RA Manual: Notes on Writing Code Matthew Gentzkow and Jesse Shapiro

Via Marginal Revolution blog, Jesse Shapiro and Matthew Gentzkow make their programming advice for research assistants available online. Useful and practical tips. Well worth reading.

New NBER Working Papers on Homocide Laws

Using Audit Studies to Test for Physician Induced Demand: The Case of Antibiotic Abuse in China
Janet Currie, Wanchuan Lin, Juanjuan Meng

NBER Working Paper No. 18153
Issued in June 2012
NBER Program(s):   HC   HE

The overuse of medical services including antibiotics is often blamed on Physician Induced Demand. But since this theory is about physician motivations, it is difficult to test. We conduct an audit study in which physician financial incentives, beliefs about what patients want, and desires to reciprocate for a small gift are systematically varied. We find that all of these treatments reduce antibiotics prescriptions, suggesting that antibiotics abuse in China is not driven by patients actively demanding antibiotics, by physicians believing that patients want antibiotics, or by physicians believing that antibiotics are in the best interests of their patients, but is largely driven by financial incentives. Our results also show that physician behavior can be significantly influenced by the receipt of a token gift, such as a pen.

Ungated Version

Stand Your Ground Laws and Homicides
Chandler B. McClellan, Erdal Tekin

NBER Working Paper No. 18187
Issued in June 2012
NBER Program(s):   HE   LE

Since 2005, eighteen states have passed legislation that has extended the right to self-defense, with no duty to retreat, to places a person has a legal right to be, and several other states are debating to introduce similar legislation. The controversies surrounding these laws have captured the nation’s attention recently. Despite significant implications that they may have on public safety, there has been little empirical investigation of the impact of these laws on crime and victimization. In this paper, we examine how Stand Your Ground laws that extend the right to self-defense to areas outside the home affect homicides using monthly data from the U.S. Vital Statistics. We identify the impact of these laws by exploiting the variation in the effective date of these laws across states. Our results indicate that Stand Your Ground laws are associated with a significant increase in the number of homicides among whites, especially white males. According to our estimates, between 4.39 and 7.44 additional white males are killed each month as a result of these laws. We find no evidence to suggest that these laws increase homicides among blacks. Our results are robust to a number of specifications and unlikely to be driven entirely by the killings of assailants. Taken together, our findings raise serious doubts against the argument that Stand Your Ground laws make America safer.

Facebook to allow users to share organ donation status

Update 2:
From today, June 25th, this option will be available on facebook in Ireland. As we don't have an organ donor register, it is difficult to see what impact it will have, but it may be an effective method of increasing awareness.


Update:
It seems that organ donation registrations rose by 800% in California yesterday. Impressive.


Facebook rolled out a new option yesterday, whereby users in the UK and US can now indicate on their pages if they wish to be organ donors (it also provides a link to the donor registries which are in place in those countries- Ireland does not currently have a registry).

This change may help donation to become a social norm, and could prompt those who had previously been ambivalent about donating to make a decision. People want to be similar to their friends, and nobody wants to be the odd one out; so if everyone in your timeline has signed up to donate, you may be more likely to do the same.

Additionally, a piece in the New York Times points out that, as this blog has noted previously, ultimately consent for organ donation in many places lies with the family. An individuals' facebook page may serve as an important source of information regarding their wishes for donation if family members have to make a decision about consent.

It will be interesting to track if this leads to a meaningful increase in donation registrations, or a better awareness among friends and family of the wishes of their loved ones. Hopefully this latest tool will be rolled out in Ireland soon.

Research Group Launch

We will formally launch the research group at a one-day workshop in Stirling on October 26th. The purpose of the workshop will be to bring together Stirling faculty, external partners, students, potential students and others and to provide an outline of the research group. Suggestions for talks welcome. I will use this post to update on the session including details of talks.

Relatively lax bankruptcy laws in the US are often cited as a positive.

Training Rocky

Might be helpful for those of you in the difficult stages of a thesis

Cabinet Office: Test, Learn, Adapt.

The latest publication from the Cabinet Office Behavioural Insights Team "Test, Learn, Adapt: Developing Public Policy with Randomised Controlled Trials " is available on this link. 

Online resources for teaching economics

I am going to use this post to keep track of various online resources for teaching Economics. Please feel free to make suggestions. I want to keep it to material that offers formal pedagogical training material. I think anyone teaching Economics or involved in running Economics programmes should follow the developments regarding online delivery of courses by top universities.

