Neuroscience gets a right and left hook

First a "leaked" study in press in Perspectives on Psychological Science confirmed suspicion focused on the use of inappropriately adjusted correlations in many studies using fMRI. Edward Vul and colleagues surveyed 54 articles that do not contain sufficient information in the method section to confirm how the analyses were produced and find over half of the studies to contain "grossly" inflated correlations.

The damning conclusion was that "a disturbingly large, and quite prominent, segment of social neuroscience research is using seriously defective research methods and producing a profusion of numbers that should not be believed."

The article is freely available here: Voodoo Correlations in Social Neuroscience

The week in neuroscience then went from voodoo correlations based on questionable research methodology to a questioning of the very foundations of the core technique of neuroscience: functional brain imaging. Blood flow changes picked up by fMRI scanners may not reflect the metabolic demand produced by local neural activity is the message that comes across strongly in a letter to Nature by Yevgeniy B. Sirotin and colleagues this week. The authors monitored neural activity and blood flow in two monkeys (they only need one intact one to show fMRI inaccuracies) whilst performing visual tasks. The key finding was that between stimuli there was virtually no neural activity but increased blood flow was observed suggesting that anticipation of expected tasks rather than neural activity may be a driving force behind blood flow changes.

Commentry: Another shock for brain imaging research

Exposure to innocent victims increases discounting

A study by Mitchell Callan and colleagues from the latest issue of the Journal of Experimental Social Psychology shows that watching a video depicting the suffering of an innocent vs. a non-innocent victim increased discounting across six time delays. The authors reasoned that forming a "personal contract" to take a larger sum at a later date rather than a smaller sum now may be perceived as a bad idea in an unjust world where investments may not pay off.

Looking through the lens of the recession, rife with innocent victims, you wonder to what extent economic instability leads to more impulsive choices. When Ryanair's CEO Michael O'Leary swept in to secure huge discounts on Boeing 737-800's in the wake of 9/11, he was clearly capitalising on what he had the vision to recognise would be a passing scare. Though the current crisis appears far from transient it would be worth documenting its effects on economic decision-making. Loss-aversion may increase and though people are certainly saving money in the event of a shock, trade-off's should increase between wanting access to money now vs more money at a fixed time far into the future.

Private Sector Data on the Labour Market

Alan Krueger describes here (on the Economix Blog) how the Gallup Organisation has developed five new indicators of daily economic activity. Every day Gallup polls 1,000 people; and in relation to the job market, it asks the following to those who work:

“Now thinking more generally about the company or business you work for, including all of its employees. Based on what you know or have seen, would you say that, in general, your company or employer is — 1) hiring new people and expanding the size of its workforce, 2) not changing the size of its work force, or 3) letting people go and reducing the size of its work force?”

Krueger reports that the gap between hiring and letting people go is strongly correlated with the number of new unemployment insurance claims each week. The Gallup data have the advantage of being computed daily, and so they provide an early warning of where the labor market is heading.

Estimating the Public-Private Wage Gap in Russia

A new IZA working paper by Gimpelson and Lukiyanova discusses the institutional framework for public sector wage setting in Russia. They apply the switching regression technique that allows correcting for non-random sector selection, and find that there is significant cross-group variation in the wage gap. The paper concludes that wages in the public sector should be linked to private sector wages at the regional level.

Do Cognitive Skills Depend on Non-Cognitive Skills? And If So, What Does the Labour Market Reward?

In a previous post, I mentioned research on behavioural determinents of earnings by Bowles et al. (2001); these authors report that cognitive skills represent less than a fifth of the return to schooling. They suggest that the remaining 82% of the return to schooling could either be associated with more advanced cognitive skills that are not captured by basic measures, or with noncognitive skills. More recently, Pasche (2008) finds that over half the return to schooling is constituted of basic cognitive skills. Either way, the bias of non-cognitive personality traits is important when estimating the returns to education.

Research by Borghans, Meijers and ter Weel (reported at the AEA meeting earlier this month), examines the role of noncognitive skills in explaining cognitive test scores. They measure noncognitive skills both by personality traits and economic preference parameters; and the idea is that noncognitive skills might affect the effort people put into a test to obtain good results.

The authors experimentally varied the rewards for questions in a cognitive test to measure to what extent people are sensitive to financial incentives. To distinguish increased mental effort from extra time investments, they also varied the questions’ time constraints. Favourable personality traits such as high performance-motivation and an internal locus of control are associated with high test scores in the absence of rewards; which the authors say is consistent wiith trying as hard as possible.

In contrast, favourable economic preference parameters (low discount rate, low risk aversion) are associated with increases in time investments when incentives are introduced, consistent with a rational economic model in which people only invest when there are monetary returns.

The main conclusion of the research is that individual behavior in cognitive tests depends on noncognitive skills. This means that de-compositions of the returns to schooling may be biased towards cognitive skills in ways that have not been considered before. This underscores further the need to consider the bias of non-cognitive personality traits when estimating the returns to education.

Extraversion and Expectations about the Returns to Higher Education

Gergely and Kézdi discuss college enrollment, the Big Five personality traits (in particular extraversion), and earnings expectations in the context of Hungarian higher education. They report that conditional on IQ and various measures of other personality traits, as well as past schooling experience and past behavioral problems, more extraverted men expect lower returns to higher education.

Weird symmetry: Happiness, housing and self-regulation failure

Irish house prices Apr-96 to Nov-08 (data from ESRI)
Diurnal Happiness Patterns 10am to 2am (data from student sample N=200)

There's some evidence to suggest that the dip in happiness that occurs in those who stay up late during the week is due to poor self-regulation, lack of self-imposed structure, and probably persisting in staying awake in the face of what is most likely a poor choice of television stations and an absence of conversation partners. Looking at the completely unrelated housing graph I wonder to what extent an analogous failure of self-regulation was involved. In psychological theory the benchmark for appropriate personal self-regulation incorporates ideals, goals, and standards, based both on internal factors and the perceived demands of society. The self is constantly help up against such standards in the face of having to behave flexibly in fluctuating personal and environmental conditions to achieve important goals. This monitoring process functions primarily to identify movement away from standards. Self-regulatory strength or "willpower" and motivation- caring about the goal of meeting standards, are then both required to make difficult changes to the self to insure that such standards are upheld. Self-regulation can be impaired if there is dysfunction in any of the three main processes: standards, monitoring, strength and motivation. The most common inhibitors of self-regulation in everyday life are lack of sleep, emotional distress, distraction, and alcohol consumption: perhaps prompting the recent "Wall Street got drunk" remarks!

