The BIT's tax experiment is on NBER

Michael Hallsworth et al. have a new NBER working paper called The Behavioralist As Tax Collector: Using Natural Field Experiments to Enhance Tax Compliance*. This is an interesting and welcome development.

To put this paper in context, one of the biggest successes of the Behavioural Insights Team since their formation in 2010 has been their tax experiments using social normative messages like "9 out of 10 people pay their tax on time" in communications with taxpayers. Their findings were first highlighted in their 2012 report on 'Fraud, Error and Debt':

"The graph shows a 15 percentage point increase from the old-style control letter which contained no social norm and the localised social norm letters. HMRC estimates that this effect, if rolled out and repeated across the country, could advance approximately £160 million of tax debts to the Exchequer... This would free up collector resource capable of generating £30 million of extra revenue annually."

Those figures are eyebrow-raising, to put it mildly**. Given the low implementation costs of adding a sentence like "9 out of 10 people in your neighbourhood pay their tax on time" to a tax letter that is going to be sent anyway, those sort of returns potentially mean enormous benefit:cost ratios. It's a really striking result, one that the BIT themselves often cite in interviews and presentations and which has inspired similarly successful efforts in Australia and Ireland (see #6).

The problem is that this graph, while intriguing, is from a paper that is off the (academic) reservation. I don't mean that as criticism - I admire the clarity of the BIT's white papers on health, charitable giving and so on and they are clearly aimed at policy-makers rather than academics. As an academic working in Behavioural Science, who is interested in behavioural change interventions, I am however in the position where I'm not comfortable citing some of the most interesting work being done in the area because it hasn't been peer-reviewed.

So it's great to see this NBER working paper which looks under the hood of two of the taxation field experiments conducted in the UK (N=200,000). As implied by the descriptive statistics in the figure below, the social normative messages were effective at increasing tax payments.

I hope to see more of the BIT's work in this format in coming years.

*Update - I may have mistakenly implied that NBER working papers are peer-reviewed. This is not the case, as Paul Krugman explains here.

*The title of the paper is in the same vein as John List's "The Behavioralist goes to the factory / the market / school" series.
**This is partly a function of the fact that the BIT work on a national scale and phrase their findings accordingly, but a 15 percentage point increase is also a very large effect size. The economics literature has taken a few stabs at social normative messages in tax compliance communications before and the average effect size has been basically zero.

Effects of stress on economic decision-making: Evidence from laboratory experiments

The abstract for my new paper with Gunther Fink (Harvard) and Colm Harmon (Sydney) is below. The working paper is available on this link. The paper examines the effect of experimentally-induced stress on participants risk preferences, time preferences and exploratory learning behaviour.


Effects of stress on economic decision-making: Evidence from laboratory experiments

The ways in which preferences respond to the varying stress of economic environments is a key question for behavioral economics and public policy. We conducted a laboratory experiment to investigate the effects of stress on financial decision making among individuals aged 50 and older. Using the cold pressor task as a physiological stressor, and a series of intelligence tests as cognitive stressors, we find that stress increases subjective discounting rates, has no effect on the degree of risk-aversion, and substantially lowers the effort individuals make to learn about financial decisions.

IFS Working Paper: Can survey participation alter household saving behavior?

Can survey participation alter household saving behavior?

Type: IFS Working Papers

Authors: Thomas F Crossley, Thomas F Crossley, Jochem de Bresser, Liam Delaney and Joachim Winter

doi: 10.1920/wp.ifs.2014.1406

Download BibTex file |  E-mail to a friend
Much empirical research in economics is based on data from household surveys. Panel surveys are particularly valuable for understanding dynamics and heterogeneity. A possible concern with panel surveys is that survey participation itself may alter subsequent behavior. We provide novel evidence of survey effects on a central life-cycle choice: household saving. We exploit randomized assignment to survey modules within the LISS Panel, an internet panel survey which is representative of the Dutch population. We find that households that respond to detailed questions on expenditures and needs in retirement reduced their non-housing saving rate by 3.5 percentage points, on average. This mean effect is driven by high-education households which have the highest pension and housing wealth. Our saving measure is based on linked administrative wealth data. Thus we can rule out the possibility that the effect is on reporting, rather than on the underlying saving behavior. One interpretation is that the survey acted as a salience shock, possibly with respect to reduced housing costs in retirement.

The Cult of p(0.05)

From the Probable Error blog, an alphabetical list of the ways that researchers describe their results when the p-value is greater than 0.05.

(barely) not statistically significant (p=0.052)
a barely detectable statistically significant difference (p=0.073)
a borderline significant trend (p=0.09)
a certain trend toward significance (p=0.08)
a clear tendency to significance (p=0.052)
a clear, strong trend (p=0.09)
a considerable trend toward significance (p=0.069)
a decreasing trend (p=0.09)
a definite trend (p=0.08)
a distinct trend toward significance (p=0.07)
a favorable trend (p=0.09)
a favourable statistical trend (p=0.09)
a margin at the edge of significance (p=0.0608)
a marginal trend (p=0.09)
a marginal trend toward significance (p=0.052)
a marked trend (p=0.07)
....
flirting with conventional levels of significance (p>0.1)
heading towards significance (p=0.086)
highly significant (p=0.09)
hint of significance (p>0.05)
hovered around significance (p = 0.061)
hovered at nearly a significant level (p=0.058)
hovering closer to statistical significance (p=0.076)
hovers on the brink of significance (p=0.055)
in the edge of significance (p=0.059)
in the verge of significance (p=0.06)
inconclusively significant (p=0.070)
indeterminate significance (p=0.08)
indicative significance (p=0.08)
is just outside the conventional levels of significance
just about significant (p=0.051)
just above the arbitrary level of significance (p=0.07)
just above the margin of significance (p=0.053)
just at the conventional level of significance (p=0.05001)
just barely below the level of significance (p=0.06)
just barely failed to reach significance (p<0 .06="" span="">
just barely insignificant (p=0.11)
just barely statistically significant (p=0.054)
just beyond significance (p=0.06)
just borderline significant (p=0.058)
just escaped significance (p=0.07)
just failed significance (p=0.057)
just failed to be significant (p=0.072)
just failed to reach statistical significance (p=0.06)
....
very closely approaches the conventional significance level (p=0.055)
very closely brushed the limit of statistical significance (p=0.051)
very narrowly missed significance (p<0 .06="" span="">
very nearly significant (p=0.0656)
very slightly significant (p<0 .1="" span="">
virtually significant (p=0.059)
weak significance (p>0.10)
weakened..significance (p=0.06)
weakly non-significant (p=0.07)
weakly significant (p=0.11)
weakly statistically significant (p=0.0557)
well-nigh significant (p=0.11)

