A little while back, I wrote about some of the theory behind present biased behaviour. People who are present biased (i.e. place a disproportionately high value to things that happen right now, relative to things that happen in the future) can be aware of the fact that they are (‘sophisticated’), or not (‘naive’). One interesting and important implication of the theory is that sophisticated people will respond to commitment devices that are costly. For example, Gine and others published a […]
“Thank you for answering my questions. Do you have anything you would like to ask me?” “How often do you get to see the impact you have made with the work you do? I like to do something where I can solve a problem and see the fruits of my labour, so to speak.” “In the past, to be honest, we really didn’t see what happened that much. But it is more and more the case that we get to […]
In 1999, Ted O’Donoghue and Matthew Rabin published a paper in the American Economic Review that, 8 years later, would serve as the catalyst for my interest in Behavioural Economics. For the longest time, economists had recognised that people place a lower weight on things that happen later in the future than things that happen sooner. The problem was that the way in which this was represented mathematically, although simple and convenient, suggested that people would behave consistently about the […]
Price Discrimination is a well-known concept in microeconomics. The basic idea is quite simple. In a competitive market, firms have to accept an equilibrium price. This is because competition, in theory, should drive prices down to somewhere close to marginal cost (the cost of producing one extra good). However, quite often in real life, a firm has some market power that enables them to set prices independently of other firms. This is possible for a number of reasons e.g. monopoly/oligopoly, […]
Bands like Genesis, Muse, Metallica, and Dave Matthews Band have something important in common. They started out with music that was somewhat ‘against the grain’, attracting a specialist audience of listeners. Once they became more established, however, their music shifted towards more mass-market appeal, attracting the wider majority. I’m sure you can think of examples of bands which you liked, but felt subsequently ‘sold out’ in their later years. Conversely, you may also be able to think of bands that […]
I recall teachers using the phrase ‘economic intuition’ a lot around my early exposure to the subject. The more I thought about it over the years, the more I wondered what this mystical superpower was. Economic intuition. What the hell is it, exactly? By definition, intuition is the ability to understand or make sense of something without conscious reasoning. An instinctive ability, if you will. This is rather amusing, because a large proportion of economics is about as unintuitive as […]
As you may have heard, the legendary blues guitarist BB King died recently. Following this though, there were some comments on the internet that got me thinking. Intermingled with the usual condolences and such, a few commenters were critical towards him because of the fact that he did not have a strong understanding of music theory. Their argument seemed to be that his lack of theoretical knowledge about what he was playing somehow diminished his achievements. He is not the […]
In the 1970s, the motoring industry and legal world in the US was subject to the now famous Ford Pinto incident. Through a leaked memo, it was apparently discovered that Ford had realised that there was a design flaw with the car that could cause an explosion upon rear impact. To repair this, so the story goes, Ford could have spent $11 per car, but ultimately decided against it because it would have proven more expensive than any legal damages […]
A little while ago, I came across the interesting website ‘Every Noise at Once‘. It is an attempt to visually map every defined genre of music, so that one can see the proximity of one genre to another. This is not only useful as a discovery tool for finding new music styles that you might enjoy, it also has the potential to tell us something quite insightful about the history and evolution of music. There are some very cool analyses […]
I tend to shy away from discussions of a religious nature, because there is usually not much objective information exchanged. The only way, I say to myself, that I would touch the topic, is if there was actually some evidence that was not purely subjective or opinion-oriented in nature. However, I thought of an empirical question that interested me: does being religious and actively engaging in religious activity actually make people any better off in terms of their wellbeing than […]
Measuring the effect of an intervention, or ‘treatment’, is essential to the scientific method. It helps us to separate real relationships from spurious ones. But there are some pitfalls that cloud our ability to see the true effects of a treatment. Let’s try to understand these pitfalls using an explicit example. Suppose that we want to test the impact of a new fangled weight loss pill that has been released in only one town. The pill was only available at […]
In today’s modern world, it is quite likely that you will come across a group of individuals doing battle with another group of individuals. However, it may surprise you that there are no kingdoms, knights heads, or fair maidens up for grabs. Instead, these people running around like headless chickens are participating in something known as ‘sport’. I appreciate that this may seem rather puzzling. Fear thee not! I have assembled the finest succinct guide in all of the galaxy […]