There are Free Lunches Statement of Intentions

There are Free Lunches: Behavioral Clues to Live Happy in the Economic World is a blog that intends to present updated and relevant information about the "hidden" and only recently uncovered dimensions of the economic science: the behavioral factors. With this blog we intend to promote in Europe and in the rest of the World, the top research articles and perspectives on behavioral economics, decision making, consumer behavior, and general behavioral science. We aim to be followed by journalists, academics, managers, civil servants, and everyone who wishes to improve their daily interaction with the economic world and consequently, their lives' happiness.

Tuesday, 29 November 2011

Emotions, not facts, drive investors to sell (via Futurity)

UC DAVIS (US) — Regret and pride guide stock investors more than economic facts — often to their financial detriment—a new study shows.

Researchers looked at each day an investor made a stock purchase and whether the investor had sold those same stocks for a gain or loss during the previous 252 trading days. The team found that investors not only prefer to re-buy a stock that was profitable in the past, but they are also more likely to buy such a stock if it lost value after they sold it. (Credit: iStockphoto)

“Having sold a stock, investors are disappointed if it continues to rise, and regret having sold it in the first place,” says Brad Barber, a professor in the Graduate School of Management at the University of California, Davis. “They anticipate that their disappointment and regret will be more intense if they repurchase such a stock rather than not repurchasing it; thus investors are most likely to repurchase a stock previously sold for a gain that is trading below the price at which they sold it.”

If you have 2 minutes, you can check everything here and have a link to the paper: EmotionsDriveInvestors

Monday, 28 November 2011

Willpower: It's in Your Head (via NYT)

IS willpower an illusion? Is the traditional notion of a deep mental reservoir of strength a fiction?

In recent years, the popular answer has been yes. Our abilities, according to this argument, are constrained by the narrow limits of our biology. In her 2008 book, “Health at Every Size,” the nutritionist Linda Bacon argues that, because of how the brain’s hypothalamus works, it is a “myth” that anyone can will himself to lose weight by maintaining a diet. “It’s not your fault!” she writes. “Biology is so powerful it can ‘make’ you break that diet.”

This year, in their book “Willpower: Rediscovering the Greatest Human Strength,” the social psychologist Roy F. Baumeister and the New York Times science writer John Tierney survey a large body of scientific research to conclude that willpower is limited and depends on a continuous supply of the simple sugar glucose. When glucose is depleted, you fall prey to impulse shopping, affairs and cookies. The solution? “Try to get some glucose in you,” Mr. Tierney told NPR.

Such theories have an obvious appeal: attributing failures of willpower to our fixed biological limits justifies our procrastination as well as our growing waistlines. Not only that, we also get to consume more sugar. But are these theories correct?

You can check everything here, if you have 5 minutes- Willpower: It's in Your Head

Thursday, 24 November 2011

Kahneman Fast&SlowThinking BookPresentation@LSE (via BehEconGroup@Linkedin)

To celebrate the 100.000th visit to the There are Free Lunches blog and to thank all my readers for their attention and support, I would like to share with all of them an extensive interview - almost 1:30hr - with Daniel Kahneman, the founder of Behavioral Economics, Nobel Prize of Economics, and the most influent psychologist alive.

If you are willing to take the chance, I am sure you will hear interesting things about the way economic actors make decisions, what is the future of an economy of well-being, and many other interesting stuff. This interview was provided by Alain Samson: KahnemanFastSlowBookPresentation@LSE

Happiness should have greater role in development policy – UN Member States (via UN)

This happen on the 19th of July 2011. Only came to my eyes yesterday, and represents such good news that I decided to share it with you:

"The General Assembly today called on United Nations Member States to undertake steps that give more importance to happiness and well-being in determining how to achieve and measure social and economic development.

In a resolution adopted without a vote, the Assembly invited countries “to pursue the elaboration of additional measures that better capture the importance of the pursuit of happiness and well-being in development with a view to guiding their public policies.”