The Irish Diaspora and Irish Economic Recovery

In today's Irish Times, Rob Kitchin and Mark Boyle (from NUI Maynooth) write about enriching relations with the Irish Diaspora. Diaspora networks could play a useful role in Irish economic recovery, in relation to exchange of knowledge and know-how. Of particular interest is the Irish Technology Leadership Group, which ivolves Irish people in senior positions in Silicon Valley, who are seeking to invest in Irish companies. This group could help potential Irish start-ups to learn about issues such as commercialisation and technological transfer.

According to Kitchin and Boyle, many countries around the world are putting diaspora strategies into place. Several of these countries – Australia, Chile, India, Jamaica, Lithuania, New Zealand, Scotland, plus the World Bank – are attending a workshop on diaspora strategies today and tomorrow, organised by NUI Maynooth. Rob Kitchin is director of the National Institute for Regional and Spatial Analysis at NUI Maynooth. Mark Boyle is professor of geography at NUI Maynooth. Their working paper outlining a potential diaspora strategy for Ireland can be accessed here.

What Do We Know About Genes, Personality and Behaviour?

Deric Bownd's MindBlog is a useful resource to answer a question such as this. Here Bownds discusses the genetics of personality and well-being. He mentions a study by Weiss et al. (Psychological Science, 2008) that examines personality and subjective well-being in 973 twin pairs. Bownds mentions that numerous studies of personality have shown that genetic effects account for approximately 50% of the variance in the 'Big Five' peronslity traits. Weiss et al. report a very close genetic relationship between positive personality traits and well-being.

Bownds also mentions on his blog (here) that the Nov. 7 issue of Science Magazine is a gold mine of articles on genetics and behavior. He mentions that some believe that psychology is the last frontier of genetic analysis. Of particular interest, there is a story on the strengths and shortcomings of genetic studies of personality. Also, Bownds discusses on his blog (here) a gene that is associated with risk-taking.

Aid Watch

One of the world's foremost development economists, NYU's William Easterly has just started blogging.

William Easterly's new blog.

Resources on Innovation

For perhaps obvious reasons I have been getting a lot of requests lately for information on innovation and researcher productivity. On the assumption that everyone who emails me reads this blog, below is my best stab at a snap-shot of very useful resources

The Sigma Xi postdoc study in the states is one of the largest studies to data on postdoc careers, matching and related issues. Publications, surveys and so on are available on the site below.

http://postdoc.sigmaxi.org/

The australian innovation report is below – this is a really strong set of documents with lots of relevance to the Irish case

http://www.innovation.gov.au/innovationreview/Pages/home.aspx

Pre-publication drafts of the Mirlees review papers are available below – includes chapters on taxation and innovation

http://www.ifs.org.uk/mirrleesreview/publications.php

British Skills Document Below – includes substantial information on skills training that these guys are rolling out

http://www.hmg.gov.uk/media/9102/NewOpportunities.pdf

The website of the Irish study examining students and researchers is below

http://geary.ucd.ie/ius

Really useful site on the UK Department of Innovation Universities and Skills Webpage

http://www.dius.gov.uk/policy/he-debate.html

Worth looking at, among other things, the governments report on research careers

http://www.dius.gov.uk/policy/documents/Nigel%20Thrift%20contribution%20to%20HE%20Debate.pdf

The research careers ireland website is also worth looking at.

http://www.researchcareersireland.com/Default.aspx

The recently released “Ireland’s Smart Economy” Document is below

http://www.taoiseach.gov.ie/index.asp?locID=231&docID=4147

The Expert Group on Future Skills Needs is below. They have things up there such as the National Skills study

http://www.skillsireland.ie/

When I get time I will do a brief memo on the information resources available through CSO, IDA, Forfas and so on. The website below is worth a look

http://www.statcentral.ie/

The US Survey of Doctorate Recipients (SDR) gathers information from individuals who have obtained a doctoral degree in a science, engineering or health field. The SDR is conducted every 2 years and is a longitudinal survey that follows recipients of research doctorates from U.S. institutions until age 76. Data from this survey are available on the SRS Web site and on the SESTAT Web site. Several papers have been written with this data including the one linked below.

http://www.nsf.gov/statistics/srvydoctoratework/

http://ideas.repec.org/p/nbr/nberwo/12693.html

The US Survey of Earned Doctorates, which began in 1957-58, is a census of all individuals receiving a research doctorate from a U.S. institution.

http://www.nsf.gov/statistics/srvydoctorates/

J Scott Long has some good work on research careers and productivity

http://www.indiana.edu/~jslsoc/research_science.htm

The Cornell Higher Education Research Institute contains links to good working papers

http://www.ilr.cornell.edu/CHERI/

For those interested in causal evaluation of job programmes, training programmes and so on, see the recent economist article “International Bright Young Things” which places causal field experiments informed by behavioural economics at the heart of the future of economics

http://www.economist.com/finance/displaystory.cfm?story_id=12851150

Esther Duflo is one the leaders in this field. Examples of her experimental work is linked below. This should be studied closely by anyone who is setting up recovery initiatives if they really want to be sure that they are having an effect

http://ideas.repec.org/a/tpr/qjecon/v122y2007i3p1235-1264.html

http://ideas.repec.org/a/tpr/qjecon/v118y2003i3p815-842.html

http://ideas.repec.org/p/nbr/nberte/0333.html

Another Blast from the Past - NYT 1987

This time a New York Times article from February 15th 1987:

"The conservative economic ideas often identified with President Reagan and Prime Minister Margaret Thatcher have become a key part of the campaign debate in Ireland this year. A new center-right party, the Progressive Democrats, has become the main vehicle for promoting the conservative remedies as a way to overcome the nation's crushing economic ills. But in the campaign for the election Tuesday, Prime Minister Garret FitzGerald and his Fine Gael party are also calling for deep spending cuts as a prelude to lower interest rates, lower taxes and greater reliance on the private sector."

