Knowing and Making

For a while, I've been storing up lots of links to interesting pages from blogs and other places. I keep meaning to weave many of them into an interesting narrative, but some of them don't quite seem to fit, and yet are still on topics that I'm interested in, namely: expectations (and related, rational expectations theory) sentiment and whether it is real, and can be modelled macroeconomic theory and in particular, under what behavioural or market conditions Keynesian stimulus is efficient Here are some of those links which I'm, realistically, never going to get around to to analysing in detail: Rajiv Sethi on rational expectations and equilibrium paths . A good insight into why the rational expectations model is unlikely to reflect reality. But aren't rational expectations the only way to achieve a stable equilibrium in many models? Yes indeed. The conclusion must be that either those models are incorrect (a cop-out) or that the economy cannot be stable . Th...

Consumerology reports a study by David Hardisty, Eric Johnson and Elke Weber at Columbia which randomly offered participants various choices between different pricing options for airline tickets. The main distinction was between a surcharge described as a "carbon tax" and an identical charge described as a "carbon offset". The tax was unpopular - no real surprise. But when people were asked if they supported making the carbon offset mandatory - which is of course exactly equivalent - the response was highly favourable (around 2 points more positive on a scale from -3 to +3). Not only was the "mandatory offset" more popular, but it was regarded identically by Democrats and Republicans. The tax, on the other hand, was strongly disliked by Republicans while Democrats made no distinction between taxes and mandatory offsets. Thus the entire effect appears to be due to Republicans' attitudes to tax. This is an example of a well-known cognitive bias ca...

Nice little iPhone application highlighted here at Consumerology . It is intended to help close the gap between action and reward which is the chief cause of procrastination. Could be a good add-on to any workflow system - I'll definitely be downloading it (as soon as I get my iPhone, which ironically suffers from a two-month gap between placing my order and getting my reward). A rather different approach to implementing behavioural economics in software is taken by my company, Inon - have a look at our CVM software , which helps you find better ways to sell more personalised services to each customer.