Main Resources Relevant to Formal Economics Training (Will Add to This):

1. MIT OpenCourseWare Economics Courses: This is a large part of the MIT Economics Curriculum at Undergraduate and Graduate level.

2. EdX is a new initiative of both MIT and Harvard. It will begin running courses in October.

3. CourseRA has a number of useful courses in Economics.

4. Kahn Academy has many tutorials on most areas of Economics. Mostly pre-college or early undergraduate courses for now.

See below the press conference announcing the Harvard/MIT edX initiative.



Salman Khan talking about the idea behind Kahn academy:

Book Club: The Triumph of the CIty

On Friday June 22nd at 2pm we will be having another virtual book club. This time, the book is 'The Triumph of the City" by Harvard Economist Ed Glaeser. I will post up questions for the discussion tomorrow. 

For those who haven't read the book, there are two excerpts available online:

The first is at The Atlantic, and discusses the benefits of skyscrapers.
The second is from The Scientific American, and it gives a good overview of the main points in the book.

Questions for Book Club:

1.  Best thing for a city is to attract smart people & leave them alone to do what they want. 

What you need for a successful city:

Thriving cities have a mix of educated, wealthy people, and also those who are striving.

Public services like schools/transport

Amenities like restaurants also attract people.

Low prices & sensible planning

2.    People make the city, not places. Following on from this- policy should help poor people not poor places; spending capital on vast capital projects to revitalise a city is unwise.

3.    Low prices are necessary to attract residents. Benefits of unregulated development: they have reduced prices in places like Houston, but have increased sprawl considerably.

3.     Urban Poverty as a least worst option?

4.     Progress and innovation are universally good? Is there ever a case where innovation is a negative & should be reigned in?

5.     Is it fair, if America can’t or won’t stop using cars & reduce their carbon emissions, to ask developing countries like India and China to do so?

6.      “Shrinking to greatness”: Glaeser recommends that the money spent regenerating New Orleans could have been better spent, even by giving a lump sum to survivors to help them to move elsewhere. This may be cost effective, but what do you lose? Do people have a right to have their homes restored after natural disasters?

7.    The city is good for the environment compared to suburuban level. Not all preservation should be encouraged. NIMBYism has costs: results in building in “browner” areas. Influence of climate on growth.

8.     Government policy drives people to the suburbs. Is it right that government policy encourages a particular way of life- suburban living? When should government intervene?

10. Does the book minimise the role of luck or employ retroactive justification? Would Dublin have been featured as an exemplar 5 years ago?

New NBER Working Papers on Development and Behavioural Economics

The Behavioralist Goes to School: Leveraging Behavioral Economics to Improve Educational Performance
Steven D. Levitt, John A. List, Susanne Neckermann, Sally Sadoff

NBER Working Paper No. 18165
Issued in June 2012
NBER Program(s):   ED   PE

A long line of research on behavioral economics has established the importance of factors that are typically absent from the standard economic framework: reference dependent preferences, hyperbolic preferences, and the value placed on non-financial rewards. To date, these insights have had little impact on the way the educational system operates. Through a series of field experiments involving thousands of primary and secondary school students, we demonstrate the power of behavioral economics to influence educational performance. Several insights emerge. First, we find that incentives framed as losses have more robust effects than comparable incentives framed as gains. Second, we find that non-financial incentives are considerably more cost-effective than financial incentives for younger students, but were not effective with older students. Finally, and perhaps most importantly, consistent with hyperbolic discounting, all motivating power of the incentives vanishes when rewards are handed out with a delay. Since the rewards to educational investment virtually always come with a delay, our results suggest that the current set of incentives may lead to underinvestment. For policymakers, our findings imply that in the absence of immediate incentives, many students put forth low effort on standardized tests, which may create biases in measures of student ability, teacher value added, school quality, and achievement gaps. 

http://www.nber.org/papers/w18165.pdf

The European Origins of Economic Development
William Easterly, Ross Levine

NBER Working Paper No. 18162
Issued in June 2012
NBER Program(s):   EFG   POL

A large literature suggests that European settlement outside of Europe shaped institutional, educational, technological, cultural, and economic outcomes. This literature has had a serious gap: no direct measure of colonial European settlement. In this paper, we (1) construct a new database on the European share of the population during the early stages of colonization and (2) examine its impact on the level of economic development today. We find a remarkably strong impact of colonial European settlement on development. According to one illustrative exercise, 47 percent of average global development levels today are attributable to Europeans. One of our most surprising findings is the positive effect of even a small minority European population during the colonial period on per capita income today, contradicting traditional and recent views. There is some evidence for an institutional channel, but our findings are most consistent with human capital playing a central role in the way that colonial European settlement affects development today.

