experimental economics

68 results back to index


pages: 187 words: 62,861

The Penguin and the Leviathan: How Cooperation Triumphs Over Self-Interest by Yochai Benkler

Abraham Maslow, Alan Greenspan, behavioural economics, business process, California gold rush, citizen journalism, classic study, Daniel Kahneman / Amos Tversky, do well by doing good, East Village, Everything should be made as simple as possible, experimental economics, experimental subject, framing effect, Garrett Hardin, informal economy, invisible hand, jimmy wales, job satisfaction, Joseph Schumpeter, Kaizen: continuous improvement, Kenneth Arrow, knowledge economy, laissez-faire capitalism, loss aversion, Murray Gell-Mann, Nicholas Carr, peer-to-peer, prediction markets, Richard Stallman, scientific management, Scientific racism, Silicon Valley, social contagion, Steven Pinker, telemarketer, Toyota Production System, Tragedy of the Commons, twin studies, ultimatum game, Washington Consensus, Yochai Benkler, zero-sum game, Zipcar

This adoption of cooperative systems in so many fields has been paralleled by a renewed interest among researchers in the social and behavioral sciences in the mechanics of cooperation. Perhaps humankind might not be so inherently selfish after all. Through the work of hundreds of scientists, we have begun to see mounting evidence in psychology, organizational sociology, political science, experimental economics, and elsewhere that people are in fact more cooperative and selfless, or at least behave far less selfishly, than most economists and others previously assumed. This isn’t just theory; dozens of field studies have identified cooperative systems, often more stable and effective than equivalent incentive-based ones.

In the next few chapters I will look at the intellectual arc of work in various fields over the past fifty years in several core disciplines concerned with human action and motivation. We will look broadly, but also dive more deeply into the role of cooperation in social relations: the effects of empathy and solidarity, our drive to do what is right and fair, and our desire to conform to the normal. I will draw from such diverse fields as evolutionary biology, experimental economics, psychology, organizational sociology, and neuroscience. I’ll also draw from the real world, with examples ranging from the band Radiohead’s online pricing (or non-pricing) structure to the success of the Obama campaign and case studies of companies like Toyota and Google; from the harsh realities of a group of lobster fishermen to the strides being made by companies simultaneously pursuing social justice and profit.

Other facts enter into the equation, such as relative need, luck, and talent. We come to accept that some people are better off than others, and that’s just how it is. And yet we still care about fairness in one way or another. What, then, might we be caring about when we feel that we care about fairness? In looking through the experimental economics and social psychology literature, it seems that when we care about “fairness” we really care about three distinct things: fairness of outcomes, fairness of intentions, and fairness of processes. With regard to outcomes, we care about how much each of us gets out of an interaction relative to others, given the generally understood norms.


pages: 500 words: 145,005

Misbehaving: The Making of Behavioral Economics by Richard H. Thaler

3Com Palm IPO, Alan Greenspan, Albert Einstein, Alvin Roth, Amazon Mechanical Turk, Andrei Shleifer, Apple's 1984 Super Bowl advert, Atul Gawande, behavioural economics, Berlin Wall, Bernie Madoff, Black-Scholes formula, book value, business cycle, capital asset pricing model, Cass Sunstein, Checklist Manifesto, choice architecture, clean water, cognitive dissonance, conceptual framework, constrained optimization, Daniel Kahneman / Amos Tversky, delayed gratification, diversification, diversified portfolio, Edward Glaeser, endowment effect, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, George Akerlof, hindsight bias, Home mortgage interest deduction, impulse control, index fund, information asymmetry, invisible hand, Jean Tirole, John Nash: game theory, John von Neumann, Kenneth Arrow, Kickstarter, late fees, law of one price, libertarian paternalism, Long Term Capital Management, loss aversion, low interest rates, market clearing, Mason jar, mental accounting, meta-analysis, money market fund, More Guns, Less Crime, mortgage debt, Myron Scholes, Nash equilibrium, Nate Silver, New Journalism, nudge unit, PalmPilot, Paul Samuelson, payday loans, Ponzi scheme, Post-Keynesian economics, presumed consent, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, random walk, randomized controlled trial, Richard Thaler, risk free rate, Robert Shiller, Robert Solow, Ronald Coase, Silicon Valley, South Sea Bubble, Stanford marshmallow experiment, statistical model, Steve Jobs, sunk-cost fallacy, Supply of New York City Cabdrivers, systematic bias, technology bubble, The Chicago School, The Myth of the Rational Market, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, transaction costs, ultimatum game, Vilfredo Pareto, Walter Mischel, zero-sum game

I keep a photograph of one of those farm stands in my office for inspiration. 16 Mugs At some point during the Vancouver year, the economist Alvin Roth, who was then deeply involved with experimental methods, organized a conference at the University of Pittsburgh. The goal was to present the first drafts of papers that would later be published in a small book called Laboratory Experimentation in Economics: Six Points of View. The contributors were major figures in the experimental economics community including Al, Vernon Smith, and Charlie Plott. Danny and I represented the new behavioral wing of the experimental economics community. For Danny and me, the most interesting discussion was about my beloved endowment effect. Both Vernon and Charlie claimed we didn’t have convincing empirical evidence for this phenomenon. The evidence I had presented was based on a paper written by Jack Knetsch along with an Australian collaborator, John Sinden.

I felt like I had arrived on the shores of a new world with no map, no idea where I should be looking, and no idea whether I would find anything of value. Kahneman and Tversky ran experiments, so it was natural to think that I should be running experiments, too. I reached out to the two founders of the then nascent field called experimental economics, Charlie Plott at Caltech and Vernon Smith, then at the University of Arizona. Economists traditionally have used historical data to test hypotheses. Smith and Plott were practitioners of and proselytizers for the idea that one could test economic ideas in the laboratory. I first took a trip down to Tucson to visit Smith.

This assertion, unsupported by any evidence, was firmly believed, even in spite of the fact that nothing in the theory or practice of economics suggested that economics only applies to large-stakes problems. Economic theory should work just as well for purchases of popcorn as for automobiles. Two Caltech economists provided some early evidence against this line of attack: David Grether and Charlie Plott, one of my experimental economics tutors. Grether and Plott had come across research conducted by two of my psychology mentors, Sarah Lichtenstein and Paul Slovic. Lichtenstein and Slovic had discovered “preference reversals,” a phenomenon that proved disconcerting to economists. In brief, subjects were induced to say that they preferred choice A to choice B . . . and also that they preferred B to A.


pages: 503 words: 131,064

Liars and Outliers: How Security Holds Society Together by Bruce Schneier

Abraham Maslow, airport security, Alvin Toffler, barriers to entry, behavioural economics, benefit corporation, Berlin Wall, Bernie Madoff, Bernie Sanders, Brian Krebs, Broken windows theory, carried interest, Cass Sunstein, Chelsea Manning, commoditize, corporate governance, crack epidemic, credit crunch, CRISPR, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Graeber, desegregation, don't be evil, Double Irish / Dutch Sandwich, Douglas Hofstadter, Dunbar number, experimental economics, Fall of the Berlin Wall, financial deregulation, Future Shock, Garrett Hardin, George Akerlof, hydraulic fracturing, impulse control, income inequality, information security, invention of agriculture, invention of gunpowder, iterative process, Jean Tirole, John Bogle, John Nash: game theory, joint-stock company, Julian Assange, language acquisition, longitudinal study, mass incarceration, meta-analysis, microcredit, mirror neurons, moral hazard, Multics, mutually assured destruction, Nate Silver, Network effects, Nick Leeson, off-the-grid, offshore financial centre, Oklahoma City bombing, patent troll, phenotype, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, profit motive, race to the bottom, Ralph Waldo Emerson, RAND corporation, Recombinant DNA, rent-seeking, RFID, Richard Thaler, risk tolerance, Ronald Coase, security theater, shareholder value, slashdot, statistical model, Steven Pinker, Stuxnet, technological singularity, The Market for Lemons, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Timothy McVeigh, too big to fail, traffic fines, Tragedy of the Commons, transaction costs, ultimatum game, UNCLOS, union organizing, Vernor Vinge, WikiLeaks, World Values Survey, Y2K, Yochai Benkler, zero-sum game

Neuroscience is starting Kerri Smith (2011), “Neuroscience vs Philosophy: Taking Aim at Free Will,” Nature, 477:23–5. Ultimatum game Charles A. Holt (2000), “Y2K Bibliography of Experimental Economics and Social Science: Ultimatum Game Experiments,” University of Virginia. Hessel Oosterbeek, Randolph Sloof, and Gijs van de Kuilen (2004), “Cultural Differences in Ultimatum Game Experiments: Evidence From a Meta-Analysis,” Experimental Economics, 7:171–88. how the game works Werner Güth, Rolf Schmittberger, and Bernd Schwarze (1982), “An Experimental Analysis of Ultimatum Bargaining,” Journal of Economic Behavior & Organization, 3:267–88.

Thaler (1986), “Fairness and the Assumptions of Economics,” Journal of Business, 59:S285–S300. Christoph Engel (2011), “Dictator Games: A Meta Study,” Experimental Economics, 14:584–610. Trust game Joyce Berg, John Dickhaut, and Kevin McCabe (1995), “Trust, Reciprocity, and Social History,” Games & Economic Behavior, 10:122–42. not what happens Colin Cramer (2003), Behavioral Game Theory: Experiments in Strategic Interaction, Russell Sage Foundation. Public Goods game John O. Ledyard (1995), “Public Goods: A Survey of Experimental Research,” in Alvin E. Roth and John H. Kagel, eds., Handbook of Experimental Economics, Princeton University Press. fear of rejection Daniel Kahneman, John L.

The Joint Effects of Sex and Agreeableness on Income,” Journal of Personality & Social Psychology, in press. George Price Oren S. Harman (2010), The Price of Altruism: George Price and the Search for the Origins of Kindness, W.W. Norton & Co. bargaining games Gary E. Bolton (1998), “Bargaining and Dilemma Games: From Laboratory Data Towards Theoretical Synthesis,” Experimental Economics, 1:257–81. found a coin Paula F. Levin and Alice M. Isen (1972), “The Effect of Feeling Good on Helping: Cookies and Kindness,” Journal of Personality & Social Psychology, 21:384–8. flying through clouds Lawrence J. Sanna, Edward C. Chang, Paul M. Miceli, and Kristjen B. Lundberg (2011), “Rising Up to Higher Virtues: Experiencing Elevated Physical Heights Uplifts Prosocial Actions,” Journal of Experimental & Social Psychology, 47:472–6.


pages: 461 words: 128,421

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox

"Friedman doctrine" OR "shareholder theory", Abraham Wald, activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, Andrei Shleifer, AOL-Time Warner, asset allocation, asset-backed security, bank run, beat the dealer, behavioural economics, Benoit Mandelbrot, Big Tech, Black Monday: stock market crash in 1987, Black-Scholes formula, book value, Bretton Woods, Brownian motion, business cycle, buy and hold, capital asset pricing model, card file, Carl Icahn, Cass Sunstein, collateralized debt obligation, compensation consultant, complexity theory, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, democratizing finance, Dennis Tito, discovery of the americas, diversification, diversified portfolio, Dr. Strangelove, Edward Glaeser, Edward Thorp, endowment effect, equity risk premium, Eugene Fama: efficient market hypothesis, experimental economics, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, George Akerlof, Glass-Steagall Act, Henri Poincaré, Hyman Minsky, implied volatility, impulse control, index arbitrage, index card, index fund, information asymmetry, invisible hand, Isaac Newton, John Bogle, John Meriwether, John Nash: game theory, John von Neumann, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Arrow, libertarian paternalism, linear programming, Long Term Capital Management, Louis Bachelier, low interest rates, mandelbrot fractal, market bubble, market design, Michael Milken, Myron Scholes, New Journalism, Nikolai Kondratiev, Paul Lévy, Paul Samuelson, pension reform, performance metric, Ponzi scheme, power law, prediction markets, proprietary trading, prudent man rule, pushing on a string, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Richard Thaler, risk/return, road to serfdom, Robert Bork, Robert Shiller, rolodex, Ronald Reagan, seminal paper, shareholder value, Sharpe ratio, short selling, side project, Silicon Valley, Skinner box, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, statistical model, stocks for the long run, tech worker, The Chicago School, The Myth of the Rational Market, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, Thorstein Veblen, Tobin tax, transaction costs, tulip mania, Two Sigma, Tyler Cowen, value at risk, Vanguard fund, Vilfredo Pareto, volatility smile, Yogi Berra

Reprinted in Thaler, Quasi Rational Economics. 19. Richard H. Thaler and H. M. Shefrin, “An Economic Theory of Self-Control,” Journal of Political Economy (April 1981): 392–406. 20. The best description of Chamberlin’s experiment, and of the rise of experimental economics in general, is in Ross M. Miller, Paving Wall Street: Experimental Economics and the Quest for the Perfect Market (New York: John Wiley & Sons, 2002). 21. It’s called the Social Science Faculty, and includes anthropologists, psychologists, political scientists, and legal scholars as well as economists. CHAPTER 11: BOB SHILLER POINTS OUT THE MOST REMARKABLE ERROR 1.

See also rational market hypothesis and agency costs, 162 and behavioral finance, 299–300 and the Chicago School, xiii, 101–5 and contrary evidence, 224–25 and corporate finance, 355n. 38 described, 153 and Fama, 97, 206–7 and finance, 202–6 and Friedman, 93 and Graham, 119–20 and information availability, 182 and Jensen, 107 and market anomalies, 304 and market crashes, 228, 232 and Mills, 320 and mutual funds, 125, 130, 131 origin of, 43, 73 and portfolio theory, 54–55, 57 and psychology, 201–2 resistance to, 105–7, 269–70 and risk, 139 and Samuelson, 73 and security analysis, 366n. 29 and Shiller, 196–98 and Shleifer, 247 and stock market bubbles, 315 and takeovers, 166–68 taxonomy of, 101 testing, 190, 194–95 “Efficient Markets: Theory and Evidence” (Fama), 104 Einstein, Albert, 7, 50, 66 Ellis, Charley, 130, 131 Employee Retirement Income Security Act (ERISA), 272, 290 Employee Retirement Security Act, 137–38 endogenous change, 305–6 endowment effect, 294 Engel, Louis, 97–98 Engels, Friedrich, 369n. 1 Engle, Robert, 139 Enron, 267, 283 environmental risk, 185 equilibrium theory and the Arrow-Debreu framework, 77–78 and asset pricing, 87 background of, 9–12 and behavioral finance, 301 and complexity theory, 304–6 and derivatives, 237 and intrinsic values, 193 and Keynesian economics, 35 and mathematics, 49–50 and Pareto’s Law, 349–50n. 2 and Reder, 89–90 and Samuelson, 61 equity risk premium, 141–43, 263–64 Erhard, Werner, 285, 319 Erhard Seminars Training (est), 285 event study method, 102 exchange rates, 92–93, 200, 250 executive compensation, 164–65, 274–79, 279–80, 284–85 expected utility, 51–52, 54, 75, 80, 176–77, 193 experimental economics, 188–90 Fallows, James, 365n. 8 Fama, Eugene, 323 and Alexander, 72 and Asness, 259–60 and behavioral finance, 295–96, 296–97, 298, 299–300 and the Chicago School of Economics, 96 and computing, 99–100 and the efficient market hypothesis, 101, 103–5, 193–94, 204, 206–8 and equity risk premium, 263 and experimental economics, 190 and the Journal of Financial Economics, 201 and Mandelbrot, 70, 134 and market crashes, 232 satirical depiction of, 287–88 and Shleifer, 248, 252 and stock price momentum, 209–10 and value stocks, 225 Fannie Mae, 313 Farmer, J.

The science and engineering hotbed had created an Economics Department of sorts,21 and Smith’s former Purdue colleague Charles Plott was one of its early hires. Together, they began to see the laboratory not just as an educational device but as a serious means of verifying economic theories. Smith and Plott hatched test after test, developing an experimental-economics ethos that has lived on at Caltech and a few other campuses, the most important element being that participants must compete for real monetary rewards. These weren’t the questionnaires and what-if scenarios used by other social scientists, but actual markets—albeit artificial ones populated almost exclusively by college students.


pages: 326 words: 106,053

The Wisdom of Crowds by James Surowiecki

Alan Greenspan, AltaVista, Andrei Shleifer, Apollo 13, asset allocation, behavioural economics, Cass Sunstein, classic study, congestion pricing, coronavirus, Daniel Kahneman / Amos Tversky, experimental economics, Frederick Winslow Taylor, George Akerlof, Great Leap Forward, Gregor Mendel, Howard Rheingold, I think there is a world market for maybe five computers, interchangeable parts, Jeff Bezos, John Bogle, John Meriwether, Joseph Schumpeter, knowledge economy, lone genius, Long Term Capital Management, market bubble, market clearing, market design, Monkeys Reject Unequal Pay, moral hazard, Myron Scholes, new economy, offshore financial centre, Picturephone, prediction markets, profit maximization, Richard Feynman, Richard Feynman: Challenger O-ring, Richard Thaler, Robert Shiller, Ronald Coase, Ronald Reagan, seminal paper, shareholder value, short selling, Silicon Valley, South Sea Bubble, tacit knowledge, The Nature of the Firm, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Toyota Production System, transaction costs, ultimatum game, vertical integration, world market for maybe five computers, Yogi Berra, zero-sum game

But even if you find the history unconvincing, there is this to consider: in the late 1990s, under the supervision of Bowles, twelve field researchers—including eleven anthropologists and one economist—went into fifteen “small-scale” societies (essentially small tribes that were, to varying degrees, self-contained) and got people to play the kinds of games in which experimental economics specializes. The societies included three that depended on foraging for survival, six that used slash-and-burn techniques, four nomadic herding groups, and two small agricultural societies. The three games the people were asked to play were the three standards of behavioral economics: the ultimatum game (which you just read about), the public-goods game (in which if everyone contributes, everyone goes away significantly better off, while if only a few people contribute, then the others can free ride off their effort), and the dictator game, which is similar to the ultimatum game except that the responder can’t say no to the proposer’s offer.

Specifically, companies can use methods of aggregating collective wisdom—like, most obviously, internal decision markets—when trying to come up with reasonable forecasts of the future and even, potentially, when trying to evaluate the probability of possible strategies. Despite the evidence from experimental economics and places such as the IEM, companies have been strangely hesitant to use internal markets. But the few examples that we have suggest that they could be very useful. In the late 1990s, for instance, Hewlett-Packard experimented with artificial markets—set up by the economists Charles R. Plott and Kay-Yut Chen—to forecast printer sales.

But at some point, one grain of sand too many will send the pile tumbling. INVESTORS TODAY ARE CERTAINLY better informed than any investors in history. They know that bubbles exist, and that they rarely—if ever—end well. So why are bubbles so hard to eliminate? For an answer, it helps to look at an experiment done at the Experimental Economics Laboratory at Caltech, where economists have demonstrated just how bubbles work. In the experiment, students were given the chance to trade shares in some imaginary company for fifteen five-minute periods. Everyone was given two shares to start, and some money to buy more shares if they wanted.


pages: 442 words: 39,064

Why Stock Markets Crash: Critical Events in Complex Financial Systems by Didier Sornette

Alan Greenspan, Asian financial crisis, asset allocation, behavioural economics, Berlin Wall, Black Monday: stock market crash in 1987, Bretton Woods, Brownian motion, business cycle, buy and hold, buy the rumour, sell the news, capital asset pricing model, capital controls, continuous double auction, currency peg, Deng Xiaoping, discrete time, diversified portfolio, Elliott wave, Erdős number, experimental economics, financial engineering, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, global village, implied volatility, index fund, information asymmetry, intangible asset, invisible hand, John von Neumann, joint-stock company, law of one price, Louis Bachelier, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, market design, market fundamentalism, mental accounting, moral hazard, Network effects, new economy, oil shock, open economy, pattern recognition, Paul Erdős, Paul Samuelson, power law, quantitative trading / quantitative finance, random walk, risk/return, Ronald Reagan, Schrödinger's Cat, selection bias, short selling, Silicon Valley, South Sea Bubble, statistical model, stochastic process, stocks for the long run, Tacoma Narrows Bridge, technological singularity, The Coming Technological Singularity, The Wealth of Nations by Adam Smith, Tobin tax, total factor productivity, transaction costs, tulip mania, VA Linux, Y2K, yield curve

Uncertainty dynamics and predictability in chaotic systems, Quarterly Journal of the Royal Meteorological Society 125, 2855–2886. 389. Smith, V. L. (1982). Microeconomic systems as an experimental science, American Economic Review 72, 923–955. 390. Smith, V. L. (1991). Papers in Experimental Economics (Cambridge University Press, New York). 391. Smith, V. L. (1996). The handbook of experimental economics, Journal of Economic Literature 34, 1950–1952. 392. Sornette, D. (1998). Discrete scale invariance and complex dimensions, Physics Reports 297, 239–270. 393. Sornette, D. (1999). Complexity, catastrophe and physics, Physics World 12 (N12), 57–57. 394.

This is because people have natural intuitive mechanisms—mind modules that serve them well in daily interchanges—enabling them to “read” situations and the intentions and likely reactions of others without deep, tutored, cognitive analysis. This fact has been established by “experiments” performed by a large school of economics researchers (the bibliography of which contains 1500 entries [197]) in the fields of “experimental economics” [389]. These experimental approaches to economics, started in the midtwentieth century, were developed to examine propositions implied by economic theories of markets. An untested theory is simply a hypothesis, and science seeks to expand our knowledge of things by a process of testing hypotheses.

Indeed, “in many experimental markets, poorly informed, error-prone, and uncomprehending human agents interact through the trading rules to produce social algorithms which demonstrably approximate the wealth maximizing outcomes traditionally thought to require complete information and cognitively rational actors” [391]. In much of the literature on experimental economics [101, 226, 143], the rational expectations model has been the main benchmark against which to check the informational efficiency of experimental markets. The research generally falls into two categories: information dissemination between fully informed agents (“insiders”) and uninformed agents, and information aggregation among many partially informed agents.


pages: 302 words: 83,116

SuperFreakonomics by Steven D. Levitt, Stephen J. Dubner

agricultural Revolution, airport security, An Inconvenient Truth, Andrei Shleifer, Atul Gawande, barriers to entry, behavioural economics, Bernie Madoff, Boris Johnson, call centre, clean water, cognitive bias, collateralized debt obligation, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, deliberate practice, Did the Death of Australian Inheritance Taxes Affect Deaths, disintermediation, endowment effect, experimental economics, food miles, indoor plumbing, Intergovernmental Panel on Climate Change (IPCC), John Nash: game theory, Joseph Schumpeter, Joshua Gans and Andrew Leigh, longitudinal study, loss aversion, Louis Pasteur, market design, microcredit, Milgram experiment, Neal Stephenson, ocean acidification, oil shale / tar sands, patent troll, power law, presumed consent, price discrimination, principal–agent problem, profit motive, randomized controlled trial, Richard Feynman, Richard Thaler, selection bias, South China Sea, Stanford prison experiment, Stephen Hawking, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, ultimatum game, urban planning, William Langewiesche, women in the workforce, young professional

The message couldn’t have been much clearer: human beings indeed seemed to be hardwired for altruism. Not only was this conclusion uplifting—at the very least, it seemed to indicate that Kitty Genovese’s neighbors were nothing but a nasty anomaly—but it rocked the very foundation of traditional economics. “Over the past decade,” Foundations of Human Sociality claimed, “research in experimental economics has emphatically falsified the textbook representation of Homo economicus.” Non-economists could be forgiven if they felt like crowing with satisfaction. Homo economicus, that hyper-rational, self-interested creature that dismal scientists had embraced since the beginning of time, was dead (if he ever really existed).

