Thanksgiving Random Notes

Gee, it's been for awhile that I don't serve anything here. I am a lousy barista, indeed.

So where are we? Well, apparently we, the baristas, here don't seem to believe that a revolution in economics would happen real soon -- which doesn't mean that the field has gone nowhere since the last time you open the textbook. Come to academic seminars, open NBER web or AEA web, and you'll know what I mean.

Psychology/behavioral approach is moving to the mainstream now, to take one direction of progress in micro, and many are talking about (funny shape of) aggregate demand in near zero short term nominal interest rate in macro.

But we're now near Thanksgiving break, so all those seemingly important serving shall wait.

Well, maybe holiday mood and good behavioral economics shall not be contradicted, thanks to Daniel Kahneman.

His latest book, "Thinking, Fast and Slow", is delightful and well-written -- so well that actually you can read it while waiting for your train, cooking the Turkey, or attending the royal wedding (well, maybe not). For such a heavy academic content, it's not an easy to write in popular lingo yet retain the depth of knowledge. Kahneman did it. You don't need to know psychology or economics (god forbid) to digest Kahneman's thought in this book.

In short: you should buy it.

The other thing that you can do during holiday is probably going to your typical movie theater and watch The Muppets and not-so typical theater for Being Elmo.

Happy Thanksgiving, folks

Weird Definition

Economist has a funny way to describe a sophisticated person: A person who does not suffer from time-inconsistency problem. The rest, me included, is a mere naive person.

Envious Revivalism

I come across an interesting job market paper (download the pdf in the relevant link) on a theory of the Islamic revival by Jean-Paul Carvalho of Oxford University. He wrote that the origins of Islamic revival since 1970s in developing countries are traced to a growth reversal that failed to deliver the promise for upward mobility; and increasing inequality that hit the lower middle class.

Perhaps you may not even need economics to come up with this conclusion.

But, what makes his paper interesting from economics perspective is the use of a behavioral economics model of religion based on psychological notions of envy and unfulfilled aspiration. Here, the agents have reference-dependent preferences, contrary to Becker-Stigler approach for independent and stable preference.

Math aside, the paper gives interesting survey on Islamic revivalism. Now, regardless your economics knowledge, do you think envy and unfulfilled aspiration motives explain what has been going on in Indonesia?

On New Year's Resolutions (by Tirta)

Hi there. As our favorite psychologist Tirta reminds us, we're approaching the end of the year again. We don't like being older. But as you can't deny gravity or greed, time is unbeatable. And we like to fool ourselves by sweet resolutions, only to fail them very quickly. The dumbfounded psychologist offers his explanation. Enjoy! -- Kate

ps. Sorry the fonts were too small. I have fixed 'em now.
pps. Forgot to tell you. It took me awhile before realizing that the smart Dumbfounded Psychologist @ Australia is our own guest blogger, Tirta. Of course he didn't tell me that. (Well to tell you the truth, I took one special course in Langley long time ago. I can read patterns in writings and then identify the writer with 98% accuracy - so far). So my apologies, Tirta; Peter Parker might have to order another spidey costume?

On New Year's Resolutions
by Tirta

Dear Cafe Salemba goers,

It's that time of the year again, when we all stop, sit, and reflect on what we have done in the past twelve months, and what we would like to do in the upcoming twelve. Yes, it's time for New Year's resolutions, time for all sorts of admirable pacts between our present and future selves, from reading more books to smoking less.

Yet it's almost a truism that only about a third of these resolutions will be eventually fulfilled, as we will fail another third, and the last third...well, we won't even remember what the last third are. And then it comes full circle, when in twelve months time, we will sketch another list of things to commit to in the year to come, and again fail two-third of them. And so it goes, annually.

For any psychologist (including a dumbfounded one, like me), this has to be one of the most intriguing habits of our species. So in my last visit to the cafe this year, I'm going to sip some regular flat white, as usual, and chat a little bit about why we're not that good when dealing with annual resolutions. I'll also share some ideas that might be useful to overcome this problem.

Here's why New Year's resolutions are awfully hard to stick to. When we make commitments, we simulate what lies ahead. We travel mentally into the future, and imagine ourselves doing what we think we should do. We see ourselves sitting in a desk, diligently reading serious books; we see ourselves in a cafe, sipping coffee and having good conversations sans cigarette. All too easy for creatures as smart as us.

