An interesting article in the Irish Times on the Irish government’s approach to dealing with potential issues arising from yesterday’s news from the UK. It includes a link to an 8-page pdf summarising the main actions by different areas of government policy.
The ESRI published a report on Friday entitled “An Investigation of Consumers’ Capabilities with Complex Products“. The authors are Pete Lunn, Marek Bohacek, Jason Somerville, Aine Ni Choisdealbha and Féidhlim McGowan. It contains a fascinating range of experimental findings demonstrating the pronounced difficulties experienced by consumers in valuing and making decisions with complex, multi-attribute products.
Below is from the ESRI press release. This has been a long-run research programme and the work is worth wide-spread debate in terms of implications for consumer protection, regulation and related policy areas.
PRICE Lab is a research programme in behavioural economics, jointly funded by the Central Bank of Ireland, the Commission for Communications Regulation, the Commission for Energy Regulation and the Competition and Consumer Protection Commission. The lab uses computerised experiments to study what consumers are capable of and what they are not.
The experiments described in the report systematically tested how accurately consumers could distinguish good deals from bad deals. The results showed that once consumers had to take into account more than two or three factors at the same time, they struggled to spot good deals and often made mistakes.
The findings also revealed systematic biases in consumers’ choices. Across multiple experiments, consumers tended to think that deals closer to the top of the product range were good value while deals closer to the bottom were bad, even when the high-end products were expensive for what they were and the low-end products were good value at the price listed.
The report discusses implications of the results for consumer protection. The findings suggest that consumers can benefit if product ranges and descriptions are kept simple. Where companies instead market products in an unnecessarily complex fashion, with multiple characteristics and price components, consumers will be more likely to make mistakes. In markets where consumers struggle with the volume or complexity of product information, comprehensive, independent price comparison sites can play an important role, by helping consumers to integrate the information or by drawing consumers’ attention to the most important product features.
I posted before about David Bell’s analysis of the Scottish referendum bookies odds. The bookmakers seemed to do a good job not overreacting to the late poll numbers showing a marked swing to Yes. The days before the referendum were throwing up some dramatic poll results but the odds did not adjust as dramatically, implying the bookies were either temporally averaging across polls, had some priors about the quality of the polls, or were doing a degree of Bayesian updating or something similar. David has provided a nice piece here for those looking to keep track of bookies odds for Brexit. For now, it looks like Stay is the favorite by quite a margin and more than one would think just by looking at opinion polls.
The fourth Irish Behavioural Science and Policy Network meet-up will take place on April 25th at 6pm in Dublin city centre (venue tbc). It will end at 8pm. Each meet-up is structured around a collection of short talks, where each speaker describes briefly an idea they are working on (or thinking about), followed by questions, potential suggestions for collaboration between members, and a group discussion on the collection of talks.
This session will focus on applications of behavioural science to public policy. including health applications and the role of design principles. Speakers will include Dan Hayden from UCD, Clare Delargy from the BIT, Eoin O’Malley from DCU and David Hevey from TCD.
All those interested are welcome to attend, so please do share this event information with anyone who you think would like to come along.
We look forward to seeing you on the 25th of April.
The eight annual one day conference on Economics and Psychology will be held on November 27th at the ESRI in Dublin. The purpose of these sessions is to develop the link between Economics, Psychology and cognate disciplines in Ireland. A special theme of these events is the implications of behavioural economics for public policy. Please sign up here to attend. There is no registration fee. Our keynote speakers are: Alan Sanfey, one of the world’s leading experts on fairness and social decision making; Stefan Hunt, who will speak about behavioural economics and financial regulation; and Pelle Hansen, who will discuss ongoing work on behavioural science and policy in Denmark.
At the last event in November 2014 we agreed to develop a broader network to meet more regularly to discuss work at the intersection of economics, psychology and policy. This has had three meet-ups so far and a fourth will take place on November 9th. Anyone interested in this area is welcome to attend. A website with more details and a mailing list to sign up to is available here. There are currently over 100 people signed up to the network and the events have been, at least in my view, very lively and interesting. There are several more planned for throughout 2016 and we welcome suggestions.
830am to 9am: Registration
9.15am to 940am: Cathal Fitzgerald (DCU) “I Groupthink Therefore We Are: Detecting Behavioural Convergence in Leaders Before the Economic Crisis”.
9.40am to 1005am: Michael Daly (Stirling and UCD) “Childhood Self-Control and Smoking Throughout Life”.
1005am to 1030am: Victoria Taranu (Universiteit Hasselt ) “The implications of nudging in reducing residential energy demand and its potential for the EPC”.
1030am to 11am: Coffee
11am to 1125am: Leonhard Lades (Stirling) “Present bias and everyday self-control failures: A Day Reconstruction Study”.
1125am to 1150pm: David Comerford (Stirling). “The role of agency in preferences”.
1215pm to 1pm: Alan Sanfey (Radbood). “Social motivations in decision-making: Insights from Decision Neuroscience”.
1pm to 2pm: LUNCH
2pm to 240pm: Pete Lunn (ESRI). “Pricelab: experiments for consumer policy”
240pm to 320pm: Stefan Hunt (FCA). “Applying behavioural insights to regulation: lessons from consumer financial protection”.
