Read: Are Markets Moral?

  • A complete waste of time.

    “Are Markets Moral?” is a transcript of a one day inter-disciplinary workshop on the question that is this book’s title.

    Presenters regurgitate ideas that they have presented much more eloquently and convincingly earlier, often in other, much longer books of their own, or they speculate about issues, social phenomena that they have absolutely no clue about. The discussions are shallow; the discussants talk at cross-purposes, don’t try to synthesize, or if they respond they resort to cheap attacks, free from empirical facts with the sole purpose to discredit an opposing (and reasonable, evidence-driven) opinion.

    The composition of the group of participants is seriously biased. Everyone seems to have (just) their own pet peeve and no genuine interest in answering the workshop’s big question. I pity the poor souls who attended in the hope of gaining new insight.

    Much more enjoyable, instructive, and insightful are Daniel Friedman’s “Morals and Markets” and Paul Zak’s “Moral Markets.”

Read: The Sense of Style

  • Pinker’s The Sense of Style is a unique writing guide in the sense of its foundation in psychology, its acknowledgement of the nonsense of a strict prescriptive–descriptive dichotomy, and its reference and discussion of other well known guides and popular texts on writing. I like that. It unfortunately also contains a chapter with a very common list of good and wrong usage of terms that could be found on any blog on writing as well. I did not like that.

    Hence, the first five chapters are easy to recommend. They instruct, explain, and entertain. It was interesting and enlightening to learn that many “rules”, that need to be broken, are based on the misconception that English is Latin. It is not. Latin grammar does not apply to the English language.

    There are a couple of other things I noticed and learned.

    Pinker’s Sense of Style is political. Pinker takes clear positions. (On, for instance, feminism and the gender neutral singular)

    Every sentence requires a writer to grapple with tradeoffs between clarity, concision, tone, cadence, accuracy, and other values. Why should the value of not excluding women be the only one whose weight is set to zero?

    Typographical conventions that support the reader, the ease of reading, and hence facilitate the understanding of a text may be at odds with grammatical structure that also clarifies the meaning and facilitates the understanding of a text.

    No discussion of the illogic of punctuation would be complete without the infamous case of the ordering of a quotation mark with respect to a comma or period. The rule in American publications (the British are more sensible about this) is that when quoted material appears at the end of a phrase or sentence, the closing quotation mark goes outside the comma or period, “like this,” rather than inside, “like this”. The practice is patently illogical: the quotation marks enclose a part of the phrase or sentence, and the comma or period signals the end of that entire phrase or sentence, so putting the comma or period inside the quotation marks is like Superman’s famous wardrobe malfunction of wearing his underwear outside his pants. But long ago some American printer decided that the page looks prettier without all that unsightly white space above and to the left of a naked period or comma, and we have been living with the consequences ever since.

    I would usually prefer the typographers’ approach. Though Pinker (and Pullum) makes a valid point when it comes to the discussion of the structure of a text, its sentences.

    The American punctuation rule sticks in the craw of every computer scientist, logician, and linguist, because any ordering of typographical delimiters that fails to reflect the logical nesting of the content makes a shambles of their work. On top of its galling irrationality, the American rule prevents a writer from expressing certain thoughts. In his semi-serious 1984 essay “Punctuation and Human Freedom,” Geoffrey Pullum discusses the commonly misquoted first two lines of Shakespeare’s King Richard III: “Now is the winter of our discontent / Made glorious summer by this sun of York.”68 Many people misremember it as “Now is the winter of our discontent”, full stop. Now suppose one wanted to comment on the error by writing:
    Shakespeare’s King Richard III contains the line “Now is the winter of our discontent”.
    This is a true sentence. But an American copy editor would change it to:
    Shakespeare’s King Richard III contains the line “Now is the winter of our discontent.”
    But this is a false sentence, or at least there’s no way for the writer to make it unambiguously true or false.

    Hence, yes, the typographer’s rule needs to be broken if necessary.

Read: The power of fifty bits

  • The Praise. What happens when a practitioner writes about behavioral sciences’ insights and their applications? You get a refreshingly different perspective, refreshingly new examples for behavior change strategies that work, and in this particular case a refreshingly balanced discussion of the underlying ethical principles.

