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March 17, 2011

The housing bubble by city

Filed in Ideas ,R ,Tools
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DIFFERENT CITIES TELL DIFFERENT STORIES

Inspired by a tutorial called 5 Minute Analysis in R: Case-Shiller Indices, we decided to redo the analysis with 1) More up to date data and 2) Hadley Wickham’s super ggplot2 graphics package.

The above plot shows the general trend in home prices, relative to January 2000, in various cities, but is otherwise a mess.

Much like Olympic sports coverage, we next focus in on a few exceptional stories. It is much easier to read.

Miami sailed high and fell far. Detroit rose modestly and but dropped more than it went up.  Dallas held steady. DC is enjoying a bit of renewed growth, but are it and New York yet to fall?

The graphs were surprisingly easy to create in R, and the full code is below. If you’d like to do your own analysis, the Standard & Poor’s Web site has data that you can download yourself. We chose the “seasonally adjusted” data set.

New to us in the code below was the “droplevels‘ command which was added to R’s version 12. It dispenses with unused factor levels that you sometimes end up with when subsetting data. Extra levels are often harmless, but in ggplot2 they show up in the legend.  Without droplevels, the second graph would have the legend of the first graph.


library(ggplot2)
## Read in data, available from:
#www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us----
dat=read.csv("CSHomePrice_History.csv")
mdf=melt(dat,id.vars="YEAR")
mdf$Date=as.Date(paste("01-",mdf$YEAR,sep=""),"%d-%b-%y")
names(mdf)=c("MonthYear","City","IndexValue","Date")
ggplot(data=mdf,aes(x=Date,y=IndexValue)) + geom_line(aes(color=City),size=1.25) +
scale_x_date("Year", minor="years") + scale_y_continuous("Case Schiller Index")
sm=subset(mdf,City %in% c('NY.New.York','FL.Miami','CA.Los Angeles','MI.Detroit',
'TX.Dallas','IL.Chicago','DC.Washington'))
sm$City=droplevels(sm$City)
ggplot(data=sm,aes(x=Date,y=IndexValue)) + geom_line(aes(color=City),size=1.5) +
scale_x_date("Year", minor="years") + scale_y_continuous("Case Schiller Index")

March 10, 2011

Brands in Australia. Special JDM issue on recognition (Vol II).

Filed in Articles ,Ideas
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JDM SPECIAL ISSUE VOL II: RECOGNITION PROCESSES IN INFERENTIAL DECISION MAKING

If you’re not from Australia (and statistically speaking, you’re not), it is hard to say whether you recognize the above logo or not. Hungry Jack’s is the Burger King franchisee in Australia and thus gets to use the famous bun-and-textual-meat logo.

Editor John Baron and special issue editors Julian N. Marewski, Rüdiger F. Pohl and Oliver Vitouch are proud to announce the second special issue of the journal Judgment and Decision Making on Recognition Processes in Inferential Decision Making. The article includes 7 new articles, which in addition to the articles from the first special issue, make 16. A third issue is in the works. Please find the editors’ introduction here.

Decision Science News is in Australia this week. Though not the case with the Hungry Jack logo, we easily sorted the brand logos we observed down here  into recognized and unrecognized during a two-hour walk through the city. Here are the results of that exercise:

NON-AUSTRALIAN BRAND LOGOS RECOGNIZED ON A TWO HOUR WALK IN SYDNEY
7-11
Apple Store
Abercrombie & Fitch
Arthur Murray School of Dance
Avis
Bally
Baskin Robbins
Ben & Jerry’s
Ben Sherman
Blockbuster
Body Shop
Burger King
Camper (shoes)
Canon
Citibank
Coke
Florsheim
French Connection
GNC
Hilton
HSBC
Hugo Boss
Ibis (hotel)
Kodak
Lavazza
Lee
McDonald’s
Mont Blanc
Oakley
Payless Shoes
Quality Inn
Quicksilver
Shell
Starbucks
Subway (sandwiches)
Tag Heuer
Wagamama (restaurant)
Western Union

AUSTRALIAN BRAND LOGOS RECOGNIZED ON A TWO HOUR WALK IN SYDNEY
Country Road
Gloria Jean’s
Uggs

BRAND LOGOS NOT RECOGNIZED ON A TWO HOUR WALK IN SYDNEY
About half of them

OTHER OBSERVATIONS ABOUT SYDNEY
They have cranes (both harbor and avian)
They would spell harbor “harbour”
The double yellow line is white
One USD = one AUD
They drive on the left
They have more cafes than people

March 2, 2011

Social Decisions Webconference

Filed in Conferences ,Ideas
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ALL OF THE CONFERENCE, NONE OF THE BEING THERE

Hugo Mercier at Penn has created a “web conference” in which papers are posted online, and people can read and comment on them. It is just like a conference, minus the $100 per gallon of coffee charged by the hotel.

