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Saturday, November 8, 2008

Edge 264: Putting Psychology Into Behavioral Economics - Thaler, Mullainathan, Kahneman

Edge 264 — November 7, 2008

(16,450 words)

http://www.edge.org

This online EDGE edition is available at:
http://www.edge.org/documents/archive/edge264.html

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THE THIRD CULTURE
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THE DOUBLE HELIX MEDAL FOR SCIENTIFIC RESEARCH
James D. Watson & J. Craig Venter

At the Cold Spring Harbor Board of Director's Dinner in New York City, James Watson and Craig Venter were co-recipients of the Double Helix Medal for Scientific Research.

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SWATTING ATTACKS ON FRUIT FLIES AND SCIENCE
By Jerry Coyne

Sarah Palin's criticism of the critters is just bad buzz. Research on them offers insights into learning, genes, diseases.

In her usual faux-folksy style, Palin lit out after a congressional earmark involving these insects: "You've heard about some of these pet projects ó†they really don't make a whole lot of sense ó†and sometimes these dollars go to projects that have little or nothing to do with the public good. Things like fruit-fly research in Paris, France. I kid you not." (Reading this diatribe is not sufficient; only video reveals the scorn and condescension dripping from her words.)

JERRY COYNE is a professor in the department of ecology and evolution at the University of Chicago, where he works on diverse areas of evolutionary genetics. He is the author (with H. Allen Orr) of Speciation, and Why Evolution Is True.

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Once again, real life is not a casino with simple bets. This is the error that helps the banking system go bust with an astonishing regularity.

REAL LIFE IS NOT A CASINO
By Nassim Nicholas Taleb

On New Years day I received a a prescient essay from Nassim Taleb, author of The Black Swan, as his response to the 2008 Edge Question: "What Have You Change Your Mind About?" In "Real Life Is Not A Casino", he wrote:

"I've shown that institutions that are exposed to negative black swans—such as banks and some classes of insurance ventures—have almost never been profitable over long periods. The problem of the illustrative current subprime mortgage mess is not so much that the "quants" and other pseudo-experts in bank risk-management were wrong about the probabilities (they were) but that they were severely wrong about the different layers of depth of potential negative outcomes."

Taleb had changed his mind about his belief "in the centrality of probability in life, and advocating that we should express everything in terms of degrees of credence, with unitary probabilities as a special case for total certainties and null for total implausibility".

"Critical thinking, knowledge, beliefs—everything needed to be probabilized. Until I came to realize, twelve years ago, that I was wrong in this notion that the calculus of probability could be a guide to life and help society. Indeed, it is only in very rare circumstances that probability (by itself) is a guide to decision making. It is a clumsy academic construction, extremely artificial, and nonobservable. Probability is backed out of decisions; it is not a construct to be handled in a stand-alone way in real-life decision making. It has caused harm in many fields."

The essay is one of more than one hundred that have been edited for a new book What Have You Changed Your Mind About? (forthcoming, Harper Collins, January 9th).

NASSIM NICHOLAS TALEB is an essayist and mathematical trader and the author of Fooled by Randomness and The Black Swan.

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PUTTING PSYCHOLOGY INTO BEHAVIORAL ECONOMICS
A Talk By Richard Thaler, Daniel Kahneman, Sendhil Mullainathan

Class 6: A Short Course In Behavioral Economics
Sean Parker, Anne Treisman, Paul Romer, Danny Hillis, Jeff Bezos, Salar Kamangar, George Dyson, France LeClerc

RICHARD THALER: ehavioral economics and good psychology, there's a lot of art. There is science and there are well-crafted experiments, but thinking about what the right experiment to run, was art and, there are 80 gazillion experiments, which ones are relevant to getting people to plant the right seed. That's a problem that Sendhil and I have been talking about for, well, since he was born. You're now seeing the results of 15 years of conversations. And there wasn't a scientific way of answering that question.

