For those in or near Sydney at the end of July, there’s an interesting conference in the works – the Marketing Science Ideas Exchange. From the blurb:

The Marketing Science Ideas Xchange (MSiX) is the first event of its type in Australia dedicated to the interface between behavioural science and marketing. The conference will demonstrate why behavioural sciences in general, and behavioural economics in particular, is making such strong headways into advertising. The conference promises to be a mix of theory and practical examples, all housed within a fun and interactive ideas exchange environment.

It will be interesting to go to a behavioural insights conference full of marketers, rather than the usual economists. Marketers have had to be willing to embrace a relatively realistic understanding of human behaviour and, obviously, have been exploiting decision-making biases for years. But I get the sense that they could be more systematic in their approach and adopt a much richer understanding of human nature.

Headlining the conference is Rory Sutherland, the best friend of behavioural science in the ad world (although Rory is happy to keep using the term ‘behavioural economics‘). Watch the video below for a taste of what is on offer. I endorse Rory’s fast train strategy, and recommend googling around for some of this other presentations.

There are some other interesting speakers in the lineup. I recently saw Alex Gyani from the UK’s Behavioural Insights Team (now seconded in the NSW Department of Premier and Cabinet) speak on the need for evidence based policy, and expect he’ll be continuing that theme. The rest of the program is here.

Links this week (or closer to a month):

1. It’s reigning men. How our convict past explains our glass ceiling.
2. Rory Sutherland on measurebation.
3. The genetics of investment biases (ungated version). HT: Tyler Cowen.  Basically another confirmation of the three laws of behaviour genetics.
4. Rats regret bad decisions.
5. Matt Ridley on fat.
6. Pulling apart the research on the destructiveness of female hurricanes – Paul Frijters and Andrew Gelman.
7. Sendhil Mullainathan on the limits to big data.

In April, a Conference on Genetics and Behaviour was held by the Human Capital and Economic Opportunity Global Working Group at the University of Chicago.

The videos for the conference are now up, so as I watch through them, I’ll post links and some brief thoughts. The first session, with videos linked below, was on Genes and Socioeconomic Aggregates. The video and audio are average at times, and you might want to get the slides (links provided where available) as they are hard to read in the video at times. However, there are some good bits in all of the presentations.

Gregory Cochran: Genetics and Society (slides)

Cochran laid out some ideas that should be in the minds of economists, although he does not focus much attention on selling the ideas. Unfortunately, the questions at the end got derailed by epigenetics (my views approximate Cochran’s). One interesting argument by Cochran is that human environments tend be variable, as, in a Malthusian world, good times (when people breed like mad) tend to be followed by bad (too many people) which tend to be followed by good (people died in the bad). As a result, epigenetic transmission based on the current environment may be a poor strategy.

When Cochran posted this video on his blog, some interesting discussion followed in the comments – they are worth checking out.

Enrico Spolaore: Ancestry and the Diffusion of Economic Development: Facts and Questions (slides)

Spolaore touches on his work concerning genetic distance and the diffusion of development (I have posted about it here, here and here). He is extending this work to look at the diffusion of fertility reduction from France (where the demographic transition first occurred), and is getting similar results.

Steven Durlauf: Two Remarks on the Inference of “Macro” Genetic Effects (slides)

I did not get much from Durlauf’s presentation, although some of the questions were interesting. Steve Hsu deflates the “it’s all too hard” message when he points out that animal breeding is now using genetic data.

Henry Harpending: Some Quantitative Genetics Approaches

Harpending discusses his work on how assortative mating can mimic strong selection. I sense this presentation might be difficult to follow if you aren’t familiar with his work (a link to that is here). Not much value in the question session, which gets derailed by issues concerning scaling when estimating heritability.

Aldo Rustichini: Determinants of Inequality and Intergenerational Mobility (slides)

A tough presentation to follow – you need to use the slides to have a chance of getting across it – and not recommended for those not mathematically inclined. The highlight is Greg Cochran trying not to jump out of his chair between the 7 and 8 minute mark due to some comments about heritability. Cochran also deflates the idea that there is a high level of false paternity in humans – for more on that, check out this post by Razib Khan.

