1. Study suggests brief exposure to charismatic career women inspires female students to pursue same field

    January 31, 2018 by Ashley

    From the Southern Methodist University press release:

    A low-budget field experiment to tackle the lack of women in the male-dominated field of economics has been surprisingly effective, says the study’s author, an economist at Southern Methodist University, Dallas.

    Top female college students were inspired to pursue a major in economics when exposed very briefly to charismatic, successful women in the field, according to SMU economist Danila Serra.

    The results suggest that exposing young women to an inspiring female role model is successful as a result of the mix of both information and pure inspiration, Serra said.

    “The specific women who came and talked to the students were key to the success of the intervention,” she said. “It was a factor of how charismatic and enthusiastic they were about their careers and of how interesting their jobs looked to young women.”

    Given the simplicity and low-cost of the intervention, similar experiments could be easily conducted in other male-dominated or female-dominated fields of study to enhance gender diversity.

    Serra’s results showed that among female students exposed to the enthusiastic mentors there was a 12-percentage point increase in the percentage of female students enrolling in the upper-level Intermediate Microeconomics course the following year — a 100% increase, or doubling, for that demographic.

    Not surprisingly, given that the intervention was targeted to female students, Serra found that the role model visits had no impact on male students.

    But astonishingly it had the greatest impact on high-achieving female students.

    “If we restrict the analysis to the top female students, the students with a GPA of 3.7 or higher, the impact is remarkable — it is a 26 percentage points increase,” Serra said. “So this intervention was especially impactful on the top female students who perhaps were not thinking about majoring in economics.”

    The results were very surprising to Serra, an assistant professor in the SMU Department of Economics in Dedman College who teaches the upper-level class Behavioral and Experimental Economics. Serra’s research relies on laboratory and field experiments, a relatively new methodology in the field of economics. She launched and is co-leader of the Laboratory for Research in Experimental Economics at SMU.

    “I didn’t think such limited exposure would have such a large impact,” Serra said. “So this is telling me that one of the reasons we see so few women in certain fields is that these fields have been male-dominated for so long. This implies that it is very difficult for a young woman to come into contact with a woman in the field who has an interesting job in the eyes of young women and is enthusiastic about her major and her work. Young men, on the other hand, have these interactions all the time because there are so many male economics majors out there.”

    Co-author on the research is Catherine Porter, associate professor of economics at Heriot-Watt University, Edinburgh, Scotland, and Serra’s former Ph.D. classmate at the University of Oxford.

    “The gender imbalance in economics has been in the news a lot lately, and much of the discussion has been very negative,” said Porter. “This study offers something positive: a cheap way of improving the gender balance. The results can hopefully be used by other schools in order to redress the low numbers of women that major in economics — women have a lot to offer and should consider economics as a subject that is interesting and varied for a career.”

    Serra reported the findings, “Gender differences in the choice of major: The importance of female role models,” on Jan. 6 in Philadelphia at the 2018 annual meeting of the Allied Social Sciences Association. Hers is one of many findings on gender and gender differences in economics presented at a session organized by the Committee for the Status of Women in the Economics Profession.

    Inspiring the individual is the best tool to recruit and retain

    Serra launched the study after SMU was one of 20 U.S. universities randomly chosen by Harvard economics professor Claudia Goldin for the Undergraduate Women in Economics Challenge. The project awarded each university a $12,500 grant to develop a program freely chosen by the universities to test the effectiveness of a deliberate intervention strategy to recruit and retain female majors.

    Nationally, there’s only about one woman for every three men majoring in economics. SMU has a large number of economics majors for a school of its size, with 160 a year. The gender imbalance, however, is greater at SMU than the national average, with only one woman to every four men.

    Serra developed her intervention based on her own experience as a Ph.D. student at the University of Oxford several years ago.

    “I started thinking about role models from my personal experience,” Serra said. “As a student, I had met many female professors in the past, but my own experience taught me that inspiration is not about meeting any female professor — it’s about meeting that one person that has a huge charisma and who is highly inspiring and speaks to you specifically.”