    In contrast to many other authors in the popular behavioral science genre Bob Nease does not write about human irrationality. That is already a reason to recommend his book: The term irrationality is often misunderstood as stupidity, and some authors seem to emphasize this interpretation, pushing the need for paternalistic advice and guidance. Nease, on the other hand, is focusing on bounded rationality – limited cognitive ability, limited willpower, (and limited self-interest) – as the result of a long evolutionary process. People are not (that) inherently stupid and do not need to be guided by a better-knowing and well-meaning paternalistic entity, our decision processes and the resulting (in)actions are just maladaptive as a consequence of a rapidly changed environment. As a result, there is an intention—action gap. A gap that can be closed with the right choice architecture, or rather action-taking architecture. Since the intentions are already there it just needs to get easier to follow through with them.

    Nease offers a small set of strategies that have this goal in mind: Making it easier to follow through (when the inaction is caused by inattention and inertia). The strategies are, of course, not new or unique to Nease’s insight. Default options, mandated choice, and framing are discussed at length in the academic and the popular behavioral science literature. Yet, the examples from his personal work experience and the reminders (for the action-taking-environment engineer) for the constant need to experiment make his book entertaining, instructive, and hence worthwhile to read.

    Fifty bits is a rather short, concise, and focused book. There is no padding. Indeed, some parts could have been slightly more detailed. As a result, there is no excessive hurdle for picking up the book and reading it. I guess this feature of the book, making it easier to pick it up and read it in full, is intentional.

    The critique. While Nease is very careful to present a balanced discussion, to consider the ethics of behavior changing interventions, and to call for intellectual honesty, avoidance of deception, and generally being “nice” there is an inconsistency in one of his arguments. At least, I cannot agree with his rationale for choosing between mandated choice and defaults with opt-out.

    First Nease recommends requiring an active choice (chapter 3), what is sometimes also called “mandated choice.” Then, however, in chapter 5 (“Let it Ride”) he also recommends setting defaults with opt-outs and tries to establish a rule when to ask for an active decision vs when to rely on the default.

    It is all linked to the “Effort [cost] of Active Choice”, “Effort [cost] of Opting out”, and the “Fraction who would Opt out.” Setting a default with opt-out leads to a larger behavioral effect at the population level. If the expected cost of opting out is lower (at the population level) than the cost of active choice the choice architect should implement a default with opt-out.

    This may sound reasonable. So, let me add one of Nease’s insights that he offers in chapter 9 “Simplify wisely” under the heading “Why is easy so good?”

    The bottom line is that what logically looks like a small bump on the road to better behavior psychologically looks more like a wall. (p. 135)

    Seemingly small obstacles can be associated with high psychological costs. Looking only at the physical cost to opt out, let’s say looking only at the time it would take, neglects these psychological costs (to overcome inertia). Naively applied – as in Nease’s example –, the rule would too often recommend setting a default with opt-out instead of mandated choice.

    Yet, there is another reason why I do not like this advice and cannot agree with the presented rationale for it.

    The rule is based on a cost to society argument and the, at least, theoretical possibility to compensate the losers (i.e. aiming at a Kaldor-Hicks improvement). However, since compensation never occurs it remains unclear whether there is indeed an increase in society’s welfare. Further, this requires that the disutilities and utilities caused to the individual members of society can be compared across individuals and aggregated in a meaningful way. I would contest this assumption. (For more and more eloquent critiques on this kind of social welfare improvements see the works of Arrow, Baumol, Bergson, Little, … ) Mandated choice, on the other hand, does not require any of these interpersonal utility comparisons.

    Obviously, if my critique is on such a technicality, a point that is often dismissed and ignored in practice it cannot be that bad. Let’s just say I would prefer active choice on principle. It seems more honest, more autonomy preserving, maybe even autonomy enhancing (if the action-taking-environment engineer does not add peer pressure).

    Disclosure: The author, Bob Nease, sent me a copy of his book for free. Thank you, Bob! I enjoyed it.

Read The checklist manifesto

  • A small, low cost, autonomy-preserving intervention that yields dramatic improvements in a desired outcome. Where have I heard this before?

    Gawande describes his discovery of the checklist, its benefits, and the difficulties to design a good one so that it is actually used. With Gawande being a general surgeon the book is rather focused on his medical work. Though his narrative also adds insights from airline pilots – who has not heard of the pre-flight checklist? – and construction, and, superficially, finance.