SENDHIL MULLAINAITHAN: A lot of what makes behavioral economics interesting is psychology, it is about what happens inside the mind. These phenomena are taking things that are happening inside the mind and interfacing them with things happening in the world, the environment, and getting feedback or getting interesting responses from that.

We happen to call the word economics. But it's not economics. You could be talking about crime, you could be talking about many things, in the social domain, the entire spectrum of human behavior. Anyone who is interested in the broader world should be interested in something we currently call "behavioral economics".

DANIEL KAHNEMAN: What we're saying is that there is a technology emerging from behavioral economics. It's not only an abstract thing. You can do things with it. We are just at the beginning. I thought that the input of psychology into behavioral economics was done. But hearing Sendhil was very encouraging because there was a lot of new psychology there. That conversation is continuing and it looks to me as if that conversation is going to go forward. It's pretty intuitive, based on research, good theory, and important.

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ARTICLES OF NOTE
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FINANCIAL TIMES
Obama's technology czar: the betting begins
By Richard Waters

Obama's technology czar: the betting begins
By Richard Waters

Barack Obama's promise to appoint the first chief technology officer for the US has had Silicon Valley buzzing all year. Now the election is over, it's time for the real horse race to begin.

John Doerr of Kleiner Perkins got things going this afternoon at the Web 2.0 Summit in San Francisco. Asked who should get the job, the always-outspoken Doerr didn't hesitate.

His first pick was Sun co-founder, Kleiner partner and all-round brainiac Bill Joy (pictured above left.)

As an alternative he suggested Danny Hillis (above right), a supercomputer pioneer and leading exponent of artificial intelligence.
Both men would certainly be a good fit for Doerr's personal job description for the first US CTO: someone to lead a new, much-needed focus on fundamental research, the sort of work that will bring new breakthroughs as significant as the birth of the internet (a product of DARPA.) ...

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NEW YORK REVIEW OF BOOKS
Science: The Coming Century
By Martin Rees

...Science is the only truly global culture: protons, proteins, and Pythagoras' theorem are the same from China to Peru. Research is international, highly networked, and collaborative. And most science-linked policy issues are international, even global—that's certainly true of those I've addressed here.

It is worth mentioning that the United States and Britain have been until now the most successful in creating and sustaining world-class research universities. These institutions are magnets for talent—both faculty and students—from all over the world, and are in most cases embedded in a "cluster" of high-tech companies, to symbiotic benefit.

By 2050, China and India should at least gain parity with Europe and the US—they will surely become the "center of gravity" of the world's intellectual power. We will need to aim high if we are to sustain our competitive advantage in offering cutting-edge "value added." ...

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THE NEW YORK TIMES
A Conversatrion with Stuart L. Pimm
By Claudia Dreyfus

'I realized that extinction was something that as a scientist, I could study. I could ask, Why do species go extinct?'

For a man whose scholarly specialty is one of the grimmest topics on earth — extinction — Stuart L. Pimm is remarkably chipper. On a recent morning, while visiting New York City, Dr. Pimm, a 59-year-old zoologist, was full of warm stories about the many places he travels: South Africa, Madagascar and even South Florida, which he visits as part of an effort to save the endangered Florida panther. Fewer than 100 survive in the wild. In 2006, Dr. Pimm, who holds the Doris Duke professorship of Conservation Ecology at Duke University, won the Heineken Prize for Environmental Sciences, the Nobel of the ecology world. ...

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SCIENCE
THE GONZO SCIENTIST
Flunking Spore
John Bohannon

...So over the past month, I've been playing Spore with a team of scientists, grading the game on each of its scientific themes. When it comes to biology, and particularly evolution, Spore failed miserably. According to the scientists, the problem isn't just that Spore dumbs down the science or gets a few things wrong--it's meant to be a game, after all--but rather, it gets most of biology badly, needlessly, and often bizarrely wrong. I also tracked down the scientists who appeared on television in what seemed like an endorsement of Spore's scientific content on the National Geographic channel. They said they had been led to believe that the interviews were for a straight documentary about "developmental evolutionary" science rather than a video promoting a computer game (see the news story in Science's 24 October issue). "I was used," says Neil Shubin, a paleontologist at the University of Chicago in Illinois, who worries that science has been "hijacked" to promote a product. How did things go so wrong for a game that seemed so good? ...

