Links 29.4.15

1. Charlie Munger on academic economics' strengths and weaknesses from Farnam Street.

2. Lead Exposure and Behaviour: Effects on Antisocial and Risky Behavior Among Children and Adolescents (Reyes, 2015). NBER working paper.
Abstract: It is well known that exposure to lead has numerous adverse effects on behavior and development. Using data on two cohorts of children from the NLSY, this paper investigates the effect of early childhood lead exposure on behavior problems from childhood through early adulthood. I find large negative consequences of early childhood lead exposure, in the form of an unfolding series of adverse behavioral outcomes: behavior problems as a child, pregnancy and aggression as a teen, and criminal behavior as a young adult. At the levels of lead that were the norm in United States until the late 1980s, estimated elasticities of these behaviors with respect to lead range between 0.1 and 1.0.

3. What’s the most important thing in statistics that’s not in the textbooks?  from Andrew Gelman..

4. The deadline for abstract submissions for the Behavioural Science workshop for Phd students is tomorrow.

5. Economic, neurobiological, and behavioral perspectives on building America’s future workforce (Knudsen et al., 2006). PNAS.
Abstract: A growing proportion of the U.S. workforce will have been raised in disadvantaged environments that are associated with relatively high proportions of individuals with diminished cognitive and social skills. A cross-disciplinary examination of research in economics, developmental psychology, and neurobiology reveals a striking convergence on a set of common principles that account for the potent effects of early environment on the capacity for human skill development. Central to these principles are the findings that early experiences have a uniquely powerful influence on the development of cognitive and social skills and on brain architecture and neurochemistry, that both skill development and brain maturation are hierarchical processes in which higher level functions depend on, and build on, lower level functions, and that the capacity for change in the foundations of human skill development and neural circuitry is highest earlier in life and decreases over time. These findings lead to the conclusion that the most efficient strategy for strengthening the future workforce, both economically and neurobiologically, and improving its quality of life is to invest in the environments of disadvantaged children during the early childhood years.

The Economic Burden of Non-Communicable Diseases

The global burden of non-communicable diseases (NCDs) is expected to increase in the coming decades as the total global population rises along with the proportion of the population in older age groups. The overall impact of chronic disease on population health in developing countries will be substantial, particularly for conditions such as hypertension and cardiovascular disease. Many low and middle income countries are in the midst of an epidemiological transition, with the dominant cause of mortality shifting from infectious disease to NCDs, and a rise in the average age at death. In some cases, urbanisation and rapid economic development have brought behavioural and lifestyle changes, leading to a rise in the prevalence of NCD risk factors such as smoking, poor diet, and sedentary lifestyles. Globally, NCDs are responsible for 66 percent of all mortality, and account for 54 percent of healthy life years lost, as measured by Disability-Adjusted Life Years (DALYs). 

There is a substantial amount of existing evidence on the impact of NCDs on individual wellbeing, however there is less evidence on the economic effect of chronic disease on society as a whole. NCDs can impact on growth in a number of ways, including through reduced reductions in effective labour supply (including productivity, early retirement, and morality), diversion of productive savings towards medical expenditure, and reduced government capacity to invest in infrastructure or education. 

In a recent report for the World Economic Forum (Economics of Non-Communicable Diseases in Indonesia, Bloom, D. E., Chen S., McGovern M., Prettner K., Candeias V., Bernaert A. and Cristin S., World Economic Forum, 2015), we estimate the economic burden of NCDs in Indonesia over the period 2012-2030 to be $ 4.47 trillion. 

http://www.weforum.org/reports/economics-non-communicable-diseases-indonesia

Summaries of the report are available here:

http://blogs.wsj.com/briefly/2015/04/21/the-cost-of-chronic-disease-in-indonesia-the-numbers/

http://www.cnbc.com/id/102603446

Details of the methodology are provided in our earlier paper:

Bloom, David E., et al. "The macroeconomic impact of non-communicable diseases in China and India: Estimates, projections, and comparisons." The Journal of the Economics of Ageing 4 (2014): 100-111. http://www.sciencedirect.com/science/article/pii/S2212828X14000206

 

See also our non-technical summary:

Bloom, D.E., Cafiero-Fonseca, E.T., McGovern, M.E., Prettner, K. (2014): "China and India's Decent into Chronic Disease: Killing Themselves Slowly." The Milken Institute Review, Q2, 2014. http://assets1c.milkeninstitute.org/assets/Publication/MIReview/PDF/24-33MR62.pdf  

Workshop on "The Behavioural Science of Self-Control" (December 4, 2015)

On December 4th 2015, we will host a workshop on “The Behavioural Science of Self-Control: Integrating Economic and Psychological Perspectives”. The workshop is funded by the Scottish Institute for Research in Economics (SIRE). It will take place in the Court Room in Stirling University.
 
You can sign up for the Workshop here.

Self-control is an important human capacity that prevents people from acting on impulses. It has been identified as a key variable in both economics and psychology. This workshop aims to bring together researchers from both disciplines in order to discuss different perspectives on self-control, overcome artificial disciplinary boundaries, and integrate perspectives into a more coherent behavioural science of self-control. 

Figure 1: The Behavioural Science of Self-Control

In economics, self-control is often defined as the ability to stick to prior plans and thus have dynamically consistent time preferences. The methods typically used in economics to analyse self-control problems are mathematical formalisations, secondary data, and incentivised delay discounting questions in experiments or large scale surveys. In psychology, self-control is defined as the ability to regulate one's behaviours, emotions, and thoughts. Psychologists typically use scales in surveys and experimental manipulations to analyse self-control (see Figure 1).