    The obvious benefits of catching small oversights with a checklist that even, no, especially trained and experienced professionals often commit seem surprisingly dramatic in medicine. Yet, I was more impressed with a, for a lack of better expression, nudge that was/is implemented with the help of a checklist and not with the direct impact of the checklist itself: Actors (i.e. the surgical team, the different specialist builders) are made to talk to each other (and learn each others’ names) and share responsibility. Indeed, responsibility and therefore decision power is redistributed from the top to the bottom. That, I believe, is a major driver for the success of groups.

    Bottom line: The checklist manifesto is not a gripping thriller, it is not intended to entertain. Similar to a checklist it may seem a bit dry. And maybe there is even too much detail when Gawanda writes about his personal experiences with patients. It is interesting, though. Eye-opening even. And yes, I would like to have more checklists (or reliable, written rules and procedures that would serve as checklists) for my own work – sometimes, for the administrative parts.

Read: Busy

  • I may have read just too much of similar themed texts recently. Crabbe’s Busy seem utterly un-original. There is the usual mix of second hand research reporting and personal anecdotes to fill the gaps in support of an argument.

    The list of references is impressive, admitted. Yet, mixing articles from highly respected authors in highly respected academic journals with pop-science books is less than inspiring confidence. The reliance on personal anecdotes adds to that impression.

    On the other hand, the book’s thesis seems to be pretty much common wisdom nowadays. Many of the cited articles are ten or twenty years old. And thus, the gaps in the support of an argument may be not important at all. The conclusions are all accepted, there is nothing controversial.

    This still leaves the entertainment value of the book. It reads quite nicely.

Read: Happy Money

  • So, after Stuffocation I wanted to get a bit more on (and closer to) the original research. Dunn and Norton’s Happy Money was supposed to fill that role as “Better Spending” is at the core of their research.

    I had too high expectations.

    The book is rather small, but not brief. There is a lot of unnecessary padding, irrelevant anecdotes, and personal back story. Hence, they say a lot less than they actually write.

    Since most of the results presented in their book I already knew, Happy Money has added very little. Out of the 5 chapters that discuss the research only two offered something new. Articles on “Buy Experiences”, “Make It a Treat”, and “Buy Time” had already made it to my desk. And, unfortunately, the book did not offer anything worthwhile compared to these articles.

    The chapters on the ideas that one should rather “Pay Now, Consume Later” and “Invest in Others” were more interesting. “Pay Now, Consume Later” follows directly from the concept of “pain of paying” and the peak-end effect. If there is no “pain (of paying)” at the end of the consumption experience the experience is more enjoyable, makes one happier. Getting happier by “Invest(ing) in Others” seems a bit like conventional wisdom. There is, however, a substantial amount of research on this. It took me a while to make the connection to the altruism and warm glow literature. They do not refer to any of the relevant economics artciles in this area (like James Andreoni’s A Theory of Warm-Glow Giving from the 1990) but only cite very recent articles in psychology. They do, however, refer to the Waldfogel paper on the Deadweight Loss of Christmas, the economic inefficiency of gift giving to show how myopic, narrow-minded, and thus incomplete the economic analysis of gift giving is. Consequently, they neglect all, almost all, the relevant research in (behavioral) economics, published in economics journals, and thus irrelevant to psychologists. While, of course, perfectly justifiable, I perceived this rather mono-disciplinary approach as annoying. Given the title Happy Money I expected rather a fusion of the different fields of economics and psychology.

    What else annoyed me?

    The authors feel it is necessary to explicitly tell their readers that they are professors at highly reputed universities and that they publish in highly reputed academic journals and that their friends are also professors at universities of the highest reputation. They were the rising stars, they were the people who will change the world. They are the authority on the book’s topic. You do not need to look any further.

    And finally, in the last chapter they explain how government should make the world a better place by just applying all the principles discussed in the book, to cast them into a law and make them a guide for government action. Their recommendations are plain paternalistic policies. Given the heated debate about freedom preserving libertarian paternalism, nudging, these restricting, purely paternalistic policies that would force happiness upon the feeble-minded citizen who does not know what is good for him were a big surprise.

Read: Stuffocation

  • A downside of reading ebooks is that you cannot briefly skim the whole book to get an idea about its content, the argument the author wants to make. Yes, the table of contents can still give a clue about this. Yet, somehow with an ebook it is less likely that I will consult the table of contents (again) once I have “turned” the pages.