http://www.nber.org/papers/w18162.pdf

Mappiness TEDx Talk

A nice talk from George MacKerron from a 2011 TEDx event on his iphone app Mappiness

June 15th Workshop

Thanks to everyone who attended and spoke at the 15th June Workshop. It was a very full day and the range of talks was great. For no particular reason, below are some photos from the talks. Our next workshop will be in October and I strongly encourage people to make suggestions for talks. The rationale for organising these workshops is to allow an outlet for work to be presented at various stages from initial stages to work that is in final stages of submission and so on. It is particularly important that PhD students present work at different stages. Another important aspect of the workshop is to give people thinking of working in our group in Stirling a chance to get a sense of the range of projects ongoing. Furthermore, the sessions provide a good venue for presenting work to people from other disciplines and hearing approaches from other disciplines. For example, it was great to have a talk on network-modelling from a computer scientist and to hear the potential applications of behavioural economics in this area. 

LSE CEP Mental Health Policy Group Report: How Mental Illness loses out in the NHS

The connections between mental health and economic issues such as skills development, wealth and labour market performance are some of the most important issues of our time. How mental health services are funded and resources devoted more generally to alleviate mental health problems are an important feature of this. This new report by the CEP Mental Health Policy group argues that mental health funding is massively inadaquate in the UK and that the balance between physical and mental health funding is grossly disproportionate to the relative burdens of illness between the two. I hope this is an issue and report that is widely discussed. In our own research group, the connection between psychology, mental health and economics is a dominant theme and we will increasingly focus on potential policy implications of work examining the connection between economics and mental health.

Peter Ubel: Consumer Irrationality and Market Failure

Interesting discussion from Duke's Peter Ubel on consumer irrationality and the market. When should consumers be protected from themselves? With particular focus on obesity.

Traffic Congestion and Infant Health: Evidence from E-ZPass

Traffic Congestion and Infant Health: Evidence from E-ZPass
Janet Currie and Reed Walker
American Economic Journal: Applied Economics, 3(1): 65–90.

Abstract
We exploit the introduction of electronic toll collection, (E-ZPass), which greatly reduced both traffic congestion and vehicle emissions near highway toll plazas. We show that the introduction of E-ZPass reduced prematurity and low birth weight among mothers within 2 kilometers (km) of a toll plaza by 10.8 percent and 11.8 percent, respectively, relative to mothers 2-10 km from a toll plaza. There were no immediate changes in the characteristics of mothers or in housing prices near toll plazas that could explain these changes. The results are robust to many changes in specification and suggest that traffic congestion contributes significantly to poor health among infants. (JEL I12, J13, Q51, Q53, R41)

http://www.columbia.edu/~rw2157/research/CurrieWalker_EZPass_2011.pdf

Early Career Fellowships Stirling

These 2-year research positions offer the opportunity for outstanding early career researchers embarking upon an independent research career.

The fellowships will provide a fixed-term, research only contract on a salary on the Grade 7 scale (£30,122 - £35,939) and a grant for research expenses of £5,000 per annum.

The University of Stirling is offering 8 Postdoctoral Fellowships across its Academic Schools.  Fellows will be assigned a senior mentor from their host Academic School who has an excellent personal record on research publication and external funding.

Proposals are invited from high calibre early career researchers.  Prior to submitting a proposal you are strongly encouraged to identify and approach a potential mentor within a School.  All proposals MUST be accompanied by a letter of support from the relevant School.

 http://www.stir.ac.uk/schools/  

The closing date is 19 July 2012. For more information on any project and the application process please submit an enquiry in the form below ensuring you include the title of the project you are interested in.

Aint nobody got time for that

Tried to think of an economics angle on this (well, the title points to time constraints I suppose). It's a viral video remixing an interview with a woman describing an apartment fire. Worth watching the original interview.

Stirling Workshop Series in Economics, Psychology and Policy

The second in our series of workshops on Economics, Psychology and Policy takes place from 9am to 5pm on June 15th in the Stirling Cottrell Building. The purpose of this workshop is to bring together researchers working on a range of exciting topics spanning disciplines including economics, psychology, and mathematics. Details of the previous session are here. Please email claremdelargy@gmail.com to confirm a place.