Quamrul Ashraf has pointed me to an episode of Through the Wormhole with Morgan Freeman titled “Is Poverty Genetic?”

The official version of the video is below (payment required?), although it is blocked in Australia (Australians lead the world in digital piracy, despite being willing to pay for content. This sort of thing is why). Below that is another version I managed to find on YouTube – so go for it.

The good: The coverage of Ashraf’s work with Oded Galor on genetic diversity and economic development (my posts on their work are here), experiments on capuchin monkeys’ sense of fairness, and our sense of shame.

The so-so: The opening piece on Eric Turkheimer’s research on the heritability of IQ was OK, but when tied into the next section on differences in brain development, it goes a bit awry. A few concepts that would have helped – IQ heritability increases with age, differences that emerge after birth can be genetic, and genes shape their environment.

The not so good: Kin selection being spun as sacrifice for the benefit of the species. The overall conclusion.

Not sure: The econophysics of poverty.

John Coates writes:

[W]e tend to view financial risk taking as a purely intellectual activity. But this view is incomplete. Risk is more than an intellectual puzzle — it is a profoundly physical experience, and it involves your body. Risk by its very nature threatens to hurt you, so when confronted by it your body and brain, under the influence of the stress response, unite as a single functioning unit. This occurs in athletes and soldiers, and it occurs as well in traders and people investing from home. The state of your body predicts your appetite for financial risk just as it predicts an athlete’s performance. …

Our challenge response, and especially its main hormone cortisol (produced by the adrenal glands) is particularly active when we are exposed to novelty and uncertainty. If a person is subjected to something mildly unpleasant, like bursts of white noise, but these are delivered at regular intervals, they may leave cortisol levels unaffected. But if the timing of the noise changes and it is delivered randomly, meaning it cannot be predicted, then cortisol levels rise significantly.

So what does this mean for financial markets?

When opportunities abound, a potent cocktail of dopamine — a neurotransmitter operating along the pleasure pathways of the brain — and testosterone encourages us to expand our risk taking, a physical transformation I refer to as “the hour between dog and wolf.” One such opportunity is a brief spike in market volatility, for this presents a chance to make money. But if volatility rises for a long period, the prolonged uncertainty leads us to subconsciously conclude that we no longer understand what is happening and then cortisol scales back our risk taking. In this way our risk taking calibrates to the amount of uncertainty and threat in the environment.

In this light, the Federal Reserve has another parameter to consider.

THE Fed, however, through its control of policy uncertainty, has in its hands a powerful tool for influencing risk takers. But by trying to be more transparent, it has relinquished this control. …

As uncertainty in fed funds declined, one of the most powerful brakes on excessive risk taking in stocks was released.

During their tenures, in response to surging stock and housing markets, both Mr. Greenspan and Mr. Bernanke embarked on campaigns of tightening, but the metronome-like ticking of their rate increases was so soothing it failed to dampen exuberance.

There are times when the Fed does need to calm the markets. After the credit crisis, it did just that. But when the economy and market are strong, as they were during the dot-com and housing bubbles, what, pray tell, is the point of calming the markets? Of raising rates in a predictable fashion? If you think the markets are complacent, then unnerve them. Over the past 20 years the Fed may have perfected the art of reassuring the markets, but it has lost the power to scare. And that means stock markets more easily overshoot, and then collapse.

The Fed could dampen this cycle. It has, in interest rate policy, not one tool but two: the level of rates and the uncertainty of rates.

I like this analysis, but I’m not sure about the conclusion. Reserve banks operate under an illusion of control, acting as though they are behind the wheel of a finely tuned sports car. The reality is closer to 19th century medicine. Even if Coates’s analysis is right, I’m wary of the Fed or other reserve banks trying to generate the “right level” of uncertainty.

Links this week:

1. Some economist bashing – first from Mark Buchanan, who wonders why economists wheel out “whacky” versions of what they know in public debate, and second, from Tim Harford, on an astonishing record of complete failure.
2. Herb Gintis reviews Complexity and the Art of Public Policy: Solving Society’s Problems from the Bottom Up (HT: Arnold Kling)
3. We can’t ignore the evidence: genes affect social mobility.
4. The costs of climate change – some corrections.
5. Steven Pinker on writing.

