Economic Rockstar

Connecting Brilliant Minds in Economics and Finance

067: Leigh Caldwell on Cognitive Economics and the Mathematics of Behavioral Economics

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067: Leigh Caldwell on Cognitive Economics and the Mathematics of Behavioral Economics

leigh caldwellLeigh Caldwell is a behavioural economist based in London.

Leigh, together with Elina Halonen, runs the Irrational Agency, which takes the latest scientific discoveries in psychology and behavioural economics, blends it with their hands-on experience of marketing and business, and turns them into powerful, incisive market research techniques.

In 2012, Leigh condensed his experience in pricing and the marketing of several of his businesses into a new book The Psychology of Price: How to use price to increase demand, profit and customer satisfaction.

Leigh is co-founder of the London Behavioural Economics Network, writes for the Pricing Revolution and the Knowing and Making blogs, and regularly features as an economics commentator on BBC News, Radio 4, Research Magazine and other media.

My own background is all about intellectual challenge. I went to university early as a teenager. I studied maths and physics. I was always into pushing myself intellectually and finding the next challenge to take on – Leigh Caldwell

Economists: 

In this interview, Leigh mentions: Elina Halonen, Dan Ariely and George Lowenstein.

Economics:

In this interview, Leigh mentions: Behavioral economics, experimental economics, lab experiments, demand curve, equilibrium, utility, mathematics, rationality, nudge, choice architecture, cognitive economics, reference pricing model, anchoring, hyperbolic discounting, heuristics, neuroeconomics, Nudge Unit, organ donation, tax collection, productivity, GDP and unemployment.

In this episode you will learn:

  • why Leigh help co-found the London Behavioural Economics Network (LBEN).
  • the importance of academics and practitioners working together to further the discipline of economics.
  • why finding the sweet-spot between controlled experiments and realism is difficult yet important.
  • what cognitive economics is and how different it is the behavioral economics.
  • whether big data could influence an individuals consumption behaviors.
  • about the need to use the mathematics of computer science in behavioral economics.
  • why we shouldn’t use the current maths of economics to explain human behavior.
  • why a lack of mathematics is holding back the discipline of behavioral economics.
  • why mathematics is essential for theorising and modelling economics, especially behavioural economics.
  • about the paradox of self-awareness in cognitive economics when faced with choices.
  • how a consumers relationship with a material object is a unique experience and how putting a price on the good can ruin this experience.
  • why charging a higher price for your product or service would generate higher profits in a perceived perfectly competitive market.
  • whether the 99p or 99 cent pricing strategy works.
  • about the reference pricing model and why charging $39 for a product is better than charging $34 for the same product.
  • about the importance of setting prices when considering how numbers are spoken, i.e. numbers with more syllables are received to be more expensive than those with fewer syllables. 
  • how Leigh uses the findings in academic papers to make money for his business.
  • how Leigh uses economic conferences to network, to find out about the latest research and to discover the new academic societies that have been established.
  • about Leigh’s goal for 2016 to start a Cognitive Economics Society.
  • about the advice Leigh would give the UK government to apply cognitive and behavioral economics to deal with some aspects of social life.
  • how the UK government changed people’s behaviour about paying their taxes on time.
  • about the productivity challenge the UK government is facing today and what can be done about it.
  • about the current research Leigh is undertaking regarding where our preferences come from.

Conferences:

Books:

  • The Psychology of Price: How to use price to increase demand, profit and customer satisfaction by Leigh Caldwell.
  • Predictably Irrational by Dan Ariely.
  • Basic Instinct by Pete Luhn
  • Nudge by Richard Thaler
  • Thinking, Fast and Slow by Kahneman and Tversky

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050: Dan Ariely on Irrational Behavior and the Importance of Our Environment When Making Decisions

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050: Dan Ariely on Irrational Behavior and the Importance of Our Environment When Making Decisions

Dan Ariely is Professor of Psychology & Behavioral Economics at Duke University in North Carolina. Dan’s interests spanDan Ariely a wide range of behaviors, and his sometimes unusual experiments are consistently interesting, amusing and informative, demonstrating profound ideas that fly in the face of common wisdom.

In addition to appointments at the Fuqua School of Business, the Center for Cognitive Neuroscience, the Department of Economics, and the School of Medicine at Duke University, Dan is also a founding member of the Center for Advanced Hindsight.

Dan is the author of the New York Times bestsellers Predictably Irrational, The Upside of Irrationality, and The Honest Truth About Dishonesty and his latest book Irrationally Yours is now available.

Dan has received numerous honors and awards in medicine, psychology and economics.

Dan received a B.A in Psychology from Tel Aviv University, an M.A and PhD in Cognitive Psychology from University of North Carolina and another PhD in Business Administration from Duke University.

Influencer:

Professor Hanan Frenk, Tel Aviv University

Economists:

In this interview, Dan mentions: Brian Wansink. 

Psychologists:

In this interview, Dan mentions: Mike Norton and Elizabeth Dunn.

Economics:

In this interview, Dan mentions and discusses: Tragedy of the Commons, behavioral economics, public goods, pricing, decision-making, choice architecture, Ulysses Contract, happiness, asymmetric dominance effect and choice.