    Serra said that’s what she experienced as a graduate researcher when she first met Professor Abigail Barr, who later became her Ph.D. advisor.

    “I know for a fact that that is why I decided to do a Ph.D. in economics, because I was greatly inspired by this person, her experiences and her research,” she said. “So I thought it would be interesting to see whether the same could work for a general student population.”

    Two inspiring women role models, 15 minutes, four classrooms

    Serra asked two of her department’s top undergraduate female economics students to take the lead in choosing the role models.

    The students, Tracy Nelson and Emily Towler, sorted through rosters of SMU economics alums and shortlisted 18 men and women that they thought were working in interesting fields — which purposely excluded stereotypical jobs in banking and finance — and then carried out scripted interviews with a subset of who agreed to be interviewed via Skype to get additional information about their career path and to assess their charisma.

    The students ultimately found two alumnae, July Lutz and Courtney Thompson, to be the most inspiring. Julie Lutz, a 2008 graduate, started her career in management consulting but, shortly after, decided to completely change her career path by going to work for an international NGO in Nicaragua, and then as a director of operations at a toy company based in Honduras. Lutz now works in Operations at a fast-growing candy retail company. Courtney Thompson, class of 1991, has had a stellar career in marketing, becoming the senior director of North American Marketing and Information Technology at a large international communications company, with the unique claim of being not only a female econ major at a time when that was exceedingly rare, but also African American in a white dominated field.

    Serra invited each woman to speak during the Spring 2016 semester for 10 to 15 minutes to four Principals of Economics classes that she had randomly selected from a set of 10. The Principles classes are very popular, with about 700 students total from a variety of desired majors, and are typically gender balanced. The imbalance, said Serra, starts the following year with Intermediate Microeconomics, which is a requirement for upper-level economics courses and so is a good indicator of a desire to major in economics.

    Serra offered each role model an honorarium for speaking, but each woman declined and indicated they were happy to be back on campus sharing with students. Serra told the speakers nothing of the purpose of the research project, but encouraged each one to explain to the class why they majored in economics and to be very engaging. She directed them to approach the students with the following question in mind: “If you had to convince a student to major in economics, what would you say?”

    Thompson, Serra said, during her college days played SMU’s costumed Peruna mascot, and today retains a “bubbly, big personality, that makes her extremely engaging.” In her classroom visits, Thompson described her experience working and being extremely successful in marketing with an economics degree, while being surrounded by business majors. Lutz, being still in her 20s, was very easy for the young women in the classrooms to identify with, and her experience working in the non-profit and in developing countries may have been especially appealing to them.

    Young women judge best who will inspire them

    Serra believes that a key to the success of the intervention was the fact her two female economics students actively participated in the selection of the role models.

    “The most important thing about the project was that I realized I needed current female students to choose the role models,” Serra said. “I’m not that young anymore, so I’m probably not the best person to recognize what is inspiring to young women. I think young female students are in the best position to tell us what is most inspiring to them.”

    Serra is the inaugural recipient of the $50,000 Vernon L. Smith Ascending Scholar Prize for her highly cited corruption research.

    She uses lab experiments to study bribery, governance and accountability, questioning long-standing assumptions. Some of her findings are that corruption declines as perpetrators take into account social costs of their illegal activities, and as victims share information about specific bribery exchanges through online reporting. Serra’s current research agenda also includes experimental work on gender differences in preferences, behaviors and outcomes.


  2. Study suggests socioeconomic status may be linked to differences in the vocabulary growth

    December 10, 2017 by Ashley

    From the University of Texas at Dallas press release:

    The nation’s 31 million children growing up in homes with low socioeconomic status have, on average, significantly smaller vocabularies compared with their peers.

    A new study from the Callier Center for Communication Disorders at The University of Texas at Dallas found these differences in vocabulary growth among grade school children of different socioeconomic statuses are likely related to differences in the process of word learning.