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THE BOSTON GLOBE
U Tube
Want a free education? A brief guide to the burgeoning world of online video lectures.
By Jeffrey MacIntyre

Graduate Studies: Edge.org

For those seeking substance over sheen, the occasional videos released at Edge.org hit the mark. The Edge Foundation community is a circle, mainly scientists but also other academics, entrepreneurs, and cultural figures, brought together by the literary agent John Brockman.

Edge's long-form interview videos are a deep-dive into the daily lives and passions of its subjects, and their passions are presented without primers or apologies. It is presently streaming excerpts from a private lecture, including a thoughtful question and answer session, by Nobel laureate Daniel Kahneman to Edge colleagues on the importance of behavioral economics.

It won't run to everyone's tastes. Unvarnished speakers like Sendhil Mullainathan, a MacArthur recipient with intriguing insights on poverty, are filmed in casual lecture, his thoughts unspooling in the mode of someone not preoccupied with clarity or economy of expression. The text transcripts are helpful in this context.
Regardless, the decidedly noncommercial nature of Edge's offerings, and the egghead imprimatur of the Edge community, lend its videos a refreshing air, making one wonder if broadcast television will ever offer half the off-kilter sparkle of their salon chatter. ...

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PUBLISHERS WEEKLY
What Have You Changed Your Mind About?
Edited by John Brockman. Harper Perennial, $14.95 paper (384p)

In this wide-ranging assortment of 150 brief essays, well-known figures from every conceivable field demonstrate why it's a prerogative of all thoughtful people to change their mind once in a while. Technologist Ray Kurzweil says he now shares Enrico Fermi's question: if other intelligent civilizations exist, then where are they? Nassim Nicholas Taleb (The Black Swan) reveals that he has lost faith in probability as a guiding light for making decisions. Oliver Morton (Mapping Mars) confesses that he has lost his childlike faith in the value of manned space flight to distant worlds. J. Craig Venter, celebrated for his work on the human genome, has ceased to believe that nature can absorb any abuses that we subject it to, and that world governments must move quickly to prevent global disaster. Alan Alda says, "So far, I've changed my mind twice about God," going from believer to atheist to agnostic. Brockman, editor of Edge.org and numerous anthologies, has pulled together a thought-provoking collection of focused and tightly argued pieces demonstrating the courage to change strongly held convictions. (Jan.)

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HUFFINGTON POST
Man Versus Machine
Thomas B. Edsall

...Jaron Lanier takes on the debate about the role and power of computers in shaping human finances, behavior and prospects from a radically different vantage point faulting -- in an article published on the Edge web site -- "cybernetic totalists" who, absolve from responsibility for "whatever happens" the individual people who do specific things. I think that treating technology as if it were autonomous is the ultimate self-fulfilling prophecy. There is no difference between machine autonomy and the abdication of human responsibility. . . .There is a real chance that evolutionary psychology, artificial intelligence, Moore's law fetishizing, and the rest of the package will catch on in a big way, as big as Freud or Marx did in their times.

[Also: Nathan Myhrvold, George Dyson, Ray Kurzweil]

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WALL STREET JOURNAL
October Pain Was 'Black Swan' Gain
Scott Patterson

For most of October, it seemed nearly everything that could go wrong with the markets did. But the rout turned into a jackpot for author and investor Nassim Nicholas Taleb.

Mr. Taleb last year published "The Black Swan," a best-selling book about the impact of extreme events on the world and the financial markets. He also helped start a hedge fund, Universa Investments L.P., which bases many of its strategies on themes in the book, including how to reap big rewards in a sharp market downturn. Like October's. ...

