Behavioral Economics Schedule

• Instructor: Simon Halliday, PhD.
• Time: Tues & Thurs 1:20 to 2:35pm
• Venue: Seelye 211
• Semester: Spring 2020
• Course code: ECO254
• Email/hangouts: shalliday@smith.edu
• Syllabus
• Project Guidelines
• FAQ
• Experiment report guidelines

Week 2: Heuristics & Biases

Tuesday 4 Feb & lab on Thursday 6 Feb

Reading

• Cartwright Chapter 2: To the end of section 2.5.
• Rabin, Matthew, 2002, “A Perspective on Psychology and Economics”, European Economic Review, 46 (4-5): 657-685.
  • This Rabin paper is a lovely and not too technical introduction to many of the important ideas in behavioral economics. Some of the ideas will only become clear later in the course, but don’t worry we shall get there!

Revision

• BFH Chapter 3: Doing the best you can

Recommended

• Rabin, Matthew, 1998, “Psychology and Economics,” Journal of Economic Literature, Vol 36 (1): 11-46.
  • This is a much more technical approach than the Rabin paper above, but potentially useful depending on what you plan to do for your project.

Cases

• Michael Moss, “The Extraordinary Science of Addictive Junk Food,” New York Times, 2013.
• Steven Levy, “Nest’s Plan to Stop Brownouts Before They Start”, Wired, 2013. See also: MyEnergy.com.

• Larcom et al (15 September 2015), ‘The Benefits of Forced Experimentation’, is available here: www.voxeu.org/article/benefits-forced-experimentation

• The reading guide is available here: docs.google.com/document/d/12SU6upZrKDtUwyNaWOATo3LIzRjT3yODHkUlag5Hgu0/edit

Week 3: Risk

Tuesday 11 February

Reading

• Cartwright, Chapter 3: Risk, Read up to Section 3.5
  
• Tversky and Kahneman, 1981, “The Framing of Decisions and the Psychology of Choice,” Science, Vol 211, January, 453-458 (6 pages).

Revision

• BH Chapter 13: A Risky and Unequal World.

Thursday 13 February

• We’re doing Lab 1 today.
• Go here to see it: Lab1
• We’ll download and check R Studio for you all.

Homework On your laptop, follow these steps to install R and the latest version of RStudio. Make sure to install R and LaTeX first!

1. Download and install R here: cran.rstudio.com/
2. Download and install LaTeX here: www.latex-project.org/get/
3. Download and install R Studio here: www.rstudio.com/products/rstudio/download/

We will use these documents as guides, for some of them you will need to log in to Moodle:

• Installation Guide: https://moodle.smith.edu/mod/resource/view.php?id=37210
• Tidy Data: tidy_data
• Check your name off here: https://docs.google.com/spreadsheets/d/1DB60SzS9VBA1IsUr2AiPWJyt0f3C6RyLbcSstSWvCWw/edit?usp=sharing

Watch these videos by Nick Horton (Amherst College) as an introduction to R markdown if you want more revision:

• Video 1: www.youtube.com/watch?v=w4hLT7WyjnM&feature=youtu.be
• Video 2: www.youtube.com/watch?v=MdxNFiXm1qE&feature=youtu.be

Prof Horton also has some videos about starting out with R:

• Video 1: www.youtube.com/channel/UC5fHtS-LUBTBWI9_h7eCcRQ
• Video 2: www.youtube.com/watch?v=3Y_i3PxIKfg

Week 4: Risk

Tuesday 12 February

Read

• Cartwright Chapter 3, Section 3.6 (don’t read further than 3.6)
• George Loewenstein et al, 2001., “Risk as Feelings,” Psychological Bulletin, Vol 127 (2): 267-286. (15 pages)
• Make sure you’ve also read the Kahneman & Tversky paper from last week.
• We shall spend time finishing up to the end of 3.5, briefly discuss 3.6, then switch to the two papers.

Other Notes

• Check here for the notes on Bayes’ Rule and understanding expected utility changes: bayes_rule.

