April 24, 2008
Harford-Ariely: my video response
My second response to Dan Ariely is on video here.
Friday Aug 8 2008
All times are London time
My second response to Dan Ariely is on video here.
April 24th, 2008 in Audio and Video, Logic of Life | Permalink
About Tim Harford

I write leaders for the FT and two columns for FT Magazine: "The Undercover Economist", about economics in everyday life, and "Dear Economist", in which readers' questions are answered, tongue-in-cheek, with the latest economic theory. To find out about my books, "The Undercover Economist" and my new book "The Logic of Life", or about my radio series, More or Less, see timharford.com.
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Dear Tim,
I understand your concern on the ecological validity of psychological experiments in the lab. Well, psychology is the study of human mind but unlike economics psychology cannot simply capture the whole population in the world, which is both impossible and statistically invalid. Psychology doesn’t have a nice and easy measure such as GDP or GNP to represent a certain population, because it sounds ridiculous to say “ok, Britain can be characterized as modest and conservative as the personality questionnaire shows so.” What psychology can do which is both convenient and scientifically sound is do an experiment or survey that involves a random sample(s) of people, and then make inferences based on the sample results.
Regarding your question to Dan Ariely, you can read the literature of prospect theory by Daniel Kahneman, the most brilliant psychologist who changed the theory of economics, if you are not convinced.
Jay
Posted by: Jay | April 25th, 2008 at 9:44 pm | Report this commentHi Tim and Dan
You two are obviously nice blokes. But, would you please spend less time being nice to each other and get to the nub of the rational vs irrational ecenomic behaviour debate? The experiments you each chose don’t help.
Schelling and others show HOW racial seregation and job applications can be explained, but they don’t explain WHY. For example, there may be socio-psychological and/or anthropological explanations. Is this lack of inter-disciplinary work, or too narrow (ie mainly economics-based) research?
The pay increase experiment was doomed from the start: my only surprise is the effects lasted 90 minutes. The task involved was too simple. Even Adam Smith warned against the dangers of over-simplifying work. The area of “rewards management” abounds with ideas on what motivates - and pay isn’t even near top of the list, whereas having more interesting work is. However, to translate the results of the study you each mention to Chief Executives’ pay is - frankly - ridiculous. (I would even be careful of transferring any pay scheme between different workplaces). Again, is this lack of cross-disciplinary research or thinking?
Finally, there is the question of culture. All of the studies you quote are US or western-economy based. Just how culturally sensitive are economic theories? eg I know that a pay scheme that works in the US or UK will not be acceptable in many other countries of the western or eastern worlds.
I logged into your debate hoping to get help in clarifying the rational vs irrational economic behaviour question. I’m left still with the words of Robert Bridges’ poem “In Broken Images” uppermost in my mind.
Posted by: derek tunnicliffe | April 26th, 2008 at 11:00 am | Report this comment