[A figure like this one was brought up at a SJDM conference committee meeting. Or maybe it was $800. Something crazy. –Ed]

The theme is “social decisions”. Here are the introduction and the schedule:

http://www.cognitionandculture.net/Social-decisions-workshop/workshop-decision-making-for-a-social-world.html

Definitely some big names on there. Enjoy!

February 23, 2011

Do helmets make sports more violent?

Filed in Encyclopedia
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MORAL HAZARDS AND WOMEN’S LACROSSE

This week Decision Science News and Peter McGraw’s blog team up for a joint post. — Enjoy

The New York Times just ran a piece called “A Case Against Helmets in Lacrosse“.

The hook of the article is that wearing helmets, which one would expect to make the game safer, could make the game more dangerous. Let’s review the quotes.

One:

It’s hard to absolutely prove, but what we’ve seen is that behavior can change when athletes feel more protected, especially when it comes to the head and helmets,” said Dr. Margot Putukian, Princeton’s director of athletic medicine services and chairwoman of > the U.S. Lacrosse safety committee. “They tend to put their bodies and heads in danger that they wouldn’t without the protection. And they aren’t as protected as they might think.”

Two:

Then again, other sports have spent the last several years realizing that safety equipment can bring dangers of its own. Checking in professional hockey became considerably more vicious with the adoption of helmets in the 1970s and ’80s, and football players felt so protected by their helmets and face masks that head-to-head collisions became commonplace at every age level.

Three (re: protective eyewear in Women’sLacrosse):

[Someone] said that after the move to make eyewear mandatory for the 2005 season, “It’s subconscious, but you see harder checking, and rougher play.”

Interesting topic! Let’s get Dan and Peter’s take on it:

DAN’S TAKE
This is an example of moral hazard, which the Wikipedia (at least during the last five minutes) defines as a situation in which “a party insulated from risk behaves differently than it would behave if it were fully exposed to the risk.” The top 10 Google Scholar papers with “moral hazard” in the title have over 10,000 collective citations. You hear a lot about moral hazards, for example, that people began driving more recklessly when seat belts were invented, at cocktail parties, coffee breaks, dinners with visiting speakers, and other moments in which people say what they really think.

Is it possible that requiring lacrosse players to wear helmets will increase risk to players? I doubt it. My grounds for skepticism? TCTBT: too cute to be true.

TCTBT (also “too clever to be true”) arguments survive not because they are correct, or supported by the best evidence, but because they are elegant, counter-intuitive, and make a person sound smart at a cocktail party. They fly well in Op-Ed pieces, keynote speeches, and other places where one is unlikely to be asked for evidence.

The smart thing to do when you hear a TCTBT explanation is to doubt it. Since repeating a clever explanation is clearly its own reward, how is one to say that the person offering it is well-informed or just trying to be conversationally brilliant?

While I feel that moral hazard is overhyped, I must admit that I’ve gone spelunking with a helmet and without a helmet, and yes, a person does let his head bump against the cave walls more often with the helmet on than off. However, the net impact to your head is less with the helmet on. This is what I would expect to happen in lacrosse. More helmets will bump against helmets, which seems more ‘violent’, but the net noggin impact will be less. And despite popular belief, they have rules in lacrosse, so the temptation to run helmet first into people may not even have an advantage.

Interestingly, the article says, “checking in professional hockey became considerably more vicious with the adoption of helmets in the 1970s and ’80s”. Again, correlation, is not causation. And is ‘viciousness’ measured in injuries?

I say let Moral Hazards join Prisoner’s Dilemmas, Tragedies of the Commons, and other cleverly constructed scenarios that don’t arise in proportion to the vast numbers of articles written about them. Pay more attention to boring things like default effects that exert large and demonstrable influences on hundreds of decisions in daily life.