Links this week:

1. A conversation with Rory Sutherland. Many good pieces, but my favourite line:

Certainly there’s a problem with numbers in that there are sophisticated things in life that we all understand perfectly well when verbally described. Should psychology be constrained by math? I mean, who has the better understanding of human behavior—Shakespeare or Eugene Fama? If you make mathematical expression a barrier to entry, to any kind of theory, you are undoubtedly limiting yourselves.

2. Another article taking a shot at the idea that “all calories are equal”.
3. A not so glowing review of the latest book in the Freakonomics franchise – Think Like a Freak. Noah Smith also takes a shot.
4. H. Allen Orr reviews Nicholas Wade’s A Troublesome Inheritance: Genes, Race and Human History.
5. Two good pieces on the mess that is copyright protection – an extended riff on barriers to innovation and the ridiculous length of copyright terms.

First, from Andrew Leigh, discussing Gregory Clark’s work showing that low social mobility persists across countries and policy environments:

How do we break the pattern? Part of the answer must lie in a fair tax system, a targeted social welfare system, effective early childhood programs, and getting great teachers in front of disadvantaged classrooms. We need banks willing to take a chance on funding an outsider, and it doesn’t hurt to maintain a healthy Aussie scepticism about inherited privilege.

As an aside, it appears Leigh (with Mike Pottenger) is finding the same low mobility in Australia as Clark has found elsewhere.

In contrast, from Arnold Kling:

For libertarians, the implications of Clark’s finding of strong heritability of social status are ambiguous. On the one hand, his findings argue against extensive efforts at social engineering that try to achieve parity across groups. … Attempts to engineer different outcomes tend to produce perverse results. …

On the other hand, his findings argue against the need to create strong incentives to succeed. If some people are genetically oriented toward success, then they do not need lower tax rates to spur them on. Such people would be expected to succeed regardless. The ideal society implicit in Clark’s view is one in which the role of government is to ameliorate, rather than attempt to fix, the unequal distribution of incomes.

Kling’s approach to Clark’s argument seems preferable to doubling down on measures that don’t appear to increase social mobility. That is, of course, if increased social mobility is what we should be chasing.

Links this week:

1. There are plenty of reviews of Nicholas Wade’s new book, A Troublesome Inheritance: Genes, Race and Human History. Robert VerBruggen‘s is one of the more interesting. We’ll be throwing a lot of social science under the bus if we apply Andrew Gelman’s filter more generally. Greg Cochran points to some errors and Razib offers a perspective.
2. Gelman again, this time on poor research in evolutionary psychology. I agree with both him and Pinker here.
3. A review of Think Like a Freak. From the excerpts I have seen, it seems that Levitt and Dubner are running into the same problem as a lot of the behavioural economics literature – there are only so many “funky” stories to go around.
4. Can a single gene explain 3 per cent of the variation in IQ? I don’t think so, but interesting none the less.

Gary Becker was one of the first economists to seriously contemplate the role that evolutionary biology could play in economics. In 1976, he wrote:

I have argued that both economics and sociobiology would gain from combining the analytical techniques of economists with the techniques in population genetics, entomology, and other biological foundations of sociobiology. The preferences taken as given by economists and vaguely attributed to “human nature” or something similar – the emphasis on self-interest, altruism toward kin, social distinction, and other enduring aspects of preferences – may be largely explained by the selection over time of traits having greater genetic fitness and survival value.

Over the last two days, a couple of people have classed him as the greatest social scientist of the last 50 years. I am happy to grant the title of greatest economist over that period, but I’ll reserve the social scientist title. Becker broke down a lot of barriers in other fields, but I am not sure that many of his applications will outlast approaches grounded in biology. In the long-run, E.O. Wilson and his groundbreaking work starting with Sociobiology might be the more important piece.

In the meantime, below are links to some posts over the last few years I have written about Becker’s work:

1. Rotten kids and altruism.
2. Altruists and the knowledge problem.
3. Consumption and fitness.
4. Deriving the demand for children.
5. The evolution of happiness.