Tuesday 30 June 2015

How the Poor Make Better Financial Decisions Than the Wealthy

They can’t afford to be irrational spenders.

budgeting.
Are the poor or the wealthy more rational spenders?
Photo by Thinkstock
People often assume that the poor are less competent than the wealthy. Some even suggest that the poor have flawed values or ways of thinking. But my colleagues and I have recently found that the poor outperform the rich at some financial decisions. Under poverty, people develop a unique expertise.

Wednesday 6 May 2015

Column: Why Businesses Don’t Experiment

Dan Ariely

FROM THE APRIL 2010 ISSUE
A few years ago, a marketing team from a major consumer goods company came to my lab eager to test some new pricing mechanisms using principles of behavioral economics. We decided to start by testing the allure of “free,” a subject my students and I had been studying. I was excited: The company would gain insights into its customers’ decision making, and we’d get useful data for our academic work. The team agreed to create multiple websites with different offers and pricing and then observe how each worked out in terms of appeal, orders, and revenue.

Monday 2 March 2015

Nudge theory: How behavioural economics is shaping financial services

Nudge cover 620 x 430.jpg
The Government and FCA must tread a fine line in using behavioural nudges to encourage consumer engagement with financial services, experts warn. 

Thursday 15 January 2015

Powerful People Are Looking Out For Their Future Selves

Would you prefer $120 today or $154 in one year? Your answer may depend on how powerful you feel, according to new research in Psychological Science, a journal of the Association for Psychological Science.
Many people tend to forego the larger reward and opt for the $120 now, a phenomenon known as temporal discounting. But research conducted by Priyanka Joshi and Nathanael Fast of the University of Southern California Marshall School of Business suggests that people who feel powerful are more likely to wait for the bigger reward, in part because they feel a stronger connection with their future selves.

Saturday 10 January 2015

Being Happy at Work Matters for You—and Your Boss

Being happy at work makes you a better employee and it isn't all about fun. Published on November 20, 2014 by Paul Dolan, Ph.D., in Happiness by Design

Being happy at work is important. Studies suggest that if you’re not happy at work, you’re less productive, more likely to take days off sick, and a poor problem solver. Still, some people maintain being happy at work isn’t important—that happiness is just one possible by-product of a good working environment, and not worth being goal in and it itself. I think, however, this comes from a fundamental misunderstanding of what happiness can mean. In order to discuss whether it’s worth being happy at work—or anywhere else—we should first understand what sort of happiness we are talking about. 

Why Smart People Are Stupid

BY JONAH LEHRER original source here




Here’s a simple arithmetic question: A bat and ball cost a dollar and ten cents. The bat costs a dollar more than the ball. How much does the ball cost?

Tuesday 6 January 2015

The Advantages of Closing a Few Doors

Behavioral economist Dan Ariely, the author of Predictably Irrational wrote a paper in 2004 presenting five experiments, about the abnormal human tendency of keeping doors open even when is obviously a dumb strategy. 

I have to admit this is one of my favourite papers, In my experience I can say, when facing a risky choice, close a few doors but leave two open, the first one, wide open (our vision,goal) the second, half-closed (whenever possible), this asymmetry is what will allow us to benefit from disorder and minimize the risk of blowing up during the process. 

Like Neo said to the architect in Matrix Reloaded, "The problem is choice"
You can find the paper here: "Keeping Doors Open: The Effect of Unavailability on Incentives to Keep Options Viable." Jiwoong Shin, Dan Ariely. Management Science, May 2004. (PDF)

Monday 5 January 2015

Make policy for real, not ideal, humans

Many believe dysfunctional behaviour in finance is due solely to distorted incentives Financial times source
Ingram Pinn illustration


Out of the crooked timber of humanity, no straight thing was ever made. This famous remark of the German philosopher, Immanuel Kant, is particularly relevant to economists. “Homo economicus” is far-sighted, rational and self-interested. Real human beings are none

Sunday 4 January 2015

Freakonomics: This is what we really want to know

In this section, I will gather the most fascinating studies and insights from freakonomics world, a term coined by Steve Levitt and Stephen J.Dubner after their first book,  Freakonomics: The hidden side of everything

Let's begin with a question that fretting me up since teenagers time:  

What’s More Dangerous: Marijuana or Alcohol? Post written by  Stephen  J.Dubner

Imagine a fantasy world that’s exactly as the world is today except that two things are missing: alcohol and marijuana. And then imagine that tomorrow, both of them are discovered. What happens now? How are each of them used – and, perhaps more importantly, regulated? How would we weigh the relative benefits and costs of alcohol versus marijuana?

Tuesday 30 December 2014

In Praise of Small Miracles

by David Brook  Original source here

DEC. 11, 2014

Most of us don’t save enough. When governments try to encourage saving, they usually enact big policies to increase the incentives. But, in Kenya, people were given a lockable metal box — a simple place to put their money. After one year, the people with metal boxes increased savings by so much that they had 66 percent more money available to pay for health emergencies. It would have taken a giant tax reform to produce a shift in behavior that large.