Thursday, April 9, 2020

Interview with Colin Camerer on Behavioral Economics

Merle van den Akker has an "Interview with Colin Camerer" at her Money on the Mind website (April 6, 2020). Here are some of Camerer's answers. 

What does a young behavioral economist who is starting graduate school need to know? 
First, you need to know the “rules” of economics—the basic canon and methods—very well. (That was a big advantage for me at Chicago in graduate school, it is a crucible for learning to “think like an economist”.) To break the rules you need to know the rules.

Second, in my opinion, if you want to succeed in behavioral economics it is a big help to be very fluent in an adjacent social science. A lot of behavioral economics is in the business of importing ideas and translating them, redesigning and “selling” them inside economics. So you need to become bilingual and know what psychology, or neuroscience, media studies, or whatever, is solid, and has a long good empirical pedigree. Figuring that out can be difficult.

Third, nowadays you really should be able to do lab (and online) experiments, know about quasi-experimental designs (IV, diff-in-diff, regression discontinuity) and know some machine learning. It is often said that most of the methods you will use in your long research career are those you learned in graduate school. It is like packing for a long, long trip to a place where there are no stores in case you forgot to pack anything. Fill that backpack with methods.
What are some promising frontier areas for behavioral economics? 
Behavioral economics has been slow to embrace machine learning (for reasons discussed in the next section— it got on the BEAM reading list very late), which is unfortunate. As a result, a lot of the exciting work in behavioral science is being done in computational social science by sociologists, cognitive science, cultural anthropologists, etc. ...
It would be good to see more behavioral insights using systematic work on emotion, attention, memory, design, haptics, social influence, etc. Personalization is also important because one-size-fits-all interventions are so wasteful; a chunk of people won’t budge, a chunk budge easily, and then there is a middle group who need just the right nudge. But personalization requires thinking about personality, character skills, etc.—an area that behavioral economics willfully neglected for a long time (because we were busy doing more foundational things). The general success of behavioral economics, in my historical accounting, came from importing basic concepts and methods from psychology and putting them in the right place ... But doing this well requires really understanding the psychology on its own terms. In the early days that was not so challenging because Slovic, Lichtenstein, Fischhoff, Loewenstein, Kahneman and Tversky, Einhorn and Hogarth (and many others) basically did the careful filtering for those of us who were not as psychology-trained. But nowadays if you want to understand concepts like habits, salience, attention, emotion, evolution, and use them to do behavioral economics you better do a lot of reading or co-produce data and co-author with a collaborator who knows a ton.
Underinvestment in Neuroeconomics
Neuroeconomics is the opposite of the 5-10 year fad phenomenon. It is thriving but very few behavioral economists are involved. It is almost like a sports league that got together and voted that a certain type of ball or clothing material should be outlawed because it is not “cricket”. It is a special case of the plain fact that the elite economics departments do not care at all about whether the behavior that people are assumed in models to be capable of are biologically implemented.

I am a little surprised there have not been more talented economics students taking up neuroeconomics since the upside is so huge. It seems related to the fact that the economics profession, particularly in the US, is much, much more status- and ranking-obsessed than any other academic field I know, and there is a lot of tribalism. Ambitious students who care about status and future job placement are petrified of doing anything too risky like neuroeconomics because they wouldn’t get jobs in HRM top-tier US economics departments (which is probably true). Their advisors often explicitly warn them away from new ideas too, because they care about their students’ placements in a similar way. There is so much low-hanging fruit in neuroeconomics.
There's much more in the interview. In addition, if you want to gain a nodding acquaintance with many of the key players in behavioral economics in both  business, there are more than 30 other interviews at the website, including with Kelly Peters, Biju Dominic, Joshua Greene, Evelyn Gosnell, George Loewenstein, and others.