by Gneezy, Uri
8. Richard H. Thaler, “Show Us the Data. (It’s Ours After All.),” New York Times, April 23, 2011, http://www.nytimes.com/2011/04/24/business/24view.html.
Chapter 8: How Can We Save Ourselves from Ourselves?
1. You can watch the video on YouTube if you’re desperate to discover what happens next. Perhaps you’ve already seen it—it was national news, after all. We wouldn’t suggest it.
2. The RAND Health Insurance Experiment randomized nearly 6,000 people into different levels of cost-sharing. The experiment is still incredibly influential, and it was frequently cited in the health care debates of 2010. Perhaps the best sign that experimentation is back is that Oregon recently finished a study where researchers randomized individuals into Medicare. For a discussion of the results from the first year of that experiment, see Amy Finkelstein, Sarah Taubman, Bill Wright, Mira Bernstein, Jonathan Gruber, Joseph P. Newhouse, Heidi Allen, Katherine Baicker, and the Oregon Health Study Group, “The Oregon Health Insurance Experiment: Evidence from the First Year,” Quarterly Journal of Economics 127, no. 3 (2012): 1057–1106.
3. For more information, see “Kanye West,” Wikipedia, http://en.wikipedia.org/wiki/Kanye_West (last accessed April 2, 2013).
4. See Dana Chandler, Steven D. Levitt, and John A. List, “Predicting and Preventing Shootings Among At-Risk Youth,” American Economic Review Papers and Proceedings 101, no. 3 (2011): 288–292.
5. “Jaime Oliver Misses a Few Ingredients,” School Nutrition Association Press Releases, March 22, 2010, http://www.schoolnutrition.org/Blog.aspx?id=13742&blogid=564.
6. John A. List and Anya C. Savikhin, “The Behavioralist as Dietician: Leveraging Behavioral Economics to Improve Child Food Choice and Consumption,” 2013, University of Chicago working paper.
7. Paul Rozin, Sydney Scott, Megan Dingley, Joanna K. Urbanek, Hong Jiang, and Mark Kaltenbach, “Nudge to Nobesity I: Minor Changes in Accessibility Decrease Food Intake,” Judgment and Decision Making 6, no. 4 (2011): 323–332.
8. An important effort to increase the supply of such organs is the pathbreaking research of Stanford economist Al Roth, who received the Nobel Prize in Economics in 2012, in part for his contribution to the design of matching algorithms of live donors with people who need transplants. Roth and his colleagues show that simple changes to the procedure used to allocate the organs can make a big difference in outcomes.
9. Eric J. Johnson and Daniel Goldstein, “Do Defaults Save Lives?” Science 302 (2003): 1338–1339, http://www.dangoldstein.com/papers/DefaultsScience.pdf.
10. See Dean Karlan and John A. List, “Nudges or Nuisances for Organ Donation,” 2012, University of Chicago working paper.
11. See “Federal Advisory Committee Draft Climate Assessment Report Released for Public Review,” US Global Change Research Program, http://ncadac.globalchange.gov/ (last accessed April 2, 2013).
12. http://www.energystar.gov/ia/partners/univ/download/CFL_Fact_Sheet.pdf?9ed9-3f06 (last accessed July 24, 2013).
13. See Robert Cialdini, “Don’t Throw in the Towel: Use Social Influence Research,” APS Observer, April 2005.
14. See David Herberich, John A. List, and Michael K. Price, “How Many Economists Does It Take to Change a Light Bulb? A Natural Field Experiment on Technology Adoption,” 2012 University of Chicago working paper.
Chapter 9: What Really Makes People Give to Charity?
1. “American Giving Knowledge Base,” Grant Space, http://www.grantspace.org/Tools/Knowledge-Base/Funding-Resources/Individual-Donors/American-giving (last accessed April 27, 2013).
2. This research has led us to establish the Science of Philanthropy Initiative (SPI) at the University of Chicago in order to explore the underpinnings of philanthropy by employing an interdisciplinary approach that includes strategic partnerships with the fundraising community. SPI is supported by a $5 million grant from the John Templeton Foundation. Please see http://www.spihub.org for more information.
3. Since John had no resources to run these experiments, it also helped that he could use the sports card collection that he amassed as a kid to pay his experimental participants.