Takeaway:

“Think about your environment and always experiment” – Dan Ariely

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In this episode, you will learn:

  • about Dan Ariely’s traumatic experience resulting in severe burns.
  • how Dan Ariely found his love for psychology and behavioral economics.
  • why Dan will not be teaching his Irrational Behavior course on Coursera.
  • the problems with MOOCs like Coursera and why it is making the wrong choice regarding its open platform system.
  • why Dan was turned down for his first book – a cookbook and what advice he was given by a publisher.
  • why we as humans make very costly mistakes and what we can do about it.
  • how people eat more than they realise and how experiments in economics have shown this.
  • why we are bad at doing things that makes us happy.
  • the most common mistake companies make when making decisions or processing information.
  • how companies can avoid making mistakes.
  • if anger is a good or bad emotion.
  • the most surprising finding from Dan Ariely’s research.
  • the most surprising question put to Ask Ariely.
  • how to get poor people in Kenya to save.
  • how your environment matters when making decisions.

Quotes by Dan Ariely in Episode 50 of the Economic Rockstar Podcast:

“Choice architecture is this idea that our environment influences how we make decisions” – Dan Ariely

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“In the process of trying to not make any mistakes, companies create environments that punish risk and therefore punish ingenuity and growth” – Dan Ariely

“Tim is a very interesting character and he is experimenting on himself. We have to realize that his experiments have the validity that they work very well for him” – Dan Ariely

On Coursera:

“I think we do need rules for trolls. I think that pricing is a very good mechanism for some things and I’m not sure it’s a mechanism for all for all things like this. The reality is that Coursera probably over samples from the people on the tail of the distribution in terms of mental stability.” – Dan Ariely

Books:

Resources Mentioned by Dan Ariely:

Where to Find Dan Ariely:

Transcript:

The full transcript of this episode with Dan Ariely will be available shortly.

Thanks for Listening!

Thanks so much for joining me again this week. Have some feedback you’d like to share? Leave a note in the comment section below!

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035: Stephen Young on Being Car-Free and the Behavioural Economics of Owning A Car

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035: Stephen Young on Being Car-Free and the Behavioural Economics of Owning A Car

Stephen Young is a Senior Lecturer at Brighton Business School and is subject leader for behavioural economics.Stephen Young

He is also Visiting Lecturer at Brighton and Sussex Medical School, where he teaches Behavioural Economics to health professionals, including commissioners, public health practitioners and GPs.

As an independent consultant and trainer, Stephen also provides client workshops and presentations on behavioural economics and behaviour change.

Stephen is widely published and his research interests include behaviour change, climate change, health, sustainability, and Information and Communications Technology.

Stephen does not own a car and is so passionate about being car free that he writes regularly on his blog livingthecarfreelife.blogspot.com. 

Economists:

In this interview, Stephen mentions and discusses:

Paul Ormerod, Richard Thaler, Cass Sunstein, John Cochrane, Paul Dolan, Malcolm Gladwell, Phil Goodwin, Daniel Kahneman, Adam Smith, Karl Marx, Barry Schwartz, Richard Layard, Nassim Nicholas Taleb, Paul Krugman and Friedrich Hayek.

Economic Themes:

In this interview, Stephen mentions and discusses:

Bank run, financial crisis, risk, behavioural economics, nudge, rationality, incentives, tax, choice architecture, obesity, climate change, externalities, loss aversion and the endowment effect.

On Economic Theory:

“None of the models are completely perfect. None of them work to everybody’s benefit” – Stephen Young

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Is behavioural economics storming the citadel or is it shoring up the ramparts? – Stephen Young

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Find Out:

  • why Stephen decided to become an academic.
  • about the Northern Rock bank run in the UK in 2007.
  • why universities need to adapt or die when it comes to addressing relevant content.
  • what Stephen is doing to reduce his carbon footprint in college and how he’s responding to the digital needs of his students.
  • why health professionals are interested in behavioral economics.
  • about the Irish government’s fight against obesity.
  • how Stephen is encouraging a town in the UK to become pedestrian friendly.
  • about framing car ownership – status and perception of rank.
  • how by ditching your car you can burn calories.
  • how the average person is working two days a week to pay for their car.
  • about the emotional attachment that a car represents.
  • what major cities across Europe are doing to make them more pedestrian and bike-friendly.
  • about peak car ownership.
  • some advice from Stephen on how to give up your car and become car free.
  • about the pluralist approach to embracing economics.

“The externalities don’t work for car ownership because it’s not priced in because of the pollution emitted” – Stephen Young

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You can live a better life without a car. You can be thinner. You  can be richer. You can be more sociable. You can be more flexible. You can get around just as easily – Stephen Young.

Reasons for Peak Car Ownership:

  1. The youth do not have the income to finance the ownership of a car due to the high unemployment rates.
  2. High cost of car insurance.
  3. The opportunity costs of owning the latest technology.
  4. You don’t need a car to participate in a lot of things today.

Behavior Economics in the Health Sector:

“We’re not just nudged by the other side, we’re being bombarded by the other side. There’s a lot of room to doubt the way public health policy is being transacted and implemented in a lot of economies” – Stephen Young.

Giving Up Your Car and Becoming Car Free:

  1. Try living without your car for a while before you give up.
  2. If you’re moving house, locate to an area where everything you need is close by.
  3. Don’t give up your car just because it’ll make the world a better place. Only do it to improve your own life.
  4. Take a ‘hike’ – go for a walk.
  5. Walking is a great way of forming your thoughts and ideas as it clears your head and frees your mind.
  6. Walking, rather than driving, improves your health and well-being. It connects you to where you live, to where you are.

“All truly great thoughts are conceived by walking” – Nietzcshe.

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Recommended Books:

Where to Find Stephen Young:

Stephen Young’s Publications:

Forthcoming

  • Young, S. and Caisey, V. Behavioral Economics and Social Marketing: Points of Contact?  Chapter in Volume II of Stewart, D. (Ed) Handbook of Persuasion and Social Marketing. NY: Praeger. 2015.

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