Perhaps this altruism was just an ancient evolutionary leftover, like that second kidney. But who cared why it existed? The United States would lead the way, a light unto the nations, relying proudly on our innate altruism to procure enough donated kidneys to save tens of thousands of lives every year. The Ultimatum and Dictator games inspired a boom in experimental economics, which in turn inspired a new subfield called behavioral economics. A blend of traditional economics and psychology, it sought to capture the elusive and often puzzling human motivations Gary Becker had been thinking about for decades. With their experiments, behavioral economists continued to sully the reputation of Homo economicus.

His stay at Arizona was brief, for he was soon recruited by the University of Maryland. While teaching there, he also served on the President’s Council of Economic Advisors; List was the lone economist on a forty-two-person U.S. delegation to India to help negotiate the Kyoto Protocol. He was by now firmly at the center of experimental economics, a field that had never been hotter. In 2002, the Nobel Prize for economics was shared by Vernon Smith and Daniel Kahneman, a psychologist whose research on decision-making laid the groundwork for behavioral economics. These men and others of their generation had built a canon of research that fundamentally challenged the status quo of classical economics, and List was following firmly in their footsteps, running variants of Dictator and other behavioralist lab games.


pages: 340 words: 94,464

Randomistas: How Radical Researchers Changed Our World by Andrew Leigh

Albert Einstein, Amazon Mechanical Turk, Anton Chekhov, Atul Gawande, basic income, behavioural economics, Black Swan, correlation does not imply causation, crowdsourcing, data science, David Brooks, Donald Trump, ending welfare as we know it, Estimating the Reproducibility of Psychological Science, experimental economics, Flynn Effect, germ theory of disease, Ignaz Semmelweis: hand washing, Indoor air pollution, Isaac Newton, It's morning again in America, Kickstarter, longitudinal study, loss aversion, Lyft, Marshall McLuhan, meta-analysis, microcredit, Netflix Prize, nudge unit, offshore financial centre, p-value, Paradox of Choice, placebo effect, price mechanism, publication bias, RAND corporation, randomized controlled trial, recommendation engine, Richard Feynman, ride hailing / ride sharing, Robert Metcalfe, Ronald Reagan, Sheryl Sandberg, statistical model, Steven Pinker, sugar pill, TED Talk, uber lyft, universal basic income, War on Poverty

Chang & Phillip Li, ‘A preanalysis plan to replicate sixty economics research papers that worked half of the time’, American Economic Review, vol. 107, no. 5, 2017, pp. 60–4. 50John P.A. Ioannidis, ‘Why most published research findings are false’, PLoS Med, vol. 2, no. 8, 2005, e124. 51See, for example, Zacharias Maniadis, Fabio Tufano & John A. List, ‘How to make experimental economics research more reproducible: Lessons from other disciplines and a new proposal’, Replication in Experimental Economics, 2015, pp. 215–30; Regina Nuzzo, ‘How scientists fool themselves – and how they can stop’, Nature, vol. 526, no. 7572, 2015, pp. 182–5. 52Larry Orr, ‘If at first you succeed, try again!’, Straight Talk on Evidence blog, Laura and John Arnold Foundation, 16 August 2017 53Author’s interview with David Johnson, 16 July 2015. 54The same is true of the question as to when research should overturn prior beliefs.

Estimating the impacts of exposing corrupt politicians’, Journal of Political Economy, forthcoming. 36F.H. Knight, Risk, Uncertainty, and Profit, New York: Cosimo, 1921, p. 313, quoted in Omar Al-Ubaydli & John A. List, ‘On the generalizability of experimental results in economics’, in Guillaume R. Fréchette and Andrew Schotter (eds) Handbook of Experimental Economic Methodology, New York: Oxford University Press, 2015, pp. 420–62. 37Glenn W.Harrison & John A. List, ‘Field experiments’, Journal of Economic Literature, vol. 42, no. 4, 2004, pp. 1009–55. 38John A. List, ‘Do explicit warnings eliminate the hypothetical bias in elicitation procedures? Evidence from field auctions for sportscards”, American Economic Review, vol. 91, no. 4, 2001, pp. 1498–1507. 39Peter Bohm, ‘Estimating the demand for public goods: An experiment”, European Economic Review, vol. 3, 1972, pp. 111–30. 40Quoted in Manzi, Uncontrolled, p. 152. 41Robert Slonim, Carmen Wang, Ellen Garbarino & DanielleMerrett, ‘Opting-In: Participation Biases in Economic Experiments’, Journal of Economic Behavior and Organization, vol. 90, 2013, pp. 43–70. 42Ernst Fehr & John A.

See George Kelling & James Wilson, ‘Broken windows: The police and neighborhood safety’, Atlantic, vol. 249, no. 3, 1982, pp. 29–38. 31See USAID, ‘Frequently Asked Questions about Development Innovation Ventures’, Washington, DC: USAID, 6 February 2017; USAID, ‘FY2015 & FY2016 Development Innovation Ventures Annual Program Statement’, Washington, DC: USAID, 20 October 2015. 32These examples are drawn from the Coalition for Evidence-Based Policy (now incorporated into the Laura and John Arnold Foundation), and a presentation by Adam Gamoran, titled ‘Measuring impact in science education: Challenges and possibilities of experimental design’, NYU Abu Dhabi Conference, January 2009. 33‘In praise of human guinea pigs’, The Economist, 12 December 2015, p. 14. 34Education Endowment Foundation, ‘Classification of the security of findings from EEF evaluations’, 21 May 2014. 35‘David Olds speaks on value of randomized controlled trials’, Children’s Health Policy Centre, Faculty of Health Sciences, Simon Fraser University, 26 May 2014. 36Dean Karlan & Daniel H. Wood, ‘The effect of effectiveness: Donor response to aid effectiveness in a direct mail fundraising experiment’, Journal of Behavioral and Experimental Economics, vol. 66, issue C, 2017, pp. 1–8. The mailings were sent in 2007 and 2008, but the description quoted is from the 2008 letters. TEN COMMANDMENTS 1Gueron and Rolston, Fighting for Reliable Evidence, p. 383 2Admittedly, this creates the risk that results may come too late to shape policy.


pages: 256 words: 60,620

Think Twice: Harnessing the Power of Counterintuition by Michael J. Mauboussin

affirmative action, Alan Greenspan, asset allocation, Atul Gawande, availability heuristic, Benoit Mandelbrot, Bernie Madoff, Black Swan, butter production in bangladesh, Cass Sunstein, choice architecture, Clayton Christensen, cognitive dissonance, collateralized debt obligation, Daniel Kahneman / Amos Tversky, deliberate practice, disruptive innovation, Edward Thorp, experimental economics, financial engineering, financial innovation, framing effect, fundamental attribution error, Geoffrey West, Santa Fe Institute, George Akerlof, hindsight bias, hiring and firing, information asymmetry, libertarian paternalism, Long Term Capital Management, loose coupling, loss aversion, mandelbrot fractal, Menlo Park, meta-analysis, money market fund, Murray Gell-Mann, Netflix Prize, pattern recognition, Performance of Mutual Funds in the Period, Philip Mirowski, placebo effect, Ponzi scheme, power law, prediction markets, presumed consent, Richard Thaler, Robert Shiller, statistical model, Steven Pinker, systems thinking, the long tail, The Wisdom of Crowds, ultimatum game, vertical integration

The earnings camp listens to what people talk about day-to-day, including the investment community’s chatter, what hits CNBC’s screens, and the stories on the Wall Street Journal’s. pages. In contrast, the economists look at how the market behaves. One group focuses on the components, the other on the aggregate. Research in experimental economics, for example, shows that markets can generate very efficient prices even when the individual participants have limited information. Just as watching one bee won’t help you understand the hive’s behavior, listening to individual investors will give you scant insight into the market.10 I have explained to executives countless times that the opinion of the market is far more relevant than the utterances of individuals.

Shyam Sunder, “Relationship Between Accounting Changes and Stock Prices: Problems of Measurement and Some Empirical Evidence,” Journal of Accounting Research: Empirical Research in Accounting: Selected Studies 1973 11 (1973): 1–45. 10. Vernon L. Smith, Rationality in Economics: Constructivist and Ecological Forms (Cambridge: Cambridge University Press, 2008). See also Charles R. Plott and Vernon L. Smith, eds., Handbook of Experimental Economics Results: Volume 1 (Amsterdam: North-Holland, 2008). 11. John R. Graham, Campbell R. Harvey, and Shiva Rajgopal, “Value Destruction and Financial Reporting Decisions,” Financial Analysts Journal 62, no. 6 (2006): 27–39. 12. This is a bias that arises from the availability heuristic. See Max H.

New York: Viking, 2002. Plassmann, Hilke, John O’Doherty, Baba Shiv, and Antonio Rangel. “Marketing Actions Can Modulate Neural Representations of Experienced Pleasantness.” Proceedings of the National Academy of Sciences 105, no. 3 (2008): 1050–1054. Plott, Charles R., and Vernon L. Smith, eds. Handbook of Experimental Economics Results: vol. 1. Amsterdam: North-Holland, 2008. Poundstone, William. Fortune’s Formula: The Untold Story of the Unscientific Betting System That Beat the Casinos and Wall Street. New York: Hill and Wang, 2005. Pronovost, Peter. “Testimony before Government Oversight Committee,” April 16, 2008.


pages: 519 words: 104,396

Priceless: The Myth of Fair Value (And How to Take Advantage of It) by William Poundstone

availability heuristic, behavioural economics, book value, Cass Sunstein, collective bargaining, Daniel Kahneman / Amos Tversky, delayed gratification, Donald Trump, Dr. Strangelove, East Village, en.wikipedia.org, endowment effect, equal pay for equal work, experimental economics, experimental subject, feminist movement, game design, German hyperinflation, Henri Poincaré, high net worth, index card, invisible hand, John von Neumann, Kenneth Arrow, laissez-faire capitalism, Landlord’s Game, Linda problem, loss aversion, market bubble, McDonald's hot coffee lawsuit, mental accounting, meta-analysis, Nash equilibrium, new economy, no-fly zone, Paul Samuelson, payday loans, Philip Mirowski, Potemkin village, power law, price anchoring, price discrimination, psychological pricing, Ralph Waldo Emerson, RAND corporation, random walk, RFID, Richard Thaler, risk tolerance, Robert Shiller, rolodex, social intelligence, starchitect, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, three-martini lunch, ultimatum game, working poor

This was roughly Graham’s assessment. He believed that most investors made emotional decisions to plunge into or out of the market and didn’t care much about the price. There has been much experimental work on the psychology of market prices. Colin Camerer has used Caltech’s Laboratory for Experimental Economics and Political Science to create super-simplified stock markets. The lab is the creation of Charles Plott, one of the economists who replicated preference reversal. It consists of a grid of cubicles, each with a computer. Every keystroke or mouse action is recorded and archived by software.

“Experts, Amateurs, and Real Estate: An Anchoring-and-Adjustment Perspective on Property Pricing Decisions.” Organizational Behavior and Human Decision Processes 84, 87–93. Oosterbeek, Hessel, Randolph Sloof, and Gijs van de Kuilen (2004). “Cultural Differences in Ultimatum Game Experiments: Evidence from a Meta-analysis.” Experimental Economics 7, 171–88. Orr, Dan, and Chris Guthrie (2006). “Anchoring, Information, Expertise, and Negotiation: New Insights from Meta-Analysis.” Ohio State Journal on Dispute Resolution 21, 597–628. Available at ssrn.com/abstract=900152. Phillips, Lawrence D., and Detlof von Winterfeldt (2006).

.), Foundations of Social Cognition: A Festschrift in Honor of Robert S. Wyer, Jr. Mahwah, N.J.: Lawrence Erlbaum Associates. Strategic Interaction Group (2002). “An Interview with Werner Güth.” Excerpt at http://www.econ.mpg.de/english/research/ESI/gueth_interview.php. The full interview is in Experimental Economics: Financial Markets, Auctions, and Decision Making, Fredrik Andersson and Hakan Holm (eds.). Dordrecht, Netherlands: Kluwer Academic Publishers. Stross, Randall (2008). “What Carriers Aren’t Eager to Tell You About Texting.” The New York Times, Dec. 26, 2008. Summers, Lawrence (1986).


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Big Three in Economics: Adam Smith, Karl Marx, and John Maynard Keynes by Mark Skousen

Albert Einstein, banking crisis, behavioural economics, Berlin Wall, Bretton Woods, business climate, business cycle, creative destruction, David Ricardo: comparative advantage, delayed gratification, experimental economics, financial independence, Financial Instability Hypothesis, foreign exchange controls, full employment, Hernando de Soto, housing crisis, Hyman Minsky, inflation targeting, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Arrow, laissez-faire capitalism, liberation theology, liquidity trap, low interest rates, means of production, Meghnad Desai, microcredit, minimum wage unemployment, money market fund, open economy, paradox of thrift, Pareto efficiency, Paul Samuelson, Phillips curve, Post-Keynesian economics, price stability, pushing on a string, rent control, Richard Thaler, rising living standards, road to serfdom, Robert Shiller, Robert Solow, rolodex, Ronald Coase, Ronald Reagan, school choice, secular stagnation, Simon Kuznets, The Chicago School, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tobin tax, Tragedy of the Commons, unorthodox policies, Vilfredo Pareto, zero-sum game

What Hayek views as positive, Stiglitz sees as negative. Market economists counter Stiglitz by arguing that while imperfect information may indeed be pervasive, the outcome of the imperfect competitive market system acts "as if' it is perfectly competitive. For example, experimental economics seems to confirm this "as if' approach. Vernon L. Smith, Nobel laureate from George Mason University and founder of experimental economics, ran an experiment to test the Chamberlin-Robinson "imperfect competition" model. Recall from chapter 5 that this model suggested that a small number of sellers (or buyers) creates an imperfect form of competition, causing prices to rise, and output to fall.

Churchill Keynesian view of, 150, 175, 181 (Keynes), 142 leaks, 180 Economic Consequences of the Peace production and, 48—49. 184 (Keynes), 140-141, 156 productive and unproductive, 186 Economic determinism, 80, 87, 96 Economic freedom, 10-11, 18 Environmentalism, 214 economic growth and, 31-32, 203-204 Equation of exchange, 126-127, 196 effects of, 31-32, 34 Essay on Population (Malthus), 51 See also Capitalism Essay on the Nature of Commerce in Economic growth General (Cantillon), 42-43 Bohm-Bawerk on, 112 Essence of Christianity (Feuerbach), 71 economic freedom and, 31-32, 203-204 Everyday Stalinism (Fitzpatrick), 203 keys to, 11 Exchange Protestantism and, 124 classical view of, 106 savings and, 179 equation of, 126-127, 196 Economic indicators, 182 key to wealth, 9 Economic Possibilities for Our Marxist view of, 99-100 Grandchildren (Keynes), 152, 217 Experimental economics, 215 Economic theories Exploitation, worker, 85, 86 pendulum approach to, ix-x totem pole approach to, x-xi Fable of the Bees, 39-40 Economics Falling profits, 85-86 blackboard, 55 Faust, 72 classical. See Classical model Federal Reserve, 127-128, 160, expanding role of, 209 194-195 the imperial science, 209 Feuerbach, Ludwig, 71 mathematics and, 55, 56 Fiscal policy, 172, 208 moral behavior and, 30 Fisher, Irving, 125-128, 129 neoclassical, 106, 192-193, 199, 205 Fitzpatrick, Sheila, 203 as a social science, 113 Foster, William T„ 157-158, 183 stagnation of, 106 Foundations of Economic Analysis Economics (Samuelson), 165-166, 169, (Samuelson), 55 170 Franklin, Benjamin, 44—45. 174 Economics of Impetfect Competition Free banking, 36 (Robinson), 134-135 Free markets Edgeworth, Francis, 115-116 degrees of faith in, 26-27 Education, 89 post Soviet Union, 199, 204 Effective demand, 158-151^8 wealth and prosperity through, 18 Egoism, 27, 29 Free trade.


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The Middleman Economy: How Brokers, Agents, Dealers, and Everyday Matchmakers Create Value and Profit by Marina Krakovsky

Affordable Care Act / Obamacare, Airbnb, Al Roth, Ben Horowitz, Benchmark Capital, Black Swan, buy low sell high, Chuck Templeton: OpenTable:, Credit Default Swap, cross-subsidies, crowdsourcing, deal flow, disintermediation, diversified portfolio, experimental economics, George Akerlof, Goldman Sachs: Vampire Squid, income inequality, index fund, information asymmetry, Jean Tirole, Joan Didion, John Zimmer (Lyft cofounder), Kenneth Arrow, Lean Startup, Lyft, Marc Andreessen, Mark Zuckerberg, market microstructure, Martin Wolf, McMansion, Menlo Park, Metcalfe’s law, moral hazard, multi-sided market, Network effects, patent troll, Paul Graham, Peter Thiel, pez dispenser, power law, real-name policy, ride hailing / ride sharing, Robert Metcalfe, Sand Hill Road, search costs, seminal paper, sharing economy, Silicon Valley, social graph, supply-chain management, TaskRabbit, the long tail, The Market for Lemons, the strength of weak ties, too big to fail, trade route, transaction costs, two-sided market, Uber for X, uber lyft, ultimatum game, Y Combinator

For example, economic theory has much to say about transaction-cost economics, two-sided markets, and intermediaries’ ability to reduce information asymmetries between buyers and sellers. In particular, game theory informs our understanding of repeated interactions, reputations, shirking and cheating, and third-party enforcement. Social psychology and experimental economics show how acting on behalf of others affects people’s behavior and impressions. And sociology offers insights into the ways the structures of social networks create opportunities for middlemen. This book reports on fascinating research from these and other fields, revealing the ways in which the scientific findings illuminate and reinforce the lessons that top middlemen have picked up on the job.

The number rises to $10,000 for Gold, $25,000 for Platinum, and an astounding $150,000 per month for Titanium. 17.You must also get consistently high feedback scores from your buyers: fall anywhere below 98 percent positive feedback, and you lose your PowerSeller status. 18.Interview with Ann Whitley Wood, September 24, 2013. 19.Along the same lines, a recent article pointed out that large players also dominate the Prosper Marketplace (where two-thirds of the lenders are hedge funds and other large institutions) and that nearly half of the hosts on Airbnb had at least three listings on the site, suggesting these hosts weren’t just renting out a spare bedroom. See William Alden, “The Business Tycoons of Airbnb,” New York Times Magazine, November 25, 2014. 20.Paul Resnick, Richard Zeckhauser, John Swanson, and Kate Lockwood, “The Value of Reputation on eBay: A Controlled Experiment,” Experimental Economics 9, no. 2 (2006): 79–101. 21.Nira Yacouel and Aliza Fleischer, “The Role of Cybermediaries in Reputation Building and Price Premiums in the Online Hotel Market,” Journal of Travel Research 51, no. 2 (2012): 219–26. 22.Michael Anderson and Jeremy Magruder, “Learning from the Crowd: Regression Discontinuity Estimates of the Effects of an Online Review Database,” The Economic Journal 122, no. 563 (September 2012): 957–89. 23.Michael Luca, “Reviews, Reputation, and Revenue: The Case of Yelp.com,” Harvard Business School Working Paper, No. 12–016. 24.Carl Shapiro, “Premiums for High Quality Products as Returns to Reputation,” The Quarterly Journal of Economics (November 1983): 659–79. 25.Investing in a storefront is one of several ways sellers can elicit trust among buyers.

Greene, and Max Bazerman, “Dirty Work, Clean Hands: The Moral Psychology of Indirect Agency,” Organizational Behavior and Human Decision Processes 109 (2009): 134–41. 3.Gabriel Rossman, “Obfuscatory Relational Work and Disreputable Exchange,” Sociological Theory 32, no. 1 (May 2014): 43–63. 4.Mikhail Drugov, John Hamman, and Danila Serra, “Intermediaries in Corruption: An Experiment,” Experimental Economics 17, no. 1 (March 2014): 78–99. 5.For a review, see Neeru Paharia, Lucas C. Coffman, and Max Bazerman, “Intermediation and Diffusion of Responsibility in Negotiation: A Case of Bounded Ethicality,” in Gary E. Bolton and Rachel T. A. Croson (eds.), The Oxford Handbook of Economic Conflict Resolution (New York: Oxford University Press, 2012), 37–46. 6.William Finlay and James E.


Adam Smith: Father of Economics by Jesse Norman

active measures, Alan Greenspan, Andrei Shleifer, balance sheet recession, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, Berlin Wall, Black Swan, Branko Milanovic, Bretton Woods, British Empire, Broken windows theory, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, centre right, cognitive dissonance, collateralized debt obligation, colonial exploitation, Corn Laws, Cornelius Vanderbilt, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, David Ricardo: comparative advantage, deindustrialization, electricity market, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Fellow of the Royal Society, financial engineering, financial intermediation, frictionless, frictionless market, future of work, George Akerlof, Glass-Steagall Act, Hyman Minsky, income inequality, incomplete markets, information asymmetry, intangible asset, invention of the telescope, invisible hand, Isaac Newton, Jean Tirole, John Nash: game theory, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, lateral thinking, loss aversion, low interest rates, market bubble, market fundamentalism, Martin Wolf, means of production, mirror neurons, money market fund, Mont Pelerin Society, moral hazard, moral panic, Naomi Klein, negative equity, Network effects, new economy, non-tariff barriers, Northern Rock, Pareto efficiency, Paul Samuelson, Peter Thiel, Philip Mirowski, price mechanism, principal–agent problem, profit maximization, public intellectual, purchasing power parity, random walk, rent-seeking, Richard Thaler, Robert Shiller, Robert Solow, Ronald Coase, scientific worldview, seigniorage, Socratic dialogue, South Sea Bubble, special economic zone, speech recognition, Steven Pinker, The Chicago School, The Myth of the Rational Market, The Nature of the Firm, The Rise and Fall of American Growth, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, time value of money, transaction costs, transfer pricing, Veblen good, Vilfredo Pareto, Washington Consensus, working poor, zero-sum game

For the spillover effects of prosocial environments, and the importance of institutions in shaping persisting habits, see Alexander Peysakhovich and David G. Rand, ‘Habits of Virtue: Creating Norms of Cooperation and Defection in the Laboratory’, Management Science, Articles in Advance, 2015 Experimental economics: Robert Sugden has suggested that David Hume should be considered one of the originators of experimental economics. In the Treatise Hume argues that the workings of the human mind should be investigated by ‘careful and exact experiments, and the observation of those particular effects, which result from its different circumstances and situations’ (A Treatise of Human Nature, ed.

As he put it, ‘If a nation could not prosper without the enjoyment of perfect liberty and perfect justice, there is not in the world a nation which could ever have prospered.’ Substitute ‘markets’ for ‘justice’, and it is a point Kenneth Arrow would have been proud of. It is this Smithian seam of inquiry that Vernon Smith and his fellow workers in experimental economics found themselves mining so successfully when they started to test mainstream assumptions about economic rationality under laboratory conditions. They found that their subjects’ behaviour could not be adequately explained by the simple assumption of utility-maximization. On the contrary, it was deeply influenced by specific norms of reciprocity and fairness, by force of habit and by desire to preserve reputation.