We would like to explore possibilities to combine theoretical and methodological approaches from economics and psychology in novel ways in order to generate new hypotheses, find new ways to test existing hypothesis, compare different theoretical and methodological approaches, figure out new ways to formalise self-control problems, and take the first step toward a behavioural science of self-control. Themes that might be discussed at the workshop include:

• Different measurements of self-control in economics and psychology.
• The roles of temptation and willpower in economics and psychology.
• Economic and psychological consequences of different degrees of self-control.
• The effectiveness of interventions to improve self-control.
• The mathematical formalisation of insights from self-control research.

Day Schedule

9.00am to 9.30am: Registration

9.30am to 9.45am: Introduction

9.45am to 10.30am: Dr Leonhard Lades "Present Bias and Everyday Self-Control Failures"

Abstract: Present bias is the economist's favorite explanation for self-control problems. Various studies show that present bias as elicited in monetary delay discounting tasks is associated with real word behaviors that are affected by self-control, such as eating, smoking, consumption, and financial decision-making. However, recent research suggests that monetary delay discounting tasks do not provide useful information about individuals' preferences, and it has not yet been established whether present-bias indeed measures self-control problems. We directly test whether individual differences in present bias are linked to individual differences in self-control as it affects everyday decision-making. We elicit time preferences avoiding most confounds mentioned in the literature, trait temptation and trait self-control using scale measures, and everyday temptations, self-control attempts, and self-control failures using a day reconstruction methodology. In a sample of 142 participants we find that experimentally elicited present bias is not associated with self-control problems, neither when measured on the trait level nor in everyday life. The results are in line with a clear distinction between discounting and visceral influences as determinants of decision making. The results can also explain why recent studies find only weak empirical associations between present bias elicited in monetary delay discounting tasks and life outcomes in non-monetary domains.

10.30am to 11.15am: Prof Kirsten Rohde "Measuring Decreasing Impatience".

Abstract: Decreasing impatience is a behavioral phenomenon which can lead to time-inconsistent behavior. I introduce a measure of decreasing impatience, the DI-index, which can conveniently be elicited in experiments and surveys. The DI-index measures the change of impatience independently from the level of impatience. It is generally applicable and does not require choices to satisfy a specific discounting model. It can, for instance, also be computed for people with increasing or constant impatience and even for people who do not satisfy the discounted utility model. The DI-index cannot only be used to measure decreasing impatience, but also to characterize and test various discounting models.
 

11.15am to 11.45am: Coffee

 

11.45am to 12.30pm: Prof Siegfried Dewitte "Behavioral Vaccination and Paling Temptations".

Abstract: Policy is often aimed at curbing the (over)consumption of products that entail health hazards. Building on the truism that the presence of these products fuels their consumption, policy often relies on restricting their availability and accessibility. Acknowledging that this may not always be physically or politically feasible, we explored if the unavoidable availability can be harnessed as a mean to reduce the pull of temptations. In a series of studies we showed that physically exposing consumers to food temptations in a context that is incompatible with the consumption of the tempting food reduces the food’s attractiveness and its subsequent consumption. We are exploring the scope of this ‘behavioral vaccination’ effect for different samples, delays, and situations. We are further investigating the underlying mechanism with a view to making the technique more effective, efficient, and widely applicable. 

12.30pm – 1.30pm: Lunch

1.30pm – 2.15pm: Dr Michael Daly "Self-Control, Time Preferences, and Health and Well-Being Across the Lifespan".  

Abstract: Drawing on three population samples, we show that informant ratings of child self-control and choice-based measures of impatience in adulthood predict subsequent health and well-being. We identify health damaging behaviours including smoking and obesity and socioeconomic success including social mobility, savings, leadership progression, and employment as feasible pathways from self-control to later health and well-being. The cumulative influence of self-control and impatience on behavioural and economic outcomes can be used to produce a lifespan model of the health and well-being benefits of self-control. Such a model could inform estimates of the potential societal benefits of large-scale intervention programmes targeting self-control and impatience early in life.


2.15pm – 3.00pm: Prof Charles Sprenger "Judging Experimental Evidence on Dynamic Inconsistency":

Abstract: Models of dynamically inconsistent decisionmaking are among the most prominent in behavioral economics. Such models capture the tensions of temptation and self-control in elegant formulation, delivering intuitive deviations from the standard model of intertemporal choice, and providing novel prescriptions for policymakers. In this brief paper, I attempt to judge the experimental literature on dynamic inconsistency, identifying key challenges and innovations, and providing one view as to how the literature may evolve.

3.00pm – 3.30pm Coffee

3.30pm – 4.15pm: Prof Wilhelm Hofmann "On Integrating the Components of Self-Control"

Abstract: As the science of self-control matures, the organization and integration of its key concepts becomes increasingly important. In response, we identified seven major components or “nodes” in current theories and research bearing on self-control: desire, higher-order goal, desire-goal conflict, control motivation, control capacity, control effort, and enactment constraints. To unify these diverse and interdisciplinary areas of research, we formulated the interplay of these components in an integrative model of self-control. In this model, desire and an at least partly incompatible higher-order goal generate desire-goal conflict, which activates control motivation. Control motivation and control capacity interactively determine potential control effort. The actual control effort invested is determined by several moderators including desire strength, perceived skill, and competing goals. Actual control effort and desire compete to determine a prevailing force, which ultimately determines behavior, provided that enactment constraints do not impede it. The proposed theoretical framework is useful for highlighting several new directions for research on self-control and for classifying self-control failures and self-control interventions.

