Article by W. Brian Arthur: “Conventional, neoclassical economics assumes perfectly rational agents (firms, consumers, investors) who face well-defined problems and arrive at optimal behaviour consistent with — in equilibrium with — the overall outcome caused by this behaviour. This rational, equilibrium system produces an elegant economics, but is restrictive and often unrealistic. Complexity economics relaxes these assumptions. It assumes that agents differ, that they have imperfect information about other agents and must, therefore, try to make sense of the situation they face. Agents explore, react and constantly change their actions and strategies in response to the outcome they mutually create. The resulting outcome may not be in equilibrium and may display patterns and emergent phenomena not visible to equilibrium analysis. The economy becomes something not given and existing but constantly forming from a developing set of actions, strategies and beliefs — something not mechanistic, static, timeless and perfect but organic, always creating itself, alive and full of messy vitality….(More)”.
Why Trust Matters: An Economist’s Guide to the Ties That Bind Us
Book by Benjamin Ho: “Have economists neglected trust? The economy is fundamentally a network of relationships built on mutual expectations. More than that, trust is the glue that holds civilization together. Every time we interact with another person—to make a purchase, work on a project, or share a living space—we rely on trust. Institutions and relationships function because people place confidence in them. Retailers seek to become trusted brands; employers put their trust in their employees; and democracy works only when we trust our government.
Benjamin Ho reveals the surprising importance of trust to how we understand our day-to-day economic lives. Starting with the earliest societies and proceeding through the evolution of the modern economy, he explores its role across an astonishing range of institutions and practices. From contracts and banking to blockchain and the sharing economy to health care and climate change, Ho shows how trust shapes the workings of the world. He provides an accessible account of how economists have applied the mathematical tools of game theory and the experimental methods of behavioral economics to bring rigor to understanding trust. Bringing together insights from decades of research in an approachable format, Why Trust Matters shows how a concept that we rarely associate with the discipline of economics is central to the social systems that govern our lives….(More)”.
Averting Catastrophe
Book by Cass Sunstein on “Decision Theory for COVID-19, Climate Change, and Potential Disasters of All Kinds…The world is increasingly confronted with new challenges related to climate change, globalization, disease, and technology. Governments are faced with having to decide how much risk is worth taking, how much destruction and death can be tolerated, and how much money should be invested in the hopes of avoiding catastrophe. Lacking full information, should decision-makers focus on avoiding the most catastrophic outcomes? When should extreme measures be taken to prevent as much destruction as possible?
Averting Catastrophe explores how governments ought to make decisions in times of imminent disaster. Cass R. Sunstein argues that using the “maximin rule,” which calls for choosing the approach that eliminates the worst of the worst-case scenarios, may be necessary when public officials lack important information, and when the worst-case scenario is too disastrous to contemplate. He underscores this argument by emphasizing the reality of “Knightian uncertainty,” found in circumstances in which it is not possible to assign probabilities to various outcomes. Sunstein brings foundational issues in decision theory in close contact with real problems in regulation, law, and daily life, and considers other potential future risks. At once an approachable introduction to decision-theory and a provocative argument for how governments ought to handle risk, Averting Catastrophe offers a definitive path forward in a world rife with uncertainty….(More)”.
Our Brain Typically Overlooks This Brilliant Problem-Solving Strategy
Diana Kwon in Scientific American: “For generations, the standard way to learn how to ride a bicycle was with training wheels or a tricycle. But in recent years, many parents have opted to train their kids with balance bikes, pedalless two-wheelers that enable children to develop the coordination needed for bicycling—a skill that is not as easily acquired with an extra set of wheels.
Given the benefits of balance bikes, why did it take so long for them to replace training wheels? There are plenty of other examples in which overlooked solutions that involve subtraction turn out to be better alternatives. In some European cities, for example, urban planners have gotten rid of traffic lights and road signs to make streets safer—an idea that runs counter to conventional traffic design.
Leidy Klotz, an engineer at the University of Virginia, noticed that minimalist designs, in which elements are removed from an existing model, were uncommon. So he reached out to Gabrielle Adams, a social psychologist at the university, to try to figure out why this was the case. The two researchers hypothesized that there might be a psychological explanation: when faced with a problem, people tend to select solutions that involve adding new elements rather than taking existing components away….
These findings, which were published today in Nature, suggest that “additive solutions have sort of a privileged status—they tend to come to mind quickly and easily,” says Benjamin Converse, a social psychologist at the University of Virginia and a co-author of the study. “Subtractive solutions are not necessarily harder to consider, but they take more effort to find.”…(More)”.