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PROSPECT
The emerging moral psychology
Dan Jones

Long thought to be a topic of enquiry within the humanities, the nature of human morality is increasingly being scrutinised by the natural sciences. This shift is now beginning to provide impressive intellectual returns on investment. Philosophers, psychologists, neuroscientists, economists, primatologists and anthropologists, all borrowing liberally from each others' insights, are putting together a novel picture of morality—a trend that University of Virginia psychologist Jonathan Haidt has described as the "new synthesis in moral psychology." The picture emerging shows the moral sense to be the product of biologically evolved and culturally sensitive brain systems that together make up the human "moral faculty."...

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THE RECORD (WATERLOO)
This is the column that changed the world
Bill Bean

I was watching a PBS production the other day entitled Dogs That Changed the World, and wondered about our contemporary fascination with things "That Changed the World."

The Machine That Changed the World (a 1991 book about automotive mass production). Cod: A Biography of The Fish That Changed the World (a 1998 book about, well, cod). The Map That Changed The World (2002 book about geologist William Smith). 100 Photographs That Changed the World (Life, 2003). Bridges That Changed the World (book, 2005). The Harlem Globetrotters: The Team That Changed the World (book, 2005). How William Shatner Changed the World (documentary, 2006). Genius Genes: How Asperger Talents Changed the World (book on brilliant people with autism, 2007). The Book That Changed the World (2008 article in the Guardian, about The Origin of Species).

This "Changed the World" stuff is getting to be a bit tedious, isn't it? Now that we have Dogs That Changed the World, can Cats That Changed the World be far behind? ...

...Bill Bean notes that there is already a place to read about People Who Changed the World and Then Changed Their Minds. Every year, the people at the Edge Foundation ask writers, thinkers, psychologists, historians and others what major ideas they have changed their minds about. Go to www.edge.org. It's good reading.

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FRANKFURTER ALLGEMEINE ZEITUNG
The Turkey Was Amazed
By Frank Schirrmacher

Nassim Nicholas Taleb, professor of risk research, had already described the process of the financial crisis, when Ben Bernanke believed we were already in an "era of security". His new book could become to the standard work of a society, that is experiencing the destruction of its life security. ..

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THE NEW YORK TIMES
Your Comments On The Economy Column
By Nicholas Kristof

...Yet I also think that it's important to keep the economy in perspective. During the boom years, we tended to equate wealth with happiness, and if there's some reordering of our national value system, that would be a good thing. Over the last year, I've become interested in the work of social psychologists like Jonathan Haidt who have conducted research on happiness. And the evidence is pretty strong that the things that we believe will make us happy, such as winning the lottery, won't do that except in the short term. In the long term, the way to be happy is to have friends and spend time with them, and to connect to a cause larger than yourself that gives you a sense of meaning.

As my column suggested, I'm influenced by the work of Alan Krueger at Princeton. He believes that networks are truly important for happiness and fulfillment — and the cost of a lay-off or foreclosure is that it tears people out of their networks. So he thinks that falling incomes aren't so bad as we may think, but that layoffs and evictions are worse, and that makes sense to me. ...

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ATLANTIC ONLINE
Too Soon To Tell
Ross Douthat

I've written before about Jonathan Haidt's view that our moral impulses can be grouped into five categories, two "liberal" (harm/care, and fairness/reciprocity) and three "conservative" (ingroup/loyalty, authority/respect, and purity/sanctity) - and I've argued before with Will Wilkinson about whether it's possible to envision a successful society in which the liberal impulses dominate completely, and the conservative impulses are stigmatized and/or essentially disappear. Haidt, for his part, thinks that it probably isn't; here's Will arguing with him:

?Frankly, I find this extremely unconvincing, and I daresay even pernicious ... What Jon needs to show is that there is a threshold on the conservative channels of the moral equalizer below which social stability is threatened. In the talk, he barely gestures toward evidence to this effect ... Indeed, my sense is that the societies in which the space between high liberal settings and low conservative settings is the greatest-that is, the most imbalanced-are by and large the best places for human beings to live."...