Our new Economics and Psychology Research Group will launch in October. Our preliminary webpage is here and twitter feed is here. We very much welcome suggestions for developing the group, ideas for collaboration and offers for sponsorship of workshops and events.

Schedule

9.00 Clare Delargy (University College Dublin) "Gender and SES differences in earnings expectations: survey and field experiment evidence".


9.30 Professor Nick Hanley (University of Stirling) "Information effects in random utility models"


10.00 Dr. David Comerford (Duke University) "Cigarette substitutes or Nicotine Replacement Therapies? implications for public health"


10.30 BREAK


10.40 Eimear Crowe (University College Dublin and St. Vincent's Hospital, Dublin) "Examining social interaction effects on mood using Day Reconstruction"


11.10 Dr. AlbertoMontagnoli & Dr. Mirko Moro (University of Stirling). "Mood and Decision Making"


11.40 Professor Roger Sugden & Malida Mooken (University of Stirling) "Capabilities approach to academia"


12.10 LUNCH


13.10 Dr. Adam Kleczkowski & Dr. Savi Maharak (University of Stirling) "Controlling epidemic spread by responding to risk: Do it well or not at all"


13.40 Dr. Aniko Biro (University of Edinburgh) "An analysis of mammography decisions"


14.20 Dr. Michael Daly (University of Aberdeen) "Self-control, smoking and policy effectiveness".


14.50 BREAK

15.00 Dr. Georgios Panos (University of Stirling). "Risk tolerance and entrepreneurship"

15.30 Professor Liam Delaney (University of Stirling) "The scarring effect of unemployment on psychological distress 17 years later: estimates controlling for pre-unemployment distress and childhood psychological factors"


16.00 Dr. Pete Lunn (The Economic and Social Research Institute, Dublin) "A Good Deal on My Mind: Experiments On Willingness to Exchange”


17.00 END

Angela Merkel thinks we are at work

Another of the phenomenon thrown up by the recession. BBC article on Irish fans heading off to Poland/Ukraine. Not sure what all this says about attitudes in the Eurozone. 

German Inflation Aversion and Policy Preferences

Higher rates of inflation aversion among German citizens are frequently mentioned in the current debate as a constraint on monetary and fiscal policy in the Eurozone (see e.g. here here here). In essence, the argument is firstly that German psychological characteristics, including memories of past hyperinflations, condition German citizens to be more inflation averse. This, in turn, leads them to be more supportive of fiscal austerity measures and tighter monetary policy. Given that German politicians may share these characteristics and also need to get elected, it is argued that such characteristics constrain EU policy options to the extent that such policies rely on the support of such a large partner as Germany.

There is historical evidence supporting higher rates of inflation aversion in the German population and Issing (2005) has argued that this had a role in Bundesbank policy. Shiller's comparison of German inflation attitudes to Brazilian and US attitudes lends support to the view that Germans were more inflation averse (Shiller 1997). Support is also provided by a 2004 by paper by Kenneth Scheve. He modelled responses to the question "What do you think the NATIONAL government should give greater priority to, curbing inflation or reducing unemployment". His analysis uses the large scale comparative ISSP surveys data between 1976 and 1997. Table 3 in his paper shows country dummy coefficients in a regression model of this question. The Germany coefficient is positive and significant, meaning (with UK as base category) German citizens place more weight on inflation than UK citizens, showing similar levels of inflation aversion to New Zealand, Japan and the US. Scheve cautions against the use of the ordering from this regression without further replications. However, he makes the point that there are substantial cross-country variations in inflation aversion that should be considered when modelling issues such as choice of institutional form and variations in economic outcomes.  A 2009 ECB working paper uses World Values Survey data from the 80s and 90s to examine the extent to which memories of hyperinflation might condition higher prioritisation of inflation control. They note in a footnote in their paper that Germans, on average, have higher levels of inflation aversion than other countries. They also argue that hyperinflation experience increases inflation aversion. However, given the amount of people still alive from the German Weimar hyperinflation, it is clearly not a good explanation for German inflation aversion unless intergenerational transmission of historically-effected attitudes is happening. This working paper provides potential mechanisms whereby past inflation experience might transmit into the development of inflation attitudes across generations and the building of inflation averse institution.