., in, 96–97 taxation in, 121–122 trade of, 113, 115–116, 136 See also Church of England; History of England (Hume) the Enlightenment, 27–28 See also Scottish Enlightenment Enquiry Concerning the Principles of Morals (Hume), 184 Epicurus, 182 Episcopalians, 31, 36 equality, capitalism and, 273–276 equilibrium, 194–195, 202–206, 225–226, 230, 299 See also general equilibrium Essay on the Principle of Population (Malthus), 198–199 Essays, Moral and Political (Hume), 27, 48, 176 Essays in Biography (Keynes), 207–208 ethical norms, 298 Euclid, 19 evolution, theory of, 168–170 exchanges, 180–181, 199, 201–202, 216, 237 experimental economics, 222 The Fable of the Bees (Mandeville), 56–57, 86 Facebook, 282, 286, 329 Fall of Man, 57 Fama, Eugene, 225 Fellenberg, Daniel, 93–94 feminist economics, 214, 217–218 See also women Ferguson, Adam, 99, 124–126, 170–171, 242 Festinger, Leon, 301–303, 311 Fifteen Sermons Preached at the Rolls Chapel (Butler), 76 financial crash, of 2008, 244–245, 249–252, 300, 322–323, 327–328 financial markets, 227–228 See also markets financial products, 250 First and Second Welfare Theorems, 195 Fisman, Raymond, 309–310 fixed capital, 110 Fletcher, Andrew, 118, 232 four maxims of good taxation, x, 122–123 four states, of mankind, 78 Fox, Charles James, 134, 138 France, 11–12, 31–33 England and, 68–69, 101, 277, 291 Smith, A., in, 84–85 franchise capitalism, 263 Freakonomics (Dubner and Levitt), 208–209 free commerce, 200 free trade, 258–259, 277, 280 freedom, 108–109, 115–116, 186 free-market, xiii, 211, 230–231, 238, 245 in America, 276–277 The Wealth of Nations on, 184–185 See also markets French Revolution, 150 Friedman, Milton, xii–xiii, 226, 253 further future, 305 game theory, 203, 299–300 General Competitive Analysis (Arrow and Hahn), 193, 195 general equilibrium, 194–195, 204–205, 207, 212, 244 See also equilibrium General Theory of Employment, Interest and Money (Keynes), 207 George II (king), 69–70 George III (king), 70–71 Germany, 240, 274 Gibbon, Edward, 22–23, 123 Glasgow, Scotland, 10, 16–17, 22, 48–49, 51, 53–54, 84, 144 Glassford, John, 16 Glass-Steagall Act of 1933, 260 globalization, 259, 280, 287, 321–322, 330 God, 28, 74, 148 goods.


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Top Dog: The Science of Winning and Losing by Po Bronson, Ashley Merryman

Asperger Syndrome, Berlin Wall, Charles Lindbergh, conceptual framework, crowdsourcing, delayed gratification, deliberate practice, Edward Glaeser, experimental economics, Fall of the Berlin Wall, fear of failure, FedEx blackjack story, Ford Model T, game design, industrial cluster, Jean Tirole, knowledge worker, Larry Ellison, longitudinal study, loss aversion, Mark Zuckerberg, meta-analysis, Mikhail Gorbachev, phenotype, Richard Feynman, risk tolerance, school choice, selection bias, shareholder value, Silicon Valley, six sigma, Steve Jobs, the Cathedral and the Bazaar, work culture , zero-sum game

Kagel, “Selection Bias, Demographic Effects, and Ability Effects in Common Value Auction Experiments,” American Economic Review, vol. 97(4), pp. 1278–1304 (2007) Cotton, Christopher, Frank McIntyre, & Joseph Price, “Gender Differences in Competition: A Theoretical Assessment of the Evidence,” The Selected Works of Christopher Cotton, http://bit.ly/Q654OM (2011) Dargnies, Marie-Pierre, “Men Too Sometimes Shy Away from Competition: The Case of Team Competition,” http://d.doiorg/102139/ssrn1814989 (2011) Dreber, Anna, Interview with Author (2011) Dreber, Anna, Christer Gerdes, & Patrik Gränsmark, “Beauty Queens and Battling Knights: Risk Taking and Attractiveness in Chess,” IZA Discussion Paper No. 5314, Institute for the Study of Labor (2010) Dreber, Anna, Emma von Essen, & Eva Ranehill, “Outrunning the Gender Gap—Boys and Girls Compete Equally,” Experimental Economics, vol. 14(4), pp. 567–582 (2011) Eckel, Catherine C., & Philip J. Grossman, “Men, Women and Risk Aversion: Experimental Evidence,” In: Charles R. Plott & Vernon L. Smith (Eds.). Handbook of Experimental Economics Results, ch. 113, pp. 1061–1073 (2008) Franken, Robert E., & Douglas J. Brown, “Why Do People Like Competition? The Motivation for Winning, Putting Forth Effort, Improving One’s Performance, Performing Well, Being Instrumental, and Expressing Forceful/Aggressive Behavior,” Personality & Individual Differences, vol. 19(2), pp. 175–184 (1995) Frick, Bernd, “Gender Differences in Competitiveness: Empirical Evidence from Professional Distance Running,” Labour Economics, vol. 18(3), pp. 389–398 (2011) Frick, Bernd, “Gender Differences in Competitive Orientations: Empirical Evidence from Ultramarathon Running,” Journal of Sports Economics, vol. 12(3), pp. 317–340 (2011) Garza, R.

Vivekanadndan, & T. D. Spector, “The Big Finger: The Second to Fourth Digit Ratio is a Predictor of Sporting Ability in Women,” British Journal of Sports Medicine, vol. 40(12), pp. 981–983 (2006) Pearson, Matthew, & Burkhard C. Shipper, “The Visible Hand: Finger Ratio (2d:4d) and Competitive Bidding,” Experimental Economics, vol. 15(3), pp. 510–529 (2012) Rustichini, Aldo, Interview with Author (2011) Sandri, Serena, Christian Schade, Oliver Mußhoff, & Martin Odening, “Holding On for Too Long? An Experimental Study on Inertia in Entrepreneurs’ and Non-Entrepreneurs Disinvestment Choices,” SiAg-Working Paper, No. 02 (2009) Schade, Christian, & Sabrina Boewe, “Characterizing the Female Entrepreneur: Comparing Behavior in a Market Entry Experiment with Other Groups of Individuals,” Frontiers of Entrepreneurship Research, vol. 30(8), art. 8. (2010) Stenstrom, Eric, Gad Saad, Marcelo V.


Smart Mobs: The Next Social Revolution by Howard Rheingold

"hyperreality Baudrillard"~20 OR "Baudrillard hyperreality", A Pattern Language, Alvin Toffler, AOL-Time Warner, augmented reality, barriers to entry, battle of ideas, Brewster Kahle, Burning Man, business climate, citizen journalism, computer vision, conceptual framework, creative destruction, Dennis Ritchie, digital divide, disinformation, Douglas Engelbart, Douglas Engelbart, experimental economics, experimental subject, Extropian, Free Software Foundation, Garrett Hardin, Hacker Ethic, Hedy Lamarr / George Antheil, Herman Kahn, history of Unix, hockey-stick growth, Howard Rheingold, invention of the telephone, inventory management, Ivan Sutherland, John Markoff, John von Neumann, Joi Ito, Joseph Schumpeter, Ken Thompson, Kevin Kelly, Lewis Mumford, Metcalfe's law, Metcalfe’s law, more computing power than Apollo, move 37, Multics, New Urbanism, Norbert Wiener, packet switching, PalmPilot, Panopticon Jeremy Bentham, pattern recognition, peer-to-peer, peer-to-peer model, pez dispenser, planetary scale, pre–internet, prisoner's dilemma, radical decentralization, RAND corporation, recommendation engine, Renaissance Technologies, RFID, Richard Stallman, Robert Metcalfe, Robert X Cringely, Ronald Coase, Search for Extraterrestrial Intelligence, seminal paper, SETI@home, sharing economy, Silicon Valley, skunkworks, slashdot, social intelligence, spectrum auction, Steven Levy, Stewart Brand, the Cathedral and the Bazaar, the scientific method, Tragedy of the Commons, transaction costs, ultimatum game, urban planning, web of trust, Whole Earth Review, Yochai Benkler, zero-sum game

Whereas simpler signals and smaller brains could have remained adequate for coordinating the males’ hunting activities, Dunbar proposes they weren’t sufficient for the complicated lists of who did what to whom that could have been the basis for the original proto-human reputation system.39. Research reported in 2002 offers provocative theories about how reputation, altruism, and punishment are structured to support human cooperation. A field now known as “experimental economics” has extended game theory to include two specific “minigames”: the “Ultimatum Game” and the “Public Goods Game.” Research using these games as probes indicate that People tend to exhibit more generosity than a strategy of rational self-interest predicts. People will penalize cheaters, even at some expense to themselves.

., AM, FM, spread spectrum), making it far more difficult to regulate devices, since modifications take place only in the software.81 During my journeys into cybersociology, I had discovered Elinor Os-trom’s studies of commons that were not tragically mismanaged and encountered the notion of “public goods” in the experimental economics games probing cooperation. And Lawrence Lessig had referred to an “innovation commons” built into the Internet’s end-to-end architecture. When the same notion showed up in the hot center of policy debate concerning wireless Internet regulation, another conceptual Schelling point in the smart mobs literature revealed itself.

Floating above the tear gas was a pulsing infosphere of enormous bandwidth, reaching around the planet via the Internet.18 From Seattle to Manila, the first “netwars” have already broken out. The term “netwar” was coined by John Arquilla and David Ronfeldt, two analysts for the RAND corporation (birthplace of game theory and experimental economics), who noticed that the same combination of social networks, sophisticated communication technologies, and decentralized organizational structure was surfacing as an effective force in very different kinds of political conflict: Netwar is an emerging mode of conflict in which the protagonists—ranging from terrorist and criminal organizations on the dark side, to militant social activists on the bright side—use network forms of organization, doctrine, strategy, and technology attuned to the information age.


pages: 998 words: 211,235

A Beautiful Mind by Sylvia Nasar

Al Roth, Albert Einstein, Andrew Wiles, Bletchley Park, book value, Brownian motion, business cycle, cognitive dissonance, Columbine, Dr. Strangelove, experimental economics, fear of failure, Gunnar Myrdal, Henri Poincaré, Herman Kahn, invisible hand, Isaac Newton, John Conway, John Nash: game theory, John von Neumann, Kenneth Arrow, Kenneth Rogoff, linear programming, lone genius, longitudinal study, market design, medical residency, Nash equilibrium, Norbert Wiener, Paul Erdős, Paul Samuelson, prisoner's dilemma, RAND corporation, Robert Solow, Ronald Coase, second-price auction, seminal paper, Silicon Valley, Simon Singh, spectrum auction, Suez canal 1869, The Wealth of Nations by Adam Smith, Thorstein Veblen, upwardly mobile, zero-sum game

A paper on war games was merely a half-hearted effort, designed to justify his employment at RAND and to be hastily drafted before he returned to Cambridge at the beginning of September.14 But Nash and Milnor did collaborate on one project, an experiment on bargaining involving hired subjects, that was to become, unexpectedly, a much-cited classic.15 The experiment, designed with two researchers from the University of Michigan who were also at RAND for the summer, anticipated by several decades the now-thriving field of experimental economics. The RAND experiments grew more or less directly out of the habit of playing games that the mathematicians indulged in their spare time. Inventing new games and trying them out, always with the inventors as subjects, had been a popular pastime at Princeton. Many of the players had, like Nash, only recently outgrown boyhood passions for chemistry and electricity experiments.

., “Passing of a Great Mind,” Life (February 1957), pp. 88–90, as quoted in William Poundstone, Prisoner’s Dilemma, op. cit., p. 143. 17. Arrow, interview. 18. See Poundstone, op. cit.; Joseph Baratta, interview, 8.12.97. 19. Arrow, interview. 20. John H. Kagel and Alvin E. Roth, The Handbook of Experimental Economics (Princeton: Princeton University Press, 1995), pp. 8–9. 21. Albert W. Tucker, interview, 12.94. 22. See, for example, Avinash Dixit and Barry Nalebuff, Thinking Strategically, op. cit. 23. See, for example, Anatole Rappaport, “Prisoner’s Dilemma,” in John Eatwell, Murray Milgate, and Peter Newman, The New Palgrave, op. cit., pp. 199–204. 24.

The description of the experiment is based on, apart from the original paper, Evar Nering, professor of mathematics, University of Minnesota, interview, 6.18.96; R. Duncan Luce and Howard Raiffa, Games and Decisions (New York: John Wiley & Sons, 1957), pp. 259–69; John H. Kagel and Alvin E. Roth, The Handbook of Experimental Economics, op. cit., pp. 10–11. 18. Kagel and Roth, op. cit. 19. Milnor, interview, 10.28.94. 20. John Milnor, “A Nobel Prize for John Nash,” op. cit. 21. See, for example, Kagel and Roth, op. cit. 22. Milnor, interview, 1.27.98. 23. Letter from John Nash to John Milnor, 12.27.64. 19: Reds 1.


pages: 402 words: 110,972

Nerds on Wall Street: Math, Machines and Wired Markets by David J. Leinweber

"World Economic Forum" Davos, AI winter, Alan Greenspan, algorithmic trading, AOL-Time Warner, Apollo 11, asset allocation, banking crisis, barriers to entry, Bear Stearns, Big bang: deregulation of the City of London, Bob Litterman, book value, business cycle, butter production in bangladesh, butterfly effect, buttonwood tree, buy and hold, buy low sell high, capital asset pricing model, Charles Babbage, citizen journalism, collateralized debt obligation, Cornelius Vanderbilt, corporate governance, Craig Reynolds: boids flock, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Danny Hillis, demand response, disintermediation, distributed generation, diversification, diversified portfolio, electricity market, Emanuel Derman, en.wikipedia.org, experimental economics, fake news, financial engineering, financial innovation, fixed income, Ford Model T, Gordon Gekko, Hans Moravec, Herman Kahn, implied volatility, index arbitrage, index fund, information retrieval, intangible asset, Internet Archive, Ivan Sutherland, Jim Simons, John Bogle, John Nash: game theory, Kenneth Arrow, load shedding, Long Term Capital Management, machine readable, machine translation, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, market fragmentation, market microstructure, Mars Rover, Metcalfe’s law, military-industrial complex, moral hazard, mutually assured destruction, Myron Scholes, natural language processing, negative equity, Network effects, optical character recognition, paper trading, passive investing, pez dispenser, phenotype, prediction markets, proprietary trading, quantitative hedge fund, quantitative trading / quantitative finance, QWERTY keyboard, RAND corporation, random walk, Ray Kurzweil, Reminiscences of a Stock Operator, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Metcalfe, Ronald Reagan, Rubik’s Cube, Savings and loan crisis, semantic web, Sharpe ratio, short selling, short squeeze, Silicon Valley, Small Order Execution System, smart grid, smart meter, social web, South Sea Bubble, statistical arbitrage, statistical model, Steve Jobs, Steven Levy, stock buybacks, Tacoma Narrows Bridge, the scientific method, The Wisdom of Crowds, time value of money, tontine, too big to fail, transaction costs, Turing machine, two and twenty, Upton Sinclair, value at risk, value engineering, Vernor Vinge, Wayback Machine, yield curve, Yogi Berra, your tax dollars at work

Innovative Abstract Visualizations Experimental markets are a remarkable laboratory technique that allows investigation of markets that would not be possible by observing real financial markets from a distance.Vernon Smith shared the 2002 Nobel Prize in economics for pioneering experimental economics.15 Vernon is also the hands-down winner of the “Nobel laureate who looks most like Willie Nelson” award. Smith’s colleagues can create (and have created) markets that have any degree of transparency they want. They have created automated and semi-automated systems that may give us insight into how we will approach markets technologically in the future. Charles Plott, Smith’s sometime collaborator at Caltech’s Experimental Economics Laboratory, has developed a novel visualization that allows participants to look deeply into the workings of the market.

The tree map is still enormously useful for its original purpose—tracking down those files that suddenly take over your disk. A free utility along these lines is Sequoia View, from the computer science department at Eindhove Technical University in the Netherlands (www.win.tue.nl/sequoiaview/). 15. For more on this remarkable story, see Paving Wall Street: Experimental Economics and the Quest for the Perfect Market by Ross Miller ( John Wiley & Sons, 2002). 16. See “Delving Deeper” by David Leinweber, Bloomberg Wealth Manager, October 2003. 17. The Harvard Business School e-Information project at www.people.hbs.edu/ptufano/einfo/ has a nice online collection of these studies. 18.


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The Secret of Our Success: How Culture Is Driving Human Evolution, Domesticating Our Species, and Making Us Smarter by Joseph Henrich

agricultural Revolution, capital asset pricing model, Climategate, cognitive bias, Daniel Kahneman / Amos Tversky, delayed gratification, demographic transition, disinformation, endowment effect, experimental economics, experimental subject, Flynn Effect, impulse control, language acquisition, Monkeys Reject Unequal Pay, Nash equilibrium, nocebo, out of africa, phenotype, placebo effect, profit maximization, randomized controlled trial, risk tolerance, side project, social intelligence, social web, Steven Pinker, sugar pill, sunk-cost fallacy, The Wisdom of Crowds, theory of mind, ultimatum game

You could probably get away with this only in a department of anthropology. I had no classes to take, no advisors to work for, and no one really seemed to care what I was doing. I started by going to the library to take out a stack of books. I read books on cognitive psychology, decision-making, experimental economics, biology, and evolutionary psychology. Then I moved to journal articles. I read every article ever written on an economics experiment called the Ultimatum Game, which I’d used during my second and third summers with the Matsigenka. I also read a lot by the psychologists Daniel Kahneman and Amos Tversky, as well as by a political scientist named Elinor Ostrom.

Properly interpreted, economic games are valuable tools for measuring social behavior and for teasing apart the complex packages of motivations, understandings, and beliefs that jointly influence decisions. Well-known economic games include the Prisoner’s Dilemma, Ultimatum Game, and Dictator Game. To understand these experiments, imagine this situation: You enter an experimental economics laboratory at Big City University. It’s filled with college-age strangers seated at computer terminals. You are told to sit down at an open terminal, which has partitions that prevent others from seeing your screen. After some preliminaries, the computer screen informs you that your ID has been randomly assigned to interact with another person in the room, but neither you nor this person will ever know the other’s identity.

In Tools, Language, and Cognition in Human Evolution, edited by E. R. Gibson and T. Ingold, 230–250. Cambridge: Cambridge University Press. Camerer, C. F. 1989. “Does the basketball market believe in the ‘hot hand’?” American Economic Review 79:1257–61. ———. 1995. “Individual decision making.” In The Handbook of Experimental Economics, edited by J. H. Kagel and A. E. Roth, 587–703. Princeton, NJ: Princeton University Press. Campbell, B. C. 2011. “Adrenarche and middle childhood.” Human Nature 22 (3):327–349. Campbell, D. T. 1965. “Variation and selective retention in socio-cultural evolution.” In Social Change in Developing Areas: A Reinterpretation of Evolutionary Theory, edited by H.


pages: 282 words: 80,907

Who Gets What — and Why: The New Economics of Matchmaking and Market Design by Alvin E. Roth

Affordable Care Act / Obamacare, Airbnb, algorithmic trading, barriers to entry, behavioural economics, Berlin Wall, bitcoin, Build a better mousetrap, centralized clearinghouse, Chuck Templeton: OpenTable:, commoditize, computer age, computerized markets, crowdsourcing, deferred acceptance, desegregation, Dutch auction, experimental economics, first-price auction, Flash crash, High speed trading, income inequality, Internet of things, invention of agriculture, invisible hand, Jean Tirole, law of one price, Lyft, market clearing, market design, medical residency, obamacare, PalmPilot, proxy bid, road to serfdom, school choice, sealed-bid auction, second-price auction, second-price sealed-bid, Silicon Valley, spectrum auction, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, The Wealth of Nations by Adam Smith, two-sided market, uber lyft, undersea cable

Levine, Muriel Niederle, Alvin E. Roth, and John J. Siegfried, “The Job Market for New Economists: A Market Design Perspective,” Journal of Economic Perspectives 24, no. 4 (Fall 2010): 187–206. [>] The experiment allowed: Soohyung Lee and Muriel Niederle, “Propose with a Rose? Signaling in Internet Dating Markets,” Experimental Economics, forthcoming. [>] And the effect of a rose: This turns out to echo the effect of signals that we observe in the economics job market when we use the relative prestige of the university from which the applicant is graduating and the one to which he or she is applying as a measure of desirability.

See also college admissions; residency programs for doctors; school matching in democracy, 166 early admissions in, 73–74 exploding offers in, 98–99 marriage age and, 72 Ph.D. offers in, 77–78 public value of, 125 Edwards, Valerie, 130 electronic order books, 83–84 Elias, Julio, 245 email, 169, 175–77 E-mini S&P 500 futures (ES), 82–89 equilibrium, 77 Ethiopia Commodity Exchange, 17–18 experimental economics, 77, 127–28, 176, 209, 244 experiments, 209, 213, 241 expert guides, 147–48 exploding offers, 9–10, 67, 98–99 empowerment of candidates and, 76–80 in gastroenterology fellowships, 76–78 for judicial clerkships, 91–99 in law firm recruiting, 67, 68 to medical residents, 136 for orthopedic surgeon fellows, 78–80 to Ph.D. candidates, 77–78 in school admissions, 73–74 exploitation, 203 failures, market abandonment of, 167 causes vs. symptoms of, 90–98 child marriage and, 70–74 from congestion, 92–93 cultural change and, 78–80 difficulty of limiting, 67–68, 74, 79–80, 90–98 from early transactions, 57–80 exploding offers and, 67–68 finding solutions for, 133–34 in gastroenterology fellowships, 75–78 in judicial clerkships, 69–70, 79, 90–98 in law firm recruiting, 65–68 in orthopedic surgeon hiring, 78–80 prevalence of, 73 safety, trust, and simplicity and, 113–30 self-control and, 67–68, 74–78 from speed, 81–99 fairness, 25 Falke, Roberta, 38–39 Farmer City, Illinois, 115 farmers’ markets, 20, 74 farming, 198 Federal Communications Commission, 186–89 Federal Law Clerk Hiring Plan, 93–98 fellowships, gastroenterology, 75–78 fertility tourism, 201–2 Fiesta Bowl, 61 financial markets, 82–89 flash crash of 2010, 84–85 Fleming, Alexander, 133–34 Florey, Howard, 134 Food Facility Inspection Report, 220–21 Football Bowl Association, 62–63 football bowl games, 59–65 Franklin, Benjamin, 200–201 Fréchette, Guillaume, 64, 237 free markets, 7, 12–13, 217, 226–28.


pages: 303 words: 83,564

Exodus: How Migration Is Changing Our World by Paul Collier

Ayatollah Khomeini, Boris Johnson, charter city, classic study, Edward Glaeser, experimental economics, first-past-the-post, full employment, game design, George Akerlof, global village, guest worker program, illegal immigration, income inequality, informal economy, language acquisition, mass immigration, mirror neurons, moral hazard, open borders, radical decentralization, risk/return, Silicon Valley, sovereign wealth fund, Steven Pinker, tacit knowledge, The Wealth of Nations by Adam Smith, transaction costs, University of East Anglia, white flight, zero-sum game

In fancier language, equilibrium is only locally stable. So moderate migration is liable to confer overall social benefits, whereas sustained rapid migration would risk substantial costs. The rest of this chapter substantiates those potential risks. Mutual Regard: Trust and Cooperation Through research in experimental economics we now understand what enables cooperative outcomes to persist. In a sense successful cooperation is a minor miracle, because if almost everyone else is cooperating, whatever is the objective will be achieved even if I don’t help: so why should I incur the costs of helping? In the vicinity of the fully cooperative outcome, each individual has a strong incentive to free ride, so cooperation should usually be unstable.

