Economics

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.

Performance Pay and Wage Inequality

There is a very interesting paper in the February 2009 issue of the Quarterly Journal of Economics on “Performance Pay and Wage Inequality”. It’s fascinating to think that 21% of the rise in wage inequality since 1980 might be attributable to increased use of performance pay schemes.

Paul Graham and Friedrich Hayek

It may be difficult to say why the old method fails, but that it does fail, anyone can see. When is software delivered on time? Experienced programmers know that no matter how carefully you plan a program, when you write it the plans will turn out to be imperfect in some way. Sometimes the plans […]

Fear is Your Only God

Are you unsure if depressions are at least partly caused by a self-propagating group fear response? Maybe this piece of spam I just got will help to change your mind: WACHOVIA CORPORATION NOTICE. Citigroup announced a buyout of Wachovia brokered by the FDIC. All Wachovia bank locations will be in the Citigroup merger to prevent […]