Speeding Up MLE Code in R
Recently, I’ve been fitting some models from the behavioral economics literature to choice data. Most of these models amount to non-linear variants of logistic regression in which I want to infer the parameters of a utility function. Because several of these models aren’t widely used, I’ve had to write my own maximum likelihood code to [...]
The Post-Lehman Era
The existence of recessions no more invalidates economic theory than the existence of AIDS invalidates molecular biology.
Inconsistencies in Bayesian Models of Decision-Making
But modeling devices that make sense for an unbiased decisionmaker may not make sense for a biased one. For example, why would individuals have priors and posteriors if they are destined to apply Bayes’ law incorrectly?1 A question I often ask myself. Wolfgang Pesendorfer : Behavioral Economics Comes of Age: A Review Essay on Advances [...]
Academic Jargon: Field-Specific Insults
Every academic field seems to develop a set of generic insults based on their intellectual toolkit. Here are two examples I hear often: Probabilists and Statisticians: “I think that’s an interesting case, but it’s in a set with measure zero.” Economists: “X group’s behavior is clearly rent-seeking.” Do any readers have good examples from other [...]
Escher and Redemption: Using Cyclical Preferences to Overcome Hedonic Treadmills
This morning I started thinking about using violations of classical economic theory to increase well-being. The main idea is probably obvious to anyone familiar with the relevant literature on cyclical preferences and the hedonic treadmill, but I think it’s still worth articulating cleanly. Please let me know if you have a reference to existing literature [...]
Failures of Self-Control: More Data
Just when you worried that preference reversals weren’t real: Professional bookmakers rarely accept bets from individuals who directly control the outcome of the bet. We analyse a unique exception to this rule and a potential policy innovation in the battle against obesity: a weight loss betting market. If obese individuals have time-inconsistent preferences then commitment [...]
The Price of Calculation
In a world in which the price of calculation continues to decrease rapidly, but the price of theorem proving continues to hold steady or increase, elementary economics indicates that we ought to spend a larger and larger fraction of our time on calculation.1 Over the next ten years, I hope that more and more mathematically [...]
How Big Businesses Work to Conserve Resources
This NYT piece by Jared Diamond is remarkable for its clear real-world examples of the ways in which businesses will independently discover ways to conserve resources, simply because minimizing wastefulness is profitable. HT: Marginal Revolution
Risk Aversion in Action
From Pew Research, here’s a gem for those interested in real world examples of risk aversion:there are two people who prefer a secure job that pays less well for every one person who prefers a higher salary with the risk of job loss. Of course, you’d want to know what all of these people assume [...]
Chess Players versus The Beauty Contest Game
Here is a fascinating piece on the Beauty Contest game being played by chess players.