Behavioral economics

Prof. Amy Finkelstein speaks with Stephen Dubner of Freakonomics Radio about why insurance markets are broken, how they can be fixed, and her new book, “Risky Business.” Finkelstein explains that “one thing I hadn’t realized ‘til I started working in economics is there’s another type of market frailty that’s really important, that’s the subject of a lot of government policy, but that most people just don’t seem to be as aware of. And that’s the problem of selection. And it’s front and center in insurance markets.”

Prof. Hari Balakrishnan speaks with Forbes contributor Stuart Anderson about his decision to leave India to pursue a PhD in computer science in the U.S., his love for teaching students as a professor at MIT and his work co-founding Cambridge Mobile Telematics, a software company that utilizes technology to make roads safer. “Immigration and immigrants make the United States stronger,” said Balakrishnan. “Immigration is the biggest strength that we have. We need to be able to attract and retain talent, no matter where people come from.”

Researchers at MIT have found that “for every nine adults who gained access to Medicaid in Oregon due to a special due to a special enrollment lottery, one previously eligible child was added to the rolls as well,” reports Dennis Thompson for U.S. News & World Report. The lottery “enabled us to look at the questions of what happens to children of adults who win the lottery, compared to children of adults who don’t win the lottery,” says Prof. Amy Finkelstein.  

Bloomberg reporter Chris Anstey spotlights a new study by MIT researchers that finds that during the Covid-19 pandemic people have been taking cues from their neighbors as to whether it is safe to resume social activities like dining in restaurants. “We felt that in [some] uncertain times, such information might be particularly valuable,” said Prof. Siqi Zheng. “If others think it’s safe to go out, then maybe I should feel safe. To be sure, we were also prepared for the opposite reaction, that people would hunker down and try to avoid crowds.”

Forbes reporter Abdo Riani spotlights an MIT and Northwestern study that uncovered why startup founders should be more cautious when listening to customer feedback. In a “study of six years’ worth of transactional data of 130 thousand customers in large retail chains…[researchers] made an interesting discovery – about 25% of customers consistently buy products that end up failing within 3 years,” writes Riani.

Bloomberg reporter Lynn Thomasson writes that a new study by MIT researchers explores the demographics of people who panic sell during stock market dips. “Financial advisors have long advised their clients to stay calm and weather any passing financial storm in their portfolios,” the researchers explain. “Despite this, a percentage of investors tend to freak out and sell off a large portion of their risky assets.”

A new study by graduate student Chi Heem Wong examines panic selling during periods of stock market volatility dips, reports Kate Dore for CNBC. “Panic selling is predictable,” explains Wong. “It’s pretty consistent over time that people with certain attributes tend to panic sell more often than others.”

In a segment for Planet Money, Greg Rosalsky spotlights a paper co-authored by Prof. Lawrence Schmidt that examines investor performance and finds that elite financiers often excel at buying stocks but perform poorly when it comes to selling stocks. "My big takeaway from this paper is even when we look at a sample of extremely talented, highly incentivized expert investors, they are still people," says Schmidt.

Prof. Sinan Aral’s new book, “The Hype Machine,” has been selected as one of the best books of the year about AI by Wired. Gilad Edelman notes that Aral’s book is “an engagingly written shortcut to expertise on what the likes of Facebook and Twitter are doing to our brains and our society.”

Prof. Sinan Aral speaks with Danny Crichton of TechCrunch about his new book, “The Hype Machine,” which explores the future of social media. Aral notes that he believes a starting point “for solving the social media crisis is creating competition in the social media economy.” 

Prof. Sinan Aral speaks with New York Times editorial board member Greg Bensinger about how social media platforms can reduce the spread of misinformation. “Human-in-the-loop moderation is the right solution,” says Aral. “It’s not a simple silver bullet, but it would give accountability where these companies have in the past blamed software.”

Prof. Sinan Aral speaks with Kara Miller of GBH’s Innovation Hub about his research examining the impact of social media on everything from business re-openings during the Covid-19 pandemic to politics.

Prof. Sinan Aral speaks with NPR’s Michael Martin about his new book, “The Hype Machine,” which explores the benefits and downfalls posed by social media. “I've been researching social media for 20 years. I've seen its evolution and also the techno utopianism and dystopianism,” says Aral. “I thought it was appropriate to have a book that asks, 'what can we do to really fix the social media morass we find ourselves in?'”

Bloomberg’s Noah Smith profiles Prof. Parag Pathak, who was recently awarded the John Bates Clark medal for his work using economic theory to improve the allocation of students to New York City public schools. “Pathak isn’t just a theorist,” writes Smith, “in keeping with economics’ age of data, he also does a lot of empirical work.”

Forbes Contributor Steve Banker highlights Prof. Yossi Sheffi’s new book, Balancing Green, which focuses on sustainability in business. As Sheffi explains, “many companies engage in sustainability initiatives to prevent them from having to react to a rising tide of sentiment,” writes Banker. “Getting ahead of these kinds of campaigns can be at the heart of a robust risk management program.”