Economist Channel

Below are many of the dissertation titles from our MSc class in the last three years (chosen as the ones I happen to have on my email rather than for any systematic reason). Was a fascinating mix of work and gives a sense of the type of topics people here have been addressing.

Reported gender discrimination:  A between countries study of women in STEM and health occupations.

Public attitudes and snoopers:  A study on terrorism priming effects on public acceptance of the draft investigatory powers bill.

The effect of temporal distance on consumer purchasing decisions:  A discrete choice experimental approach.

Do people like self-control?  Using a day reconstruction method to investigate the extent to which people like to control themselves.

Self-control and media use: The role of implementation intentions and commitment devices in procastinatory media use.

Traffic light labelling: A choice based and ratings based conjoint analysis of the size manipulation of colour codes and the provision of TFL key card information on food choices and health value.

Promoting household recycling in Singapore's public housing estate:  Testing a habit change intervention in a quasi-experimental field study.

Nudge at the end of the rainbow: attitudes to nudging in South Africa.

A matter of life and death:  The effects of priming life expectancy on pensions decumulation decisions.

Discretionary savings and individual subjective perceptions in the UK.

Following from the previous post, the MOOC on economic modelling also looks very useful. See below or on the link for details. It also starts on September 19th.

What is produced in an economy? How is it produced? Who gets the product? Microeconomics seeks to answer these fundamental questions about markets.

In this course, we’ll introduce you to microeconomic theory, together with some empirical results and policy implications. You’ll analyze mathematical models that describe the real-world behavior of consumers and firms, and you’ll see how prices make the world go ‘round.

You’ll join the ranks of business executives, policymakers, entrepreneurs, and global leaders who rely on the insights they derive from a working knowledge of microeconomics. Nobel memorial prize-winner Paul Samuelson invented the modern microeconomics curriculum at MIT. Now is your chance to learn the field from the intellectual tradition he began.

Topics include:

Consumer theory
Supply and demand
Market equilibrium
Producer theory
Monopoly
Oligopoly
Capital markets
Welfare economics
Public goods
Externalities

The MIT/Edx online course "Data Analysis for Social Scientists" will be very useful for many readers of this blog. Details on the link and below. It starts on September 19th and runs for 12 weeks.

About this course


This course is designed for anyone who wants to learn how to work with data and communicate data-driven findings effectively.

 See more about Data Analysis for Social Scientists
What you'll learn
Intuition behind probability and statistical analysis
How to summarize and describe data
A basic understanding of various methods of evaluating social programs
How to present results in a compelling and truthful way
Skills and tools for using R for data analysis

08:45 – 09:00 Registration

09:00 – 09:15 Welcome

09:15 – 11:00 Session 1 – Matters of Principle & Practice: Ethics & the Behavioural Sciences

Dr Christian Schubert (Max Planck Institute of Economics) - Nudging, Integrity and Welfare.

Dr Magdelena Malecka & Dr Robert Lepenies (EUI) - Nudges, Law & Politics - beyond the individualist perspective.

Dr. Leonhard Lades (University of Stirling) – Nudges, Well-Being and Welfare.

Commentator: Prof. Liam Delaney (University of Stirling)

11:00-11:15 Coffee

11:15-13:00 Session 2 – The Regulatory State in the Behavioural Era

Dr Fabiana Di Porto (University of Salento) & Dr Nicoletta Rangone (LUMSA University) - A Behavioural Approach to Consumer Empowerment Regulation: Applications in Gambling.

Katy King & Elisabeth Costa (Behavioural Insights Team) - Applying Behavioural Insights to Regulated Markets.

Professor James Davey (Southampton Law School) - "Behavioural Economics and Commercial Law".

Commentator: Professor Colin Scott (University College Dublin)

13:00 – 14:00 Lunch

14:00 – 15:45 Session 3 - Translating Behavioural Science into Law & Policy: Problems, Pitfalls, & Solutions

Kathryn McKay (University of Birmingham) & Prof. Muireann Quigley (Newcastle University) - Exacerbating Inequalities? Health Policy & the Behavioural Sciences.

Dr Nicky Priaulx & Dr Martin Weinel (Cardiff University) - (Mis)understanding behaviour: Law, science and expertise'.

Prof. Peter John (University College London) – How Far to Nudge?.

Commentator Dr. Michael Daly (University of Stirling).

15:45 – 16:00 Coffee

16:00-17:00 Roundtable

18:30 Speakers’ Dinner

Since November 2014 the CMA has been investigating the market for personal current accounts (PCAs) and of banking services to small and medium size enterprises (SMEs). Details of their preliminary reports and various other resources are available on the investigation website. A useful document for those who don't have the time to read the thousands of pages on that website is the 55 page summary document available here. The core task of the investigation is summarised below.

"We are required to decide whether any feature, or combination of features, of each relevant market prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the UK or a part of the UK. If we decide that there is such a feature or a combination of features, then there is an adverse effect on competition (AEC). Should an AEC be found, we are also required to decide whether action should be taken by the CMA or a recommendation be made to others to take action for the purpose of remedying, mitigating or preventing the AEC or any resulting detrimental effect on customers. This final report sets out our decisions on these questions."

The PCA and SME banking services markets are large and important in the UK. As noted in the report, 97% of adults have a PCA and there are over 70 million PCAs in the UK, generating 8.7 billion in revenue for banks in 2014. As well as traditional questions of competition policy, there are clearly many potential behavioural issues in these markets that could lead to welfare consequences for consumers.

In light of these reviews and the market studies into PCAs and SME banking which led to this investigation, we investigated three broad areas in which we had concerns that retail banking may not be working well for customers:  

(a) whether there is a weak customer response due to lack of engagement and/or barriers to searching and switching reducing the incentives on banks to compete on price and/or quality and/or to innovate;(b) whether there are barriers to entry and expansion constraining the ability of banks to enter or expand; and(c) whether the level of concentration is having an adverse effect on customers.  