That said, I know nothing about lacrosse except that I watched Pete play it once, so without further ado, I’ll turn the typing over to him. If you have empirical evidence of moral hazards we should be concerned about, please post in the comments.

PETE’S TAKE:
As someone with more than 30 years of (combined) lacrosse coaching and playing experience, my intuition leads me to believe that introducing helmets into the women’s game will increase the behaviors that put players at risk of injury. However, given that I regularly lecture on the fallibility of intuition, I also agree with Dan. I would like to see causal evidence before drawing a line in the sand. More important than just examining if helmets increase risky behavior, the analysis for deciding to institute helmets would need to balance the costs of the risky behavior against the benefits of the helmet. That is, the temporary bumps and bruises caused by more aggressive play may be worth incurring in order to reduce the risk of concussion. In that way, a thorough risk analysis would seem to be worth the price given the many thousands of women and girls who play the game.

The question of wearing a helmet creates a moral hazard in the game of lacrosse is complicated because the presence of the helmet would seem to influence more than just the offensive and defensive player’s behavior. The protection that a helmet provides could influence the way that the official monitors the game. Officials could more laxly (no pun intended) enforce the rules because they perceive the aggressive behavior as less risky, which in turn could further increase aggressiveness.

One last way to think about the helmet debate is to consider how much the debate is being colored by tradition (aka the status quo). And in this way, a useful question would be, if a new sport like lacrosse was created, would helmets be required given the emerging evidence about the risks of concussion?

Photo credit:http://www.flickr.com/photos/timailius/2472012607

February 14, 2011

Fitness plan charges you more for working out less

Filed in Encyclopedia ,Gossip ,Ideas ,Programs
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ON COMMITMENT DEVICE BUSINESSES AND SOFT CONTRACTS

This week, our former home, the Center for the Decision Sciences at Columbia University, has turned us on to this article about a fitness plan that charges you more if you work out less. Yes, it’s a business putting applied behavioral economics to work, not unlike Stickk.com or Beeminder.com (formerly known as Kibotzer.com and currently known as bmndr.com by those who like to abbrvt).

The plan works in conjunction with gyms. We have often heard people say, with great assurance, that gyms bet on people not making good use of their memberships, that they are businesses based on a human inability to commit. Sure, if you take “good use” to mean going every day, it’s clear that gyms could not handle the crowds that would result. However, we at DSN often doubt people who say things with great assurance without evidence. After all, people don’t make good use of their gym memberships may not renew their memberships, and that is bad for business.

SOFT CONTRACTS: AN IDEA THAT WILL NOT WORK IN THEORY BUT WILL WORK NONETHELESS
DSN once committed to patronize the gym 150 times a year. We did pretty well for the first half of the year and then were met by a long spell of illness and travel. After that, hitting the 150 number required more frequent workouts then we cared to commit to, so we gave up. It’s a problem when commitment contracts don’t make room for periods in which you cannot, should not, or do not want to honor your contract. Yes, we grouped “do not want” with the others. For instance, suppose we had been offered an all-expense-paid, two-month trip around the world that would leave no possibility for going to the gym. Taking the once-in-a-lifetime trip would be more important to us than going to the gym 150 times per year, so we would choose to lose the gym bet to take the trip. However, that’s not ideal. What’s ideal is to honor the gym bet when we are home and healthy and to suspend it otherwise. Since we can define these preferences a priori, it should be possible to define contracts that work within those rules. However, since it is impossible to think, a priori, of every possible thing that might make one want to suspend the bet, it seems reasonable to simply trust people to be honest about when they should be honoring the contract and when not. We realize this violates all the sacred principles of commitment contracts, experimental economics, law & order, and so on, but so what. History is filled with failed token economies and successful systems of soft guidelines.