4.15pm – 5pm: Round-table discussion on the future of self-control research.



The 6 SIRE Travel bursaries have been allocated.

You can sign up for the Workshop here. If you have questions, send them to l.k.lades(at)stir.ac.uk.

World Happiness Report

The World Happiness Report was released recently. The main findings are based on the analyses of the Gallup World Poll. A basic overview is below.

The World Happiness Report is a landmark survey of the state of global happiness. The first report was published in 2012, the second in 2013, and the third on April 23, 2015. Leading experts across fields – economics, psychology, survey analysis, national statistics, health, public policy and more – describe how measurements of well-being can be used effectively to assess the progress of nations. The reports review the state of happiness in the world today and show how the new science of happiness explains personal and national variations in happiness. They reflect a new worldwide demand for more attention to happiness as a criteria for government policy. 

The report is published by the Sustainable Development Solutions Network (SDSN).  It is edited by Professor John F. Helliwell, of the University of British Columbia and the Canadian Institute for Advanced Research; Lord Richard Layard, Director of the Well-Being Programme at LSE’s Centre for Economic Performance; and Professor Jeffrey D. Sachs, Director of the Earth Institute at Columbia University, Director of the SDSN, and Special Advisor to UN Secretary General Ban ki-Moon

Details of the seven key chapters are below.

Chapter 2, by John Helliwell, Haifang Huang, and Shun Wang, contains our primary rankings of and explanations for life evaluations.
Chapter 3, by Nicole Fortin, John Helliwell, and Shun Wang, presents a far broader range of happiness measures, and shows how they differ by gender, age and global region.
Chapter 4, by Richard Layard and Gus O’Donnell, advocates and explains the use of happiness as the measure of benefit in cost-benefit analysis.
Chapter 5, by Richard Davidson and Brianna Schuyler, surveys a range of important new results from the neuroscience of happiness.
Chapter 6, by Richard Layard and Ann Hagell, is aimed especially at the happiness of the young – the one-third of the world population that is under the age of 18 years.
Chapter 7, by Leonardo Becchetti, Luigino Bruni, and Stefano Zamagni, digs deeper into the ethical and community-level supports for happiness.
Chapter 8, by Jeffrey Sachs, discusses importance of social capital for well-being and describes ways that societies may invest in social capital in order to promote well-being.

Irish Economics and Psychology One-Day Conferences

Below are the programmes for the seven Irish workshops that have been organised so far. The 8th in the series will take place in the ESRI on November 27th. The call for papers is here.

Seventh Economics and Psychology One-Day Conference

The seventh annual one day conference on Economics and Psychology, co-organised by researchers from UCD, ESRI and NUIM, took place on October 31st in the UCD Geary Institute. The purpose of these sessions is to develop the link between Economics, Psychology and cognate disciplines in Ireland. A special theme of these events is the implications of behavioural economics for public policy though the workshops have covered work across all areas of intersection of Economics and Psychology. Programmes from the previous six events are here.

Programme:

09.00-09.20: Registration

09:20-09:30: Introduction

09:30-10:00: Dr. Michael Daly (Stirling)
Time preferences predict inflammation in later life
Abstract: 
Prominent economic and psychological models suggest that impatient individuals with high discount rates invest less in their health leading to adverse physiological consequences (Grossman, 1972; Hall & Fong, 2007). The aim of this study is to test, for the first time, whether time discount rates elicited from an incentivised experiment become biologically embedded via changes in C-reactive protein (CRP) and fibrinogen levels over time. The sample was drawn from the population-based English Longitudinal Study of Ageing. Those who completed a preference module and provided blood plasma samples at two time-points for analysis were included in the study (n=427; Age=63.6 (SD=5.7); 52.8% Female). Discount rates were calculated from a set of 12 choices between smaller sooner and larger later rewards (e.g. £25 in two weeks or £30 in one month) where the participant won the value of a randomly selected choice (median reward £28). Our results indicate a substantial relationship between high discount rates and high levels of inflammation two years later as gauged by CRP (β=.18; p<.001) and fibrinogen (β=.1; p<.05) in analyses which adjusted for age, gender, marital status, wealth and prior inflammation levels. This pattern was robust to the inclusion of controls for BMI, cardiovascular disease, arthritis, other long-term illnesses, smoking, physical activity, and alcohol consumption. Further adjustment for cognitive functioning and the Big Five personality traits did not affect the associations observed. This study provides strong evidence that incentivised elicited discount rates robustly predict longitudinal changes in inflammation in a national sample.

10:00-10:30: Marek Bohacek (ESRI)
The Integration of Visual, Numeric and Categorical Information in Judgements of Value
Pete Lunn, Marek Bohacek*, & Jason Somerville, ESRI and Trinity College Dublin
Abstract:
We investigate how accurately consumers can integrate information about multiple product attributes into judgements of value, while manipulating the nature of the attributes. Using a 2AFC “objective valuation” (OV) task, we compare performance in multi-attribute judgements when attribute magnitudes are provided as visual cues, numeric magnitudes, or between two and four categories of quality. Across three experiments with different products, we find no improvement in the accuracy of judgements when attribute magnitudes are provided as numbers, rather than as visual cues. We do find small improvements when an attribute consists of just two categories (good versus bad), or when categories are correlated with the likelihood of obtaining a surplus relative to a price. Overall, our results suggest that: (1) precise numeric attribute scales do not improve multi-attribute judgement; (2) it is the difficulty of integrating information from incommensurate attribute scales determines performance in multi-attribute judgement.

