Category: Human Sciences

What Economics Can (and Can’t) Do

July 19, 2015

“In John Stuart Mill’s view, which I believe is basically correct, economics is a separate and inexact science. It is separate from the other social sciences, because it focuses on only a small number of the causal factors that influence social phenomena. It is inexact because the phenomena with which it deals are influenced by many other causes than the few it focuses on.”

http://opinionator.blogs.nytimes.com/2015/07/14/what-economics-can-and-cant-do/

Misbehaving: The Making of Behavioural Economics by Richard H Thaler review – why don’t people pursue their own best interests?

July 5, 2015

“That a person with such everyday flaws has scaled the unforgiving heights of the economics establishment is striking in itself. Even more so is the fact that he has done so by turning those weaknesses into the very subject of a new branch of economic science. Thaler has spent a career seeking to understand individuals as they really are – chock-full of weaknesses, irrationalities and idiosyncrasies. He labels these creatures ‘humans’, rather than as ‘econs’, walking calculators rationally optimising their utility.”

http://www.theguardian.com/books/2015/jul/04/misbehaving-making-behavioural-economics-richard-h-thaler-review-nudge?CMP=twt_gu&CMP=twt_gu

Finally, an Answer to the Minimum Wage Question

May 27, 2015

How can we prove anything in the human sciences when it is virtually impossible to run reproduceable experiments the way you can in the natural sciences? Every so often a “natural experiment” presents itself and we can come to conclusions about truths in fields such as economics. The problems of economics are present in fields throughout the human sciences for the same reasons. Below is an article that discusses the issue the effects of raising the minimum wage.

“In statistics, ‘identification’ just means separating two groups in order to tell if a treatment works. You give Group A the pill and you give Group B a placebo, and you see if Group A does better than Group B. In laboratory experiments this is usually possible to do. In the real world, it’s a lot harder — you have to wait for a policy to bring about a difference between two areas that are roughly comparable.”

http://www.bloombergview.com/articles/2015-05-27/finally-an-answer-to-the-old-minimum-wage-question?cmpid=yhoo

Maligned Study on Gay Unions Is Shaking Trust

May 26, 2015

How do we create knowledge in the social sciences? What constitutes proof? What methods do social scientists undertake?

When we hear conclusions and findings of studies we often don’t question or think about how those conclusions were arrived at. This article about a particular study highlights some of the challenges and limitations of producing knowledge in the human sciences.

What methods are appropriate? How reproduceable are findings in the human sciences? What are the ethical limits of experimentation? How do the structures of our institutions (universities, scientific journals) promote or inhibit the production of knowledge?

“The scientific community’s system for vetting new findings, built on trust, is poorly equipped to detect deliberate misrepresentations. Faculty advisers monitor students’ work, but there are no standard guidelines governing the working relationship between senior and junior co-authors.

“The reviewers at journals may raise questions about a study’s methodology or data analysis, but rarely have access to the raw data itself, experts said. They do not have time; they are juggling the demands of their own work, and reviewing is typically unpaid.”

http://www.nytimes.com/2015/05/26/science/maligned-study-on-gay-marriage-is-shaking-trust.html?_r=0

http://www.nytimes.com/2015/05/28/upshot/pollings-secrecy-problem.html?hp&action=click&pgtype=Homepage&module=mini-moth&region=top-stories-below&WT.nav=top-stories-below&abt=0002&abg=1

‘By separating nature from economics, we have walked blindly into tragedy’

March 11, 2015

“We need a new way of thinking, one that tightly links the human-made world of economics and politics with the natural world of climate and biodiversity and with the designed world of 21st century technology. Consider my own home field of study, economics. Sometime in the 19th century, economics largely dropped its traditional attention to land, water and food, as industry replaced agriculture as the leading economic sector. Economists decided, by and large, that they could ignore nature – take it ‘as given’ – and instead focus on market-based finance, saving, and business investment. Mainstream economists derided the claims of ‘limits to growth.'”

http://www.theguardian.com/global-development-professionals-network/2015/mar/10/jeffrey-sachs-economic-policy-climate-change

Mathematical model explains marital breakups

March 10, 2015

“Most people know love takes work, and effort is needed to sustain a happy relationship over the long term, but now a mathematician in Spain has for the first time explained it mathematically by developing a dynamical mathematical model based on the second law of thermodynamics to model ‘sentimental dynamics.’ The results are consistent with sociological data on marriage breakdowns.”

http://phys.org/news193298961.html

What The IRS Could Learn From Mormons

March 4, 2015

How does a person’s notion of faith affect their charitable giving? How does it affect how honestly they donate their money? In an interesting Planet Money podcast and accompanying article, economists study how Mormons think about what they give to the church and what they don’t and principles the IRS could learn from them.