    Hence, while reading Suffocation (as an ebook) I often wondered why the author would now discuss things like the Streisand effect, or whether he sees a future in our society for whatever he was discussing at the moment.

    Wallman builds his argument slowly, carefully. Yet, without telling his reader the big picture up front. Only after a chapter, at the end of it, or even only after several chapters, it becomes clear what Wallman wants to say, why he tells what he just told, what the purpose of all the (anecdotal) evidence is. At the end, everything is obvious.

    Wallman identifies a problem: Stuffocation. Materialism in the sense of buying (too much) stuff, conspicuous consumption. After the all the unclutter and simplify-your-life books and articles that seem legion nowadays he does not need to spend too much time and effort to make and explain this point. He then discusses three potential solutions: minimalism, regression to simple living, and medium chill (a result of satisficing with rather modest aspirations). They all ain’t it.

    So, he identifies a common core and a less anti-materialist solution to Stuffocation, all the stuff that clutters our homes and makes us miserable, that seems more likely to catch on. Experientialism, conspicuous spending not on lots and lots stuff but lots and lots of memories (and some high-quality stuff that helps to have a great experience).

    All in all, this conclusion does not seem to be very controversial. Or original. Psychologists like Gilovich and Dunn arrived at the conclusion that spending money on experiences is making people happier than spending money on consumer goods much earlier. On the other hand, Wallman asks (and answers) whether this shift in spending on goods to experiences would be viable, whether people would change their behavior in large numbers to have a lasting effect on the economy. Of course, the anecdotal pieces of evidence still hint a the current stage of this idea’s dissemination and adoption: It’s still very, very early. Right now, experientialism seems something that is mostly for the financially (very) well off. Though, of course, these may be exactly the people who feel the most “stuffocated”, who have reached the end of material scarcity, and for whom time has become the ultimate scarce resource.

    So, despite all the shortcomings there were a few parts of the book and ideas for which I am happy to have read Stuffocation.

    For instance, I was surprised to find a(n interesting) discussion of the economic concept of GDP in the book. While Wallman’s perspective seems to be rather anti-business (“captains of consciousness”) he quite correctly points out: (only) what gets measured gets managed. Hence as long as there is no widely accepted replacement (or at least complement) for GDP that captures well-being the progress of society will be measured as the increase of the monetary value of the goods and services produced and sold and not as the increase in its citizens’ well-being, their quality of life.

    And, Wallman gave a nice summary of why conspicuous spending on experiences is better in the sense of likely to make people happier than conspicuous spending on stuff. With stuff, it is almost always easy to rank what is the better (as a proxy the more expensive) thing. With experiences the cost may not serve anymore as a proxy for the quality: a “cheap” experience may still be great. Hence, there is less of a feeling of being behind, less pressure to upgrade and spend more.

Read: Misbehaving

  • Thaler’s Misbehaving is a personal account of the development of modern behavioral economics. It is not the history of behavioral economics. It is a (part of the) history of behavioral economics. Thaler is a contemporary witness, and at the same time one of the major figures in modern behavioral economics.

    I like Misbehaving for (at least) two reasons.

    First, Thaler establishes very early and often reinforces later that standard economic [consumer / decision] theory, rational choice theory is a normative theory. It describes how people should behave if they were to optimize their utility. It (often) does not describe what they really do. Rational choice theory is based on mathematical axioms, not true human behavior. For many purposes, this is absolutely fine. In many contexts, the observed aggregate behavior is driven more by the institution than the individual. For describing human decision making, for predicting an individual’s choices it is not. This is where we need a positive, descriptive theory.

    Human cognition is bounded. Full rationality (in its mathematical definition) is, therefore, impossible. Bounded rationality is the best we can hope for. And this is the core of behavioral economics.

    Without a pre-existing unifying model to compete with the dominant Rational Choice Theory research had to start with identifying “anomalies.” Thaler did exactly this. He reports many of the initial hostilities and criticisms against his heretics, the abandoning of the dominant doctrine. Sometimes he also reports a researcher’s conversion as a result to economics becoming a more empirical science. Nevertheless, still today some colleagues, and even colleagues among the experimental economists, would start to defend Rational Choice and Expected Utility Theory even if I just described it as a normative and not a positive theory.