4. While this might seem like a great idea if you are a would-be administrator, it does have some downsides. One is that every person in the department will decide that his or her area should be chosen. People who study the economics of trade want that as the niche area; those who do labor economics think that labor is the best choice, and so on.
5. Prior to this leadership role, John had only coached the men’s and women’s water ski teams.
6. The paper was published as John A. List and David Lucking-Reiley, “The Effects of Seed Money and Refunds on Charitable Giving: Experimental Evidence from a University Capital Campaign,” Journal of Political Economy 110 (2002): 215–233.
7. John A. List and Daniel Rondeau, “Matching and Challenge Gifts to Charity: Evidence from Laboratory and Natural Field Experiments,” Experimental Economics 11 (2008): 253–267.
8. Other economists, most notably our friends Jan Potters, Martin Sefton, and Lise Vesterlund, have found similar insights from laboratory experiments.
9. Kent E. Dove, Conducting a Successful Capital Campaign, 2nd edition (San Francisco: Jossey-Bass, 2000), 510.
10. Dean Karlan and John A. List, “Does Price Matter in Charitable Giving? Evidence from a Large-Scale Natural Field Experiment,” American Economic Review 97, no. 5 (2007): 1774–1793.
11. As a condition of the experiment, we agreed to keep the name of the organization anonymous, so we can’t tell you which organization it was.
12. These brackets denote a shorthand (to avoid having to type out the full letter three times for your sake and ours).
13. We essentially rolled a four-sided dice for every one of the 50,000 houses. If we rolled a “1,” we assigned that household to Group 1, which was offered a 1:1 match. If we rolled a 2, we assigned the household to Group 2, and offered it a 2:1 match. If we rolled a 3, we offered the household a 3:1 match, and Group 4 was our control group.
14. This result fits well with our intuition.
15. Harry Bruinius, “Why the Rich Give Money to Charity,” Christian Science Monitor, November 20, 2010, http://www.csmonitor.com/Business/Guide-to-Giving/2010/1120/Why-the-rich-give-money-to-charity.
16. See the excellent research by economists Rachel Croson, Catherine Eckel, Phil Grossman, Stephan Meier, and Jen Shang showing such insights.
17. See Craig E. Landry, Andreas Lange, John A. List, Michael K. Price, and Nicholas G. Rupp, “Toward an Understanding of the Economics of Charity: Evidence from a Field Experiment,” Quarterly Journal of Economics 121 (May 2006): 747–782.
18. The solicitors all signed consent forms agreeing to allow this evaluation. The interested reader should see the excellent work of Jeff E. Biddle & Daniel S. Hamermesh, 1998. “Beauty, Productivity and Discrimination: Lawyers’ Looks and Lucre,” NBER Working Paper 5636 in the area of measuring the value of physical attractiveness.
19. See Craig E. Landry, Andreas Lange, John A. List, Michael K. Price, and Nicholas G. Rupp, “Is a Donor in Hand Better Than Two in the Bush? Evidence from a Natural Field Experiment,” American Economic Review 100 (2010): 958–983.
20. The Daily Show with John Stewart, February 16, 2011, http://www.thedailyshow.com/watch/wed-february-16–2011/you-re-welcome—-balancing-the-budget.
21. Much of this is taken directly from Andreas Lange, John A. List, and Michael K. Price, “A Fundraising Mechanism Inspired by Historical Tontines: Theory and Experimental Evidence,” Journal of Public Economics 91 (June 2007): 1750–1782.
22. See David Leonhardt, “What Makes People Give?” New York Times Magazine, March 9, 2008.
Chapter 10: What Can Cleft Palates and Opt-Out Boxes Teach Us About People’s Reasons for Giving to Charity?
1. See “Pinki Sonkar: From School Outcast to an Oscar-Winning Film,” People Magazine, February 23, 2009, http://www.peoplestylewatch.com/people/stylewatch/redcarpet/2009/article/0,,2024918
0_20260685,00.html?xid=rss-fullcontent. By the way, Smile Train commissioned the film, and it was the biggest, most effective ad campaign the charity ever ran!
2. There is by now a fair amount of evidence in the literature supporting this viewpoint, including some of our own. See John A. List and Michael K. Price, “The Role of Social Connections in Charitable Fundraising: Evidence from a Natural Field Experiment,” Journal of Economic Behavior and Organization 69, no. 2 (2009): 160–169.
