A blog about cognitive and behavioural economics. Building mathematical models of how psychology influences economic systems.
Old Bridge Inn pictures
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If you get the email version of this blog you might not have seen the pictures with yesterday's review of the Old Bridge Inn. Do go back and have a look at them if not.
Brad DeLong has an impressively clear (although, or perhaps because, a bit technical) piece on risk appetite and fundamental values of assets . I feel I should respond to it, but it's such a tour de force of clear and explicit assumptions, rigorous logic and thunderous conclusions that I feel I barely can. I particularly loved this statement for pure bloody-minded literalism (that's a good thing, by the way): The fundamental values of asset prices are the money-metric values that the costate variables associated with the commodities would have in some reasonable utilitarian central-planning social-welfare-maximization exercise under reasonable utilitarian preferences. However, here is what comes to mind: Given that asset prices rarely approach the values Brad ascribes to them, could this be because there is competition for the limited amount of savings capital available in the world? If I, as a productively investing business, want to get access to some of it, I probably need t
Rory Sutherland's new book Alchemy: The Surprising Power of Ideas that Don't Make Sense continues his 10-year campaign against the traditional, logical pursuit of business advantage, through a scientific lens that includes several cognitive economics themes. As ever, a curated series of amusing anecdotes about people or companies who took an unusual angle on marketing or product invention, fuel a philosophical wander. That philosophy could be summarised as: if it makes sense, someone's already tried it. So try something that doesn't . The ideas that underpin the book are broadly based on behavioural economics and cognitive science, with bits of evolutionary theory, statistics and old-fashioned advertising intuition thrown in. At first it doesn't look like a behavioural science book as such: the theoretical backbone takes a while to show. Rory's style is discursive: an after-dinner-talk of anecdotes, dismantling of conventional wisdom, ever-so-slightly outr
There are plenty of claims of US election fraud floating around this week. Most of them fall into three categories: Too vague to be meaningfully evaluated or investigated Too small to matter (a few individual ballots being challenged here and there, possibly valid but not enough to affect the results) Too wild to stand up to any kind of scrutiny Together, these claims are certainly problematic: they create a fog of doubt about the legitimacy of the democratic process. But a fourth category is more insidious. A twitter mutual retweeted the thread quoted below. You can click through to read the whole thread, but I have embedded the highlights. It's a well-told story, with several characteristics that make it effective - as well as dangerous. To start with, the data comes from an authoritative source, the New York Times. Even better in this case: a source associated with "the other side". Surely the liberals can't deny the truths from their own newspaper? The followin
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