Letters Remain

Category: finance

  • The Cashless Effect: Financial Abstraction Increases Spending

    I previously wrote about the denomination effect, where people spend the coins faster than banknotes because coins are perceived as ‘smaller’, creating fewer psychological barriers. This raised the question of whether increased “financial abstraction” leads to higher spending, too. Indeed, research confirms that the lower the payment transparency, the greater the spend. This is the cashless…

  • The (Edited) Latecomer’s Guide to Crypto

    On March 20, 2022, the New York Times published a 14,000-word puff piece on cryptocurrencies, both online and as an entire section of the Sunday print edition. Though its author, Kevin Roose, wrote that it aimed to be a “sober, dispassionate explanation of what crypto actually is“, it was a thinly-veiled advertisement for cryptocurrency that…

  • The ‘Bad Version’ and How to Tax the Rich

    A ‘bad version’ is a technique used by television writers to inspire creativity when experiencing a creative block. The technique involves writing a purposefully awful section of plot as a way of helping the writer find creativity and, eventually, the ideal solution: it’s a way of “nudging your imagination to someplace better”. In The Wall…

  • First Offers and Aggressive Offers: Optimal Negotiating Tactics

    When negotiating ensure that you make the first offer and make sure it’s an aggressive one: this is almost always the optimal negotiation strategy. That’s the conclusion from a study looking at negotiation tactics and the anchoring effect (from the same researchers that discovered the optimal starting prices for negotiations and auctions). One of the…

  • The Drinkers’ Bonus: Alcohol Intake and Increased Earnings

    Drinking alcohol — and the increased social capital that it leads to — may not just be responsible for a possible increase in life span; it may increase your earnings, too. In an analysis of both the General Social Survey and the published literature, researchers for the Reason Foundation show that alcohol drinkers earn, on…

  • Against Behavioural Economics and Irrationality

    Praising Maurice Allais as the father of behavioural economics rather than Kahneman and Tversky,  John Kay introduces us to some of Allais’ ideas while simultaneously providing one of the finest arguments against the simplistic view of behavioural economics as the study of irrationality: The skill of piecing together sense from fragmented and inaccurate information is a central…

  • Building a Brand In a Recession

    The recent recession saw sales of condoms, guns and burglar alarms soar. This is because, when fear enters our mind in terms of losing our job or of not being able to pay bills, we focus on two of our most basic drives: fear and sex. The key to selling and building a brand during…

  • Equal Societies Good for All

    The more unequal a society’s income distribution, the more health and social problems ail both the rich and the poor. With this theory brought to his attention through the “quite fascinating book” The Spirit Level, Nicolas Baumard displays the evidence to support the theory that economic inequality is bad for all inhabitants of a country before…

  • India and the Definition of Middle Class

    A newly proposed international definition of the middle class for developing countries, produced by the Center for Global Development for the World Bank, has some surprising conclusions for India. The report, produced by the president of the Center for Global Development, Nancy Birdsall, suggests that “middle class” is defined as everyone with an income above…

  • Abstraction to Increase Effort (and Spending)

    When there is a medium placed between our effort and a desired outcome, we strive to maximise this medium regardless of whether or not it leads optimally to that outcome (think points or virtual currencies as a medium when attempting to obtain goods). That’s my attempt at a concise summary of the findings from a…