Collard, Walford, Vernon, Itagaki, and Turk (2020) on Endowment, Ownership, and Culture

Philip Collard, Alexandra Walford, Lucy Vernon, Fumihiko Itagaki, and David Turk, “The Relationship Between Endowment and Ownership Effects in Memory Across Cultures.” Consciousness and Cognition 78, February 2020, 102865. 

• One manifestation of endowment effects is that people require more money to part with an owned item (willingness-to-accept, WTA) than they are willing to pay (WTP) to acquire such an item if it is not yet owned – as if the mere fact that you own something raises its value to you. 

• Prospect theory offers one explanation for endowment effects: things you own become part of your reference point, so to “lose” them is particularly painful, thanks to loss aversion. 

• But maybe the endowment effect is not about loss aversion, perhaps it is about your identity being connected to owned items. You have a positive view of your self-worth, so things that become associated with your self become more valuable in your eyes. Ownership of items also has been connected with an increased ability to remember the item down the road. 

• Hmm, but maybe in some cultures people are not so wrapped in self-worth that they raise the value of stuff they own because it is connected to them? Maybe cultures differ, too, in how much ownership of an item increases the ability to recall the item? 

• Experiment 1 (n=32): eight household goods are divided into two equally-valued sets of 4 items each, where those equal values are based upon student valuations collected in a pre-experiment. A participant is told that they own one of the sets but not the other. Then each of the eight items is shown, and the subject indicates how much they would be willing to sell the item for (if they “own” it) and how much they would be willing to pay for it (if they don’t own it). 

• The 32 British undergraduates showed an endowment effect: they were willing to pay on average 9.25 pounds for the unowned set, but would have to be paid 10.65 pounds to part with their “owned” items. But would a similar endowment effect be identified if the experimental subjects were not British but Japanese? 

• For Experiment 2, 61 British undergraduates were recruited, along with 52 Japanese undergraduates. A version of Experiment 1's endowment task was performed, along with new ownership and memory tasks. In the endowment experiment, the Japanese students showed no endowment effects, but once again, the British did. (The endowment task was not identical in the UK and Japan for an unexpected reason: one of the everyday items that made up part of the sets of goods was not available in Japan! "For the Japanese participants, the spatula was replaced with a ladle as the former item was not available locally [p. 4].") 

• As for remembering the items, the British subjects were much better for the items they “owned” than for ones they did not own, but the Japanese showed no difference in recall based upon ownership. Further, British subjects (but not the Japanese) showed a positive correlation between their endowment effects and the impact of ownership on their recall. 

 • Maybe these (British) endowment effects are not about loss aversion, but rather about connections to self?

O'Rourke Stuart, Windschitl, Miller, et al. (2022) on Ambiguity in a Treatment-Seeking Context

Jillian O'Rourke Stuart, Paul D. Windschitl, Jane E. Miller, et al., “Attributions for Ambiguity in a Treatment-Decision Context Can Create Ambiguity Aversion or Seeking.” Journal of Behavioral Decision Making 35(1): e22249, January 2022, available here. 

• You have a nasty skin rash and need one of two treatments: either one with a 75% chance of working or one (the ambiguous one) with somewhere between a 60% and 90% chance of working. Which do you prefer? 

• Some prior work shows that people tend to be ambiguity seeking with respect to medical treatments – they would prefer the 60-to-90% option! But perhaps the reason underlying the fact that the probability of success is uncertain affects how people feel about the ambiguous treatment? 

• Study 1 concerns two alternative reasons for ambiguity in a treatment. In one condition, the range of probabilities is attributed to different outcomes from different research studies; in the alternative condition, the ambiguity is said to arise from the medicine coming from two otherwise identical production batches, one of which has a lower probability of working than the other. 

• The subjects are a combination of Amazon Mturk participants and university students, with an overall n of 492. 

• Both conditions, that is, both explanations for the ambiguity present in one of the health treatments, give rise to some ambiguity aversion – not ambiguity seeking, as some previous literature had suggested to be exhibited in the health domain. In both conditions, nearly two-thirds of participants prefer the unambiguous option. Further, on average, participants indicated that their beliefs about the likelihood of a treatment working were lower for the ambiguous treatment than for the unambiguous treatment. 

• A second study was performed utilizing university students, with n=271. This study replicated study 1, except the ambiguity condition that previously had been attributed to varying results from research studies now was attributed to variations in the overall health status of the patients. (The alternative ambiguity explanation, concerning different production batches, remained the same.) The idea is that people might tend to have optimistic views of their health status, and further, they have some locus of control over their physical condition. Previous literature suggests that these features might induce a preference for ambiguity. 

• When the ambiguity was tied to one's overall health status, ambiguity aversion (on average) disappeared. Further, people who rated their health highly were likely to take the ambiguous option when it was tied to overall health. 

