O2 #3 Nina Mazar, Behavioral economist, Real Leader Interview 32 (via A Learning a Day)

Nina Mazar was featured in Dan Ariely’s book The Honest Truth About Dishonesty: How We Lie To Everyone Especially Ourselves and I was compelled to reach out to her to find our more about her research. Her work and the book taught me many things about how we are comfortable with lying/cheating on a regular basis. We talked about all that and much more. Do read on!

Read here an extensive interview with one of the rising star Behavioral Economists of the moment: NinaMazar  

O2 #2 Inside the Coalition's controversial 'Nudge Unit' (via The Telegraph)

Deep inside Whitehall, psychologists are finding ways to make you insulate your loft, pay your taxes, and even quit smoking. Is the Coalition's controversial 'Nudge Unit' finally paying off?

Back in the dark ages of early 2011, the Cabinet Office began grappling with one of the most serious issues facing our age: loft insulation. A curious anomaly was emerging in official statistics — that no one wanted it. Huge subsidies had been ploughed into lagging and rolls of fibreglass; there were generously-incentivised installation schemes, that would pay for themselves within months. It was, to use non-Whitehall patois, a no-brainer. And yet public adoption rates were minuscule. Policymakers were baffled. 

Step forward, then, a new Government team, with a new way of thinking.

Using research, plus a smidgen of common sense, they quickly identified the problem: laziness. More specifically, the sheer hassle of clearing an attic before you can insulate it. This alone was deterring us from taking up, effectively, a free lunch. And so, in a pilot trial in September 2011, they suggested a simple solution: that insulation firms offer to clear the lofts first, and dispose of our unwanted junk. In weeks, the uptake increased threefold, even though it cost the customer more. And when this service was subsidised to cost price, there was a fivefold increase.

Chalk up another success to the Behavioural Insights Team. Since 2009, this handful of academics has been working, largely without fanfare, to subtly alter the ways we act, look after ourselves and obey the law.

Check the rest of the article about the "Nudge Unit" here: NudgeUnit 

O2 #1 Keith Chen: Could your language affect your ability to save money? (via TED)

What can economists learn from linguists? Behavioral economist Keith Chen introduces a fascinating pattern from his research: that languages without a concept for the future -- "It rain tomorrow," instead of "It will rain tomorrow" -- correlate strongly with high savings rates.

Check the TED talk here: LanguageSaveMoney 

O2 #3 The Brain's Ability to Look Within: A Secret to Well-Being (via Psychology Today)

Tapping into our ability to turn attention inward empowers and heals.

The Two Paths of Attention: Outward & Inward

What's the difference between noticing the rapid beat of a popular song on the radio and noticing the rapid rate of your heart when you see your crush? Between noticing the smell of fresh baked bread and noticing that you're out of breath? Both require attention. However, the direction of that attention differs: it is either turned outward, as in the case of noticing a stop sign or a tap on your shoulder, or turned inward, as in the case of feeling full or feeling love. 

Scientists have long held that attention – regardless to what – involves mostly the prefrontal cortex, that frontal region of the brain responsible for complex thought and unique to humans and advanced mammals. A study by Norman Farb from the University of Toronto published in Cerebral Cortex, however, suggests a radically new view: there are different ways of paying attention. While the prefrontal cortex may indeed be specialized for attending to external information, older and more buried parts of the brain including the “insula” and “posterior cingulate cortex” appear to be specialized in observing our internal landscape.

Most of us prioritize externally oriented attention. When we think of attention, we often think of focusing on something outside of ourselves. We "pay attention" to work, the TV, our partner, traffic, or anything that engages our senses. However, a whole other world exists that most of us are far less aware of: an internal world, with its varied landscape of emotions, feelings, and sensations. Yet it is often the internal world that determines whether we are having a good day or not, whether we are happy or unhappy. That’s why we can feel angry despite beautiful surroundings or feel perfectly happy despite being stuck in traffics. For this reason perhaps, this newly discovered pathway of attention may hold the key to greater well-being.

