economics

‘What does a woman want?’ –Freud

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[T]he patient was a woman who, although she was being examined in my office at New York Hospital, claimed we were in her home in Freeport, Maine. The standard interpretation of this syndrome is that she made a duplicate copy of a place (or person) and insisted that there are two. […]

This woman was intelligent; before the interview she was biding her time reading the New York Times. I started with the ‘So, where are you?’ question. ‘I am in Freeport, Maine. I know you don’t believe it. Dr Posner told me this morning when he came to see me that I was in Memorial Sloan-Kettering Hospital. […] Well, that is fine, but I know I am in my house on Main Street in Freeport, Maine!’ I asked, ‘Well, if you are in Freeport and in your house, how come there are elevators outside the door here?’

The grand lady peered at me and calmly responded, ‘Doctor, do you know how much it cost me to have those put in?’ […]

Because of her lesion the part of the brain that represents locality is overactive and sending out an erroneous message about her location. The interpreter is only as good as the information it receives, and in this instance it is getting a wacky piece of information.

{ NeuroDojo | Continue reading }

‘Principle is OK up to a certain point, but principle doesn’t do any good if you lose.’ –Dick Cheney

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Crimes such as bribery require the cooperation of two or more criminals for mutual gain. Instead of deterring these crimes, the state should disrupt them by creating distrust among criminals so they cannot cooperate. In a cooperative crime with two criminals, the state should offer amnesty and a bounty to the criminal who first secures punishment of the other criminal. When the bounty exceeds the bribe, a bribed official gains less from keeping the bribe than from confessing and receiving the bounty. Consequently the person who pays the bribe cannot trust the person who takes it. The game’s unique equilibrium is non-cooperative and bribes disappear.

{ Review of Law & Economics }

‘But as the power of Hellas grew, and the acquisition of wealth became more an objective, the revenues of the states increasing, tyrannies were established almost everywhere.’ —Thucydides

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‘Right is to be taught even by the enemy.’ —Ovid

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Studying the satellite launch industry, Madsen and Desai (2010) find that the probability of a successful future launch increases with the cumulative number of failed launches.

KC, Staats, and Gino (2013) find almost exactly the opposite at the individual level, showing that individual surgeons future success is positively influenced by their past cumulative number of successes and negatively by their past cumulative number of failures. While a surgeon’s future success rate is negatively correlated with his or her cumulative number of failures, it is positively correlated with the cumulative number of failures of other surgeons in the same hospital. […]

While the exact channels vary from context to context, the empirical literature is clear: individuals and organizations learn from failure, be it their own or the failure of others. […]

[M]any failures go unreported and their lessons are lost.

{ Victor Bennett/Jason Snyder | Continue reading }

photo { William Eggleston, Untitled, 1960 }

‘History is the science of what never happens twice.’ —Paul Valéry

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A recent Wall Street Journal/NBC News poll found that 49% of Americans still believe the U.S. economy is in recession, even though we are now in the sixth year of the recovery. […] If investing when others are skeptical has historically been a successful strategy, why don’t more investors do so? […] Taking advantage of the findings discussed earlier requires investing when the economy and market seem to be at their worst, and rebalancing when conditions appear to be the best. This is counterintuitive for many investors, who tend to wait for confirming evidence before acting. This is related to herd behavior, the tendency to follow the crowd with portfolio decisions. Investing when others are skeptical is emotionally difficult but, as we’ve shown, tends to be when rewards are the greatest.

{ JP Morgan Funds | PDF }

related { It is not possible for a human to know whether Bank of America made money or lost money last quarter. }

art { Jim Campbell, Ambiguous Icon #1 Running Falling, 2000 }

As sparrows eagles, or the hare the lion

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We conduct an empirical study to analyze how waiting in queue in the context of a retail store affects customers’ purchasing behavior. […] pooling multiple queues into a single queue may increase the length of the queue observed by customers and thereby lead to lower revenues. We also find that customers’ sensitivity to waiting is heterogeneous and negatively correlated with price sensitivity, which has important implications for pricing in a multiproduct category subject to congestion effects.

{ Management Science | Continue reading }

photo { Garry Winogrand }

It rubs the lotion on its skin. It does this whenever it is told.

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When individual performance was publicly posted in the workplace, employees working in a group performed better than when working alone; however, when individual performance was not posted, employees working in a group performed worse than when working alone.

{ Management Science | Continue reading }

photo { Lionat Natalia Petri }

‘Nothing will come of nothing.’ —Shakespeare

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The next time I had to negotiate a contract, it began in typical fashion with a prospective employer sending me a lopsided agreement and asking me to counter-propose. I said I was incompetent to do that and suggested they write a new contract as if they were me, putting in everything that would be in my best interests, and then taking out everything they would never agree to. Since that would be the best I could get, I would accept it subject to agreement on compensation.

We started with base pay. I wrote down the least I would work for and asked them to write down the most they would offer a perfect person, irrespective of whether I was that person or not. If when we exchanged papers, their number wasn’t higher than mine then we could stop there and save time. Their number was twice the best base pay I had ever received in past jobs, and my request was for $0. I explained that my goal is to live a debt-free life, and therefore I wanted to give value before receiving compensation.

{ qz | Continue reading }

Yes, and plum pudding and gooseberry pie

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[They] analyzed a database of 6,500 restaurant menus describing 650,000 dishes from across the U.S. Among their findings: fancy restaurants, not surprisingly, use fancier—and longer—words than cheaper restaurants do (think accompaniments and decaffeinated coffee, not sides and decaf). Jurafsky writes that “every increase of one letter in the average length of words describing a dish is associated with an increase of 69 cents in the price of that dish.” […]

Cheaper establishments also use terms like ripe and fresh, which Jurafsky calls “status anxiety” words. Thomas Keller’s Per Se, after all, would never use fresh—that much is taken for granted—but Subway would.

{ The Atlantic | Continue reading }

photo { Maurizio Di Iorio }

related { Guests given the numeral-only menu (00.) spent significantly more than those who received a menu with prices showing a dollar sign ($00.00) }

Center stage on the mic

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Peter Drucker once observed that, “Much of what we call management consists of making it difficult for people to work.” […]

Bain & Company studied a sample of big firms, finding that their managers spent 15% of their time in meetings, a share that has risen every year since 2008. Many of these meetings have no clear purpose.

The higher up you go, the worse it is. Senior executives spend two full days a week in meetings with three or more colleagues.

{ The Economist | Continue reading }

Everything interesting takes place in the dark

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Recent theoretical developments in evolutionary psychology suggest that more intelligent individuals may be more likely to prefer to remain childless than less intelligent individuals.

Analyses of the National Child Development Study show that more intelligent men and women express preference to remain childless early in their reproductive careers, but only more intelligent women (not more intelligent men) are more likely to remain childless by the end of their reproductive careers. […]

Because women have a greater impact on the average intelligence of future generations, the dysgenic fertility among women is predicted to lead to a decline in the average intelligence of the population in advanced industrial nations.

{ Social Science Research | PDF }

photo { Richard Kern }

Or have we eaten on the insane root that takes the reason prisoner?

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What you order may have less to do with what you want and more to do with a menu’s layout and descriptions.

After analyzing 217 menus and the selections of over 300 diners, a Cornell study published this month showed that when it comes to what you order for dinner, two things matter most: what you see on the menu and how you imagine it will taste.

{ Cornell | Continue reading }