The simplicity of this simulation, however, is deceptive. The brain, because it was naturally built in a kludged manner over millions of years, is not an ideal tool for future peeking purposes. It can never fill in all the important details, such as the gossip magazines that will be scattered around our desk, and the smoking friends who will seem to enjoy themselves more than we do. And as they always say: The devil is in the details. All of a sudden there is a profound change in the equation: Books appear boring and cigarette seems irresistible -- and there you have it: We find ourselves back to magazines and nicotine again, before January ends.

Now multiply this simple example by some orders of magnitude, and you have a psychological explanation why New Year's resolutions don't work. So if you, in a few weeks time, find yourself not making it to the fourth item on your resolution list, you can at least understand why: It's because your brain is an imperfect biological organ that lives primarily in the present¹, not an ideal logical machine in some atemporal planet.

Okay. Now the antidotes. I have two. One psychological, the other sociological. Wait...make it three (I'm pretty sure I have to have an economic one, or else Kate and the barristas will kick me out of this place).

First the psychological. In one set of randomised experiments, my colleague Roy Baumeister found that self-control tasks depleted people of blood sugar more than other, comparable tasks; in another set of experiments, he showed that people who consumed blood sugar during the experiment performed better in a number of self-control tasks relative to the control group². Blood sugar, he then went on theorising, is the fuel of our self-control engine. Whenever we need to exercise self-control to commit ourselves to things we wouldn't otherwise do, like faithfully adhering to New Year's resolutions, we need to refill our blood sugar. So next year, make sure you have enough blood sugar before opening that first chapter of the book, or before going out with your smoker friends.

The sociological solution is a non-brainer: Socialise with the right crowd. Find yourselves, as often as possible, among bookworms and non-smokers. Recent research by the sociologist Nicholas Christakis has shown how smoking, obesity, and even happiness may spread from person to person in a dynamic social network ³. Unless you prefer to live your life in an atomic fashion, hang out with those who are more likely to help you with your set of resolutions. No, it's not manipulating others for your selfish benefit, it's applying the insights from the new science of network⁴.

Finally, the favourite solution of your manager and hosts. Some dismal scientists have recently pursued the time-honoured idea that better commitments requires better financial incentives. Last year, Jordan Golberg, Dean Karlan, and Ian Ayres set up a virtual company called stickk.com, where you can put some money in and ask the company to give it away to your most hated charity every time you fail to finish that first chapter of the book or find yourselves holding a burning cigarette. You will commit, their reasoning goes, when there is something significant (read: money) at stake.

That's it folks. I'm off for a holiday now.

Oh, one last thing before I go. To Kate, Aco, Ujang, Sjamsu, Ape, and Rizal: Thanks for being generous to psychology over the years; I just noticed that among the tags on the right, psychology (14) fares rather well, on a par with capitalism, competition, econ 101, and household economics, and above corruption (8), financial market (11), labor economics (13), macroeconomics (13), poverty (13), and property rights (8). Well done shrinks!

Happy New Year 2009,
Your Dumbfounded Psychologist @ Down Under

¹ Some of you might raise your eyebrows here and wonder: What about memory? Surely that's a sign that the brain also lives in the past? Well no, that is not true. Memories, according to Psych 101, are never recalled, they are reconstructed. One of the most groundbreaking neuroscience findings this year is that brain cells that fired when one experienced an event for the first time fire again whenever one is remembering that event -- which indicates that remembering, in fact, is re-experiencing.
² http://www.psy.fsu.edu/~baumeistertice/gailliotetal2006.doc
³ http://christakis.med.harvard.edu/
⁴ If you don't believe me, say hi to the Belligerent Sociologist @ New York. He would be delighted to tell you all you need to know about this new science.

We're INTP?

According to Typealyzer, we here are:

The logical and analytical type. They are especially attuned to difficult creative and intellectual challenges and always look for something more complex to dig into. They are great at finding subtle connections between things and imagine far-reaching implications.

They enjoy working with complex things using a lot of concepts and imaginative models of reality. Since they are not very good at seeing and understanding the needs of other people, they might come across as arrogant, impatient and insensitive to people that need some time to understand what they are talking about.

Ah, psychologists are amazing!