The resolution said “the pursuit of happiness is a fundamental human goal” and embodies the spirit of the globally agreed targets known as the Millennium Development Goals (MDGs).

Member States also welcomed the offer of Bhutan, which for many years has used gross national happiness rather than gross domestic product (GDP) as a marker of success, to convene a panel discussion on the theme of happiness and well-being during the Assembly’s next session, which begins in September.

The resolution notes that the GDP indicator “was not designed to and does not adequately reflect the happiness and well-being of people in a country,” and “unsustainable patterns of production and consumption can impede sustainable development.”

Meanwhile, the Assembly today also adopted a resolution stressing the importance of equality among the six official UN languages – Arabic, Chinese, English, French, Russian and Spanish.

Wednesday, 23 November 2011

Equity and Social Capital can Overcome Everything..Even a Fire

Today I would like to share with my readers the story of a company from my country, Portugal, and how equity and social capital allowed the company to surpass a very difficult obstacle: a fire that destroyed the entire production zone, corresponding to 20% of the total area.

The story is simple, but the outcome is not. Sicasal is a company from the processing of meat industry and after a fire which destroyed a significant part of the factory, and in times of economic crisis, everyone was expecting a massive lay-off. Surprisingly, the management and the employees of the company showed us that “when ties are strong, the boat goes the boat beyond the vague”. Not only the administration announce since the beginning that there would not be lay-off, but also the employees engaged themselves personally in reconstructing the factory that was destroyed by the fire.

What was the result? After one week, the factory was working at 80% of his full capacity, and this was achieved with almost no help from outside resources. The employees themselves, almost alone, rebuilt the factory that was destroyed by the fire.

Also, the country was impressed by the emotional way employees talked about their factory and its leaders.

If you understand Portuguese, you can check a small piece from Portuguese television here:

Sunday, 20 November 2011

Is there a proven system for making yourself happier? (via SimoleanSense)

Yes. We see a lot about increasing happiness these days, including excellent books by Daniel Gilbert, Gretchen Rubin and Martin Seligman.

I was curious about what what led to all this and came upon studies done by Michael Fordyce in 1977 and 1983.

He developed a system of 14 points that showed solid gains in happiness among his students: The collected findings from all studies indicate that the program has a noticeable and perhaps long-lasting effect on happiness for the great majority of individuals exposed to it and that this effect is due to the content of the information, not merely the artifact of sensitization or expectations about happiness to which it was compared.

Source: "A Program to Increase Happiness: Further Studies." from Journal of Counseling Psychology, 30(4), 483-498

So what was the system? Here are the 14 points, along with links to relevant info:

Briefly described, the 14 fundamentals are as follows:

(a) keep busy and be more active;

(b) spend more time socializing;

(c) be productive at meaningful work;

(d) get better organized and plan things out;

(e) stop worrying;

(f) lower your expectations and aspirations;

(g) develop positive, optimistic thinking;

(h) become present oriented;

(i) work on a healthy personality;

(j) develop an outgoing, social personality;

(k) be yourself;

(l) eliminate negative feelings and problems;

(m) close relationships are the number one source of happiness;

(n) put happiness as your most important priority.

Yes, some may seem obvious or easier said than done, but we probably aren't working as hard at many of these at we could.

Does access to a television increase debt? (via SimoleanSense)

Interesting, this paper suggests that television access is associated with higher debt levels for durable household goods, but not with the total amount of non-mortgage debt.

The empirical results suggest that the greater access to television is associated with a greater tendency to maintain household debt and debt for household products. Results also suggest that greater access to television is associated with higher levels of debt for durable goods, though not for total debt levels.

