Etc: Links for 29th Nov, 2019

  1. “When the British actor Jonathan Routh published the first edition of his Good Loo Guide (“Where to Go in London”) in 1965, he singled out the device for mention every time he found one. Only five toilets, out of more than a hundred, held hand dryers – of the pedal-operated kind that, in the 1965 movie Help!, inhale the jacket sleeves of Ringo Starr and Paul McCartney. Mostly, Routh encountered towels of cloth or paper, and quite often, he had to pay to use these products. (“Do loos ever advertise their attractions?” he wondered, while extolling the virtues of the splendid restrooms of Hyde Park in the 1968 update. “Has anyone ever seen an ad saying ‘Just arrived – new free electric hand-drier at the so-and-so loos.’”) Even in the third and final edition of the guide, released in 1987, I counted more instances of electric razors, armchairs and pre-pasted disposable toothbrushes than of hand dryers.”
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    The excellent, excellent Samanth Subramanian in this lovely article about (of all things) paper towels and hand driers. Yes, really. What’s more, Samanth won the Financial/Economic story of the year award for this write-up. Read the book by clicking on his name here, also read Following Fish, and definitely read this article itself. Congratulations, Samanth!
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  2. “And which book takes the very top prize for best of the year? You can’t compare the Alter to the others, so I will opt for Eric Kaufmann’s Whiteshift and also Pekka Hämäläinen’s Lakota America, with Julia Lovell on Maoism and Alain Bertaud on cities as the runner-ups. But again a strong year all around.”
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    Tyler Cowen’s list of books he found worth his time in 2019. As he would say, self-recommending.
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  3. “So what’s a desperate founder to do? Smith impulsively flew to Las Vegas and played blackjack with the last of the company money .Amazingly, when he came back the next week, he had turned the remaining $5,000 into $27,000 – just enough for the company to stay in operation for another week.

    In the book “Changing How the World Does Business: FedEx’s Incredible Journey to Success – The Inside Story,” Roger Frock, a former senior vice president of operations at FedEx, describes the scene when he found out what Smith did. “I said, ‘You mean you took our last $5,000 – how could you do that? [Smith] shrugged his shoulders and said, ‘What difference does it make? Without the funds for the fuel companies, we couldn’t have flown anyway.'””
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    A lovely story about how Fedex came back from the dead.
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  4. “The money of the world’s mega-wealthy, though, is heading there in ever-larger volumes. In the past decade, hundreds of billions of dollars have poured out of traditional offshore jurisdictions such as Switzerland and Jersey, and into a small number of American states: Delaware, Nevada, Wyoming – and, above all, South Dakota. “To some, South Dakota is a ‘fly-over’ state,” the chief justice of the state’s supreme court said in a speech to the legislature in January. “While many people may find a way to ‘fly over’ South Dakota, somehow their dollars find a way to land here.””
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    Oh hey, Tiebout. Whassup.
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  5. “Behavioral finance is finance. That individual human beings can sometimes do silly things, for reasons to do with either nature or nurture, is not under dispute. That they may make these same mistakes in the aggregate is no longer heretical. That is the gift of those that have been “misbehaving” by attacking hallowed, efficient market doctrine. Economists now can consider potential irrationality versus a standard model of profit-maximizing utility without being disinvited to (those wild and crazy) economist parties. Economists can now suggest that cognitive biases can affect asset prices without threatening their tenure.”
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    The term may be overrated – the logic isn’t: in defense of behavioral finance.

Lunch With FT: Richard Thaler

“One thing for sure is Remain is a horrible name. It’s weak. Whereas Leave is strong.”

Richard Thaler is by now a household name – well, I think so at any rate, and this interview that he gave to Tim Harford (who should be a household name!) is worth reading in its entirety. You’ll need to sign in/register, I think – sorry about that.

Quick update: we’re conducting a workshop on behavioral economics for undergrad students at GIPE this week, and I’ll post nuggets such as these along the way.