Read here this interesting article about the importance of looking within: LookWhithin 

O2 #2 Perspectives about New Directions for Economic Measurement (via Federal Reserve)

I appreciate the opportunity to speak at a conference with the important theme of
economic measurement. In many spheres of human endeavor, from science to business
to education to economic policy, good decisions depend on good measurement. More
subtly, what we decide to measure, or are able to measure, has important effects on the
choices we make, since it is natural to focus on those objectives for which we can best
estimate and document the effects of our decisions. One great pioneer in this subject
area, of course, is Simon Kuznets, who was awarded the Nobel Prize in 1971 for his work
on economic measurement, including the national income accounts. Over the years many
economists have built on his work to further improve our ability to quantify aspects of economic activity and thus to improve economic policy making and our understanding of how the economy works. The remarkably broad and ambitious research program of this
conference and the impressive expertise that has been assembled illustrate the continued vitality of this field. Evolving technologies that allow economists to gather new types of data and to manipulate millions of data points are just one factor among several that are likely to transform the field in coming years.

As we think about new directions for economic measurement, we might start by
reminding ourselves of the purpose of economics. Textbooks describe economics as the
study of the allocation of scarce resources. That definition may indeed be the “what,” but
it certainly is not the “why.” The ultimate purpose of economics, of course, is to
understand and promote the enhancement of well-being. Economic measurement
accordingly must encompass measures of well-being and its determinants.
In the tradition of national income accounting, economic policymakers have
typically focused on variables such as income, wealth, and consumption. The Federal
Reserve has a statutory mandate to foster maximum employment and price stability,
which motivates our extensive efforts to monitor and forecast measures of employment
and inflation. Substantial research and the development of data collection infrastructures
have, over the years, greatly enhanced our ability to receive timely and accurate measures
of those variables. Aggregate measures, such as gross domestic product and personal
consumption expenditures, are useful for monitoring people’s ability to meet basic
material needs and for tracking cyclical and secular changes in the economy as a whole.
Indeed, the experience of the recent financial crisis and the ensuing recession was
strongly reflected in nearly all of these aggregate measures, indicating the severe
economic stress felt by millions of people and hundreds of communities across the
country.

But, as many of you will discuss this week, aggregate statistics can sometimes
mask important information. For example, even though some key aggregate
metrics--including consumer spending, disposable income, household net worth, and debt
service payments--have moved in the direction of recovery, it is clear that many
individuals and households continue to struggle with difficult economic and financial
conditions. Exclusive attention to aggregate numbers is likely to paint an incomplete
picture of what many individuals are experiencing. One implication is that we should
increase the attention paid to microeconomic data, which better capture the diversity of
experience across households and firms. Another implication, however, is that we should
seek better and more-direct measurements of economic well-being, the ultimate objective
of our policy decisions.

Although the field is still young, there have been interesting developments in the
measurement of economic well-being. In a commencement address two years ago titled
“The Economics of Happiness,” I spoke about the concepts of happiness and life
satisfaction from the perspective of economics and other social science research.


Read the rest of the introduction, from Ben S. Bernanke - Chairman
of the Board of Governors of the Federal Reserve System, to the
32nd General Conference of the International Association for Research in Income and Wealth here: BernankeConferenceResearchIncomeWealth

O2 #1 What is Positive Psychology (via YouTube)

Watch here a very insightful and entertaining presentation describing what is Positive Psychology: PositivePsychology

CO2 #3 Amy Cuddy: Your body language shapes who you are (via TED)

Body language affects how others see us, but it may also change how we see ourselves. Social psychologist Amy Cuddy shows how “power posing” -- standing in a posture of confidence, even when we don’t feel confident -- can affect testosterone and cortisol levels in the brain, and might even have an impact on our chances for success.

Amy Cuddy’s research on body language reveals that we can change other people’s perceptions — and even our own body chemistry — simply by changing body positions.

Watch one of the most viewed TED talks of all time here: BodyLanguage 

CO2 #2 Could boredom be curable? (via The Boston Globe)

An elusive human annoyance may finally be yielding its secrets.

YOU’RE DRIVING TO WORK one morning when you find yourself stuck in a traffic jam. You’re sitting in math class, listening to your teacher explain the afternoon’s lesson. You’re labeling envelopes to send out party invitations, letter after letter after letter. What do these seemingly unrelated experiences share? They have the potential to be unbelievably boring.

