This is a contributed article by my colleague, Mukul Patki. Mukul has 10+ years of experience in Analytics and is Aryng‘s main instructor on Experimentation.
Understanding the consumer psyche and the irrationality of the human decision-making process is key to developing winning value propositions or product features to test in the market. Here is a discussion of 5 Key Behavioral Economics (BE) principles (among dozens) that all marketers should not only understand but internalize.
The psychology of altruism helps explain why the ice bucket challenge and #nomakeupselfie campaigns became such social media phenomenons as Alix Barasch explains. Over the past few weeks, Facebook has been flooded with videos of people dumping ice water on their heads. Rather than being a drastic measure to cool off in the summer, this trend was prompted by the ‘Ice Bucket Challenge’, a campaign that dares people to pour a bucket of ice water on themselves or else donate to ALS research (or the Motor Neurone Disease Association MND in the UK). Those who accept the challenge can dare three more people to take part.
::vtol:: , a project founded by musician and artist Dmitriy Morozov, along with Julia Borovaya, Edward Rakhmanov, and Alexander Kaplan, have recently worked on a new project called Solaris. which makes use of an EEG headset (Emotiv Epoc) to let people control a swirling pool of ferrofluid – magnetic liquid – with their brainwaves.
We are the unwitting subjects of subtle mind games to make us better passengers, writes Katia Moskvitch. And it sometimes starts before we even board.
Nudging with signs
Passengers, of course, don’t always play along, and create extra private space by placing luggage on a seat next to them. “We observed how chair design could nudge people not to do this, and found that the mere introduction of an armrest here and there reduced luggage on seats, making it possible for more people to sit down,” says Hansen.
Hansen is now briefing airport architects and interior designers on how to redesign seating areas at departure gates.
But there are other ways of reducing bottlenecks at airports, for example by using visual displays to nudge passengers so that they don’t rush the gates. Hansen’s team wants to keep them seated until their row is due to board the plane. “The nudge-intervention here consists of two elements, both based on the principle of providing visual information,” says Hansen. The departure gate, for example, could have two screens, one to show the names of people who are due to board the plane, while the other has calls to action, like "please keep seated" and "find your passport and boarding pass". The visual cues basically work like traffic lights.
The empirical mean–variance evidence comparing the performance of Socially Responsible Investments (SRI) and conventional investments suggests that there is no significant difference between the two. This paper re-examines the problem in the context of Marginal Conditional Stochastic Dominance (MCSD), which can accommodate any return distribution or concave utility function. Our results provide strong evidence that there is a financial price to be paid for socially responsible investing. Indices composed of socially responsible firms are MCSD dominated by trademarked indices composed of conventional firms as well as by indices carefully matched by size and industry with the firms in the SRI indices. Zero cost portfolios created by shorting the SRI index and using the proceeds to invest in the conventional index generate higher average returns, lower variance and higher skewness than either of the two indices standing alone. They also MCSD dominate the SRI and conventional indices standing alone.
There’s a simple way to get more done: You match your most important tasks to your most productive time. For many of us, mornings are it.
A recent survey done by Timeful, a scheduling app, and famed behavioral economics professor Dan Ariely, found that more than 60% of respondents claimed their most productive time occurred during various windows between 6 a.m. and noon.
So if you make the most of the first hour of your workday, you can get more done before your mid-morning break than most people do all day. Here’s how to rock this time and start the day right:
Abstract: We study in a sample of 1,070 primary school children, aged seven to eleven years, how altruism in a donation experiment is related to children’s risk attitudes and intertemporal choices. Examining such a relationship is motivated by theories of reciprocal altruism that provide a cornerstone for understanding human social behavior. We find that higher risk tolerance and patience in intertemporal choice increase, in general, the level of donations, albeit the effects are non-linear. We confirm earlier results that altruism increases with age during childhood and that girls are more altruistic than boys. Having older brothers makes subjects less altruistic.
Not long ago, I wrote about one of my favorite pastimes: sitting quietly on a park bench in New York City’s Central Park. These moments of solitude, if not silence, are becoming increasingly rare in this era of “fetishistic connectivity.”
Lately I’ve been wondering what it would be like to do a silent retreat. Would the noise in my head drive me to distraction? Would I want to burst forth yelling and screaming in rebellion? Or would I find clarity and calm amid the meditation and silence?
The benefits of meditation are well-known and have been espoused by some of the world’s most successful investors and innovators. Indeed, even business schools are starting to include meditation in their curricula. Last year, my colleague Jason Voss, CFA, wrote about “a watershed event in business school education,” the news that Georgetown would teach meditation to its business school students in a semester-long course. And last week, NYU’s Stern School of Business announced that MBAs will be offered meditation this fall as part of the NYU Mindfulness in Business Initiative. (Voss also recently blogged about how meditators can overcome behavioral biases.)