Week 1: Introduction

Tuesday 28 January

• What is Economics about? How does it inform policy?
• What is Behavioral Economics about? How might it inform policy?
• The results of in-class question about behavioral economics will appear here

Read

• Behavioral Economics for Kids here
• Alm, James, 2017, “Presidential Address: Is economics useful for public policy”, Southern Economic Journal, 83 (4), 835–854 (16 pages)
  • Why read this? I want to convince you, first, that economics itself is useful for informing policy decisions and, second, that behavioral economics is at least as useful too in informing policy-makers on how to construct policy too. But, we mustn’t throw out the baby with the bathwater: “economics” and “behavioral economics” must be used appropriately.

Recommended

• The Behavioral Economics Guide 2016, available here.
  • The BE Guide is useful for you to get a broad sense of what we do in Behavioral Economics and what kinds of ideas you might want to research in your team project.

Cases

• George Loewenstein, “Economics Behaving Badly”, New York Times, July 14 2010.
• Richard Thaler, 2015, “Unless You Are Spock, Irrelevant Things Matter in Economic Behavior,” New York Times, 8 May 2015.

Transparency and Integrity in Research

• New Truths that only one can see, New York Times, George Johnson, 20 January 2014.
• How reliable are psychology studies?, Ed Yong, The Atlantic, 27 August 2015.
• Unreliable Research: trouble at the lab, The Economist, 17 October 2013.
• Austerity’s Spreadsheet Error (Colbert Report Video)

Homework

Complete these surveys:

• Your individual background and preferences: goo.gl/forms/M9DaKh366j
• Questions about your thinking and preferences: goo.gl/forms/MKPML7aMny
• Moodle statistical knowledge survey: https://moodle.smith.edu/mod/questionnaire/view.php?id=518703

Music Videos from Today: - https://www.youtube.com/watch?v=Z0mfBt3mhtc - https://www.youtube.com/watch?v=a01QQZyl-_I

Week 6: Time concluded

Tuesday 26 February

Read

• Dan Ariely and Klaus Wertenbroch, 2002, “Procrastination, Deadlines, and Performance: Self-Control by Pre-Commitment,” Psychological Science, Vol. 13 (3): 219-224. (6 pages) We already read this for last week, but go over your notes
• Richard H. Thaler and Cass R. Sunstein, “Libertarian Paternalism,” The American Economic Review: Papers and Proceedings, Vol. 93, (2): 175-179. (5 pages)

Cases

• Katrin Bennhold, “Britain’s Ministry of Nudges,” New York Times, 2013.
• “The limits of nudging,” The Economist, 2015.

Week 7: Learning & Information

Tuesday 5 March

Reading

• Textbook & Lab notes
• Cartwright, Chapter 5 up to the end of Section 5.4 (feel free to exclude Section 5.3.4. if you’re struggling to understand it as it may employ game theory you have not done)

Catch-up on groups & on learning articles: - Sundali and Croson, 2006, “Biases in casino betting: The hot hand and the gambler’s fallacy,” Judgment and Decision Making, Vol 1 (1): 1-12 (11 pages)

Thursday 7 March

• Gary Charness and Matthias Sutter, 2012, “Groups make better self-interested decisions,” Journal of Economic Perspectives, 26 (3): 157-176 (18 pages) Cases

• People don’t want equality, they want fairness: http://www.theatlantic.com/science/archive/2015/10/people-dont-actually-want-equality/411784/

• Cass Sunstein reviews Akerlof and Shiller’s Phishing for Phools: http://www.nybooks.com/articles/archives/2015/oct/22/why-free-markets-make-fools-us/

Week 8: Fairness and Social Preferences

Do people only worry about their own consumption or their own money, or are they concerned (in prosocial or antisocial ways) about what others get? If they do care, what do their preferences look like? Are they altruistic? Are the reciprocal? What experiments do we use to check this and how can we understand the breadth of these preferences?