Its foundations were laid by Adam Smith in The Wealth of Nations, where he famously demonstrated that such behavior generates social benefits. But Smith also wrote The Theory of Moral Sentiments, about the foundations of mutual regard. Belatedly, that work is receiving its due recognition.4 It is being expanded by the new subdiscipline of neuroeconomics, in which the regard for others is neurologically grounded.5 Experimental economics has found that a propensity to trust is both valuable and varies between societies. Studies of happiness find that what really matters is social, not material: how we relate to others, and how we are regarded by others. But even judged by the narrow metric of income, a group within which there is high regard and trust for others will be better off than one of selfish individualists.


pages: 411 words: 108,119

The Irrational Economist: Making Decisions in a Dangerous World by Erwann Michel-Kerjan, Paul Slovic

"World Economic Forum" Davos, Alan Greenspan, An Inconvenient Truth, Andrei Shleifer, availability heuristic, bank run, behavioural economics, Black Swan, business cycle, Cass Sunstein, classic study, clean water, cognitive dissonance, collateralized debt obligation, complexity theory, conceptual framework, corporate social responsibility, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-subsidies, Daniel Kahneman / Amos Tversky, endowment effect, experimental economics, financial innovation, Fractional reserve banking, George Akerlof, hindsight bias, incomplete markets, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, iterative process, Kenneth Arrow, Loma Prieta earthquake, London Interbank Offered Rate, market bubble, market clearing, money market fund, moral hazard, mortgage debt, Oklahoma City bombing, Pareto efficiency, Paul Samuelson, placebo effect, precautionary principle, price discrimination, price stability, RAND corporation, Richard Thaler, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, social discount rate, source of truth, statistical model, stochastic process, subprime mortgage crisis, The Wealth of Nations by Adam Smith, Thomas Bayes, Thomas Kuhn: the structure of scientific revolutions, too big to fail, transaction costs, ultimatum game, University of East Anglia, urban planning, Vilfredo Pareto

Today, this multidisciplinary field—which brings together economics, neuroscience, psychology, philosophy, sociology, and physics—is offering new empirical and theoretical insights on how emotions and rationality interdependently sha(r)p(en) our decisions. Among the most striking examples are a couple of neuroscientific studies of a familiar experimental economic setting, the Ultimatum Game (UG). The first of these was conducted by scientists at Princeton University in 2003.8 Alan Sanfey, Jonathan Cohen, and colleagues used functional magnetic resonance imaging (fMRI)9 in order to estimate the brain activity that occurs when people decide to accept (or not) an unfair share of money in the UG.10 From a purely rational view, whether a proposition is unfair or not should not make any difference to their decision—they would get more money by accepting than by rejecting it.

Camerer, California Institute of Technology Colin Camerer is the Rea and Lela Axline Professor of Business Economics at the California Institute of Technology (located in Pasadena, California), where he teaches cognitive psychology and economics. He earned an MBA in finance and a PhD in decision theory from the University of Chicago Graduate School of Business. Before coming to Caltech in 1994, Professor Camerer worked at the Kellogg, Wharton, and University of Chicago business schools. He studies both behavioral and experimental economics. His most recent books include Behavioral Game Theory (Princeton University Press, 2003), Foundations of Human Sociality, with fourteen co-authors (Oxford University Press, 2004), and Advances in Behavioral Economics, co-edited with George Loewenstein and Matthew Rabin (Princeton University Press, 2004).


pages: 385 words: 111,807

A Pelican Introduction Economics: A User's Guide by Ha-Joon Chang

"there is no alternative" (TINA), Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, antiwork, AOL-Time Warner, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, Charles Babbage, collateralized debt obligation, colonial rule, Corn Laws, corporate governance, corporate raider, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, discovery of the americas, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, falling living standards, financial deregulation, financial engineering, financial innovation, flying shuttle, Ford Model T, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Akerlof, Gini coefficient, Glass-Steagall Act, global value chain, Goldman Sachs: Vampire Squid, Gordon Gekko, Great Leap Forward, greed is good, Gunnar Myrdal, Haber-Bosch Process, happiness index / gross national happiness, high net worth, income inequality, income per capita, information asymmetry, intangible asset, interchangeable parts, interest rate swap, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, laissez-faire capitalism, land bank, land reform, liberation theology, manufacturing employment, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, Neal Stephenson, Nelson Mandela, Northern Rock, obamacare, offshore financial centre, oil shock, open borders, Pareto efficiency, Paul Samuelson, post-industrial society, precariat, principal–agent problem, profit maximization, profit motive, proprietary trading, purchasing power parity, quantitative easing, road to serfdom, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, scientific management, Scramble for Africa, search costs, shareholder value, Silicon Valley, Simon Kuznets, sovereign wealth fund, spinning jenny, structural adjustment programs, The Great Moderation, The Market for Lemons, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Vilfredo Pareto, Washington Consensus, working-age population, World Values Survey

The school thus has a fundamental affinity, and some overlap in membership, with the Institutionalist school. The Behaviouralist school is the youngest of the schools of economics that we have so far examined, but it is older than most people think. The school has recently come to prominence through the fields of behavioural finance and experimental economics. But it has its origins in the 1940s and the 1950s, especially in the works of Herbert Simon (1916–2001), the 1978 Nobel economics laureate.* Limits to human rationality and the need for individual and social rules Simon’s central concept is bounded rationality. He criticizes the Neoclassical school for assuming that people possess unlimited capabilities to process information, or God-like rationality (he calls it ‘Olympian rationality’).

Focusing too much at this ‘micro’ level, the school often loses sight of the bigger economic system. This does not have to be; after all, Simon wrote a lot about the economic system. But most members of the school have focused too much on individuals – especially those economists who are engaged in experimental economics (trying to establish whether people are rational and selfish through controlled experiments) or neuroeconomics (trying to establish links between brain activities and particular types of behaviour). It also needs to be added that, given its focus on human cognition and psychology, the Behaviouralist school has few things to say about issues of technology and macroeconomics.


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Thinking, Fast and Slow by Daniel Kahneman

Albert Einstein, Atul Gawande, availability heuristic, Bayesian statistics, behavioural economics, Black Swan, book value, Cass Sunstein, Checklist Manifesto, choice architecture, classic study, cognitive bias, cognitive load, complexity theory, correlation coefficient, correlation does not imply causation, Daniel Kahneman / Amos Tversky, delayed gratification, demand response, endowment effect, experimental economics, experimental subject, Exxon Valdez, feminist movement, framing effect, hedonic treadmill, hindsight bias, index card, information asymmetry, job satisfaction, John Bogle, John von Neumann, Kenneth Arrow, libertarian paternalism, Linda problem, loss aversion, medical residency, mental accounting, meta-analysis, nudge unit, pattern recognition, Paul Samuelson, peak-end rule, precautionary principle, pre–internet, price anchoring, quantitative trading / quantitative finance, random walk, Richard Thaler, risk tolerance, Robert Metcalfe, Ronald Reagan, Shai Danziger, sunk-cost fallacy, Supply of New York City Cabdrivers, systematic bias, TED Talk, The Chicago School, The Wisdom of Crowds, Thomas Bayes, transaction costs, union organizing, Walter Mischel, Yom Kippur War

Your leisure time and the standard of living that your income supports are also not intended for sale or exchange. Knetsch, Thaler, and I set out to design an experiment that would highlight the contrast between goods that are held for use and for exchange. We borrowed one aspect of the design of our experiment from Vernon Smith, the founder of experimental economics, with whom I would share a Nobel Prize many years later. In this method, a limited number of tokens are distributed to the participants in a “market.” Any participants who own a token at the end Bon s A end Bon of the experiment can redeem it for cash. The redemption values differ for different individuals, to represent the fact that the goods traded in markets are more valuable to some people than to others.

That’s perfectly natural, but the result is that the organization is not taking enough risk.” Keeping Score Except for the very poor, for whom income coincides with survival, the main motivators of money-seeking are not necessarily economic. For the billionaire looking for the extra billion, and indeed for the participant in an experimental economics project looking for the extra dollar, money is a proxy for points on a scale of self-regard and achievement. These rewards and punishments, promises and threats, are all in our heads. We carefully keep score of them. They shape o C Th5ur preferences and motivate our actions, like the incentives provided in the social environment.

clean up their portfolios: Lilian Ng and Qinghai Wang, “Institutional Trading and the Turn-of-the-Year Effect,” Journal of Financial Economics 74 (2004): 343–66. loss averse for aspects of your life: Tversky and Kahneman, “Loss Aversion in Riskless Choice.” Eric J. Johnson, Simon Gächter, and Andreas Herrmann, “Exploring the Nature of Loss Aversion,” Centre for Decision Research and Experimental Economics, University of Nottingham, Discussion Paper Series, 2006. Edward J. McCaffery, Daniel Kahneman, and Matthew L. Spitzer, “Framing the Jury: Cognitive Perspectives on Pain and Suffering,” Virginia Law Review 81 (1995): 1341–420. classic on consumer behavior: Richard H. Thaler, “Toward a Positive Theory of Consumer Choice,” Journal of Economic Behavior and Organization 39 (1980): 36–90.


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Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist by Kate Raworth

"Friedman doctrine" OR "shareholder theory", 3D printing, Alan Greenspan, Alvin Toffler, Anthropocene, Asian financial crisis, bank run, basic income, battle of ideas, behavioural economics, benefit corporation, Berlin Wall, biodiversity loss, bitcoin, blockchain, Branko Milanovic, Bretton Woods, Buckminster Fuller, business cycle, call centre, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Cass Sunstein, choice architecture, circular economy, clean water, cognitive bias, collapse of Lehman Brothers, complexity theory, creative destruction, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, degrowth, dematerialisation, disruptive innovation, Douglas Engelbart, Douglas Engelbart, Easter island, en.wikipedia.org, energy transition, Erik Brynjolfsson, Ethereum, ethereum blockchain, Eugene Fama: efficient market hypothesis, experimental economics, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, Financial Instability Hypothesis, full employment, Future Shock, Garrett Hardin, Glass-Steagall Act, global supply chain, global village, Henri Poincaré, hiring and firing, Howard Zinn, Hyman Minsky, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of writing, invisible hand, Isaac Newton, it is difficult to get a man to understand something, when his salary depends on his not understanding it, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, land reform, land value tax, Landlord’s Game, loss aversion, low interest rates, low skilled workers, M-Pesa, Mahatma Gandhi, market fundamentalism, Martin Wolf, means of production, megacity, Minsky moment, mobile money, Money creation, Mont Pelerin Society, Myron Scholes, neoliberal agenda, Network effects, Occupy movement, ocean acidification, off grid, offshore financial centre, oil shale / tar sands, out of africa, Paul Samuelson, peer-to-peer, planetary scale, price mechanism, quantitative easing, randomized controlled trial, retail therapy, Richard Thaler, Robert Solow, Ronald Reagan, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Simon Kuznets, smart cities, smart meter, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, statistical model, Steve Ballmer, systems thinking, TED Talk, The Chicago School, The Great Moderation, the map is not the territory, the market place, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, Torches of Freedom, Tragedy of the Commons, trickle-down economics, ultimatum game, universal basic income, Upton Sinclair, Vilfredo Pareto, wikimedia commons

Bowles, S. and Gintis, H. (2011) A Cooperative Species: Human Reciprocity and Its Evolution. Princeton, NJ: Princeton University Press, p. 20. 24. Helbing, D. (2013) ‘Economics 2.0: the natural step towards a self-regulating, participatory market society’, Evolutionary and Institutional Economics Review, 10: 1, pp. 3–41. 25. Kagel, J. and Roth, A. (1995) The Handbook of Experimental Economics, Princeton, NJ: Princeton University Press pp. 253–348, cited in Beinhocker, E. (2007) The Origin of Wealth, London: Random House, p. 120. 26. Henrich, J. et al. (2001) ‘In search of Homo Economicus: behavioral experiments in 15 small-scale societies’, Economics and Social Behavior, 91: 2, pp. 73–78. 27.

., Vaish, A. and Schmidt, M. (2014) ‘The emergence of human prosociality: aligning with others through feelings, concerns, and norms’, Frontiers in Psychology 5, p. 822. Jevons, W. S. (1871) The Theory of Political Economy, Library of Economics and Liberty, http://www.econlib.org/library/YPDBooks/Jevons/jvnPE.html Kagel, J. and Roth, A. (1995) The Handbook of Experimental Economics. Princeton, NJ: Princeton University Press. Keen, S. (2011) Debunking Economics. London: Zed Books. Kelly, M. (2012) Owning our Future: The Emerging Ownership Revolution. San Francisco: Berrett-Koehler. Kennedy, P. (1989) The Rise and Fall of World Powers. New York: Vintage Books. Kerr, J. et al. (2012) ‘Prosocial behavior and incentives: evidence from field experiments in rural Mexico and Tanzania’, Ecological Economics 73, pp. 220–227.


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Against the Gods: The Remarkable Story of Risk by Peter L. Bernstein

Alan Greenspan, Albert Einstein, Alvin Roth, Andrew Wiles, Antoine Gombaud: Chevalier de Méré, Bayesian statistics, behavioural economics, Big bang: deregulation of the City of London, Bretton Woods, business cycle, buttonwood tree, buy and hold, capital asset pricing model, cognitive dissonance, computerized trading, Daniel Kahneman / Amos Tversky, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Lloyd's coffeehouse, endowment effect, experimental economics, fear of failure, Fellow of the Royal Society, Fermat's Last Theorem, financial deregulation, financial engineering, financial innovation, full employment, Great Leap Forward, index fund, invention of movable type, Isaac Newton, John Nash: game theory, John von Neumann, Kenneth Arrow, linear programming, loss aversion, Louis Bachelier, mental accounting, moral hazard, Myron Scholes, Nash equilibrium, Norman Macrae, Paul Samuelson, Philip Mirowski, Post-Keynesian economics, probability theory / Blaise Pascal / Pierre de Fermat, prudent man rule, random walk, Richard Thaler, Robert Shiller, Robert Solow, spectrum auction, statistical model, stocks for the long run, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, Thomas Bayes, trade route, transaction costs, tulip mania, Vanguard fund, zero-sum game

De Moivre first conceived of the bell curve by writing equations on a piece of paper, not, like Quetelet, by measuring the dimensions of soldiers. But Galton conceived of regression to the mean-a powerful concept that makes the bell curve operational in many instances-by studying sweetpeas and generational change in human beings; he came up with the theory after looking at the facts. Alvin Roth, an expert on experimental economics, has observed that Nicholas Bernoulli conducted the first known psychological experiment more than 250 years ago: he proposed the coin-tossing game between Peter and Paul that guided his uncle Daniel to the discovery of utility.26 Experiments conducted by von Neumann and Morgenstern led them to conclude that the results "are not so good as might be hoped, but their general direction is correct."'-' The progression from experiment to theory has a distinguished and respectable history.

"More Casinos, More Players Who Bet Until They Lose All." The New York Times, September 25, p. Al. Jones, Charles P., and Jack W. Wilson, 1995. "Probability Estimates of Returns from Common Stock Investing." Journal of Portfolio Management, Vol. 22, No. 1 (Fall), pp. 21-32. Kagel, John H., and Alvin E. Roth, eds., 1995. The Handbook of Experimental Economics. Princeton, New Jersey: Princeton University Press. Kahneman, Daniel, and Amos Tversky, 1979. "Prospect Theory: An Analysis of Decision under Risk." Econometrica, Vol. 47, No. 2, pp. 263-291.` Kahneman, Daniel, and Amos Tversky, 1984. "Choices, Values, and Frames." American Psychologist, Vol. 39, No. 4 (April), pp. 342-347.


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The Starfish and the Spider: The Unstoppable Power of Leaderless Organizations by Ori Brafman, Rod A. Beckstrom

Atahualpa, barriers to entry, Burning Man, creative destruction, disintermediation, experimental economics, Firefox, Francisco Pizarro, jimmy wales, Kibera, Lao Tzu, Network effects, peer-to-peer, pez dispenser, shareholder value, Silicon Valley, Skype, The Wisdom of Crowds, union organizing

SOURCES CHAPTER 7: The Combo Special: The Hybrid Organization EClass229 still offers unbelievable bargains for designer clothing. Since our coup with the Zegna suits, we've recommended it to all our friends. The value of positive feedback on eBay is explained in Paul Resnick, Richard Zeckhauser, John Swanson, and Kate Lockwood, "The Value of Reputation on eBay: A Controlled Experiment," Experimental Economics (forthcoming). A comprehensive overview of Google's history can be found in John Battelle's The Search—How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture (New York: Portfolio, 2005). The story of IBM's decision to give away its software is told by David Kirkpatrick in "Giving to Get More: IBM Shares Its Secrets," Fortune (August 22, 2005).


pages: 807 words: 154,435

Radical Uncertainty: Decision-Making for an Unknowable Future by Mervyn King, John Kay

Airbus A320, Alan Greenspan, Albert Einstein, Albert Michelson, algorithmic trading, anti-fragile, Antoine Gombaud: Chevalier de Méré, Arthur Eddington, autonomous vehicles, availability heuristic, banking crisis, Barry Marshall: ulcers, battle of ideas, Bear Stearns, behavioural economics, Benoit Mandelbrot, bitcoin, Black Swan, Boeing 737 MAX, Bonfire of the Vanities, Brexit referendum, Brownian motion, business cycle, business process, capital asset pricing model, central bank independence, collapse of Lehman Brothers, correlation does not imply causation, credit crunch, cryptocurrency, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, DeepMind, demographic transition, discounted cash flows, disruptive innovation, diversification, diversified portfolio, Donald Trump, Dutch auction, easy for humans, difficult for computers, eat what you kill, Eddington experiment, Edmond Halley, Edward Lloyd's coffeehouse, Edward Thorp, Elon Musk, Ethereum, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, fear of failure, feminist movement, financial deregulation, George Akerlof, germ theory of disease, Goodhart's law, Hans Rosling, Helicobacter pylori, high-speed rail, Ignaz Semmelweis: hand washing, income per capita, incomplete markets, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Jeff Bezos, Jim Simons, Johannes Kepler, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Snow's cholera map, John von Neumann, Kenneth Arrow, Kōnosuke Matsushita, Linda problem, Long Term Capital Management, loss aversion, Louis Pasteur, mandelbrot fractal, market bubble, market fundamentalism, military-industrial complex, Money creation, Moneyball by Michael Lewis explains big data, Monty Hall problem, Nash equilibrium, Nate Silver, new economy, Nick Leeson, Northern Rock, nudge theory, oil shock, PalmPilot, Paul Samuelson, peak oil, Peter Thiel, Philip Mirowski, Phillips curve, Pierre-Simon Laplace, popular electronics, power law, price mechanism, probability theory / Blaise Pascal / Pierre de Fermat, quantitative trading / quantitative finance, railway mania, RAND corporation, reality distortion field, rent-seeking, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Solow, Ronald Coase, sealed-bid auction, shareholder value, Silicon Valley, Simon Kuznets, Socratic dialogue, South Sea Bubble, spectrum auction, Steve Ballmer, Steve Jobs, Steve Wozniak, Suez crisis 1956, Tacoma Narrows Bridge, Thales and the olive presses, Thales of Miletus, The Chicago School, the map is not the territory, The Market for Lemons, The Nature of the Firm, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Davenport, Thomas Malthus, Toyota Production System, transaction costs, ultimatum game, urban planning, value at risk, world market for maybe five computers, World Values Survey, Yom Kippur War, zero-sum game

Most of the observed ‘biases’ in behavioural economics are not the result of errors in beliefs or logic, although some are. Most are the product of a reality in which decisions must be made in the absence of a precise and complete description of the world in which people live, in contrast to the small worlds in which the students whose choices are studied in experimental economics are asked to participate. In those latter exercises, there is always something which the experimenters think is the ‘right’ answer. Kahneman uses as an example of bias a drawing similar to the image on page 142. 14 His subjects are asked to judge which of the three figures on the page is the largest, and most choose the one furthest back.

Economists frequently derive their findings from large data sets. One major study was able to replicate fewer than one half of published results, even with assistance from the authors and use of the same data employed by these authors. 18 A smaller study of experimental findings in economics found that around 60% of results could be replicated. 19 But experimental economics, unusually, is economic research under laboratory conditions; it involves asking subjects questions like ‘How often does the letter K appear in a text?’ The percentage of results that would have been reproduced successfully would certainly have been much lower if the same conjectured ‘bias’ had been investigated in a different experiment.


pages: 190 words: 61,970

Life You Can Save: Acting Now to End World Poverty by Peter Singer

accounting loophole / creative accounting, Bear Stearns, Branko Milanovic, Cass Sunstein, clean water, do well by doing good, end world poverty, experimental economics, Garrett Hardin, illegal immigration, Larry Ellison, Martin Wolf, microcredit, Monkeys Reject Unequal Pay, Peter Singer: altruism, pre–internet, purchasing power parity, randomized controlled trial, Richard Thaler, Silicon Valley, subprime mortgage crisis, Thomas Malthus, Tyler Cowen, ultimatum game, union organizing

Jen Shang and Rachel Croson, “Field Experiments in Charitable Contribution: The Impact of Social Influence on the Voluntary Provision of Public Goods,” The Economic Journal, forthcoming. Renewing members gave 43 percent more when they were given the appropriate information, and new members 29 percent more. For the mail survey, see Rachel Croson and Jen Shang, “The Impact of Downward Social Information on Contribution Decision,” Experimental Economics 11 (2008), pp. 221—33. 4. Matthew 6:1. 5. Charles Isherwood, “The Graffiti of the Philanthropic Class,” The New York Times, December 2, 2007. 6. www.boldergiving.org. 7. Plan International, “Sponsor a Child: Frequently Asked Questions,” www.plan-international.org/sponsorshipform/sponsorfaq/, accessed January 16, 2008. 8.


pages: 288 words: 64,771

The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality by Brink Lindsey

Airbnb, Asian financial crisis, bank run, barriers to entry, Bernie Sanders, Build a better mousetrap, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Carmen Reinhart, Cass Sunstein, collective bargaining, creative destruction, Credit Default Swap, crony capitalism, Daniel Kahneman / Amos Tversky, David Brooks, diversified portfolio, Donald Trump, Edward Glaeser, endogenous growth, experimental economics, experimental subject, facts on the ground, financial engineering, financial innovation, financial intermediation, financial repression, hiring and firing, Home mortgage interest deduction, housing crisis, income inequality, informal economy, information asymmetry, intangible asset, inventory management, invisible hand, Jones Act, Joseph Schumpeter, Kenneth Rogoff, Kevin Kelly, knowledge worker, labor-force participation, Long Term Capital Management, low skilled workers, Lyft, Mark Zuckerberg, market fundamentalism, mass immigration, mass incarceration, medical malpractice, Menlo Park, moral hazard, mortgage debt, Network effects, patent troll, plutocrats, principal–agent problem, regulatory arbitrage, rent control, rent-seeking, ride hailing / ride sharing, Robert Metcalfe, Robert Solow, Ronald Reagan, Savings and loan crisis, Silicon Valley, Silicon Valley ideology, smart cities, software patent, subscription business, tail risk, tech bro, too big to fail, total factor productivity, trade liberalization, tragedy of the anticommons, Tragedy of the Commons, transaction costs, tulip mania, Tyler Cowen, Uber and Lyft, uber lyft, Washington Consensus, white picket fence, winner-take-all economy, women in the workforce

Alas, since rapid price increases based on fundamentals happen all the time, it’s never clear that a bubble has occurred until after it’s over—which is why people are fooled by them, again and again. Asset bubbles are a glitch inherent in markets. Vernon Smith, the Nobel Prize–winning pioneer in experimental economics, has demonstrated this in a lab setting where groups of experimental subjects tasked with trading an asset will regularly inflate bubbles.16 However, bubbles are more than a market failure; they are a human failure. The very same herd mentality that sweeps market participants into a speculative mania can extend to government regulators as well.