10:30-11:00: Coffee

11:00-11:45:  Prof. Rowena Pecchenino (NUIM)
The Economic Consequences of Despair
Abstract: 
This paper examines despair, the total loss of hope, from the perspectives of many disciplines to characterize the despairing individual, his motivations, and his capacity for decision-making.  It then examines the extent to which economics has recognized despair and whether economics should incorporate despair into its theoretical and policy analyses, and, if so, how.

11:45-12:30: Dr. Pete Lunn (ESRI)
Do Consumers Value Products they are Familiar with more Accurately? (with Marek Bohacek & Féidhlim McGowan).
Abstract: 
We investigate how the precision of consumer valuations is affected by familiarity with the product. Using a within-subject design, we compare performance in a 2AFC "objective valuation" task across four products: houses, contracts for broadband services, and two unfamiliar computer-generated products. Participants decide whether each product, with a given set of attributes at a particular price, represents good or bad value. The value of the familiar products is objectively defined by two statistical models relating attributes to prices in the market. The same models also determine the mathematical relationship between attributes and prices of the two unfamiliar products, allowing us to identify the effect due to familiarity. Data collection is to be completed by end-September. We will present an initial analysis of the experimental data at the conference.

12:30 - 13:30: Lunch

13:30-14:00: Prof. Liam Delaney (Stirling)
Behavioural Economics and Irish Public Policy 
Abstract: 
This presentation will outline the relevance of the last ten years of behavioural economics and behavioural science for research across a number of domains including pensions policy, financial regulation, education, health and consumer policy.

14:00-14:45: Dr. Edel Walsh, (School of Economics, University College Cork)
An Examination of Life Satisfaction in Ireland: Evidence from the European Social Survey 5 (2010)

Abstract: 
The aim of this research is to establish the most significant factors affecting life satisfaction, at an individual level, in Ireland during the recent economic recession. The global financial crisis significantly impacted the Irish economy and by 2010 Ireland was experiencing its third consecutive year of negative growth. During the period 2007 to 2010 the level and rate of unemployment increased substantially in Ireland with an average unemployment rate of 13.8 per cent being reported in 2010. In addition, unemployment affected men more than women and in particular the 20-24 year age group. Given the well-established link between life satisfaction, income and unemployment, the economic conditions in Ireland in 2010 make it an interesting case to study. The data used in this analysis were obtained from the Irish component of the European Social Survey 5 (2010).

Using both OLS and ordered probit models the determinants of life satisfaction are estimated. The paper also tests if there are significant gender differences in the results but find no significant differences in the determinants of male and female life satisfaction in Ireland at that time. The main findings suggest that unemployment has a statistically significant effect on reducing life satisfaction. Income is found to have a significant, but modest effect on improving life satisfaction. The results also suggest that being young (24 or younger) or old (over 65) and having social connections have the largest positive effects on life satisfaction. Other findings suggest that having children positively impacts on one’s life satisfaction. Living in a rural area of Ireland is a positive factor affecting an individual’s satisfaction with their life. Further significant results indicate that life satisfaction is largely, negatively influenced by marital status (being divorced or separated) and suffering from a disability. The overall findings are important in the context of the current policy focus on well-being in Ireland.

14:45-15:30pm: Dr. Ronan Lyons (Trinity College Dublin & Spatial Economics Research Centre, LSE)
What house price equation do households use? Insights from the Irish housing market, 2003-2014
Abstract: 
Housing is the most important good in the typical household’s consumption basket and the largest asset in its portfolio. Given this, and given that expectations about house prices act as a demand shifter, the measurement of house price expectations is a topic of importance for economic policy. This research attempts to answer two related questions. Firstly, to what extent are expectations backward-looking, rather than based on perceptions of future fundamentals? And secondly, how do households believe that changes in fundamentals will affect house prices? These questions are answered combining national surveys (2003-2008), national and local surveys (2011-2014) and an experimental survey, drawing on methods from the willingness-to-pay literature.

15:30-16:00: Coffee 

16:00-17:00:  Prof. Ruth Byrne (TCD)

The Cognitive Science of the Human Imagination

Abstract: 
The human imagination remains one of the last uncharted terrains of the mind. In everyday imaginative thought, people often create alternatives to reality and imagine how events might have turned out ‘if only’ something had been different. People engage in such flights of the imagination for more than entertainment – psychological experiments show that the alternatives to reality that people create ensure that they learn the causes of outcomes and how to prevent them in the future; they contribute to the experience of emotions such as regret, guilt, relief and hope; and they underlie social ascriptions of blame, responsibility, and fault. The loss of these imaginative thoughts following certain sorts of brain injury has devastating consequences for normal cognition.

New discoveries suggest that, just as experiments have shown that rational thought is more imaginative than previously supposed, so too imaginative thought is more rational than previously supposed.  Cognitive scientists have established that people tend to change the same sorts of things in their ‘if only’ thoughts, such as events within their control, actions rather than inactions, exceptions rather than usual events. These ‘fault-lines’ in the human imagination provide important clues about its logic and its limitations, and indicate that imaginative thoughts are guided by the same principles that underlie rational thoughts. 