    Dr. Mandy Maguire, associate professor in the School of Behavioral and Brain Sciences (BBS), said in her study that children from lower-income homes learned 10 percent fewer words than their peers from higher-income homes. When entering kindergarten, children from low-income homes generally score about two years behind their higher-income peers on language and vocabulary measures.

    The vocabulary gap between the two groups of children gets larger throughout their schooling and has long-term academic implications, Maguire said.

    The primary reason for the differences in infancy and preschool is related to different quantity and quality of language exposure at home. But why the gap increases as the children get older is less studied.

    “We might assume that it’s the same reason that the gap is large when they’re young: that their environment is different,” Maguire said. “Another possibility is that all of this time spent in low-income situations has led to differences in their ability to learn a word. If that’s the case, there’s a problem in the mechanism of learning, which is something we can fix.”

    The study, recently published in the Journal of Experimental Child Psychology, aimed to determine whether socioeconomic status is related to word learning in grade school and to what degree vocabulary, reading and working memory might mediate that relationship.

    For the study, 68 children ages 8 to 15 performed a task that required using the surrounding text to identify the meaning of an unknown word. One exercise included three sentences, each with a made-up word at the end — for example, “Mom piled the pillows on the thuv.”

    “You have to understand all of the language in each sentence leading up to the made-up word, remember it and decide systematically across all three sentences what the made-up word must mean,” Maguire said. “In this case, the three sentences all indicated ‘thuv’ meant ‘bed.’ This isn’t quite the same as real word learning, where we have to create a new concept, but this what we think kids — and adults — do as they initially learn a word.”

    Specifically, the study found that children of lower socioeconomic status are not as effective at using known vocabulary to build a robust picture or concept of the incoming language and use that to identify the meaning of an unknown word.

    Reading and working memory — also known to be problematic for children from low-income homes — were not found to be related.

    The study also provides potential strategies that may be effective for intervention. For children ages 8 to 15, schools may focus too much on reading and not enough on increasing vocabulary through oral methods, Maguire said.

    Maguire said parents and teachers can help children identify relationships between words in sentences, such as assigning a word like “bakery,” and having the child list as many related words as possible in one minute. Visualizing the sentences as they read also can help.

    “Instead of trying to fit more vocabulary in a child’s head, we might be able to work on their depth of knowledge of the individual words and linking known meanings together in a way that they can use to learn new information,” Maguire said.

    This study was funded by a three-year grant from the National Science Foundation, which was awarded in April 2016.

    Three co-authors of the paper are BBS doctoral students who work in Maguire’s Developmental Neurolinguistics Laboratory: Julie M. Schneider, Anna E. Middleton and Yvonne Ralph. Lab coordinator Michael Lopez and Dr. Robert Ackerman, an associate professor, also are co-authors, along with Dr. Alyson Abel, a recent Callier Center postdoctoral fellow who is an assistant professor at San Diego State University.


  3. Theory linking cognition, genes and income refuted

    November 29, 2017 by Ashley

    From the Northwestern University press release:

    Researchers have cast doubt on a widely-held belief that connects family income with cognitive development, according to a new study published in Proceedings of the National Academy of Sciences.

    A popular theory holds that genes play a larger role in brain development for children from advantaged environments than in those from poorer backgrounds, especially in the United States.

    But in the largest study to date using matched birth and school records, the researchers from Northwestern University, Stanford University and the University of Florida found family income won’t necessarily mitigate the effects of genetics on cognitive outcomes.

    While children from higher socio-economic status backgrounds have much better cognitive outcomes on average than those from lower socio-economic status households, genetics appear to matter just as much for both groups,” said Northwestern economist David Figlio, study lead author and dean of the School of Education and Social Policy. “Genes matter. Environment matters. But we find no evidence that the two interact.”

    Some studies suggest that the difference in genetic influence between rich and poor families is particularly pronounced in the U.S., but the Florida data, which includes records of siblings and twins, calls this idea into question, the researchers said.