pages: 236 words: 66,081

Cognitive Surplus: Creativity and Generosity in a Connected Age by Clay Shirky

Andrew Keen, behavioural economics, Brewster Kahle, Burning Man, citizen journalism, commons-based peer production, corporate social responsibility, Dean Kamen, experimental economics, experimental subject, fundamental attribution error, Great Leap Forward, invention of movable type, invention of the telegraph, Kevin Kelly, lolcat, means of production, meta-analysis, Nelson Mandela, New Urbanism, Nicholas Carr, seminal paper, social contagion, social software, Steve Ballmer, the long tail, The Nature of the Firm, the scientific method, the strength of weak ties, Tragedy of the Commons, ultimatum game, work culture , Yochai Benkler

Stahl, “The Actual Structure of eBay’s Feedback Mechanism and Early Evidence on the Effects of Recent Changes,” International Journal of Electronic Business 7.3 (2009): 301-20. 177 an 8 percent premium on price: Paul Resnick published these findings with his coauthors Richard Zeckhauser, John Swanson, and Kate Lockwood, in “The Value of Reputation on eBay: A Controlled Experiment,” Experimental Economics 9.2 (2006): 79-101. 179 added a fake quote to composer Maurice Jarre’s Wikipedia page: Shawn Pogatchnik discussed Fitzgerald’s actions in “Student Hoaxes World’s Media on Wikipedia,” MSNBC, May 12, 2009, http://www.msnbc.msn.com/id/30699302 (accessed January 10, 2010). CHAPTER 7: Looking for the Mouse 185 notes in his book The Success of Open Source: Steven Weber, The Success of Open Source (Cambridge, MA: Harvard University Press, 2005): 272. 188 He got a loan to enter the indulgence-printing business: The British Library discusses Gutenberg’s printing of indulgences in its documentation of Gutenberg’s Bible: http://www.bl.uk/treasures/gutenberg/indulgences.html (accessed January 9, 2010). 188 John Tetzel, the head pardoner for German territories: Tetzel’s place in history was largely secured by Martin Luther’s objections to indulgences in 1517, but his name recently reappeared when the Catholic Church brought back indulgences in 2008; in discussing this change, John Allen references Tetzel’s phrase in the Room for Debate blog, http://roomfordebate.blogs.nytimes.com/2009/02/13/sin-and-its-indulgences (accessed January 7, 2010). 190 As Elizabeth Eisenstein notes in The Printing Press as an Agent of Change: Elizabeth Eisenstein, The Printing Press as an Agent of Change: Communications and Cultural Transformations in Early-Modern Europe (Cambridge, U.K.: Cambridge University Press, 1980). 192 a computer system called PLATO: Elisabeth Van Meer discusses this history in “PLATO: From Computer-Based Education to Corporate Social Responsibility,” Iterations: An Interdisciplinary Journal of Software History (2003): 6-22. 196 “The behavior you’re seeing is the behavior you’ve designed for”: Joshua Porter, “The Behavior You’re Seeing Is the Behavior You’ve Designed For,” Bokardo, July 28, 2009, http://bokardo.com/archives/the-behavior-youve-designed-for (accessed January 10, 2010). 203 One of the most parsimonious examples of this pattern on the web is from JavaRanch: “Be Nice,” JavaRanch, http://faq.javaranch.com/java/BeNice (accessed January 10, 2010). 203 it sometimes upgraded its software every half hour: Nisan Gabbay, “Flickr Case Study: Still About Tech for Exit?”


pages: 233 words: 64,702

China's Disruptors: How Alibaba, Xiaomi, Tencent, and Other Companies Are Changing the Rules of Business by Edward Tse

3D printing, Airbnb, Airbus A320, Asian financial crisis, barriers to entry, bilateral investment treaty, business process, capital controls, commoditize, conceptual framework, corporate governance, creative destruction, crowdsourcing, currency manipulation / currency intervention, David Graeber, Deng Xiaoping, disruptive innovation, experimental economics, global supply chain, global value chain, Great Leap Forward, high net worth, high-speed rail, household responsibility system, industrial robot, Joseph Schumpeter, Lyft, Masayoshi Son, middle-income trap, money market fund, offshore financial centre, Pearl River Delta, reshoring, rising living standards, risk tolerance, Silicon Valley, Skype, Snapchat, SoftBank, sovereign wealth fund, special economic zone, speech recognition, Steve Jobs, thinkpad, trade route, wealth creators, working-age population

Following Mao’s death in 1976, his successors recognized that his repressive policies could not be sustained, even if they wanted to see them continue. A five-day meeting of the Communist Party’s Central Committee in December 1978 led to the release of energy pent up in the preceding decades. Gathered at a hotel in west Beijing, the committee agreed to allow experimental economic reforms that would tentatively allow market forces once again to operate in China. The primary leader of this reform movement was Deng Xiaoping, chairman of the party’s Central Advisory Committee. Deng had been in party leadership positions since the 1960s, always advocating for (and sometimes overseeing) economic reforms.


pages: 247 words: 64,986

Hive Mind: How Your Nation’s IQ Matters So Much More Than Your Own by Garett Jones

behavioural economics, centre right, classic study, clean water, corporate governance, David Ricardo: comparative advantage, en.wikipedia.org, experimental economics, Flynn Effect, Gordon Gekko, greed is good, hive mind, invisible hand, Kenneth Arrow, law of one price, meta-analysis, prediction markets, Robert Gordon, Ronald Coase, Saturday Night Live, social intelligence, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tyler Cowen, wikimedia commons, zero-sum game

Caplan, Bryan, and Stephen C. Miller. “Intelligence Makes People Think Like Economists: Evidence from the General Social Survey.” Intelligence 38, no. 6 (2010): 636–647. Chaudhuri, Ananish. “Sustaining Cooperation in Laboratory Public Goods Experiments: A Selective Survey of the Literature.” Experimental Economics (2011). Christiakis, Nicholas, and James Fowler. Connected: How Your Friends’ Friends’ Friends Affect Everything You Feel, Think, or Do. New York: Little, Brown, 2011. Covey, Steven. The Seven Habits of Highly Effective People: Anniversary Edition. New York: Simon & Schuster, 2013. Cowen, Tyler.


Spite: The Upside of Your Dark Side by Simon McCarthy-Jones

affirmative action, Atul Gawande, Bernie Sanders, Brexit referendum, Daniel Kahneman / Amos Tversky, dark triade / dark tetrad, Donald Trump, Elon Musk, en.wikipedia.org, experimental economics, Extinction Rebellion, greed is good, Greta Thunberg, income inequality, Jeremy Corbyn, Jon Ronson, loss aversion, Menlo Park, meta-analysis, Milgram experiment, New Journalism, Nick Bostrom, p-value, profit maximization, rent-seeking, rewilding, selective serotonin reuptake inhibitor (SSRI), shareholder value, Steven Pinker, TED Talk, The Wealth of Nations by Adam Smith, theory of mind, Tragedy of the Commons, ultimatum game, WikiLeaks

Zettler, “The Dark Core of Personality,” Psychological Review 125, no. 5 (2018): 656–688. 63. M. Ridley, The Rational Optimist: How Prosperity Evolves (London: Fourth Estate, 2010), 86. 64. H. Oosterbeek, R. Sloof, and G. Van De Kuilen, “Cultural Differences in Ultimatum Game Experiments: Evidence from a Meta-analysis,” Experimental Economics 7, no. 2 (2004): 171–188. 2. Counterdominant Spite 1. C. Boehm, Moral Origins: The Evolution of Virtue, Altruism, and Shame (New York: Soft Skull Press, 2012). 2. Boehm, Moral Origins. 3. Again, more correctly, they will not tolerate men trying to dominate other men. 4. Lee, as cited in Boehm, Moral Origins, 44. 5.


pages: 270 words: 73,485

Hubris: Why Economists Failed to Predict the Crisis and How to Avoid the Next One by Meghnad Desai

3D printing, Alan Greenspan, bank run, banking crisis, Bear Stearns, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, correlation coefficient, correlation does not imply causation, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, German hyperinflation, Glass-Steagall Act, Gunnar Myrdal, Home mortgage interest deduction, imperial preference, income inequality, inflation targeting, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, low interest rates, market bubble, market clearing, means of production, Meghnad Desai, Mexican peso crisis / tequila crisis, mortgage debt, Myron Scholes, negative equity, Northern Rock, oil shale / tar sands, oil shock, open economy, Paul Samuelson, Phillips curve, Post-Keynesian economics, price stability, purchasing power parity, pushing on a string, quantitative easing, reserve currency, rising living standards, risk/return, Robert Shiller, Robert Solow, Ronald Reagan, savings glut, secular stagnation, seigniorage, Silicon Valley, Simon Kuznets, subprime mortgage crisis, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, women in the workforce

Gordon Brown, on taking office as Chancellor in the New Labour government in 1997, immediately gave the Bank of England autonomy in determining interest rates in pursuit of an inflation target. We had come a long way from the euthanasia of the rentier. Economists do not do fieldwork as anthropologists do, nor do they, on the whole, experiment in a laboratory as natural scientists do. There is a branch called “experimental economics” but it has not changed the nature of the subject to any great extent. But economists do confront published data. The time series of data on income, consumption, investment and so forth are available on an annual or quarterly basis. Economists model them using statistical techniques, like the models Klein built for the US economy.


pages: 209 words: 13,138

Empirical Market Microstructure: The Institutions, Economics and Econometrics of Securities Trading by Joel Hasbrouck

Alvin Roth, barriers to entry, business cycle, conceptual framework, correlation coefficient, discrete time, disintermediation, distributed generation, experimental economics, financial intermediation, index arbitrage, information asymmetry, interest rate swap, inventory management, market clearing, market design, market friction, market microstructure, martingale, payment for order flow, power law, price discovery process, price discrimination, quantitative trading / quantitative finance, random walk, Richard Thaler, second-price auction, selection bias, short selling, statistical model, stochastic process, stochastic volatility, transaction costs, two-sided market, ultimatum game, zero-sum game

Ronen, Tavy, 1998, Trading structure and overnight information: A natural experiment from the Tel-Aviv Stock Exchange, Journal of Banking and Finance 22, 489–512. Ross, Sheldon M., 1996, Stochastic Processes (John Wiley, New York). Roth, Alvin E., 1995, Bargaining experiments, in John H. Kagel, and Alvin E. Roth, eds., The Handbook of Experimental Economics (Princeton University Press, Princeton, NJ). Roth, Alvin E., and Axel Ockenfels, 2002, Last-minute bidding and the rules for ending second-price auctions: Evidence from eBay and Amazon auctions on the internet, American Economic Review 92, 1093–103. Rubinstein, Ariel, 1982, Perfect equilibrium in a bargaining model, Econometrica 50, 97–110.


pages: 241 words: 78,508

Lean In: Women, Work, and the Will to Lead by Sheryl Sandberg

affirmative action, business process, Cass Sunstein, constrained optimization, experimental economics, fear of failure, gender pay gap, glass ceiling, job satisfaction, labor-force participation, longitudinal study, Mark Zuckerberg, meta-analysis, old-boy network, Richard Thaler, risk tolerance, Sheryl Sandberg, Silicon Valley, social graph, Susan Wojcicki, women in the workforce, work culture , young professional

Orley Ashenfelter and David Card (Amsterdam: North Holland, 2010), 1544–90; Rachel Croson and Uri Gneezy, “Gender Differences in Preferences,” Journal of Economic Literature 47, no. 2 (2009): 448–74; and Catherine C. Eckel and Phillip J. Grossman, “Men, Women, and Risk Aversion: Experimental Evidence,” in Handbook of Experimental Economics Results, vol. 1, ed. Charles R. Plott and Vernon L. Smith (Amsterdam: North Holland, 2008), 1061–73. 3. Centers for Disease Control and Prevention, Drowning Risks in Natural Water Settings, http://​www.​cdc.​gov/​Features/​dsDrowning​Risks/. 4. Karen S. Lyness and Christine A. Schrader, “Moving Ahead or Just Moving?


pages: 309 words: 86,909

The Spirit Level: Why Greater Equality Makes Societies Stronger by Richard Wilkinson, Kate Pickett

"Hurricane Katrina" Superdome, basic income, Berlin Wall, classic study, clean water, Diane Coyle, epigenetics, experimental economics, experimental subject, Fall of the Berlin Wall, full employment, germ theory of disease, Gini coefficient, God and Mammon, impulse control, income inequality, Intergovernmental Panel on Climate Change (IPCC), knowledge economy, labor-force participation, land reform, longitudinal study, Louis Pasteur, meta-analysis, Milgram experiment, mirror neurons, moral panic, Murray Bookchin, offshore financial centre, phenotype, plutocrats, profit maximization, profit motive, Ralph Waldo Emerson, statistical model, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, ultimatum game, upwardly mobile, World Values Survey, zero-sum game

Visible even in young children, our concern for fairness sometimes seems so strong that we might wonder how it is that social systems with great inequality are tolerated. Similarly, the sense of indebtedness (now recognized as universal in human societies) which we experience after having received a gift, serves to prompt reciprocity and prevent freeloading, so sustaining friendship. As the experimental economic games which we discussed showed, there is also evidence that we can feel sufficiently infuriated by unfairness that we are willing to punish, even at some personal cost to ourselves. Another characteristic which is perhaps important is our tendency to feel a common sense of identity and interdependence with those with whom we share food and other resources as equals.


pages: 411 words: 80,925

What's Mine Is Yours: How Collaborative Consumption Is Changing the Way We Live by Rachel Botsman, Roo Rogers

"World Economic Forum" Davos, Abraham Maslow, Airbnb, Apollo 13, barriers to entry, behavioural economics, Bernie Madoff, bike sharing, Buckminster Fuller, business logic, buy and hold, carbon footprint, Cass Sunstein, collaborative consumption, collaborative economy, commoditize, Community Supported Agriculture, credit crunch, crowdsourcing, dematerialisation, disintermediation, en.wikipedia.org, experimental economics, Ford Model T, Garrett Hardin, George Akerlof, global village, hedonic treadmill, Hugh Fearnley-Whittingstall, information retrieval, intentional community, iterative process, Kevin Kelly, Kickstarter, late fees, Mark Zuckerberg, market design, Menlo Park, Network effects, new economy, new new economy, out of africa, Paradox of Choice, Parkinson's law, peer-to-peer, peer-to-peer lending, peer-to-peer rental, planned obsolescence, Ponzi scheme, pre–internet, public intellectual, recommendation engine, RFID, Richard Stallman, ride hailing / ride sharing, Robert Shiller, Ronald Coase, Search for Extraterrestrial Intelligence, SETI@home, Simon Kuznets, Skype, slashdot, smart grid, South of Market, San Francisco, Stewart Brand, systems thinking, TED Talk, the long tail, The Nature of the Firm, The Spirit Level, the strength of weak ties, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thorstein Veblen, Torches of Freedom, Tragedy of the Commons, transaction costs, traveling salesman, ultimatum game, Victor Gruen, web of trust, women in the workforce, work culture , Yochai Benkler, Zipcar

ndmViewId=news_view&newsId=20090304005278&newsLang=en. 19. Christoph Uhlhaas, “Is Greed Good?” Scientific American Mind (August/September 2007), www.sciamdigital.com/index.cfm?fa=Products.ViewIssuePreview&ARTICLEID_CHAR=0950A3EC-3048-8A5E-10BB9808E7E70922. 20. P. Resnick et al., “The Value of Reputation on eBay: A Controlled Experiment,” Experimental Economics 9, no. 2 (2006): 79–101. 21. Bart Wilson, “Fair’s Fair,” Atlantic (January 25, 2009), http://business.theatlantic.com/2009/01/fairs_fair.php. 22. Jonah Lehrer, The Decisive Moment (Text Publishing Company, 2009), 176. 23. Uhlhaas, “Is Greed Good?” 24. Christian Mayer, “Playing Games,” Max Planck Research (January 2003), www.mpg.de/english/illustrationsDocumentation/multimedia/mpResearch/2003/heft01/1_03MPR_64_69.pdf. 25.


pages: 297 words: 84,009

Big Business: A Love Letter to an American Anti-Hero by Tyler Cowen

"Friedman doctrine" OR "shareholder theory", 23andMe, Affordable Care Act / Obamacare, augmented reality, barriers to entry, Bernie Sanders, Big Tech, bitcoin, blockchain, Bretton Woods, cloud computing, cognitive dissonance, company town, compensation consultant, corporate governance, corporate social responsibility, correlation coefficient, creative destruction, crony capitalism, cryptocurrency, dark matter, David Brooks, David Graeber, don't be evil, Donald Trump, driverless car, Elon Musk, employer provided health coverage, experimental economics, Fairchild Semiconductor, fake news, Filter Bubble, financial innovation, financial intermediation, gentrification, Glass-Steagall Act, global reserve currency, global supply chain, Google Glasses, income inequality, Internet of things, invisible hand, Jeff Bezos, junk bonds, late fees, Mark Zuckerberg, mobile money, money market fund, mortgage debt, Network effects, new economy, Nicholas Carr, obamacare, offshore financial centre, passive investing, payday loans, peer-to-peer lending, Peter Thiel, pre–internet, price discrimination, profit maximization, profit motive, RAND corporation, rent-seeking, reserve currency, ride hailing / ride sharing, risk tolerance, Ronald Coase, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, The Nature of the Firm, Tim Cook: Apple, too big to fail, transaction costs, Tyler Cowen, Tyler Cowen: Great Stagnation, ultimatum game, WikiLeaks, women in the workforce, World Values Survey, Y Combinator

The relative “cheating factor” is about 6 to 1, with more of the cheating done on the personal income tax. In terms of those simple proportions, individuals would appear to cheat more on their taxes than businesses do.12 CEOS IN LABORATORY GAMES Ernst Fehr and John A. List, two of the best known economists in the field of experimental economics, set up what is called a “trust game” and compared the performance of CEOs to non-CEOs. The results were pretty straightforward: the CEOs both were more trusting of others and exhibited more trustworthiness themselves.13 The experiments used a modified version of the traditional trust game, which is one means of measuring how much trust exists between individuals.


pages: 291 words: 81,703

Average Is Over: Powering America Beyond the Age of the Great Stagnation by Tyler Cowen

Amazon Mechanical Turk, behavioural economics, Black Swan, brain emulation, Brownian motion, business cycle, Cass Sunstein, Charles Babbage, choice architecture, complexity theory, computer age, computer vision, computerized trading, cosmological constant, crowdsourcing, dark matter, David Brooks, David Ricardo: comparative advantage, deliberate practice, driverless car, Drosophila, en.wikipedia.org, endowment effect, epigenetics, Erik Brynjolfsson, eurozone crisis, experimental economics, Flynn Effect, Freestyle chess, full employment, future of work, game design, Higgs boson, income inequality, industrial robot, informal economy, Isaac Newton, Johannes Kepler, John Markoff, Ken Thompson, Khan Academy, labor-force participation, Loebner Prize, low interest rates, low skilled workers, machine readable, manufacturing employment, Mark Zuckerberg, meta-analysis, microcredit, Myron Scholes, Narrative Science, Netflix Prize, Nicholas Carr, off-the-grid, P = NP, P vs NP, pattern recognition, Peter Thiel, randomized controlled trial, Ray Kurzweil, reshoring, Richard Florida, Richard Thaler, Ronald Reagan, Silicon Valley, Skype, statistical model, stem cell, Steve Jobs, Turing test, Tyler Cowen, Tyler Cowen: Great Stagnation, upwardly mobile, Yogi Berra

For the tale of Cambry, see David Gelles, “Inside Match.com,” Financial Times, July 29, 2011; this source also has the information on conservatives and liberals and the New Jersey anecdote. For cognitive biases, see http://en.wikipedia.org/wiki/List_of_cognitive_biases. For the pointer about experimental economics I am indebted to Amihai Glazer. In addition to Ken Regan, for another look at using computers to measure the quality of human play, see Matej Guid, “Search and Knowledge for Human and Machine Problem Solving,” doctoral dissertation, University of Ljubljana, 2010, http://eprints.fri.uni-lj.si/1113/1/Matej__Guid.disertacija.pdf.


pages: 312 words: 83,998

Testosterone Rex: Myths of Sex, Science, and Society by Cordelia Fine

"World Economic Forum" Davos, assortative mating, behavioural economics, Cass Sunstein, classic study, confounding variable, credit crunch, Donald Trump, Downton Abbey, Drosophila, epigenetics, experimental economics, gender pay gap, George Akerlof, glass ceiling, helicopter parent, Jeremy Corbyn, longitudinal study, meta-analysis, phenotype, publication bias, risk tolerance, seminal paper

However, the high- and low-risk packs are equated overall for frequency of reward and punishment. 32. Holt, C. A., & Laury, S. K. (2002). Risk aversion and incentive effects. American Economic Review, 92(5), 1644–1655. See also Harbaugh, W., Krause, K., & Vesterlund, L. (2002). Risk attitudes of children and adults: Choices over small and large probability gains and losses. Experimental Economics, 5(1), 53–84. This study presented participants from ages 5 to 64 years with gambles involving “real and salient payoffs” (p. 55). The authors note “While many other researchers have found that men are less risk averse than women, with this protocol we find no evidence to support gender differences in risk behavior or in probability weighting, either in children or in adults.”


pages: 302 words: 87,776

Dollars and Sense: How We Misthink Money and How to Spend Smarter by Dr. Dan Ariely, Jeff Kreisler

accounting loophole / creative accounting, Airbnb, Albert Einstein, behavioural economics, bitcoin, Burning Man, collateralized debt obligation, Daniel Kahneman / Amos Tversky, delayed gratification, endowment effect, experimental economics, hedonic treadmill, IKEA effect, impact investing, invisible hand, loss aversion, mental accounting, mobile money, PalmPilot, placebo effect, price anchoring, Richard Thaler, sharing economy, Silicon Valley, Snapchat, Stanford marshmallow experiment, Steve Jobs, TaskRabbit, the payments system, Uber for X, ultimatum game, Walter Mischel, winner-take-all economy

Dan Ariely (Duke University), Predictably Irrational (New York: HarperCollins, 2008). CHAPTER 8: WE OVERVALUE WHAT WE HAVE 1. Daniel Kahneman (Princeton), Jack L. Knetsch (Simon Fraser University), and Richard H. Thaler (University of Chicago), “The Endowment Effect: Evidence of Losses Valued More than Gains,” Handbook of Experimental Economics Results (2008). 2. Michael I. Norton (Harvard Business School), Daniel Mochon (University of California, San Diego), and Dan Ariely (Duke University), “The IKEA Effect: When Labor Leads to Love,” Journal of Consumer Psychology 22, no. 3 (2012): 453-460. 3. Ziv Carmon (INSEAD) and Dan Ariely (MIT), “Focusing on the Forgone: How Value Can Appear So Different to Buyers and Sellers,” Journal of Consumer Research 27, no. 3 (2000): 360–370. 4.


pages: 250 words: 88,762

The Logic of Life: The Rational Economics of an Irrational World by Tim Harford

activist fund / activist shareholder / activist investor, affirmative action, Albert Einstein, Andrei Shleifer, barriers to entry, behavioural economics, Berlin Wall, business cycle, colonial rule, company town, Daniel Kahneman / Amos Tversky, double entry bookkeeping, Dr. Strangelove, Edward Glaeser, en.wikipedia.org, endowment effect, European colonialism, experimental economics, experimental subject, George Akerlof, income per capita, invention of the telephone, Jane Jacobs, John von Neumann, Larry Ellison, law of one price, Martin Wolf, mutually assured destruction, New Economic Geography, new economy, Patri Friedman, plutocrats, Richard Florida, Richard Thaler, Ronald Reagan, Silicon Valley, spinning jenny, Steve Jobs, The Death and Life of Great American Cities, the market place, the strength of weak ties, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Tyler Cowen, women in the workforce, zero-sum game