• A third study (Mturk, n=242) looked more at self-focused attributions for ambiguity, beyond overall health. Now the ambiguity was tied either to: (1) how regularly you apply the medicinal cream; or (2) the strength of your immune system; or (3) your genetic makeup. A fourth condition brought back the "different results from different research studies" explanation of study 1. 

• Study 3 also tried out two different conditions for the underlying probability of success, one centered on 75% and one centered on 25%. 

• Attributions 1 – application regularity – and 2 – immune system strength – led to rather massive ambiguity seeking! [The other ambiguity explanations led to ambiguity neutrality.] People indicate (in attributions 1 and 2) that they were optimistic about the resolution of the ambiguity. Indeed, folks seem excessively optimistic about the relative power of their immune systems.

White and Perfors (2022) on Ambiguity Aversion in Vignettes

Joshua P. White and Andrew Perfors, “Ambiguity Aversion in Qualitative Contexts: The Role of Prior Beliefs,” May 22, 2022; available here.

• The idea is to test for ambiguity aversion in more-or-less familiar risky situations that are not about money, such as blind dates or election outcomes. Further, the issue of whether ambiguity aversion arises from people holding pessimistic beliefs about the actual odds facing them in ambiguous situations is explored.

• The three lab experiments employ Amazon Mechanical Turk (overall n>2000) and the analysis is pre-registered, including the data exclusion criteria.

• The 24 vignettes: Would you rather be in the risky situation or the ambiguous situation? Half of the vignettes concern potential gains (e.g., new job) and half concern potential losses (e.g., losing a job). 

• The results: ambiguity aversion is typically present on average in both the gain and loss framings; ambiguity aversion is greater, however, in the gain scenarios, and the amount of aversion varies quite a bit across scenarios. 

• The scenario that tracked an Ellsberg urn problem showed (easily) the highest ambiguity aversion. 

• For some individuals, the aversion to ambiguity seems to derive from pessimistic feelings about how ambiguity would be resolved. (The Ellsberg-style urn vignette – which involved a casino! – is particularly likely to be affected by pessimism.) But there remains a good deal of ambiguity aversion that does not derive from pessimistic beliefs (nor from "comparative ignorance," the concern that a decision maker is up against better informed folks – such as casino owners, perhaps?).

Berman, Ariely, Gosnell, et al. (2020), “Reframing the Loneliness Epidemic”

Kristen Berman, Dan Ariely, Evelyn Gosnell, et al., “Reframing the Loneliness Epidemic.” Pages 123-131 in The Behavioral Economics Guide 2020, edited by Alain Samson. 

• Loneliness involves a dearth of satisfying relationships 

• Some 20% of Americans report not having any close friends 

• Loneliness undermines subjective well-being and health – and there is no widely available, effective “treatment” 

• Nearly half of loneliness can be traced to one’s genes 

• People tend to get lonelier as they age 

• Women, on average, are lonelier than men 

• Unemployment and retirement both increase loneliness 

• Loneliness can be a sort of self-fulfilling trap 

• How to deal with the loneliness epidemic? Reframing!: instead of treating loneliness, perhaps we can prevent it. In particular, can we nudge friendship? 

• An old study found that a 45-minute meaningful conversation made people feel as close with their (previously unknown) conversation partner as they felt in their more established relationships. 

• But people are risk averse, and (perhaps) they shy away from conversations that could result in rejection. 

• One approach is to change the default, to make deep conversation the expected behavior.

• Experiment 1: A Conference Networking Study. At the beginning of a conference for finance sector workers, Conversation Cards were distributed that contained probing questions participants would answer in conversing with each other. Other conditions included a "just network as usual" command and an "avoid small talk" suggestion. 

• The subjects responded well to the Conversation Cards – but they still weren’t all that interested in following up to build friendships. (The "avoid small talk" folks were sort of frustrated, at a bit of a loss to break the ice.)

• Experiment 2: Nudging Deep Conversation in a Social Setting (Friday night happy hours)  

• The conditions were (1) conversation about the future v. (2) conversation about the past v. (3) an ice-breaker activity with no conversational guidance 

 • The conversational prompts both worked! More talking sessions, and more desire to build the connections... 

• Should we rethink social architecture to encourage deep conversations, without exposing people to large social risks? (And do the conversations really have to be deep?) 

• You can acquire the Conversation Cards at the cost of production and transfer (see p. 129).

Blanchflower (2020) on Unhappiness and Age

David G. Blanchflower, “Unhappiness and Age.” Journal of Economic Behavior and Organization 176: 461–488, 2020. 

 • We “know” that happiness tends to hit a nadir around the age of 50 – but do unhappiness and related conditions such as stress and loneliness and pain reach a peak at about that time, too? 