For the rest of the article, follow this link.

Could Advertising Be Part of the Recovery?

As I've noticed shorter and shorter ad breaks on TV and radio over the last month, I've been wondering if lower advertising revenues are having an effect on jobs in the media sector. In some sense I'm glad to have less interruptions during my media consumption, but media, multimedia, graphic design and advertising are popular career choices in Ireland, and it doesn't appeal to think of employment opportunities in this sector of the economy drying up.

Before Christmas, a story emerged that cuts might be made at Irish televisions stations due to lower advertising revenues. After Christmas we heard that Irish advertising spend was down 30 per cent at end of 2008, and is predicted to fall further in 2009. On the other side of the Atlantic, a pay freeze was announced yesterday at Yahoo.

The question arises - could more jobs in media, multimedia, graphic design and advertising be saved if advertising revenues didn't fall so much? Also, is there a commercial imperative for companies (who are in it for the long haul) to keep advertising during the recession (and thereby stimulate employment in some parts of the economy)?

In other words, could advertising be part of the recovery? We mentioned recently that the Economist journal review points to an interesting article from Knowledge@Wharton: "When the going gets tough, the tough don't skimp on their ad budgets". According to the article:

"Research shows that companies that consistently advertise even during recessions perform better in the long run. A McGraw-Hill Research study looking at 600 companies from 1980 to 1985 found that those businesses which chose to maintain or raise their level of advertising expenditures during the 1981 and 1982 recession had significantly higher sales after the economy recovered. Specifically, companies that advertised aggressively during the recession had sales 256% higher than those that did not continue to advertise."

It may not be as simple as simply pouring money into advertising campaigns though. First of all, if cash is scarce, how can campaigns be financed? Maybe a special bond could be set up by IBEC and/or ISME and issued to the Irish public?

Second, while there is evidence that advertising during a recession is beneficial, the extent (or even the existence) of the benefit may depend on the nature of business being conducted. Some very brief google-searching on the topic brings up the Ad Contrarian Blog (run by the CEO of an ad agency). This post on advertsting during a recession, suggests that there are three types of businesses (in relation to advertising), as follows:

* Businesses for whom advertising is essential.
* Businesses for whom advertising is discretionary.
* Businesses that are somewhere in the middle.

According to the post, businesses for whom advertising is essential tend to be in categories that are consumer-oriented and highly responsive to marketing activity. They include fast food, retail, consumer packaged goods, and automotive. This suggests that Irish companies involved in these types of activities should ensure that they do not cut back on advertising during the recession.

Also, according to this post on the same blog, it is better to focus on changing behavior rather then attitudes. Apparently, it is easier to convince someone to eat a Big Mac than to convince them that a Big Mac is a good thing to eat. Also, it is easier to convince someone to go to Las Vegas than to convince them that going to Las Vegas is a smart thing to do.

The question remains though, how can companies test that particular advertising approaches during a recession will be (more or less) successful? We mentioned before (here) that Google has rolled out a tool designed to show how people browsing the web respond to online advertising (Adplanner - see here).

"By comparing the behaviour of people who are exposed to particular adverts with those who are not, the company hopes to give advertisers feedback about which campaigns are are successful." This may be one of the first instances where advertising has been evaluated in the spirit of randomised controlled trials.

A kidney for your troubles?

Alvin Roth gave the Kahneman lecture this year at the international association for research in economics and psychology conference. In it he referred to many 'repugnant preferences', thing that disgust us now and constrain markets in various ways. He gives the example of fur markets, and products that are ok to buy in one country but not in another, like dog or horse meat. Entertainment events like 'dwarf throwing' which are seemingly fine now whereas if you substitute other minorities this is condemned. Taboos can form and disappear over time and are largely arbitrary according to Roth. John Haidt supports the idea linking moral judgements to feelings of disgust in his experiments where he induces disgust via hypnosis and this alters how we feel about many decisions. Evolutionary psychologists argue that in cases this is a programmed heuristical response for avoiding decaying carcases, feces, intra-family mating and so forth. The response can potentially be hijacked by learnt associations we accumulate throughout life. Most interestingly, however, Roth points to the boundaries linked to disgust in relation to the human body and how transactions can transform from feeling morally ok if made out of concern for another to feeling less moral, even disgusting, if done for money. Giving someone a kidney is a pretty amazing thing to do but pawning one to the highest bidder.. we're not so sure. This brings me to the legal price of a kidney in Singapore, a maximum of $33,000 dollars seemingly according to the asia sentinel news blog. It's one way to remove your financial worries in these uncertain times. I have a fair idea what it'd be like to get $33,000 dollars now but it's harder to imagine the lifelong effects of this transaction so maybe it's ok that my disgust reaction does the work for me instead of weighing up costs and benefits of this decision!

Tax Policy Centre

A really useful set of resources including recent publications on using taxation to reform healthcare and an analysis of the Obama stimulus plan

http://www.taxpolicycenter.org/

Web-based Technology and the Recovery - What Do Irish Consumers Want?

In keeping with the recent theme of Irish economic recovery, I have been wondering how existing (and not-yet-developed) web-based technologies can be geared towards enterprise and the enhancement of existing business activities. In particular I have been thinking about technologies which summarise trends in online search and media covearge - often these are provided for free, in the spirit of open-source software.

Now more than ever, there is a need for market research to find out what Irish people will buy during a recession (Fergal mentioned cosmetics recently). Also, what is it that Irish people really want - what are the new product developments that could be rolled out to re-invigorate consumer spending?