OTHER DSN POSTS ON COMMITMENT DEVICES
Stop overeating with a turn of the wrist

Contracts to fight procrastination

February 10, 2011

Max Planck Summer Institute on Bounded Rationality

Filed in Conferences ,Programs
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APPLICATIONS NOW ACCEPTED FOR JUNE 21-28, 2011 SUMMER SCHOOL IN BERLIN

br.jpg

Summer Institute on Bounded Rationality
Foundations of an Interdisciplinary Decision Theory
21 – 28 June, 2011

Directed by Gerd Gigerenzer
Center for Adaptive Behavior and Cognition
Max Planck Institute for Human Development, Berlin, Germany

It is our pleasure to announce the Summer Institute on Bounded Rationality 2011 – Foundations of an Interdisciplinary Decision Theory, which will take place from June 21st to 28th, 2011 at the Max Planck Institute for Human Development in Berlin. The objective of the Summer Institute is to provide a platform for genuinely interdisciplinary research, bringing together young scholars from psychology, economics, biology, and philosophy. Its focus will be on the concept of “social rationality” – how rational behavior can emerge from simple heuristics that interact with a social environment. The goal is a deeper understanding of the way Homo sapiens forms decisions in an uncertain social world. Sharing knowledge across disciplines may well challenge the reigning assumptions in each.

Talented graduate students and postdoctoral fellows from around the world are invited to apply by March 18th, 2011. We will provide all participants with accommodation and stipends to cover part of their travel expenses. Details on the Summer Institute and the application process are available at http://www.mpib-berlin.mpg.de/summerinstitute

Please pass on this information to potential candidates from your own department or institute.

February 3, 2011

That wasn’t so great

Filed in Ideas
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GPS AND CHICKEN WINGS VS FLYING FIRST CLASS

This week, the Decision Science News editor talks about “premium experiences” and counter-evidence to the maxim that things don’t bring happiness.

I own a GPS but not a car.

When I travel, I look forward to getting into a rental, plugging in the GPS and finding the route to the hotel, the conference, or the local place with the best chicken wings. I get a strange pleasure of going to an arbitrary place like, say, Jacksonville, looking on Yelp to find the best place to find an arbitrary food, and then having the GPS guide me there. This is a true pleasure that technology brings me. It’s much better than driving while looking at scraps of paper or a crummy Avis map.

A noted behavioral economist and I were driving to a party once. Naturally, the conversation turned to the GPS. He shared my affection for them and pointed out another use, which is that you can give them to visiting relatives, who are then liberated and can drive themselves around and find their way back home again. He said that his delight in the GPS is unusual, however, as he finds disappointment in most things: especially espressos.

I thought about this a lot.

There is a common bit of advice which is to pay for experiences, not for things. I had always taken that for granted as true. Don’t be materialistic. Don’t pollute the world with needless junk. All that. But, I’m starting to realize that dollar for dollar, it often isn’t true, especially when dealing with premium experiences that are supposed to be great.

Take flying first class. A few years ago, when I first did it, it was great. A warm ramekin of nuts and a vodka tonic, sure, why not? But then, despite a bill that is sometimes $1000 higher, I’ve learned that a first class ticket: won’t get you into the lounge before your flight, won’t assure you your choice of meal (they run out), won’t get you your choice of drink, etc. On the first class flight I took last, the “meal” was a tiny bag of pretzels and a mint. (Guy behind me: “is there any other food?”. Stewardess: “no”).

When I think the supposedly premium “experiences” I’ve had, first class tickets, meals in fancy restaurants, etc., I have trouble remembering them, and those I do remember make me less happy than the $300 gadget that can show me the way to chicken wings nationwide. And when I summon the best experiences I’ve had, most were free.

There have been some comments about getting more specific about what is meant as an experience, and isn’t using the GPS an experience. So a clarification is in order:

With “experiences” I’m thinking of things billed as experiences in themselves: a fancy flight, a fancy meal, a theme park visit, a boat ride, a massage, an indulgence of one sort or the other. Granted, there are some great experiences (e.g. renting a canoe and spending the day on the Housatonic), but I’ve found in the past I’m quite ready to spend on experiences and deprive myself of material things when some material things (e.g. a GPS) are just an astonishing value as they lead to many, many feelings of satisfaction for the price of one supposedly great indulgence.

January 27, 2011

Correlation, causation and the Super Bowl

Filed in Gossip ,Ideas
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THE SUPERBOWL INDICATOR

Discussing the Decision Science News correlation, causation post during one of our daily and always entertaining Yahoo! Research lunches, someone said “this battle can’t be won because people just want to believe certain things are causal”. In line with that, Jason Zweig sends along this very funny piece about a spurious correlation, which, even though abandoned by its creators, refuses to die:

http://blogs.wsj.com/marketbeat/2011/01/28/super-bowl-indicator-the-secret-history/

Another nice side effect of last week’s post was this XKCD sent along by Winter.

