Archivio per novembre 2013



29
Nov
13

Planning for the future

See on Scoop.itBounded Rationality and Beyond

I’d like to write about the implications of living longer for retirement planning and the role that behavioral biases play in the difficulty people have in planning for their retirement years. My research interests are in how people think about the future, especially when they are planning for the future, and how thinking about the future is different than thinking about the present. My research supports what the physicist Niels Bohr (and many others) reportedly said, “predictions are difficult, especially about the future”. The first and biggest challenge is paying attention to the future long enough to make a plan. Why is thinking about the (far) future so difficult, especially when it comes to money? You might think it is simply because people are short-sighted and greedy. We know from behavioral research, however, that given a choice between a healthy snack and a sweet treat, people will eat the treat now and plan to have the healthy snack next week1.

However, when next week arrives, they do the same thing—indulging their current self now and promising virtuous choices for the future self. And to some extent, we see the same thing with financial behavior—people run up credit card debt to pay for a new TV or a winter vacation. But while I believe that self-control problems and what behavioral economists call “present-biased preferences2 ” are real and important, I think they are probably a relatively minor cause of the difficulty most of us having in thinking about long-term financial planning. I think it is important that people stop beating themselves up over their weakness of will and lack of self-control and realize that long-term planning is actually an unnatural act that requires outsmarting the brain’s natural focus on the present and near-future.

See on bringyourchallenges.com

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29
Nov
13

Tax compliance and loss aversion

See on Scoop.itBounded Rationality and Beyond

Abstract
We study if taxpayers are loss averse when filing returns. Preliminary deficits might be viewed as losses assuming zero preliminary balances as reference points. Swedish taxpayers can to try to escape such losses by claiming deductions after receiving information about the preliminary balance. Using a regression kink and discontinuity approach, we study data for 3.6 million Swedish taxpayers for 2006.
There are strong causal effects of preliminary tax deficits on the robability of claiming deductions. 

Compliance will increase and auditing costs will be reduced if preliminary taxes are calibrated so that most tax payers receive refunds.

Per Engstrom – Katarina Nordblom – Henry Ohlsson – Annika Persson

#behavioraleconomics
See on econ.au.dk

29
Nov
13

Tax compliance and loss aversion

See on Scoop.itBounded Rationality and Beyond

Abstract
We study if taxpayers are loss averse when filing returns. Preliminary deficits might be viewed as losses assuming zero preliminary balances as reference points. Swedish taxpayers can to try to escape such losses by claiming deductions after receiving information about the preliminary balance. Using a regression kink and discontinuity approach, we study data for 3.6 million Swedish taxpayers for 2006.
There are strong causal effects of preliminary tax deficits on the robability of claiming deductions. 

Compliance will increase and auditing costs will be reduced if preliminary taxes are calibrated so that most tax payers receive refunds.

 

Per Engstrom – Katarina Nordblom – Henry Ohlsson – Annika Persson

#behavioraleconomics
See on econ.au.dk

28
Nov
13

Cass Sunstein on making government simpler, not smaller

See on Scoop.itBounded Rationality and Beyond

As head of the White House office that deals with government regulation under President Obama, Cass Sunstein pushed for fewer rules and lower costs. His new book lays out a path for simpler, if not smaller, government going forward. 

Whenever a federal agency sets new standards, say about the environment, or the financial industry, there’s an office inside the White House that has to put the final seal of approval on those regulations. It’s called OIRA (pronounced, “Oh, Ira”) – theOffice of Information and Regulatory Affairs.

Up until last year, Cass Sunstein ran that office for President Obama. And he’s got a new book about making government, and its rules, work more elegantly. It’s called “Simpler”.

“Think of a large company which is not going to get smaller. It shouldn’t. It should grow. But it can get simpler. It can make the experience for its own employees and for its customers easier,” Sunstein says. “My suggestion is that governments can serve their citizens a lot better if they get simpler." 

The current regulatory system in the United States is undoubtedly complicated, with state and local agencies issuing their own rules. That’s in addition to the sometimes conflicting policies coming out of multiple federal agencies. At Sunstein’s former post, OIRA, the focus is on negotiating and solving those potential conflicts.

