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nudge April 22, 2008

Posted by KG in econ, interviews, neuroscience, politics, psychology, science.
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freakonomics q&a with richard thaler and cass sunstein about their new book:

Q: You talk about heuristics and decision-making biases which influence most people’s thinking. Which heuristic or bias has taken you for a ride? Are we as a society more or less vulnerable to heuristics than we were 20 years ago and why?

CASS: The one that has most gotten to me is the availability heuristic, which means that people assess probabilities by asking whether examples easily come to mind.

For about two years after 9/11, I was scared to fly, even though I knew, from my own work, that the risks were really low. And after a bad incident with Chinese food (I have a severe shrimp allergy, and the vegetarian dish contained shrimp), I have been ridiculously nervous about shrimp hiding somewhere in Chinese food.

Fortunately, I am also subject to optimistic bias — with respect to just about everything — and so I now fly contentedly and eat Chinese food happily if sometimes a bit warily.

I don’t know if our society is more vulnerable to bad heuristics and errors than it was 20 years ago. Certainly there’s a lot of vulnerability to those things, but the same as been true for a very long time.

Q: Is there a situation where it would be imperative to shove instead of nudge. How would you, as a libertarian paternalist, justify such a situation?

A: When children and third parties are at risk, mandates and shoves may be OK. We are not opposed to mandatory vaccination laws, in part because those who don’t get vaccinated endanger others.

Many antipollution laws are fine too. A full answer here would point to the costs of bargaining: when people can’t contract their way to a sensible outcome, because of collective action problems and a lack of information, the argument for a mandate gets stronger.

Shoves that aren’t that big an intrusion, such as mandatory seatbelt laws, are OK too, if they can be shown to save a lot of lives. But generally, we like freedom of choice.


who’s against government transparency? February 8, 2008

Posted by KG in campaign finance, econ, politics.
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ian ayres @ freakonomics on the concept of a blind trust for campaign donations:

Transparency in government has a glorious tradition. Justice Louis Brandeis long ago said, “publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.” But there exists in our government a central mechanism of democracy that stands against this cult of disclosure — the voting booth. Ballot secrecy was adopted toward the end of the nineteenth century to deter political corruption. Before the secret ballot, people could buy your vote and hold you to your bargain by watching you place that vote. Voting booth privacy disrupted the economics of vote buying, making it much more difficult for candidates to buy votes because, at the end of the day, they could never be sure who had voted for them.

A similar anti-transparency argument can be applied to campaign finance. We might replicate the benefits of the voting booth by creating a “donation booth,” or a screen that forces donors to funnel campaign contributions through blind trusts. Like the voting booth, the donation booth would keep candidates from learning the identity of their supporters. Just as the secret ballot makes it more difficult for candidates to buy votes, mandating anonymous donations through a system of blind trusts might make it harder for candidates to sell access or influence because they would never know which donors had paid the price. Knowledge about whether the other side actually performs his or her promise is an important prerequisite for trade. People — including political candidates — are less likely to deal if they are uncertain whether the other side performs. The secret ballot disrupts vote buying because candidates are uncertain how a citizen actually voted; anonymous donations disrupt influence-peddling because candidates are uncertain whether contributors actually contributed.

So instead of mandating transparency, we might do better to mandate a kind of non-transparency.

link roundup January 27, 2008

Posted by KG in 2008 Elections, arts/culture, books, comedy, econ, food, health, international, interviews, media, news, politics, science, speeches, talks, television.
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1. what don’t we know about the pharmaceutical industry? a freakonomics quorom

2. video: stewart slams media for provoking campaign drama

3. malcolm gladwell @ TED in 2004, exhibiting his superior storytelling abilities and making the horizontal segmentation of pasta fascinating – 18 min 15 sec youtube video

4. booksthatmakeyoudumb

5. nabokov wanted his final, unfinished work destroyed. should his son get out the matches?

6. nicholas kristof in india (“china and india: the race is on” & “power of a mother’s love” – nytimes video)

the case for open immigration October 17, 2007

Posted by KG in books, econ, immigration, international, news, politics, race, terrorism.
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q&a with philippe legrain (freakonomics):

The economic case for open borders is as compelling as the moral one. No government, except perhaps North Korea’s, would dream of trying to ban the movement of goods and services across borders; trying to ban the movement of most people who produce goods and services is equally self-defeating. When it comes to the domestic economy, politicians and policymakers are forever urging people to be more mobile, and to move to where the jobs are. But if it is a good thing for people to move from Kentucky to California in search of a better job, why is it so terrible for people to move from Mexico to the U.S. to work?

We tend to think it’s fine that foreign financiers cluster together in New York, I.T. specialists in Silicon Valley, and actors in Hollywood, while American bankers ply their trade in London, Hong Kong, and China; surely the same logic should apply to Mexican construction workers, Filipino care workers, and Congolese cleaners coming to the U.S. After all, they are all simply service providers plying their trade abroad.

From a global perspective, freer migration could bring huge economic gains. When workers from poor countries move to rich ones, they can make use of the advanced economies’ superior capital, technologies, and institutions, making these economies much more productive. Economists calculate that removing immigration controls could more than double the size of the world economy. Even a small relaxation of immigration controls would yield disproportionately big gains.

From an ethical point of view, it seems hard to argue against a policy that would do so much to help people poorer than ourselves. A Rand study of recent immigrants to the U.S. finds that the typical immigrant ends up $20,000 per year better off. And it’s not just the migrants themselves who gain — it’s their countries of origin, too. Already, migrants born in poor countries and working in rich ones send home much more — some $200 billion a year officially, perhaps another $400 billion informally — than the miserly $100 billion that Western governments give in aid. These remittances are not wasted on weapons or siphoned off into Swiss bank accounts; they go straight into the pockets of local people. They pay for food, clean water, and medicines. They enable children to stay in school, fund small businesses, and benefit the local economy. What’s more, when migrants return home, they bring with them new skills, new ideas, and the money to start new businesses that can provide a huge boost to the local economy. For example, Africa’s first Internet cafés were started by migrants returning from Europe.

interesting perspective from philippe legrain, who travelled for six months interviewing immigrants and researching the topic. if the “rational wing” of the republican party, as tyler cowen refers to it as, can get on board, maybe what is counterintuitive for most could actually be accepted.  xenophobia, fear, and racism are seemingly more powerful forces than even blind faith to party ideology though.