Sunday, December 21, 2008


An interesting book of 2008 is Nudge by behavioral economist Richard Thaler and legal scholar Cass Sunstein. Based on behavioral studies they discuss incentives structures for many different topics. Thaler and Sunstein introduce the term choice architecture to refer to carefully designed incentive structure that gently push the people into desired chosen. From empirical studies we know that people often follow default options, chose more the first option in a list of options, are sensitive to the decisions others are making, etc. In making decisions on insurances or retirement options, the way the information is provided can improve the decisions participants make (more relevant to their individual situation). Even when we like to address a global challenge like climate change, nudging is possible. For example, by technical options that make energy use more visible (daily energy use on your website) or automatically turn of devices when people do not use it. Selling cars with a "low-carbon" or traditional version will not take of is one can not show clearly one use the "low-carbon" option. Hence the success of the Prius which is only availble as a hybrid. Thaler and Sunstein were colleagues of President-elect Obama and act as informal advisors. So there is hope that we will experience more nudging in the future.
For more information see also

Saturday, November 8, 2008

Sh** happens

The big necessity by Rose George is an unusual book since it discusses the details of how human societies deal with human waste. 2.6 billion people have nowadays no form of sanitation which has immense implications for public health. When excrement is disposed in open fields flies, the weather and other factors disseminate the droppings. One of the startling statistics of the book is that people in areas without sanitation 'consume' on average 10 gram of human waste a day contributing to the spread of diseases and bad public health in general.

The book describe the diverse ways countries and communities deal with human waste. From the untouchables in India, the lowest caste who are responsible for removing the human waste, to the hygiene obsessed Japanese with high-tech restrooms. From the Chinese who use the 'night soil' to create energy to the experimentation with new latrine pit designs in Tanzania. The diverse ways of human waste managements show some of the difference in social structure and culture around the world.

The provision of sanitation is an important public good that not only requires monetary investments but also cooperation of the users. Especially lack of maintenance of sanitation systems may prevent the development of this public good. Various examples are discussed where communities in India are rewarded when their community is open defecation-free. The solution to sanitation is not necessarily the same for each context due to variation of population density, availability of water, etc. Hence institutional diversity can also be studied for the problem of human waste.

Saturday, August 2, 2008

Plastic brains

Just finished "The brain that changes itself" of Norman Doidge which discuss new developments in brain research. Mainly the findings that brains can adapt to lost functions. Many examples are discussed of people who lost brain function due to stroke, or had only half a brain, and were able to train other parts of the brain to take over functionality.
What has this to do with institutional diversity?
In the last few years there is a lot of research on detecting areas of the brain that correlate with cooperative behavior in social dilemmas. But what if brain functions are not all genetic but in important ways wired due to repeated activities. The example of brain washing of children in North Korea is discussed in the book where children are confronted the whole day with propaganda material on adoration of the leaders and defining other nations as enemies, including in arithmetic exercises. In this way children are wired with "cultural norms" which will be difficult to unwire. Hence habitual behavior and social norms might become wired during childhood. Rewiring the brain will require persistent and repeated training of other areas of the brain. This might be possible for people who like to function after hit by a stroke, but it is less likely to expect to be plausible or desirable for changing habitual behavior. This again shows the importance of education in addressing the long term global challenges we are facing.

Thursday, July 24, 2008

The benefits of theft

Stealing somebody's property is illegal, but sometimes it has benefits and is tolerated. Within the increasing digital world copying software and other digital products is easy to do. The Economist of July 19th discusses some cases where one likes to benefit from piracy. For example, for each music track that is legally exchanged, 20 music tracks are illegally derived from peer-to-peer systems. The music industry starts now to adapt to the situation and start making use of data mining to figure out who is downloading what and where (see BigChampage) to improve the scheduling of concerts and other events.
Microsoft tolerates illegal copies of their software in China. The reason is to maintain a large share of users and get them locked in with Microsoft products. If they would enforce intellectual property seriously, Chinese customers may move to cheaper open source products and get locked in with those products. For the longer term allowing some stealing now would be beneficial.
The benefits of theft seems to be restricted to those products which benefits from lock-in effects or where during the process of illegal possession of the products information (on preferences) of the thieves could be derived. If your main gain of revenue depends on dominating the market, piracy is a good sign that there is demand for your product and contribute to the dominance of the market.