Tuesday 19 March

Reading

• Cartwright, Chapter 7 up to Section 7.4.
• Daniel Kahneman, Jack Knetsch, and Richard Thaler, 1986, “Fairness as a Constraint on Profit Seeking: Entitlements in the Market,” American Economic Review, Vol. 76 (4): 728-741, (13 pages).
• Alexander Cappelen et al, 2007, “The Pluralism of Fairness Ideals: An Experimental Approach,” American Economic Review, Vol. 97 (3) 818-827, (9 pages).

Cases

• Kusum Ailawadi and Paul Farris, “How Companies Can Get Smart About Raising Prices,” Wall Street Journal, 2013. See also: Four Barrel.
• “The rise of the sharing economy,” Economist, 2013.

Recommended

• Stefano DellaVigna, 2009, “Psychology and Economics: Evidence from the Field,” Journal of Economic Literature, 47 (2): 315–372.

Revision

• BFH Chapter 2

Thursday 21 March

• Presentations

Week 9: Fairness and Social Preferences (contd.)

Tuesday 26 March

See readings for Week 9. We focused on the slides. I’ll look at readings a bit next week if we have time.

Thursday 28 March

We’re going to spend some time learning about ifelse() today to make sure everyone is comfortable with how it can be used to create new and useful variables.

• Go to this new lab: lab_extras
• We will also look at how to do citations in R Markdown at the citations page.

Week 10: Gender and Preferences

Tuesday 2 April

• Gender – See readings on Moodle

Thursday 4 April

• Go here for Lab5
• Go here on Moodle to download the data: https://moodle.smith.edu/mod/resource/view.php?id=405319
• The codebook or data description to understand what the data means is available on Moodle here: https://moodle.smith.edu/mod/resource/view.php?id=405318

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Week 14

Tuesday 5 December

Read

• Tanjim Hossain and John List, 2012, “The Behavioralist Visits the Factory: Increasing Productivity Using Simple Framing Manipulations,” Management Science 58 (12): 2151 - 2167 (X pages). Note: We will use the NBER version of this paper because the Management Science version isn’t available to us yet through our online resources.
• Slide are here

Thursday 7 December

• Bring your laptops. It’s team project time!

• We’ll also do the final experiment (other things equal)

• Go here: https://shalliday.shinyapps.io/sutter_shiny

• Import the data from your midterm and see whether you can create an interactive version of Figure 4 using the template provided.

Week 15: Final Presentations

Tuesday 12 December

• Group 1
• Group 2
• Group 3

Thursday 14 December

• Group 4
• Group 5
• Group 6

Week 11: Happiness and Utility

Tuesday 9 April

Reading

• Cartwright, Chapter 10, up to the end of section 10.4.
• Daniel Kahneman and Alan Krueger, “Developments in the Measurement of Subjective Well-Being,” Journal of Economic Perspectives, 2006, Vol. 20 (1) 3-24, (20 pages).
• Betsey Stevenson and Justin Wolfers, 2013. “Subjective Well-Being and Income: Is There Any Evidence of Satiation?,” American Economic Review, American Economic Association, vol. 103(3), pages 598-604, May (5 pages)

Watch

• Daniel Kahneman, “The riddle of experience vs. memory,” TED, 2010. (Video, 20 minutes)

Thursday 4 April

• Experiment 3, go here: http://veconlab.econ.virginia.edu

Week 2: Policy and Manipulation

Tuesday 16 April

• Cartwright Chapter 11.
• Chetty, Raj, 2015, “Behavioral Economics and Public Policy: A Pragmatic Perspective,” American Economic Review: Papers & Proceedings, 105 (5): 1-33, (30 pages)
• Bhargava and Loewenstein, 2015, “Behavioral Economics and Public Policy 102: Beyond Nudging”, American Economic Review: Papers & Proceedings, 105 (5): 396–401

Thursday 18 April

• I hope we can do an exercise with the World Values survey here for Lab6, but I may defer that if I think you need more time for your team projects.

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