State of American Well-being II

Following Gallup-Healthways report last month on the State of American Well-being at the state level, they have now published a more detailed report which has state, community and congressional district analysis. You can access the new report here. Some example graphs are below.

Well-being scores by occupation:

For a comparison here's a graph the recent Wellbeing and Policy report.

Does Living in California Make People Happy? It may well do according to these results. Five of the top 10 wellbeing congressional districts are in California.

The report also contains data on health behaviours such as smoking, obesity, frequency of visits to the dentist and whether the person has health insurance. Download it here.

Behavioural Economics and Regulation

Below is a cross-post of a piece I wrote for the irisheconomy.ie blog.

I have blogged before on the potential applications of behavioural economics to public policy in Ireland. A lot of attention has been given to policies that change individual behaviour in potentially welfare promoting directions (See Tim Harford’s summary of this in the FT). An interesting question is the implications of moving to a model of consumers with bounded rationality and self-control for regulation and competition policy. A number of recent documents in the UK and US are relevant for this.

This excellent FCA occasional paper examines the potential implications of behavioural economics for financial regulation. It should be noted that “nudging” is a subset of the policies that might follow behavioural market tests. Many of the potential policies discussed in this document are hard interventions rather than soft nudges. They also extend across regulators. For example, on page 45 they outline recent moves by Ofcom to ban autorenewal of internet contracts and OFT to ban certain types of gym membership contracts.

In some senses a more radical document by Barr, Mullainathan and Shafir from 2008 outlines a new approach to consumer regulation based partly on the notion of “sticky defaults” whereby firms would be required to default people into the most desirable option based on their characteristics and only move them if they make choices following being provided with clear information. Such models are discussed in relation to two markets fraught with behavioural bias and consumer exploitation, namely credit cards and mortgages. The document also sets out proposals for changing the incentives of brokers.

Far from the collection of isolated “nudges” that forms much of the public debate around behavioural economics, what has unfolded in recent years is a body of theoretical and empirical work that simply gives better predictions and foundations for regulation than what preceded. There are clearly many insights in this literature that have implications for Irish regulators and are worth debating further.

Examples of the applied questions raised by the recent literature include:

Should credit card variable and teaser rates be banned or at least taken out of the regular offers made to consumers?

Should mortgage providers be forced to disclose better deals available to their customers?

Should pay-day lenders be granted full access to the Irish market? If so, how do you regulate them?

Should autoenrolment proceed in Ireland, what provisions should be put in place so that companies do not exploit naïve consumers by charging fees well in excess of regular rates?

Do behavioural biases prevent annuities markets from functioning optimally?

Clearly, many of the above questions are more than just empirical questions or issues of economic theory. They also relate to political issues and wider issues of freedom of choice. Policies such as pension autoenrolment have proved quite popular as they are, in some sense, a win-win in encouraging savings among non-traditional savers and providing extra customers for financial providers. However many of the above policies are likely to be far more contested by interest groups and it will be good to have an open debate on their merits.

Notes:

A reading list from my research blog here.

A short blogpost I prepared summarising the FCA document with some other readings on regulatory and consumer exploitation issues.

Pete Lunn at ESRI has written about policy implications in a number of documents (see recent OECD review paper here).

Hyman Minsky on Radio 4

BBC Radio 4 aired an interesting program about the work of the American economist Hyman Minsky, whose work has gained new prominence since the financial crisis. Click here to listen to it.

A quick check of google trends confirms his renaissance. I think it's fairly remarkable that interest surges basically as soon the crisis started in August 2007. Not sure what the third peak is in September 2009, perhaps 2 year anniversary articles being written about the crash.

Do Fertility Transitions Influence Infant Mortality Declines? Evidence from Early Modern Germany

Do Fertility Transitions Influence Infant Mortality Declines? Evidence from Early Modern Germany

Alan Fernihough and Mark McGovern

Journal of Population Economics, Forthcoming

http://www.springerlink.com/openurl.asp?genre=article&id=doi:10.1007/s00148-014-0506-z

Abstract

The timing and sequencing of fertility transitions and early-life mortality declines in historical Western societies indicate that reductions in sibship (number of siblings) may have contributed to improvements in infant health. Surprisingly, however, this demographic relationship has received little attention in empirical research. We outline the difficulties associated with establishing the effect of sibship on infant mortality and discuss the inherent bias associated with conventional empirical approaches. We offer a solution that permits an empirical test of this relationship while accounting for reverse causality and potential omitted variable bias. Our approach is illustrated by evaluating the causal impact of family size on infant mortality using genealogical data from 13 German parishes spanning the sixteenth, seventeenth, eighteenth, and nineteenth centuries. Overall, our findings do not support the hypothesis that declining fertility led to increased infant survival probabilities in historical populations.

