Wednesday, 30 June 2010

Nagging versus nudging

My Counteradvertising post from last week is not an isolated example.

Andrew Lansley, the health secretary, has suggested that:
"If we are constantly lecturing people and trying to tell them what to do, we will actually find that we undermine and are counterproductive in the results that we achieve"
The newsworthiness of this story is, of course, not because the media wants a debate about which are the most effective cognitive incentives in the public health arena. It's because Lansley is going up against popular cheeky-cockney-chef Jamie Oliver.

Putting that aside - and I've no idea if Lansley is correct on this individual issue - he does have a valid point. Telling people what to do is, in many situations, ineffective or counterproductive.

Anecdote alert: a Polish friend claimed over dinner today that Britain has, by far, the highest number of nagging public health warnings of any country: posters, TV ads, product packaging. This may or may not be accurate, but it rings true.

And it chimes with the effects of recent research by the Universities of Southampton and Manchester: 'nudge' approaches are, broadly, more effective than 'think' approaches. Appealing to citizens' rationality is hard work, meets (or causes) resistance, and arguably can entrench existing attitudes instead of changing them. If instead we redesign the choice architecture in people's environment - of which they are hardly even aware - we can influence their behaviour much more powerfully.

More on that research later, as I went to a very interesting presentation of its results last week.

A random note: while looking up that confirmation bias link, I came across an article by Peter Suber. I had forgotten about him, but as the inventor of Nomic, he's got to have some fascinating things to say. I'll be starting here and delving further in the near future.

Tuesday, 29 June 2010

The revealed attitude of the Fed

Here's a little something on fiscal stimulus. It contains a suggestion I've seen from Tyler Cowen and Scott Sumner, among others:

...while the zero bound does not bind, the Fed might nonetheless be reluctant to engage in the appropriate amount of monetary expansion, and that a fiscal boost is therefore required. A potential response to this is that if the Fed has chosen the unemployment rate with which it is satisfied, it will simply offset any fiscal measures to push unemployment below that level.
That's only true if the Fed is assumed to be a simple (rational?) agent acting with just one lever: controlling the money supply in order to choose a balance between inflation and unemployment. However, it's very plausible that the Fed is not happy about the current unemployment rate, and recognises that it could and perhaps should increase inflation (or NGDP) to fight it. But it is also worried about its long-term credibility (as Ben Bernanke indicates in his answer to Brad Delong here, for example). If so, its reason for accepting unemployment is not to reduce current inflation, but to improve the future efficiency of the economy.

Plausibly, the Fed may believe that inflation caused by fiscal stimulus, and not offset by higher interest rates, will not damage its credibility in the way that large-scale QE might.

In fact, I believe this describes exactly the Fed's current attitude. Even if it's not Bernanke's personal opinion, we can infer a "collective attitude" from the joint behaviour of the Fed governors. In which case, fiscal stimulus is probably justified.

Then again, the "revealed attitude" of Congress is not helpful in this respect. The Fed may have to move if Congress won't, and find another way to keep its credibility. For example, by acting as a responsible agency which helps the economy recover. I hope the Bank of England is a bit more accommodating after the UK government's imminent cuts.

Monday, 28 June 2010

Blogging, sticky wages, relationships

In case you were worried, I have not been intimidated by Kartik Athreya's "Economics is Hard" into closing down my blog.

I've just been so busy doing stuff and going to things that I haven't had time to write any of it up.

Soon, though. Tomorrow, I hope.

Meanwhile, a couple of thoughts here and in the next posting:

There's an interesting discussion on nominal wage stickiness between Scott Sumner and Bryan Caplan. Scott, as usual, has some good insights into the question: are sticky wages the primary cause of recessions? To save you reading it all, the answer is yes.

This debate exposes a question of economic modelling which I've considered recently. Is the individual transaction the best level to model economic exchange? As a rational agent with no mental processing costs, it is more economically efficient to treat each single exchange as a new decision and re-optimise your choices. But it's not very realistic.

Agents who require time to make a decision are more likely to group exchanges into a continuous series - an economic relationship. Economic relationships include ongoing contracts, employment relationships and brand loyalty. Economic relationships take time to build and once they exist, they have momentum. Where a relationship exists, it may not be efficient to make a trade outside of the relationship, even if preferences and prices alone indicate that it should be. To make this useful will require more formal modelling, but it is an interesting area.