Boredom is more than just one of life’s minor irritations. It has been implicated in drug use and alcoholism, problematic gambling and compulsive behavior—and has even been tied to potentially lethal errors in job execution. Bored nuclear military personnel perform less reliably than colleagues engaged in their work; bored airline pilots become more likely to rely heavily, and dangerously, on automated processes.

Philosophers and scientists alike have found ways to describe boredom as an experience, from the ochlos of ancient Greeks to the unresolved conflicts of modern psychodynamic theory. But when it comes to what actually triggers boredom, an answer has remained elusive. Boredom can occur in a perplexingly broad range of situations and seems to involve both our external environment and our inner resources.

Now, after an exhaustive survey of every study they could locate that mentioned boredom—over 100 are referenced in the final ­paper—a group of psychologists from York University in Canada has proposed an answer, essentially a new unified theory of boredom. In a new review paper published this fall in Perspectives on Psychological Science, cognitive psychologist John Eastwood and his team suggest all boredom may result from essentially the same thing: a conflict of attention, or attention misfocused in a way that disrupts our engagement. Sometimes the problem is that there is too much competing for our attention, sometimes too little. In all cases, they argue, boredom has as much to do with our inner response to our circumstances as to the circumstances themselves.

Read the rest of this insightful article about boredom here: BoredomCurable 

CO2 #1 Five Presentation Mistakes Everyone Makes (via Harvard Business Review)

We all know what it's like to sit through a bad presentation. We can easily spot the flaws — too long, too boring, indecipherable, what have you — when we watch others speak. The thing is, when we take the stage ourselves, many of us fall into the same traps.

Here are five of the most common, along with some tips on how to avoid them.

1. Failing to engage emotionally. You risk losing your audience when you just "state the facts," even in a business setting. No presentation should be devoid of emotion, no matter how cerebral the topic or the audience. Speak to people's hearts as well as their minds. Look for ways to add emotional texture to your exhibits, data, proofs, logical arguments, and other analytical content. Try opening with a story your audience can relate to, for example, or including analogies that make your data more meaningful.

To unearth the emotional appeal of your ideas, ask yourself a series of "why" questions. If you're requesting funding to pay for cloud storage, for instance, start by asking, "Why do we need cloud storage?" Your answer may be something like "to facilitate data sharing with colleagues in remote locations." Then ask why you need to accomplish that — and you'll eventually get to the human beings who will be affected by your ideas. Suppose your answer is "to help remote colleagues coordinate disaster relief efforts and save lives." That's your emotional hook. Once you've found it, it's easier to choose words and images that elicit empathy and support.

Get to know the other 4 presentation mistakes everyone makes here: 5PresentationMistakes 

O2 #3 Think Yourself Well (via The Economist)

THE link between mind and body is terrain into which many medical researchers, fearing ridicule, dare not tread. But perhaps more should do so. For centuries, doctors have recognised the placebo effect, in which the illusion of treatment, such as pills without an active ingredient, produces real medical benefits. More recently, respectable research has demonstrated that those who frequently experience positive emotions live longer and healthier lives. They have fewer heart attacks, for example, and fewer colds too.

Why this happens, though, is only slowly becoming understood. What is needed is an experiment that points out specific and measurable ways in which such emotions alter an individual’s biology. And a study published in Psychological Science, by Barbara Fredrickson and Bethany Kok at the University of North Carolina at Chapel Hill, does precisely that.

Read more about this important medical study here: ThinkYourselfWell 

O2 #2 60-Second Adventures in Economics (via Farnamstreetblog)

If you want to learn about economics, these videos are for you.

Ever shaken an invisible hand? Been flattened by a falling market? Or wondered what took the bend out of Phillips’ curve? David Mitchell helps reveal some of the great dilemmas faced by governments trying to run an economy – whether to save or spend, control inflation, regulate trade, fix exchange rates, or just leave everyone to get on with it and not intervene. You’ll learn why Adam Smith put such a high price on free markets, how Keynes found a bold new way to reduce unemployment, and what economists went on to discover about the impact of policy on people’s and businesses’ behaviour – which may not always be entirely rational.