Keywords: Demographic transition · Family size · Early life conditions · Infant mortality

JEL Classifications: D13 · I15 · J13 · O12

Ungated version: http://ideas.repec.org/p/qsh/wpaper/91496.html

Do online retailers respond to your choice of browser?

I noticed some unusual behaviour today. It appears that Amazon frames choices based on your browser. My default browser is Chrome, and amazon.com looks like this.

Now and again I'll check if there is good value in "Today's Deals", the link to which I have highlighted.

However this afternoon I was using Firefox instead of Chrome. I visited Amazon and saw this:

Gone was the option for "Today's Deals", replaced with a link to buying a Kindle.

That was when I opened Chrome and took the first screenshot above. The usual link was there. I then checked Internet Explorer and wget (a fancy way of downloading a webpage), and again the usual links appeared. Thinking it was random chance, I refreshed the browsers. Still, Firefox did not offer the "Today's Deals" link. To clear my cache, I closed the browsers and re-launched them but got the same result: there was a "Today's Deals" link for every browser except for Firefox.

I always thought that price discrimination based on this sort of thing was frowned upon. What is it about Firefox users that makes Amazon want to obscure their daily discounts from them?

Links of the Week (22/3/14)

1. Hetschko et al (2013), Changing Identity: Retiring From Unemployment, The Economic Journal
"Using German panel data, we show that unemployed people are, on average, less satisfied with their life than employed people, but they report a substantial increase in their life satisfaction upon retirement. We interpret this finding using identity theory. Retirement raises the identity utility of the unemployed because it changes the social norms they are supposed to adhere to. The social norm for people of working age prescribes that able-bodied people should be employed, whereas the social norm for the retired does not contain such expectations. Findings for various subgroups are consistent with that interpretation."

2. Behavioural economics and public policy (Tim Harford, FT)

3. Data Colada on pre-registration for experiments

4. Lewandowsky et al. (2014), The Subterranean War on Science
"This article surveys some of the principal techniques by which the authors have been harassed; namely, cyber-bullying and public abuse; harassment by vexatious freedom-of-information (FOI) requests, complaints, and legal threats or actions; and perhaps most troubling, by the intimidation of journal editors who are acting on manuscripts that are considered inconvenient by deniers. The uniformity with which these attacks are pursued across several disciplines suggests that their motivation is not scientific in nature."

Pension Reform in the UK

One of the major announcements in the UK budget speech yesterday was the reform of pension policy. In particular retirees in defined contribution schemes can now draw down their entire pension pot as a lump sum rather than receiving pensions in the form of an annuity. This is nicely summarised in this BBC article (see also page 42 onwards in the budget document). There are many interesting behavioural questions in this area including who saves for retirement in the first place, how people make comparisons between different ways of using their retirement funds and how firms may potentially exploit behavioural biases through complex and opaque pricing structures. A potential behavioural issue that has been discussed widely over the last day is the extent to which the new freedom to draw down a pension fund may lead to people spending it too quickly for a variety of reasons. The fact that drawn-down funds will be subject to tax might reduce this tendency to a degree but there are still many plausible behavioural reasons to think that at least sizeable subsets of people find this type of smoothing difficult. Having said that, there is also a clear normative issue as to the freedom people should have to control their own finances. Added to that it offers the possibility for consumers to withdraw from the annuities market and attempt to find better value elsewhere (something that may lead to adverse selection in the annuities market as noted by the BBC). In any case this is a major policy move and, coupled with the continued roll-out of autoenrolment, sees a very different pensions environment in the UK, one that has many features that should be studied closely by people interested in behavioural economics and policy.

Notes: 

Carl Emerson (IFS) slides on pensions aspects of the budget. He outlines reasons why compulsory annuitisation might be a good thing.

False positives, big data and JFK

From Noah Smith:

This is what you get when you analyze big data with no theory. pic.twitter.com/ZoQ0LZhFa0
— Noah Smith (@Noahpinion) March 19, 2014

The below mini-documentary on the JFK assassination touches on the same issue of finding illusory correlations when your data are big enough.

World Cup Final 2006 - A case study on decision making under pressure

Issue 11 of excellent football magazine The Blizzard has a very interesting interview with Horacio Elizondo. Elizondo officiated the 2006 World Cup Final between France and Italy, and was the person who sent off French captain (and football legend) Zinedine Zidane for a violent headbutt on the Italian defender Marco Materazzi. Here's an excerpt from the interview in which Elizondo runs through his decision making process.

Q. Obviously, that decision was correct. A headbutt to the chest — no room for doubt there! But discussion has continued about the role of the fourth official in that decision. In 2006, did you get a word in your ear from the fourth official?

"It was all done over the headset. When Materazzi fell to the floor, the ball was up the other end of the pitch and of course I was keeping up with play over there... So immediately I ask my assistant, Darío García, [touching a finger to his ear to indicate the headset] “Darío, did you see anything? What happened? Why’s he on the floor?” He tells me, “I don’t know, I see him there on the floor but I didn’t see what happened.” Then I ask Rodolfo [Otero, the other assistant referee], who was on the other touchline, in the other half of the pitch — without much hope, because he was a long way away — and he tells me, “No, me neither.” And that’s where I start to think... [blows out his cheeks] I had a lot of doubts, clearly something had happened, but if no one saw what it was... and then Luis Medina Cantalejo’s voice [the fourth official] appears in my headset, and he says “Horacio, Horacio, I saw it,” he says to me. “A really violent headbutt by Zidane on Materazzi, right in the chest.”

