT online over the last couple of days. If you navigate the main section of the Stephen Kinsella blog, there are some additional posts where it is possible to comment on the article.

Cognitive Skills Explain Economic Preferences, Strategic Behavior, and Job Attachment

Cognitive Skills Explain Economic Preferences, Strategic Behavior, and Job Attachment

Date:
2008-07
By:
Burks, Stephen V. (University of Minnesota, Morris) Carpenter, Jeffrey P. (Middlebury College) Goette, Lorenz (Federal Reserve Bank of Boston) Rustichini, Aldo (University of Minnesota)

URL:
http://d.repec.org/n?u=RePEc:iza:izadps:dp3609&r=cbe
Economic analysis has said little about how an individual’s cognitive skills (CS's) are related to the individual’s preferences in different choice domains, such as risk-taking or saving, and how preferences in different domains are related to each other. Using a sample of 1,000 trainee truckers we report three findings. First, we show a strong and significant relationship between an individual’s cognitive skills and preferences, and between the preferences in different choice domains. The latter relationship may be counterintuitive: a patient individual, more inclined to save, is also more willing to take calculated risks. A second finding is that measures of cognitive skill predict social awareness and choices in a sequential Prisoner's Dilemma game. Subjects with higher CS's more accurately forecast others' behavior, and differentiate their behavior depending on the first mover’s choice, returning higher amount
Keywords:

field experiment, risk aversion, ambiguity aversion, loss aversion, time preference, Prisoners Dilemma, social dilemma, IQ, MPQ, numeracy, U.S. trucking industry, for-hire carriage, truckload (TL), driver turnover, employment duration, survival model
JEL:
C81 C93 L92 J63

Behavioural Economics Books

In response to a few requests to recommend some good books on behavioural economics, below is a very incomplete list. As usual, feel free to add to this. Ill put up another list soon.

“Judgement Under Uncertainty: Heurisics and Biases” is a classic

http://www.amazon.com/Judgment-under-Uncertainty-Heuristics-Biases/dp/0521284147/ref=pd_sim_b_6

“Advances in Behavioural Economics” is still the best for me in the relatively recent field

http://www.amazon.com/Advances-Behavioral-Economics-Roundtable/dp/0691116822

“Nudge” is the recent work by Thaler and Sunstein that has created a great deal of discussion

http://www.amazon.com/Judgment-under-Uncertainty-Heuristics-Biases/dp/0521284147/ref=pd_sim_b_6

Ariely’s “Predictably Irrational” details much of his experimental work

http://www.amazon.com/Predictably-Irrational-Hidden-Forces-Decisions/dp/006135323X/ref=pd_sim_b_5

Camerer’s “behavioural game theory” is a tougher trip but worth it

http://www.amazon.com/Behavioral-Game-Theory-Experiments-Interaction/dp/0691090394/ref=pd_sim_b_1

Exotic Preferences by Lowenstein is a great overview of his and others work on preference formation, emotion and decision making

http://www.amazon.com/Exotic-Preferences-Behavioral-Economics-Motivation/dp/0199257086/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1218108620&sr=8-1

Frey and Stutzer’s book on economics and psychology is below

http://www.amazon.com/Economics-Psychology-Promising-Cross-Disciplinary-Seminar/dp/0262062631/ref=pd_sim_b_4

On the Irish front, Peter Lunn has recently a book lately called Basic Instincts

http://www.amazon.co.uk/Basic-Instincts-Human-Nature-Economics/dp/0462099202

College of Human Sciences Podcasts on Global Ireland

Available from the College of Human Sciences Webpage

http://www.ucd.ie/humansciences/podcast/index.html

Part 1 Speakers: Prof Ben Tonra & Prof Brigid Laffan - 'Ireland as Global Citizen and European Republic' / 'Ireland - A Small State in a Large Union' (65mb)

Part 2 Speaker: Dan Mullhall (29mb)

Part 3 Questions and Answers session on previous speakers (20mb)

Part 4 Speaker: Richard Sinnott - 'The Lisbon Treaty Referendum - Ireland’s Call' (37mb)

Part 5 Speaker: John Coakley / Jennifer Todd - 'Border Crossings' (32mb)

Part 6 Q+A with Paul Gillesspe on previous speakers (34mb)

Part 7 Speaker: Tom Inglis - 'Cultural Difference and the Cultural Economy' (25mb)

Part 8 Speaker: Dr Stephen Loyal - 'The Challenges of Immigration' (22mb)

Part 9 Questions and Answers session on previous speakers (29mb)

Part 10 Speaker: Brendan Halligan (23mb)

Part 11 Speaker: Prof Karl Whelan - 'Ireland and the Global Economy' (33mb)

1000th Post

1000 posts since this was set up in January 2006.

send me suggestions if you think there is anything that could be improved on. We are eventually going to get round to tidying up all the links on the side. A more worked out tagging and category system would help also.

Overall though, as the great Father Fintan Stack once said, "I've had my fun and that's all that matters".

Knol - From Google Blog

There is a debate about whether Knol is an attempt at competing with Wikipedia. In academic use, its unclear where exacly it fits - for example, much of what you would think of writing a "knol" about seems better placed in a standard journal article review or scholarly dictionary. Does this offer a replacement for those? Scholarpedia is another potential candidate for competing with standard academic review formats. At the moment, there is not much incentive for individual academics to produce these types of documents but is it, more generally, a more logical way of reviewing fields that are very fast-moving?

http://en.wikipedia.org/wiki/Scholarpedia

http://en.wikipedia.org/wiki/Knol

"A few months ago, we announced a new web authoring tool called Knol. Well, today we've announced its public launch, and we wanted to tell you a little bit more about it and how you might use it to complement your blog. Blogs are great for quickly and easily getting your latest writing out to your readers, while knols are better for when you want to write an authoritative article on a single topic. The tone is more formal, and, while it's easy to update the content and keep it fresh, knols aren't designed for continuously posting new content or threading. Know how to fix a leaky toilet, but don't want to write a blog about fixing up your house? In that case, Knol is for you. Except for the different format, you'll get all the things you've come to expect from Blogger in Knol.

