It’s not surprising to discover that in an experiment looking at how taxes and subsidies can be used to influence healthier food purchases it was the taxing of unhealthy food that improved choices, not the subsidisation of healthy options.
Strangely, though, it turns out that the health food subsidies actually worsened choices (the study theorises that the shoppers used the ’saved’ money to treat themselves, while still purchasing the unhealthy goods).
Taxes were more effective in reducing calories purchased over subsides. Specifically, taxing unhealthy foods reduced overall calories purchased, while cutting the proportion of fat and carbohydrates and upping the proportion of protein in a typical week’s groceries.
By contrast, subsidizing the prices of healthy food actually increased overall calories purchased without changing the nutritional value at all. It appears that mothers took the money they saved on subsidized fruits and vegetables and treated the family to less healthy alternatives, such as chips and soda pop. Taxes had basically the opposite effect, shifting spending from less healthy to healthier choices.
via Nudge
On discussing why he and his co-founders are seeking venture capital funding for their programming question and answer site (StackOverflow), Joel Spolsky provides a number of scenarios for when a company should give consideration to VC funding:
- There’s a land grab going on.
- There is a provable concept that’s repeatable.
- The business could benefit from the publicity of getting an investment from someone who is thought of as being a savvy investor.
- The investor will add substantial value to the business in advice, connections, and introductions.
- The business can potentially have a big exit or become a large, publically traded company.
- The founders are happy to give up some control to make the business more successful.
And when a company should not consider it:
- The founders are risk-averse and are willing to trade a much smaller payout for lower risk.
- The founders are technical without substantial business experience and wish to maintain absolute control forever.
- If the investor is mostly “dumb money.”
- If you’re going into an established field with a lot of competition.
- If the product is immature and unproven.
- If the founders don’t have enough of the right kinds of industry connections, or the idea is not compelling enough, so that raising VC would take months or years
- If there is any other way to raise the kind of money you need.
A number of pieces have been written disagreeing with Spolsky’s article, suggesting that either StackOverflow does not fit these criteria or that the reasoning is just plain wrong. 37signals’ post covers both.
In a series of novel framing experiments, researchers have shown that our self-identified political leanings correlate with how we perceive financial losses.
Hundreds of online participants chose between various flights, computers and so on. In each case they could plump for a cheaper option or a more expensive, greener option, the latter including either a ‘tax’ to help reduce carbon emissions, or an ‘offset’ to do the same – depending on how the choice was framed. Whether the expensive option was framed as a tax or offset made no difference to Democrat (left-wing) participants. By contrast, Republicans (right-wing) and Independents were much less likely to choose the more expensive option when it was labelled as a tax.
Large bonuses and salaries are in place to attract prime talent and as an incentive to improve performance, goes conventional wisdom and the bankers’ rhetoric. However recent research by Dan Ariely (author of Predictably Irrational) and colleagues suggests that while large pay will attract the best talent, large performance-based bonuses may hinder superior performance.
Interestingly big bonuses succeeded in increasing performance only when the tasks undertaken were mechanical in nature (e.g. tapping a key as fast as possible) but not when they were cognitive. When tasks were conducted in public (public scrutiny as a task motivator), performance did increase.
Like money, social pressure motivates people, especially when the tasks require only effort and not skill or thinking. But at some point, too much of it overwhelms the motivating influence.
If our tests mimic the real world, then massive bonuses clearly don’t work. They may not only cost employers more but also discourage executives from working to the best of their abilities. The financial crisis, perhaps, didn’t happen in spite of the bonuses, but because of them.
Much has been written on the (ir)rationality of purchasing lottery tickets (Eliezer Yudkowsky’s viewpoint is particularly fine), but little has been said on applications of these biases that could improve the finances of all of those who buy a ticket.
Now behavioural economists are attempting to boost the historically poor household savings rate by using our lottery-like optimism as an incentive to save:
Psychologists have long known that people tend to overestimate the odds of rare events. Applying that behavioral insight, finance professor Peter Tufano of Harvard Business School has devised a clever program called “Save to Win.” Launched earlier this year for members of eight credit unions in Michigan, it is a cross between a certificate of deposit and a raffle ticket. Members who put $25 or more into a Save to Win one-year CD* are entered into a monthly “savings raffle” for prizes up to $400, plus one annual drawing for a $100,000 jackpot. […]
In 25 weeks, the program has attracted about $3.1 million in new deposits, often from people who have never been able to set money aside.
via Techdirt
* CD = Certificate of Deposit (similar to a savings account).