So obviously, when I get to the spot, I already know Zidane is on his way. I got to the spot, to where Materazzi was, and the Spaniard [Cantalejo] had already told me what I needed to know to make the decision that Zidane was going to leave the pitch. What I then asked [Cantalejo] was, “Why did he headbutt him?” — whether he’d seen whether Materazzi had done anything beforehand — and he replied, “No, honestly I don’t know. I just saw the headbutt.” And when I got there, I realised that the players didn’t know what was going on either...And the noise in the stadium... the crowd just went silent, as if to say, “What’s going on? Why is that player lying on the floor?” And me in the middle of it, thinking, “Right then... how do I make this decision clear? Zidane’s going, he’s standing there calmly.

It didn’t seem very correct, to me, to just BANG! take a red card out like that, as if from nowhere, with the crowd and players all having seen that I’d been in the other half and hadn’t seen anything. So, since the headsets were only new you can see if you watch it on video that I go over to Darío García... I went over to Darío, but I knew Darío didn’t know anything! So, why? Well, because that is understandable. Everyone understands if you go over to the assistant that it’s because the assistant is going to tell you something to help you make a decision. So I get to Darío, and I just say to him, “Focused!” — I say it to him and I say it to myself, to remind us both, “there are still 10 minutes to go, stay focused.” — I turn around and go to Zidane and take out the red card."

Q. Even though he hadn’t been the assistant who told you...

"No, he didn’t tell me anything. How could he, if he didn’t know? When I realised I needed to get the card out I thought, “Right then, let’s see, how can I make this easily understood?” And I say to myself, “If the assistant calls you over, everyone knows that’s because he’s going to tell you something. It was a little bit of a disguise, but it contained some truth as to how the decision was taken".

Applying Behavioural Economics at the Financial Conduct Authority

The role of behavioural economics in regulation is a key new area in policy. This FCA document "Applying behavioural economics at the Financial Conduct Authority" has been discussed in our classes over the last six months. It reviews the case for integrating behavioural economics insights into regulation, in particular financial regulation.

It is a very useful document outlining the basic behavioural biases, the potential role they might play in consumer decision making, how they may influence firm behaviour, potential tests for behavioural market failure and potential policy remedies.

Some of this is early stage. There are clearly not yet streamlined tests for behavioural market failures. However, a number of policies have already been influenced by these ideas. The case studies from the Office of Trading on gym contracts (page 49) and Ofcom (page 49 also) on autoextension of telecommunications contracts are worth looking at and show how these ideas area being translated across different regulators.

It seems very clear that behavioural biases operate across many markets that are confusing for consumers. What is less clear is the role of the regulators. Should they attempt to steer markets without overly interfering or adopt harder lines in cases where consumers are clearly confused?

An excellent example is provided in the document in the area of consumer redress (see page 45). The FCA conducted a trial testing the efficacy of letter reminders to increase the number of consumers claiming redress for being missold a product. Of 200,000 customers who had been overcharged 21 pounds on average only 1.6 per cent responded to basic reminders. This is multiplied by a factor of 6.5 when a number of behavioural aspects of the letters are altered.

It is interesting that such techniques can influence behaviour but it is hardly satisfactory that 90 per cent of consumers still fail to seek redress. The success of pension autoenrolment policies suggests it is possible to have deep influence on individual and market behaviour through changing defaults. However, many of the solutions to the effects being exploited in consumer markets involve much less direct effects like reminders and other type of indirect nudges. It is a big question as to whether more direct policies such as banning certain practices are desirable.

Useful Readings:

Mark Armstrong and John Vickers "Consumer protection and contingent charges". A later version of this is available in the Journal of Economic Literature.

The Office of Fair Trading investigation into fees for fitness clubs an interesting example of where a regulator specifically took action on a practice said to be exploiting consumer biases.

Huffman and Heidtke "Behavioral Exploitation Antitrust in Consumer Subprime Mortgage Lending"

Useful presentation by Maurice Stucke "Behavioral Exploitation and Its Implications on Competition and Consumer Protection Policies".

Stucke "Behavioural Antitrust and Monopolisation".

Oregon Health Insurance Experiment

I have been teaching an advanced microeconometrics course specialising on estimation of treatment effects. One of the lectures was devoted to examining the analysis of randomised controlled trials. A particularly interesting recent randomised trial is the Oregon Health Insurance Study. A description of the study is below:

"The Oregon Health Study is the first randomized controlled trial examining the impact of insuring the uninsured. In April 2008, the Oregon Health Authority determined that it had enough funds to provide health insurance to an additional 10,000 uninsured low-income adults through the Oregon Health Plan Standard (OHP) program– but 90,000 people wanted in. To be as fair as possible, the state held a lottery to determine who would receive an OHP application and who would not. The OHP lottery randomly assigned people to treatment (those who “won” the lottery and received the opportunity to apply for OHP) and control (those who did not receive the opportunity to apply) groups.  The Oregon Health Study follows participants over time to measure the impact of access to OHP."

 A key paper from this study was published in the QJE in 2012.

"In 2008, a group of uninsured low-income adults in Oregon was selected by lottery to be given the chance to apply for Medicaid. This lottery provides an opportunity to gauge the effects of expanding access to public health insurance on the health care use, financial strain, and health of low-income adults using a randomized controlled design. In the year after random assignment, the treatment group selected by the lottery was about 25 percentage points more likely to have insurance than the control group that was not selected. We find that in this first year, the treatment group had substantively and statistically significantly higher health care utilization (including primary and preventive care as well as hospitalizations), lower out-of-pocket medical expenditures and medical debt (including fewer bills sent to collection), and better self-reported physical and mental health than the control group."

