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