3. See Amee Kamdar, Steven D. Levitt, John A. List, Brian Mullaney, and Chad Syverson, “Once and Done: Leveraging Behavioral Economics to Increase Charitable Contributions,” NBER working paper to be published in 2013.
4. The interested reader should see the psychology and economics literatures, which are full of models and experiments showing that people tend to be nice to those who are nice to them. See, for example: Akerlof, George. 1982. “Labor Contracts as Partial Gift Exchange.” Q.J.E. 97 (November): 543–69; Rabin, Matthew. 1993. “Incorporating Fairness into Game Theory and Economics”; A.E.R. 83 (December): 1281–1302; Fehr, Ernst, and Simon Gächter. 2000. “Fairness and Retaliation: The Economics of Reciprocity.” J. Econ. Perspectives 14 (Summer): 159–81; Dufwenberg, Martin, and Georg Kirchsteiger. 2004. “A Theory of Sequential Reciprocity.” Games and Econ. Behavior 47 (May): 269–98; Charness, Gary. 2004. “Attribution and Reciprocity in an Experimental Labor Market.” Manuscript, Univ. California, Santa Barbara; Sobel, Joel. 2005. “Social Preferences and Reciprocity.” Manuscript, Univ. California, San Diego; Falk, Armin. 2007. “Charitable Giving as a Gift Exchange: Evidence from a Field Experiment.” IZA Working Paper no. 1148, Inst. Study Labor, Bonn.
5. Belinda Luscombe, “Using Business Savvy to Help Good Causes,” Time Magazine, March 17, 2011.
6. The charitable-giving deduction is a hotly debated policy. Many in the industry say that getting rid of the tax deduction would ravage the nonprofit sector. This argument is a matter of ongoing research and the jury is still out. But the real impact hinges on determining exactly why people give.
Chapter 11: Why Is Today’s Business Manager an Endangered Species?
1. “Netfilx Introduces New Plans and Announces Price Changes,” Netflix US & Canada Blog, Tuesday, July 12, 2011, http://blog.netflix.com/2011/07/netflix-introduces-new-plans-and.html?commentPage=25.
2. “Netflix Apology,” Saturday Night Live video, http://www.nbc.com/saturday-night-live/video/netflix-apology/1359563/.
3. Stephen F. Jencks, Mark V. Williams, and Eric A. Coleman, “Rehospitalizations Among Patients in the Medicare Fee-for-Service Program,” New England Journal of Medicine 360 (2009): 1418–1428.
4. In the following, we describe our experience in the winery with more details: “Intuition Can’t Beat Experimentation,” Rady School of Management, UC San Diego, http://rady.ucsd.edu/mba/student/clubs/rbj/rady-business-journal/2011/intuition/ (last accessed April 29, 2013). For a description of the experiment, see Ayelet Gneezy and Uri Gneezy, “Pricing Experimentation in Firms: Testing the Price Equal Quality Heuristics,” Rady School of Management, UC San Diego, http://econ.as.nyu.edu/docs/IO/11975/Gneezy_CESS.pdf.
5. Ayelet Gneezy, Uri Gneezy, Leif D. Nelson, and Amber Brown, “Shared Social Responsibility: A Field Experiment in Pay-What-You-Want Pricing and Charitable Giving,” Science 329 (2010): 325–327.
6. Uri Gneezy and Pedro Rey-Biel, “On the Relative Efficiency of Performance Pay and Social Incentives,” Barcelona Graduate School of Economics working paper no. 585, October 2011.
7. Tanjim Hossain and John A. List, “The Behavioralist Visits the Factory: Increasing Productivity Using Simple Framing Manipulations,” Management Science 58 (2012): 2151–2167.
Epilogue
1. This passage comes from Steven D. Levitt and John A. List, “What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World,” Journal of Economic Perspectives 21, no. 2 (2007): 153–174. For an early paper by a pioneer in the field of experimental economics, see Vernon L. Smith, “Microeconomic Systems as an Experimental Science,” American Economic Review 72, no. 5 (1982): 923–955.
2. For obvious reasons, we encourage you not to deceive your clients. In this case, don’t advertise a matching grant if it doesn’t exist.