That can lead to criticism that the office is a convenient place for Presidents to allow inconvenient rules to wither away. Sunstein doesn’t agree with that characterization.

See on marketplace.org

28
Nov
13

Cass Sunstein on making government simpler, not smaller

See on Scoop.itBounded Rationality and Beyond

As head of the White House office that deals with government regulation under President Obama, Cass Sunstein pushed for fewer rules and lower costs. His new book lays out a path for simpler, if not smaller, government going forward. 

Whenever a federal agency sets new standards, say about the environment, or the financial industry, there’s an office inside the White House that has to put the final seal of approval on those regulations. It’s called OIRA (pronounced, “Oh, Ira”) — theOffice of Information and Regulatory Affairs.

Up until last year, Cass Sunstein ran that office for President Obama. And he’s got a new book about making government, and its rules, work more elegantly. It’s called “Simpler”.

“Think of a large company which is not going to get smaller. It shouldn’t. It should grow. But it can get simpler. It can make the experience for its own employees and for its customers easier,” Sunstein says. “My suggestion is that governments can serve their citizens a lot better if they get simpler.” 

The current regulatory system in the United States is undoubtedly complicated, with state and local agencies issuing their own rules. That’s in addition to the sometimes conflicting policies coming out of multiple federal agencies. At Sunstein’s former post, OIRA, the focus is on negotiating and solving those potential conflicts.

That can lead to criticism that the office is a convenient place for Presidents to allow inconvenient rules to wither away. Sunstein doesn’t agree with that characterization.

See on www.marketplace.org

28
Nov
13

The Behavioural Economics of Big Data

See on Scoop.itBounded Rationality and Beyond

It has long been recognised by those working with data that given a large enough sample size then most data points will have statistically significant correlations because at some level everything is related to everything else.  The psychologist Paul Meehl famously called this the ‘Crud Factor’  leading us to believe there are real relationships in the data where in fact the linkage is trivial.

Nate Silver made the same point when he warned that the number of ‘meaningful relationships’ is not increasing in step with the meteoric increase in amount of data available.  We simply generate a larger number of false positives, an issue endemic in data analytics which led John Ioannidis to suggest that two-thirds of the findings in medical journals were in fact not robust.

So if we cannot always rely on statistical techniques to cut through swathes of data to find meaningful patterns then where do we turn?  Naturally, we look to ourselves. Perhaps this is implicit in the discussion about the qualities of good data scientists, being ‘informed sceptics’ that balance judgement and analysis or that the key qualities are having a sense of wonder, a quantitative knack, persistence and technical skills.  However as soon as we recognise that humans are involved in the analysis of data we need to start exploring some of the frailties of our judgement for if there is one thing that behavioural economics has taught us, is that none of us is immune from misinterpreting data.

 
See on rwconnect.esomar.org

28
Nov
13

The Behavioural Economics of Big Data

See on Scoop.itBounded Rationality and Beyond

It has long been recognised by those working with data that given a large enough sample size then most data points will have statistically significant correlations because at some level everything is related to everything else.  The psychologist Paul Meehl famously called this the ‘Crud Factor’  leading us to believe there are real relationships in the data where in fact the linkage is trivial.

Nate Silver made the same point when he warned that the number of ‘meaningful relationships’ is not increasing in step with the meteoric increase in amount of data available.  We simply generate a larger number of false positives, an issue endemic in data analytics which led John Ioannidis to suggest that two-thirds of the findings in medical journals were in fact not robust.

So if we cannot always rely on statistical techniques to cut through swathes of data to find meaningful patterns then where do we turn?  Naturally, we look to ourselves. Perhaps this is implicit in the discussion about the qualities of good data scientists, being ‘informed sceptics’ that balance judgement and analysis or that the key qualities are having a sense of wonder, a quantitative knack, persistence and technical skills.  However as soon as we recognise that humans are involved in the analysis of data we need to start exploring some of the frailties of our judgement for if there is one thing that behavioural economics has taught us, is that none of us is immune from misinterpreting data.

 
See on rwconnect.esomar.org




Time is real? I think not

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