According to Genevieve Carbery in last week's Irish Times, social networking site Bebo was the most searched-for term in Ireland in 2008. But rival Facebook was the fastest-growing search term last year, while Polish social networking site Nasza Klasa topped the rising searches list in Limerick and Galway.

These statistics may change during 2009, but it is possible to keep track of developments using Google’s 'Insight for Search' website (www.google.com/ insights/search/), which provides information on the most popular search terms in different geographical categories and time frames. For the moment, it seems that there is a definite demand for "ambient awareness".

We have discussed the Google Trends software (similar to Search for Insights) quite enthusiastically on this blog before, again here, and also Quantcast Web User Demographics and Alexa.com. The Google Trends software has been enhanced to let users get their hands dirty with the secondary data, which potentially could be extremely useful. Writing here on the Google Research Blog, Heej Hwang from the Google Trends team describes how the Trends data can be downloaded to a .csv file (a common format to import/export data), which can be opened in most spreadsheet applications (or easily converted to do so).

The technology developed by Summize Labs is also worth considering. (Summize was recently acquired by Twitter, which I just discovered here). One used to be able to enter a topic in the Summize Labs search engine to find up-to-the-second "tweets" about that topic, then automatically analyze the attitudes expressed in the "tweets". (As an example, the last time I looked, the overall sentiment on Obama was "swell"). This could prove to be a very powerful tool for political scientists, marketers and all kinds of researchers. Twitter will be adding search and its related features to its core offering in the very near future.

We've also mentioned before that Google's chief economist is predicting that the brightest graduates in economics will seek their fortune in marketing in the years ahead. This will be due to the Internet giving companies the information-rich environment once available only in financial markets (see post here).

In June, searches for the word “recession” peaked at 30 times the 2007 average. There were almost three times as many searches for “recession” as there were for “Celtic Tiger” in 2008. Maybe there will be more searches for "recovery" in 2009?

Australia Innovation Report

A comprehensive website below with links to Australia's Innovation Report

http://www.innovation.gov.au/innovationreview/Pages/home.aspx

Upcoming Talks Geary

January 27th 2009. 3pm. Joachim Winter (University of Munich). "The Workings of a Private Health Insurance Market: Enrollment Decisions, Plan Choice, and Adverse Selection in Medicare Part D" (joint with Florian Heiss and Daniel McFadden)

February 3rd 2009. 1pm Bart Golsteyn (Univeristy of Maastricht) "Economics and Personality"

February 10th 2009. 1pm Daniel Goldstein (London Business School). "Choosing Outcomes versus Choosing Products: Consumer-Focused Retirement Investment Advice".

February 17th 2009. 1pm Frank Walsh (University College Dublin). "Supervision and Wages"

March 2nd 2009, 4pm. Gerard O'Neill (Amarach Research). "The Psychology of Recession and Recovery"

Gerard's talk is the first in a new series we have started at the Institute that will focus on the interaction between social science and public policy. A much wider initiative is being launched in this domain in the upcoming weeks.

Reforming the Taxation System for the 21st Century - The Mirlees Review

pre-publication drafts of the Mirlees review papers are available below (thanks CH) - required reading for anyone commenting or involved with the current Irish Taxation review

http://www.ifs.org.uk/mirrleesreview/publications.php

New British Document on Skills and Education

An interesting new British document - in general a pretty top-level document but worth looking at this in the context of any "stimulus package" in any economy - as pointed out in the Glaeser blog-posts stimulus packages must seek to gain the maximum return for society in terms of the actual activities commenced with the spending. The document below is a good summary of some potential spending options.

here

Some of the policies emphasised include

- Early Childhood Education

- Investment in People Making a Transition from Education to Work

- School Building Programme

Irish Unemployment Document - Blast from the Past

In what almost looks like a historical document from 1994 that I came across online, the options for unemployment reduction for the nineties are explored.

http://www.wrc.ie/publications/regionsw.pdf

ireland's miracle recovery

many people are converging around the idea that new technologies offer one route to ireland recovering. this point is made by gerard o'neill here on his soon-to-be-renamed "turbulence ahead" blog. the general thrust of looking to web 2.0 technologies to aid in the crafting of optimistic and specific solutions is something that should be given a proper hearing

http://www.turbulenceahead.com/2009/01/recovery-20.html

Truman Bewley

Bewley's work on the early 1990s recession needs to be read and replicated here - i am already too committed time-wise to do this alone but if any student or researcher wants me to supervise this then get in touch. The basic idea is to interview employers (and also employees - see other work by Bewley) and compare the rationale behind their decisions with standard labour market theory. Would be a really good MA research option or final year project particularly if updated in line with recent behavioural labour economics work

http://cowles.econ.yale.edu/P/cp/p09b/p0963.pdf

EEA Call for Papers

Coming Soon

http://eea-esem2009.barcelonagse.eu/callpapers.php

Behavioural Economics and Taxation

Below is a presentation given as part of a discussion on what tax policy can learn from behavioural economics.

The talk: briefly overviews Geary; outlines the idea of causal econometric evaluation; and gives a brief overview of behavioural economics. With respect to tax the talk: outlines the role of trust, fairness and legitimacy in tax systems including using ultimatum games and money burning experiments as examples; examines loss aversion, endowment effects, hyperbolic discounting and other non-standard preferences; outlines the potential role of group processes such as conformity including a discussion of the causal peer effects literature; discusses common biases such as the planning fallacy and overconfidence; puts particular emphasis on cognitive complexity and procrastination; outlines major papers in the savings and pensions literature that used behavioural principles to change financial behaviour.

link here

Economics as part of a liberal education

the Economic Logic blog draws attention to David Colander's new work with KimMarie McGoldrick on the economics major as part of a liberal education. Ive read the paper (linked below) and as all of Colander's work it certainly makes you think.

here

In general, they are pessimistic about the idea that people doing cutting edge research on a particular programme within a discipline are cut out to teach undergraduates broad principles of economics. I really would want to see some evidence on this. Another easily believable story is that succesful researchers are more motivated people and better teachers because of this. We can surely all think of examples of top researchers who give brilliant "topics" classes that cut through the main areas in a discipline in a way suitable for senior undergrads and do so in a way that introduces them to the cutting edge in the field. While I was obsessed with some of the broader historical courses as an undergrad, ultimately these "topics" courses, if well taught, have just as much place in a liberal education. Conversely we can also all remember courses taught by the best researchers in the Institution essentially resembling poor attempts to recycle research talks into a course, given by someone who clearly disliked teaching and students.