Growing Up in Wrong Times

In her work in progress, Growing Up in Bad Times: Macroeconomic Volatility and the Formation of Beliefs, Paola Giuliano of Harvard shows that individuals who are subject to macroeconomic volatility when he/she is 18-25 years old support more government redistribution but less confident on government institutions --and these beliefs will stay over his/her lifetime.

If it's true, then it partly tells me why our public discussion, which is now dominated by people aged 18-25 at the time the crisis hit in 1998-2000, is hostile to market based reform while at the same time, paradoxically, not confident with the government. And it will remain so until they are too old for public discussion, or the subsequent cohort coming up with differing views wins the debate.

It reminds me of an old joke: if you are below 30 and you are not marxist, you don't have a heart; but if you are above 30 and still marxist, you don't have a head.

Apparently, you are what you were at 18-25.

Indifference point

A friend of Café Salemba, Irma Kurniawan offers her thought on indifference point. Irma has been studying psychology at Universitas Indonesia, University of Queensland, Oxford University, and University College London. Her PhD research is on the neuroscience of action choices.

-- Manager

Indifference point: what does it mean?
by Irma Kurniawan

Paul Glimcher, a leading neurophysiologist/neuroeconomist, has given a 4-day visit at the Functional Imaging Laboratory, London this week and we had the privilege of listening to him give a series of informal lectures about classical economics axioms in Expected Utility Theory, and how these should be implemented in studying neuroeconomics. One thing he mentioned a lot was the notion of indifference point; a point where the (expected) utility between two (bundles of) goods are equal. Now, my impression is that economists think this as a point where buyers are indifferent between two objects and that the two are equally preferred. What this actually mean, cognitively, isn’t clear. Does this mean one is merely indecisive? Or one simply doesn’t care (indifferent) when given two goods that are of equal value to her? Would she let someone else choose for her at random in this situation? Or is there an unknown choice-making feature at the point of indifference that we haven’t discovered yet?

I don’t know enough about economics to say how economists would derive an indifference point empirically. In psycho/neuroeconomics, indifference is indicated when after 100 times of choosing between bananas and sausages, subjects chose bananas almost 50% of the time. This means that subjects would choose a banana on one choice trial and a sausage on the next trial, and that the indifference is only observed in the proportion of choosing each option across all trials (I also wonder whether this violates transitivity of choices, but let’s not talk about this yet!). One might then ask, at any single trial, what drives a subject to choose one over the other? Is this simply noise in the choice-making process? Did she choose randomly?

If the two goods are indeed of equal (subjective) value to her, might it be that this particular choice is a difficult choice such that she doesn’t know which one is better and which one she should choose? This is a plausible explanation. Psychologists would predict that people take longer to decide between options that are of equal (subjective) value to them, than to decide between 1 preferred object and 1 less-preferred object. This may suggest that they are engaged with more cognitive (i.e., thinking) process before making such a choice.

If this is true; if indifference at all indicates difficulty of a choice, does this mean subjects are engaged with a higher dose of ‘cost-benefit analysis’? Even if we fail to observe reaction time differences between choosing equally-valued products and choosing unequally-valued products, can we still make inferences about how much ‘cost-benefit analysis’ one is engaged with? Could we find a cost-benefit metric that can gauge how much analysis one is making about the values of each good?

Why care? Economists might not care what indifference actually means psychologically. Is it people’s indecision, difficulty in making such choices, or is there an underlying loss-gain analysis element in these decisions? If we know what it means for one to be indifferent, we’re able to identify underlying parameters for indifference and make stronger predictions about one’s future choices.

PS: Bautista et al., PNAS, 2001 have made this attempt to parameterise birds’ critical factors for choosing to fly or to walk (after establishing the indifference point between walking and flying).

To be Delusional to Strive

According to Daniel Gilbert:

"In short, the production of wealth does not necessarily make individuals happy, but it does serve the needs of an economy, which serves the needs of a stable society, which serves as a network for the propagation of delusional beliefs about happiness and wealth"

--Stumbling on Happiness, page 219

He argues that humans need to be delusional and transmit this false belief across generation because it helps them to save the society.

Delusional? I am scratching my head. Again.

The science of interaction

Our guest blogger, Tirta, raises the issue on the individual vs. collective behavior, and the importance of taking the distinction into account.