Most of the evidence on inflation aversion among German citizens predates the euro. More recently, Berlemen (2011) examines Eurobarometer data from 2007-2010. Figure 1 in his paper, linked here, shows German citizens as below average in terms of their perception of inflation as a problem. However, as noted by the author, this is potentially misleading in the sense that it may be due to policy actions already addressing inflation. Thus, he reweights the answers by taking residuals of worry about inflation from an equation including actual inflation. In Figure 3 in the paper, you can see that on this measure German citizens are above average in terms of inflation concern but ranked 10th. It is hard to comment on the magnitude of the difference from the average citizen but I think it is a lot smaller than what is implied by the basic argument. It must be said though that, while the data is more recent than the Scheve paper, the Scheve measure is a more relevant measure of inflation aversion.

A recent PEW poll (full report here) conducted in US and 8 EU countries on policy attitudes in the Eurozone really does not, in my view, provide strong evidence for Germans being more inflation-focused than other countries. German citizens are happier with the EU and with economic conditions than other EU citizens but they also have substantially lower unemployment and are naturally satisfied to a great extent with job conditions than in other countries. The PEW results show Greeks, with a similar rate of inflation to Germany, being more worried about rising prices. This is a surprising result and might be a fluke of sampling but, in any case, there is no reading of the basic attitude numbers that make German citizens look oddly preoccupied with inflation. The results on page 9 suggest that Germans are no more supportive of austerity policies than French or Italian citizens. To the extent that they are opposed to direct assistance, this is a view they share with France and lag behind British citizens. Nor are they any more favourable to the ECB than other countries. As the PEW authors put it "But in public policy debates – over austerity, bailouts and budgetary sovereignty – German attitudes do not differ greatly from those of other Europeans." PEW is a well-known and reputable survey agency. However, a caveat on any single snapshot must clearly be placed. This is the most recent large-n comparative data that exists but it clearly needs to be viewed as not supporting the view that Germans have special psychological characteristics that are driving their policy preferences rather than proving they don't.

In sum, I find commentary about German national characteristics being a key driver of monetary and fiscal policy in Europe frustrating and over-simplifying. However, the paper by Scheve is convincing that there are national differences controlling for economic factors in policy preferences and it would be interesting to know more about these. The potential for intergenerational transmission might reconcile how events taking place before the vast majority of a population were born might still spillover into policy preferences. The working paper by Farvaque and Mihailov is a clear line of argument in this regard but this is very much an early stage and indicative literature.  Also, there is some evidence from surveys that Germans are more inflation averse than other countries once economic conditions are controlled for. However, this evidence is not conclusive and the most recent paper based on data in the Eurozone finds very weak evidence that German citizens are overly concerned with inflation compared to other countries. Furthermore, the scant evidence that exists on German attitudes to current policy do not show them as being particularly austerity-driven compared to French or British citizens.

If people want to make the claim that psychological characteristics of German citizens are constraining policy in the Eurozone, a lot more work would need to be conducted. Firstly, someone needs to provide convincing evidence that the current generation of Germans are indeed more inflation averse than French, UK and other EU citizens. They also need to demonstrate, contrary to the PEW findings, that this is driving attitudes to policy. Then, at the very least, a plausible model of employment effects of different eurozone options would be needed to confirm that any residual German attitude to particular monetary and fiscal policies was not simply a masked fear of unemployment or relative economic displacement. It may be possible that what people mean by German inflation-aversion is more institutional than residing in actual individual attitudes. Kevin O'Rourke makes the point that the ideas of policy-makers in Germany may be driving the German policy stance more than economic interests. It is potentially testable that German policymakers are pursuing ideological policies out of step with their voters to a greater degree than other countries but does not seem to be the case in the PEW data.


References:

Berlemann, M. (2011). ECB Presidency and Inflation Aversion among the Citizens of European Countries: An Empirical Assessment. CESifo Forum, 2, 88-92. Retrieved from http://www.ifo.de/portal/pls/portal/docs/1/1206763.PDF

Ehrmann, E.,  & Tzamourani, P., (2009). "Memories of high inflation," Working Paper Series 1095, European Central Bank. 

Etienne Farvaque and Alexander Mihailov (2011) Intergenerational Transmission of Inflation. Aversion: Theory and Evidence. Working Paper. Accessed April 2011. 