If you want to check the complete the paper, here you have the link:

Monday, 14 November 2011

The need to re-design money to solve both financial crisis and environmental crisis (via Jem Bendell’s Journal)

Why is the whole world in debt? How can we end these crises? Here is a TEDx talk on the hidden cause of the financial crisis. The real crisis is in our monetary system – the way our money is created. The solution is to redesign the way money is created. This is the underlying reform required to end the financial, environmental and social crises afflicting our societies. In this TEDx talk, Professor Jem Bendell calls on assembled broadcasters from across Europe, to expose the true nature of our current crises, and how to solve them.

Listen to these guy for 12 minutes, if you find it really interesting, please share it with all your friends - that was what I did:

Do Small Packages Make Us Eat More? (via Psychology Today)

In 2004, Kraft introduced small package sizes for several of its snack food lines. Aside from there being times when a smaller package might be more convenient, many consumers welcomed packages that were trumpeted as being helpful in moderating their own intake. This now-popular trend of "reduced size" or "100 calorie" packs was of course wildly successful. Not only did consumers want smaller packages, they were willing to pay more (per unit) for a package that was shrunk down in size. This was a win-win situation for both consumers and firms. Many consumers recognize that if left with the large package of chocolate, they continued to eat and eat. The idea was that if the package was smaller and promised to help them regulate their own intake, this had value for them.

But do people actually eat less as a result? New research says its unlikely to be the case. Jennifer Argo and Kate White, two marketing professors, recently conducted a series of studies in which consumers were given the opportunity to eat various unhealthy snacks. Those eating from small packages (versus large packs or no packages) ate significantly more that the other groups. Further, those who were low in appearance self-esteem (individuals particularly concerned with their weight and body image), the effects were even larger. Ironically, those who are presumably most interested in small packages are those who are most likely to overeat from them.

If you have 3 minutes, you can check everything here:

Thursday, 10 November 2011

Why Do People Eat Too Much? (via Wired)

“It seems to me that our three basic needs, for food and security and love, are so mixed and mingled and entwined that we cannot straightly think of one without the others.”
- M.F.K. Fisher

Human beings are notoriously terrible at knowing when we’re no longer hungry. Instead of listening to our stomach – a very stretchy container – we rely on all sorts of external cues, from the circumference of the dinner plate to the dining habits of those around us. If the serving size is twice as large (and American serving sizes have grown 40 percent in the last 25 years), we’ll still polish it off. And then we’ll go have dessert.

Consider a clever study done by Brian Wansink, a professor of marketing at Cornell. He used a bottomless bowl of soup – there was a secret tube that kept on refilling the bowl with soup from below – to demonstrate that how much people eat is largely dependent on how much you give them. The group with the bottomless bowl ended up consuming nearly 70 percent more than the group with normal bowls. What’s worse, nobody even noticed that they’d just slurped far more soup than normal.

Or look at this study, done in 2006 by psychologists at the University of Pennsylvania. One day, they left out a bowl of chocolate M&M’s in an upscale apartment building. Next to the bowl was a small scoop. The following day, they refilled the bowl with M&M’s but placed a much larger scoop beside it. The result would not surprise anyone who has ever finished a Big Gulp soda or a supersized serving of McDonald’s fries: when the scoop size was increased, people took 66 percent more M&M’s. Of course, they could have taken just as many candies on the first day; they simply would have had to take a few more scoops. But just as larger serving sizes cause us to eat more, the larger scoop made the residents more gluttonous.

Serving size isn’t the only variable influencing how much we consume. As M.F.K. Fisher noted, eating is a social activity, intermingled with many of our deeper yearnings and instincts. And this leads me to a new paper by David Dubois, Derek Ruckner and Adam Galinsky, psychologists at HEC Paris and the Kellogg School of Management. The question they wanted to answer is why people opt for bigger serving sizes. If we know that we’re going to have a tough time not eating all those French fries, then why do we insist on ordering them? What drives us to supersize?

If you have 3 minutes, you can check everything here:

Five Good Questions for Behavioral Economist Dan Ariely (via AdvisorOne)

When it comes to making decisions, using emotions is likely to be unsuccessful or lead us astray; money isn’t unique in that regard.