    The finding mildly surprised Figlio, but he said it falls in line with his previous work published in American Economic Review, which indicated that heavier babies do better in school. In that study of Florida children, Figlio and his coauthors found that those who were heavier at birth scored higher on math and reading tests in the third to eighth grades, and that the relationship between birth weight and test scores is essentially the same for everybody.

    “It’s definitely still true that, from the point of view of test scores, you’d rather be a tiny baby from a wealthy family than a big baby from a poor family,” said Figlio, faculty fellow at Northwestern’s Institute for Policy Research. “But birth weight matters, and it matters for everyone. It seems the same effect is at play here.”

    A full understanding of how genes interact with the environment for cognition is more complex and elusive than previously supposed, the researchers said.

    “Being able to say that ‘genes’ matter more for this group versus that group is appealing partly for its simplicity,” said study co-author Jeremy Freese of Stanford. “We suspect the truth is more complicated: Some genes may matter more in richer families and other genes may matter in poorer families. There’s no overall characterization.”

    Freese emphasized that genetic differences do matter in cognitive development. “But we are still far from understanding how in any useful way,” he said. “Meanwhile, we know poor children face many social disadvantages, and there is much we can do to address those to help promote the flourishing of all children.”


  4. Study suggests workers may ‘choke’ under pressure of non-monetary incentives

    October 22, 2017 by Ashley

    From the University of Arkansas, Fayetteville press release:

    Competition for non-monetary awards can have adverse effects on performance and may cause employees to “choke” under pressure, according to a new study by a University of Arkansas economist.

    Raja Kali, professor of economics in the Sam M. Walton College of Business, and colleagues at HEC Montreal, a business school in Canada, examined the performance of elite U.S. golfers between 2006 and 2012 and found that players underperformed when trying to qualify for the U.S. Ryder Cup team, which does not compensate them for participating.

    The findings, published in the Journal of Economics & Management Strategy, challenge historical findings indicating that non-monetary incentives like plaques, rings and “employee-of-the-year” competitions motivate employees to perform better.

    “In terms of broader impact or relevance to the way firms do business, these findings are important, because managers and firms in general probably do not realize that some non-monetary efforts to build morale or boost performance may not be helping,” Kali said. “In fact, they may be counterproductive.”

    The researchers focused on performances of elite golfers in PGA of America tournaments that qualified them for the Ryder Cup, the competition between U.S. and European golfers. Being part of an elite group of golfers and the opportunity to represent one’s country were identified as primary incentives for participating in the Ryder Cup.

    The Ryder Cup qualifying point system allocates a number of points to each PGA Tour tournament. During the qualifying period, which is typically two years, two editions of the same PGA Tour have a different value of Ryder Cup points. One year — the year previous to the Ryder Cup — there are few points, and the next year — the year of the Ryder Cup — there are many points, while all other aspects of the tournament are the same.

    The researchers’ strategy was to compare the performance of players across the same tournament in two subsequent years. By focusing on blocks of the PGA Tour tournament with similar economic incentives (prize money) but different glory incentives (Ryder Cup points), they could measure the effect of the latter.

    “We found significant evidence that the desire to attain glory — which, in this case, we defined as the effects of status, social esteem and respect — was a burden for player performance,” Kali said. “Furthermore, the players who underperformed the most were those who were in more desperate need of Ryder Cup points.”

    The researchers wanted to understand and add to the literature on non-monetary incentives, which are widely used by firms and are generally assumed to have a positive impact on worker performance. The new study is the first to examine non-monetary incentives in a competitive, entrepreneurial setting.

    It is also the first study to find evidence of diminished performance or failure — popularly referred to as “choking,” especially in the context of sports — when explicitly competing for non-monetary incentives.

    Choking under pressure, rather than risk-taking or intimidation by superstars, seems to be the reason behind underperformance, especially when the competitive pressure intensifies,” Kali said.