As can be seen above, granting access to medicaid had effects on both utilisation of healthcare services and on health (see also their Science paper and NEJM paper). These results relate to the early stages of the study and it will be very interesting to see what happens as participants are tracked over time.

The study is a very good example of the use of randomised trials to answer large-scale policy questions. It also demonstrates the potential for linkage of administrative and survey data in examining the effects of public policies. The low take-up of health insurance (albeit high enough to generate strong first stage predictions) among those offered might be a particularly interesting question for behavioural economists.

Using behavioural science in the classroom to unlock motivation

Everyone starts with an A

Applying behavioural insight to improve performance and narrow the socioeconomic attainment gap in education.

“Imagine a classroom where everyone started off an academic year with an “A” grade, and in order to keep the grade, a pupil had to show continuous improvement throughout the year. In this classroom, the teacher would have to dock points from a pupil’s assessment when his or her performance or achievement was inadequate, and pupils would work to maintain their high mark rather than to work up to it. How would this affect effort, expectations, performance, and assessment relative to current practice?”

This is one of the questions the RSA (Royal Society for the encouragement of Arts Manufacture and Commerce) pose in their report Everyone Starts with an A, which explores the application of behavioural insight to educational policy and practice.

Using research from behavioural science and our evolving understanding of human nature, the report explores how effort, motivation, learning enjoyment, resilience, and overall performance at school can be influenced in ways not often traditionally recognised.

Download EveryoneStarts with an 'A' full report in English (PDF 393.6KB)
Download Everyone Starts with an 'A' poster in English (PDF 71.4KB)
Download Everyone Starts with an 'A' full report in German (PDF 411.4KB)
Download Everyone Starts with an 'A' poster in German (PDF 56.3KB)

Connecting theory to practice

Supported by the Vodafone Foundation Germany, this report is intended to start a conversation among educators and includes practical tips to help connect theory to real-life practice in the classroom.

Three concept areas are covered:

·         Growth mindsets: the belief that intelligence and ability are not a fixed and innate trait, but rather they can be improved and strengthened through effort and practice.

·         Cognitive biases: our thinking patterns can have systematic influence on motivation, evaluation, and teacher and pupil expectations about performance. Anchoring, the halo effect, confirmation bias, and loss aversion may all play a role. 

·         Surroundings: the physical environment of the classroom can affect various cognitive and non-cognitive skills - such as attention levels and self-control - which are important for learning.

These three points are promising areas for further research. An improved understanding of how these concepts affect pupil learning might be especially valuable to disrupt patterns of assumption about performance levels, for those who self-identify as being part of a stigmatised group, such as those from a low socioeconomic background. The RSA hopes that practitioners will continue the discussion started here by trialling the tips and techniques in their own schools and sharing their experiences with peers and colleagues.

For more information, download the paper here (or choose your preferred version above), read blogs about the launch of the report here and here, or view the press release here. 

Nathalie Spencer is a Senior Researcher in the RSA’s Social Brain Centre, and a longtime reader of the Stirling Behavioural Science blog.  

Links of the Week (14/3/14)

1. Great interview with MIT economist Josh Angrist (2013)

2."Changing Behaviour Beyond the Here and Now" (Rogers & Frey 2014), HKS Working Paper

3. Gesturing with hands as a tool for math learning

4. "Samples can't be too large" (2013), by the excellent blog Data Colada

New paper on financial incentives and health behaviour

This systematic review collated evidence from 16 studies, and found that financial incentives are more effective than usual care for smoking cessation and vaccination and screening behaviours.

http://www.plosone.org/article/info%3Adoi%2F10.1371%2Fjournal.pone.0090347

March 21st: Half Day Behavioural Science for Business and Policy Workshop

On March 21st, the Stirling Behavioural Science Centre will hold a targeted workshop on “Behavioural Economics, Policy and Business” in Stirling University. The event begins at 2pm and ends at 4.30pm and there will be coffee in advance. The venue is Stirling University Cottrell Building Court Room and further directions will be provided. Details of the first workshop in this series, which took place on November 8th 2013, are available on this link.

If you wish to attend this event, please sign up here.

This is the second in our series of public policy workshops which are aimed at providing a forum for widespread engagement between centre researchers and people working in policy and business. The broad questions of interest for the forum are below. Details of the talks will be provided here.

- What aspects of behavioural economics should particularly interest business people? For example, how is behavioural economics relevant to product development, advertising and marketing? What are the potential regulatory changes emerging from this literature?

- Why should policymakers care about behavioural economics? What is the relevance of behavioural economics to such questions as how we should design taxation and regulation?

- What has this new literature to say about economic policy in Scotland and RUK?

There will also be a Q&A session and ample opportunity for audience participation.

Programme:

130pm to 2pm: Registration and Coffee

2pm to 220pm: David Comerford (Stirling) "Building efficiency: Does publication of energy performance certificates induce investment in energy-savings technologies?"

220pm to 240pm: Liam Delaney (Stirling) "Behavioural Economics and Constitutional Change."

240pm to 300pm: Christopher Boyce (Stirling) "Well-being and policy"

3pm to 320pm: Seda Erdem (Stirling) ""Eliciting perceptions and preferences".

320pm to 340pm: Ron McQuaid (Stirling) "Employment and Economic Inactivity"

340pm to 430pm: Panel Discussion

Further reading

- A list of behavioural policy readings is provided on this link that address a number of the ethical and policy questions discussed during the panel session.

- Behavioural Foundations of Public Policy edited by Shafir is a particularly powerful introduction to behavioural science applications to policy questions.