Some specific recommendations include experimentation with pedagogical methods other than the lecture method. The proposal for the development of a "teaching commons" is of interest to a lot of us here who have started to put our courses up and make them a space also for people outside the university. The MIT Open-Courseware initiative is very inspiring. At Irish level Steve Kinsella has been doing a good job on this front and I am attempting to do it this year and learning a lot as I go. Some of the other recommendations include specific undergraduate teaching training and certification on top of a research PhD. They also argue for the distinction between broad teaching questions and research questions, one that has been picked up on before by Mankiw and others on their blogs. The extent to which research active teachers should focus on the stock as opposed to the flow of knowledge when teaching senior undergrads is certainly worth debating. The recommendation on inviting experienced professionals to give talks is one that many of my colleagues follow in various ways and is definitely an interesting one.

As an endnote, I love feeding some ammunition to our friends in the fairer social sciences who dont like economics. The book below, referenced in the report, seems to have enough gems to sustain a few arguments.

Foley, Duncan. 2006. Adam’s Fallacy: A Guide to Economic Theology. Harvard University Press, Cambridge MA.

Retraining Benefit Rather than Unemployment Benefit

Paul Mooney from the National College of Ireland also extends the argument that unemployment benefits be directed instead toward specific training supports (from the RTE Website)

Prime Time: Paul Mooney, National College of Ireland, says the Government must tackle unemployment and choose just a few areas to specialise in

Copenhagen Consensus as a Model for Defining National Recovery Priorities

Substantial amounts are being written at present on national level recovery. Its worth thinking about a model such as the Copenhagen Consensus one where defineable problems and projects to address them are put forward, judged and ranked. last years document contains amazing ideas succintly described and placed in their correct context

here

Trade Union Call for Social Bond

The ICTU response is below - the idea of a social bond that people could buy into if they believed it was fair is an interesting one.

here

there is also a proposal relating to upskilling and training that seems, at first glance, to be well worth considering.

"In place of monies paid out in pro- rata unemployment benefit to workers on a three or less day week, exchequer resources should be alternatively allocated to the provision of training and upskilling opportunities for these workers on a reduced working
week."

Tis My Money I Just Didn't Want To Fill Out De Forms!

Was giving a talk this week on what has been written on behavioural economics and taxation. Was trying to illustrate the idea that simplification of financial instruments can have effects on behaviour and that, in general, complexity and hassle are key issues in thinking about tax and finance systems. Below is a classic illustration of this concept.

Changemakers Competition

The Nudge blog directed me to a competition that invites people to send in suggestions for using behavioural economics ideas to design better healthcare policies. The RWJ Foundation introduces the scheme "It is our hope that the projects entered in the “Designing for Better Health” competition demonstrate novel and effective approaches that make it easier for people to make choices and change their behavior to improve their health."

http://www.changemakers.net/designingforbetterhealth

"Eligibility Criteria

The competition is open to all types of organizations (charitable organizations, private companies, or public entities) from all countries. We consider all entries that:

• Reflect the theme of the competition: Designing for Better Health. Entries will demonstrate innovative solutions around financial transactions for social change.

• Indicate growth beyond the stage of idea, concept, or research. At a minimum, entries should be at the demonstration stage and indicate success. While we support new ideas at every stage and encourage their entry, the judges are only able to evaluate programs that are beyond the conceptual stage, and have demonstrated a proof of impact, even at small scale.

• Are submitted in English, Spanish or Portuguese."

Lecture on Rationality

A one hour lecture to the psychology students - the lecture examines some basics concepts of rationality, introduces the idea of economic games, examines assumptions underlying choice in certainty and uncertainty, introduces applications to consumption savings and labour supply, discusses psychological and biological evidence on the nature of risk preferences, examines the allais and ellsberg paradoxes, introduces prospect theory loss aversion and the endowment effect, discusses normative and revealed preferences with particular reference to the recent Beshears et al paper linked on the site, discusses rationality assumptions such as arbritage eliminating rationality. Concludes with some basic implications for public policy. One basic implication for policy that the lecture draws from the literature is that small-scale inexpensive experiments examining the difference between normal choice and informed choice would be a good place to start in thinking about sub-optimality in decision making. This point is made extremely well in the Beshears et al paper.

the next lecture will cover heuristics and biases and there will be lectures on emotion, identity, intertemporal choice, neuroeconomics and well-being. the final lecture in this course will be on the implications of behavioural economics for public policy. Anyone who would like to argue with me or discuss this area please feel free to get in touch.

Rationality Lecture

Draft Captain Chesley 'Sully' Sullenberger

Ive just been reading the story of how this man managed to safely land a plane in the Hudson river without any deaths. Thinking of a pilot facing the engines of his plane failing and still managing to hold his nerve, redirect the flight, land it in a river and save everyone on board seems like a good metaphor for us all to keep in mind. I wonder does he know anything about rescuing financial systems.

Economix Blog

I have only recently started looking at this blog - for people interested in more micro analysis of public policy (like most of the people who read our blog) this is really useful. Contributors include Alan Krueger and Edward Glaeser.

Some really interesting posts include a breakdown of where Obama's stimulus package will be spent . Their posts on higher education (including one from Glaeser on a stimulus package for low-skilled workers) are also really good. Glaeser's post urging governments to think very carefully about value for money in job creation makes an obvious but important point.

UK Internship Scheme

The current weekend's newspapers are filled with accounts of how graduates are finding it impossible to find jobs.