    The still standard normative economic theory approach can serve many purposes well and is often easier than more realistic approaches. As-if utility maximization has its purpose. Yet, as the sole policy analysis tool it may lead to the wrong conclusions and should, therefore, be augmented with the many insights we have gained from neighboring fields and the empirical economic research of the decision maker. A recommendation that, obviously, also Thaler advocates and has already helped to implement on several occasions.

    Second, somewhere in the middle of the book Thaler alerts, >Tempering expectations about the magnitude of the sizes of effects that will be obtained is important because the success of […some nudges…] can create the false impression that it is easy to design small changes that will have big impacts. It is not.
    >
    >It is also crucial to understand that many improvements may superficially appear to be quite small: a 1 or 2% change in some outcome. That should not be a reason to scoff, especially if the intervention is essentially costless. […] A 2% increase in the effectiveness of some program may not sound like a big deal, but when the stakes are in billions of dollars, small percentage changes add up. As one United States senator famously remarked, “A billion here, a billion there, pretty soon you’re talking about real money.”

    I believe this statement is more important than its place in the book and its extent of the discussion in the book implies.

    In the laboratory, we are used to large effects. Experiments are often designed such as to generate as large an effect as possible. Even though the lab is the real world with real world incentives and real world decision makers, decisions outside the lab are made in a context that matters, after a series of other different decisions that matter, by more heterogeneous decision makers what matters, too. This is not just additional noise. These factors need to be investigated as well. Yet, this means that an effect in the field of maybe 2% when standard theory would predict none is huge.

    Of course, this also has implications for research. Experimental results obtained under “clean” conditions with small samples in the laboratory will not always translate to similar effects outside the laboratory. The small samples imply that statistical significant effects may be over-estimated. The “clean” lab environment may lack moderating factors. Hence, large-scale field studies will become more and more important as the basis for evidence-based policies. We have already begun to see this.

Read: The Calculus of Selfishness

  • Karl Sigmund’s The Calculus of Selfishness applies basic evolutionary game theory to the analysis of cooperation in strategic interactions. Though it is published in the Princeton Series in Theoretical and Computational Biology it is rather addressed to social scientist, economist and psychologist, and in particular undergraduates.

    The Calculus starts simple enough and Sigmund introduces whatever mathematics he needs without being too formal in his approach. For a text in applied math the book reads surprisingly well. However, it is still a book in applied math and I fear it is as such not really appealing to an undergraduate in the social sciences. Indeed, I do not believe there are many undergraduate economics students who would enjoy this book and not put it aside after the first few pages, the first chapter at the latest. While this may be a good example of a text in applied math it is not “good enough” for the nascent social scientist.

    On the other hand, it is an excellent introductory text on the evolutionary game theory of cooperation, direct and indirect reciprocity, fairness, reputation, and trust. I only wished Sigmund would have expanded on structured interaction and the co-evolution of subpopulations. He only hints at what results would be obtained when one would look at these things more carefully.

    I also particularly appreciate that each chapter ends with a briefly annotated list of references for further, in more depth, reading on the topic and the game theoretic approach that was introduced in the respective chapter. While the terse exposition of the chapter can only serve to raise one’s interest these references are the real treasure trove of The Calculus of Selfishness.

    Hence, while I would not recommend the book to any of my undergraduates in economics or social sciences I would happily point any graduate student in its direction.

Read: The Art of Choosing

  • It really seems to become a popular exercise, writing up your research in a format suited for the mass market, writing a popular science book. While the secret to success for science journalists is to cram as many anecdotes as possible in a more or less organized way in between the covers of their book those original researchers that get noticed add a little of a personal touch, some private details to the mix. Or, if they are really successful they add a lot of personal stuff to complement their research results, to enlighten the reader with regard to their motivation and their personal process of doing research.

    Sheena Iyengar of jam-sampling fame (PDF) belongs to this last group. Her The Art of Choosing is a remarkable re-telling of her research hand in hand with a telling of her story. Not only is her book, that is the chapters in her book more cast from the same mold as, for instance, Ariely’s The Upside of Irrationality, also her philosophy, her world view, and her conclusions from her research are much more appealing to me. Hence, she tells not just about the Art of Choosing, she tells about seeing choice where others may see only fate, destiny, or a pre-selected path. She writes about “freedom-to” and personal responsibility. Yet, at the same time, she also writes about (optimal) limits to choice, the need to delegate decisions in certain situations, and cultural differences in the benefits of choice.

    This book is highly recommended.