Nudging in the Crimea

The Crimea is due to hold a referendum in six days about whether they will leave Ukraine and join Russia. The Kyiv Post reports that there are two options on the ballot sheet: 'Yes' and 'Yes, later'.

Links of the Week (7/3/14)

1. A look back on the facts of the Kitty Genovese case
"The fact that this crime, one of six hundred and thirty-six murders in New York City that year, became an American obsession—condemned by mayors and Presidents, puzzled over by academics and theologians, studied in freshman psychology courses, re-created in dozens of research experiments, even used four decades later to justify the Iraq war—can be attributed to the influence of one man, A. M. Rosenthal, of the New York Times."

2. Belo et al. (2014), Broadband in School: Impact on Student Performance, Management Science
"This paper examines the effects of providing broadband to schools on students' performance. We use a rich panel of data on broadband use and students' grades from all middle schools in Portugal. Employing a first-differences specification to control for school-specific unobserved effects and instrumenting the quality of broadband to account for unobserved time-varying effects, we show that high levels of broadband use in schools were detrimental for grades on the ninth-grade national exams in Portugal. For the average broadband use in schools, grades reduced 0.78 of a standard deviation from 2005 to 2009. We also show that broadband has a negative impact on exam scores regardless of gender, subject, or school quality and that the way schools allow students to use the Internet affects their performance. In particular, students in schools that block access to websites such as YouTube perform relatively better."

3. Most researchers don't understand error bars (2008)

4. Angus Deaton on 'What good are children'?
"It is a commonplace that new parents are overwhelmed by a “tsunami of love” when they first meet their dependent offspring. Older children, though often a source of irritation and worry, are also a source of joy, and there are few parents who can even bear to think of a world without their children. Yet, study after study has shown that those who live with children are less satisfied with their lives than those who do not."

Summary of the "Measurement and Determinants of Well-Being" (ESRC Workshop 1/6, Stirling 21/2/14)

Thanks to all of those who attended on ESRC workshop on “Measurement and Determinants of Well-Being” in Stirling on Friday February 21st. Some notes and suggested readings are below. Since some of these papers are in the working stages we cannot provide full slides for them. Details of future workshops will be provided via the mailing list, the blog and our twitter account.
  

09.30-10.00: Professor Alex Wood (Stirling Behavioural Science Centre):

Title: "From Aristotle to Big Datasets: Conceptualising and Measuring Well-Being"

Alex Wood started the day by welcoming the audience, introducing the general topic, and presenting an overview about different measures of well-being. In particular, he highlighted two major perspectives on wellbeing, which would re-appear throughout the day in different talks. These two perspectives on wellbeing are the Aristotelian perspective and the Benthamite perspective. 

The Aristotelian perspective suggests that people who live a good and virtuous life are happy. Happiness, understood in this way, does not have to involve emotions. People could define for themselves what they consider to be the good life and give an evaluation of their life as a whole (as with life satisfaction measures). Or, as Aristotle preferred, we could adopt a culturally shared definition of what the good life entailed and assess whether the person lives according to this. Contrary to this, the Benthamite perspective suggests that happiness can be understood in terms subjective experiences of pleasure ­and pain. In this view, indicators of pleasure and pain (both mathematically represented as "pleasure/pain = intensity * duration") can be used to obtain an overall measure of subjective happiness. 

Alex discussed both views on happiness and gave several examples of situations where the one or the other concepts seemed to suit better. He showed that both views on happiness are related to measures of happiness that are used in current happiness research - for example Subjective Well-being (SWB), positive affect, negative affect, life satisfaction, capabilities, Psychological Well-being (PWB), autonomy, purpose of life, positive relationships, and measures of health. These concepts are either related to the Aristotelian, or the Benthamite perspective. Alex also touched upon public policy issues related to both perspectives (“What should we promote? Good life or good moods?”). Having presented this general overview, Alex presented some insights from his own research on happiness. He showed, for example, that two factors related to SWB and PWB emerge as the best description of the data when conducting a factor analysis on various measures of well-being. Lastly, he presented data on the role of conscientiousness with regard to income changes and unemployment (see #4).

10.00-10.30: Eimear Crowe (Stirling Behavioural Science Centre):

Title: "Measurement of Well-being in Major Depression"

Major Depressive Disorder (MDD) is the leading cause of disability worldwide and a key contributor to the global burden of disease (WHO, 2012). It affects well-being at the moment-to-moment, day-to-day level, and in ways in which healthy individuals may not experience (eg. negative self-cognitions, emotion instability, extreme fatigue and suicidality). Dynamic MDD-specific measures are therefore needed. In order to get an accurate account of well-being in MDD, we need multidimensional measures that are sensitive to the following: (1) The effect of retrospective recall biases and negative cognitive distortions on self-report measures in MDD. (2) How MDD affects well-being in terms of daily, momentary functioning and experience. (3) The specificity of symptom experience in MDD. (4) The diurnal ebb and flow of affect/symptoms in MDD and how these temporal dynamics themselves affect well-being. 

This talk discussed existing methods of well-being measurement in MDD and the limitations of these. It demonstrated the usefulness of state-level, momentary measures such as the Experience Sampling Method (ESM) in elucidating the dynamic nature of the disorder. Finally, the results of a new ESM study which measured diurnal patterns of affect and key MDD symptoms in an Irish sample of severely depressed psychiatric patients was presented. The clinical implications of such intra / inter-day conceptualisations of MDD were discussed; specifically, how they may advance our understanding of depression both in terms of mechanism of action and therapeutic manipulation.