320pm to 350pm Coffee
350pm to 430pm: Pelle G Hansen (Roskilde University). “Applying behavioural science in Denmark: progress and lessons”.
430 to 5pm Discussion
The Geary Institute is hosting a half-day workshop to look at changes in well-being in Ireland over the last 10 to 15 years. The specific aim is to consider a wide range of possible outcomes including physical and mental health as well as subjective well-being. Moreover we want to draw on a range of approaches from epidemiology, psychological medicine and the social sciences as well as different types of data. The event will be held in the UCD Geary Institute on Tuesday November 17th from 1130pm to 4pm. A light lunch would be provided. This is is likely to be a full event so please RSVP to email@example.com to register attendance (there is no fee) and also let us know if you subsequently cannot make it.
Co-organisers: Kevin Denny (UCD) and Liam Delaney (Stirling University)
1130pm to 1150pm: Registration
11.50pm – 1200pm: Introduction and Aims
1200pm – 1230pm: Brendan Walsh (UCD): “Reflections on Economic Conditions and Well-being in Ireland”.
1230pm – 1.00pm: Paul Corcoran (UCC) “Impact of Austerity and Recession on Suicide and Self-Harm in Ireland”.
130pm – 2pm: Kevin Denny (UCD): “Self-reported health in good times and in bad: Ireland in the 21st century”.
2pm – 230pm: Eithne Sexton (TCD) – “Subjective wellbeing at older ages in Ireland 2009-2013: Predictors of change over time”.
230pm – 3pm: Cecily Kelleher (UCD): “Impact of the Economic Climate on Health Status during the first two decades of the 21st Century in the Republic of Ireland: Findings from the Lifeways Cross-Generation Cohort study of a Thousand Families”.
3pm – 330pm: Michael Hogan (NUIG): “Engaging with Citizens in the Design of Well-being Measures and Policies: Systems Thinking and the Public Participation Network”.
330 – 4pm: Discussion
The election of the majority Conservative government in May meant that a referendum to decide whether Britain remains part of the EU became inevitable. A commitment to an “in-out” referendum on EU membership was provided in the May Queen’s Speech and it will likely go ahead in 2016 (or 2017 at the latest). Opinion polls show a split electorate. Risk aversion and other status quo factors should work in favour of the “stay” side. Bookies odds reflect this with at least one popular bookmaker placing the odds of a “leave” result at 3-1. In any case while the likeliest outcome at present is that Britain will remain in the EU, it is still a strong possibility they will leave and worth discussing in terms of implications for Britain and other countries. Germane to the title of this blog the implications for the Irish economy broadly are worth discussing.
In the draft national risk assessment published by the Taoiseach’s office earlier this year, Brexit is mentioned as follows:
“Following the general election in May, the British Government is likely to make proposals both on how the functioning of the EU could be improved and on how specific UK concerns about EU membership could be addressed, with the possibility of a UK referendum on EU membership. A fundamental change to the role of the UK in the EU, or a period of continuing uncertainty regarding the UK’s relationship with the EU, could present significant challenges for the EU as a whole and for Ireland in particular, especially in terms of (i) pursuit of Ireland’s objectives as a Member State as the UK is an important ally within the EU on negotiations on issues of mutual concern such as trade and the deepening of the single market; 24 (ii) bilateral relations with the UK, including the significant economic and trading relationship; and (iii) the impact on Northern Ireland issues and North/South relations.”
A number of questions come to mind in the prospect of Britain leaving the EU. I raise these purely for discussion and they are not ordered by any degree of likelihood or priority. In the event of a “leave” vote a number of alternative configurations might result including various forms of trade deal with the UK and EU members. (See here for one attempt to answer some of the economic questions below; Davy’s also released a piece on economic effects; NTMA piece on economic effects here; Alan Matthews on the implications for Irish agri-food).
a) What are the implications for border arrangements between Northern Ireland and the Republic of Ireland?
b) What are the implications for the status of UK citizens living in the Republic Ireland?
c) What are the implications for Irish citizens living in the United Kingdom?
d) Will the uncertainty surrounding the referendum affect currency volatility?
e) How will the uncertainty surrounding the referendum impact on FDI into Ireland? Does the prospect of a Brexit make Ireland a safer destination for some types of companies relative to the UK? In a “leave” scenario would Ireland be more attractive a destination than the UK for non-EU companies looking for access to the EU market?
f) How would a Brexit influence trade between Ireland and the rest of the EU?
g) What implications would Brexit have for the Scottish political situation and potential knock-on effects to the Irish economy?
h) What implications would it have for support for the EU in Ireland?
i) How would a “leave” result influence the Northern Irish economy?
j) Would a “leave” result limit mobility of Irish people to the UK?
k) What implications would a “leave” result have for wider political movements in Europe?
The small amount of publicly available analysis so far suggests the answer to most of the economic questions is that it would have a negative impact on the Irish economy largely coming through trade disruption. But it seems clear there is a lot of uncertainty in what a leave scenario would look like. As reported widely in the media there are now various groups in Ireland looking at these questions including in various state agencies and the Central Bank. It will be interesting to see this debate unfold.