INDEX
Accelerated Reader, 84
Achievement gap, 79, 83, 103, 105
Adaptation, 30–31
Affirmative Action, 139–141
African Americans
discrimination against, 115–116, 121–123
discrimination against gay couples and, 134–135
risk for teen gun violence and, 155, 156
Age
discrimination based on, 120–123
education interventions and student, 89–90
Air France, 130
Albert, Derrion, 146, 147, 151, 153
All in the Family (television program), 12
Altgeld Gardens housing project (Chicago), 145
Altruism, charitable giving and, 14, 15, 172, 184
Amadio, Tom, 69–70, 79, 86, 92, 96
Amazon.com, 128
American Cancer Society, 191
Amnesty International, 209
Andreoni, James, 177, 184
Animus-based discrimination, 113–116
attribution theory and, 138–139
combined with economic discrimination, 124–127
distinguishing from economic discrimination, 120–127, 132–138
public policy and, 139–141
Anti-Semitism, 10, 111, 112
Apartheid, 111
Apple, 217
Applicant screening, discrimination and, 10–11
Aristotle, 68
Attribution theory, discrimination and, 138–139
Auto dealerships. See Car sales/dealerships
Becker, Gary, 111–114, 144
Becker, Jessie, 215
Becker, Louis, 111–112
Behavior
designing incentives to change, 28–31
lower price and changes in, 168–169
social norms and changes in, 167–169
Behavioral economics consortium, 223–224
Behavioral issues, risk for gun violence and, 155
Behavioral manipulations, 106
Behavioral pricing approach, 227–230
Big data
concerns about, 8–9
economic discrimination and, 118–119, 143–144
Blockbuster, 214
Bloomberg, Michael, 184
Bloom Trail High School (Chicago Heights, Illinois), 72, 89
Bok, Derek, 200
Bonus incentives, 236
Brooks, David, 8
Brown, Amber, 227
Brown v. Board of Education, 66
Buffett, Warren, 193
Burd, Steven, 28
Burn Rescue, 208
Bush, George W., 167, 181
Business innovation/experimentation, 212–239
barriers to experimentation in business, 237–238
direct mail surveys, 230–233
field experiments, 5, 217–233, 234–236, 237–239
framing as business tool, 233–236
at Humana, 222–225
at Intuit, 218–221
at Netflix, 213–217
pricing and, 225–230
California, Proposition 209, 140
Campbell Soup Company, 60
Car insurance, discrimination based on gender and, 116–117
Carle, Eric, 94
Carlyle, Thomas, 17
Car sales/dealerships
distinguishing economic from animus-based discrimination and, 132–138
gender and price negotiation and, 60
Causality, correlation vs., 6–12
Center for Environmental Policy Analysis (CEPA), 174, 177–178
Centers for Disease Control and Prevention, 158
CEO positions, women in, 35
CEPA. See Center for Environmental Policy Analysis (C
EPA)
Charitable giving
altruism and, 14, 15, 172, 184
incentives to increase, 13–15, 209–211
motivation for, 171–173, 192–193, 195
pay-what-you-want pricing combined with, 228–230
self-interest and, 184, 185, 192–193, 210
tax code and, 172, 207, 210
using field experiments to find ways to encourage, 5
“warm glow” theory of, 184, 185, 192–193
See also Fundraising
Chertoff, Michael, 151
Chicago
murders in, 146, 147, 148–149
reduction of gun violence in, 150
Chicago Food Depository, 161
Chicago Heights (Illinois), 15, 68–70
drop-out problem, 69, 70–72
education reform attempts in, 72–90
incentives for student achievement in, 72–79
monetary incentives for teachers in, 86–87
monetary incentives to improve standardized testing outcomes in, 79–85
monetary incentives to improve student performance in, 87–90
preschool intervention in, 92–104
Chicago Public Schools, 66–67
Culture of Calm in, 151–153
monetary incentives to improve standardized testing outcomes in, 79–85
programs to reduce gun violence in, 151–158
risk factors for teen gun violence in, 154–156
Youth Advocate Programs, Inc. in, 156–158
Chicago Transit Authority, 151
Childhood obesity, 158–162
Christie, Agatha, 190
Citadel (hedge fund), 75
Citizen and Law Enforcement Analysis and Reporting System (CLEAR), 149–150
Cleft palates, 196–197, 202
Clinton, Bill, 104
Cole, Robert, 118
Columbia University, 113
Common (rapper), 153
Compact fluorescent lightbulbs, 166–168
Compensation schemes, gender differences in response to, 36–38
Competitiveness
among women, 13, 35–38
evolution and lack of female, 33–34