- Manager

The science of interaction
by Tirta

I have the following issue with Milton Friedman's dictum that economic assumptions are only as good as the predictions they make.

The dictum implies that in any economic model, what really happens in individual minds doesn't really matter, as long as the collective phenomenon of interest can be predicted. In fact, one of the criticisms against the recent interest in behavioral economics is that at the aggregate level, there's no such thing as irrationality. Individuals may be irrational, but society as a whole is rational – as shown by the success of rational models in their predictions of many collective actions.

Now this is all fine, if there is only one explanation behind each phenomenon of interest. But what if the phenomenon of interest can be predicted by two differing models built upon two dissociable assumptions behind the action of the individual – one being more psychologically realistic than the other? Should we choose the simpler assumption (i.e. homo economicus) for the sake of neat predictions? Or should we pick the more realistic one (e.g. homo behavioral-economicus, homo neuro-economicus) at the expense of perhaps less clear and less fruitful predictions?

I think there is a danger in the tendency to prefer simple and neat models to complex and more complicated ones. Parsimony as a scientific criterion doesn't always apply, at least when it comes to explaining how the human mind works. A century of psychological explorations have shown that the human mind and brain are necessarily complicated and, as far as reality goes, cannot be further simplified.

So it seems that we are left with either making good-collective predictions based on bad-individual assumptions, or making bad-collective predictions based on good-individual assumptions.

Can we make good-collective predictions based on good-individual assumptions?

In principle yes, and I think the key lies in understanding how the actions of individuals result in collective phenomena. The more we understand about the science of interaction, the less we have to rely on making unrealistic assumptions about individuals, while at the same time maintaining our accuracy in predicting the emergence of collective actions.

Now I personally don't know how far we've come with the science of interaction. But I sense that, if anything, the end result of understanding how different individuals interact with one another in collective settings would be better and more fruitful economic predictions.

On Psycho-economics (2)

Our psychologist friend Tirta continues on his post about the amalgamation of psychology and economics. Enjoy. -- Manager

On Psycho-economics (2)
by Tirta

A while ago I wrote about my worry with psycho-economics. I felt that the field was taking off a bit too early, because we psychologists still don't know much about how the decision-making mind really works. In my grim view, to fill the decision-making literature with neuro-laden jargons and colorful brain images may be nothing more than a showcase of unsubstantiated excitements.

An example I mentioned at the time was that of the economist Roland Fryer, who has been involved in a project to help New York students get better grades. I argued that Fryer was right to tackle the problem using the incentive approach, and that we need not worry too much about the psychological side of the issues – given how little we know about what happens in the students' brains when they study in schools. So I took it that as long as you have the right incentive, you would produce students with better grades.

I would now like to tweak my previous stance, as a result of reading two articles in the past few days.

The first one was about Fryer and his New York student project. He and his team had come up with an incentive: mobile phones. Students who do well in tests will be rewarded with mobile phones – which are to be used for school-related purposes (teachers would text their students about exams and homework, for instance). Now there are many objections to this mobile-phone approach, but I personally prefer to wait and see for some future data as to assess whether this particular incentive works.

The second one was about the psychologist and neuroscientist Stanislas Dehaene, whose research is about what he called 'the number sense'. He has produced groundbreaking work covering the many aspects of how the human and non-human brains deal with numbers: from the crude task of making an estimate that we share with other species (for example, which one is bigger: 2 or 8?) to the most sophisticated number manipulations only a handful of fortunate souls can do (fancy notions like the Poincare conjecture sounds fit here – although I honestly know nothing about this mathematical proposition).

One practical implication of Dehaene's work is that when it comes to mathematical reasoning as taught in schools, the brain has a pre-wired starting point: the number module. (Evolutionary psychologists believe that the brain is naturally designed with built-in modules, one of which is the number module). So mathematics teachers don't work with blank slates, they instead work with the number sense. Let's take the simplest example of counting.

Today the world is built upon the base-ten Arabic (some say Indian) numerals. Some languages, like English and Indonesian, are not completely compatible with this base-ten form: there are words that are cumbersome to pronounce and came out of nowhere, like 'eleven' or 'sebelas'. Chinese words for numbers, in contrast, are efficient to say and perfectly compatible with the Arabic numeral system. This is why Chinese four-year olds can count up to 40, while their American counterparts find it hard to get to 15; and why the average Chen can hold up to 9-digit in his memory, while the average Joe's capacity is limited to 7-digit. Dehaene's work is full of insights like this.