Using simple experiments Dan Ariely studies how people actually act in the marketplace, as opposed to how they should or would perform if they were completely rational. His interests span a wide range of daily behaviors and his experiments are consistently interesting, amusing, and informative, demonstrating profound ideas that fly in the face of common wisdom.
Dan is the James B. Duke Professor of Psychology & Behavioral Economics at Duke University, where he holds appointments at the Fuqua School of Business, the Center for Cognitive Neuroscience, the School of Medicine, and the Department of Economics. He is also a founding member of the Center for Advanced Hindsight.

Dan earned a bachelor’s degree in psychology from Tel Aviv University, his master’s and doctorate degrees in cognitive psychology from the University of North Carolina, and a doctorate in Business Administration from Duke University. He is the author of The New York Times bestsellers Predictably Irrational: The Hidden Forces that Shape Our Decisions and The Upside of Irrationality: The Unexpected Ways We Defy Logic at Work and at Home. I am the proud owner of both and have benefitted from them both.

His research has been published in leading psychology, economics, and business journals, and has been featured many times in the popular press. Dan has graciously agreed to answer what I hope are Five Good Questions.

If you have 10 minutes, you can check everything here:

Tuesday, 8 November 2011

Economics Behaving Badly (via The New York Times)

It seems that every week a new book or major newspaper article appears showing that irrational decision-making helped cause the housing bubble or the rise in health care costs.

Such insights draw on behavioral economics, an increasingly popular field that incorporates elements from psychology to explain why people make seemingly irrational decisions, at least according to traditional economic theory and its emphasis on rational choice. Behavioral economics helps to explain why, for example, people under-save for retirement, why they eat too much and exercise too little and why they buy energy-inefficient light bulbs and appliances. And, by understanding the causes of these problems, behavioral economics has spawned a number of creative interventions to deal with them.

But the field has its limits. As policymakers use it to devise programs, it’s becoming clear that behavioral economics is being asked to solve problems it wasn’t meant to address. Indeed, it seems in some cases that behavioral economics is being used as a political expedient, allowing policymakers to avoid painful but more effective solutions rooted in traditional economics.

Take, for example, our nation’s obesity epidemic. The fashionable response, based on the belief that better information can lead to better behavior, is to influence consumers through things like calorie labeling — for instance, there’s a mandate in the health care reform act requiring restaurant chains to post the number of calories in their dishes.

Calorie labeling is a good thing; dieters should know more about the foods they are eating. But studies of New York City’s attempt at calorie posting have found that it has had little impact on dieters’ choices.

Obesity isn’t a result of a lack of information; instead, economists argue that rising levels of obesity can be traced to falling food prices, especially for unhealthy processed foods.

To combat the epidemic effectively, then, we need to change the relative price of healthful and unhealthful food — for example, we need to stop subsidizing corn, thereby raising the price of high fructose corn syrup used in sodas, and we also need to consider taxes on unhealthful foods. But because we lack the political will to change the price of junk food, we focus on consumer behavior.

If you have 3 minutes, you can check everything here:

Can a change in portion size transform our bad food habits? (via TheSustainableBusinessBlog)

Including calorie numbers on menus has little effect but changing portion size and price could have a surprising result.

It is a commonly held view that calorific information on restaurant menus helps customers manage calorie consumption. In an online survey of visitors to the Sustainable Restaurant Association's website, over 60 per cent of respondents from the UK agreed. And in the halls of New York City's Board of Health they felt so strongly about the display of calorific values, it's been a legal requirement for short-order restaurants since 2008.

In the study Calorie Labeling and Food Choices: A First Look at the Effects on Low-Income People in New York City by New York University, only half of the customers questioned had noticed any calorie labeling on menu boards. Of those, just over 27 percent said the information influenced their choices. However, saying you're influenced is very different from being influenced. The study found there was no change in the number of calories purchased after the introduction of calorie labeling. Why?

If you have 3 minutes, you can check everything here: