Tag: behavioral economics

Sample Size of One: The Rose Negotiations

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The Replication Crisis is an ongoing crisis where it has been difficult or impossible to reproduce findings of scientific studies.

The field of behavioural science too, has had its challenges with replicating past research findings. Some years ago, peer-reviewed scientific journal, Nature Human Behaviour, attempted to replicate 21 social and behavioural science studies published in the top peer-reviewed journals, Nature and Science. It could replicate only 13. Other such studies conducted too, resulted in disappointing results.
 
Is it surprising if behavioural science and behavioural economics research findings are difficult to replicate? Till recent decades, many studies were undertaken by professors on captive university students; a long shot from representing world diversity. Findings from one country could throw up different results in another country based on many variables like the history of that nation, recent and current economic progress, poverty levels, trust levels, level of ethics in government, enforcement and business, among other factors. We see diversity even in our interactions with foreigners on social media.
 
And yet, we as humans, are always trying to find a simple common denominator. A thumb rule. A recipe or formula that we would like to think would apply to the world population.
 
Instead, what if we looked at behavioural science endeavours the other way around? Why struggle to have larger and more diverse sample sizes to represent world diversity and improve study accuracy? Instead, what if we started with a simpler sample size? One that we are more sure of, and that offers more accurate data points. What if we start with us as individuals? The observations, feelings, rationale or reactions of the individual (hence ‘Sample Size of One’)? And from there, cautiously see if and to what extent, it applies to other individuals or groups?
 
Whenever we experience a situation, we could try and assign values to various parameters. Then, similar situations created for others in other parts of that city, country or the world, would give us more data sets. We could then look for a single line passing through diverse cultures, or spot similarities in diverse groups. Similarities in similar groups from contrasting countries too? Or not.
 
What we will have, is readings across these situations or experiments across countries and cities. At present, if an experiment with a sample size of 10,000, finds 70% respondents behave a certain way in a scenario; we extrapolate it and believe 70% of world population might behave in a similar way.
 
Instead, what if we had that scenario, but had different data sets for different locations? That way we might find clearer patterns (there goes the human in me again) among groups in diverse cultures where a certain improvement intervention might respond similarly to another one which had similar outcomes from an experiment.

This thought occurred to me during a recent festival and an interaction with a flower woman in the market. Here’s the story.

Sample Size of One: The Rose Negotiation

My family is a bit religious. During Dussehra puja a few weeks ago, I was back at the market, buying flowers and fruit.

A woman in the market has a flower stall and sells bouquets. I always buy roses from her. On regular days, a rose costs INR 10. On festive days, she sells them for either INR 12 or 15.
I asked her how much for one.

“INR 15”, she smiled and replied, “but you can have them for INR 12. How many do you want?”

I asked for ten. Like always, I asked her to cut them to a particular length. I said I’ll pick up the other stuff on my list and come back for the roses.

Back at her stall 15 minutes later, she said the total was INR 150.

I said, “but didn’t you say you’d give them at INR 12 a piece?”

Now she seemed confused, like she had goofed up the prices.

In the past too, I have always paid her the full price, whether she offered a discount or not. After all, these vendors pay a premium to buy flowers during special occasions. And on that day too, I had intended to pay her the full INR 150 either way.

But there’s the funny thing.

When she first offered a discount and later forget about it, I felt a mild disappointment or something. And it is possible others might have felt the same way in that situation. It is odd, since I was ready to pay full price, right? A loss aversion of sorts.

Trying to quantify my feeling on a Disappointment-Delight scale [-10 to +10] (-10 being very disappointed, 10 being very delighted), I got:

  1. If I go to the stall on a regular day, and I am charged INR 10 for a rose: 0 (on the scale)
  2. When the woman first quoted the festival price of INR 15: -5
  3. When she said she’ll let me buy them at INR 12: 5
  4. When I made a mental note to still pay her INR 15 a piece: 9 (it is always priceless to expect and see smiles on the faces of those who work hard to make a living, when you pay them full price and not be the asshole who squeezes an extra buck out of them)
  5. Her later quoting the original rate of INR 15 a rose: -8
  6. Me then paying her the original rate of INR 15: 3

Despite my intended payment amount and her final quote being the same, my delight level dropped from a 9 (in pt. 4) to probably a 3 (pt. 6).

-End of story-
 

What do you think? Could experiments/ experiences like this one, experienced by a single person, be then gauged on a list of parameters for other people in the same city, country, and in other parts of the world? The objective not being to find a single global thumb rule or measure (like 70% or 8/10 on delight). But rather, to see how different groups of people fare on each such experiment/ experience. It need not be a labour-intensive effort. Data could be crowd-sourced.

Could this approach be a little less presumptive and a little more accurate than prevailing forms of research studies?

 
 
#SampleSizeOfOne #BehaviouralScience #BehaviouralEconomics

Behavioural Law

Classic economics started off factoring psychology and behavioural trends and shortcomings (biases) into economic understanding. However, through the ages, economic concepts and policies were built on the assumption that humans are rational beings. This was like putting a blanket over our susceptibility to biases and our irrational decision-making tendencies.

It took the path-breaking decades of work by 2002 Nobel Laureate (Memorial Prize in Economic Sciences) Daniel Kahneman, Amos Tversky and a few others, to identify and document common human mistakes that spring from our heuristics and biases. This led to the importance of the field of behavioural economics which should ideally replace all economic skillsets.

Going by that logic, I did a cursory check on the LLB syllabus in India and that at Harvard Law School. I also came across research papers and articles around behavioural law at institutes like Yale, Harvard, Cambridge. However, a generic search for Indian LLB syllabus and the Harvard Law curriculum did not show up any subject dedicated to psychology, behaviour, or behavioural law. Stanford mentioned it. However Yale Law did have a fair bit of behaviour covered.

Harvard Law curriculum

While the Harvard program had some 55o study modules, and while they certainly might be including aspects of behavioural law, the subjects list did not include anything related to it or behaviour, despite the importance one might associate with it.

One would imagine that given all the business and personal collaborations and disputes that occur across the world, institutes should have at least by now made human behaviour, behavioural economics and psychology a key part of learning.

You might wonder what it might include? While I wouldn’t exactly know how, I do know that legal professionals are well trained in attack and defense, both in documentation and in fighting cases. And they are adept at understanding the opposition for defense or attack; and identifying potential risk scenarios well into the future. However, armed with behavioural knowledge, they might be able to influence collaborations and solve disputes amicably simply with a better understanding of behaviour and therefore a better choice of words and strategy perhaps. One that could benefit all related parties themselves fairly in the short term, but also steadily influence a more collaborative human race in the longer term.

Many of us have seen those videos of Providence, Rhode Island’s chief municipal judge, Francesco “Frank” Caprio, who metes out ‘human’ and ‘humane’ justice. Someone receiving a judgement from him, or someone simply being spectator to his judgement might have a very different view of humankind. One that is compassionate and optimistic. In a world itching to accuse and punish, imagine the mindset change an entire global legal fraternity might bring about, if they had the superior maturity of Judge Frank Caprio.

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