The UK government's plan for a large scale internship programme should be looked at very seriously, as should the plan to make people stay in some form of training until 18.


http://news.bbc.co.uk/2/hi/uk_news/education/7821629.stm

Anchoring Vignettes and the "Rose-Coloured Glasses" Effect in Parents' School Satisfaction

Jack Buckley (Professor of Humanities and Social Sciences at the Steinhardt School, NYU), was mentioned on this blog before in relation to findings he produced on survey context effects in the use of anchoring vignettes. The post is available here.

Buckley has produced other work using anchoring vignettes - related to parents' school satisfaction. He used the chopit model (estimated in GLAMM) to examine the "rose-coloured glasses" effect, which refers to parents reporting higher levels of satisfaction with a school solely or partially as a justification for the effort expended in the choice process. This reminds me of the cognitive dissonance problem, along the lines of "I made the right choice" (when I know I really didn't).

Initially, Buckley finds that parents in charter schools evaluate their child's school more highly and are more satisfied with many dimensions of those schools than parents with children in traditional public schools. (Charter schools are elementary or secondary schools in the United States that receive public money but have been freed from some of the rules, regulations, and statutes that apply to other public schools - more on this here). After applying the anchoring vignettes technique, Buckley shows that parents who change to a charter school are actually tougher graders of the new school.

These results are reported in a book by Buckley and Mark Schneider: "Charter Schools - Hope or Hype?". The publication is currently available courtesy of Google Books here; if you scroll to page 191 you'll find the relevant section. Buckley's vignettes are available to view on Gary King's example page: here, here and here.

The Returns to Positive Social Development in Childhood

Mary Silles from NUI Galway produced a working paper at Copenhagen's Center for Applied Microeconometrics in 2005, entitled "Personality, Education and Earnings". The paper uses the UK National Child Development Study to examine the effects of social maladjustment in childhood on schooling and earnings. "Net of differences in family background and cognitive ability, estimates suggest that early social maladjustment scores are associated with lower labor market earnings and schooling. These results suggest that there are substantial returns to fostering positive social development in childhood."

What Do We Know About Non-Cognitive Personality, Education and Earnings?

Bowles et al. (2001) find that, on average, controlling for cognitive skills reduces the years of schooling coefficient by 18%. Cognitive skills therefore represent less than a fifth of the return to schooling. The remaining 82% of the return to schooling could either be associated with more advanced cognitive skills that are not captured by basic measures, or with noncognitive skills. A different finding was recently presented by Pasche (2008) - 'What is it About Schooling That the Labor Market Rewards? The Components of the Return to Schooling'. Pasche finds that over half the return to schooling is constituted of basic cognitive skills. Either way, the bias of non-cognitive personality traits is important when estimating the returns to education.

According to Linz and Semykina (2005), personality may affect earnings through gender; they find that women's earnings are affected by personality, while men's earnings are not; the "unexplained" portion of the gender wage gap falls by as much as 12% when personality traits are included. Mueller and Plug (2004) also find that gender is important - they show that antagonistic, emotionally stable and open men enjoy substantial earnings advantages over otherwise similar individuals; whereas the labour market appears to value conscientiousness and openness to experience for women. Heineck and Anger (2008) produce evidence for a robust wage penalty associated with an external locus of control, for both men and women.

Heineck (2009 - from the recent AEA meeting) finds evidence for a negative relationship between wages and agreeableness for men, a negative relationship between wages and neuroticism for females, and a positive relationship between openness to experience and wages for women. Borghans et al. (2008 - from the recent AEA meeting) suggests that people are most productive in jobs that match their style. An oversupply of one attribute relative to the other reduces wages for people who are better with the attribute in greater supply. According to Lee (2006), issues that require further study and resolution are 1) which traits create wage differentials, and 2) two-way causality: does personality affect the wage, or does a wage premium become an incentive for a person to adopt new memes?

Heart Rate and Affect

Our continuous tracking of heart-rate paper is available now - comments welcome

http://ideas.repec.org/p/ucd/wpaper/200901.html

Skills-Matching During Recessions and Implications for Lower-Skilled Workers

On the New York Times blog Economix (Explaining the Science of Every Day Life), Princeton economist Alan Krueger has discussed the US job market for college graduates (here). Krueger raises the point that underutilisation of highly educated workers' skills should be a concern during periods of recession. He bases this on the idea that employers tend to be more selective in downturns - "the job situation is likely to weaken considerably for less-educated workers as the downturn persists, however, because employers are likely to raise skill requirements."

Krueger mentions research by UCD economist Paul Devereux, which finds that “the education levels of new hires within occupations are higher when the unemployment rate is high and this effect is more pronounced in lower-paying occupations.” Paul Devereux's paper "Occupational Upgrading and the Business Cycle" (Labour, 2003) is available here. The paper concludes with the idea that low-skilled individuals suffer most from recessions in terms of occupation quality and unemployment.

The "lipstick effect" of the recession

Given the current economic conditions, one would be tempted to assume that sales in all sectors will plummet over the current year. This is not the case, according to Dhaval Joshi, analyst with RAB Capital. A natural consequence of a recession is that people spend less on goods that can be considered "luxuries", focusing their constrained budget on more essential items. This does not mean that they forgo luxury however. In the UK recently car sales and mortgages have collapsed, as we can imagine have the sales of a whole host of goods. One product group whose sales historically flourish during a recession is cosmetics.
The idea goes as follows: even in a poor economic climate, people like to treat themselves. In order to keep a similar level of satisfaction while economizing more, they scale down their expectations of what characterises a "luxury good", with cosmetics appearing to be an adequate source of comfort. Joshi points to 1930's USA and Germany, Japan of the last 20 yeas, and the European recessions of the early 80s, 90s and 2000s as examples of instances where industrial production generally was falling, while the cosmetics sector not only survived but grew. For the first half of this year L'Oreal posted sales growth of 5.3% amid incessant reports of doom and gloom elsewhere.
So if you see less Fendi bags and Mini Coopers floating around in the new year, take a look around to see if this substitution is indeed occurring...