  5. Study looks at how economic factors affect parenting styles

    October 10, 2017 by Ashley

    From the Yale University press release:

    Settling on a parenting style is challenging. Is it better to be strict or more lenient? Have helicopter parents found the right approach to guiding their children’s choices?

    A new study co-authored by Yale economist Fabrizio Zilibotti argues that parenting styles are shaped by economic factors that incentivize one strategy over others.

    Zilibotti and co-author Matthias Doepke, a professor of economics at Northwestern University, assert in a paper published in the journal Econometrica that economic conditions, especially inequality and return to education, have influenced child-rearing strategy.

    “All parents want their children to succeed, and we argue that the economic environment influences their methods of childrearing,” said Zilibotti, the Tuntex Professor of International and Development Economics at Yale. “For instance, greater occupational mobility and lower inequality today makes an authoritarian approach less effective than generations ago. It’s not that parents spare the rod because they are more concerned about their children’s wellbeing now than they were 100 years ago. Rather, parenting strategies adapted to the modern economy.”

    Zilibotti and Doepke assert that parents are driven by a combination of altruism — a desire for their children to succeed — and paternalism that leads them to try to influence their children’s choices, either by molding their children’s preferences or restricting them. These motivations manifest in three parenting styles: A permissive style that affords children the freedom to follow their inclinations and learn from their own experiences; an authoritative style in which parents try to mold their children’s preferences to induce choices consistent with the parents’ notions of achieving success; and an authoritarian style in which parents impose their will on their children and control their choices.

    “There is an element of common interest between parents and children — a drive for success — but there is tension where parents care more about their children’s wellbeing as adults,” Zilibotti said. “We postulate that socioeconomic conditions drive how much control or monitoring parents exercise on their children’s choices.”

    The researchers apply their model across time periods and between countries. Parenting became more permissive in the 1960s and 1970s when economic inequality reached historic lows in industrialized countries and parents could realize a return on letting children learn from their own experiences, they argue. Across countries, they document a link between parenting, on the one hand, and income inequality and return to education, on the other hand. Using the World Value Survey, where people are asked which attitudes or values they find most important in child rearing, they identify permissive parents with those emphasizing the values of imagination and independence in rearing children, whereas authoritarian and authoritative parents are those who insist on the importance of hard work and obedience, respectively. They show that parents in more unequal countries are less permissive. The same pattern emerges when they consider redistributive policies. In countries with more redistributive taxation, more social expenditure, and even stronger civil right protection, parents are significantly more permissive.

    The researchers assert that their theory can help explain the recent rise of “helicopter parenting,” a version of the authoritative style in which parents seek to influence their children’s choices with a combination of persuasion and intensive monitoring. They argue that the style gained purchase in the United States as economic inequality increased, inducing a shift to more intensive parenting to strengthen children’s drive for achievement and prevent them from risky behaviors. Meanwhile, they argue, more permissive parenting remains popular in Scandinavian countries, where inequality is lower than it is in the United States.


  6. Wealth disparity and family income impact the brain development of female youth

    August 22, 2017 by Ashley

    From the Baycrest Centre for Geriatric Care press release:

    Female teenagers living in neighbourhoods with wide salary gaps and a low-income household show changes to their brain maturation that could indicate a higher risk of developing mental illness in adulthood, suggests a recently published study by Canadian researchers.

    The research, led by Baycrest’s Rotman Research Institute (RRI), found that female adolescents in these living situations showed a greater thinning in the brain’s cortical thickness (a measurement of the brain’s maturation), which may reflect higher exposure to stress. These findings, which were recently published in the Nature journal, Scientific Reports, could help predict the risk of youth developing a mental illness and contributes to a growing body of evidence that living in poverty disturbs brain development.

    “Our research illustrates how the social environment can influence brain development and why tackling public issues, such as income inequality, should be a priority,” says Dr. Tomáš Paus, RRI senior scientist and the Anne and Max Tanenbaum Chair and Professor of Population Neuroscience at the University of Toronto. “Wealth disparity and low family income may generate additional social stress on kids and this extra pressure could be changing the way their brain structure evolves.”