Sunday, 27 June 2010

The economics zeitgeist, 27 June 2010

This week's word cloud from the economics blogs. I generate a new cloud every Sunday, so please subscribe using the RSS or email box on the right and you'll get a message every week with the new cloud.
The words moving up and down the chart are listed here. Apparently people are losing interest in BP but tax has risen up the list a bit.

I summarise around four hundred blogs through their RSS feeds. Thanks in particular to the Palgrave Econolog who have an excellent database of economics blogs; I have also added a number of blogs that are not on their list. Contact me if you'd like to make sure yours is included too.

I use Wordle to generate the image, the ROME RSS reader to download the RSS feeds, and Java software from Inon to process the data.

You can also see the Java version in the Wordle gallery.

If anyone would like a copy of the underlying data used to generate these clouds, or if you would like to see a version with consistent colour and typeface to make week-to-week comparison easier, please get in touch.

Tuesday, 22 June 2010

Counteradvertising

An intriguing situation with an advertising campaign in which the government promotes breastfeeding of babies.

The "Breast is Best" campaign, aside from biasing sales in Kentucky Fried Chicken, is intended to encourage new mothers to breastfeed their babies instead of using bottles. Breastfeeding generally is thought to improve the health of the baby and, possibly, also of the mother.

However, the campaign appears to have the surprising side-effect of reducing the number of breastfeeding mothers. Apparently, highlighting the fact that people need to be encouraged to breastfeed creates an unintended norm...leading many people to (not consciously, I believe) think that bottle feeding is the default option.

Therefore, a pro-breastfeeding organisation has asked the government to stop the campaign.

I'm sure the new coalition, with its new budget constraints on the COI (Central Office of Information - the civil service advertising department) will be happy to oblige.

But advertisers everywhere would be advised to look closely too. What messages are you sending with your advertising? Imagine someone looking cynically at your campaigns...what does it say that you have to advertise how high the quality of your products is? And if you insist that you're the cheapest option available, what do you think people will infer?

Good advertisers and copywriters, of course, know how to communicate a message indirectly, so as not to create a cynicism backlash. But there are plenty of bad adverts out there too.

Monday, 21 June 2010

Ouch.

Sad news of a plane crash in Cameroon. There were eleven passengers on board and the search party has not yet confirmed whether there are any survivors. But here's a slightly awkward quote from the information minister:
"For the moment, between nine and 10 corpses have been retrieved," Information Minister Issa Tchiroma Bakary told a news conference in Yaounde on Monday.
Think about that for a moment.

Ewww.

Sunday, 20 June 2010

The economics zeitgeist, 20 June 2010

This week's word cloud from the economics blogs. I generate a new cloud every Sunday, so please subscribe using the RSS or email box on the right and you'll get a message every week with the new cloud.

The words moving up and down the chart are listed here. "BP" and "oil" are still up there.

I summarise around four hundred blogs through their RSS feeds. Thanks in particular to the Palgrave Econolog who have an excellent database of economics blogs; I have also added a number of blogs that are not on their list. Contact me if you'd like to make sure yours is included too.

I use Wordle to generate the image, the ROME RSS reader to download the RSS feeds, and Java software from Inon to process the data.

You can also see the Java version in the Wordle gallery.

If anyone would like a copy of the underlying data used to generate these clouds, or if you would like to see a version with consistent colour and typeface to make week-to-week comparison easier, please get in touch.

Saturday, 19 June 2010

How is the UK doing - in detail

I have posted a couple of detailed comments in response to Scott Sumner's recent items, and as most of my readers probably don't read his blog, I'm cross-posting them here.

For background, read this comparison of the performance of the UK and Sweden, and the comment thread; then the following response by Scott.