11.00-11.30: Hilda Osafo Hounkpatin (University of Manchester):

Title: "Does it matter how we measure well-being? Implications for the income and happiness literature?" (with Christopher Boyce, Alex Wood and Graham Dunn).

Research on the association between income and well-being has often focussed on subjective well-being measures such as life satisfaction. While life satisfaction has been theoretically and empirically associated with income, we argue that income may not relate to other domains of well-being, such as psychological needs. We explore the association between income and a broad range of subjective and psychological well-being (PWB) measures. 

We find that income is significantly associated with self-reports of life satisfaction and environmental mastery, but not with PWB measures such as personal growth and purpose in life, suggesting that increases in income may not improve overall well-being. These findings highlight the importance of distinguishing between the different well-being domains when examining predictors of well-being and further suggest the need for alternative quality of life indicators besides income. We provide evidence for the use of personality measures as more fitting indicators of well-being as changes in personality measures are associated with changes in a broad range of well-being measures, and more strongly related to well-being than income and demographic factors together. Altogether this research suggests that income is not associated with overall well-being and other indicators such as personality measures may serve as more adequate markers of national progress.

11.30-12.00: Christine O'Farrelly (University College Dublin):

Title: "Investigating the impact of a home visiting programme on self-reported and psychophysiological indices of parental stress" (with Michael Daly, Liam Delaney, Orla Doyle, Nick Fitzpatrick and Judy Lovett).
Note: The Preparing for Life project is described in detail here and the presentation slides are available here

Prolonged exposure to stress and poor well-being can have detrimental effects on health, labour market and social outcomes. Thus identifying effective interventions which can mitigate these negative consequences is a key public health and policy concern. This study examines the impact of an Irish early childhood programme on parental stress and well-being utilising multiple measurement techniques including a self-report standardised measure of parenting stress, an adapted day reconstruction method which charts emotional responses to activities, self-reported life satisfaction and mood, and wrist-mounted ambulatory measurements of electrodermal activity. Utilising multiple measures allows us to elicit treatment effects on positive and negatives aspects of well-being in order to yield a more comprehensive understanding of which dimensions of well-being may be amenable to change through social intervention.

Preparing for Life (PFL) is a five-year home-based intervention which provides disadvantaged families with education and support on child development and parenting through regular mentoring sessions from pregnancy until the child starts school.  The aim of the programme is to improve child outcomes through working with parents directly to improve their personal, parental, and material wellbeing. Research on the impact of similar programmes on parental well-being is inconclusive. However, much of this literature is restricted to self-report measures. This study includes 102 mothers, who were previously randomised to the treatment or control group. Data were collected in a field setting over a 6-month period on the four indicators of parental wellbeing. The results suggest that PFL is having some effect on mothers’ wellbeing, specifically in terms of their positive affect, yet there were no differences between the treatment and control group regarding the overall scores for negative affect, life satisfaction, or parenting stress. Treatment effects were observed for positive affect, mood, and enthusiasm. Analysis of mothers’ electrodermal activity, a physiological marker of emotional arousal, is ongoing. The addition of this data may help to provide further insight on the effectiveness of PFL on maternal wellbeing. The findings of this study could hold important practical applications for those interested in promoting wellbeing.

12.00-12:30: Dr. Michael Daly (Stirling Behavioural Science Centre)

Title: "Nation-level and individual-level associations between money and sense of meaning in life" (with Liam Delaney)

Note: Slides available here

A large body of research suggests that income contributes positively to subjective well-being and that the impact of money on well-being may be greatest amongst the poor. However, recent research has shown that high levels of meaning and purpose exist together in poor countries (Oishi & Diener, in press) leading to the suggestion that improving the economic circumstances of those living in poverty may not improve their sense of meaning and purpose. Drawing on examples of Simpson's paradox we suggest that nation-level correlations between a country's wealth and the average sense of meaning of its residents could be spurious and that the relationship between money and meaning may be reversed when examined at the individual and within-individual level.

To test this idea, we utilize data from the World Values Survey (WVS) (N = 210,089) and the Midlife in the United States (MIDUS) longitudinal study (N = 1,657). We first replicate the negative correlation between nation-level meaning/purpose and GDP per capita first identified by Oishi & Diener (in press) in the Gallup World Poll. Next, we show that the association between household income and meaning and purpose in life is positive at the individual level in WVS. Our test of the robustness of this association found that income at baseline robustly predicted increases in purpose in life over a ten year period in the MIDUS study. These findings were supported by twin-fixed effects analyses. In combination, our findings suggest that the negative nation-level link between country wealth and meaning may be a result of omitted third variables. At the individual-level earning more money appears to predict greater purpose in life and initial evidence suggests this is unlikely to be due to reverse causation, stable genetic factors or the early life childhood family environment. We propose that to resolve this question the association between nation-level within-country changes in wealth and meaning over time must be examined. This would provide a robust test of the money-meaning link that adjusts for stable unobserved differences between countries.

13:30-14:15: Dr. Martin Binder (University of Kassel and University of Sussex)

Title: "Capabilities and Subjective Well-Being".

Note: Martin Binder's paper on Subjective Well-being Capabilities is available here

As a result of the disenchantment with traditional income-based measures of welfare, alternative welfare measures have gained increasing attention in recent years. Two of the most prominent measures of well-being come from subjective well-being research and the (objective) capability approach. Despite their promising features, both approaches have a number of weaknesses when considered on their own. This paper sets out to examine to what extent a fusion between both approaches can overcome the weaknesses of both individual approaches. It uses features of the capability framework to enrich what is basically a subjective well-being perspective. Key drawbacks of normative subjective well- being views can be overcome by focussing welfare assessments on ‘‘Subjective Well-being Capabilities’’, i.e. focussing on the substantive opportunities of individuals to pursue and achieve happiness.