Links for 5th March, 2019

  1. “Using a neural network trained on widely available weather forecasts and historical turbine data, we configured the DeepMind system to predict wind power output 36 hours ahead of actual generation. Based on these predictions, our model recommends how to make optimal hourly delivery commitments to the power grid a full day in advance. This is important, because energy sources that can be scheduled (i.e. can deliver a set amount of electricity at a set time) are often more valuable to the grid.”
    The big problem with renewable energy is its utter unpredictability – which is why we will always struggle to move to a world that uses renewable energy as a primary source. Unless, of course, we figure out how to make great batteries. But in the meantime, anything that helps us predict the pattern of availability of wind and solar power is great news.
  2. “Still, people do break Google’s protection. CAPTCHAs are an ongoing arms race that neither side will ever win. The AI technology which makes Google’s approach so hard to fool is the same technology that is adapted to fool it.Just wait until that AI is convincing enough to fool you.
    Sweet dreams, human.”
    Ever clicked on the “I’m a human” button and wondered why it seemed like such a stupid idea. Well, uh, not stupid. Not stupid at all.
  3. “This further tells us that people are buying and selling homes. It’s just that the builders are not a part of this transaction.”
    This is a very short excerpt, but especially for Indians, this article is well worth reading (and Vivek Kaul is well worth following!). Home loans are going up every year, but unsold inventory is also going up every year? What gives?
  4. “All of economics is meant to be about people’s behavior. So, what is behavioral economics, and how does it differ from the rest of economics?”
    An essay about behavioral economics and its many applications, written by two people who are more familiar with the field than almost anybody else. There isn’t much here for people who are already familiar with the field – but if you are new to behavioral economics, this is an excellent introduction.
  5. “Two landmark events helped pushed along the proliferation of Sichuan cuisine in New York. In 2005, the peppercorn ban was lifted, though imported peppercorns still had to be heat treated and were thus less potent than they might have been. (This restriction was finally lifted in 2018.) ”
    I was in New York in 2007, and knew nothing of how to try new food, and it is a major source of regret. Especially when I read articles like these.

A five part series on behavioral economics

This week’s posts were going to be about podcasts that I listen to, but I’ll push that out to next week.

I and a colleague of mine at the Gokhale Institute (which is where I work) are running a five day seminar at the Institute on behavioral economics. This one is for undergraduate students only, but based on how this one turns out, we might do a couple more through the year. But for that reason, I figured we might take a look at behavioral economics is, and explore work being done in this area, and why it matters.

In this post, I’ll give you an overview of behavioral economics, and in the five subsequent posts that follow, I’ll detail what we spoke about in each session.

First things first: behavioral economics really is a tautology, because economics is the study of choice, and we make our choices given what we know and given what we feel.

The trouble is, modern economic theory (most, but not all of it) would tend to say that what we feel ought not to matter, and in fact doesn’t actually matter in the real world. Except we’ve all demolished a big fat bowl of ice-cream because we’re feeling blue, the diet be damned. We’ve all bought items on sale on Amazon, when we clearly had no need for them. And we’ve all chosen to play a game on the phone over completing a task at hand, and hang the consequences. I could go on (and not just where individuals are concerned, but firms and governments too!), but you get the picture.

We’re all predictably irrational.

In a sense, behavioral economics is about the first word in that link. As a social scientist, it’s not much use to say that we’re irrational. That’s akin to saying that there’s nothing that we can say, do or predict about the choices that all of us make.

But predictably  irrational? Ah, how exactly? If our irrationality can actually be modeled, then perhaps we could understand how and why we make the choices we do. Even better, maybe we could push people towards eating more salads and less ice-cream. Although you should note that there are some people in my tribe who don’t necessarily think this to be a good idea.

Still, the study of

a) whether we think “rationally” or not, and…

b) if not, then can we think systematically about how we are “irrational” and why…

c) and can we use our findings from this exercise to make people, institutions and therefore societies behave differently (and hopefully better)…

…is the study of behavioral economics.

And the five day version (duly expanded) of this is what Savita Kulkarni and I will be talking about at Gokhale Institute over the course of the next five days. And I’ll keep you guys updated as we go along.