Sixth Economics and Psychology One-Day Conference

The 6th in the series of conferences on economics and psychology in Ireland took place on November 29th in NUI Maynooth co-organised by Liam Delaney (Stirling) and Richard Roche (NUIM). The event took place in the Glenroyal hotel which is adjacent to the Maynooth campus. Below is a summary of the day. Thanks to all the attendees and we will contact in the New Year about next year's workshop. 

Programme and Summary

The conference was opened at 9am by Liam Delaney.

9am - 9.30am 


Title: A behavioural examination of the forward rate unbiasedness hypothesis in precious metals markets
Author: Fergal O'Connor, (Trinity College Dublin)

Abstract:

We offer the first examination of whether the gold forward market is an unbiased predictor of the future gold spot rate and find evidence that it is not, especially at longer maturities. We then examine whether this can be explained by behavioural factors such as market optimism and the strength of the market’s reaction to news, developing Aggarwal and Zong’s (2008) approach to allow for investor risk aversion.We show that the gold market generally suffers from overreaction to historical spot price changes over the full period of our sample. The forward premium is found to be optimistic. The market’s forecast errors are sometimes found to be pessimistic but this disappears once we allow for investor risk aversion. Revisions to the market’s forecasted spot price consistently overreact to observed forecast errors. Finally, some of these findings are shown to be dependent on the sample length used.

930am - 10am 
Title: Policy vs Politics in voluntary recycling
Author: Marie Briguglio, (Behavioural Science Centre, Stirling Management School, University of Stirling)

Abstract:
The study explores the role of politics in determining voluntary contributions to public goods, using voluntary recycling in Malta as a case study. Earlier literature provides us with some fairly robust findings on the determinants of recycling:  voluntary participation is driven by moral motives and is suppressed by constraints that households may face. Although some studies have explored the role of political orientation as a determinant of voluntary contributions to the environment, none have attempted to parse out the effect of political attachment to the party in government from ideology. We test the hypothesis that loyalty to the party in government matters, and that it does so independently of ideology or environmental moral motives:  individuals give more to public goods, if their political party is in government and responsible for providing such goods. This, in turn, may be underpinned by stronger efficacy beliefs, trust, in-group identification or even feelings of reciprocity and gratitude to one’s own party. To test this hypothesis, we generate data on recycling behaviour and  intent as well as political behaviour and attitudes from a dedicated nation-wide representative survey (n=1000) conducted in Malta (using Computer-Assisted Telephone Surveys) shortly after the change in government in 2013.  We set out to measure political attachment, political orientation, and environmental moral motives along with other controls necessary to identify their separate impact on voluntary contribution. We also embed a randomised experiment to test the impact on recycling intent (among different political groups) of a 7-word political statement.  These findings start to unpack what much of the literature to date has referred to as “moral motives” and offer practical insights for interventions targeting voluntary participation in the recycling interventions.

10.00am - 10.30am
Title: Notches as Nudges: arbitrary thresholds operate as meaningful targets for promoting home energy efficiency
Authors: David Comerford, Mirko Moro and Ian Lange, (Behavioural Science Centre, Stirling Management School, University of Stirling)

Abstract:

For reasons of efficiency, public health and environmental protection, improving home energy efficiency is a policy goal. Previous research has analyzed the effectiveness of subsidies and tax breaks as incentives. This paper considers the effect of a policy change that was purely informational - the introduction of energy performance certificates (EPCs) for houses from 2007. Before the introduction of EPCs, energy performance was measured in SAP (Standard Assessment Procedure) scores, on a 0-100 scale that gives no normative information. EPCs converted SAP scores to a colour-coded letter grade scale, from A-G. We find using the English Housing Survey that there has been an upward shift in home energy efficiency since the introduction of EPCs, with a disproportionate number of houses clustering at the lowest point on the D scale.

COFFEE BREAK 

10.45am - 11.30am 
Title: Money, Well-Being, and Loss Aversion: Does an Income Loss Have a Greater Effect on Well-Being Than an Equivalent Gain? 

Author: Christopher Boyce, (Behavioural Science Centre, Stirling Management School, University of Stirling)

Abstract:

Higher income is associated with greater well-being, but do income gains and losses affect well-being differently? Loss aversion, whereby losses loom larger than gains, is typically examined in relation to decisions about anticipated outcomes. Here, using subjective-well-being data from Germany (N = 28,723) and the UK (N = 20,570), we found that losses in income have a larger effect on well-being than equivalent income gains and that this effect is not explained by diminishing marginal benefits of income to well-being Our findings show that loss aversion applies to experienced losses, challenging suggestions that loss aversion is only an affective-forecasting error. By failing to account for loss aversion, longitudinal studies of the relationship between income and well-being may have overestimated the positive effect of income on well-being. Moreover, societal well-being might best be served by small and stable income increases, even if such stability impairs long-term income growth.

Link to paper

11.30am to 12.15pm 

Title: Price your Vice: The Action Dynamics of Delay Discounting in a Public Setting

Authors: Denis O'Hora, Maciej Dabrowski, David Crowley, Rachel Carey, Aoife Kervick, (NUI Galway)

Abstract:

Delay discounting, the tendency to discount rewards or losses that occur in the future, is a reliably observed characteristic of human behaviour and the degree to which an individual discounts future rewards and losses has been linked to many behavioural and health problems including smoking, over-eating and alcohol abuse. The current experiment was based in the RISK lab exhibition hosted by the Science Gallery at Trinity College Dublin.  Over 700 participants played a short computer game in which they chose first between amounts of euro and later between amounts of a chosen vice at various delays.  Participants completed the domain-specific risk-taking scale (DOSPERT) and provided demographic details to facilitate an investigation into whether or not degree of discounting predicted risky behaviour.  Participant movement during choice was also tracked to investigate whether conflict during initial decisions was sensitive to the discounted value of the delayed euro/vice reward.  Findings will be discussed in the context of dynamic models of decision making.

