Gerd Gigerenzer is fond of telling a story about Harry Markowitz, modern portfolio design pioneer and winner of the 1990 Nobel Memorial Prize in Economic Sciences. Here’s one version of the story, from Risk Savvy: Assume you have a chunk of money and want to invest it. You do not want to put all your eggs into one basket and are considering a number of stocks. You want to diversify.
It was easy to see why many behavioural practitioners loved the idea that you could induce honesty by getting someone to sign a form at the top, not the bottom. It was practical. It was cheap to implement. It involved more than the common “send them a reminder” or “chuck a social norm on it” that comprises much of the applied behavioural science canon. (That said, don’t underestimate reminders.) It provided an unintuitive proposal to improve business outcomes that wasn’t likely to come from any other source.
The best books I read in 2021 - generally released in other years - were: David Badre, On Task: How Our Brain Gets Things Done: Effectively spans from the latest neuroscience to practical applications. The presentation of some computational models of our brains was great. I think about them a lot. Hugo Mercier and Dan Sperber, The Enigma of Reason: A New Theory of Human Understanding: I’m not sold on the overarching thesis, but I love the way they pull apart many different theories and approaches in psychology.
Below are the notes I developed in preparing content for a unit in Applied Consumer Financial Decision Making as part of UTS’s Graduate Certificate in Behavioural Economics. (It was titled Behavioural Approach to Investment and Insurance Decisions). The course was for post-graduates with no assumed prior knowledge of economics or behavioural economics. This unit taken taken after introductory economics and behavioural economics units. This content was placed into an online learning system, with built-in interactivity (hence the presence of some questions below), plus supplemental content such as videos.
The best books I read in 2020 - generally released in other years - were: Albert Camus, The Plague Tom Chivers, The AI Does Not Hate You: Superintelligence, Rationality and the Race to Save the World: Great introduction to and history of the rationalist community. Melanie Mitchell, Artificial Intelligence, A Guide for Thinking Humans: Mitchell is too easy on humans, but a fair examination of where we are with AI and some great explanations of various AI approaches.
Below is the text of my presentation at Nudgsestock on 12 June 2020. Intro Over the past decade or two, behavioural scientists have had a great ride. There have been bestselling books and Nobel Memorial Prizes. Every second government department and corporate has set up a team. But recently, the wind seems to have changed. We’re told that behavioural economics is itself biased. “Don’t trust the psychologists on coronavirus - Many of the responses to Covid-19 come from a deeply-flawed discipline”.
Most articles on how behavioural science (or “behavioural economics”) can explain “X” are rubbish. “How behavioural economics explains Donald Trump’s election” or the equivalent would have been “How behavioural economics doomed Donald Trump” if he had failed to be elected. It’s after-the-fact storytelling of no scientific substance. Through the last six weeks I have been collecting examples in the media of behavioural science applied to the coronavirus pandemic. There’s plenty of the usual junk.
In a previous post I posed the following bet: Suppose you have $100 and are offered a gamble involving a series of coin flips. For each flip, heads will increase your wealth by 50%. Tails will decrease it by 40%. Flip 100 times. The changes in wealth under a sequence of flips of this nature is “non-ergodic”, as the expected value of the bet does not converge with its time-average growth rate.
Better late than never…. The best books I read in 2019 - generally released in other years - are below. Where I have reviewed, the link leads to that review (not many reviews this year). Nick Chater, The Mind is Flat: A great book in which Chater argues that there are no ‘hidden depths’ to our minds. Stephan Guyenet, The Hungry Brain: Outsmarting the Instincts that Make us Overeat: Excellent summary of modern nutrition research and how the body “regulates” its weight.
In my previous posts on loss aversion (here, here and here), I foreshadowed a post on how “ergodicity economics” might shed some light on whether we need loss aversion to explain people’s choices under uncertainty. This was to be that post, but the background material that I drafted is long enough to be a stand alone piece. I’ll turn to the application of ergodicity economics to loss aversion in a future post.