The findings with respect to the above questions show very low levels of consumer engagement in both PCA and SME banking markets. Half of consumers had been with the same PCA for the last 10 years. Only 3 per cent had switched within the last year.  The figures are not dramatically different for SME banking customers with many of the same issues arising.

As well as this, there is an important question as to how customers use these accounts, in particular the extent to which they incur overdraft fees. The most striking feature of the report for me from a behavioural perspective relates to the use of unarranged overdrafts. Unarranged overdrafts are a very expensive form of credit. Nearly half of the people using them were unaware they were doing so. It is one of the clearest areas I know where there is a potential behavioural market failure, as can be seen from the report's findings below.

In addition, there are particular concerns for overdraft users. Around 4.5% of active PCAs used an overdraft in 2014 with around a quarter of PCA customers using an unarranged overdraft. Despite overdraft users tending to have the most to gain from switching, we found that:
(a) Overdraft charges are particularly difficult to compare across banks, due to both the complexity and multiplicity of the charging structures and the difficulties in understanding their own usage. In particular, customers exceeding their pre-arranged credit limit can incur substantial charges but
there is no easy way for a customer to find and compare the charges or
credit limits an alternative PCA might offer them.
(b) Overdraft users generally have limited awareness of and engagement with their overdraft usage. For example, over half of overdraft users we surveyed underestimated their usage by two or more months in a year and over a third were not aware that they had gone into overdraft. Moreover, around half of unarranged overdraft users did not believe they had gone into unarranged overdraft.
(c) There are additional barriers to switching for overdraft users due to uncertainty surrounding the acceptance and timing of any overdraft approval when opening a new account. In addition, a new bank may not be willing to offer the same level of overdraft facility as a customer’s bank, for example because the new bank will not have access to the customer’s transaction data but will need to rely on information from the customer and from CRAs. 

The report outlines a range of remedies to encourage active consumption on behalf of PCA and SME banking consumers. These are nested under four broad headings, as outlined below. There are many innovative and interesting ideas contained within these remedies, many of which have been discussed in various papers and reports on behavioural regulation over the last 10 years. As such, the roll-out of these remedies offers a particularly useful case-study as to whether this approach can actively shape outcomes in markets of this nature.

Our integrated package of remedies is illustrated below, and consists of four
elements:
(a) Three cross-cutting foundation measures that will underpin increased competition in our reference markets. They have the object of increasing customer engagement and making it easier for personal and business customers to compare the prices and service quality of different providers
and of encouraging the development of new services.
(b) Additional measures to make current account switching work better, including building on and improving the existing CASS.
(c) A set of measures aimed at PCA overdraft users, a group of customers who suffer particularly from the competition failures in the PCA market.
(d) A set of measures targeted at the specific problems in SME banking, making it easier for SMEs to compare different providers and reducing the hold that incumbent banks have in the market for BCAs and SME loans

The potential remedies for the levels of low engagement and high frequency of incurring overdraft fees and unplanned overdraft fees merit a lot of debate. Several consumer groups had advocated for mandating centrally imposed caps on the amount that banks can charge customers for exceeding their overdraft limit rather than allowing banks to set this limit themselves. Instead they recommend what could be considered a Nudge approach that forces banks to provide more transparent and timely information about the likelihood of incurring different types of overdraft fees. This is one of the most contentious aspects of the report and one of the most contentious aspects of this literature and policy area more generally. To use the phrase from the well-known Bubb and Pildes paper, why should behavioural economics trim its sails in this manner? Why focus on soft intervention when a harder more mandated approach might be more effective? I have blogged about this issue before. It is one of the central issues in behavioural economics, law and regulation and will likely shape this debate long into the future.

(a) requiring banks to automatically enrol all their customers into an unarranged overdraft alert;
(b) requiring banks to offer, and alert customers to the opportunity to benefit from, grace periods during which they can take action to avoid or reduce all charges resulting from unarranged overdraft use;
(c) recommending to the FCA that it undertakes further work to identify, research, test and, as appropriate, implement measures to increase overdraft customers’ engagement with their overdraft usage and charges. This will be facilitated by an Order to require banks to cooperate with the FCA in its research programme, including RCTs; and
(d) to increase PCA customers’ engagement with overdraft features, we are recommending that the FCA looks at ways for banks to engage customers more in considering overdraft features and their potential relevance and impact, during the PCA opening process. 

There are several other issues that people have been debating on this report. The extent to which competition in these markets is constrained by the market power of the largest established banks is an ongoing debate and is not widely addressed in the report, other than to say they have largely concluded that market power itself is likely not the source of low consumer engagement. The behavioural economics approach is a key feature of British regulation across several areas over recent year (see BIT report, FCA report, CMA Chairman speech on behavioural economics, and University of East Anglia book for very useful papers; see also Bar-Gill Seduction by Contract for a recent book on the behavioural law approach). The extent to which it tends in Britain to be associated with a soft-mandatory or Nudge type approach needs to be kept under scrutiny and debate. Behavioural barriers do not necessarily imply softer interventions. It will be fascinating to see whether this comprehensive package of recommended behavioural interventions has an effect of the levels of engagement and quality of consumer outcomes in this market. If it does not, it will certainly tip the balance back in favour of those advocating harder approaches.

The report also brings home the vast numbers of small businesses and retail consumers who clearly have difficulty engaging with what are, for many, complex services. The wider effects this might be having on constraining start-up formation, impacting on family solvency, mental health, and other welfare outcomes are worth considering, and they provide a substantive area of inquiry for people who are bringing psychological and behavioural perspectives to these areas.