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Archive for July, 2014

Just a nudge in the dark

Michael Sanders

In a world where academics are assessed on their impact as well as the number and quality of their peer-reviewed papers, findings must answer one of two questions in the affirmative – “Is it important?”, or “Is it cool?”

There is no doubt that Behavioural Economics is cool – this has been assured by books like Dan Ariely’s Predictably Irrational[1], which brought the subject to widespread attention, as well as Nobel Prize winner Daniel Kahneman’s Thinking Fast and Slow[2].

From a public policy perspective, Thaler and Sunstein’s book, Nudge[3], is probably the most important of these, as it is geared most heavily towards applying insights from behavioural economics and psychology to real world problems with which governments are concerned.

The attention of policymakers, as well as the nascent replication crisis in psychology changes the question that must be asked of findings – it is not sufficient simply to be cool. The majority of the famous studies in this field are conducted in laboratories, primarily on university students, and primarily on female economics and psychology undergraduate students at that. This is the way science is conducted, but it is important to know whether findings generalise to other contexts.

At the same time, large scale field experiments can be costly, time consuming, and are subject to a lot of noise. These are the very reasons that lab experiments are so attractive for researchers.

There is a halfway house – conducting lab-like experiments, where we take the structure of the lab into the field, where things are noisy and people might be distracted by other things. In a study published today, we do just that[4].

Participants were members of the public, and they were asked to play a trust game. In this game, one player starts off with a small amount of money, for example £1, and is asked if they’d like to trust the other player. If they do so, the other player receives the £1, plus an additional £3, giving them £4 in total. They then choose whether or not to split the money with the first player. If they do, both players keep £2 – if they don’t, the second player gets £4 and the first player walks away empty handed. The question is – will you trust, and are you trustworthy?

Previous experiments[5], carried out in the lab, found that when you frame the game as a “Betrayal game”, people were significantly less trusting, and significantly less trustworthy as well, than when the game is described as  a “Partnership game”. In our experiment, we showed graphs for one condition or the other to different participants. So, some people saw the results for the “Betrayal game”, while other people saw the results for the “Partnership game”. According to theories on framing, the first group should be less trusting and less trustworthy, as they have been “primed” by Betrayal.

What do we find? Interesting, despite the noisy environment, and the fact that we were using members of the public rather than students, we still saw some effects. People were significantly less likely to trust each-other if they were primed with the untrusting game, but, they were no less likely to split the money. This suggests that outside of the lab, people can still be primed in their beliefs about other people, but that their own preferences don’t change – in the real world, people are more difficult to make less nice, but it might still be possible to make them trust other people less. We should never read too far into an individual study, but if it holds up in repeated and larger studies, the implications are potentially interesting. Not trusting other people is sensible if other people aren’t trustworthy, but if they are, we can lose many beneficial opportunities if we trust too little. If priming can lead people to hold incorrect beliefs about how trustworthy other people are, it could actually make us worse off as a society.

[1] Ariely (2008): “Predictably Irrational”, Harper Collins

[2] Kahneman (2012): “Thinking, Fast and Slow” Penguin.

[3] Thaler and Sunstein (2008): “Nudge: Improving decisions about health, wealth and happiness”      Penguin

[4] http://www.bristol.ac.uk/cmpo/publications/papers/2014/wp330.pdf

[5] Burnham, McCabe and Smith (2000) “Friend-or-foe intentionality priming in an extensive form trust game” Journal of Economic Behavior and Organisation Vol 43 No.1 pp57-73

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Little and often: (How) Is giving to charity like weight watchers?

Sarah Smith

David Erasmus wants us to give to charity little and often. He draws parallels between charitable giving and dieting and thinks there is a role for the weight watchers of donating. Giving little and often will help get us into a giving habit.

He may be right. Good intentions – losing weight, giving to charity – can be hard to keep. We know what the long-term benefits are, but there is some short-term pain. Giving to charity may not be as costly as giving up sweet and fatty treats, but it takes time and effort out of busy lives.

So how does weight watchers help?

First, there is the public commitment to fulfilling the good intention; this makes it costly NOT to take action. The super rich are already doing this through their Giving Pledge; the same principle could be applied on a smaller scale.

Second, regular meetings and weigh ins provide immediate benefits. And there may be more satisfaction in (publicly) losing a pound a week for 10 weeks than in losing the 10 pounds in one go. The same could be true of giving. Economists think the “warm glow” from giving comes from the (total) amount given. But could it be more rewarding to give £1 ten times than to give £10 once? Diminishing marginal utility may mean it makes sense to spread donations – if you give £10 in one go, the first pound adds more to your happiness than the tenth, so why not spread it out? The very act of giving also gives us satisfaction. Psychologists have shown that giving money away makes people happy; and are doing more work to understand why this is. Personal connections and having an impact seem to be important, not just the total amount given.

Third, weight watchers opens up the process to public scrutiny. People feel good from having other people appreciate and share in their weight loss. Also, like the initial commitment, it also almost certainly makes it more costly to give up giving up.

So, perhaps there is something in the idea that giving little and often and in public can make the process of donating more rewarding and can help to sustain a longer-term commitment to a good intention. The only real difference is that while most people hope to attend weight watchers only once, charitable giving should be something that they are more than happy to carry on with.