Behavioral

The choices we make—the cars we drive, the neighborhoods we live in, the gyms we join—are influenced by our social networks, the people we surround ourselves with. Our financial choices are no exception. While thousands of studies have examined peer effects, a new study co-authored by Florian Ederer, assistant professor of economics, is the first to clearly identify the two channels of social influence—social learning and social utility—that explain why our peers’ financial decisions affect our own.

Nobel Laureate Robert J. Shiller says that an event on the magnitude of the 2008-2009 financial crisis has to have many causes, but he sees “the spirit of the times” as a driving force behind many of them. In a lecture at Yale SOM, he described how he sees this spirit acting in everything from Fed policy to the growth in casinos.

In a New York Times op-ed, Professor Robert J. Shiller explains that stock market movements are driven by popular narratives that spread like “thought viruses.” Secular stagnation—the idea that the global economy may languish for years to come—is the current story driving down the stock market. Whether true or false, the idea alone has the potential to erase five years of gains and create a bear market.

Somehow ice and cold water have become the social media phenomenon of the summer. Millions of people have shivered and screamed while dumping buckets of ice over their own heads, and a medical charity has tens of millions of dollars raised as a result. Yale Insights spoke with Yale economist Florian Ederer to try to make sense of all of this.

Laboratory experiments have suggested that, counterintuitively, having both an internal motivation for completing a task and an external reward makes performance weaker. A study by Yale SOM’s Amy Wrzesniewski tested this idea in the real world, by examining how the motivations of West Point cadets affected their performance. The results have strong implications for how leaders can get the best performance from their organizations.

What kinds of motives are most conducive to success? In a New York Times op-ed, Professor Amy Wrzesniewski and coauthor Barry Schwartz discuss their research looking at the motives of new West Point cadets and how they relate to success as Army officers.

Recent research, drawing on behavioral economics, suggests that donors make larger contributions to a nonprofit organization when they have a sense of active involvement in the organization's mission. In an op-ed for the New York Times, Professor Robert Shiller suggests that changes to legal and institutional structures could be powerful new tools to increase engagement and giving.

The degree of physical contact that a celebrity has with a piece of memorabilia affects how much collectors are willing to pay for it at auction, according to a study co-authored by Professor George Newman.

To reduce subtle biases that limit women and minority academic scientists, research universities should design diversity programs that adhere to rigorous scientific standards, according to a new paper co-authored by Professor Victoria Brescoll.

Nobel laureate Robert Shiller discusses some of the trends he currently sees in finance and the housing market.