IAREP Conference

I was at the IAREP conference with Kevin and Michael last week, and saw some interesting papers.

Al Roth from Harvard gave the Kahneman lecture, in which he examined how repugnance sometimes constrains transactions and markets. He covered a range of examples, "from slavery and indentured servitude (which once were not as repugnant as they now are) to lending money for interest (which used to be widely repugnant and is now not), and from bans on eating horse-meat in California to bans on dwarf tossing in France." The main application though
was to look at laws against the buying and selling of organs for transplantation. There was also an Irish example (page 25 of Roth's presentation) about article 40 (6,1) in the Irish constitution: "The publication or utterance of blasphemous, seditious, or indecent matter is an offence which shall be punishable in accordance with law."

Piotr Gasparski (Warsaw School of Social Psychology) talked about the preliminary estimate fallacy, or Why We Spend More Than We Planned. The concept is introduced by analogy to the planning fallacy. I'll nominate this paper as the most relevant from IAREP to the upcoming Budget on October 14th.

Daniel Egan (Barclays Wealth) gave a talk on Linking Psychometrically Measured Financial Risk Tolerance With Choice Behaviour. Using a stated choice experiment, he showed that individuals that indicate greater risk tolerance on the Barclays psychometric scale also indicate that they are willing to bear greater risk. Egan also gave a paper on Cross Cultural Variation In Financial Risk Perception And Risk Tolerance. It examined the effect of attitude to risk, risk tolerance and returns expectations on stated portfolio choices. These micro-level factors were shown to account for cross-cultural variation.

Also, the Barclays Insights page is worth looking at. In association with the Economist intelligence Unit, they have produced a report entitled Breaking the Mould: A Question of Personality. The conclusion is that "by creating a picture of investors based on their attitudes to risk, performance, objectives and other measures, behavioural finance is helping to create tailored portfolios that match the psychological profile of each individual."

Tom Eikebrokk gave a paper that he and his wife (Ellen Nyhus) are writing about the Consideration of Future Consequences Scale (CFC). They examined the factor structure of the 12-item CFC scale. "CFC is defined as a stable individual trait describing the extent to which people consider distant versus immediate consequences of their behaviour... Degree of CFC is found associated with behaviour relating to health, academic achievement, environmental and financial behaviour."

The Eikebrokk and Nyhus paper is the first validation study using panel data from a large representative sample (the Dutch DNB Household Survey from the CentERdata). The authors found that a 3-factor version of the scale fits the DNB household data best. They also mentioned an interesting paper by Joiseman et al (2008) which separates the CFC items according to the near and distant future. This is an interesting angle in relation to empirical work on micro-level behaviour such as human capital investment. In other words, it may only be the "distant future" items in the CFC that would pick up the propensity to invest in human capital.

Empar Pons gave a paper on Non-cognitive Traits And The Gender Wage Gap. The paper indicates that "part of the unexplained term that we observe in the traditional human capital analysis may not be due to discrimination but rather caused by the omission of important non-cognitive variables." The paper explores the effect of Locus of Control, Consideration of Future Consequences and the Big-Five Personality Traits.

Finally, Stefana Della Vigna gave the Up and Coming Bright Young Thing Session on The Economics Of The Media: A Behavioral Take. He focused on "how evidence from the field has played a growing role in behavioural economics over the last ten years, and how natural experiments, and in particular the ones using media data, can provide such evidence." He discussed two distinct topics based on recent articles published in the QJE. The first was "persuasion" --- presented using field evidence from the staggered introduction of Fox News in local cable markets in the US (and the effect of this on voting).

The second topic in Della Vigna's talk was the impact of arousal due to exposure to media violence. Della Vigna compared "the level of violent crime on weekends when blockbuster violent movies are released, compared to other weekends (everything else held constant)." The data used was very novel, including an examination of the www.imdb.com movie database! Kevin posted up a NBER paper by Della Vigna on the blog before: Psychology and Economics: Evidence from the Field, and Michael gave some interesting comments on it. Its now forthcoming in the JEL.