14:15-15:00: Dr. Samantha Dockray (University College Cork)

Title: "Psychobiological correlates of wellbeing; Mix-ups of measurement and meaning"
Note: Slides available here

Positive psychological well-being has been associated with favourable health outcomes, and it is likely that several biological processes mediate the effects of positive mood on physical health.  These biological processes include the activation of the neuroendocrine and autonomic systems, and these systems are often used as direct associates of psychological states, and the system reactivity and recovery are usually presented as explanatory pathways.

Although measures of psychological wellbeing continue to be delineated, the measures of physiological activation used to show differences in positive wellbeing are based on models of stress, distress and psychopathology.  This paper will examine individual differences and intra-individual change in positive wellbeing, and the concomitant and/or consequent physiological activation of the cardiovascular and neuroendocrine systems.  Findings are drawn from several prospective and intervention studies of psychophysiological wellbeing. The summary findings indicate the measurement of the dynamic between physical and psychological wellbeing must consider type as well as intensity of emotion, and examine the usefulness of physiological measures in relation models of positive wellbeing and health outcomes. The results are discussed with reference to models of health, and the potential for health interventions using a positive psychology framework.

15:20-16:05: Professor Suzanne Skevington (University of Manchester)

Title: "What is Quality of Life and Wellbeing? Can we really measure it?"

Note: The World Health Organization Quality of Life (WHOQOL)

In recent years there has been debate about whether we can measure quality of life and wellbeing. Professionals and decision-makers in health and social care need good quality outcome measures that can precisely  assess whether treatments and interventions significantly improving life, especially for those with limiting long term conditions. Clinical Consulting Groups now seek suitable measures that can be used to assess their population, but the seemingly interchangeable use of the terms quality of life and wellbeing serves to confuse those who must make these important choices.  

This talk considered some definitions of quality of life and wellbeing with other related issues, and looked at how they have changed recently. Such definitions provide clues to the ways that measures are constructed and used, and by whom. Several measures on wellbeing, were outlined to illustrate these points. The features of a cross-cultural  measure - the WHOQOL - were also discussed. The WHOQOL was developed by a collaboration at the World Health Organisation, and represents the first international generic patient-reported outcomes measure.

16:05-16:35: Anne-Marie Conlong (Performance Unit, Office of The Chief Statistician & Performance, Scottish Government).

Title: "Measuring Well-Being in Scotland: Scotland Performs".
Note: Scotland Performs website 

Anne-Marie Conlong gave an overview about how well-being measures are currently used in the Scottish Government. In particular, she presented the work of “Scotland Performs” which deals with the measurement of well-being at the national level. 

Ms. Conlong talked about the aims of the government to decentralise institutions, give more power to local authorities and abolish departmental silos. She presented the outcomes-based approach that the government has recently put forward. The outcomes-based approach aims to combine all areas in the government to generate a successful country with opportunities for all of Scotland to flourish through increased sustained economic growth. 

Ms. Conlong also presented the 16 national outcomes and indicators, and presented the current state of measurement of well-being today. She noted that Joseph Stiglitz has mentioned Scotland Performs as a recent governmental success story and is not far away from the dashboard of indicators that Stiglitz has called for. While being optimistic about recent developments, Anne-Marie also stressed that the situation is far from perfect and that there is room for improvement. For the future, a round table was initiated, which brings together various stakeholders who are interested in improving Scotland Performs. Anne-Marie highlighted four specific topics for future work within Scotland Performs: 1. Parliamentary engagement (disseminating knowledge about the outcomes-based approach), 2. improving indicators and participation (especially environmental indicators, work and wellbeing indicators, and indicators related to the communities in which people live in), 3. presentation and communications around Scotland Performs (e.g., website improvement), and 4. imbedding and impact (how is Scotland Performs imbedded in the Scottish Government). In order to increase the impact and policy making Scotland Performs aims to build up evidence, understand, and identify where Scotland Performs can change policy making and policy thinking. 

16.35 - 17.15: Panel Discussion

The presenters and audience discussed various aspects of the measurement and determinants of well-being. One interesting topic related to an insight of Suzanne Skevington’s presentation which indicated that people's evaluations about what is important for the quality of their lives does not cohere with what actually leads to a high quality of life in the data. The panel discussed whether judgements about what increases quality of life or data about what actually increases quality of life should be used as a basis for policy interventions. This discussion led to the question of whether prescriptive or descriptive forms of well-being should inform (behavioural) policy-making. Libertarian paternalism and nudge-theory were critically discussed as a specific type of policy intervention that aims to support people to lead happier lives. At this point it was noted the Behavioural Science Centre will host a workshop specifically dedicated to the interplay between behavioural science and public policy in June 2015. 

The panel then discussed whether there is sufficient collaboration between key stakeholders such as NGOs, GPs, charities, and the Government in the context of well-being policy. It was argued that in economics more attention has been devoted to this kind of research since the economic crisis. Although a lot of collaborations between different institutions have started, there is a lot of unknown terrain and the “devil is in the details”. In the Scottish Government, for example, not everybody is at the table yet, but the situation is improving. The final topic discussed was the type of data that is currently used in well-being research. Almost all the data presented during the workshop was self-reported. It was argued that self-reported data is limited because it is difficult to obtain really big datasets that can compete with datasets of objective measures often used in economics. Several instruments that allow obtaining objective measures of well-being were mentioned.

That concludes the summary of the day. Click on our Twitter hashtag #StirBSC to see the day's tweets. Our next ESRC-funded workshop will take place on May 23 on "Increasing the richness and frequency of social science survey data".