Like Blogger, Knol has simple web authoring tools that make it easy to collaborate, co-author, and publish. It has community features as well: Your readers will be able to add comments and rate your article, and, if you want, they'll be able to suggest edits that you can then either accept or reject. And, just like in Blogger, you can also choose to include ads from AdSense in your knols to perhaps make a little money.

One other important difference between Knol and Blogger is that Knol encourages you to reveal your true identity. Knols are meant to be authoritative articles, and, therefore, they have a strong focus on authors and their credentials. We feel that this focus will help ensure that authors get credit for their work, make the content more credible.

All in all, we think Knol will be a great new way for you to share what you know, inform people about an issue that is important to you, raise your profile as an expert in your field, and maybe even make some money from ads. Create your Knol right now for free."

Visualising Britain from Above

Wow! -

http://news.bbc.co.uk/2/hi/technology/7539529.stm

Moral Minds

just finished reading "Moral Minds: How Nature Designed our Universal Sense of Right and Wrong" by Marc D. Hauser. If you are looking for a full book review and critique of the central thesis, then you've come to the wrong place but this book is a real trove of interesting information.

The main idea idea of the book is that moral sense is an innate capacity that develops over the lifespan. There is excellent background on Kohlberg, Piaget, Kant, Hume and Chomsky in the first chapter which he synthesises in to a theory of moral development.

Some highlights in terms of the book in terms of relevance to behavioural econ include

- A discussion of the Nisbett and Cohen work on "Cultures of Honour" that examines the extent to which moral codes emerge from the historical economic conditions in communities.

http://www.amazon.com/Culture-Honor-Psychology-Violence-South/dp/0813319935

- Discussion of Damasio's work on frontal lobe damage and consideration of future consequences and its relationship to moral reasoning. This is followed by a discussion of psychopathy, future reasoning and moral culpability.

- Discussion of Hamilton and Trivers and the relevance of evolutionary sociobiology to moral reasoning.

- I know at least one reader of the blog who will be interested in the work of Harbaugh who showed, among other things, that shorter children within an age group make higher offers in ultimatum games than larger children (attributed to social dominance). His work is available below

http://harbaugh.uoregon.edu/

- discussion of DeWaal and colleagues work on reciprocity among chimpanzees.

- discussion of Kahneman's work on remembered utility

- A discussion of Kacelnik's views on the evolutionary rationality of hyperbolic discounting. A brief non-technical discussion is below but worth reading these papers and corresponding literature. In general, the book has some great discussions of experimental work with animals and children.

http://www.sciencemag.org/cgi/content/full/275/5296/29a?ck=nck

- there is a lot in the book on different research paradigms and thought experiments in moral judgment research such as,

The Ultimatum Game
The Prisoners Dilemma
The Trolley Problem

Anyway, there's lots more in there and you can get a sense of the overall narrative yourself by reading the book.

IZA Working Paper on "Happiness Inequality"

Barry Stevenson and Justin Wolfers

Abstract


This paper examines how the level and dispersion of self-reported happiness has evolved over the period 1972-2006. While there has been no increase in aggregate happiness, inequality in happiness has fallen substantially since the 1970s. There have been large changes in the level of happiness across groups: Two-thirds of the black-white happiness gap has been eroded, and the gender happiness gap has disappeared entirely. Paralleling changes in the income distribution, differences in happiness by education have widened substantially. We develop an integrated approach to measuring inequality and decomposing changes in the distribution of happiness, finding a pervasive decline in within-group inequality during the 1970s and 1980s that was experienced by even narrowly-defined demographic groups. Around one-third of this decline has subsequently been unwound. Juxtaposing these changes with large rises in income inequality suggests an important role for non-pecuniary actors in shaping the well-being distribution.



http://ftp.iza.org/dp3624.pdf

Brainless Economics?

The economist has an article in last weeks edition asking "Do economists need brains?". Basically an introduction to neuroeconomics. They cite the first success of neuroeconomics as providing support for the idea that irrational behaviour in a one-shot ultimatum game is explained by a punishment motive:

"Neuroeconomists have tried to explain this seemingly irrational behaviour [turning down low offers] by using an “active MRI”. In MRIs used in medicine the patient simply lies still during the procedure; in active MRIs, participants are expected to answer economic questions while blood flows in the brain are scrutinised to see where activity is going on while decisions are made. They found that rejecting a low offer in the ultimatum game tended to be associated with high levels of activity in the dorsal stratium, a part of the brain that neuroscience suggests is involved in reward and punishment decisions, providing some support to the behavioural theories."

They go on to suggest that economics can improve neuroscience's understanding of how the brain works by introducing neuroscientists to game theory:

"The neuroscientist’s idea of a game is rock, paper, scissors, which is zero-sum, whereas economists have focused on strategic games that produce gains through collaboration."

They then describe some of the arguments against, as well as some proponents who go back somewhat further than than the current enthusiasts, before finishing by drawing a clear distinction between (soft) behavioural econ and (hard) neroecon. Quoting Kahneman:

"It is far easier to argue for mindless economics than for brainless economics"

Links to some of the books and articles mentioned are below:

The Emotional Brain: The Mysterious Underpinnings of Emotional Life by Joseph LeDoux [Amazon]

The Case for Mindless Economics Faruk Gul & Wolfgang Pesendorfer

Edgeworth's Hedonimeter and the Quest to Measure Utility by David Colander