12.15pm - 1pm 

Title: How accurately can people resolve trade-offs? 
Authors: Pete Lunn and Marek Bohacek, (ESRI)

Abstract:

We develop and experimentally test an idealised model of how people judge trade-offs between two product attributes, where overall value is determined by their linear combination.  The experimental method employs the standard techniques of forced-choice psychophysics. Subjects value a hypothetical product (a golden egg) the value of which is objectively determined by a consistent formula, i.e. experimental subjects are effectively price-takers. Performance is measured for forced-choice comparisons between the product and a price, where subjects must decide which is worth more, and between two simultaneously presented products. The experiment requires subjects initially to judge the product based on a single dimension (e.g. larger size means higher value), then to judge the product based on a second dimension (e.g. finer texture means higher value), and finally to judge the product based on both dimensions simultaneously. The results reveal that product attributes are mapped onto prices imprecisely and, furthermore, that precision decreases sharply once a trade-off is involved. The accuracy of valuations further deteriorates with the size of the trade-off. Overall, our findings suggest capacity limits in the ability to make apparently simple trade-offs.

LUNCH BREAK 

2pm - 2.45pm 

Title: Dimensional Limits in Multi-Attribute Valuations

Authors: Marek Bohacek and Pete Lunn, (ESRI)

Abstract:

How many attributes can decision-makers simultaneously combine into an overall assessment of value? This question is investigated using a novel experimental design that employs a hypothetical product (a golden egg) the value of which is objectively determined, i.e. experimental subjects are effectively price-takers. The product’s attributes consist of standard visual stimuli, such as size, texture, shape etc., where overall value is determined by a simple linear equation that assigns a weight to each attribute. The task is to learn to value these products over repeated forced-choice trials in which the subject compares a product against a price and must decide which is worth more. We measure performance as a function of the number of attributes that subjects must simultaneously consider. Experiment 1, which employs a representative sample of Dublin consumers (n=36), uses a within-subject design to show that the accuracy of valuations declines rapidly once value is determined by more than one attribute. The results show that it is the number of attributes that governs performance, rather than the nature of them. Experiment 2 then uses a between-subject design to examine whether a group of highly educated and financially literate individuals (n=24) can learn to value these multi-attribute products given exposure to one consistent task, with plenty of practice and feedback. The results confirm the difficulty of combining information across multiple dimensions and reveal that learning is modest. Overall, our findings suggest that there may be important cognitive limits to the ability to make multidimensional judgements of value.

2.45pm - 3.15pm 

Title: "Childhood self-control and unemployment over the lifespan"

Authors: Michael Daly, Liam Delaney, Mark Egan

Abstract: The capacity for self-control may underlie successful entry into the labor force and job retention, particularly in times of economic uncertainty. In an analysis of two large-scale, nationally representative cohort studies of British children (N = 16,676), we found that childhood self-control influenced the emergence and persistence of patterns of unemployment across four decades. A 1 SD increase in self-control reduced unemployment by a quarter or 1.5 percentage points and led to a substantial reduction in the lifetime duration of unemployment, after adjustment for intelligence and social class. Our analysis of monthly unemployment data from before and after the onset of the UK early 1980s recession showed that those with low childhood self-control suffered the greatest increases in unemployment during this period. Whilst the self-controlled avoid unemployment and are resilient to the labor market effects of recession, this group were found to suffer the largest aversive well-being effects from prolonged periods of unemployment. Our results uncover a critical role of self-control in shaping lifespan trajectories of occupational success and in determining how macroeconomic conditions shape population unemployment levels. Accordingly, we recommend a better integration of self-control into labor market activation programmes and a greater focus on self-control in research that aims to understand individual differences in responses to existing programmes.

COFFEE BREAK 

3.30pm - 4.15pm 
Title: “Measuring Investment in Human Capital Formation: An Experimental Analysis of Early Life Outcomes”
Authors:
Orla Doyle (University College Dublin)
Colm Harmon (University of Sydney and IZA)
James J. Heckman (University of Chicago, University College Dublin, NBER and IZA)
Caitriona Logue (University College Dublin)
Seong Hyeok Moon (University of Chicago)

Abstract:

The literature on skill formation and human capital development clearly demonstrates that early investment in children is an equitable and efficient policy with large returns in adulthood.  Yet little is known about the mechanisms involved in producing these long-term effects. This paper presents early evidence on the nature of skill formation based on an experimentally designed, five-year home visiting program in Ireland targeting disadvantaged families - Preparing for Life (PFL). We examine the impact of investment between utero to 18 months of age on a range of parental and child outcomes. Using the methodology of Heckman et al. (2010a), permutation testing methods and a stepdown procedure are applied to account for the small sample size and the increased likelihood of false discoveries when examining multiple outcomes. The results show that the program impact is concentrated on parental behaviors and the home environment, with little impact on child development at this early stage. This indicates that home visiting programs can be effective at offsetting deficits in parenting skills within a relatively short timeframe, yet continued investment may be required to observe direct effects on child development. While correcting for attrition bias leads to some changes in the precision of estimates, overall the results are quite similar.