American Economic Association

Details of recent AEA meeting on link below - includes sessions on financial decision making, genes and economics, personality and economics, risk preferences, college participation, cognitive function and economic behaviour, peer effects and education, fairness, long run evolutionary processes, rationality in consumer credit and a lot more.

http://www.aeaweb.org/annual_mtg_papers/2009/

History and the Financial Crisis

With many of us turning our attention to the conference organised by UCD School of Economics this afternoon, I thought the following paper might be of interest. Its by Brad de Long from Berkeley, and it delves into a lot of history related to the current crisis. Available here.

Away From Policies and Toward Projects

In their article the Economist summarise the contribution of the new development economists "With her colleague, Abhijit Banerjee, Ms Duflo and Mr Kremer have remade development economics, nudging it away from its concern with policies, towards a preoccupation with projects. They study economic development as seen from the field, clinic or school, rather than the finance ministry".

A question for discussion is whether we need to do the same in countries like Ireland with respect to attempting to deal with business cycle downturns. While the study of macro fiscal policy will always be central or near to the centre of discussions of correcting a downward business cycle, there is a certain sense of futility surrounding current analyses of why we are in a major slump. Perhaps equally as central should be questions on how to define and evaluate on a micro level policies that stimulate start-up companies, innovation and so on.

The paper below by Shiller touches on the role of economic crises in generating institutional innovation and touches on the potential role of behavioural economics in triggering a rethink of institutions.

link here

American Economic Journal: Applied Economics

This month sees the launch of the American Economic Journal: Applied Economics. It will publish papers covering a range of topics in applied economics, with a focus on empirical microeconomic issues. In particular, there is an emphasis towards papers on labour economics, development microeconomics, health, education, demography, empirical corporate finance, empirical studies of trade, and empirical behavioural economics.

The first volume includes articles on:

(i) Educational Debt Burden and Career Choice (Evidence from a Financial Aid Experiment at NYU Law School)
(ii) Incentives and Services for College Achievement (Evidence from a Randomized Trial)
(iii) The Effect of Alcohol Consumption on Mortality (Regression Discontinuity Evidence from the Minimum Drinking Age)

How to Fund Aging - Link Retirement Age to Longevity

Vox blog adds yet another simple and well argued policy suggestion from a well respected source - worth reading this. It is certainly worth questioning whether individuals in their 30s and 40s should view 60 or even 65 as being a realistic retirement age. I know this will depend on one's work environment but there is a growing group of people surely who would not want to retire at this age particularly if they are healthy, productive and gain psychological benefits from continuing to work


link here

Economics and Psychology Course

Below is a link to the first lecture in the series which is a relatively informal overview. The aim of this course is to introduce economics and psychology/behavioural economics to students studying both economics and psychology. As can be seen from the notes, the core topics are rationality, judgement biases and heuristics, intertemporal choice, identity motivation and incentives, emotion and economics, neuroeconomics. This leads into lectures on well-being and economics and finally the implications of all this for public policy. There will also be practical tutorials as well as several in-class experiments.

I will give lectures on this material in other venues also including some upcoming policy presentations. I am happy to exchange ideas with people who are interested in this area from all walks of life. I also welcome comments on ommissions, threads of thought and so on.

link here

Experimental Philosophy

A friend directed me to survey experiments conducted recently by the philosopher Joshua Knobe. His research is at the interface of cognitive psychology and ethics. You can take part in these yourself at his website: http://www.unc.edu/~knobe/

These find that moral considerations play a role in the process by which people determine whether or not a behavior is intentional.

Top Young Economists

The Economist provides its take on who the rising stars of the economics profession are. There is a strong slant toward experimental and behavioural work including people like Roland Fryer, Esther Duflo and Xavier Gabaix

here

Deadline for Paper Submissions to IEA Conference

The deadline for paper submissions to the annual conference of the Irish Economics Association is Friday week (the 16th January). For more details, follow this link.

The IEA Programme Committee will award a prize of €500 for the best paper presented by someone who is either (a) aged < 30 or (b) within 3 years of finishing a PhD. There will also be limited support for up to 5 graduate student presenters, not in receipt of a full salary.

The conference will be held at the Blarney Golf Resort Hotel, Tower, Blarney, Co Cork from April 24 - 26, 2009.

Grade Inflation in Ireland's Higher Education System during the Celtic Tiger Years

http://gearybehaviourcenter.blogspot.com/2010/03/grades.html

Conference on the Irish Economic Crisis

This was sent by IEA today and put on the Irish Economy blog. Looks very interesting.

Admission is free, but spaces are limited. Places can be booked by email to stefanie.feicke@ucd.ie, telephone (01) 7168335.

Responding to the Crisis

The UCD School of Economics, in association with the Dublin Economics Workshop, has arranged a half-day conference on the current economic crisis at the Royal College of Physicians, 6, Kildare St., Dublin 2, on January 12th. 2009.

Programme

14.15 Introductory Remarks

Rodney Thom (UCD)

14.20 Session 1: Fiscal Consolidation

Chair: John Fitz Gerald (ESRI)

Philip Lane (TCD): Fiscal Policy Options in the Euro Area

Ciaran O’Hagan (SocGen Paris): How Much Can Small Sovereigns Borrow?

Colm McCarthy (UCD): Expenditure Control and Fiscal Consolidation

Discussant: Karl Whelan (UCD)

Coffee at 15.45

16.00 Session 2: The Property Bubble and the Banking Crisis

Chair: Brendan Walsh (UCD)

Patrick Honohan (TCD): Resolving the Banking Crisis

Morgan Kelly (UCD): The Irish Property Bubble and its Consequences

Robbie Kelleher (Davy): Bank Solvency, Basle II and Accounting Standards

Discussant: Alan Ahearne (NUI Galway)

Conference concludes at 17.30.

How extraverted is honey.bunny77@hotmail.de?