First, I tackle UK monetary policy:
As illustrated by the currency discussion, the figures in this debate is strongly influenced by the choice of starting point.
For example, nominal GDP in the UK has been growing at an annual rate of 6% for the last nine months.
http://www.telegraph.co.uk/finance/economics/7764916/Boost-for-UK-as-GDP-growth-revised-up.html
All of the problems in Scott's figures come from a single quarter, Q1 2009. In Q1 of 2009 we were still in recession, with a 3% fall in NGDP in that quarter alone. I believe the CPI was also negative in that quarter (though I can't find quarterly index figures for that, only annual changes).
It was only in March 2009 that the Bank of England's QE programme was announced (it was increased in May and again later in the year). The Bank clearly recognises the issues in this quote from its May inflation report:
As discussed in Section 2, UK nominal demand growth has fallen to well below its average annual rate of around 5% since the MPC's inception, a period over which inflation has been, on average, close to target. Growth in broad money, as measured by M4, has picked up since mid-2008. But as described in the box on page 13, that pickup wholly reflected strong growth in money holdings of institutions which intermediate between banks. Growth in a more economically relevant measure of broad money, which excludes such institutions, has slowed broadly in line with nominal spending (Chart 1.2).
Do read the whole report if you have time, it gives some good insight into the Bank’s beliefs about NGDP and money.
In other words, the severity of the recession became clear in Q4 2008, and the Bank cut nominal interest rates sharply. Q1 2009 was even worse; so the Bank cut interest rates to zero, and realised that a new policy (QE) was required. It immediately instituted that policy, and the effect of the policy was to create an annual NGDP growth rate of 6%.
Does this not sound like a bank doing roughly the right things? Maybe they could have acted a bit faster, but did any mechanism exist in 2008 by which they could measure NGDP expectations?
If you want some annual figures, wait for the Q2-Q2 figures instead of Q1-Q1: they will be far better. In fact, I expect Q2 figures to be a good bit better than those of recent quarters, meaning that NGDP growth will probably be a good bit higher than 6%.
Will the Bank allow NGDP to catch up to previous trend? That is a good question and we'd love to know the answer. The quality of Mervyn King's public communication falls far short of the effectiveness of the Bank's policy actions. But the Bank is not as delinquent as the Q1 2009 figures would suggest.
Back in a moment and will talk about UK public sector spending.

Then, public spending in the UK:
OK, British government spending.
The first thing is to get the figures right. Where does this 52% come from? An OECD estimate - and the OECD, to say the least, has an unpredictable approach to economic data. The three other sources that I can find put the figure close to 45% (£645bn spend, £1410bn GDP):
http://www.hm-treasury.gov.uk/d/psf.pdf
http://www.ukpublicspending.co.uk/downchart_ukgs.php?year=1950_2010&units=p&chart=F0-total
http://www.guardian.co.uk/news/datablog/2010/apr/25/uk-public-spending-1963
The percentage fell from about 40% to 38% in the late 1990s and then rose to about 41% during the 2000s - only reaching 43% in 2008-09 and (a projected) 45-48% in 2009-10.
A large part of the rise in the last two years is due to falling nominal GDP (which as Scott points out fell 5% during the 2008-09 fiscal year - in the UK that runs from April to March). Real public spending has grown quite slowly in this period, with most of the rise coming from increased social transfers. Indeed, some of the differences in the above figures may come from the choice of denominator: is it annualised GDP at the start of the year, the end of the year or total GDP during the period in question? And do the figures reflect data revisions after the end of the period?
Anyway, the point is that UK public spending is not much higher than Canada's. Incidentally I'm not sure if I have a reliable figure for Sweden - this source says 52% and this unsourced figure is 53%. Maybe that's why they have been doing better than the UK!
About a third of UK public spending is transfers, so government consumption - a more meaningful concept - is around 30% of GDP. 8% of GDP goes on health, 6% on education, 3% on defence, 2% on police and justice, and the rest on a range of other stuff - there is an interesting breakdown here.
None of this is to claim that the UK does not have problems.
The effectiveness of lots of that public spending is lower than it should be. While the outgoing government had good intentions and (in my opinion) largely chose to spend money in the right areas, policy was too volatile for effective spending and management norms to develop. A bit of stability would allow civil servants, who are mostly pretty good at their jobs, to find mechanisms that work for delivering services efficiently.
Outside of the public sector, a large proportion of the population has low formal education, although I think there are informal skills which partly compensate for this. We did have a low savings rate (private and public) for years, though in the last two years private saving has soared - largely financing the public deficit of course. The economy has been overweighted towards the property sector - though there is some justification for this in a high population density country.
And government finances are strongly dependent on the degree of income inequality - in other words, on the finance sector. The collapse in finance sector profits and shrinkage of high wages since 2008 has resulted in a £50-80 billion fall in tax revenue, which will probably now have to be fixed by increasing taxes on the rest of the economy.
On Scott's final point - yes, I suppose philosophically the UK's poor or unskilled people don't deserve to benefit from public goods financed by the City of London; but unlike low-income African or Asian people, they are the ones who have a vote. Economically one can argue that the financing of public goods and social insurance is efficiently done within a relatively closed, coherent society. But I would certainly much rather see higher transfers - or even better, productive investment - to other parts of the world. This, however, is just a dream right now.
Frankly, like most countries, the UK is a complex mix of strengths and weaknesses, and the simplistic adjustment of government spending numbers up or down is not going to make a lot of difference. Probably the one thing the government can best do is take Scott's advice and manage NGDP growth. Whatever happens, we will gradually feel our way towards a more productive, wealthier and better society, along with the rest of the world.
Update: See the further chain of comments between Scott and me for more on this. I'm not sure if we have shed any more light on the issues.