We all want customized experiences and products -- but when faced with 700 options, consumers freeze up. With fascinating new research, Sheena Iyengar demonstrates how businesses (and others) can improve the experience of choosing. Do you know how many choices you make in a typical day? Do you know how many choices you make in typical week? I recently did a survey with over 2,000 Americans, and the average number of choices that the typical American reports making is about 70 in a typical day. There was also recently a study done with CEOs in which they followed CEOs around for a whole week. And these scientists simply documented all the various tasks that these CEOs engaged in and how much time they spent engaging in making decisions related to these tasks. And they found that the average CEO engaged in about 139 tasks in a week. Each task was made up of many, many, many sub-choices of course. 50 percent of their decisions were made in nine minutes or less. Only about 12 percent of the decisions did they make an hour or more of their time. Think about your own choices. Do you know how many choices make it into your nine minute category versus your one hour category? How well do you think you're doing at managing those choices?
Many people question about the way to define EI instruments and objectives in a clear and unambiguous manner. Often, indeed, this skepticism hides the refuse to acknowledge the paramount importance of the economic and financial issues into the global world of intelligence. Many Intelligence scholars, in fact, continue to reject the “globalization” of the Intelligence, as the enlargement of both its spectrum of interest (going from the traditional military and political aspects, to the economical and financial ones, and in perspective towards the medical, physical and astronomical ones), and the geographical areas relevant for the national security (proceeding from the East-West dichotomy to each micro-angles of the world).Due to the global recession, economy and finance constraints “bind” everywhere – in industrialized and developing countries – any public and private functions. Today, in the sovereign and corporate world, the debt stock contracted in the past, and the more and more moderate flow of income seriously limit the exertion of both the full state sovereignty and the management of an optimized business.
Fashions in research funding, reward structures in universities and streamlining of scientific agendas undermine traditional academic norms and may result in science bubbles. Research from the University of Copenhagen, which has just been published in the journal Philosophy and Technology, shows how the mechanisms that set off the financial crisis might be replicating in the field of science.
“In finance, the first condition for a bubble occurs when too much liquidity is concentrated on too few assets. The second is the presence of speculators. In science, similarly, if too much research funding is focused on too few research topics, and all researchers speculate in the same fashionable scientific templates to attract funding, a potential science bubble may be forming,” professor of Formal Philosophy Vincent F. Hendricks from University of Copenhagen explains.
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You should have an advanced knowledge of behavioural science concepts, ........
Essential Criteria: • Advanced behavioural science knowledge (this will be assessed through the selection process) • Ability to persuasively communicate complex concepts to a non-technical audience • Ability to design and evaluate randomised control trials (both lab/field) • Excellent data analysis skills • Ability to manage a varied workload and to deliver projects to a high standard, on time • An enthusiastic, adaptable and creative approach to work • Ability to work in a fast-paced environment and to deliver under pressure • Good people and project management skills • An understanding of and interest in public policy and services
Psychologen, Anthropologen und Verhaltensökonomen sollen her und Angela Merkel helfen: Die Regierung will wirksamer regieren und den Bürgern einen Schubs in die „richtige“ Richtung geben.
In dieser Stellenausschreibung steckt politische Musik. Das Bundeskanzleramt sucht gleich drei Referenten mit tiefen Kenntnissen über Psychologie, Anthropologie und Verhaltensökonomik für den Stab Politische Planung, Grundsatzfragen und Sonderaufgaben. Die „Bild“-Zeitung fabrizierte daraus die Schlagzeile „Merkel will Psycho-Trainer anheuern“. Ob die Kanzlerin demnächst „im Guru-Stil regieren“ wolle, fragte das Blatt in boulevardesker Überspitzung.
Ein Regierungssprecher dämpfte die Phantasie: „Ich kann sie beruhigen: Es werden keine Sofas im Kanzleramt aufgestellt.“ Vielmehr gehe es darum, neue Methoden für „wirksames Regieren“ zu erproben. Dafür sollten Erkenntnisse der Verhaltensökonomie stärker genutzt werden. Denn Forscher hätten herausgefunden, „dass viele Menschen so handeln, dass es ihren eigenen Interessen widerspricht“, so der Regierungssprecher.
Alessandro Cerboni's insight:
Psychologists, anthropologists and behavioral economists to help her and Angela Merkel: The government wants to govern effectively and provide citizens with a nudge in the "right" direction.
Abstract The subject of this article is the frame problem, as conceived by certain cognitive scientists and philosophers of mind, notably Fodor for whom it stands as a fundamental obstacle to progress incognitive science. The challenge is to explain the capacity of so-called iinformationally un encapsulated cognitive processes to deal effectively with information from potentially anycognitive domain without the burden of having to explicitly sift the relevant from the irrelevant. Thepaper advocates a global workspace architecture, with its ability to manage massively parallelresources in the context of a serial thread of computation, as an answer to this challenge. Analogical reasoning is given particular attention, since it exempliﬁes informational unencapsulation in its most extreme form. Because global workspace theory also purports to account for the distinction between conscious and unconscious information processing, the paper advances the tentative conclusion that consciousness may go hand-in-hand with a solution to the frame problem in the biological brain.