Check all these videos here: 60-SecondEconomics 

O2 #1 Reducing disposable shopping bag usage (via Nudge Unit)

In her new paper, Tatiana Homonoff from Princeton University shows that small incentives can have a larger effect than the simple cost/benefit calculation would suggest, but how these incentives are framed matters.

Her findings accord with the idea of loss aversion – that people value losses more than the equivalent gain: a five-cent tax on disposable shopping bags in Washington DC was found to reduce their use by a substantial amount, while a  five-cent bonus for using a reusable bag had essentially no effect on behaviour.

Know more about this paper here: ReducingBagUsage  

CO2 #3 U.K. regulator turns to behavioral economics to detect fraud (via Futures)

Stefan Hunt spent much of his academic career trying to understand why people make lousy financial decisions.

Now the former Harvard and Yale economist is helping U.K. market regulators protect consumers from those who might profit from exploiting the biases, instincts and fears that prompt those poor choices.

“It’s not like we are completely irrational,” said Hunt, who leads a 25-strong research team at the Financial Services Authority. “We make some systematic and predictable mistakes.”

Regulators are attempting to use behavioral economics to better understand the mindset behind the improprieties plaguing Britain’s financial hub: from rogue trader Kweku Adoboli, who hid trades that cost UBS AG $2.3 billion, to improper sales of loan insurance, for which U.K. banks have set aside more than 10 billion pounds ($16 billion) to compensate consumers.

The 37-year-old said he hopes awareness of behavioral science will make for better rules and fairer markets as the FSA prepares to split its role and create a new consumer-protection agency next year.

Behaviorists challenge the notion in traditional economics that people weigh their options and pick the best outcome for themselves. Instead, they look at the psychology of choices.

Read here this interesting article about a new application of BE: BEFraud 

CO2 #2 Why Couples Fight About Money (via Something You Should Know)

Mike Carruthers:
Money is probably the biggest reason couples fight. So why is that?

Deborah Price:
We’re very wired to react and be irrational and illogical when it comes to money because it’s a core survival issue.
 

Deborah Price, author of the book The Heart of Money...

So knowing that we have to give people structures to be able to communicate and the very first thing, if you’re starting to notice that you’re unhappy or feeling uncomfortable about something is to just talk about your feelings without blame. “I’m feeling uncomfortable about our financial arrangement and what I’d like to do is to sit down and let’s talk about it so it doesn’t become a problem because I love you and our relationship.” That’s a very non-blaming proactive way to communicate.

Hear the audio podcast here: CouplesFightMoney

CO2 #1 Holiday Shopping Tips From Behavioral Economists (via Bloomberg)

Behavioral economists study human errors. People don’t always make the best choices for themselves, so there’s good reason to doubt whether they will always make the best choices for others.

If you’ve ever received a useless gadget, a horrendous tie or some kind of bowl, you’ll know that when people buy Christmas presents, they can blunder badly. Chances are pretty good that whatever you end up getting people this year, and however hard you try, some of your friends and family members aren’t going to think that the gift is worth what you paid for it.

University of Minnesota economist Joel Waldfogel, author of “Scroogenomics,” finds that Americans spend about $65 billion on winter holiday presents every year -- and that many of those billions are simply wasted, because a lot of people don’t much like what they get. Typically the value of a gift, to the recipient, is about 20 percent lower than its cost. He describes the holiday season as “an orgy of value destruction.”

Mis-giving is a big problem for givers as well as recipients. In a large survey, the average respondent was found to give 23 presents every holiday season. Gift-giving can also take an economic toll. Personal debts tend to jump after December. That isn’t ideal, especially in hard economic times and if recipients aren’t thrilled with what they get.

Here are some tips for gift-givers, building on six behavioral findings that bear directly on holiday-season mis- giving. They might help you get through December a little better.

Check the rest of Cass Sunstein's article here: ChristmasShoppingTips

O2 #3 Saving Economics from the Economists (via The HBR)

Economics as currently presented in textbooks and taught in the classroom does not have much to do with business management, and still less with entrepreneurship. The degree to which economics is isolated from the ordinary business of life is extraordinary and unfortunate.