Wednesday, 16 June 2010

The nature of economic truth

Re-reading an old David Beckworth post, I was reminded of that ancient question: is economics a science?

On the content of the post, I have no idea if the United States is an optimal currency area. Or the eurozone.

But a deeper question is: why ask the question?

If this kind of speculation was taking place in a discipline like physics, it would be ignored - if there is no way to test it, there's no point talking about it.

But "the US is an OCA" is not a testable proposition. Therefore, is there no value in proposing it? Well, economists don't seem to think so - these things are discussed endlessly, and some of them even get peer reviewed and published.

Economic "truth" (or economic arguments), even when not meeting the standard of science, can achieve two things.

The first is their value as engineering. Sometimes, with the physics proved to scientific standard, the task is to apply it in a practical design. Nobody can prove that this design is the best, but - if it works - it's still useful to create it. Much of day-to-day economics is like this - designing systems or incentives to the best of our ability, given an agreed background of theory.

The second is more subtle. Economic debates like that one between Beckworth, Krugman and Sumner give us meta-knowledge about the state of knowledge. Certain opinions - the economy needs more money - are common between all three. Knowing the disagreements can increase our confidence in the agreements.

Monday, 14 June 2010

Sentance to ponder [sic]

Andrew Sentance (yes, sorry about that) writes in the Sunday Times about inflation and in particular, why it is stubbornly high in the UK compared to the rest of the world.

Taking out the VAT rise, strong oil price and fall in the pound, he notes that:
It appears that instead of pushing down significantly on cost and price increases, the impact of spare capacity on domestic inflation has been muted.
Assuming this is correct - and we must remember that there is an economic recovery under way, so we'd expect some inflation - we are left with an important question. Why is there so little spare capacity in the UK?

It's important not just in order to keep inflation down. More deeply, it matters because real growth in the economy only happens when more productive capacity comes into use. If there is no spare capacity, we can't have growth until we invest in new production, and that takes time.

Sentance points out that:
Unemployment has risen to a lower level than...in the early 1980s and early 1990s — it is at 8% of the labour force rather than 10%. The latest CBI survey shows 62% of manufacturers reporting spare capacity, in line with the average for the decade before the crisis. This evidence is hard to square with the drop in GDP figures...
The 62% figure may hide something - it doesn't tell us how much spare capacity each manufacturer has. If, instead of falling across the board, sales held up for the highest-quality companies and fell disproportionately for the rest, there might now be more capacity unused than in the past. Unfortunately, it would be of the kind that is less likely to come back into use as the economy grows. Successful companies are more likely to invest in building new high-quality capacity than to find clever ways to quickly use the excess that sits in their competitors' factories.

Similarly with the labour force - which is a more important component of economic capacity in the UK economy than the capital stock. Unemployment has risen a few percentage points, but perhaps the people who lost their jobs were mostly the marginal employees - who are unlikely to contribute much to productive growth in the recovery. There is, unfortunately, a large number of people in the UK without many marketable skills.

One of the most important meanings of the economists' beloved word "flexibility" in the economy is its ability to bring marginal resources into useful operation. Marginal labour and capital will only be employed if there are creative people ready to figure out how to make that happen.

It's a cliche to bemoan the lack of two things in the British economy: management skills and an educated workforce - but I fear that lack is exactly what leads to the OBR's new estimate of spare capacity in the UK: a frighteningly tiny 2%.

Sunday, 13 June 2010

The economics zeitgeist, 13 June 2010



This week's word cloud from the economics blogs. I generate a new cloud every Sunday, so please subscribe using the RSS or email box on the right and you'll get a message every week with the new cloud.

The words moving up and down the chart are listed here. Noticeable this week and last: BP continues to surge. As does oil, though Gulf has fallen a little. And look at that strange little sequence around positions 661-666.

I summarise around four hundred blogs through their RSS feeds. Thanks in particular to the Palgrave Econolog who have an excellent database of economics blogs; I have also added a number of blogs that are not on their list. Contact me if you'd like to make sure yours is included too.

I use Wordle to generate the image, the ROME RSS reader to download the RSS feeds, and Java software from Inon to process the data.

You can also see the Java version in the Wordle gallery.