In 1966, Abraham Maslow published The Psychology of Science: A Reconnaissance. Building on a concept he had touched upon in earlier works, Maslow wrote, “I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.” It was a clever way to discuss confirmation bias, and the phenomenon he described became commonly known as Maslow’s hammer or man-with-a-hammer syndrome.
Of course, Maslow’s quip was not intended for tradesmen working in the physical world. No, instead this remark was referring to people working with ideas — psychologists, politicians, teachers, business leaders, and, of course, analysts, portfolio managers, and investors. It is much easier to imagine a person working in a knowledge-based trade applying a framework that he or she believes in only to discover that the world around them is more complex than expected.
Abstract: Tax evasion is a pervasive problem in many countries. In particular, some developing countries do not collect even half of what they would if taxpayers complied with the written letter of the law. The academic literature has not been oblivious to the need to explain why people pay (or do not pay) taxes. However, the empirical literature has not yet reached consensus. This paper reports the results of a large field experiment that tried to affect compliance by influencing property tax taxpayers’ beliefs regarding the levels of enforcement, equity, and fairness of the tax system in a municipality in Argentina. Results indicate that the most effective message was one that stated the actual fines and potential legal consequences taxpayers may face in the case of noncompliance (tax compliance increased by more than 4 percentage points). No average effects are found for the treatments designed to affect beliefs about the equity and fairness of the system. However, the evidence also points out that not every taxpayer updates his or her beliefs in the same direction, as relevant heterogeneous effects are found across the population. The evidence in this paper advances the state of knowledge and may help to reconcile some of the different results in the literature.
As companies and governments move away from traditional defined benefit pension plans toward defined contribution plans, the role of the financial adviser has gained greater importance. The work of Harry Markowitz and the birth of modern portfolio theory have given finance professionals a framework for creating the optimal portfolio. Even though numerous models exist for constructing portfolios, it can be difficult to persuade lay investors to make rational choices. Their seemingly irrational decisions can arise from a lack of knowledge or from psychological barriers that prevent them from behaving rationally.
In Investor Behavior: The Psychology of Financial Planning and Investing, H. Kent Baker of American University's Kogod School of Business and Victor Ricciardi of Goucher College have assembled a collection of 30 articles written by more than three dozen scholars in the field of behavioral finance. The articles encompass a wide range of topics in the psychology of investing, focusing on academic work on financial planning. Even readers who are somewhat familiar with the literature on behavioral finance will benefit because the book addresses a number of topics not usually covered in the mainstream behavioral finance literature.
In psychology and neuroscience, and in other disciplines studying decision- making mechanisms, it is often assumed that optimal decision-making means statistical optimality. This is attractive because statistically optimal decision procedure sare known,can be simply implemented in biologically-plausible models, and because such models have been show into give good fits to behavioural as well as neural data. Here we question when statistical optimality is the kind of optimality we should expect natural selection to aim towards, by considering what kind sof loss function should be optimised under different behavioural scenarios. In laboratory settings subjects are often reward edonly on making a correct choice, so optimisation of a zero-one loss function is appropriate, and this is achieved by implementing a statistically- optimal decision procedure that gives the best compromise between speed and accuracy of decision-making. Many naturalistic decisions may also be described by such a loss function; however others, such as selecting food items of potentially different value, appear to be different since the animalis rewarded by the value of the item it chooses regard less of whether it was the best available. We argue that most naturalistic decisions are value-based. Mechanisms that optimise speed-accuracy trade-offs need to be parameterised, using information about the decision problem, in order to deal with value-based decision- making. Mechanisms for value-sensitive decision-making have been described, how ever, which adaptively change between decision-making strategies with out the need for continual reparameterisation.
Over a quarter of a century has passed since the 1987 publication of Paul A. Samuelson’s historiographical manifesto ‘Out of the closet: A program for the Whig history of economic science’, summarising arguments that had developed during a 16-year debate provoked by his 1971 Journal of Economic Literature article on the Marxian transformation problem. Samuelson’s intervention marked a defining turning point in the evolution of contemporary economic thought.
In the wake of the economic turmoil that opened with the 2007 financial crash, 20 years after Samuelson’s manifesto, criticisms of the quality of economic thought have multiplied. This special issue of Cambridge Journal of Economics offers a timely re-appraisal of the impact of the Whig-historical programme on the economic thinking and practices that have become the target of today’s critics.
The term ‘Whig history’ was originally coined by the English historian Herbert Butterfield (1981 ) to refer to what Peter Boettke (2005)describe as ‘history as written by those perceived to have been the intellectual victors of key debates’. Butterfield’s largely successful purpose was to discredit and eliminate the practice, amongst historians, of presenting the past and its ideas as nothing more than an imperfect form of the present. Since then, awareness of the dangers of such reductionism and the necessity of what Bagchi (2014) calls a ‘contextual’ approach to social knowledge has spread through most of the social sciences.