Issing, O, (2005). "Why Did the Great Inflation Not Happen in Germany?"  FEDERAL RESERVE BANK OF ST. LOUIS REVIEW MARCH/APRIL, PART 2 2005

PEW Research Center:  (2012) "European Unity on the Rocks" Greeks and Germans at Polar Opposites

Scheve, K. (2004). Public Inflation Aversion and the Political Economy of Macroeconomic Policymaking. International Organization, 58(1), 1-34. doi:10.1017/S0020818304581018

Shiller, R. (1997). Why do people dislike inflation? In C. Romer & D. Romer (Eds.), Reducing inflation: Motivtion and Strategy. (pp. 13-65). Chicago and London: The University of Chicago Press. Retrieved from http://www.nber.org/chapters/c8881.pdf

Questions for journal club on neuroeconomics and psychiatry

What is neuroeconomics?

See Loewenstein et al. (2008) for a detailed introduction into how economics, psychology, and neuroscience  are beginning to converge.

What does neuroeconomics have to offer to psychiatry (and vice versa)?

Psychiatric diagnoses are typically based on clusters of symptoms and are inherently atheoretical. Economic concepts may offer a potential integrated computationally based framework for understanding psychiatric problems and even for improving how psychiatric conditions are defined.

What are the economic concepts of key relevance to psychiatry?

Single-dimension utility, marginal rate of substitution, expectation, uncertainty, gain-loss asymmetry, social preferences, time preferences, revealed & real preferences, others?. Each of these is described and their relation to psychiatry and disorder discussed in detail as summarized below:

Single-dimension utility: A global account of all choice behaviour. Studies examining neural valuation networks provide some support for the idea that a global valuation system overlaps with brain areas & networks implicated in psychiatric dysfunction. Monamine neurotransmitters are strongly implicated in both psychiatric disorder and the evaluation of rewards/punishments.

Example of integration of neuroeconomics & psychiatry in this area: Forming a quantitative measure of the severity of depression by examining response to financial incentives.

What does this tell us about the cause or mechanisms involved in depression?

How would the utility function of a depressed person differ from others (higher valuation of costs- including enduring risks)?

How could this research design be integrated with functional imaging/other tools of neuroscience?


Marginal rate of substitution: The basic idea here is the amount of one good a person will exchange/give up for a certain amount of another good. However, addicts often resist substitution from heroin to methadone, from cigarettes to nicotine replacement devices and so forth. Addictive drugs may be readily available (as opposed to more complex rewards), may be valued far more greatly than other goods and may attenuate the value of other rewards.

Is it tautological to say that a low marginal rate of substitution for addictive goods is a risk factor for addiction?

Hasler proposes that people may identify with their disorder and may feel unwilling to give up this part of their identity and compares this to the endowment effect. Alternatively, the symptoms of disorder could be valued (e.g. rituals in OCD, delusional ideas in schizophrenia, body form in anorexia) and people may not be willing to give these up or substitute them for alternative behaviours/thoughts/bodily states and so on.

Is there evidence for the role of synaptic plasticity in the substitution of rewards?


Expectation: Habit learning is affected in many psychiatric conditions leading to dysfunctional symptoms like the avoidance of perceived but non-existent threats (as in PTSD). Some emotional states reflect the expected utility of an anticipated outcome (potentially anxiety, fear, depression, hope-optimism).

"Hot stove" effect - avoidance brings success and is repeated leading to what Hasler calls biased sampling which will include the neglect of positive alternatives. This failure to explore is key to attachment theories and is one interpretation of why the profound lifetime effects of early childhood maltreatment/abuse occur.

Disengagement is mentioned but not elaborated. It is likely to be an expectation driven effect that is prominent in depression (excessive disengagement) and symptoms linked to perfectionism (failure to disengage).

Uncertainty: Decision to take risks depends on the concavity of the utility function (standard model) and the probability weighting function (prospect theory).

Can neuroticism be construed as a negative attitude towards risk? (certainly linked to poor decision-making in contexts of evaluation of risk as evident for example in a paper by Denburg et al. (2009) on Iowa gambling task performance).

An impaired evaluation of risk may contribute to stress-induced psychopathology, and an aversion to or adverse reaction to the ambiguity inherent in social relationships may be a key component of borderline personality disorder, social anxiety, conduct disorder (what are you looking at?!).

Gain-loss asymmetry: Loss aversion implies that losses loom larger than gains (potentially 2:1) and there is also diminished sensitivity to larger losses (see Fig 2.).

Might anxiety and depression be linked to excessive loss aversion?

Bipolar patients do not appear to show the normal pattern of diminished sensitivity to losses or gains, which is one explanation for their excessive pursuit of rewards and feelings of despair.


Social preferences: Although people are self-interested they also value the well-being of others, often behave altruistically, are averse to inequity, betrayal, and "free-loading". Economic games can be used to produce a behavioural and computational account of social preferences and when combined with neuroimaging a neural account which can be used to estimate the extent of dysfunction.