“I asked a Mormon bishop in Salt Lake City if a few more rules defining income might make tithing easier on Mormons or bring in more money for the church. He said all this soul-searching about what you owe God is kind of the point.”

http://www.npr.org/blogs/money/2012/03/02/147749784/what-the-irs-could-learn-from-mormons

Freakonomics Podcast: The Maddest Men of All. Episode about Behavioral Economics

February 27, 2015

Another interesting discussion on the field of behavioral economics (see a previous post on the topic). Some really interesting discussions on this podcast about the contrast between classical economics and behavioral economics. You get some insight into the different approaches to knowledge and assumptions between two related fields in the human sciences.

You also get some interesting insights about how we make decisions. To what degree are our decisions motivated by reason? And to what degree are they motivated by emotion? Is it ethical for someone to use their knowledge of our emotional decision making to push us to make a decision they want us to make (i.e. buy something we otherwise wouldn’t)?

“Let’s take an example where you go to an airline website and it … quotes you a price for your seat to Sacramento, whatever it may be, and it says only four seats left at that price. Now, that works on me. I’ve spent eight years studying this stuff, I know it’s an attempt to exploit my scarcity bias, but it still makes me click. That’s just the way I’m wired. Now implicit in that line is that subsequent seats will be more expensive. But actually the person in their weasel wording hasn’t exactly made that promise, have they? They’ve merely said at this price. At this price is not quite clear. It could be that the subsequent four seats are being sold actually at a lower price.”

http://freakonomics.com/2015/02/26/the-maddest-men-of-all-a-new-freakonomics-radio-podcast/

When Whites Get a Free Pass: Research Shows White Privilege is Real

February 24, 2015

“This elegant experiment follows in a tradition of audit testing, in which social scientists have sent testers of different races to, for example, bargain over the price of new cars or old baseball cards. But the Australian study is the first, to my knowledge, to focus on discretionary accommodations. It’s less likely these days to find people in positions of authority, even at lower levels of decision making, consciously denying minorities rights. But it is easier to imagine decision makers, like the bus drivers, granting extra privileges and accommodations to nonminorities. Discriminatory gifts are more likely than discriminatory denials.”

Ethics of behavioral economics: Nudges or manipulation?

February 11, 2015

The field of behavior economics includes the study of how and why people make the decisions they do and consequently, it’s the study of how to change people’s decisions to push them in different directions. Governments have used these techniques and findings to promote positive behaviors like not littering and not smoking but also to increase the number of people paying their taxes. Private companies have used these techniques to increase the sales of their products and services. People employing these techniques often say they provide a “nudge.” At what point do these nudges become manipulation? Does it matter if the behavior being promoted is one we agree is positive like quitting smoking? How does the use of language affect our perception of ideas and things?

What is also interesting about this field is that some traditional economists resent the term “behavioral economics” and don’t consider it to be part of their field. They were further annoyed when a behavioral economist and self identified psychologist, Daniel Kahneman, won the Nobel Prize for economics.

Below are a couple of articles about this field.

1. Manipulate Me: The Booming Business in Behavioral Finance

“Many behavioral interventions work, whether at reducing litter and power usage or boosting savings rates and organ donations. Yet these successes aren’t the whole story. Even after rigorous experimentation and data analysis, the best-intentioned nudges can fall flat or backfire. Some may be behavioral band-aids that don’t address deeper structural problems such as stagnating wages. Nevertheless, consumers have jumped on the bandwagon, eager to be manipulated into the best version of themselves, and businesses are rushing to meet the demand.”

http://www.bloomberg.com/news/articles/2014-04-07/manipulate-me-the-booming-business-in-behavioral-finance

2. What was I thinking?

The latest reasoning about our irrational ways

“Why do people do things like this? From the perspective of neoclassical economics, self-punishing decisions are difficult to explain. Rational calculators are supposed to consider their options, then pick the one that maximizes the benefit to them. Yet actual economic life, as opposed to the theoretical version, is full of miscalculations, from the gallon jar of mayonnaise purchased at spectacular savings to the billions of dollars Americans will spend this year to service their credit-card debt. The real mystery, it could be argued, isn’t why we make so many poor economic choices but why we persist in accepting economic theory.”

http://www.newyorker.com/magazine/2008/02/25/what-was-i-thinking

3. Why Behavioral Economics Is Cool, and I’m Not

“It happens to me regularly: I’m an organizational psychologist, but I get introduced at least once a week as a behavioral economist. The first time this happened before a speech, I attempted to set the record straight, telling the executive that all of my degrees were in psychology. His response: ‘Your work sounds cooler if I call you a behavioral economist.'”

http://www.huffingtonpost.com/adam-grant/why-behavioral-economics_b_5491960.html