Now surely there are jargons and brain pictures filling up the number sense literature, but I think they are substantiated. We psychologists apparently know a bit about how the mathematical mind works, and we should be able to redesign how mathematics is taught in schools -- to make it more aligned with the nature of the number sense.

So yes, incentives do matter, and perhaps the mobile-phone approach will bring you better grades. (After all, the brain also operates with an incentive module). But paying more attention to the number sense might help the falling grades too, and make learning more fun even if Fryer runs out of mobile phones.

(Ir)rationally Fun Book

Tim Harford's latest book is probably one of the best popular books introducing rational choice (aka cost-benefit analysis) economics. But for a healthy dose for perspective from the other camp, that is, behavioral economics, I would really recommend the just-released Dan Ariely's Predictably Irrational.

The book is a good fun read -- so good that I missed the bus because I was so absorbed reading the first chapter and failed to proceed to cashier timely.

I enjoyed the way Dan set his creative experiment and most of the time got his points describing human predictably irrational behavior. My favorite chapter is on placebo effect --not to mention his practical joke about MIT's T-shirt that reads "Harvard: Because not everyone can get into MIT".

But somewhat I am bit wary with some of his suggested policy recommendation that gives a glimpse of paternalism. This is one example:

If you accept the premise that market forces and free market will not always regulate the market for the best, then you may find yourself among those who believe that the government (we hope a reasonable and thoughtful government) must play a larger role in regulating some market activities, even if this limits free enterprise. Yes, a free market based on supply, demand, and no friction would be the ideal if we were truly rational. Yet when we are not rational but irrational, policies should take this important factor into account.
--page 48

The problem: how can we find a rational government? More often than not, government is less rational than people under free market.

Reply to Tirta (Aco)

At the risk of being incomplete and less elaborated, let me respond to Tirta.

I always think what economists and psychologists do are two different things -- that can in times work complementary. I myself am not very interested in knowing how the mind works, albeit it is very important thing. It's enough for me to understand at the outset why people do a particular, interesting thing (that is to say: not everything interests me) without having to know his/her state of mind. Yes, it (this approach) might be more powerful to explain ex post situation, but it might as well be useful to help predict similar behavior in the future given similar condition, more or less. What the second Daniel says i think is also true, at least in my case: I trust (more on) what people do, not what they say or feel. In some cases though, I have to rely on what people say -- that is, when I lack the observation of what they do. So, I think it's extremely useful that psychologists teach us how the mind works -- but at least for me, it is useful only to make us know how the mind works.

(To be continued -- probably).

What say you, economists? (Tirta)

Triggered by a series of discussions here and there, Tirta posed the following 'challenge'. -- Manager

What Say You, Economists?

by Tirta

Following our interesting -- and at times heated -- discussion on the limits of economic analyses in explaning human decision making (e.g. this, this, this, this, and this), here are two Daniels:

Economists often criticize psychological research for its propensity to generate lists of errors and biases, and for its failure to offer a coherent alternative to the rational-agent model. This complaint is only partly justified: psychological theories of intuitive thinking cannot match the elegance and precision of formal normative models of belief and choice, but this is just another way of saying that rational models are psychologically unrealistic. - Daniel Kahneman (2003), "Maps of Bounded Rationality: Psychology for Behavioral Economics", The American Economic Review, 93(5), p.1449.

Most modern economists would disagree with this statement [Wealth may be measured by counting dollars, but utility must be measured by counting how much goodness those dollars buy.] because economics is currently committed to an assumption that psychology abandoned a half-century ago, namely, that a science of human behavior can ignore what people feel and say and rely solely on what people do. - Daniel Gilbert (2006), Afterword, "Stumbling on Happiness".

So what say you, economists?

Happiness and wealth, again

On an earlier post on life satisfaction and wealth, Rizal -- by way of Kahneman -- argued that the two are positively, and quite strongly, correlated. I recalled the Economist wrote two articles on the related issue their 2006 end-year edition. According to those articles, the positive correlation between happiness and affluence is true, but the relationship seems to be non-linear, with a negative second derivative.