That was not the case in the past. When modern economics was born, Adam Smith envisioned it as a study of the “nature and causes of the wealth of nations.” His seminal work, The Wealth of Nations, was widely read by businessmen, even though Smith disparaged them quite bluntly for their greed, shortsightedness, and other defects. The book also stirred up and guided debates among politicians on trade and other economic policies. The academic community in those days was small, and economists had to appeal to a broad audience. Even at the turn of the 20th century, Alfred Marshall managed to keep economics as “both a study of wealth and a branch of the study of man.” Economics remained relevant to industrialists.

Read here this short but interesting article about the future of Economics: RonaldCoase  

O2 #2 Gross national happiness in Bhutan: the big idea from a tiny state that could change the world (via The Guardian)

Bhutan measures prosperity by gauging its citizens' happiness levels, not the GDP. Now its ideas are attracting interest at the UN climate change conference in Doha.

The principles of Bhutan’s gross national happiness system are spelled out for pupils at a secondary school in Paro, a largely agricultural region.  

A series of hand-painted signs dot the side of the winding mountain road that runs between the airport and the Bhutanese capital, Thimphu. Instead of commands to cut speed or check mirrors, they offer the traveller a series of life-affirming mantras. "Life is a journey! Complete it!" says one, while another urges drivers to, "Let nature be your guide". Another, standing on the edge of a perilous curve, simply says: "Inconvenience regretted."

It's a suitably uplifting welcome to visitors to this remote kingdom, a place of ancient monasteries, fluttering prayer flags and staggering natural beauty. Less than 40 years ago, Bhutan opened its borders for the first time. Since then, it has gained an almost mythical status as a real-life Shangri-La, largely for its determined and methodical pursuit of the most elusive of concepts – national happiness.

Read the rest of the article here: GNHButhan 

O2 #1 Sendhil Mallainathan on Behavioral Economics & Development (via Kaltura)

Check here this enlightning presentation about Behavioral Economics & Development, from Sendhil Mullainathan here: BE&Development 

O2 #3 Scientists and Philosophers Answer Kids’ Most Pressing Questions About How the World Works (via BrainPickings)

Why we fall in love, what we’re all made of, how dreams work, and more deceptively simple mysteries of living.

“If you wish to make an apple pie from scratch,”Carl Sagan famously observed in Cosmos, “you must first invent the universe.” The questions children ask are often so simple, so basic, that they turn unwittingly yet profoundly philosophical in requiring apple-pie-from-scratch type of answers. To explore this fertile intersection of simplicity and expansiveness,Gemma Elwin Harris asked thousands of primary school children between the ages of four and twelve to send in their most restless questions, then invited some of today’s most prominent scientists, philosophers, and writers to answer them. The result is Big Questions from Little People & Simple Answers from Great Minds (public library) — a compendium of fascinating explanations of deceptively simple everyday phenomena, featuring such modern-day icons as Mary Roach, Noam Chomsky, Philip Pullman, Richard Dawkins, and many more, with a good chunk of the proceeds being donated to Save the Children.

Read more about this promising book here: ScientistsPhilosophersKids 

O2 #2 Investment Banks Now Turn to Psychologists for Help (via CNBC)

Gone are the days when investment banks looked only for the numerical whiz kids to help them in their investment decisions. Now, they use psychologists to get a better insight of how investors' minds and the markets work.

"The classical models of economics make this assumption that we are all completely rational, all the time and all of finance theory is based around that," Greg Davies, head of behavioral and quantitative finance at Barclays, told CNBC. "But we don't have to look around us too far to realize that we're not entirely rational all the time and, in fact, markets are driven to a very large extent — particularly in the short-term — by issues of anxiety, stress and enthusiasm."

Davies told CNBC Europe's "Squawk Box" that, as a behavioral expert at Barclays, he uses his knowledge to try to help clients become better investors.

"[We do this] by helping them to understand their personalities better, their own proclivities, and how to make better long-term investing decisions by controlling their emotions," he said.

Read more about how behavioral issues are arriving to investment banks here: InvestmentBanksPsychologists