Jodi Beggs: Economists Do It With Models

[unable to retrieve full-text content]On The Increasingly Unfortunate Economics Of Peanut Allergies…: Things get awkward when companies decide to maximize profit, if for no other reason than it highlights where policy makers have procrastinated on regulation in hopes that self-interested oganizations would just behave.

I didn’t tell you last time that the disposition effect result I discussed suffered from a potential econometric problem, so I make up for that here. As usual, you can see the whole behavioral economics playlist here in case you want to catch up or need a review.

So the internet seems pretty much obsessed with this story right about now… The headline, taken at face value, isn’t particularly surprising to economists- we are quick to point out that a pretty wide variety of items can count as “money”, provided that they perform a few functions: A medium of exchange A unit of account A store of value By this characterization, sure, ramen could serve as money- I guess ramen packs aren’t so large as to be too cumbersome to be traded, you could quote...

[unable to retrieve full-text content]Fine, We Can Talk About Exports Too, Coffee Edition…: I guess I agree that it’s unfair to talk about imports without talking about exports, and I do find it perplexing that people worry about the effects of imports on employment but don’t match that against the effects of exports on employment.

In a previous video, my class went over the empirical setup in one of the main papers about the disposition effect in stock-market behavior. Now they got to talk about the results of that analysis. If you need a refresher, you can see the whole behavioral economics playlist here.

You know you’re an econ/math nerd if you read this and think “haha, it’s like the matching pennies game.” But hear me out…here’s the matching pennies game, and, like the joke, the crux of the game is that there is no Nash equilibrium without randomization. To further the analogy: The matching pennies game works as it does because player 1, let’s say, “gets off” when the pennies match whereas player 2 gets off when the pennies don’t match. (This wording hopefully shows the intuition of why...

In my class, I try to introduce a topic and then give my students a discussion question to work through so I can make sure that everyone is catching on. This discussion question relates back to the disposition effect, or the bias towards selling winning stocks and away from losing stocks. If you need a refresher, you can see the entire behavioral economics playlist here.

Steve Levitt, in addition to gaining fame (at least at an economist level, not a Justin Bieber level) for writing Freakonomics, has made a career teasing cause and effect out of (largely) observational data. (By “observational data,” I mean that he doesn’t explicitly run controlled experiments in a lot of cases and just looks at the world as it transpired naturally instead.) Observational data presents an interesting challenge because people usually make choices in life rather than being...