• This article looks at tons of data (total "N" almost 14 million) from many, many nations, for the most part drawn from the third millennium CE. 

• The conclusion is stark: unhappiness and related measures tend to peak for people in their late 40s or so, mirroring pretty closely the results for happiness measures. 

• There are a host of analytical issues involving, for instance, the precise measure of reported “unhappiness” and the selection of control variables for regression analysis. Nonetheless, the main finding of a peak of unhappiness in midlife is quite robust to how these issues are handled, even across countries. 

• The impact of some life events is symmetric with happiness and unhappiness: unemployment decreases happiness and raises unhappiness; higher incomes increase happiness and lower unhappiness. 

• Oddly(?), being of male gender seems to decrease unhappiness and to decrease happiness. 

• There’s a lot of variance in unhappiness between countries. Ireland in 2014 reported a 12.1% rate of adult depression, while in Poland, it was 4.2%. But in both countries, the rate of depression was highest for 55-64 year olds. 

• Americans are outliers with respect to the amount of pain reported; in 2018, one-quarter of Americans report having suffered pain on the previous day, and prescription painkiller use is common. 

• Suicide rates tend to show a peak in middle-age, but then they eventually begin to rise again at older ages. 

• In the US in 2018, almost 10% of people say that their mental health was not good for at least 20 of the past 30 days. 

• There’s even a midlife peak in the belief that the country as a whole is getting worse. 

• The increase in unhappiness associated with midlife is on a similar scale to what happens with bad events, such as becoming unemployed or losing a spouse.

Twenge and Cooper (2022) on the Happiness Class Divide

Jean M. Twenge and A. Bell Cooper, “The Expanding Class Divide in Happiness in the United States, 1972–2016.” Emotion 22(4): 701–713, 2022. 

• Signs of a growing class divide in the US include the data on income inequality, “deaths of despair,” and the rising mortality rate for non-college educated white Americans. 

• Has it become more true in the US that money and prestige buy happiness? Twenge and Cooper attempt to answer this question. 

• The data: the General Social Survey (GSS), 1972-2016, adults age 30 and above, n≈44,000. 

• “Class” here is of the socio-economic variety (SES), and is measured by income, education, and “occupational prestige” 

• The GSS happiness question: ‘Taken all together, how would you say things are these days—would you say that you are very happy, pretty happy, or not too happy?’ 

• Income, education, and occupational prestige all contribute considerably to happiness – and for income, the effect does not taper off as income rises. 

• The connection between SES and happiness has increased markedly between 1972 and 2016 – though some of this increase can be traced to increasing marital differences between SES classes. 

• The larger happiness gap between SES groups is, for white people, caused by diminishing happiness for those in the lower classes, while the upper-class folks almost held their own in terms of happiness. 

• For Black people, lower-SES people showed a small decline in happiness between 1972-2016, but high-SES people saw a significant increase in happiness. 

• Has class become more salient as income inequality increases?

Helliwell, Huang, and Wang (2020), “Happiness and the Quality of Government"

John F. Helliwell, Haifang Huang, and Shun Wang, “Happiness and the Quality of Government.” NBER Working Paper 26840, March 2020 [pdf here]. 

• Happiness studies have become pretty standard parts of social science and governance in the last two decades. Helliwell, Huang, and Wang look at cross-country evidence concerning happiness and government quality; 150+ countries, 2005-2017, n≈1,500.  

• One common measure of subjective well-being is the Cantril ladder, where respondents are asked to imagine a ladder with eleven numbered levels, from zero on the bottom (worst possible life for the respondent) to ten on the top (best possible life for the respondent). 

• Life satisfaction (as measured, for instance, by the Cantril ladder) varies much more on a cross-country basis than do hedonic measures of happiness – and the long-run connection between public policy and life satisfaction seems more solid than the policy-emotions link. “Good government may or may not make you feel happy, but does… make you happier with your life as a whole [p. 5].” 

• Some empirical results: the quality of delivery of government services contributes to life satisfaction; the extent of democracy does not, though the quality of democracy is fairly highly correlated with life satisfaction. 

• Further, per-capita income is positively connected with life satisfaction; confidence in the government is closely connected to delivery quality, and significantly raises life satisfaction. 

• In cross-country comparisons, health care spending seems to be associated with higher life satisfaction, while military spending is associated with lower life satisfaction. 

• Conflict is bad for life satisfaction, though some of the connection arises from the harm that conflict imposes on per-capita income. 

• Well-being inequality reduces average life satisfaction; raising well-being for those with the least does not have to come at the expense of the well-being of everyone else.