Link to paper 

4.15pm - 5pm 
Title: The Person in Context: How the individual interacts with their socio-economic environment to determine behaviour and wellbeing
Authors:
Alex M. Wood, (Behavioural Science Centre, Stirling Management School, University of Stirling)
Christopher J. Boyce, (Behavioural Science Centre, Stirling Management School, University of Stirling)
Gordon D. A. Brown, (Department of Psychology, University of Warwick)
Silvio Aldrovandi, (Department of Psychology, University of Warwick)
Michael Daly, (Behavioural Science Centre, Stirling Management School, University of Stirling)

Abstract:

This talk promotes better understanding of the socio-economic determinants of well-being and behaviour through studying how the person interacts with their environment. The programme presented aims to integrate behavioural science which focuses on the person (e.g., psychology) with the social sciences which focus on the structure of society (e.g., economics and management). First, defining "the person" through measurable individual differences, three prospective analyses of  over 6,000 people show that personality characteristics prior to major life events affect reaction and adaptation (e.g., conscientious people gain more happiness following increases in income, but lose greater well-being following unemployment, and more agreeable people recover well-being faster after the onset of disability). Second, defining "the person" through core characteristics that everyone share, evidence is presented from evolutionary biology and cognitive science showing that people have an inherent sensitivity to rank position within a hierarchy. This core rank sensitivity is then used to explain phenomena across economics, health policy, and marketing. The converging evidence shows (a) how people make judgments in each of these fields, (b) why apparent relative judgements effects such as anchoring occur, (c) why income is related to health and well-being, (d) how this research can be used in interventions to promote healthy behaviour. Taken together, the talk illustrates why it is important to incorporate a focus on how individual differences and core human characteristics interact with environment in both research and practice, and more broadly, why it is important to integrate the behavioural and social sciences.

Link to Professor Wood's webpage with many of the papers 

Fifth Economics and Psychology One-Day Conference

This year's conference is being co-organised by researchers in the ESRI and the UCD Geary Institute and will be held in the ESRI. The purpose of the conference is to strengthen the link between Economics, Psychology and cognate disciplines in Ireland. As with previous conferences, a special theme is the implications of behavioural economics for public policy.

The growing interest in and practical application of behavioural economics across the EU, US and UK increases the importance of Irish public policy makers engaging with this literature and this event will provide an important platform for such engagement.  Previous keynote speakers have included international experts such as Arie Kapteyn (RAND), David Laibson (Harvard) and John O'Doherty (Calttech). Papers from the 2011 session on implications of behavioural economics for public policy in Ireland will be published in a special issue of the Economic and Social Review in November 2012.

The two keynote speakers for this year’s conference are:

Professor Robert Sugden and Dr. David Halpern.

Programme (Provisional):

9am - 10.40: Contributed session on behavioural economics  

Michael Dowling (DCU):   "Female Directors and UK Company Acquisitiveness"
Valeria di Cosmo (ESRI): "Estimating the impact of time-of-use pricing on Irish electricity demand"

Richard Roche (NUIM): "Contribution of Neuroscience to Society" 
Denis O’Hora (NUIG): "Cognitive conflict in “Decision Space”: Using Action Dynamics to investigate Decision Making"

BREAK 

11am - 12.30pm: Contributed session on behavioural economics

Brendan Kennely (NUIG): "Assessment systems in economics: A discrete choice experiment"
Michael Daly (Stirling): "Self-Control and Smoking Policy"

David Comerford (Duke and Stirling): "Consumer Sentiment" 

LUNCH 

1.30pm - 2.45pm: Contributed session on behavioural economics

Liam Delaney (Stirling): "Behavioural Economics and Pension Autoenrolment" 

Pete Lunn (ESRI): "Behavioural Economics and Market Failure" 

Keith Walsh (Revenue) "Influencing Taxpayer Behaviour – Applying Behavioural Research in Tax Administration"

BREAK 

3.00pm - 4.00 pm: Keynote session on behavioural economics: I Professor Robert Sugden  

4.00pm - 5.00pm: Keynote session on behavioural economics II: Dr. David Halpern  

Economics, Psychology and Neuroscience Fourth Annual One Day Session:

The final programme for November 25th is below. The speakers are a mix of PhD students, researchers in public institutions and academics. This year’s main session take place at the Geary Institute on Friday November 25th. All are welcome. Please RSVP to geary@ucd.ie There will be a special issue of the ESR based on some of the papers from this year’s session. The panel session will be used to discuss how developments in the recent literature have policy relevance. There is no registration charge.

Programme:

9.00: REGISTRATION


9.15: Organ Donation and Individual Consent- The role of Family Consent in Donation Systems.
Clare Delargy- UCD Geary Institute

9.45: Credit Cards: Friend or Foe.
Yvonne McCarthy - Central Bank of Ireland.

10.15: Understanding Taxpayer Behaviour – New Opportunities for Tax Administration.
Keith Walsh- Revenue Commissioners

10.45: BREAK

11.30: The Role of Economic Psychology in Students’ Term-Time Employment and Academic Achievement.
Martin Ryan- UCD Geary Institute

12.00: LUNCH

13.00: Corruption and Well-Being
Rob Gillanders - University College Dublin

13.30: Subcultures in Household Financial Decision-Making: An Exploratory Study of Risky Asset Ownership in the Netherlands.
Michael Dowling- DCU

14.00:BREAK

14.15: Behavioural Economics and participation in recycling programmes
Marie Brugligio- University of Malta

14.45: Behavioural Economics and Policymaking: Learning from the Early Adopters.
Pete Lunn, ESRI

15.15: BREAK

15.30: Behavioural Economics and the Irish Pension System
Liam Delaney- Stirling University and Geary Institute

16.00: Is the health impact of socioeconomic status explained by objective financial resources or subjective social status?
Michael Daly - Manchester and Aberdeen.