If anyone would like a copy of the underlying data used to generate these clouds, or if you would like to see a version with consistent colour and typeface to make week-to-week comparison easier, please get in touch.

Saturday, 12 June 2010

Six reasons why there are too many graduates

Talking of identity economics, I can now identify the author of almost every Worthwhile Canadian Initiative posting within the first couple of sentences. They are trying to confuse me by throwing two new authors into the mix, but I have figured out their wily ploy.

So in the first Frances Woolley post I have recognised, she has mentioned in passing a mysterious fact.
Squidward Tentacles, SpongeBob's co-worker, probably did better in school than SpongeBob did. He has intellectual pretensions, to play clarinet and to dance. But these aspirations only make him miserable in his job as a cashier at Krusty Krab.
Canada, like many other countries, has expanded access to post-secondary education, but the demand for educated workers has not kept up to the supply. A study by Marc Frenette based on data from the 1980s and 1990s found over thirty percent of university graduates were over-qualified for their jobs.
But the quantity demanded and supplied should be equal in equilibrium - at least roughly. For supply and demand to be thirty percent out of balance over a thirty year period is a spectacular market failure.

What explains this? There are several possible reasons.

First, it could be down to subsidy. Higher education is indeed subsidised by most governments, and we would normally expect this to result in oversupply. So perhaps people are going to university who would not do so were this a free market.

However, even if there is an oversupply, we'd expect graduate wages to fall until enough demand is created to mop them all up. The oversupply would result in people having more education than is optimal, but it would not mean that skills go to waste. If we subsidise cows, people will eat more beef but there won't be piles of it rotting away in the streets.

So the second question is: why would employers not create enough jobs for the graduates to do? Well, production requires a balance between labour and capital, but also a balance between different kinds of labour. It's likely that expanding employment of skilled people would also require more employment of unskilled people. And if everyone is getting a degree, there's only one place to get unskilled people - overseas. So, since most rich countries have strict immigration controls (especially on unskilled labour), graduates end up having to do unskilled jobs.

The third factor is that employers do not reduce graduate wages so they can hire more graduates. Instead, they pay efficiency wages - wages above the market rate which help to buy honesty and loyalty from staff. Another way to express this is that employers deliberately keep the labour market oversupplied, so their bargaining position is stronger.

So there is some logic in this market, and a reason for employers - the demand side of the market - to act as they do. Why do employees (or rather school-leavers) cooperate with them? Even if the government pays some of the costs of education, student must still give up three or four years of their life

The fourth possibility is that - in the short-term, there could be a simple problem of wrongly predicting demand. Any supplier who needs to spend time building a product (or in this case, a body of knowledge) has to forecast what demand might be by the time they are finished. Anyone starting a degree in a booming economy in 2004 or 2005 had the bad luck to come out in the middle of a recession. But this can't explain a consistently wrong forecast for three decades in a row.

Fifth, students might be gaining private utility from their education which is nothing to do with future employment. University is quite good fun, and future life is enhanced by the having of knowledge. This, like the public subsidy, would create an extra supply of graduates.

Sixth and perhaps most overlooked, the overconfidence bias. A well-known test of students at Harvard asked them, at the beginning of term, to estimate the class ranking they would gain at the end [I can't find a reference for this right now - please comment if you know where it is]. Around 25% of students thought they would be in the top 10%. 50% thought they'd be in the top quarter. And every single student predicted they would be in the top half of the class.

You will be unsurprised to hear that not every student did end up in the top half. Perhaps, however, everyone entering university firmly believes they will be in the top 70% who do achieve gainful employment which uses all of their skills. After all, the propaganda they've all heard in their school years points towards it. Nobody knows - until it's too late - that they will end up in the bottom third who get left behind.

And perhaps this is, after all, exactly the outcome that society wants. An increase in skills and knowledge across the population has big positive externalities. This justifies the subsidy of education, and - perhaps - justifies the costs borne by those individuals who don't end up with the career of their dreams.

Should the public therefore consider compensating those individuals for the time they've spent in our interests? An interesting question. If so, a graduate tax is a terrible policy. But that's a debate for another posting.

Tuesday, 8 June 2010

Servants or masters? Neither

At the end of an otherwise decent article in the Guardian, George Irvin trips over one of the oldest cliches in the left-wing rhetorical manual:
Most important, we have not begun to question seriously whether placating the financial markets by means of such cuts is unavoidable. Perhaps it's time to start thinking the unthinkable: namely, that financial markets should be our servants, not our masters.
This is a stupid distinction to draw, because markets are neither servant nor master of anybody. They are a place where people (or countries) can choose to go, and where we can each decide on our own participation within the structures available.

