Behavioral economics in prison


The Behavioral Economist’s Case for Prison Gangs

It may seem counterintuitive that gangs can exist in what is perhaps the ultimate tightly regulated environment. Gangs, however, have been thriving in American prisons since the 1950s, and are now ubiquitous. Why is it that the corrections system has been unable to eradicate gang activity from the facilities they run? A recent article in Behavioral Economics by M. Garrett Roth and David Skarbek makes the case that gangs have actually become necessary elements within the prison system, allowing inmates to create and sustain an internal economy centered on contraband, eliminating much of the violence and disorder that would be present without them. ….[READ]

The Gulag of optimization


A Sucker Is Optimized Every Minute

Not long ago, our blockbuster business books spoke in unison: Trust your gut. The secret to decision-making lay outside our intellects, across the aisle in our loopy right brains, with their emo melodramas and surges of intuition. Linear thinking was suddenly the royal road to ruin. Dan Ariely’s “Predictably Irrational” tracked the extravagant illogic of our best judgment calls. The “Freakonomics” authors urged us to think like nut jobs. In “Blink,” Malcolm Gladwell counseled abandoning scientific method in favor of snap judgments. Tedious hours of research, conducted by artless cubicle drones, became the province of companies courting Chapter 11. To the artsy dropouts who could barely grasp a polynomial would go the spoils of the serial bull markets. ….[READ]

Customers are researchers


The Psychological Motivations of Today’s Buyer and the Paradigm-Shifting Result

The better we understand our customers, the better we become at conversion optimization. Although the digital age has given rise to new forms of marketing, it has not fundamentally changed human psychology. Regardless of how digital marketing innovations change, we can still depend on the findings of psychology to support powerful conversion optimization techniques. I want to explain how an understanding of your customer’s psychological curiosity can change how you approach your marketing initiatives. Prepare for some pleasant surprises and rude awakenings. Customers are researchers. Satisfy their need for information. If you think that your customers are stupid, you’re stupid. ….[READ]

How to manage information overload


In the Age of Information, Specializing to Survive

Jonathan Haber majored in philosophy at Harvard University. And Yale. And Stanford. He explored Kant’s “The Critique of Pure Reason” with an Oxford don and Kierkegaard’s insights into “Subjectivity, Irony and the Crisis of Modernity” with a leading light from the University of Copenhagen. In his quest to meet all the standard requirements for a bachelor of arts degree in a single year, the 52-year-old from Lexington, Mass., also took courses in English common law, Shakespeare’s late plays and the science of cooking, which overlapped with the degree in chemistry he earned from Wesleyan in 1985. Here’s the brilliant part: Mr. Haber didn’t spend a dime on tuition or fees. Instead, he gorged from the smorgasbord of free courses offered by top universities. ….[READ]

Acquisition vs. Transaction Utility


Perceived Value, Hidden in Plain Sight

In his legendary 2005 commencement address at Kenyon College, David Foster Wallace riffed on the melodramatic moments of adulthood, emphasizing that life after graduation is not uplifting and vibrant but filled with “boredom, routine, and petty frustration.” He describes the checkout line in a crowded grocery store during the end-of-the-day rush. “You finally get to the front, and you pay for your food, and you get told to ‘Have a nice day’ in a voice that is the absolute voice of death.” Wallace’s speech is a hallmark of postmodern thinking. Instead of pivoting off rousing anecdotes and graduation clichés, he describes the sad loneliness of adult life, stressing that we must use what we learn in school to construct meaning for ourselves. ….[READ]

The art of magic in the lab


Psychologists use magic to study the illusory feeling of free choice

Most of the time, when a magician asks you to “pick a card” she makes it feel as though you have a free choice, but you don’t really. The authors of a new paper say this is a microcosm for many real-life situations in which we feel free to choose, but in fact our choices are heavily influenced and constrained. Jay Olson, a magician and psychologist, and his colleagues, have put a classic card trick technique under the spotlight as a way to study the psychology behind this experience of illusory free choice. For each of 118 participants approached on the street or on campuses, Olson “riffled” through a pack of cards before asking the participant to “pick a card”. ….[READ]

Nonconscious Consumer Research


Why Implicit Consumer Choice Models Are Essential to Modern Market Research

This past February, I returned to Amsterdam for the first time in 15 years. On this trip I was presenting a workshop at the IIeX Europe market research conference on how to design and analyze implicit research studies on a software system developed to measure consumer nonconscious processing. Back in 2001, I was presenting an academic paper on a fundamentally different, and more accurate, model of how consumers make decisions: the Proportional Difference model. What struck me on this visit was just how slow business has been in becoming current with the insights coming out of the behavioral science literature–and this was my observation at what is now the most innovative summit of researchers in our industry. ….[READ]