A recent article in Technimentis explains what our email addresses may reveal about our personalities. (I had problems opening this webpage with Explorer so you may want to use a different browser). The story is based on findings by Back, Schmukle and Egloff (2008): "How extraverted is honey.bunny77@hotmail.de? Inferring personality from e-mail addresses", Journal of Research in Personality, 42 (4), 1116-1122.

Six hundred participants provided their e-mail address and were assessed with a short form of the Big Five Inventory, and the Narcissistic Personality Inventory. Another batch of participants ("observers") rated all of the first groups’ e-mail addresses on 11 personality ratings. The researchers discovered three main results:

1. Observers agreed on their ratings of the e-mail address owners’ personalities.
2. Observers’ ratings were accurate on all personality dimensions except extraversion.
3. E-mail addresses influenced observers, provided valid personality cues, and were utilized fully to make judgments.

The conclusion offered is that individuals could accurately judge the openness level of an individual solely on e-mail address alone; conscientiousness and narcissism are somewhat more difficult to track, and agreeableness and neuroticism slightly more challenging again.

Recent Research on 'Openness to Change', and Other Personality Traits

Justin Wehr mentions on his blog that there is a recent article in Scientific American which discusses research findings on the personality trait: 'openness to change'. According to the article, people become increasingly open to change until they reach about age 30; at that point the trait begins a gradual decline. In the article, one suggested explanation is that people need to be open to change when they are looking for a mate, but once they settle down and have kids, they have a greater need for security.

Myself and Liam have been reading for some time about evidence on whether there is stability in personality traits such as 'openness to change'. An argument in favour of this viewpoint is that there are 'powerful forces' for stability (genes and habit), according to Borghans et al. (2008) . However, the literature on the stability of personality traits over the life cycle has mixed findings.

An 'extreme but common' view among psychologists is that mean-level change in personality is nearly impossible after early adulthood (Borghans et al., 2008). However, it is also suggested that the greatest mean-level change in most personality traits takes place in young adulthood (i.e. early 20's) (Borghans et al., 2008). An exception is the trait of sensation seeking (which is linked to risk aversion); there is a dramatic peak in sensation seeking during adolescence (Spear, 2000).

According to Borghans et al. (2008), less is known about the stability of 'preferences in economic decision-making', in comparison to the stability of personality traits. No longitudinal study has measured the mean-level stability of time preference over the life cycle (Frederick et al., 2002). Sahm (2007) shows that risk aversion is not a perfectly stable characteristic over the lifecycle and that it increases with age.

Even if preferences in the economic decision-making of a cohort change as the cohort gets older, myself and Liam have argued that there is still a mean-level in the cohort preferences --- which is relatively stable over a relatively short time frame e.g. the enrolment duration of undergraduate students. Given this, as well as the evidence for an adolescent peak in sensation-seeking, we present the argument that the non-cognitive personality traits of students are not endogenous in an empirical model of human capital investment during higher education. This argument is enhanced by the findings mentioned in Scientific American - that 'openness to change' generally does not start to decline until age 30 and later.

Other recent research and meta-analyses of previous studies, indicate that change occurs in all of the major ('Big Five') personality traits at various points in the lifespan. On average, levels of agreeableness and conscientiousness typically increase with time, whereas extraversion, neuroticism, and openness tend to decrease (Srivastava, S., John, O. P., Gosling, S. D., and Potter, J.; 2003). In addition to these group effects, there are individual differences: different people demonstrate unique patterns of change at all stages of life (Roberts, B. W., and Mroczek, D.; 2008). However, it should also be remembered that the 'Big Five' is thought to refer to traits that are not context-dependent (McAdams, D. P., 1995).

Blog Update

People sometimes ask wearily "where do you get the time to keep a blog??" with the implication being that you must have too much time on your hands. The answer is easy - it takes a few minutes a day and pays off a lot in terms of not having to send lots of individual emails to people recommending papers. Most of the research students I work with look at the blog and it helps keep information flowing around our research group. This doesnt substitute for more intense internal forums like seminars, project collaboration software and so on but I believe it is a nice and inexpensive complement,.

Also, a lot of people with interesting thoughts log-in and get some benefit from it and I regularly get sent useful mails and have interesting discussions triggered by something that was posted. So I am happy to keep this going another year at least.

I was thinking recently about whether anything should be done with the blog. A few things come to mind

- We have never really made use of the comments forum and Im not entirely sure thats a bad thing. People have said this is a shame. Suggestions welcome but this isnt a major problem for me.

- We used the blog for this once this year on a simple survey monkey experiment.We now have our own online lab facility in the group where we can do experiments. I think using the blog to post simple demonstration experiments and pilot tests with the new lab and then to post the results would be a good idea.

- I will work a bit more on the presentation of the blog. Its looking a little clunky and dated. Suggestions welcome.

- Adding more posts directed toward undergrads in psychology and economics is a priority.

- Changing the name is definitely on the cards. As someone pointed out "Geary Behaviour Centre" does have shades of 1984 about it and also doesnt really convey what the blog is about. Geary Behavioural Economics Blog is the one I am most leaning toward.

- Feel free to email or comment if you have anything to add.

Irish Day Reconstruction Project

A new website will be up soon detailing the ongoing well-being work being conducted here. below is the initial version. It contains reading lists, details of the studies being undertaken, links, people involved and so on.

http://geary.ucd.ie/wellbeing/home

We recently won an IRCHSS grant to carry out this work on a representative population sample examining town-level factors affecting well-being, measurement of well-being, integration of biological markers and so on. This builds on work we have already conducted on a student sample and on a sample of commuters in Dublin. From this work, we integrated biological markers to study financial discounting and we are about to release a set of papers examining diurnal biological patterns and their relation to affect.

This is strongly related to another project we have been developing examining health history in Ireland in the 20th century including the health and well-being of migrants to the UK, US and other destinations. We are currently working on a set of papers examining the determinants of infant mortality in Ireland and how early conditions affected the later health and well-being of the Irish population.

http://geary.ucd.ie/secondarydata/

Happy to talk to anyone who is interested in either of these projects.