Greece (more precisely, the people who run its exchequer) can choose whether to borrow money on the international markets. If it wants to, it enters into a two-sided arrangement with consenting investors on terms that both are happy with.

If it then wants to default, it does have that option. Exercising that option will bring consequences.

So much for the borrower. Are markets the servants or the masters of the lender? If someone wants to invest in sovereign bonds they bring their money to the market and can invest it on terms that are agreeable to the borrower country. Once those terms are worked out and signed, the investor has a new set of choices available, each with its own consequences.

Each interaction that I make will remove some choices I previously had, and open up some others. There is nothing special about markets - all choices in life have this character.

If anything is the master of Greece, it is the choices Greeks have made in the past. If anything is the servant of Greece, it's the future path of its history. Markets are just another structure, another tool that the universe makes available to us. What's more, markets are made up of just a bunch of people. Are those people servants or masters of Greece? Of course not.

It's cheap, lazy rhetoric, it tries to simplify a subtle relationship into a crude caricature, and it spoils an otherwise useful piece of writing.

Sunday, 6 June 2010

The economics zeitgeist, 6 June 2010

This week's word cloud from the economics blogs. I generate a new cloud every Sunday, so please subscribe using the RSS or email box on the right and you'll get a message every week with the new cloud.


I summarise around four hundred blogs through their RSS feeds. Thanks in particular to the Palgrave Econolog who have an excellent database of economics blogs; I have also added a number of blogs that are not on their list. Contact me if you'd like to make sure yours is included too.

I use Wordle to generate the image, the ROME RSS reader to download the RSS feeds, and Java software from Inon to process the data.

You can also see the Java version in the Wordle gallery.

If anyone would like a copy of the underlying data used to generate these clouds, or if you would like to see a version with consistent colour and typeface to make week-to-week comparison easier, please get in touch.

Wednesday, 2 June 2010

When marketing emails go slightly wrong

From my email today, this is a charming attempt from an Indian software company to make themselves look relevant:

Dear Leigh,
Hope you are well.
It was a pleasure to travel to some very nice cities like Crawley, Brighton, Worthing, Southampton, Stoke-on-Trent, Birmingham, Stevenage, Bushy, Cambridge, Newcastle-upon-Tyne, Oxford, London and meet some very nice people.

British readers will spot several obvious flaws in this assertion. I will try to avoid offending readers around the country by suggesting which are the flaws.

Tuesday, 1 June 2010

Geary panel talk on behavioural economics

The panel discussion at the Geary Institute was excellent.

It was introduced by Liam Delaney who gave a 15-minute overview of behavioural economics, focused particularly around policy and commitment devices. As a good Dubliner, he used Ulysses as his example, tying himself to the mast to sail past the Sirens without losing himself to temptation. Liam pointed out that Ulysses tied his own body to the mast, without relying on the Greek government of the time to stop him getting into trouble. Nobody pointed out that in modern times, the need for self-discipline seems to be the other way around.

This was followed by a few minutes each from Colm Harmon, Gerard O'Neill, Pete Lunn and me. Colm's focus is on policy and he suggested using the experimental techniques of behavioural economics to provide more accurate and interesting data. Gerard has a commercial view, as to some extent does Pete - though Pete's work is at ESRI, the Irish economic research institute, and he has a broader remit. I tried out an anchoring experiment, which worked pretty well, including the auction of a bottle of wine. At the end of the lecture I tried to collect on the €35 highest bid, which did not work quite so well. Never mind - it was good to show people how susceptible they are to manipulation. People with a birthday in the second half of the month will pay 26% more for a bottle of wine than those in the first half of the month. Who knew? Well, Dan Ariely I guess.

I think the debate has been recorded so I'll try to get a copy and link to it here. But some of the key questions were about whether it's a good thing to use behavioural economics to increase consumption, whether the public sector (the health department in particular) needs to protect itself against clever psychological techniques used by pharmaceutical companies, and what behavioural economics has to say about the financial crisis.

Everyone I spoke to was very open and most had interesting things to say. Afterwards Liam and some colleagues took me out for a generous tour around some of Dublin's best pubs, at which point the story gets a little hazy. But I remember some excellent stories about Jim Heckman and the cream (if that's the word) of the Irish business and political establishment. Looking forward to my next trip back, or a return visit to London by anyone from the conference who'd like some hospitality in return.