Detailed studies of the winner’s curse include Douglas Dyer and John Kagel, “Bidding in Common Value Auctions: How the Commercial Construction Industry Corrects for the Winner’s Curse,” Management Science 42 (1996): 143–76; James Cox, Sam Dinkin, and James Swarthout, “Endogenous Entry and Exit in Common Value Auctions,” Experimental Economics 4, no. 2(October 2001): 163–81; and Glenn Harrison and John List, “Naturally Occurring Markets and Exogenous Laboratory Experiments: A Case Study of Winner’s Curse,” UCF Working Paper, 2005. Camp David: The story is told in Fred Kaplan’s history, The Wizards of Armageddon (New York: Simon & Schuster, 1983), and Robert Dodge’s biography of Schelling, The Strategist (Hollis, N.H.: Hollis, 2006).


pages: 321 words: 92,828

Late Bloomers: The Power of Patience in a World Obsessed With Early Achievement by Rich Karlgaard

Airbnb, Albert Einstein, Amazon Web Services, Apple's 1984 Super Bowl advert, behavioural economics, Bernie Madoff, Bob Noyce, book value, Brownian motion, Captain Sullenberger Hudson, cloud computing, cognitive dissonance, Daniel Kahneman / Amos Tversky, David Sedaris, deliberate practice, Electric Kool-Aid Acid Test, Elon Musk, en.wikipedia.org, experimental economics, Fairchild Semiconductor, fear of failure, financial independence, follow your passion, Ford Model T, Frederick Winslow Taylor, Goodhart's law, hiring and firing, if you see hoof prints, think horses—not zebras, Internet of things, Isaac Newton, Jeff Bezos, job satisfaction, knowledge economy, labor-force participation, Larry Ellison, longitudinal study, low skilled workers, Mark Zuckerberg, meta-analysis, Moneyball by Michael Lewis explains big data, move fast and break things, pattern recognition, Peter Thiel, power law, reality distortion field, Sand Hill Road, science of happiness, scientific management, shareholder value, Silicon Valley, Silicon Valley startup, Snapchat, Steve Jobs, Steve Wozniak, sunk-cost fallacy, tech worker, TED Talk, theory of mind, Tim Cook: Apple, Toyota Production System, unpaid internship, upwardly mobile, women in the workforce, working poor

Arkes and Catherine Blumer, “The Psychology of Sunk Cost,” in Judgment and Decision Making: An Interdisciplinary Reader, ed. Terry Connolly, Hal R. Arkes, and Kenneth R. Hammond, 2nd ed. (New York: Cambridge University Press, 2000). The sunk-cost fallacy is: Daniel Friedman et al., “Searching for the Sunk Cost Fallacy,” Experimental Economics 10, no. 1 (2007): 79–104. opportunity cost: John W. Payne, James R. Bettman, and Mary Frances Luce, “When Time Is Money: Decision Behavior Under Opportunity-Cost Time Pressure,” Organizational Behavior and Human Decision Processes 66, no. 2 (1996): 131–52; Robert Kurzban et al., “An Opportunity Cost Model of Subjective Effort and Task Performance,” Behavioral and Brain Sciences 36, no. 6 (2013): 661–79.


pages: 350 words: 103,988

Reinventing the Bazaar: A Natural History of Markets by John McMillan

accounting loophole / creative accounting, Albert Einstein, Alvin Roth, Andrei Shleifer, Anton Chekhov, Asian financial crisis, classic study, congestion charging, corporate governance, corporate raider, crony capitalism, Dava Sobel, decentralized internet, Deng Xiaoping, Dutch auction, electricity market, experimental economics, experimental subject, fear of failure, first-price auction, frictionless, frictionless market, George Akerlof, George Gilder, global village, Great Leap Forward, Hacker News, Hernando de Soto, I think there is a world market for maybe five computers, income inequality, income per capita, independent contractor, informal economy, information asymmetry, invisible hand, Isaac Newton, job-hopping, John Harrison: Longitude, John Perry Barlow, John von Neumann, Kenneth Arrow, land reform, lone genius, manufacturing employment, market clearing, market design, market friction, market microstructure, means of production, Network effects, new economy, offshore financial centre, ought to be enough for anybody, pez dispenser, pre–internet, price mechanism, profit maximization, profit motive, proxy bid, purchasing power parity, Robert Solow, Ronald Coase, Ronald Reagan, sealed-bid auction, search costs, second-price auction, Silicon Valley, spectrum auction, Stewart Brand, The Market for Lemons, The Nature of the Firm, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, War on Poverty, world market for maybe five computers, Xiaogang Anhui farmers, yield management

If there are unfilled jobs for barrel scrapers, the employers raise the offered wage, people change their jobs in response, and the vacancies get filled. With a price system, unlike under central planning, no central authority needs to know when there is an imbalance of supply and demand. Evidence that price movements can guide an economy to a stable outcome comes from experimental economics, in research done by Vernon Smith and others.12 An economy is simulated in the laboratory, with experimental subjects, usually undergraduate students, being put in the role of consumers and firms (and to get them to take their decision-making seriously, they are offered cash payments based on the outcomes of their decisions).


Calling Bullshit: The Art of Scepticism in a Data-Driven World by Jevin D. West, Carl T. Bergstrom

airport security, algorithmic bias, AlphaGo, Amazon Mechanical Turk, Andrew Wiles, Anthropocene, autism spectrum disorder, bitcoin, Charles Babbage, cloud computing, computer vision, content marketing, correlation coefficient, correlation does not imply causation, crowdsourcing, cryptocurrency, data science, deep learning, deepfake, delayed gratification, disinformation, Dmitri Mendeleev, Donald Trump, Elon Musk, epigenetics, Estimating the Reproducibility of Psychological Science, experimental economics, fake news, Ford Model T, Goodhart's law, Helicobacter pylori, Higgs boson, invention of the printing press, John Markoff, Large Hadron Collider, longitudinal study, Lyft, machine translation, meta-analysis, new economy, nowcasting, opioid epidemic / opioid crisis, p-value, Pluto: dwarf planet, publication bias, RAND corporation, randomized controlled trial, replication crisis, ride hailing / ride sharing, Ronald Reagan, selection bias, self-driving car, Silicon Valley, Silicon Valley startup, social graph, Socratic dialogue, Stanford marshmallow experiment, statistical model, stem cell, superintelligent machines, systematic bias, tech bro, TED Talk, the long tail, the scientific method, theory of mind, Tim Cook: Apple, twin studies, Uber and Lyft, Uber for X, uber lyft, When a measure becomes a target

Glenn Begley and Lee Ellis reported that scientists working in a commercial lab were able to reproduce only 6 of 53 important cancer biology studies published in the recent scientific literature. Shortly thereafter, the Open Science Collaboration—a large-scale collective effort among dozens of researchers—reported that they were able to replicate only 39 out of 100 high-profile experiments in social psychology. In experimental economics, meanwhile, a similar effort was under way. One study revealed that only 11 of 18 experimental papers published in the very best economics journals could be replicated. Was science, one of our most trusted institutions, somehow generating inadvertent bullshit on a massive scale? And if so, why?


pages: 329 words: 99,504

Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud by Ben McKenzie, Jacob Silverman

algorithmic trading, asset allocation, bank run, barriers to entry, Ben McKenzie, Bernie Madoff, Big Tech, bitcoin, Bitcoin "FTX", blockchain, capital controls, citizen journalism, cognitive dissonance, collateralized debt obligation, COVID-19, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, cryptocurrency, data science, distributed ledger, Dogecoin, Donald Trump, effective altruism, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, experimental economics, financial deregulation, financial engineering, financial innovation, Flash crash, Glass-Steagall Act, high net worth, housing crisis, information asymmetry, initial coin offering, Jacob Silverman, Jane Street, low interest rates, Lyft, margin call, meme stock, money market fund, money: store of value / unit of account / medium of exchange, Network effects, offshore financial centre, operational security, payday loans, Peter Thiel, Ponzi scheme, Potemkin village, prediction markets, proprietary trading, pushing on a string, QR code, quantitative easing, race to the bottom, ransomware, regulatory arbitrage, reserve currency, risk tolerance, Robert Shiller, Robinhood: mobile stock trading app, Ross Ulbricht, Sam Bankman-Fried, Satoshi Nakamoto, Saturday Night Live, short selling, short squeeze, Silicon Valley, Skype, smart contracts, Steve Bannon, systems thinking, TikTok, too big to fail, transaction costs, tulip mania, uber lyft, underbanked, vertical integration, zero-sum game

Binance probably faced significant legal headwinds, but it had developed a distributed—and mostly unaccountable—corporate structure that would be the envy of any offshore financial concern. It was hard to see how this “democratization of finance” was going to lead to a fairer economy rather than a more chaotic one, with a vast gulf between winners and losers. The liberatory rhetoric and experimental economics of crypto could be alluring, but they amplified many of the worst qualities of our existing capitalist system while privileging a minority group of early adopters and well-connected insiders. Binance exemplified the worst of these excesses. It was a premiere operator in an industry that prided itself in risk-taking and constantly “building,” although it seemed to be building little more than a better mousetrap


pages: 344 words: 104,077

Superminds: The Surprising Power of People and Computers Thinking Together by Thomas W. Malone

Abraham Maslow, agricultural Revolution, Airbnb, Albert Einstein, Alvin Toffler, Amazon Mechanical Turk, Apple's 1984 Super Bowl advert, Asperger Syndrome, Baxter: Rethink Robotics, bitcoin, blockchain, Boeing 747, business process, call centre, carbon tax, clean water, Computing Machinery and Intelligence, creative destruction, crowdsourcing, data science, deep learning, Donald Trump, Douglas Engelbart, Douglas Engelbart, driverless car, drone strike, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, experimental economics, Exxon Valdez, Ford Model T, future of work, Future Shock, Galaxy Zoo, Garrett Hardin, gig economy, happiness index / gross national happiness, independent contractor, industrial robot, Internet of things, invention of the telegraph, inventory management, invisible hand, Jeff Rulifson, jimmy wales, job automation, John Markoff, Joi Ito, Joseph Schumpeter, Kenneth Arrow, knowledge worker, longitudinal study, Lyft, machine translation, Marshall McLuhan, Nick Bostrom, Occupy movement, Pareto efficiency, pattern recognition, prediction markets, price mechanism, radical decentralization, Ray Kurzweil, Rodney Brooks, Ronald Coase, search costs, Second Machine Age, self-driving car, Silicon Valley, slashdot, social intelligence, Stephen Hawking, Steve Jobs, Steven Pinker, Stewart Brand, technological singularity, The Nature of the Firm, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Tim Cook: Apple, Tragedy of the Commons, transaction costs, Travis Kalanick, Uber for X, uber lyft, Vernor Vinge, Vilfredo Pareto, Watson beat the top human players on Jeopardy!

Aggarwal, “Cognitive Diversity”; John B. Van Huyck, Raymond C. Battalio, and Richard O. Beil, “Tacit Coordination Games, Strategic Uncertainty, and Coordination Failure,” The American Economic Review 80, no. 1 (1990): 234–48; Cary Deck and Nikos Nikiforakis, “Perfect and Imperfect Real-Time Monitoring in a Minimum-Effort Game,” Experimental Economics 15, no. 1 (2012): 71–88. 16. Figure from Aggarwal, “Cognitive Diversity,” 2015. Reprinted by permission of authors. 17. David Engel, Anita Williams Woolley, Ishani Aggarwal, Christopher F. Chabris, Masamichi Takahashi, Keiichi Nemoto, Carolin Kaiser, Young Ji Kim, and Thomas W. Malone, “Collective Intelligence in Computer-Mediated Collaboration Emerges in Different Contexts and Cultures,” Proceedings of the SIGCHI Conference on Human Factors in Computing Systems (New York: Association for Computing Machinery, 2015), doi:10.1145/2702123.2702259 (conference held in Seoul, South Korea, April 18–23, 2015). 18.


Drunk: How We Sipped, Danced, and Stumbled Our Way to Civilization by Edward Slingerland

agricultural Revolution, Alexander Shulgin, Any sufficiently advanced technology is indistinguishable from magic, Burning Man, classic study, collective bargaining, coronavirus, COVID-19, Day of the Dead, delayed gratification, Deng Xiaoping, disruptive innovation, Drosophila, experimental economics, germ theory of disease, global pandemic, Google Hangouts, hive mind, invention of agriculture, John Markoff, knowledge worker, land reform, lateral thinking, lockdown, lone genius, meta-analysis, microdosing, Picturephone, placebo effect, post-work, Ralph Waldo Emerson, search costs, Silicon Valley, Skype, social intelligence, Steve Ballmer, Steve Jobs, Steven Pinker, sugar pill, TED Talk, Tragedy of the Commons, WeWork, women in the workforce, work culture , Zenefits

“Lost in the storm: The academic collaborations that went missing in hurricane ISAAC.” Economic Journal, 128(610), 995–1018. Camus, Albert. (1955). The Myth of Sisyphus and Other Essays (Justin O’Brien, Trans.). New York: Vintage. Capraro, Valerio, Jonathan Schulz, and David G. Rand. (2019). “Time pressure and honesty in a deception game.” Journal of Behavioral and Experimental Economics, 79, 93–99. Carhart-Harris, R. L., and K. J. Friston. (2019). “REBUS and the anarchic brain: Toward a unified model of the brain action of psychedelics.” Pharmacological Reviews, 71, 316–344. 10.1124/pr.118.017160. Carmody, S., J. Davis, S. Tadi, J. S. Sharp, R. K. Hunt, and J. Russ. (2018).


pages: 437 words: 113,173

Age of Discovery: Navigating the Risks and Rewards of Our New Renaissance by Ian Goldin, Chris Kutarna

"World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, Airbnb, Albert Einstein, AltaVista, Asian financial crisis, asset-backed security, autonomous vehicles, banking crisis, barriers to entry, battle of ideas, Bear Stearns, Berlin Wall, bioinformatics, bitcoin, Boeing 747, Bonfire of the Vanities, bread and circuses, carbon tax, clean water, collective bargaining, Colonization of Mars, Credit Default Swap, CRISPR, crowdsourcing, cryptocurrency, Dava Sobel, demographic dividend, Deng Xiaoping, digital divide, Doha Development Round, double helix, driverless car, Edward Snowden, Elon Musk, en.wikipedia.org, epigenetics, experimental economics, Eyjafjallajökull, failed state, Fall of the Berlin Wall, financial innovation, full employment, Galaxy Zoo, general purpose technology, Glass-Steagall Act, global pandemic, global supply chain, Higgs boson, Hyperloop, immigration reform, income inequality, indoor plumbing, industrial cluster, industrial robot, information retrieval, information security, Intergovernmental Panel on Climate Change (IPCC), intermodal, Internet of things, invention of the printing press, Isaac Newton, Islamic Golden Age, Johannes Kepler, Khan Academy, Kickstarter, Large Hadron Collider, low cost airline, low skilled workers, Lyft, Mahbub ul Haq, Malacca Straits, mass immigration, Max Levchin, megacity, Mikhail Gorbachev, moral hazard, Nelson Mandela, Network effects, New Urbanism, non-tariff barriers, Occupy movement, On the Revolutions of the Heavenly Spheres, open economy, Panamax, Paris climate accords, Pearl River Delta, personalized medicine, Peter Thiel, post-Panamax, profit motive, public intellectual, quantum cryptography, rent-seeking, reshoring, Robert Gordon, Robert Metcalfe, Search for Extraterrestrial Intelligence, Second Machine Age, self-driving car, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Skype, smart grid, Snapchat, special economic zone, spice trade, statistical model, Stephen Hawking, Steve Jobs, Stuxnet, synthetic biology, TED Talk, The Future of Employment, too big to fail, trade liberalization, trade route, transaction costs, transatlantic slave trade, uber lyft, undersea cable, uranium enrichment, We are the 99%, We wanted flying cars, instead we got 140 characters, working poor, working-age population, zero day

Brynjolfsson, Erik and Andrew McAfee (2014). The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. New York: W.W. Norton & Company. 46. Chen, Yan, Grace Young, et al. (2013). “A Day without a Search Engine: An Experimental Study of Online and Offline Searches.” Experimental Economics 14(4): 512–536; Brynjolfsson, Erik and Andrew McAfee (2014). The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. New York: W.W. Norton & Company. 47. Metcalfe, Robert (1995, December 4). “Predicting the Internet’s Catastrophic Collapse and Ghost Sites Galore in 1996.”


pages: 523 words: 111,615

The Economics of Enough: How to Run the Economy as if the Future Matters by Diane Coyle

accounting loophole / creative accounting, affirmative action, Alan Greenspan, An Inconvenient Truth, bank run, banking crisis, behavioural economics, Berlin Wall, bonus culture, Branko Milanovic, BRICs, business cycle, call centre, carbon tax, Cass Sunstein, central bank independence, classic study, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation does not imply causation, Credit Default Swap, deindustrialization, demographic transition, Diane Coyle, different worldview, disintermediation, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Financial Instability Hypothesis, Francis Fukuyama: the end of history, general purpose technology, George Akerlof, Gini coefficient, global supply chain, Gordon Gekko, greed is good, happiness index / gross national happiness, hedonic treadmill, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, illegal immigration, income inequality, income per capita, industrial cluster, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jane Jacobs, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, light touch regulation, low skilled workers, market bubble, market design, market fundamentalism, megacity, Network effects, new economy, night-watchman state, Northern Rock, oil shock, Paradox of Choice, Pareto efficiency, principal–agent problem, profit motive, purchasing power parity, railway mania, rising living standards, Robert Solow, Ronald Reagan, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, social contagion, South Sea Bubble, Steven Pinker, tacit knowledge, The Design of Experiments, The Fortune at the Bottom of the Pyramid, The Market for Lemons, The Myth of the Rational Market, The Spirit Level, the strength of weak ties, Tragedy of the Commons, transaction costs, transfer pricing, tulip mania, ultimatum game, University of East Anglia, vertical integration, web application, web of trust, winner-take-all economy, World Values Survey, zero-sum game

Payback: Debt and the Shadow Side of Wealth. London: Bloomsbury. Baker, Dean. 2010. Taking Economics Seriously. Cambridge, MA: MIT Press. Barber, Benjamin R. 2009. “A Revolution in Spirit.” The Nation, 22 January. Bardsley, Nicholas, Robin Cubitt, Graham Loomes, Peter Moffatt, Chris Starmer, and Robert Sugden, eds. 2009. Experimental Economics: Rethinking the Rules. Princeton: Princeton University Press. Barrington-Leigh, Christopher, Anthony Harris, John Haltiwanger, and Haifang Huang. 2010. “International Evidence on the Social Context of Well-being.” VoxEU, 24 April, http//www.voxeu.org. Barro, Robert J. 2000. “Inequality and Growth in a Panel of Countries.”


pages: 501 words: 114,888

The Future Is Faster Than You Think: How Converging Technologies Are Transforming Business, Industries, and Our Lives by Peter H. Diamandis, Steven Kotler

Ada Lovelace, additive manufacturing, Airbnb, Albert Einstein, AlphaGo, Amazon Mechanical Turk, Amazon Robotics, augmented reality, autonomous vehicles, barriers to entry, Big Tech, biodiversity loss, bitcoin, blockchain, blood diamond, Boston Dynamics, Burning Man, call centre, cashless society, Charles Babbage, Charles Lindbergh, Clayton Christensen, clean water, cloud computing, Colonization of Mars, computer vision, creative destruction, CRISPR, crowdsourcing, cryptocurrency, data science, Dean Kamen, deep learning, deepfake, DeepMind, delayed gratification, dematerialisation, digital twin, disruptive innovation, Donald Shoup, driverless car, Easter island, Edward Glaeser, Edward Lloyd's coffeehouse, Elon Musk, en.wikipedia.org, epigenetics, Erik Brynjolfsson, Ethereum, ethereum blockchain, experimental economics, fake news, food miles, Ford Model T, fulfillment center, game design, Geoffrey West, Santa Fe Institute, gig economy, gigafactory, Google X / Alphabet X, gravity well, hive mind, housing crisis, Hyperloop, impact investing, indoor plumbing, industrial robot, informal economy, initial coin offering, intentional community, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invention of the telegraph, Isaac Newton, Jaron Lanier, Jeff Bezos, job automation, Joseph Schumpeter, Kevin Kelly, Kickstarter, Kiva Systems, late fees, Law of Accelerating Returns, life extension, lifelogging, loss aversion, Lyft, M-Pesa, Mary Lou Jepsen, Masayoshi Son, mass immigration, megacity, meta-analysis, microbiome, microdosing, mobile money, multiplanetary species, Narrative Science, natural language processing, Neal Stephenson, Neil Armstrong, Network effects, new economy, New Urbanism, Nick Bostrom, Oculus Rift, One Laptop per Child (OLPC), out of africa, packet switching, peer-to-peer lending, Peter H. Diamandis: Planetary Resources, Peter Thiel, planned obsolescence, QR code, RAND corporation, Ray Kurzweil, RFID, Richard Feynman, Richard Florida, ride hailing / ride sharing, risk tolerance, robo advisor, Satoshi Nakamoto, Second Machine Age, self-driving car, Sidewalk Labs, Silicon Valley, Skype, smart cities, smart contracts, smart grid, Snapchat, SoftBank, sovereign wealth fund, special economic zone, stealth mode startup, stem cell, Stephen Hawking, Steve Jobs, Steve Jurvetson, Steven Pinker, Stewart Brand, supercomputer in your pocket, supply-chain management, tech billionaire, technoutopianism, TED Talk, Tesla Model S, Tim Cook: Apple, transaction costs, Uber and Lyft, uber lyft, unbanked and underbanked, underbanked, urban planning, Vision Fund, VTOL, warehouse robotics, Watson beat the top human players on Jeopardy!, We wanted flying cars, instead we got 140 characters, X Prize

Chapter Four: The Acceleration of Acceleration Force #1: Saved Time In “The Original Macintosh”: Andy Hertzfeld, “Saving Lives,”Folklore.com, August 1983. See: https://www.folklore.org/StoryView.py?story=Saving_Lives.txt. University of Michigan behavioral economist Yan Chen: Yan Chen, “A Day Without a Search Engine: An Experimental Study of Online and Offline Searches,” Experimental Economics 17, no. 4 (December 2014): 512–536. See: https://link.springer.com/article/10.1007/s10683-013-9381-9. Over the past hundred years, labor-saving devices: University of Montreal, “Fridges and Washing Machines Liberated Women, Study Suggests,” Science Daily, March 13, 2009. See: https://www.sciencedaily.com/releases/2009/03/090312150735.htm.