Dark patterns, the tricks websites use to make you say yes, explained
Article by Sara Morrison: “If you’re an Instagram user, you may have recently seen a pop-up asking if you want the service to “use your app and website activity” to “provide a better ads experience.” At the bottom there are two boxes: In a slightly darker shade of black than the pop-up background, you can choose to “Make ads less personalized.” A bright blue box urges users to “Make ads more personalized.”
This is an example of a dark pattern: design that manipulates or heavily influences users to make certain choices. Instagram uses terms like “activity” and “personalized” instead of “tracking” and “targeting,” so the user may not realize what they’re actually giving the app permission to do. Most people don’t want Instagram and its parent company, Facebook, to know everything they do and everywhere they go. But a “better experience” sounds like a good thing, so Instagram makes the option it wants users to select more prominent and attractive than the one it hopes they’ll avoid.
There’s now a growing movement to ban dark patterns, and that may well lead to consumer protection laws and action as the Biden administration’s technology policies and initiatives take shape. California is currently tackling dark patterns in its evolving privacy laws, and Washington state’s latest privacy bill includes a provision about dark patterns.
“When you look at the way dark patterns are employed across digital engagement, generally, [the internet allows them to be] substantially exacerbated and made less visible to consumers,” Rebecca Kelly Slaughter, acting chair of the Federal Trade Commission (FTC), told Recode. “Understanding the effect of that is really important to us as we craft our strategy for the digital economy.”
Dark patterns have for years been tricking internet users into giving up their data, money, and time. But if some advocates and regulators get their way, they may not be able to do that for much longer…(More)”.
Mine!: How the Hidden Rules of Ownership Control Our Lives
Book by Michael Heller and James Salzman: “A hidden set of rules governs who owns what–explaining everything from whether you can recline your airplane seat to why HBO lets you borrow a password illegally–and in this lively and entertaining guide, two acclaimed law professors reveal how things become “mine.”
“Mine” is one of the first words babies learn. By the time we grow up, the idea of ownership seems natural, whether buying a cup of coffee or a house. But who controls the space behind your airplane seat: you reclining or the squished laptop user behind? Why is plagiarism wrong, but it’s okay to knock-off a recipe or a dress design? And after a snowstorm, why does a chair in the street hold your parking space in Chicago, but in New York you lose the space and the chair?
Mine! explains these puzzles and many more. Surprisingly, there are just six simple stories that everyone uses to claim everything. Owners choose the story that steers us to do what they want. But we can always pick a different story. This is true not just for airplane seats, but also for battles over digital privacy, climate change, and wealth inequality. As Michael Heller and James Salzman show–in the spirited style of Freakonomics, Nudge, and Predictably Irrational–ownership is always up for grabs.
With stories that are eye-opening, mind-bending, and sometimes infuriating, Mine! reveals the rules of ownership that secretly control our lives….(More)”.
Opinion Fetishism: Can we escape the reductio ad tweetum?
Essay by Alexander Stern: “Something once expressed, however absurd, fortuitous or wrong it may be, because it has been once said, so tyrannizes the sayer as his property that he can never have done with it.”
So observes the German social theorist Theodor Adorno in his 1951 book Minima Moralia. Although he is reflecting on the transformations of individuality and interpersonal relations in the industrial society of the late 1940s, Adorno sounds almost as though he is discussing Twitter, particularly the way tweets are taken as immutable expressions of a person’s essential being. Thoughts tweeted in the distant past are exhumed to torment people who have risen to prominence. People engage in ritual apologies for innocuous tweets that offend overly delicate sensibilities. Some insufficiently prudent souls even end up losing jobs for tweets that are hardly controversial.
While all of this seems to be very much of our time, one of the many unhappy products of our highly mediated lives, the provenance of Adorno’s observation suggests that the distance between what we say and who we are—between ideas and identity—has been shrinking for a long time. The consequence of that shrinkage is not just that it can dehumanize. It also distorts democratic discourse, turning it into a war of all against all. Without the distance between self and thought, self and utterance, we are unable to entertain, probe, or debate ideas. We are unable to change our minds or to persuade others. We are not even in a position to form our views in thoughtful, disinterested ways. But there may yet be a way out. Precisely by codifying and accelerating the collapse of the distinction between ideas and identity, Twitter might ironically be alerting us to the absurdity and shallowness of intellectual life practiced on its terms.
How exactly did we come to this pass? The simple answer, for Adorno, was that utterances—and those who utter them—have taken on a commodity character, in Karl Marx’s sense of the term. Commercial products, Marx thought, began to evince a strange quality under industrial production. They no longer appeared to be the result of a social process mixing labor and material but took on a fetishized glow that hid the specifics of their production and endowed their mere materiality with a quasi-mystical sheen—the kind that makes teenagers covet Air Jordans, for example. The amplification of this fetish character is, indeed, the explicit aim of contemporary branding….(More)”.