16.30: Panel Discussion

Economics, Psychology and Neuroscience Third Annual One Day Session:

10.00am - 10.30am

Martin Ryan (UCD)  "The Role of Economic Psychology and Non-Cognitive Skill in Students' Lecture Attendance and Academic Achievement"

10.30am - 11am

Liam Delaney (UCD)  "Automatic Enrollment and the Irish Pension System"

11am - 11.20am: Coffee

11.30am - 12pm

Cormac O'Dea (IFS and UCL). "Cognitive function, numeracy and retirement saving trajectories"

12pm - 12.30pm

Marie Briguglio (University of Malta). "Voluntary Pro-Environmental Behaviour".

1230pm - 1pm

Michael Daly(TCD) "How income relates to life satisfaction and daily emotional experience: Evidence from the American Life Panel"

LUNCH

2pm - 2.30pm

Mick O'Connell (UCD) "Variation in 'Returns to Education' and academic performance by country in OECD's PISA science scores"

3pm - 3.30pm

Peter Lunn (ESRI) "What Can I Get For It? A theoretical and empirical re-analysis of the endowment effect."

3.30pm - 4pm Coffee

4pm - 5.30pm: Keynote Speaker.

David Laibson (Harvard) "Natural Expectations and Economic Behavior"

Second Annual Economics and Psychology One-Day Conference

The 2009 conference will take place at the Institute of Bankers in Ireland (IFSC, Dublin) on Friday November 6th 2009. The Institute of Bankers in Ireland is located at 1 North Wall Quay, Dublin 1. 

The purpose of this conference is to provide a forum for the discussion of work at the interface of economics, psychology and cognate disciplines such as neuroscience.

In particular, the event aims to complement existing international forums by providing a platform for discussion among people working in these areas in Irish universities. We welcome applications from Ph.D. students working in this area.

Session1: 10:00-11:20
Chair: Dr. Richard Roche

Martin Ryan, UCD, The Psychology of Survey Responses on Skills-Matching
David Comerford, UCD, Experimental Tests of Survey Expenditure Measures
Eibhlin Hudson, UCD, Measuring Socioeconomic Differences in Child Health
Michael Daly, TCD, Cortisol, Morningness and Well-Being

Session2: 11:40-1:00
Chair: Prof. Rowena Pecchenino

Dr. Richard Roche, NUIM, Neuroeconomics of Time Discounting
Dr. Pete Lunn, ESRI, What's In It For Me? A Computational Theory of Economic Exchange
Dr. Stephen Kinsella, UL, Electricity Price Auctions: An Experimental Analysis

1:00 – 2:00: Lunch

Session3: 2:00-3:20
Chair: Dr. Liam Delaney

Katherine Carman, Tilburg, Health Risks and the Perception of Probabilities
Dr. Marcel Das, Tilburg, The Dutch MESS Panel

4:00: Keynote – Arie Kapteyn, Director, RAND Labor and Population

Economics and Psychology One-Day Conference

A one-day conference on Economics and Psychology will take place in NUIM on November 7th (Exact Venue to be confirmed). The purpose of this event is to provide a forum for the discussion of work at the interface of economics, psychology and cognate disciplines such as neuroscience. The event is co-organized by the Department of Economics, Finance and Accounting in Maynooth and the UCD Geary Institute. The International Association for Research in Economic Psychology (IAREP) is the relevant international body and we would encourage attendees to consider joining this group. All are welcome and there is no registration fee. Please contact Liam Delaney (Liam.Delaney@ucd.ie ) to confirm attendance.

Programme 

10.00 – 10.15: Welcome: Professor Rowena Pecchenino

10.15-10.45: Liam Delaney (UCD). “Psychological and Biological Foundations of Time Preferences”.

10.45-11.15: Orla Doyle (UCD). “Early Childhood Differences in Time Preferences: Evidence from the Millennium Cohort Study” 

11.15-11.30: Coffee

11.30 – 12.00: Stephen Kinsella (UL). “Computable and Experimental Economics at UL”

12.00 – 12.30: Mirko Moro (UCD). “Spatial Heterogeneity in Well-Being” 

12.30- 1.00: Kevin Denny (UCD). “A continuum of handedness predicts behaviour”

1.00 – 2.00: Lunch

2.00 – 2.30: Richard Roche (NUIM). “Neuroeconomics and Time Preferences”

2.30-3.00: Rowena Pecchenino (NUIM). “Becoming: Identity and Spirituality”

3.00 – 3.30: Martin Ryan (UCD). “Time Use and Time Preferences” 

3.30-3.45: Coffee 

3.45 – 4.15: David Comerford (UCD). “Transport Mode Choice: Decision and Experienced Utility” 

4.15 – 4.45: Peter Lunn (ESRI). “What’s it Worth? Can uncertainty in the perception of value explain loss aversion?” 

4.45 – 5.15: John O’Doherty (TCD) “Neuroeconomics of human decision making: from simple choice to social interactions”