Examples: The ultimatum game- person A offers B a certain allocation of a sum X, B can choose to accept this allocation or reject it in which case neither receive money.

An exaggerated response to unfairness could place the individual at risk for affective disorders like depression. A diminished response to unfairness could indicate psychopathy (characterized by a lack of moral disgust).

Example: Trust games - person A gives B a certain allocation of sum X, B can choose to send some of the allocation back to A (this is typically doubled or tripled). Deficient in trust shown amongst those with borderline personality disorder.

Depression has been characterized as an involuntary defeat syndrome which is an adaptive response to hierarchical conflict indicating one has accepted a low rank. This can be studied through economic games (e.g hawk-dove).


Time preferences: Intertermporal choices - trade-off gains and losses over varying time horizons (e.g. any credit decision).

Internalizing and externalizing problems are linked to self-control and future orientation (potential overinhibition, overcontrol, excessive future orientation vs. disinhibition, lack of control, present orientation). Present-orientation could be a risk for substance abuse, ADHD, mania, conduct disorder, impulsive aspects of psychopathology (potentially suicide risk, psychopathy).

Anhedonia is associated with an inability to experience contemporaneous rewards. Abraham Lincoln example - anhedonia may facilitate future orientation for which Lincoln was renound. Acute depression, on the other hand, is linked to hypersensitivity to future negative outcomes.

Becker & Murphy rational addiction model predicts that present-orientated people will be at risk of addiction and that their consumption may be utility maximizing. Hasler proposes that the model enables a precise understanding of how stress affects consumption, the need for quick withdrawal of addictive substances, and the need for a substance even if the positive affective impact has diminished.

Though there is evidence that time and risk preferences are similar to the general population in those with psychiatric disorders such as addiction and bulimia nervosa, it is also clear that visceral factors (Loewenstein, 1996) can induce a present-orientation and that such factors are typically not fully considered when people plan goal directed actions.

Revealed and real preferences


Is there a disconnect between revealed and real preferences in psychiatric disorders?

Important problem, as up to 50% of the population experience a psychiatric disorder during their lifetime (Kessler et al., 2005) and it is likely that mild psychiatric symptoms were selected for throughout our evolutionary history.

Example of alcohol addiction in healthy present-orientated people as potentially representing a rational utility maximizing strategy.

Early experiences may condition exploratory behaviour and the susceptibility to learned helplessness where people become underresponsive to the pay-off probabilities of the current environment.

Can CBT be considered a corrective force ameliorating the disconnect between desired and revealed outcomes and thus eliminating subobtimal utility maximization?

How is normality and optimal functioning currently defined in psychiatry at what might neuroeconomics add to this?

What would psychiatry look like if it were computationally based or in a more extreme scenario if it were based on economic concepts as described above?

What does neuroeconomics bring to psychiatry that it has been lacking? A systematic understanding of motivation, effort and reward may counterbalance the recent focus on executive functioning deficits (e.g. attentional impairment & memory problems).

Suggestions for Blog

As can be seen, making some alterations to the blog and nesting it within the newly developing research group. Would very much welcome suggestions for things people want to see the blog used for. As usual, feel free to email me or put things in the comments. Time constraints have precluded longer posts and I really hope to do more of this over the summer. The introduction of online google hangout sessions has been a brilliant addition and it's certainly something we will be continuing. The blog has also played a very useful role in the development of the workshop programme. I have got a number of positive emails about using the blog to keep an up-to-date list of funding opportunities. The number of posts is slightly less than in previous incarnations, in part owing to the fact that many of contributors have moved to different locations and also that twitter is now the main way of distributing one-shot paper links. The blog will also be used in the development of a postgraduate and possibly undergraduate programme in Economics and Psychology here.

Continuous Delay Aversion Test

As an illustration of the gap between ideas and implementing their measurement, at the other end of the spectrum from the elegant insights of Hasler reproduced by Liam below is another account of time preferences, from probably the most peculiar task I've seen in the cognitive neuroscience literature. It is called the Continuous Delay Aversion Test, where the participant is instructed to prod a virtual donkey into spewing gold which is quite common in fairy tales seemingly though I must have missed that bit in Shrek!