Noise: A Flaw in Human Judgment
Book by Daniel Kahneman, Olivier Sibony, and Cass R. Sunstein: “Imagine that two doctors in the same city give different diagnoses to identical patients—or that two judges in the same courthouse give markedly different sentences to people who have committed the same crime. Suppose that different interviewers at the same firm make different decisions about indistinguishable job applicants—or that when a company is handling customer complaints, the resolution depends on who happens to answer the phone. Now imagine that the same doctor, the same judge, the same interviewer, or the same customer service agent makes different decisions depending on whether it is morning or afternoon, or Monday rather than Wednesday. These are examples of noise: variability in judgments that should be identical.
In Noise, Daniel Kahneman, Olivier Sibony, and Cass R. Sunstein show the detrimental effects of noise in many fields, including medicine, law, economic forecasting, forensic science, bail, child protection, strategy, performance reviews, and personnel selection. Wherever there is judgment, there is noise. Yet, most of the time, individuals and organizations alike are unaware of it. They neglect noise. With a few simple remedies, people can reduce both noise and bias, and so make far better decisions….(More)”.
Framers: Human Advantage in an Age of Technology and Turmoil
Book by Kenneth Cukier, Viktor Mayer-Schönberger and, Francis de Véricourt: “The essential tool that will enable humanity to find the best way through a forest of looming problems is defined in Framers by internationally renowned authors Kenneth Cukier, Viktor Mayer-Schönberger and Francis de Véricourt. From pandemics to populism, AI to ISIS, wealth inequity to climate change, humanity faces unprecedented challenges that threaten our very existence.
To frame is to make a mental model that enables us to see patterns, predict how things will unfold, and make sense of new situations. Frames guide the decisions we make and the results we attain. People have long focused on traits like memory and reasoning leaving framing all but ignored. But with computers becoming better at some of those cognitive tasks, framing stands out as a critical function—and only humans can do it. This book is the first guide to mastering this innate human ability.
Illustrating their case with compelling examples and the latest research, authors Cukier, Mayer-Schönberger and de Véricourt examine:
· Why advice to “think outside the box” is useless.
· How Spotify beat Apple by reframing music as an experience.
· What the historic 1976 Israeli commando raid on Entebbe that rescued over 100 hostages can tell us about how to frame.
· How the #MeToo twitter hashtag reframed the perception of sexual assault.
· The disaster of framing Covid-19 as equivalent to seasonal flu, and how framing it akin to SARS delivered New Zealand from the pandemic.
Framers shows how framing is not just a way to improve how we make decisions in the era of algorithms—but why it will be a matter of survival for humanity in a time of societal upheaval and machine prosperity….(More)”.
The World Happiness Report 2021
Report by the Sustainable Development Solutions Network: “There has been surprising resilience in how people rate their lives overall. The Gallup World Poll data are confirmed for Europe by the separate Eurobarometer surveys and several national surveys.
- The change from 2017-2019 to 2020 varied considerably among countries, but not enough to change rankings in any significant fashion materially. The same countries remain at the top.
- Emotions changed more than did life satisfaction during the first year of COVID-19, worsening more during lockdown and recovering faster, as illustrated by large samples of UK data. For the world as a whole, based on the annual data from the Gallup World Poll, there was no overall change in positive affect, but there was a roughly 10% increase in the number of people who said they were worried or sad the previous day.
- Trust and the ability to count on others are major supports to life evaluations, especially in the face of crises. To feel that your lost wallet would be returned if found by a police officer, by a neighbour, or a stranger, is estimated to be more important for happiness than income, unemployment, and major health risks (see Figure 2.4 in chapter 2)
- Trust is even more important in explaining the very large international differences in COVID-19 death rates, which were substantially higher in the Americas and Europe than in East Asia, Australasia, and Africa, as shown here (see Figure 2.5 of chapter 2). These differences were almost half due to differences in the age structure of populations (COVID-19 much more deadly for the old), whether the country is an island, and how exposed each country was, early in the pandemic, to large numbers of infections in nearby countries. Whatever the initial circumstances, the most effective strategy for controlling COVID-19 was to drive community transmission to zero and to keep it there. Countries adopting this strategy had death rates close to zero, and were able to avoid deadly second waves, and ended the year with less loss of income and lower death rates.
- Factors supporting successful COVID-19 strategies include
- confidence in public institutions. Trusted public institutions were more likely to choose the right strategy and have their populations support the required actions. For example, Brazil’s death rate was 93 per 100,000, higher than in Singapore, and of this difference, over a third could be explained by the difference in public trust….(More)”