le 29 octobre 2013
*A full executive summary of this book will be available at newbooksinbrief dot com, on Tuesday, November 5.
The main argument: Until quite recently, the field of economics was dominated mainly by theory-making. Specifically, economists applied their intellects to the human world, and developed abstract models to explain (and predict) the unfolding of economic events. At the heart of all this theory-making stood homo economicus—a narrowly self-interested individual who responded to incentives and disincentives in a perfectly rational way.
In the past half century, though, various economists have added new wrinkles to the field’s repertoire. To begin with, pioneering economists such as Amos Tversky and Daniel Kahneman introduced controlled lab experiments (among other things) into the fold. And these experiments succeeded in adding nuance to our understanding of economic-man (he’s not quite as one-dimensional and rational as he was once taken to be), as well as texture and complexity to our understanding of economic phenomenon.
More recently, economists such as Uri Gneezy and John A. List have stepped in and showed that controlled field experiments also have a place in economics. For Gneezy and List, the world is their laboratory, and the two go about slyly manipulating the environment in a controlled way (often fiddling with incentives and disincentives of all types) to see how we humans respond to the tweaks. Gneezy and List have been practicing this approach for upwards of 20 years now, and in this time they have helped shed light on everything from how to decrease crime rates; to how to improve school success; to how to encourage more charitable giving; to how to promote healthy living and decrease obesity; to how to set prices on products (so as to maximize profits); to how to understand (and limit) discrimination (to name but a few lines of research of theirs). And in their new book 'The Why Axis: Hidden Motives and the Undiscovered Economics of Everyday Life' the two catch us up on their experiments and their results (while also touching on the experiments of other like-minded practitioners).
Take education, to begin with. Gneezy and List have gained a fair bit of attention recently for showing how monetary incentives can be used to help improve grades and graduation rates (particularly with at-risk students)—and even curb school violence; and here we are apprized of the ins and outs of the experiments that were used in this research. What is less well-known is that the authors have also recently become involved in a massive longitudinal study that is designed to test the effectiveness of different approaches to pre-kindergarten education. Though still in its infancy, the study has already yielded some very interesting results, and given that the researchers intend to follow their experimental subjects throughout their lives, the study should help shed a great deal of light on just what approach to early childhood education is most effective.
When it comes to charitable giving, Gneezy and List’s experiments have worked wonders in showing just how to encourage as much charity as possible—and have challenged many of the industry’s long-held beliefs in the process. The authors cover everything from how much seed-money is needed for a project to maximize donations; to how to approach follow-up requests made to established donors; to how to leverage raffles, lotteries and tontines for best success.
On the topic of business, Gneezy and List remind us how a failure to use an experimental approach can lead to business disaster (as illustrated by Netflix’ 2011 decision to modify its business model without experimental research—a decision that drove hordes of customers away, sent the company’s stock plummeting, and nearly sank the business outright). The lesson: business tweaks (including changes in pricing) should be tested in a controlled way in a small market (say a given city) before being adopted across the board (an approach that has been utilized to great effect by such companies as Intuit and Humana).
When it comes to discrimination, Gneezy and List have been able to use their experiments to reveal that much of the discrimination that happens nowadays is motivated less by hatred (or animus) as it is by plain old self-interest. Though perhaps not as threatening as outright hatred, discrimination practiced out of self-interest (known as economic discrimination) is problematic in its own right, and Gneezy and List also explore what strategies are best to curb it (this work is more important now than ever, as the internet [combined with data-driven analysis] has made economic discrimination very easy to practice—and hide).
The book is a very fun and interesting read, and Gneezy and List clearly have a knack for telling about their research in a highly entertaining way. The only issue I had with the book is that the authors occasionally exaggerate and over-state just what we can conclude from their experiments. Still, there is much of interest to be learned here, and the book is well-worth the read (just make sure you take it with a grain of salt). A full executive summary of the book will be available at newbooksinbrief dot com on Tuesday, November 5; a podcast discussion of the book will be available shortly thereafter.
le 10 décembre 2013
Ce commentaire s'adresse aux lecteurs francophones du livre de Gneezy et List, the Why Axis. Ce livre est fascinant, facile à lire (même pour un piètre angliciste!) et instructif; en trois mots: a great book! Le titre peut paraître énigmatique mais il est approprié. Il est court, facile à retenir et lié au contenu. Ce livre essaye en effet de comprendre la face cachée de l'économie. Comment réagissons-nous aux incitations ? Pourquoi utilisons-nous des comportements discriminatoires ? Pourquoi les femmes gagnent-elles moins que les hommes à niveau égal de compétences?
Gneezy et List sont deux économistes très réputées. Ils mettent en place des protocoles d'expérimentation très rigoureux pour tester leurs hypothèses. Ainsi, ils montrent que les femmes fuient davantage la compétition que les hommes. Ils montrent aussi que les incitations financières pourraient conduire à améliorer les résultats scolaires des élèves; un sujet très controversé. Mon expérience favorite est celle liée aux solutions proposées pour lutter contre les retards des parents lorsqu'ils viennent chercher leurs enfants à la crèche. Cette expérience illustre parfaitement le côté pervers des incitations... pour en savoir plus je vous invite à lire... this great book!