Hide and seek at hotels

Hotels without pretensions helpfully attach the blow drier to the wall right by the sink. It is easy to find and easy to use. Hurrah for hotels without pretensions.

Hotels with pretensions of greatness, though, find the sight of a naked blow drier, right there on the wall by the sink, off-putting, like Victorian ladies who covered naked table legs lest their male guests come unglued by the sight. Or, perhaps but rather implausibly, they imagine that their guests have such a reaction.

So, these hotels put the blow drier in a cloth bag and hide it somewhere. Less ambitious hotels hide it in the bathroom, so that it takes only a minute or two to find, though you still have to unwind the cord and all the rest (and you have to do it every single day, because the cleaning people always put it away again, even after you signal that you do not care by leaving it out).

More artistic hotels will perhaps hide the blow drier in a desk drawer, or in a small cupboard within the big, ugly, wooden box in which they have hidden the attractive, modern TV. A couple of hotels I have been to have even hidden the blow drier at the front desk, so that one has to go down in an elevator and wait in line with the people checking out while offering them your wet, wild hair to gaze upon.

I do not understand why posh places, or places that pretend to be posh, do this. Blow driers are not that ugly. Posh hotels don't put their toilets in cloth bags and hide them, and they usually are ugly. Their lamps are often pretty ugly too and they, too, escape the cloth bag treatment. Presumably the guests at posh hotels have higher values of time, too high, one might think, to want to play hide-and-seek with the blow drier.

A mystery to be solved by some clever applied theorist.

Dark Omens in the Sky

I can't put it any better than my colleague Charlie Brown, who said:

"I think you'll agree that this paper eclipses all previous work on the efficient markets hypothesis."

Is behavioral economics your friend?

The NYT reports on a couple of interesting papers from the American Economic Association meetings last month in SF.

I am of several minds (pun fully intended) about behavioral economics. First, the name irritates me; all economics is properly about behavior. Second, I think some of theoretical work that transpires under the heading of behavioral economics, such as the development of new choice axioms, is largely wheel-spinning. Third, I think that in some quarters behavioral economics has induced a sort of looseness of thought. Instead of thinking very hard about a phenomenon in order to come up with a non-obvious rational choice explanation, someone simply blurts out "framing" or "hyperbolic discounting" and the thinking stops there. Fourth, it irritates me when people equate rational behavior with an assumption of costless information processing. It seems to me that the correct way to proceed is to incorporate a cognitive budget constraint into the optimization problem. It is hardly rational to spend huge amounts of costly cognitive resources to solve some problem when a quick, cheap but slightly wrong heuristic is available Our models should reflect this and, more broadly, we should not treat clearly irrational behavior as the benchmark of rationality. This requires learning a bit of psychology and/or neuroscience in order to get the budget constraint right. Fifth, I think that people who dismiss the entire behavioral economic enterprise ("wackonomics") based on the failings of some of its practitioners are being careless and making a serious mistake. There is important, policy relevant behavior to be explained that does not fit will with traditional models that assume costless information processing. I think economists have much to add in coming up with new and useful explanations of these behaviors.

Without blaming him for my current views in any way, I should note my major intellectual debt in this area to my graduate school colleague Nat Wilcox, now at the University of Houston, who introduced me to the literature on the boundary of psychology and economics long before it became fashionable.

Oh, and I must point out the glaring error by the NYT reporter:

Lotteries, for example, are the bane of many economists’ existence. People exhibit totally irrational behavior when it comes to such gambling, generally overvaluing the likelihood of winning. For example, let’s say you give a person two options: 1) a one-in-10 chance of receiving $100, or 2) a guaranteed payout of $10. He is much more likely to choose the first option, even though the two options have the exact same expected value (10 percent of $100 = $10). To economists, this makes little sense — both options should be equally appealing.

The two options are equally appealing only if the individual is risk neutral. Economists generally assume that individuals are risk averse, in which case the certain payment should be preferred. This is probably a very reasonable assumption in general but does poorly, as this example suggests, at explaining gambling.

Hat tip: Sarah Turner

Nudge or push?

David Friedman (Milton's son and a most interesting character) blogs on how nudges of the sort recommended by Sunstein and Thaler in their book of that name can turn into pushes.

I am not sure that this argument rules out all nudges. The examples he recounts are not really nudges that turn into pushes but pushes from the get go. At the same time, the potential for slippage into pushes should certainly figure into the cost-benefit calculation of whether to have a nudge or not in a given context.

Oh, and if you ever get a chance to have some of David's homemade mead, you should go for it; it is really good.

Hat tip: Don Hacherl

Lump sum transfers in Namibia

BIG payments in Namibia. The BBC article is a puff piece but the idea is nonetheless an interesting one. This is not a negative income tax - it is lump sum transfers from outside the system. I think much of the action will lie in the long run when the BIG recipients come to view the money as normal rather than unusual.

Also, notice the BBCs suggestion at the end that by taxing the lump sum transfers they can become self-financing. I guess addition is not a requirement for employ at the BBC.

Hat tip (on the BBC piece): Jessica Goldberg