Zombieconomics

I thought I'd end 2012 by starting to deal with the elephant in the room.

How would economics be affected by the inevitable zombie apocalypse?

1. Saving rates would plummet. This would adversely effect the demographic time-bomb.
2. In experiments we would see a greater degree of cooperation between humans as they fight for survival. However, the degree of cooperation between zombies remains an unknown.
3. Tax collection would become harder. Therefore the zombie apocalypse would cause greater tax evasion (c.f. Starbucks).
4. Responsibility for the enforcement of property rights would largely pass from the state to the individual. Sales of axes would increase.
5. Responsibility for personal health and safety would largely pass from the state to the individual. Sales of axes would increase.
6. The inevitable zombie apocalypse can only be good news for the axe manufacturing industry.

It is only by thoroughly considering the economic implications of the inevitable zombie apocalypse that we can prepare for it. Zombies or no zombies, the world needs economists.

Sham Statistics

You can prove anything with statistics. I know that is not strictly behavioural economics, but it is true. Sometimes, however, attempts to prove 'anything' are a tad blatant.

As I sat through the cinema adverts before The Hobbit started last night, one advert caught my attention. It was for a men's perfume that claimed to be better than the rest (I can't remember the brand). In order to back up this claim it had a statistic along the lines of "Most men prefer our perfume!"

In small print at the bottom of the screen was displayed the following sentence:

88% of 32 men agree

Argghhh!

That is a mind-bogglingly small (and thus unreliable) sample! Leaving aside the fact that we do not know how they conducted the survey or how the selected the 32 men (for all we know they could have been employees...), a sample size of 32 is not large enough to be conclusive.

Conclusion: You can prove anything with statistics, especially if you are unscrupulous.

When The Chips Are Down...

Last night I played poker. Not for money, just pride. I actually did quite well (cue comments about behavioural economists being able to read people - not actually true; I just got lucky!)

But I was, sadly, irrational.

When I bet my chips, I preferred to bet the smaller chips in larger quantities than the larger chips. For example, I'd bet two 500 chips rather than one 1000 chip. Not only this, but I felt more carefree when I had lots of smaller chips. I would bet on things that I definitely wouldn't have done had I had to get change from a large chip.

I sometimes refused to make bets because it would mean sacrificing a sacred 1000 chip, whereas if I had ten 100 chips I would have bet. Irrational. 

In other words, I changed my behaviour based on trivial things. Trivial things that economists assume we pay no heed of.

The Golden Rule

I heard a presentation by an economist this week about an experiment he had run which attempted to measure whether people abided by the Golden Rule in their economic interactions:

"Do to others as you would have them do to you." 

- Luke 6:31

This is a very interesting question and it would be fascinating to know the extent to which people treat others as they wish to be treated themselves. Sadly, however, the paper in question did not live up to expectations and was flawed. Empirically measuring motivation is hard!

But it did get me thinking... 

Why do I care about someone else's motivation? Surely if I am the coldly rational man that neoclassical economics assumes me to be, then I shouldn't worry about motivation; I should just care about their actions that effect me. But experimental evidence shows that people do care about motivation. They act differently if they think someone is trying to be nice or trying to screw them over (even if the action they observe is the same). Indeed, experiments show that people don't always act in the way that a coldly rational economist might expect them to.

It would seem that there is something inherent in us that does care about motivation. That does pay heed to things beyond monetary payoff. That does give a damn about morality. 

Potentially heretical thoughts for an economist, I know.