Category: finance
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Bonus Cultures and Ideal Banks, Schools, Hospitals
In light of the ongoing debate with regards to the financial sector’s so-called ‘bonus culture’, economist John Kay looks briefly at the history of the bonus and why the idea of a ‘bonus culture’ is a “poor joke” (using the example of teacher and doctor bonuses). At one time, the offer and receipt of a…
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The Economically-(Im)Perfect World of Online Games
Kristian Segerstrale–owner of online games company Playfish (acquired by Electronic Arts for $400m in November 2009)–discusses why online game environments are exciting places for economics research (and specifically: “how social factors influence economic decision making”): When economists try to model behavior in the real world, they’re always dealing with imperfect information. “The data is always…
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Negotiating Over ‘Sacred Values’
When requested to give up a “sacred value”, the inclusion of a financial incentive incites moral outrage, decreases general support for a compromise, increases anger and increases a subject’s approval of “violent opposition”. Research looking at our reactions to such proposals offers same suggestions for negotiating over sacred values. A more successful tack for negotiating over sacred values,…
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Taxes (Not Subsidies) Control Calorie Intake
It’s not surprising to discover that in an experiment looking at how taxes and subsidies can be used to influence healthier food purchases it was the taxing of unhealthy food that improved choices, not the subsidisation of healthy options. Strangely, though, it turns out that the health food subsidies actually worsened choices (the study theorises that…
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When (and When Not) to Consider Venture Capital
On discussing why he and his co-founders are seeking venture capital funding for their programming question and answer site (StackOverflow), Joel Spolsky provides a number of scenarios for when a company should give consideration to VC funding: There’s a land grab going on. There is a provable concept that’s repeatable. The business could benefit from…
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Framing Financial Loses to Conservatives
In a series of novel framing experiments, researchers have shown that our self-identified political leanings correlate with how we perceive financial losses. Hundreds of online participants chose between various flights, computers and so on. In each case they could plump for a cheaper option or a more expensive, greener option, the latter including either a ‘tax’…
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Financial and Public Incentives to Perform: What Works
Large bonuses and salaries are in place to attract prime talent and as an incentive to improve performance, goes conventional wisdom and the bankers’ rhetoric. However recent research by Dan Ariely (author of Predictably Irrational) and colleagues suggests that while large pay will attract the best talent, large performance-based bonuses may hinder superior performance. Interestingly big…
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Optimism as Incentive
Much has been written on the (ir)rationality of purchasing lottery tickets (Eliezer Yudkowsky’s viewpoint is particularly fine), but little has been said on applications of these biases that could improve the finances of all of those who buy a ticket. Now behavioural economists are attempting to boost the historically poor household savings rate by using our…
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De Beers and the Diamond Market
I’ve previously mentioned, in passing, how the concept of the diamond wedding ring was manufactured. I’ve now been reminded of this upon rediscovering Edward Jay Epstein‘s comprehensive 1982 article in The Atlantic charting the story of how De Beers created the entire market for diamonds through supply/demand manipulation and PR. De Beers proved to be the most…
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Charitable Donations: The Problem of Restricted Funds
By donating funds to disaster-specific charitable organisations and campaigns we restrict the use of our funds to the relief of that problem only. This can cause long-lasting issues for charities and worldwide disaster recovery efforts in the future. To ensure the charitable help best, the charitable should ensure they give unrestricted funds that are not…