Why Thaler’s Nobel is a well-deserved nudge for behavioural economics


A well deserved Nobel for Thaler.

Mr Thaler advanced the field in two important ways. He campaigned for behavioural economics to be taken seriously within the economics profession. He also brought it into the policy environment with his book Nudge (co-authored with Cass Sunstein) and his support for behavioural policy units in the White House and 10 Downing Street.

Within the profession, Mr Thaler found a pulpit in the Journal of Economic Perspectives, an academic journal supplied to all members of the American Economic Association. His Anomalies column was witty and sharply reasoned, highlighting strange features of the economic and financial world that standard economic theory could not explain, and rigorously debunking unconvincing attempts at rationalisation.

The complete article

Tim Harford

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Think before you donate to disasters


A different perspective to donations that you make towards disaster relief.

Donating to large international NGOs usually means that a lot of foreign relief aid will be imported into the affected countries. Most disasters, even the large scale ones are rather isolated. Flood and earthquake areas rarely extend over 10 km, and there will be local businesses which are open for business post disasters, but they will be excluded from relief by the international NGOs. Businesses in the foreign countries will be the ones who benefit from the disaster.

In the long run, these aids do affect the local economies adversely and your well-meaning donations will cause harm to the financial ecosystem. What’s worse is that some international organisations are managed off site in another country and bureaucracy may cause massive waste and inefficiencies.

The complete article

Robin Low — The Middle Ground

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The 1% Is Overrepresented in the Ivy League


If your parents count themselves among the top 1%, you’re 77 times more likely to attend an Ivy League college than your peers from families in the bottom 20% of the U.S.’ income distribution.

Why the focus on Ivy League universities? Of course, the pool of top institutions of higher education extends far beyond that group. But in mobility terms, say the authors, you’re more likely to move from the bottom quintile into the top 1% if you attend elite colleges, including those that comprise the Ivy League. In other words, elite colleges can confer mobility in powerful ways.

The complete article

Jack Gao — Institute for New Economic Thinking

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Why foreign aid cannot be regressive?


Now, when the European Union seems to be considering a significant increase in aid for Africa—led this time not by humanitarian concerns but by the well understood self-interest as reduction of migration is hard to imagine without a substantial convergence in incomes between Africa and Europe—it is worth pointing out that one argument against aid cannot hold. This is the argument made sometime in popular press (and at times, in academe too), that aid to the poor countries is just a transfer of resources from the poor people in rich countries to the rich people in poor countries. This is what is in economics called a “regressive transfer”. (“Progressive” transfer is what we desire to achieve: tax a richer person and transfer the money to a poorer.)

The complete article

Branko Milanovic — globalinequality

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American Health Care: Is It Worth It?

As Republicans debate plans to repeal or replace the Affordable Care Act (aka Obamacare), it’s useful to look at just what Americans get from their expensive health care system:

Although anecdotal evidence suggests that waiting times are lower in the U.S. than in other countries, true quality indicators are difficult to derive due to measurement errors. So it’s difficult to say definitively that U.S. consumers get better-quality care than people in other industrialized countries, but their care is definitely the most expensive.

San Antonio Review

Image: Healthcare.gov

The Trouble with Incentives


Human beings are complex. It is difficult to predict their response to incentives. Today’s needull is a review of the book – The Moral Economy: Why Good Incentives Are no Substitute for Good Citizensby Samuel Bowles.

According to legend, when the father of modern Greece, Ioannis Kapodistrias, attempted to address the malnourishment of his people by importing and freely distributing potatoes, the Greeks roundly rejected his offer. Heeding Laocoön’s ancient wisdom, the people of the Peloponnese knew better than to trust a Greek bearing gifts. As the story goes, Kapodistrias responded to the people’s refusal to accept the potatoes by unloading a shipment on the streets of Nafplion and instructing his soldiers to pretend to stand guard. The untrusting Greeks would not accept free potatoes—if they are free, something must be wrong with them—but were more than happy to steal provisions so important they needed to be guarded by the army. Kapodistrias’ ploy worked, and potatoes soon became a staple of the Greek diet. In Nafplion, the offer of free potatoes did not stimulate demand. Nor did the threat of punishment deter theft. Instead, the threat of punishment communicated the value of the potatoes. If something is worth guarding, it is worth stealing, and the Greeks responded to the new information by stealing more.

The complete article

Dimitrios Halikias – The New Rambler

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Is your country ready for a catastrophe?


How ready is your country to face a massive change? Today’s needull looks at this critical aspect.

Stiles compares the experience of Haiti in 2010 with Chile, which experienced an 8.8-magnitude earthquake soon after. More than 90% of Chile’s population lost power and thousands of homes were destroyed by a tsunami. But, within three months, the country’s stock market and consumer confidence was back to pre-disaster levels, and economic growth seemed unaffected, he says. Haiti, by contrast, had a loss of more than 5% of GDP in 2010. “Haiti struggled to rebound from the earthquake, hampered by weak government structures, poorly coordinated humanitarian response and loss of key personnel,” he says. Haiti now stands at 123rd in the index, compared to Chile’s 24th place ranking.
Though the top performers are all rich countries, several lower and middle-income nations punch above their weight. Rwanda, officially a “low income” country, is in 46th place ahead of high-income economies like Greece (54th) and plenty of upper middle- and lower-middle-income countries, including Turkey and Mexico.