You are currently browsing the tag archive for the ‘behavioral economics’ tag.

Stanford University, based in California, has once again anticipated the future. In addition to providing subsidized housing to attract and retain faculty, faculty can now choose to be paid in water. The University has quietly been buying up farms to acquire ownership of water rights and has even signed futures contracts with the Great Lakes Regional Water authority for the delivery of water 15 years from now. In addition they have a joint venture with Elon Musk, to harvest water from comets. Google meanwhile, is behind the curve. They’ve only gone as far as allowing their employees to take long showers on site.

Thom Tillis, Senator from the great state of North Carolina, was the subject of some barbs when he suggested that the health-code mandated sign that reads

“Employees must wash hands before returning to work.”

was an example of government over-regulation.

Quoting himself:

“I said that I don’t have any problem with Starbucks if they choose to opt out of this policy as long as they post a sign that says, ‘We don’t require our employees to wash their hands after leaving the restroom.’ The market will take care of that.”

Many found the sentiment ridiculous, but for the wrong reason. Tillis was not advocating the abolition of the hand washing injunction but replacing it with another that would, in his view, have the same effect. More generally, he seems to suggest the following rule: you can opt out of a regulation as long as one discloses this. If the two forms of regulation (all must follow vs. opt out but disclose) are outcome equivalent why should we prefer one to the other?

Monitoring costs are not lower; one still has to monitor those who opt out to verify they have disclosed. What constitutes disclosure? For example:

`We do not require our employees to wash their hands because they do so anyway.’

Would the following be acceptable?

“We operate a hostile work environment, but pay above above average wages to compensate for that.”

MacFreedom is an application that disables network connection for a period of up to eight hours. Actually it doesn’t mean you absolutely can’t restore the connection if you really must check on facebook what your elementary school classmate had for lunch yesterday, but you do have to restart your computer for that. So by using Freedom you force yourself to exert some effort in order to browse around. Therefore you are less likely to actually do it, and you can spend your time more productively on your tenure package research.

Economists sometimes talk about `multiple selves’ model. I never actually managed to get through a behavioral econ paper, but I think it goes something like this: There are two Erans. A sophisticated, long term planning `E1′ and a lazy, self-serving, easily tempted `E2′. As long as they (that is to say, I) are planning to do stuff, E1 is in charge. But when I actually sit down in front of my laptop to read Blograshevski et al. Econometrica 1974 `The multiple selves model in a dynamic multi-valued auction with hyperbolic discounting’, E2 takes control. Since E1 is sophisticated, he uses Freedom to disconnect from the universe for sixty minutes just before E2 arrives, so that E2 will have to pay the cost of rebooting before he can delve into the blogosphere. Presumably, between Blograshevski and rebooting, E2 might actually prefer Blograshevski.

Well, this used worked for me: I have Freedom to thank for some of the few papers that I actually managed to read or write. But here enters another, less abstract, economic idea — if E1 benefits from using Freedom, then he should actually be willing to pay for it ! Indeed, Freedom started as a freeware, then a donationware, and now it costs $10.

The economic reasoning does not work on this particular E1 though. Sorry, but paying for internet and then paying again for not being able to use the internet is just too humiliating, selves or no selves. As somebody mentioned, the next thing you know credit card issuers will ask E1 to pay fee for the service of increasing E2’s over-the-credit-limit fee.


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