Said the first article:

Happiness, as measured by national surveys, has hardly changed over 50 years. The rich are generally happier than the poor, but rich countries do not get happier as they get richer. The Japanese are much better off now than in 1950, but the proportion who say they are "very happy" has not budged. Americans too have remained much as Alexis de Tocqueville found them in the 19th century: So many lucky men, restless in the midst of abundance."

And why is that so? Here's the explanation in the second article:

The science of happiness offers two explanations for the paradox. Capitalism, it notes, is adept at turning luxuries into necessities—bringing to the masses what the elites have always enjoyed. But the flip side of this genius is that people come to take for granted things they once coveted from afar. Frills they never thought they could have become essentials that they cannot do without. People are stuck on a treadmill: as they achieve a better standard of living, they become inured to its pleasures.

Capitalism's ability to take things downmarket also has its limits. Many of the things people most prize—such as the top jobs, the best education, or an exclusive home address—are luxuries by necessity. An elite schooling, for example, ceases to be so if it is provided to everyone. These "positional goods", as they are called, are in fixed supply: you can enjoy them only if others do not. The amount of money and effort required to grab them depends on how much your rivals are putting in.

I remember an old friend used to say, "The rich may not necessarily be happy. But the poor are definitely not." Well, apparently he's not wrong.

That may explain why some people still seems to think that we Indonesians are not better off than 20-30 years ago, while the truth is we are better off in absolute term. In relative terms, i.e. how do one compare with the others, well, of course it's relative.

P.S. This is interesting. Bre Redana of Kompas praised today's Hanoi, which he described as the portrait of Jakarta in the early eighties, as much better than today's Jakarta (also today's Indonesia). The reason, he implied, was the "spirit of socialism." Read here and here. Ironically, Kompas is the most obvious product of capitalism, of course.

Wealth is Good

This is from Daniel Kahneman, quoting Gallup World Poll (HT: Marginal Revolution)

In a sample of over 130,000 people from 126 countries, the correlation between the life satisfaction of individuals and the GDP of the country in which they live was over .40 – an exceptionally high value in social science. Humans everywhere, from Norway to Sierra Leone, apparently evaluate their life by a common standard of material prosperity, which changes as GDP increases. The implied conclusion, that citizens of different countries do not adapt to their level of prosperity, flies against everything we thought we knew ten years ago. We have been wrong and now we know it. I suppose this means that there is a science of well-being, even if we are not doing it very well.

Not so good news for GDP-economics-bias haters, I believe.

On Psycho-economics

Tirta, a psychologist-in-training who knows a little quite a bit about economics thinks psycho-economics still have a long way to go before we can use it to dismiss conventional economics. He's in fact worried that psycho-economics is fast becoming an empty fad. - Manager

On Psycho-economics
by Tirta

Here's a provocative comment from Terry Burnham (which was emailed to me by our sociologist friend a while ago):

"At one level, the logic of economics is so rigorous, but it is built on a foundation of folk psychology that we would mock in other fields..."

To put things in context, the comment was made in response to a 2002 study by Andrew Lo and Dmitry Repin, the former finance professor, the latter neuroscientist. The two guys jointly discovered that heart beat, blood pressure, and skin sweat were crucial in predicting the behavior of stock traders. They went on to claim that there's a lot of irrationality and emotion going on in Wall Street and places alike, which were once thought by many economists to be full of heartless people.

Incidentally, it turns out that Burnham was the guy who did the recent testosterone study, which found that the more you have the masculine hormone, the more you will reject unfair offers in standard ultimatum games. Alpha males, in other words, are psychologically fond of equality and distributive justice (not necessarily through philosophical reflections though, as I've alluded here).

Guys like Burnham are commonplace today. These are people who apparently are not satisfied with standard economics models of rational agents. They resort to psychological constructs and colorful brain pictures for insights on how to explain some economic behaviors. They like discussions containing words like 'intuition' and 'emotion' more than those sticking with 'rational', and seem to think that these psycho-economics explanations are one step ahead closer to the truth of why we behave the way we do.

Well I'm a psychologist-in-training who happen to know a tiny bit about economics (at least this Cafe's version of it), and I don't think so. Here’s why.

Psychologists have only began to explore the workings of intuition and emotion in the 1990s. In the 1920, we were obsessed with the relationship between stimulus and response, which at best gave birth to learning and conditioning theories applicable mostly to rats. In the 1950s, we finally saw the light, and dared to open the black box -- namely, the mind -- and started to converse in terms of memory, thought, personality, attitude, and the likes.