Photo credit http://en.wikipedia.org/wiki/File:AmFBfield.svg

January 21, 2011

What can we do to defang bad science headlines?

Filed in Encyclopedia ,Gossip ,Ideas
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HOW TO STOP THE SELLING OF CORRELATION AS CAUSATION?

Decision Science News does not read news often. (We took Herbert Simon’s advice that checking the news every week or so is enough and are much happier since). However, each time we do we see headlines of the following sort:

Want to live longer? Get a grip! (On the correlation between longevity and hand grip strength).

If you want to live longer, then walk faster (On the correlation between longevity and walking speed).

If you’re reading Decision Science News, we don’t have to tell you that there’s not a scrap of evidence in the research cited in these articles that walking faster or giving firmer handshakes makes you live longer. See a target article to see it’s all correlational, not causal.

This is serious. First, it’s saying something that isn’t true. The news shouldn’t do that. They seem to get away with it by virtue of the fact that most people can’t conduct research themselves. (If they lied about testable relationships, e.g., “Want to avoid a ticket? Park on the sidewalk,” people would stop believing them rather quickly). Second, the effects are pervasive. We’ve seen PhDs in every field get suckered by a bogus headline.

(Speaking of headlines, DSN finds it hard to believe that anyone doing science journalism for more than a week wouldn’t fully grasp the correlation/causation distinction, if they didn’t have it already. Thus, we suspect there might be a strange relationship between people who write the stories and the people who write the headlines. We will check with our sister.)

It is handy that there is a Wikipedia article entitled Correlation does not imply causation, but how can people stand a chance against media machines that propagate new stories of this type every day?

A simple step is to prevent these stories from getting credibility with search engines by putting rel = “nofollow” in the URL when we ever have to link to such articles (as we have done above). But admittedly, that’s pretty weak.

Can we think of something better? This is 2011. We’re not at the mercy of a few media giants anymore. Online, people can exert a ot of collective power. What can be done about this? Maybe a browser plugin (like xmarks) that can overlay ratings on top of hyperlinks? A collective that keeps a kind of blacklist, perhaps punishing a publisher with less traffic each time they post such a headline?

What have you got?

January 14, 2011

The limits of behavioral economics

Filed in Ideas
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BEHAVIORAL ECONOMICS AS A COMPLEMENT, NOT A SUBSTITUTE


Sisyphus finds some nudges harder than others

George Loewenstein and Peter Ubel published this Op Ed in the New York Times entitled Economics Behaving Badly. It is not every day that prominent behavioral economists emphasize the limits of what they do, so we thought they deserved special mention here, (even if we are terribly late getting to this).

The article mentions some of the less-whelming behavioral economic interventions of late, and stresses that babies and bathwater need to be identified when rethinking existing systems.

Here is a representative quote:

Behavioral economics should complement, not substitute for, more substantive economic interventions. If traditional economics suggests that we should have a larger price difference between sugar-free and sugared drinks, behavioral economics could suggest whether consumers would respond better to a subsidy on unsweetened drinks or a tax on sugary drinks.

But that’s the most it can do. For all of its insights, behavioral economics alone is not a viable alternative to the kinds of far-reaching policies we need to tackle our nation’s challenges.

They mention that a program designed to reduce energy consumption by revealing neighbor’s consumption had modest effects of 1 to 2.5 percent. Since then, a working paper A working paper entitled Energy Conservation ‘Nudges” and Environmentalist Ideology: Evidence from a Randomized Residential Electricity Field Experiment by Dora L. Costa by Matthew E. Kahn, based on the same on the same study suggests that the effect can backfire as a function of the audience. Here’s the abstract:

“Nudges” are being widely promoted to encourage energy conservation. We show that while the electricity conservation “nudge” of providing feedback to households on own and peers’ home electricity usage works with liberals, it can backfire with some conservatives. Our regression estimates predict that a registered liberal who pays for electricity from renewable sources, who donates to environmental groups, and who lives in a liberal neighborhood reduces consumption by 3.1 percent in response to this nudge. A registered conservative who does not pay for electricity from renewable sources, who does not donate to environmental groups, and who lives in the bottom quartile liberal neighborhood increases consumption by 0.7 percent.