The Future of Technology by Tom Standage

air freight, Alan Greenspan, barriers to entry, business process, business process outsourcing, call centre, Clayton Christensen, computer vision, connected car, corporate governance, creative destruction, disintermediation, disruptive innovation, distributed generation, double helix, experimental economics, financial engineering, Ford Model T, full employment, hydrogen economy, hype cycle, industrial robot, informal economy, information asymmetry, information security, interchangeable parts, job satisfaction, labour market flexibility, Larry Ellison, Marc Andreessen, Marc Benioff, market design, Menlo Park, millennium bug, moral hazard, natural language processing, Network effects, new economy, Nicholas Carr, optical character recognition, PalmPilot, railway mania, rent-seeking, RFID, Salesforce, seminal paper, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, six sigma, Skype, smart grid, software as a service, spectrum auction, speech recognition, stem cell, Steve Ballmer, Steve Jurvetson, technological determinism, technology bubble, telemarketer, transcontinental railway, vertical integration, Y2K

To be sure, economics has had its place in the it industry for some years now. hp, for instance, already uses software that simulates markets to optimise the air-conditioning systems in its utility data centres. And ibm’s Institute for Advanced Commerce has studied the behaviour of bidding agents, in the hope of designing them in such a way that they do not engage in endless price wars. Now hp is reaching even higher, with experimental economics. As the name implies, researchers in this field set up controlled experiments with real people and real money to see whether economic theories actually work. Perhaps surprisingly, it seems that they do, as demonstrated by the work of Vernon Smith of George Mason University in Virginia. (Mr Smith is considered the founding father of this field and won the 2002 Nobel prize in economics.)


pages: 481 words: 125,946

What to Think About Machines That Think: Today's Leading Thinkers on the Age of Machine Intelligence by John Brockman

Adam Curtis, agricultural Revolution, AI winter, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, algorithmic trading, Anthropocene, artificial general intelligence, augmented reality, autism spectrum disorder, autonomous vehicles, backpropagation, basic income, behavioural economics, bitcoin, blockchain, bread and circuses, Charles Babbage, clean water, cognitive dissonance, Colonization of Mars, complexity theory, computer age, computer vision, constrained optimization, corporate personhood, cosmological principle, cryptocurrency, cuban missile crisis, Danny Hillis, dark matter, data science, deep learning, DeepMind, Demis Hassabis, digital capitalism, digital divide, digital rights, discrete time, Douglas Engelbart, driverless car, Elon Musk, Emanuel Derman, endowment effect, epigenetics, Ernest Rutherford, experimental economics, financial engineering, Flash crash, friendly AI, functional fixedness, global pandemic, Google Glasses, Great Leap Forward, Hans Moravec, hive mind, Ian Bogost, income inequality, information trail, Internet of things, invention of writing, iterative process, James Webb Space Telescope, Jaron Lanier, job automation, Johannes Kepler, John Markoff, John von Neumann, Kevin Kelly, knowledge worker, Large Hadron Collider, lolcat, loose coupling, machine translation, microbiome, mirror neurons, Moneyball by Michael Lewis explains big data, Mustafa Suleyman, natural language processing, Network effects, Nick Bostrom, Norbert Wiener, paperclip maximiser, pattern recognition, Peter Singer: altruism, phenotype, planetary scale, Ray Kurzweil, Recombinant DNA, recommendation engine, Republic of Letters, RFID, Richard Thaler, Rory Sutherland, Satyajit Das, Search for Extraterrestrial Intelligence, self-driving car, sharing economy, Silicon Valley, Skype, smart contracts, social intelligence, speech recognition, statistical model, stem cell, Stephen Hawking, Steve Jobs, Steven Pinker, Stewart Brand, strong AI, Stuxnet, superintelligent machines, supervolcano, synthetic biology, systems thinking, tacit knowledge, TED Talk, the scientific method, The Wisdom of Crowds, theory of mind, Thorstein Veblen, too big to fail, Turing machine, Turing test, Von Neumann architecture, Watson beat the top human players on Jeopardy!, We are as Gods, Y2K

We’re not even rational in the sense of being logical and explicitly deductive. We’re fast, intuitive, and emotional. Economists believe we are Homo economicus—selfish and rational, acting with reason in our own self-interest. But most economic and social interactions deal with fairness, trust, sharing, and long-term relationships. Experimental economics shows us that when we act directly and without hesitation, we’re social and cooperative. Only when we start thinking for some seconds do we choose to be selfish. Unless we deal with computers. When we play economic games with machine counterparts, we tend to be cold and egoistic. You can even measure the difference in our blood flow in the brain and in the hormones in our bloodstream.


pages: 288 words: 16,556

Finance and the Good Society by Robert J. Shiller

Alan Greenspan, Alvin Roth, bank run, banking crisis, barriers to entry, Bear Stearns, behavioural economics, benefit corporation, Bernie Madoff, buy and hold, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, cognitive dissonance, collateralized debt obligation, collective bargaining, computer age, corporate governance, Daniel Kahneman / Amos Tversky, democratizing finance, Deng Xiaoping, diversification, diversified portfolio, Donald Trump, Edward Glaeser, eurozone crisis, experimental economics, financial engineering, financial innovation, financial thriller, fixed income, full employment, fundamental attribution error, George Akerlof, Great Leap Forward, Ida Tarbell, income inequality, information asymmetry, invisible hand, John Bogle, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, land reform, loss aversion, Louis Bachelier, Mahatma Gandhi, Mark Zuckerberg, market bubble, market design, means of production, microcredit, moral hazard, mortgage debt, Myron Scholes, Nelson Mandela, Occupy movement, passive investing, Ponzi scheme, prediction markets, profit maximization, quantitative easing, random walk, regulatory arbitrage, Richard Thaler, Right to Buy, road to serfdom, Robert Shiller, Ronald Reagan, selection bias, self-driving car, shareholder value, Sharpe ratio, short selling, Simon Kuznets, Skype, social contagion, Steven Pinker, tail risk, telemarketer, Thales and the olive presses, Thales of Miletus, The Market for Lemons, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, Vanguard fund, young professional, zero-sum game, Zipcar

Cambridge, MA: Harvard University Press. Becker, Jasper. 1997. Hungry Ghosts: Mao’s Secret Famine. New York: Free Press. Berg, Joyce, Robert Forsythe, Forrest Nelson, and Thomas Rietz. 2008. “Results from a Dozen Years of Election Futures Markets Research.” In Vernon Smith, ed., Handbook of Experimental Economic Results, Volume 1, 742–52. Amsterdam: North-Holland. Berger, Helge, and Albrecht Ritschl. 1995. “Germany and the Political Economy of the Marshall Plan 1947–52: A Re-Revisionist View.” In Barry J. Eichengreen, ed., Europe’s Post-War Recovery, 199–245. Cambridge: Press Syndicate of the University of Cambridge.


The Economics Anti-Textbook: A Critical Thinker's Guide to Microeconomics by Rod Hill, Anthony Myatt

American ideology, Andrei Shleifer, Asian financial crisis, bank run, barriers to entry, behavioural economics, Bernie Madoff, biodiversity loss, business cycle, cognitive dissonance, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, different worldview, electricity market, endogenous growth, equal pay for equal work, Eugene Fama: efficient market hypothesis, experimental economics, failed state, financial innovation, full employment, gender pay gap, Gini coefficient, Glass-Steagall Act, Gunnar Myrdal, happiness index / gross national happiness, Home mortgage interest deduction, Howard Zinn, income inequality, indoor plumbing, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, liberal capitalism, low interest rates, low skilled workers, market bubble, market clearing, market fundamentalism, Martin Wolf, medical malpractice, military-industrial complex, minimum wage unemployment, moral hazard, Paradox of Choice, Pareto efficiency, Paul Samuelson, Peter Singer: altruism, positional goods, prediction markets, price discrimination, price elasticity of demand, principal–agent problem, profit maximization, profit motive, publication bias, purchasing power parity, race to the bottom, Ralph Nader, random walk, rent control, rent-seeking, Richard Thaler, Ronald Reagan, search costs, shareholder value, sugar pill, The Myth of the Rational Market, the payments system, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, ultimatum game, union organizing, working-age population, World Values Survey, Yogi Berra

Rosen (1981) ‘Rankorder tournaments as optimum labor contracts’, Journal of Political Economy, 89(5): 841–61. 282 ‘The general theory of the second best’, Review of Economic Studies, 24(1): 11–32. Littlechild, S. (1981) ‘Misleading calculations of the social costs of monopoly power’, Economic Journal, 91: 348–63. Lombardini-Riipinen, C. and M. Autio (2007) ‘Coverage of behavioral and experimental economics in undergraduate microeconomics textbooks’, SSRN, December, available at ssrn. com/abstract=1088076. Lunn, P. and T. Harford (2008) ‘Behavioural economics: is it such a big deal?’, Prospect Magazine, 150, September. Machin, S. and A. Manning (2004) ‘A test of competitive labor market theory: the wage structure among care assistants in the south of England’, Industrial and Labor Relations Review, 57(3): 371–85.


pages: 516 words: 116,875

Greater: Britain After the Storm by Penny Mordaunt, Chris Lewis

"World Economic Forum" Davos, 2021 United States Capitol attack, 3D printing, accelerated depreciation, Ada Lovelace, Airbnb, banking crisis, battle of ideas, behavioural economics, Bernie Madoff, bitcoin, Black Lives Matter, blockchain, Bob Geldof, Boeing 747, Boris Johnson, Bretton Woods, Brexit referendum, British Empire, carbon footprint, Charles Babbage, collective bargaining, Corn Laws, corporate social responsibility, COVID-19, credit crunch, crowdsourcing, data is not the new oil, data is the new oil, David Attenborough, death from overwork, Deng Xiaoping, Diane Coyle, Donald Trump, Downton Abbey, driverless car, Elon Musk, en.wikipedia.org, experimental economics, failed state, fake news, Firefox, fixed income, full employment, gender pay gap, global pandemic, global supply chain, green new deal, happiness index / gross national happiness, high-speed rail, impact investing, Jeremy Corbyn, Khartoum Gordon, lateral thinking, Live Aid, lockdown, loss aversion, low skilled workers, microaggression, mittelstand, moral hazard, Neil Kinnock, Nelson Mandela, Ocado, off-the-grid, offshore financial centre, Panamax, Ponzi scheme, post-truth, quantitative easing, remote working, road to serfdom, Salesforce, Sheryl Sandberg, Skype, smart cities, social distancing, South China Sea, sovereign wealth fund, Steve Jobs, Steven Pinker, surveillance capitalism, transaction costs, transcontinental railway

Hayek was praised by John Maynard Keynes and invited by Beveridge to become a professor at the London School of Economics (LSE) in the 1930s.7 This was when the left and right were focused on the problem in hand, rather than on mutual homicide. Beveridge and Hayek were the Odd Couple of 1930s economics. The LSE had been founded by Fabians in 1895 and had developed a reputation for socialism. Yet by the 1930s, in a period of experimental economic cross-dressing, it had embraced liberalism – just at the time when Hayek’s native country was turning towards fascism. Being different in almost every way from the democracy of Britain, perhaps it is the crushing conformity of communism and fascism that destroys individual excellence, and hence progress and enlightenment.


pages: 536 words: 126,051

Emotional Ignorance: Lost and Found in the Science of Emotion by Dean Burnett

airport security, Asperger Syndrome, autism spectrum disorder, call centre, cognitive dissonance, cognitive load, COVID-19, double empathy problem, emotional labour, experimental economics, fake it until you make it, fake news, fear of failure, heat death of the universe, impulse control, lockdown, longitudinal study, meta-analysis, microbiome, mirror neurons, neurotypical, New Journalism, period drama, pre–internet, Snapchat, social distancing, theory of mind, TikTok, Wall-E

Liu, ‘Emotion recognition is China’s new surveillance craze’, Financial Times, 1 November 2019. 69 Matt, S.J., ‘What the history of emotions can offer to psychologists, economists, and computer scientists (among others)’, History of Psychology, 2021, 24(2): p. 121. 70 Ortmann, A. and R. Hertwig, ‘The costs of deception: evidence from psychology’, Experimental Economics, 2002, 5(2): pp. 111–131. 71 Warren, G., E. Schertler, and P. Bull, ‘Detecting deception from emotional and unemotional cues’, Journal of Nonverbal Behavior, 2009, 33(1): pp. 59–69. 72 Rodero, E. and I. Lucas, ‘Synthetic versus human voices in audiobooks: the human emotional intimacy effect’, New Media & Society, June 2021. 73 Liu, et al., ‘Seeing Jesus in toast’. 74 Seyama, J. and R.S.


pages: 1,205 words: 308,891

Bourgeois Dignity: Why Economics Can't Explain the Modern World by Deirdre N. McCloskey

"Friedman doctrine" OR "shareholder theory", Airbnb, Akira Okazaki, antiwork, behavioural economics, big-box store, Black Swan, book scanning, British Empire, business cycle, buy low sell high, Capital in the Twenty-First Century by Thomas Piketty, classic study, clean water, Columbian Exchange, conceptual framework, correlation does not imply causation, Costa Concordia, creative destruction, critique of consumerism, crony capitalism, dark matter, Dava Sobel, David Graeber, David Ricardo: comparative advantage, deindustrialization, demographic transition, Deng Xiaoping, do well by doing good, Donald Trump, double entry bookkeeping, electricity market, en.wikipedia.org, epigenetics, Erik Brynjolfsson, experimental economics, Ferguson, Missouri, food desert, Ford Model T, fundamental attribution error, Garrett Hardin, Georg Cantor, George Akerlof, George Gilder, germ theory of disease, Gini coefficient, God and Mammon, Great Leap Forward, greed is good, Gunnar Myrdal, Hans Rosling, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, Hernando de Soto, immigration reform, income inequality, interchangeable parts, invention of agriculture, invention of writing, invisible hand, Isaac Newton, Islamic Golden Age, James Watt: steam engine, Jane Jacobs, John Harrison: Longitude, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Arrow, knowledge economy, labor-force participation, lake wobegon effect, land reform, liberation theology, lone genius, Lyft, Mahatma Gandhi, Mark Zuckerberg, market fundamentalism, means of production, middle-income trap, military-industrial complex, Naomi Klein, new economy, Nick Bostrom, North Sea oil, Occupy movement, open economy, out of africa, Pareto efficiency, Paul Samuelson, Pax Mongolica, Peace of Westphalia, peak oil, Peter Singer: altruism, Philip Mirowski, Pier Paolo Pasolini, pink-collar, plutocrats, positional goods, profit maximization, profit motive, public intellectual, purchasing power parity, race to the bottom, refrigerator car, rent control, rent-seeking, Republic of Letters, road to serfdom, Robert Gordon, Robert Shiller, Ronald Coase, Scientific racism, Scramble for Africa, Second Machine Age, secular stagnation, seminal paper, Simon Kuznets, Social Responsibility of Business Is to Increase Its Profits, spinning jenny, stakhanovite, Steve Jobs, tacit knowledge, TED Talk, the Cathedral and the Bazaar, The Chicago School, The Market for Lemons, the rule of 72, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, total factor productivity, Toyota Production System, Tragedy of the Commons, transaction costs, transatlantic slave trade, Tyler Cowen, Tyler Cowen: Great Stagnation, uber lyft, union organizing, very high income, wage slave, Washington Consensus, working poor, Yogi Berra

Thus around 1280 CE one Walter of Henley, well before our modern times devoted to gauging value in money, wrote in French an estate manual for English lords filled with quantitative prudence of a wholly rational sort.20 So was Mesopotamia four millennia earlier filled with quantitative prudence in accounts. Nowadays the behavioral economics of, say, Dan Ariely does a job of demolishing claims of individual rationality in moderns. Yet it too commits the Weberian mistake of focusing on individual psychology instead of group sociology and market economics. The experimental economics of Vernon Smith, Bart Wilson, Erik Kimbrough, and others, by contrast, works always with groups, showing that a wisdom of crowds often prevails over psychological shortsightedness and calculative confusion. And, by the way, it makes a good case that property arises without the help of the state or the nudging of the clerisy.21 Irrationality is always with us.

Observer, March 22. http://www.theguardian.com/world/2014/mar/23/francois-hollande-tulle-elections-france. Wilson, Bart J. 2010. “Social Preferences Aren’t Preferences.” Journal of Economic Behavior & Organization 73:77–82. Wilson, Bart J., Taylor Jaworski, Karl E. Schurter, and Andrew Smyth. 2012. “The Ecological and Civil Mainsprings of Property: An Experimental Economic History of Whalers’ Rules of Capture.” Journal of Law, Economics and Organization 28:617–656. Wilson, Charles. 1965. England’s Apprenticeship, 1603–1763. London: Longmans. Wilson, Charles. 1968. The Dutch Republic and the Civilisation of the Seventeenth Century. World University Library.


pages: 484 words: 136,735

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky

"World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Black Swan, bond market vigilante , bonus culture, Bretton Woods, BRICs, business cycle, buy and hold, Carmen Reinhart, classic study, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, currency manipulation / currency intervention, currency risk, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, eat what you kill, Edward Glaeser, electricity market, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, foreign exchange controls, full employment, geopolitical risk, George Akerlof, global rebalancing, Goodhart's law, Great Leap Forward, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, long and variable lags, Long Term Capital Management, low interest rates, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, military-industrial complex, Minsky moment, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, Nelson Mandela, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, Paul Volcker talking about ATMs, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, seminal paper, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, systems thinking, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Vilfredo Pareto, Washington Consensus, zero-sum game

It is, however, the least radical of the alternative approaches because it does not challenge the central assumption of REH—that booms, busts, and recessions are all caused by various types of market failure and therefore that breakdowns in laissez-faire capitalism could, at least in principle, be prevented by making markets more perfect, for example, by disseminating information or strengthening the regulations against fraud. Partly because of this ideological compatibility, academic economics has been quite willing to embrace the behavioral approach. Indeed, the work on bounded rationality by Herbert Simon, game theory by Vernon Smith, experimental economics by Daniel Kahneman, and asymmetrical information by George Akerloff, Joe Stiglitz, and Michael Spence have all been rewarded with Nobel prizes. More challenging to orthodox economics is the mathematical work in chaos theory and advanced control engineering, which suggests that most of the mathematical techniques used by precrisis academic economics were simply wrong.


pages: 436 words: 76

Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor by John Kay

Alan Greenspan, Albert Einstein, Asian financial crisis, Barry Marshall: ulcers, behavioural economics, Berlin Wall, Big bang: deregulation of the City of London, Bletchley Park, business cycle, California gold rush, Charles Babbage, complexity theory, computer age, constrained optimization, corporate governance, corporate social responsibility, correlation does not imply causation, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, Donald Trump, double entry bookkeeping, double helix, Dr. Strangelove, Dutch auction, Edward Lloyd's coffeehouse, electricity market, equity premium, equity risk premium, Ernest Rutherford, European colonialism, experimental economics, Exxon Valdez, failed state, Fairchild Semiconductor, financial innovation, flying shuttle, Ford Model T, Francis Fukuyama: the end of history, George Akerlof, George Gilder, Goodhart's law, Great Leap Forward, greed is good, Gunnar Myrdal, haute couture, Helicobacter pylori, illegal immigration, income inequality, industrial cluster, information asymmetry, intangible asset, invention of the telephone, invention of the wheel, invisible hand, John Meriwether, John Nash: game theory, John von Neumann, junk bonds, Kenneth Arrow, Kevin Kelly, knowledge economy, Larry Ellison, light touch regulation, Long Term Capital Management, loss aversion, Mahatma Gandhi, market bubble, market clearing, market fundamentalism, means of production, Menlo Park, Michael Milken, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Naomi Klein, Nash equilibrium, new economy, oil shale / tar sands, oil shock, Pareto efficiency, Paul Samuelson, pets.com, Phillips curve, popular electronics, price discrimination, price mechanism, prisoner's dilemma, profit maximization, proprietary trading, purchasing power parity, QWERTY keyboard, Ralph Nader, RAND corporation, random walk, rent-seeking, Right to Buy, risk tolerance, road to serfdom, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, second-price auction, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, Steve Jobs, Stuart Kauffman, telemarketer, The Chicago School, The Market for Lemons, The Nature of the Firm, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, total factor productivity, transaction costs, tulip mania, urban decay, Vilfredo Pareto, Washington Consensus, women in the workforce, work culture , yield curve, yield management

Josephson, P. R 1995. '"Projects of the Century' in Soviet History: Large-Scale Technologies from Lenin to Gorbachev." Technology and Culture 36 (3): 519-59. Judson, H. F. 1980. The Search for Solutions. New York: Rinehart and Winston. Kagel, ]. H., and A. E. Roth. eds. 1995. The Handbook of Experimental Economics. Princeton: Princeton University Press. Kahneman, D., and A. Tversky, eds. 2000. Choices) Values and Frames. New York and Cambridge: Russell Sage Foundation and Cambridge University Press. Kakutani, S. 1941. "A Generalization of Brouwer's Fixed Point Theorem." Duke Mathematical]ournal8: 451-9.


pages: 607 words: 133,452

Against Intellectual Monopoly by Michele Boldrin, David K. Levine

accounting loophole / creative accounting, agricultural Revolution, barriers to entry, business cycle, classic study, cognitive bias, cotton gin, creative destruction, David Ricardo: comparative advantage, Dean Kamen, Donald Trump, double entry bookkeeping, en.wikipedia.org, endogenous growth, Ernest Rutherford, experimental economics, financial innovation, Great Leap Forward, Gregor Mendel, Helicobacter pylori, independent contractor, informal economy, interchangeable parts, invention of radio, invention of the printing press, invisible hand, James Watt: steam engine, Jean Tirole, John Harrison: Longitude, Joseph Schumpeter, Kenneth Arrow, linear programming, market bubble, market design, mutually assured destruction, Nash equilibrium, new economy, open economy, PalmPilot, peer-to-peer, pirate software, placebo effect, price discrimination, profit maximization, rent-seeking, Richard Stallman, Robert Solow, seminal paper, Silicon Valley, Skype, slashdot, software patent, the market place, total factor productivity, trade liberalization, Tragedy of the Commons, transaction costs, Y2K

Author with Drew Fudenberg of Learning in Games and editor of several conference volumes, his research interests include the study of intellectual property and endogenous growth in dynamic general equilibrium models; the endogenous formation of preferences, institutions, and social norms; and the application of game theory to experimental economics. Levine has published in leading journals such as American Economic Review, Econometrica, Review of Economic Studies, Journal of Political Economy, Journal of Economic Theory, Quarterly Journal of Economics, and American Political Science Review. i P1: PDX head margin: 1/2 gutter margin: 7/8 CUUS245-FM cuus245 978 0 521 87928 6 May 21, 2008 19:26 ii P1: PDX head margin: 1/2 gutter margin: 7/8 CUUS245-FM cuus245 978 0 521 87928 6 May 21, 2008 19:26 Against Intellectual Monopoly MICHELE BOLDRIN Washington University in St.


pages: 470 words: 130,269

The Marginal Revolutionaries: How Austrian Economists Fought the War of Ideas by Janek Wasserman

"World Economic Forum" Davos, Abraham Wald, Albert Einstein, American Legislative Exchange Council, anti-communist, battle of ideas, Berlin Wall, Bretton Woods, business cycle, collective bargaining, Corn Laws, correlation does not imply causation, creative destruction, David Ricardo: comparative advantage, different worldview, Donald Trump, experimental economics, Fall of the Berlin Wall, floating exchange rates, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, Gunnar Myrdal, housing crisis, Internet Archive, invisible hand, John von Neumann, Joseph Schumpeter, laissez-faire capitalism, liberal capitalism, low interest rates, market fundamentalism, mass immigration, means of production, Menlo Park, military-industrial complex, Mont Pelerin Society, New Journalism, New Urbanism, old-boy network, Paul Samuelson, Philip Mirowski, price mechanism, price stability, public intellectual, RAND corporation, random walk, rent control, road to serfdom, Robert Bork, rolodex, Ronald Coase, Ronald Reagan, Silicon Valley, Simon Kuznets, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, trade liberalization, union organizing, urban planning, Vilfredo Pareto, Washington Consensus, zero-sum game, éminence grise

As Steven Horwitz has put it, Austrians always “took account of the puzzles that were of interest to the economics profession and aimed their explanations of those puzzles at that audience of their professional peers.” The first issue of RAE addressed monetarism and Keynesianism. In subsequent years, discussions on public choice, macroeconomics, game theory, and experimental economics filled the pages of RAE and Advances in Austrian Economics. Austrians sparred with Nobelists like Milton Friedman, Ronald Coase, James Buchanan, and Douglass North. They reveled in taking apart the arguments of intellectual allies and opponents alike. As the economist Deirdre McCloskey has noted, her conversion to an appreciation of the role of rhetoric in economic thought had a Viennese accent: “I learned from Don [Lavoie] and Karen Vaughn and Jack High as exemplars that Austrian economics was not merely a pointlessly vicious doctrinal war against one’s natural allies carried out on the field of German texts. . . .