Friday, May 30, 2008

Evidence-based Policy-making

In the May 24 edition of the New Scientist there is an article on the use of objective statistical analysis to investigated the effectiveness of policies, evidence-based policy similar to evidence-based medicine. Using randomized tests the effectiveness of various policies can be tested, although policy-making may not want to change their policies because of ideological reasons. An interesting example is a study on the effective of drug testing in UK prisons which led to an increase in the use of heroine. The reason was that cannabis can be traces for a longer period after use in urine. So, the use of drug testing aimed to reduce illegal drug use led prisoners to switch to heroine. Another example is the ideology that abstinence-only as the message in sex education is the best way to reduce HIV transmission although evidence shows that this is not a good strategy. Nevertheless the US government keeps on pushing for this particular, ineffective, policy.

I found some organizations related to evidence based policy like the Evidence Network, the Evidence-Based Policy in Development Network, the Coalition for Evidence-Based Policy and a journal called Evidence and Policy. Another related source is the book Super Crunchers by Ian Ayres which discuss in popular terms the methodology behind the evidence based movement. Recent developments in methodology (statistical tools, neural networks), cheaper and faster computing facilities, and especially lower costs of sharing and retrieving data lead to a boom in doing randomized tests in many different domains. Besides the usual marketing applications (which wording of an internet add leads to most purchases), and medical applications, Ayres discuss a lot of examples related to public policy which as social programs and education policies.
Note that the main trust of this evidence based movement is how individuals react to a certain policy (or medicine or ads). I have not seen many examples that are relevant for scholars like me who are interested in studying the conditions for self-governance, an emergent property. I can imagine that we may start analyzing how groups in digitals environments are able to cope with similar problems like creation of open source software (some studies have been done but not very systematic), governance of common space in chat rooms and digital environments, etc.. Any suggestions?

Tuesday, April 29, 2008

Predictably irrational

I just finished a fantastic book by Dan Ariely of MIT on Predictably Irrational: The Hidden Forces that Shape our Decisions. The book describes a large number of experiments in behavioral economics and psychology how on first site irrelevant factors have a major role in the outcomes in decision making experiments. Whether decisions are framed in terms of monetary rewards or social norms, how consumers start buying more expensive products when introducing an outragous expensive alternative that nobody will buy. Why honest people steal office supplies but not money. How Asian woman score differently on math test if they have read first a story on women vs asian people. If they read the story about women they scored lower, perhaps by triggering another stereotype compared with the other read.
Deriving a better understanding how humans make choices, and how different frames of information affect the decision making, is important in crafting effective institutions. If you like to read more about Predictably irrational, see

Sunday, March 9, 2008

The rules of gangs

A great book on the political economy of gangs is written by Sudhir Venkatesh

in "Gang Leader for a Day". In this book Sudhir reports on his adventures as a Chicago graduate students studying the activities of a gang. He got access to the innerworkings of the gang by getting the interest of gangleader JT. Sudhir gain the trust of the community over the years which provides him access to interesting data on the earning of the gang members and other residents of the Robert Taylor project, the way the gangs and police monitor and enforce. Sudhir is nowadays a professor in Sociology at Colombia University.

Saturday, January 26, 2008

Language and Institutions

In the edition of January 22 of PNAS Steven Pinker and colleagues discuss the "logic of indirect speech". "When people speak, they often insinuate their intent indirectly rather than stating it as a bald proposition." This is interesting from an institutional perspective. When people interact in open societies how do they know the intent of others? Using indirect speech might be a way to test the waters. "Gee, officer, is there some way we could take care of the ticker here?" is an indirect way to figure out the kind of officer the person has to deal with, but a honost officer cannot make a case of it. In open societies the ability to recognize whom to trust in social interactions is key, and indirect speech is an interesting way to use this.
Being from the Netherlands, I often get the comment in the USA to be very direct in my conversations. Is indirect speech a cultural adaptation in the large open society of the USA.
In New Scientist of January 19, an interview is reported with linguist Daniel Everett who argues that the development of language and cultural conditions are deeply connected. Language is not a consequence of a built in universal grammar a la Chomsky but evolved within a cultural and ecological niche. Everett studies the Piraha indigenous people in Brazil who have for example no words for numbers, which seem to be in contrast to the universal grammar argument. This discussion may relate to the fit between institutions and ecological conditions. In which way is their a universal grammar of institutions compared to diverse adaptations of institutional structures to ecological and cultural local conditions?