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Knowing and Making's Blog

A blog about cognitive and behavioural economics. Building mathematical models of how psychology influences economic systems.

Behavioural economics: the Kylie Minogue of market research

March 20, 2012 Comments (0)

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...

Clearing my tabs for 2012

December 31, 2011 Comments (0)

During 2011 I have probably spent about four days waiting for my browser to respond, due to the number of tabs I habitually keep open. Between the four computers I use, I probably have 200 blog posts in tabs waiting for me to comment. Here are a few of them (in no particular order), so my Chrome may enjoy a faster 2012. A note from Paul Krugman on what makes economics economics. Not a rhetorical discipline but one based on mathematical models. (However, see also Deirdre McCloskey's Knowledge...

What is "playing"?

December 29, 2011 Comments (0)

In between work on some more serious posts (not to mention the day job), let me post a brief comment on Margaret Robertson's article on gamification, "Can't play, won't play". It was written a year ago, so I'm not expecting to provoke an intense debate, but the same argument could easily be made today and it's worth responding to. In short, Margaret claims: gamification isn’t gamification at all. What we’re currently terming gamification is in fact the process of taking the thing that is...

A thought experiment: why the ECB should print money...

December 12, 2011 Comments (0)

...and why the Bank of England and Fed are right to have done so already. I'm not talking about whether the European Central Bank should directly buy eurozone government bonds. This causes a moral hazard problem - it might encourage governments to be profligate and reduce incentives for structural reform. It's, at the very least, debatable. I'm talking about a more general question: why should central banks print money in a recession? This post won't have much new to say to...

Does Nudge require regulators to be "more rational" than consumers?

November 7, 2011 Comments (0)

A couple of times recently - notably in Bill Easterly's otherwise very positive review of Daniel Kahneman's new book - I've seen the following common critique of Nudge-style approaches: "But if people are irrational, regulators are irrational too - so how can they make rules to counter citizens' irrationality?" Easterly says: But [the case for libertarian paternalism] is much too sweeping, because it overlooks everything the rest of the book says about how the experts are as prone to...

Prompted Pareto improvements

November 2, 2011 Comments (0)

I'm going to attempt to introduce a new concept here. It is a bit technical, but I'll try to provide background for non-economists first. I may indulge in some modelling to help me understand it better, so if that's not your thing, feel free to skip the equations and just read the words. I'm also struggling for the name of this concept. The title of the post, "Prompted Pareto improvements" is a name I'm reasonably happy with, but catchier suggestions are welcome. I'll start by explaining...

Please vote for us and help a charity

September 7, 2011 Comments (0)

My company Inon, which applies behavioural economics to help our clients set the right pricing strategy, has been nominated for the Smarta 100 - the top innovative businesses in London. If we win, our £10,000 prize will be donated to charity - please leave a comment if you would like to nominate your preferred charity as one of the recipients. If you'd like to support us and your chosen charity, please click here and vote for us. You'll need to register but it only takes a few...

Has the nature of investment in the economy changed?

August 31, 2011 Comments (0)

I may have more to say about this in the next few weeks, but this New York Times article about industrial policy reminds me of a question I asked on twitter the other day: ...hedge funds and venture capitalists are geared toward investing in financial instruments and software companies. In such endeavors, even modest investments can yield extraordinarily quick and large returns. Financing brick-and-mortar factories, by contrast, is expensive and painstaking and offers far less potential for...

Why Obama should propose a Balanced Budget Amendment

August 20, 2011 Comments (0)

It's the one simplest thing President Obama could do to seize control of the economic agenda. It's counterintuitive - but done right, it could be the tonic both for the economy and for a divided political scene. Don't click on your back button yet - I haven't gone crazy. Obama should propose a Balanced Budget Amendment with the following key features: The balance must be achieved over ten years, not one It should include automatic (not discretionary) investment programmes when...

The cost of making a hit single

August 20, 2011 Comments (0)

I've been listening to NPR's Planet Money podcast, and one of the recent episodes [mp3 link] is about how much it costs to make - and promote - a hit single. Or more accurately: to attempt to make a hit single. A friend in the music industry asked me to write down their figures with so he doesn't have to listen to the whole podcast. So here they are. The record in question is Rihanna's "Man Down", which her record company Def Jam was hoping would be one of the anthems of the summer. The...