Virtual Competition by Ariel Ezrachi, Maurice E. Stucke

"World Economic Forum" Davos, Airbnb, Alan Greenspan, Albert Einstein, algorithmic management, algorithmic trading, Arthur D. Levinson, barriers to entry, behavioural economics, cloud computing, collaborative economy, commoditize, confounding variable, corporate governance, crony capitalism, crowdsourcing, Daniel Kahneman / Amos Tversky, David Graeber, deep learning, demand response, Didi Chuxing, digital capitalism, disintermediation, disruptive innovation, double helix, Downton Abbey, driverless car, electricity market, Erik Brynjolfsson, Evgeny Morozov, experimental economics, Firefox, framing effect, Google Chrome, independent contractor, index arbitrage, information asymmetry, interest rate derivative, Internet of things, invisible hand, Jean Tirole, John Markoff, Joseph Schumpeter, Kenneth Arrow, light touch regulation, linked data, loss aversion, Lyft, Mark Zuckerberg, market clearing, market friction, Milgram experiment, multi-sided market, natural language processing, Network effects, new economy, nowcasting, offshore financial centre, pattern recognition, power law, prediction markets, price discrimination, price elasticity of demand, price stability, profit maximization, profit motive, race to the bottom, rent-seeking, Richard Thaler, ride hailing / ride sharing, road to serfdom, Robert Bork, Ronald Reagan, search costs, self-driving car, sharing economy, Silicon Valley, Skype, smart cities, smart meter, Snapchat, social graph, Steve Jobs, sunk-cost fallacy, supply-chain management, telemarketer, The Chicago School, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, Travis Kalanick, turn-by-turn navigation, two-sided market, Uber and Lyft, Uber for X, uber lyft, vertical integration, Watson beat the top human players on Jeopardy!, women in the workforce, yield management

Instead, companies price discriminate to capture as much of the consumers’ wealth as possible. In this context price discrimination is generally perceived as unfair. Over the past thirty years, behavioral economists in the lab and the field have tested the assumption that we are greedy, self-interested profit maximizers. Some people are. But the psychological and experimental economic data show that most people care about treating others, and being treated, fairly.21 Some economists are agnostic on price discrimination, or believe that in certain instances it may be welfare-enhancing. But 91 percent of individuals in one survey thought charging higher prices to those who were more dependent on the product was offensive.22 A collateral consequence of price discrimination is a loss of trust between companies and their customers.


pages: 517 words: 147,591

Small Wars, Big Data: The Information Revolution in Modern Conflict by Eli Berman, Joseph H. Felter, Jacob N. Shapiro, Vestal Mcintyre

basic income, call centre, centre right, classic study, clean water, confounding variable, crowdsourcing, data science, demand response, drone strike, experimental economics, failed state, George Akerlof, Google Earth, guns versus butter model, HESCO bastion, income inequality, income per capita, information asymmetry, Internet of things, iterative process, land reform, mandatory minimum, minimum wage unemployment, moral hazard, natural language processing, operational security, RAND corporation, randomized controlled trial, Ronald Reagan, school vouchers, statistical model, the scientific method, trade route, Twitter Arab Spring, unemployed young men, WikiLeaks, World Values Survey

Kalyvas and Laia Balcells, “International System and Technologies of Rebellion: How the End of the Cold War Shaped Internal Conflict,” American Political Science Review 104, no. 3 (2010): 415–29; Roger D. Petersen, Resistance and Rebellion: Lessons from Eastern Europe (Chicago: University of Chicago Press, 2006). 3 INFORMATION-CENTRIC INSURGENCY AND COUNTERINSURGENCY 1. Work in experimental economics has shown that people operating in familiar settings in which they have substantial experience tend to calculate utilities correctly and play a range of complicated equilibrium strategies. These findings are explored in a range of publications, including these: John A. List, “Does Market Experience Eliminate Market Anomalies?”


pages: 543 words: 153,550

Model Thinker: What You Need to Know to Make Data Work for You by Scott E. Page

Airbnb, Albert Einstein, Alfred Russel Wallace, algorithmic trading, Alvin Roth, assortative mating, behavioural economics, Bernie Madoff, bitcoin, Black Swan, blockchain, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Checklist Manifesto, computer age, corporate governance, correlation does not imply causation, cuban missile crisis, data science, deep learning, deliberate practice, discrete time, distributed ledger, Easter island, en.wikipedia.org, Estimating the Reproducibility of Psychological Science, Everything should be made as simple as possible, experimental economics, first-price auction, Flash crash, Ford Model T, Geoffrey West, Santa Fe Institute, germ theory of disease, Gini coefficient, Higgs boson, High speed trading, impulse control, income inequality, Isaac Newton, John von Neumann, Kenneth Rogoff, knowledge economy, knowledge worker, Long Term Capital Management, loss aversion, low skilled workers, Mark Zuckerberg, market design, meta-analysis, money market fund, multi-armed bandit, Nash equilibrium, natural language processing, Network effects, opioid epidemic / opioid crisis, p-value, Pareto efficiency, pattern recognition, Paul Erdős, Paul Samuelson, phenotype, Phillips curve, power law, pre–internet, prisoner's dilemma, race to the bottom, random walk, randomized controlled trial, Richard Feynman, Richard Thaler, Robert Solow, school choice, scientific management, sealed-bid auction, second-price auction, selection bias, six sigma, social graph, spectrum auction, statistical model, Stephen Hawking, Supply of New York City Cabdrivers, systems thinking, tacit knowledge, The Bell Curve by Richard Herrnstein and Charles Murray, The Great Moderation, the long tail, The Rise and Fall of American Growth, the rule of 72, the scientific method, The Spirit Level, the strength of weak ties, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, Tragedy of the Commons, urban sprawl, value at risk, web application, winner-take-all economy, zero-sum game

Ledyard, John, David Porter, and Antonio Rangle. 1997. “Experiments Testing Multiobject Allocation Mechanisms.” Journal of Economics and Management Strategy 6, no. 3: 639–675. Ledyard, John, David Porter, and Randii Wessen. 2000. “A Market-Based Mechanism for Allocating Space Shuttle Secondary Payload Priority.” Experimental Economics 2, no. 3: 173–195. Levins, Richard. 1966. “The Strategy of Model Building in Population Biology.” American Scientist 54: 421–431. Levinthal, Daniel A. 1997. “Adaptation on Rugged Landscapes.” Management Science 43: 934–950. Levinthal, Daniel. 1991. “Random Walks and Organizational Mortality.”


pages: 470 words: 148,730

Good Economics for Hard Times: Better Answers to Our Biggest Problems by Abhijit V. Banerjee, Esther Duflo

3D printing, accelerated depreciation, affirmative action, Affordable Care Act / Obamacare, air traffic controllers' union, Airbnb, basic income, behavioural economics, Bernie Sanders, Big Tech, business cycle, call centre, Cambridge Analytica, Capital in the Twenty-First Century by Thomas Piketty, carbon credits, carbon tax, Cass Sunstein, charter city, company town, congestion pricing, correlation does not imply causation, creative destruction, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, decarbonisation, Deng Xiaoping, Donald Trump, Edward Glaeser, en.wikipedia.org, endowment effect, energy transition, Erik Brynjolfsson, experimental economics, experimental subject, facts on the ground, fake news, fear of failure, financial innovation, flying shuttle, gentrification, George Akerlof, Great Leap Forward, green new deal, high net worth, immigration reform, income inequality, Indoor air pollution, industrial cluster, industrial robot, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, Jean Tirole, Jeff Bezos, job automation, Joseph Schumpeter, junk bonds, Kevin Roose, labor-force participation, land reform, Les Trente Glorieuses, loss aversion, low skilled workers, manufacturing employment, Mark Zuckerberg, mass immigration, middle-income trap, Network effects, new economy, New Urbanism, no-fly zone, non-tariff barriers, obamacare, off-the-grid, offshore financial centre, One Laptop per Child (OLPC), open economy, Paul Samuelson, place-making, post-truth, price stability, profit maximization, purchasing power parity, race to the bottom, RAND corporation, randomized controlled trial, restrictive zoning, Richard Thaler, ride hailing / ride sharing, Robert Gordon, Robert Solow, Ronald Reagan, Savings and loan crisis, school choice, Second Machine Age, secular stagnation, self-driving car, shareholder value, short selling, Silicon Valley, smart meter, social graph, spinning jenny, Steve Jobs, systematic bias, Tax Reform Act of 1986, tech worker, technology bubble, The Chicago School, The Future of Employment, The Market for Lemons, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, total factor productivity, trade liberalization, transaction costs, trickle-down economics, Twitter Arab Spring, universal basic income, urban sprawl, very high income, War on Poverty, women in the workforce, working-age population, Y2K

That people are using statistical logic does not, of course, mean they are always drawing the right inferences from it. In one study, researchers asked Ashkenazi Jews (European or American Jews and their descendants) in Israel to play a trust game with Eastern Jews (Asian and African immigrants and their descendants). The trust game is one of the mainstays of experimental economics. It is played by two people, one of whom, the sender, is given a certain amount of money and asked to share some part of it with the other person, the receiver. The amount could be zero and is entirely left to the sender’s discretion. However, they are both told that if the sender shares any of it, that shared amount will be tripled and given to the receiver, who then has full control over the money.


Termites of the State: Why Complexity Leads to Inequality by Vito Tanzi

accounting loophole / creative accounting, Affordable Care Act / Obamacare, Alan Greenspan, Andrei Shleifer, Andrew Keen, Asian financial crisis, asset allocation, barriers to entry, basic income, behavioural economics, bitcoin, Black Swan, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, clean water, crony capitalism, David Graeber, David Ricardo: comparative advantage, deindustrialization, Donald Trump, Double Irish / Dutch Sandwich, experimental economics, financial engineering, financial repression, full employment, George Akerlof, Gini coefficient, Gunnar Myrdal, high net worth, hiring and firing, illegal immigration, income inequality, indoor plumbing, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labor-force participation, libertarian paternalism, Long Term Capital Management, low interest rates, market fundamentalism, means of production, military-industrial complex, moral hazard, Naomi Klein, New Urbanism, obamacare, offshore financial centre, open economy, Pareto efficiency, Paul Samuelson, Phillips curve, price stability, principal–agent problem, profit maximization, pushing on a string, quantitative easing, rent control, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Second Machine Age, secular stagnation, self-driving car, Silicon Valley, Simon Kuznets, synthetic biology, The Chicago School, The Great Moderation, The Market for Lemons, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, Tyler Cowen: Great Stagnation, universal basic income, unorthodox policies, urban planning, very high income, Vilfredo Pareto, War on Poverty, Washington Consensus, women in the workforce

In the new century, an important new government role began that has accelerated in recent years: the use of paternalistically inspired regulations and so-called public nudges to promote, on the part of citizens and enterprises, behavior considered socially desirable (see Thaler and Sunstein, 2008). Some of these new regulations, or simply nudges, were justified and promoted using results obtained from experiments conducted by a fastgrowing new branch of economics called “experimental economics” (see Lewis, 2017). The nudges had the virtue of not needing compulsion on the part of the government or (significant) public resources. Therefore, the movement could be considered “paternalistically libertarian,” because individuals and enterprises were free to ignore the nudges, at low or no costs.


pages: 662 words: 180,546

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown by Philip Mirowski

"there is no alternative" (TINA), Adam Curtis, Alan Greenspan, Alvin Roth, An Inconvenient Truth, Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, bond market vigilante , bread and circuses, Bretton Woods, Brownian motion, business cycle, capital controls, carbon credits, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, democratizing finance, disinformation, do-ocracy, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, Flash crash, full employment, George Akerlof, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Greenspan put, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, information asymmetry, invisible hand, Jean Tirole, joint-stock company, junk bonds, Kenneth Arrow, Kenneth Rogoff, Kickstarter, knowledge economy, l'esprit de l'escalier, labor-force participation, liberal capitalism, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, Pareto efficiency, Paul Samuelson, payday loans, Philip Mirowski, Phillips curve, Ponzi scheme, Post-Keynesian economics, precariat, prediction markets, price mechanism, profit motive, public intellectual, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, savings glut, school choice, sealed-bid auction, search costs, Silicon Valley, South Sea Bubble, Steven Levy, subprime mortgage crisis, tail risk, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Theory of the Leisure Class by Thorstein Veblen, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, tontine, too big to fail, transaction costs, Tyler Cowen, vertical integration, Vilfredo Pareto, War on Poverty, Washington Consensus, We are the 99%, working poor

Let us look more closely at the practical mechanics of orthodox contemporary “economics imperialism.” While gleefully encroaching upon the spheres of interest of other disciplines, orthodox economics has also freely appropriated formalisms and methods from those other disciplines: think of the advent of “experimental economics” or the embrace of magnetic resonance imaging, or attempts to absorb chaos theory or nonstandard analysis or Brownian motion through the Ito calculus. Indeed, if there has been any conceptual constant throughout the history of neoclassical theory since the 1870s, it has been slavish attempts to slake its physics envy through gorging on half-digested imitations of physical models.


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Adaptive Markets: Financial Evolution at the Speed of Thought by Andrew W. Lo

Alan Greenspan, Albert Einstein, Alfred Russel Wallace, algorithmic trading, Andrei Shleifer, Arthur Eddington, Asian financial crisis, asset allocation, asset-backed security, backtesting, bank run, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, bitcoin, Bob Litterman, Bonfire of the Vanities, bonus culture, break the buck, Brexit referendum, Brownian motion, business cycle, business process, butterfly effect, buy and hold, capital asset pricing model, Captain Sullenberger Hudson, carbon tax, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, confounding variable, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, Daniel Kahneman / Amos Tversky, delayed gratification, democratizing finance, Diane Coyle, diversification, diversified portfolio, do well by doing good, double helix, easy for humans, difficult for computers, equity risk premium, Ernest Rutherford, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, Fractional reserve banking, framing effect, Glass-Steagall Act, global macro, Gordon Gekko, greed is good, Hans Rosling, Henri Poincaré, high net worth, housing crisis, incomplete markets, index fund, information security, interest rate derivative, invention of the telegraph, Isaac Newton, it's over 9,000, James Watt: steam engine, Jeff Hawkins, Jim Simons, job satisfaction, John Bogle, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, language acquisition, London Interbank Offered Rate, Long Term Capital Management, longitudinal study, loss aversion, Louis Pasteur, mandelbrot fractal, margin call, Mark Zuckerberg, market fundamentalism, martingale, megaproject, merger arbitrage, meta-analysis, Milgram experiment, mirror neurons, money market fund, moral hazard, Myron Scholes, Neil Armstrong, Nick Leeson, old-boy network, One Laptop per Child (OLPC), out of africa, p-value, PalmPilot, paper trading, passive investing, Paul Lévy, Paul Samuelson, Paul Volcker talking about ATMs, Phillips curve, Ponzi scheme, predatory finance, prediction markets, price discovery process, profit maximization, profit motive, proprietary trading, public intellectual, quantitative hedge fund, quantitative trading / quantitative finance, RAND corporation, random walk, randomized controlled trial, Renaissance Technologies, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Robert Shiller, Robert Solow, Sam Peltzman, Savings and loan crisis, seminal paper, Shai Danziger, short selling, sovereign wealth fund, Stanford marshmallow experiment, Stanford prison experiment, statistical arbitrage, Steven Pinker, stochastic process, stocks for the long run, subprime mortgage crisis, survivorship bias, systematic bias, Thales and the olive presses, The Great Moderation, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Triangle Shirtwaist Factory, ultimatum game, uptick rule, Upton Sinclair, US Airways Flight 1549, Walter Mischel, Watson beat the top human players on Jeopardy!, WikiLeaks, Yogi Berra, zero-sum game

The difference in adaptation between systematic and idiosyncratic risk is evolutionarily tremendous, giving rise to entirely different behaviors. As we saw earlier, nature abhors an undiversified bet. THE ORIGIN OF RISK AVERSION Probability matching may seem like foolish behavior in an experimental economics laboratory, but it’s likely to have originated from an environment where that kind of behavior conferred certain survival benefits that other behaviors did not. Using the mathematical framework that Tom and I developed, we can identify the specific environments that gave rise to such behavior.


Blueprint: The Evolutionary Origins of a Good Society by Nicholas A. Christakis

Abraham Maslow, agricultural Revolution, Alfred Russel Wallace, AlphaGo, Amazon Mechanical Turk, assortative mating, autism spectrum disorder, Cass Sunstein, classic study, CRISPR, crowdsourcing, data science, David Attenborough, deep learning, different worldview, disruptive innovation, domesticated silver fox, double helix, driverless car, Easter island, epigenetics, experimental economics, experimental subject, Garrett Hardin, intentional community, invention of agriculture, invention of gunpowder, invention of writing, iterative process, job satisfaction, Joi Ito, joint-stock company, land tenure, language acquisition, Laplace demon, longitudinal study, Mahatma Gandhi, Marc Andreessen, means of production, mental accounting, meta-analysis, microbiome, out of africa, overview effect, phenotype, Philippa Foot, Pierre-Simon Laplace, placebo effect, race to the bottom, Ralph Waldo Emerson, replication crisis, Rubik’s Cube, Silicon Valley, Skinner box, social intelligence, social web, stem cell, Steven Pinker, the scientific method, theory of mind, Tragedy of the Commons, twin studies, ultimatum game, zero-sum game

Heath, “Inside Amazon’s Clickworker Platform,” TechRepublic, 2016, https://www.techrepublic.com/article/inside-amazons-clickworker-platform-how-half-a-million-people-are-training-ai-for-pennies-per-task/. 3. J. Bohannon, “Psychologists Grow Increasingly Dependent on Online Research Subjects,” Science, June 7, 2016. 4. J. J. Horton, D. G. Rand, and R. J. Zeckhauser, “The Online Laboratory: Conducting Experiments in a Real Labor Market,” Experimental Economics 14 (2011): 399–425; E. Snowberg and L. Yariv, “Testing the Waters: Behavior Across Participant Pools” (working paper no. 24781, National Bureau of Economic Research, June 2018). 5. M. Zelditch, “Can You Really Study an Army in the Laboratory?,” in A. Etzioni, ed., Complex Organizations, 2nd ed.


Atomic Accidents: A History of Nuclear Meltdowns and Disasters: From the Ozark Mountains to Fukushima by James Mahaffey

clean water, Dr. Strangelove, Ernest Rutherford, experimental economics, Ford Model T, Google Earth, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, it's over 9,000, loose coupling, Menlo Park, military-industrial complex, mutually assured destruction, off-the-grid, Richard Feynman, ROLM, Ronald Reagan, Saturday Night Live, Suez canal 1869, uranium enrichment, wage slave, wikimedia commons

There are many fine hydroelectric dams in the United States, each demonstrating the American ability to bend nature to our needs with well-thought-out engineering practice and the skill necessary to build large things. In 1961 the United States and the Soviet Union were engaged in an all-out war. It was a cold war, in which the purpose was not to see how many of the other side we could kill but to prove who had the superior experimental economic system. It was an American form of capitalism against a Russian form of communism, and the battles raged on many fronts. The Soviets had already cleaned our plow in the race for manned space flight, putting Vostok 1 with Yuri Gagarin into orbit on April 14. We were falling way behind. Thinking to show the U.S., which had built the magnificent Hoover Dam in Nevada, how to really build a hydroelectric plant, the Soviet Union decided to construct the world’s largest reservoir to produce an impressive 6.4 billion watts of power using a line of ten turbo-generators.


pages: 796 words: 223,275

The WEIRDest People in the World: How the West Became Psychologically Peculiar and Particularly Prosperous by Joseph Henrich

agricultural Revolution, Bartolomé de las Casas, behavioural economics, British Empire, charter city, cognitive dissonance, Columbian Exchange, correlation does not imply causation, cotton gin, Daniel Kahneman / Amos Tversky, dark matter, delayed gratification, discovery of the americas, Edward Glaeser, en.wikipedia.org, endowment effect, epigenetics, European colonialism, experimental economics, financial innovation, Flynn Effect, fundamental attribution error, glass ceiling, income inequality, invention of agriculture, Isaac Newton, James Hargreaves, James Watt: steam engine, Johannes Kepler, John Snow's cholera map, joint-stock company, knowledge economy, land reform, longitudinal study, Menlo Park, mental accounting, meta-analysis, New Urbanism, pattern recognition, Pearl River Delta, profit maximization, randomized controlled trial, Republic of Letters, rolodex, social contagion, social web, sparse data, spinning jenny, Spread Networks laid a new fibre optics cable between New York and Chicago, Stanford marshmallow experiment, tacit knowledge, The Wealth of Nations by Adam Smith, theory of mind, trade route, Tyler Cowen, ultimatum game, wikimedia commons, working-age population, World Values Survey, zero-sum game

Toubert, P. (1996). The Carolingian moment. In A. Burguiere, C. Klapisch-Zuber, M. Segalen, and F. Zonabend (eds.), A History of the Family (pp. 379–406). Cambridge, MA: Belknap Press of Harvard University Press. Tracer, D. P. (2003). Selfishness and fairness in economic and evolutionary perspective: An experimental economic study in Papua New Guinea. Current Anthropology 44 (3), 432–38. Tracer, D. P. (2004). Market integration, reciprocity, and fairness in rural Papua New Guinea: Results from two-village Ultimatum Game experiments. In J. Henrich, R. Boyd, S. Bowles, C. Camerer, E. Fehr, and H. Gintis (eds.), Foundations of Human Sociality: Economic Experiments and Ethnographic Evidence from Fifteen Small-Scale Societies (pp. 232–59).


Europe: A History by Norman Davies

agricultural Revolution, Albert Einstein, anti-communist, Berlin Wall, bread and circuses, Bretton Woods, British Empire, business climate, centre right, charter city, classic study, clean water, Columbian Exchange, conceptual framework, continuation of politics by other means, Corn Laws, cuban missile crisis, Defenestration of Prague, discovery of DNA, disinformation, double entry bookkeeping, Dr. Strangelove, Edmond Halley, Edward Lloyd's coffeehouse, equal pay for equal work, Eratosthenes, Etonian, European colonialism, experimental economics, financial independence, finite state, Francis Fukuyama: the end of history, Francisco Pizarro, full employment, gentleman farmer, global village, Gregor Mendel, Honoré de Balzac, Index librorum prohibitorum, interchangeable parts, invention of agriculture, invention of movable type, Isaac Newton, James Hargreaves, James Watt: steam engine, Johann Wolfgang von Goethe, Johannes Kepler, John Harrison: Longitude, joint-stock company, Joseph-Marie Jacquard, Korean Air Lines Flight 007, land reform, liberation theology, long peace, Louis Blériot, Louis Daguerre, Mahatma Gandhi, mass immigration, Mikhail Gorbachev, military-industrial complex, Monroe Doctrine, Murano, Venice glass, music of the spheres, New Urbanism, North Sea oil, offshore financial centre, Peace of Westphalia, Plato's cave, popular capitalism, Potemkin village, purchasing power parity, Ralph Waldo Emerson, road to serfdom, sceptred isle, Scramble for Africa, spinning jenny, Suez canal 1869, Suez crisis 1956, Thales of Miletus, the scientific method, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, transatlantic slave trade, Transnistria, urban planning, urban sprawl, W. E. B. Du Bois

The CMEA allocated specialized tasks to each member country, and put great store on the dissemination of modern science and technology. This satisfied everyone, except Romania. But the main pilot scheme was launched in Hungary. Andropov, now head of the CPSU’s International Department, and Kádár both realized that the reign of terror which followed the Hungarian rising had created an opening for intelligent economic experimentation. Economic reform could proceed without the threat of political turbulence. ‘Goulash communism’ would cure well-fed citizens of their dreams of liberty. The main idea was to introduce limited market mechanisms into a system still controlled by the state, and to encourage enterprise, especially in agriculture, by relaxing controls on compulsory deliveries and land ownership.