But we didn't talk about emotion or intuition until only recently. Of all topics in psychology, emotion and intuition are among the most alien and under-researched.

Current psycho-economics explanations are mostly tautologies, because the mechanisms of the mental properties they are referring to are themselves subject to active investigation. Yes, emotions do influence traders and ultimatum game players, so they are not as rational as they were thought to be. But the questions shouldn’t stop there: How exactly do emotions exert their influence? Which emotions? Under what circumstances? How do they interact with cognitive-based judgements and decisions? And the list easily goes on.

Psychology still doesn’t have a sound theoretical basis as to how emotion and intuition work, and more importantly, how they both relate to cognition at large. As interesting as those colorful brain images (usually coupled with paragraphs consisting of those weird latin words familiar mostly to medical doctors) can be, we still have no idea on how to tie them all together to explain why we do what we do – and why we think what we think.

So it's ironic when some economists think that they are significantly advancing the field by referring to psychological concepts like 'emotion' and 'intuition', which have only been around in the psychology literature for a decade or so, and of which our understanding is clearly minimal.

I think psycho-economics are becoming more and more like an empty fad. Some scientists got a little bit too excited and make too much out of it. As do the journals, newspapers, and blogs.

Here's another example, which actually got this post started in the first place.

A few weeks ago, I sent this op-ed to some of the cafe's managers. Roland Fryer, a Harvard economist, recently suggested that rewarding money would make bad NYC students more diligent and studious. Barry Schwartz, a Swarthmore psychologist who wrote the op-ed, disagreed. He pointed out that this simple reward scheme would distort the many other motives that are inherent to learning.

Responding to Barry's piece, here is an economist friend of the Cafe:

"Probably due to my own bias, but I tend to side with the psychologist on this. I have seen a similar phenomenon at [my place of work] where people who focus on the financial incentives do not produce quality work relative to those who are interested in the work per se. I think multiple objectives do compete (which is why economists don't believe in corporate social responsibility), and this incentive will skew the objective of going to school."

It's true that humans have competing motives all the time, and yes, money is one of them. And going to school, surely, should be based on the noble motive of learning-for-the-sake-of-learning.

But I'm not sure if I totally agree.

One may criticize economics, as I automatically did when I read the op-ed initially, for freakonomically assuming that everything -- learning and school included -- is about the right type and amount of incentive. Yet psychology, so far as it recognizes the many different faces of motives, intuition, and emotion, has no idea as to how these mental attributes really interact. We know that it’s not just about money. The problem is, we don’t really know what the rests are.

So here’s my question. When these bad students are already devoid of the intrinsic motives of learning, which I presume was what Fryer had in mind, which would you pick: play carrot-and-stick to at least feed their mind with something that is potentially useful, or leave them as they are on the street with no better mental arsenals to face the future?

I personally would opt to be pragmatic, simplify matters appropriately, and thus side with the conventional economist. At least for the time being.

Testosteronomics

All men are created equal
But some men are more equal then the others

OK, I admit. That was a twist of George Orwell's Animal Farm (which was itself a twist of the Declaration of Independence).

What I want to say is this study argued that some men - those with higher level of testosterone - prefers to be equally poor than being a bit richer while the other men become a lot richer. (If you don't want to see the whole paper, see the Economists' review.)

The researcher run an experiment using a series of ultimatum game, played by some Harvard students who have taken microeconomics. After the experiment, he took saliva samples from the students and compare their testosterone levels. The result: responders who rejected a low final offer had an average testosterone level more than 50% higher than the average of those who accepted.

The implication of this study, is as The Economist wrote:

... what people really strive for is relative rather than absolute prosperity. They would rather accept less themselves than see a rival get ahead. That is likely to be particularly true in individuals with high testosterone levels, since that hormone is correlated with social dominance in many species.

In other words, the more masculine someone is, the less important is money. It's how your position compared to the other.

However, i was informed by Tirta about a very important caveat. Read also the first comment to the post.

Nevertheless, this study was a valuable additional literature to a debate on inequality I encountered somewhere (read my summary here and here, and a relevant discussion here).

