Knowing and Making

Discussion number 1 in a series of 3: on goal-setting. Part 2 and part 3 have now been published. Much of decision-making psychology (and by extension behavioural economics) explores the processes by which people solve a problem or achieve a goal. Usually the papers in this field contrast the rational, expected-utility way to solve these problems with the approaches people actually use in practice. An important question they rarely address is "Why that goal?" How is it that people choose the particular problem they want to solve, the objective to work towards? In the psychology lab, the answer is easy: the person in a white coat gives it to them. In real life, that doesn't happen. Answering this question is essential to developing a comprehensive theory to replace or challenge classical economics. Standard microeconomic theory has a clear, simple answer to this: we always have the same goal, maximising utility. Any other objective (finding the best job, working o...

I haven't been very active here recently, but here are some links to my writing on other sites: An article for RW Connect about the UK election polls and how behavioural methods could make polling more accurate. A journal article in the International Journal of Market Research  (subscribers only, sorry) about behavioural conjoint analysis methods. An article in the proceedings of the DCAI conference, " When can cognitive agents be modeled analytically versus computationally? " If you don't have access to either of the latter articles, drop me an email and I can send you the proof versions.

The FT has a very good article from Tim Harford today, surveying behavioural economics and asking some important questions about it. People within a field can be so immersed in their unconscious assumptions and practices that it takes an outsider to point out some of the questions they are not asking. Tim says: The past decade has been a triumph for behavioural economics...[which] is one of the hottest ideas in public policy....Yet, as with any success story, the backlash has begun. Critics argue that the field is overhyped, trivial, unreliable, a smokescreen for bad policy, an intellectual dead-end – or possibly all of the above. Is behavioural economics doomed to reflect the limitations of its intellectual parents, psychology and economics? Or can it build on their strengths and offer a powerful set of tools for policy makers and academics alike? Quite. That, of course, is a journalistic question - not one intended to be answered within the article, but designed to provoke t...

I didn't intend to stop posting on here when I started my tour . But things overtook me. Here's a summary of what some of them were: My book, The Psychology of Price , came out. You should buy it! I started a new business, The Irrational Agency , with a business partner. We've taken the ideas of behavioural economics into the market research and marketing worlds, and tried to go a bit deeper than some of the agencies who appear to have based their behavioural services on reading the first half of Predictably Irrational . We've developed a decision process model (based on some ideas regular readers might have seen on here last year) and been lucky enough to work with some quite cool clients to apply it. I developed my theory of cognitive microfoundations a bit further. It's now primarily based on information processing and attention, informed by a range of empirical decision-making work and on some theoretical work from the likes of  Payne, Bettman and Johnson ...

There has been much talk about microfoundations on the economics blogs in the last few months [ Noahpinion , Mark Thoma , Simon Wren-Lewis   twice , Andrew Gelman   twice , Karl Smith , Paul Krugman   twice , Robert Waldmann , Rajiv Sethi from 2009 ]. The idea of microfoundations is that a model of the overall economy should be consistent with how individual people act. The aggregate behaviour of variables like GDP, government deficits and unemployment should be derived by adding up the choices of individuals, not by treating the whole population as if it were a single entity. (A microfounded model might start off like this: "Imagine N agents, each of which has income y n , consumes c n and saves s n . Then y n = c n + s n . For each agent, s n varies with the interest rate r according to the following relation..." while a non-microfounded model is more likely to start: "Total spending in the economy is C and saving is S. C+S must sum to Y, total income. S varies w...

This New Yorker article about why so many Americans are single reminded me of the debate about unemployment prompted by Casey Mulligan . Here’s why: From the New Yorker: "...do people live alone because they want to or because they have to?" Paraphrasing Mulligan and his critics: “Are workers choosing to be unemployed or are they forced to be?” [actual quotes from Mulligan: " there are sensible people ...who will recognize that 2009 is not the time for them to...commute a long distance to work...[unemployment insurance has] dramatically reduced the costs to them of making this the year they coach junior's baseball team, or do some work on their house, or spend time with an ailing parent" " the market tends to create and allocate jobs for those people who are most interested in working " and " my research has been to examine...changes in the willingness and availability of people to work " versus Dean Baker's " this does not m...

Do you remember those catchy tunes from the late 1980s? I Should Be So Lucky ?  The Locomotion ? The first time you heard them they were quite fun, memorable even. But then they got more airplay. And more. And more. Radio stations figured out that the sugary, bubbly popness of the tunes would cut through a lot of background noise and get your attention, so they played them again and again. Soon we had Got To Be Certain , and Je Ne Sais Pas Pourquoi , which were exactly the same as the first two songs. Then a "strategic inter-agency collaboration" with Jason Donovan on Especially For You . ( Jason looks a bit less lifelike in this alternative version) . After a short interlude in late 1989, another number 1 with Tears On My Pillow , which was meant to be more sophisticated but was equally artificial, overproduced and in fact just the same old song as I Should Be So Lucky . By this time anyone who wasn't a 13-year-old girl was thoroughly sick of Miss Minogue, who wasn...