Instructions from Muller et al. (2006)
"you have to collect gold from each of 30 “gold-donkeys”, which let out gold from their mouth, as in the fairy tale. The more gold you collect, the more of the video clip you can see. If you collect all the gold from the whole herd, you can see 120 s of the chosen clip. The donkeys only have a certain amount of gold to give. The gold is flowing very fast at the beginning, but soon the flow diminishes and finally the donkey is completely dried out and has no more gold to give. Because donkeys are stubborn, from time to time the donkeys stop letting out the gold, although they will still have some in their stomach, indicated by the stopping of the flow of gold and the appearance of a red question mark. In this case, you can wheedle more gold out of the donkey by pressing this button. If you don’t want to wait any longer for gold of a certain donkey, you can call the next donkey by pressing this button here."

 

Durer Melancholia

The paper that Michael picked out for the online journal session is an excellent read. One "bonus feature" is an interpretation of Albrecht Durer's engraving Melancholia I. Hasler comments on the engraving:  "The depressed, frustrated mood of a female figure is associated with a half-empty hourglass, implying the running out of time, which is a frequent concern of patients with the inability to experience immediate rewards. Future-orientation seems to be an adaptive response to this inability."

Journal Club on Neuroeconomics and Psychiatry

The application of economic concepts (e.g. risk, time, social preferences) to psychiatry may represent a method of forming a computational account of psychological dysfunction that integrates insights from neuroscience, mathematics, economics, and psychology.

This Friday's online journal club (2pm) will focus on the below article:

Hasler, G. (2012). Can the neuroeconomics revolution revolutionize psychiatry? Neuroscience & Biobehavioral Reviews, 36, 64-78

Scottish Summer School Psychology and Economics

PhD students can still register for the session on psychology and economics at the DTC Summer school on June 20th by emailing events@socsciscotland.ac.uk

My component of the session will look at techniques such as anchoring vignettes, measurement of preferences in surveys, integration of psychometric measures into econometrics and related topics

http://www.socsciscotland.ac.uk/events/summer_school/june_2012/psyec

I will also be giving a plenary talk on Stress and Financial Decision Making based on co-authored with Colm Harmon, Gunther Fink and David Canning: 

Wednesday 20 June

Liam Delaney (University of Stirling) | Stress and Financial Decision Making: Evidence from the laboratory and the field         

The assumption of stable time and risk preferences is crucial to several economic models. However, a large recent literature points to non-stationarity in time preferences in several empirical settings (e.g. McClure et al 2007). Understanding the extent and biological basis of such instability is important. In particular, understanding the role of biological stress processes in generating fluctuations in preferences, valuation and choices is a key task for this literature. Many important economic outcomes are generated by choices made often in stressful and unfamiliar environments and it is questionable whether the preferences held by individuals when construing tradeoffs in these environments are identical to preferences held when thinking about such tradeoffs in the abstract. Examples include making life-changing decisions about debt in the environment of a financial institution under perceived time pressure and making decisions about job-offers in the context of welfare centers and so on. Furthermore, many economic outcomes generate stress and it is possible that the stress generated by such outcomes yields decision-making patterns that are inconsistent with rational behaviour e.g. suboptimal debt resolution mechanisms and inefficient job search patterns (e.g. Krueger and Mueller 2010, Mullainathan 2011).  While a body of psychological literature exists examining the effect of stress on decision-making, this literature is still very incomplete in application to large economic questions. In particular, we have very little understanding of how stress influences the types of preferences core to economic decision making and economic models and almost no evidence at all of the economic significance of such effects, whether they are substantial enough to merit a change in core models of economic decision making and ultimately design of major policy institutions such as welfare mechanisms and regulatory structures for financial marketing and bankruptcy resolution. Our study investigates the effects of acute stress on financial decision-making, subjects were invited to participate in two independent laboratory sessions. During both sessions, subjects were asked to respond to two blocks of financial decision tasks. After the first block, which lasted approximately 25 minutes, respondents were randomly assigned into three groups: a control group, who did not receive any stressor, a cognitive stressor group, and a physical stressor group. Respondents assigned to the cognitive stressor protocol were subjected to a series of IQ questions, designed to increase in difficulty such that all participants would fail the tasks eventually. Under the physical stressor protocol, subjects were asked to place both of their feet into ice-cold (4°C, 40°F) water, a “cold pressor test†which is widely used in the medical literature, and generally induces a large jump in blood pressure and heart rates.  After the stressor, individuals were asked to respond to a second set of financial questions. We find that exposure to stress significantly increases the degree of discounting and risk aversion displayed by individuals, and leads to large reductions in the respondents’ willingness to learn about investment options before taking their final decision.