Knowing and Making

I can't post on Felix Salmon's blog, so here's a comment I wanted to write on this amusing post about free ice cream: The answer to 65% of all thought experiments on economics blogs: selection effect. The "you" to whom Dan's question is addressed is a different set of people to the "they" who'd turn up for a free cash offer. Though of course, there is a bit of a framing effect too. The question of demographic effects in behavioural experiments is underinvestigated (though there are a few papers about cultural differences, especially in the ultimatum game).

Dan Ariely has done some really interesting experiments about how to induce honesty or dishonesty. He thinks the results are a sad fact about human nature, but I don't take that view. For me, it's just more insight into how humans behave - which helps give us the power to improve. The Wall Street Journal has a couple of examples of businesses using behavioural economics to influence their customers' behaviour. Revealingly, these examples are mostly of the 'Nudge' type - an electricity company helping customers to reduce energy use, or a pharmacy enrolling more customers in home-delivery services to help the customer save money. This isn't what's relevant to most businesses, though. The third example is much more apposite - an insurance firm using (cognitive) behavioural insights to upsell more supplementary services. Much harder for this company to pretend it's just trying to help its customers out - but much more honest for them to put their story in ...