Why do employees make retirement savings decisions that go against their best interests? A 2004 paper by Nobel Prize-winning economist Richard Thaler of the University of Chicago, co-authored with fellow researcher Shlomo Benartzi of UCLA, showed how behavioural economics could explain what standard economic theory could not. As companies moved from defined benefit retirement savings […]
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Norwegian citizens making money abroad must report this income to two tax authorities: the authorities of Norway and the authorities of the country where they made the money. In order to avoid taxes, a number of these citizens underreport their foreign income to the Norwegian authorities — not realizing that most foreign countries send the […]
Read More… from Stopping Tax Evasion: Detection Probability Vs Moral Persuasion
In pure economic theory, policy making involves applying economic levers — taxes, regulations and economic incentives — to problems that have economic roots. These problems can take the form of: Externalities — when people are impacted through no fault of their own (e.g. second-hand smoke) Misaligned incentives — when people are impacted because the interests […]
Read More… from Behavioural Economics: A Power that Goes Beyond Nudges
Shifting the bulk of compensation from mostly incentives (how much employees earn depends on how much they work) to mostly wages (employees earn the same guaranteed amount no matter how much they work) would, according to economic theory result in less productivity. Employees are no longer incentivised to work as much as possible and, human […]
Read More… from Economic Initiatives Can Lead to Unexpected Behaviours… at First
In finance, a capital asset's sensitivity to risk is often represented by the quantity beta (β), and investment opportunities that have a high risk profile are known as ‘high beta’ stocks. In this research it is hypothesized that ‘high beta’ stocks are unduly influenced by sentiment due to the investment decisions taken by ‘noise’ traders. […]
Read More… from Beware of Over-Optimistic Investors Skewing High-Risk Stock Prices
Classical and neo-classical economic theory is predicated largely on an ‘impersonal’ model, in which transactions between parties are governed not by social obligations and kinship ties but by rational and objective calculation of individual gains. This model is particularly associated with industrialized societies and the mature market economies of the West. One might, therefore, reasonably […]
Read More… from Modernizing without Westernizing: Social Ties and Indian Business
Although global investment in renewable energy has grown significantly since the start of this century, it remains below the level needed to meet Kyoto Protocol targets for reducing CO2 emissions, according to renewable energy advocates. (Investment slightly decreased in 2012.) Portfolios that do include renewables tend to be weighted towards ‘mature’ technologies such as onshore […]
Read More… from The Green Investment Gap – And How to Close It
Decision-making on the financial markets is driven by information and by trust. But trust can be flagrantly abused. This was amply demonstrated by the Bernard Madoff scandal, considered to be the biggest fraud in American history. Madoff, a former non-executive chair of the NASDAQ stock exchange, used a ‘Ponzi scheme’ to defraud investors, paying returns […]
A growing number of studies in both the field and the laboratory demonstrate that people are imperfect co-operators — they tend to co-operate only if others do so, and a significant minority don’t co-operate at all. This pattern of behaviour causes unstable co-operation levels and often results in the disappearance of positive collective action over […]
Read More… from Co-operative Behaviour: Neuroscience Insights
In making decisions, people are susceptible to the influence of those in their ‘in-group’, who commonly include others of the same age, sex, ethnicity or religion, as well as friends, family members, colleagues and classmates. This is a long-observed and commonly acknowledged phenomenon, often explained in terms of evolutionary biology. (By conforming to the common […]
Read More… from Social Influences on Decision-Making: Neuroscience Insights