Rethinking Expulsion

It is not only a question of whether the punishment fits the crime, it is more a question of how much logic was behind the punishment, if any. Tirta found time between his doctoral research (in psychology, if you need to know) to guest blog in the Café about whether expelling the four students who were accused of beating up a fellow student at Pangudi Luhur High School would do any good.

Disclaimer: Like Tirta, who graduated from Pangudi Luhur in 1998, three of the Café Salemba hosts also went to (and graduated from, we'd like to think) the same high school. - Manager

Rethinking Expulsion
by Tirta


It seems that school bullying is one of the classic problems in this country, one that is yet to be effectively dealt with. The most recent case took place about a month ago. Blasius Adi Saputra (18) was reported to be bullied by his seniors at Pangudi Luhur High School, Jakarta (The Jakarta Post, 22 May 2007).

Following the victim's father report to the police, and the frequent coverage by the media, the school authorities reacted promptly. Four seniors who were vindicated to be the bullies were directly expelled. At first sight, the expulsion looked right and appropriate.

If bullying is a valid character proxy, then the four seniors must be troublemakers who deserved to be expelled. More importantly, the expulsion was intended to be a lesson for other students. It was a strict warning to those bullies-to-be to behave accordingly, or else they would also have to leave the institution. It is so simple and straightforward a reasoning.

However, as it is often the case, education issues are neither simple nor straightforward. A critical reflection questions the logic behind the decision to expel the four seniors.

Expulsion is the most serious decision a school can exert upon its students. It is the most extreme punishment, one with long lasting impacts toward the social and psychological lives of the expellees. Expulsion is and should be exceptional, and therefore must be tightly framed by either of the two logic of punishment: retribution and consequentialism.

Retributive expulsion is backward-looking. The assessment is based on past deeds of the students, whereby two necessary principles are to be met. First, the school have tried – to the best of its ability – to educate and re-educate these students. Second, the students have been given adequate opportunity to correct their behavior. Only then the school is warranted to wave its hands and hope that some other institution would be a better place for the expellees.

As an outsider, it is not possible to speculate about either the track record of the four expelled students or how much effort have been put by the school. All one can do in this case is to apply a counter-thinking exercise, as it would be naive to downplay the role of the media and the public at large when the school made the decision in such a short time.

Let us try to hypothetically imagine what would have happened to these four seniors had this case not been brought up to the public. Would they have ended up the same, receiving expulsion letters? Or would they have received a different kind of penalty? Did they – given all they have done during their time in the school – thoroughly deserve to be expelled?

Some of us may start wondering if expulsion was the best retributive punishment to take. But regardless of its retributional justification, let us now consider the more problematic side of the expulsion: the consequential logic.

The consequential function of expulsion is purported to be bullying deterrence. This idea is so intuitive that many seem to have accepted it a priori. But a valid justification of such an extreme and exceptional punishment – one that is socially and psychologically affecting the lives of the expelled individuals in the long-run – must rest on empirical evidence, not fallible intuition.

What we need are hard data that speak of the effectiveness (or ineffectiveness) of expulsion in reducing the number of bullying. These data should come from controlled studies in our schools, studies that we currently are lacking.

In other words, we do not know whether expulsion effectively prevents future bullying from taking place. The causal effect is yet to be objectively demonstrated. And when hard data are yet to be available, it is wise not to further experiment by signing more expulsion letters.

One may nevertheless argue that expulsion does prevent bullying, at least temporarily. A kind of shock therapy effect, perhaps. But even if it does, it does so for the wrong reason. A school – unlike a prison, for instance – has its own special role as a formal institution. That role is to educate students with reason and understanding, not reward and punishment. Students should not refrain from bullying because they are afraid of expulsion, but because they rightly comprehend that bullying is an unacceptable behavior.

Surely this is not an easy task, but it is a task of which we should hold our schools up to. After all, we must not forget the reason why we send our children to school in the first place. We want them to be better citizens because they are thoughtful of societal values, not because they are afraid of going to prison.

What has been often overlooked is the fact that bullying is a very complex problem. It is not about a few bad personalities who simply do not deserve to sit in our schools. Bullying is a complex psychosocial problem, one that requires extensive analysis of both individual and situational factors, with all stakeholders – students, parents, teachers, and alumni – heavily involved.

In any case, particularly in the context of bullying, we may want to rethink expulsion and treat it with the utmost care.