Leitzel (2021) on Regulating Cocaine

Jim Leitzel, “Double Defaults: Behavioral Regulation of Cocaine.” Journal of Behavioral Economics for Policy 5(1): 7-12, 2021 [pdf here]. 

• Can we protect against the dangers of excessive or highly risky cocaine use without imposing the huge costs that accompany cocaine prohibition? 

• Yes, we can! We can offer some protection against diseased or impulsive decision-making, without posing a large barrier to “rational” cocaine use. 

• We can manage the supply side like alcohol, perhaps, or prescription drugs, but… we also can “nudge” people towards rational cocaine-related behavior. 

• We can take advantage of the surprising power of default options. 

• The First Default: You are Not Eligible to Purchase Cocaine. 

• If you are of age, you can choose to override this default of ineligibility.

• Pass a test, pay a fee, acquire a cocaine buyer’s license; behave well or you will lose your cocaine buyer’s license!

• The Second Default(s): You Can Only Purchase Cocaine in Moderate Doses.

• Prices, Quantities, Waiting Periods – the default settings on all of these are aimed at enforcing modest consumption. The waiting period involves ordering your cocaine purchases in advance, by three days, say. 

• At some cost (time, money), you can override these default terms for more liberal access to cocaine (if you have a record of unproblematic cocaine-related behavior); alternatively, you can opt-in to more stringent rules, at low cost or even some subsidization. Want to only be allowed to purchase cocaine on weekends? – great, you can impose this restriction, and the suppliers will enforce it.  Want to have a cocaine-free February? Great, you can put in a no-purchases-during-February rule, and the sellers will enforce it.

Graham and MacLennan (2020) on Well-Being

Carol Graham and Sara MacLennan, “Policy Insights from the New Science of Well-Being.” Behavioral Science & Policy 6(1): 1–20, 2020; available for download here. 

• Advice for job-seekers! Inquire about autonomy, meaningful work, and a respectful atmosphere -- these will affect your well-being at work. 

• Economic growth can be accompanied by declining happiness (or declining subjective well-being (SWB)). 

• Three types of happiness measures: (1) Hedonic (or affective, or experienced); (2) Evaluative (life satisfaction); (3) Eudaimonic (meaning and purpose). These measures are far from perfectly correlated; people seem to think that evaluative measures (overall life satisfaction) are most important. 

• Four common findings: (1) Relative position matters; (2) Reference points matter; (3) Adaptation occurs, for both favorable and unfavorable events; and, (4) People can mispredict how their choices will affect their happiness, and actual choices might not reveal preferences (as measured by SWB). 

• Some additional common findings include: (4) Income is positively connected with happiness; (5) Income increases are subject to hedonic adaptation; and (6) With respect to age, happiness appears to be u-shaped. 

• SWB provides indirect evidence on the value of activities or possessions. 

• For instance, we don’t need to ask, how happy does smoking make you; nor do we just infer from your heavy smoking that it greatly contributes to your well-being. Rather, we can ask you in general how happy you are, and then learn about your activities, and see (across large numbers of people) if smoking is associated with increased happiness. 

• Maybe policy should aim to help the least happy people? 

• People in objectively poor circumstances might still have a lot of hedonic happiness – have they adapted, or lowered their expectations? 

• Beware of making happiness an official policy goal!? -- people will distrust the government's motives as well as the reliability of the data. 

• Much of your happiness is inherited. 

• Noise and commuting are hard to adapt to. 

• In health studies, SWB can be a supplement to QALYs. 

• Mental health becomes a priority when SWB is emphasized.

Folkvord, Codagnone, Bogliacino, et al. (2019) on Online Gambling

Frans Folkvord, Cristiano Codagnone, Francesco Bogliacino, et al., “Experimental Evidence on Measures to Protect Consumers of Online Gambling Services.” Journal of Behavioral Economics for Policy 3(1): 20-29, 2019 [pdf here]. 

• Internet gambling might be particularly likely to induce problematic play. 

• The outcome variables tracked in both a laboratory (n=522) and an online (n=5997) experiment are the average amount bet, the time between plays, and the likelihood of ending a gambling session when given the opportunity. 

• In the first stage of the laboratory experiment, gamblers receive one of four interventions: a pop-up warning with a picture about gambling addiction; the warning without a picture; a task to reveal overconfidence; and a picture of a logo of a gambling treatment service. A control group skips those pre-play interventions. 

• None of the first-stage (pre-play) interventions reduce the extent or speed of play, though two of the interventions seem to speed up play! 

• The second stage of the laboratory experiment and the online experiment expand the number of treatments, including the possibility to set monetary limits and using pop-up messages requiring an action to continue gambling. 

• Most of the interventions have no effects. Monetary limits and the warnings that require a response reduce average bet amounts and slow down the rate of play. Registration forms incentivize people to quit.