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TECHNOLOGY REVIEW
Wikipedia and the Meaning of Truth
By Simson L. Garfinkel

... In a May 2006 essay on the technology and culture website Edge.org, futurist Jaron Lanier called Wikipedia an example of "digital Maoism"--the closest humanity has come to a functioning mob rule. ...

.. Lanier's complaints when his Wikipedia page claimed that he was a film director couldn't be taken seriously by Wikipedia's "contributors" until Lanier persuaded the editors at Edge to print his article bemoaning the claim. This Edge article by Lanier was enough to convince the Wikipedians that the Wikipedia article about Lanier was incorrect--after all, there was a clickable link! Presumably the editors at Edge did their fact checking, so the wikiworld could now be corrected. ...


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TECHNOLOGY REVIEW
Moving Freely between Virtual Worlds
By Erica Naone

...But the issue goes deeper than virtual cars and shopping malls. Jaron Lanier, interdisciplinary scholar in residence at the Center for Entrepreneurship and Technology at the University of California, Berkeley, and a virtual-reality pioneer, says that the search for a 3-D Internet is important for humanity. "Human cognition was designed to function in 3-D, and our computation eventually has to have a 3-D interface to maximize the matchup with the human brain as it evolved," he says. People will need to find a way to combine a concrete, 3-D spatial understanding with the connective power of the 2-D Internet, Lanier says. ...

... Lanier, who notes that he has many professional connections to people involved with virtual worlds, says that while he very much wants the 3-D Internet to succeed, he is skeptical about whether it will be possible for developers to agree on a set of standards. "There's a virtual land rush of people who want to come in and grab the standard," he says, noting that the history of IBM and Microsoft provides some indication of the money that can be made by establishing a standard. But Lanier thinks a successful standard for the 3-D Internet is unlikely to develop the same way that HTML did--that is, as an abstract definition that people then adopted. He thinks it is more likely that a well-designed package will become a standard, similar to the way that Adobe Flash is becoming standard for rich Internet applications.

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TECHNOLOGY REVIEW
Immortalizing a Piece of Yourself
By Emily Singer

Church won't be alone in distributing his cells. The scientist aims to create hundreds or thousands of cell lines over the next few years as part of the Personal Genome Project, an effort that he launched two years ago to capitalize on advances in gene-sequencing technologies. So far, the project has enrolled 10 volunteers--and garnered headlines, mainly for its genomic-era exhibitionism. Volunteers, including Harvard psychologist Steven Pinker and entrepreneur Ester Dyson, released their medical records and preliminary genetic analyses on the Web earlier this month. But media attention has mostly ignored that fact that they've also given something that may be even more personal. Each has undergone a skin biopsy, which will be used to generate stem-cell lines.

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TECHNOLOGY REVIEW
Linda Avey and Anne Wojcicki
The founders of startup 23andMe want to know your genome.
By Emily Singer

Church won't be alone in distributing his cells. The scientist aims to create hundreds or thousands of cell lines over the next few years as part of the Personal Genome Project, an effort that he launched two years ago to capitalize on advances in gene-sequencing technologies. So far, the project has enrolled 10 volunteers--and garnered headlines, mainly for its genomic-era exhibitionism. Volunteers, including Harvard psychologist Steven Pinker and entrepreneur Ester Dyson, released their medical records and preliminary genetic analyses on the Web earlier this month. But media attention has mostly ignored that fact that they've also given something that may be even more personal. Each has undergone a skin biopsy, which will be used to generate stem-cell lines.

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This online EDGE edition is available at:
http://www.edge.org/documents/archive/edge264.html

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Edge Foundation, Inc. is a nonprofit private operating foundation under Section 501(c)(3) of the Internal Revenue Code.
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EDGE

John Brockman, Editor and Publisher
Russell Weinberger, Associate Publisher
Karla Taylor, Editorial Assistant

Copyright (c) 2008 by EDGE Foundation, Inc.
All Rights Reserved.

Published by EDGE Foundation, Inc.,
5 East 59th Street, New York, NY 10022

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