    Previous studies have demonstrated links between wage gaps and a person’s physical and mental health, but this is the first study to explore its relationship with brain development.

    “During adolescence, the brain is vulnerable to developing psychiatric disorders as it undergoes changes related to puberty, the social environment and academic demands,” says Dr. Paus. “The brain may be particularly sensitive to the influence of income inequality at this time.”

    The research analyzed data from 804 adolescents (between the ages of 12 to 18) a part of the Saguenay Youth Study, a multi-generational survey measuring a variety of health indicators among parents and their children. Teenagers were split into different groups based on their sex, household income and income inequality in their neighbourhoods, which was made available through the Canadian Census. Software was used to analyze cortical thickness and compare it with the expression of stress and sex-hormone genes.

    Researchers will continue to explore whether this relationship exists in countries known to have high and low gaps in wealth distribution, such as Brazil and Finland. Thanks to recent funding from the Canadian Institutes of Health Research, the team will also follow up with youth from the Saguenay study after ten years to see if they went on to develop mental illnesses.


  7. Study suggests exercise incentives do little to spur gym-going

    August 16, 2017 by Ashley

    From the Case Western Reserve University press release:

    Even among people who had just joined a gym and expected to visit regularly, getting paid to exercise did little to make their commitment stick, according to a new study from Case Western Reserve University.

    The rewards also had no lasting effect: gym visits stabilized after the modest incentives ended.

    Despite timing incentives to when people were already more motivated to exercise, the approach proved ineffective in initiating a healthy behavior that continues to elude most Americans: only 21 percent get a recommended amount of weekly exercise, according to the Centers for Disease Control.

    “They wanted to exercise regularly, and yet their behavior did not match their intent, even with a reward,” said Mariana Carrera, an assistant professor of economics at the Weatherhead School of Management and co-author of the study. “People thought earning the incentive would be easy but were way overoptimistic about how often they’d go.”

    In the study, new gym members intended to visit three times per week but ended up averaging one weekly visit by the end of the six-week study.

    Nearly 95 percent said they expected to visit the gym more than once per week. But by the end of the third month, only about a third had.

    The experiment

    For visiting the gym nine total times during the study (an average of 1.5 times per week), participants were promised one of three modest rewards: a $30 Amazon gift card; a prize item, such as a blender, of equivalent value; or a $60 Amazon gift card. A control group received a $30 Amazon gift card regardless of how often they visited. (The value of incentives was based on what gyms were likely to offer.)

    After the first week, 14 percent did not visit the gym again.

    Incentivized participants showed a slight increase in gym visits in the sixth week — their last chance to make enough visits to earn their prize. But overall, those given incentives made only 0.14 more visits per week than those promised no reward at all.

    Focusing on people when they’re ready to make a change may be misguided,” said Carrera. “Maybe the internal motivation that gets a person to start a gym membership is unrelated to what drives them to earn financial incentives. What’s clear was there was no complementarity in lumping these two motivations together.”

    The group promised the $60 gift card also did not visit the gym more often than those given the $30 gift card or prize.

    Researchers thought that selecting the prize item at the outset might create a sense of ownership and prove to be a more powerful motivator, because failing to hit the target visit rate might feel like a loss. However, while the item induced slightly more visits, the difference was insignificant.


  8. Study suggests inattention, poor memories shape inflation expectations

    August 15, 2017 by Ashley

    From the Massachusetts Institute of Technology press release:

    Do you know your country’s current inflation rate? What do you think it will be in the future? And how do you, personally, try to plan your finances accordingly?

    Those are important questions for economists and policymakers, because central bankers generally assess future expectations of inflation when setting interest rates. Yet as a new study co-authored by an MIT economist reveals, people have a haphazard approach to assessing inflation. Most citizens only pay attention to the topic intermittently, and they overestimate how bad inflation will become.

    Still, there is some good news in these findings, based on research in the U.S. and Argentina, countries that have very different experiences with inflation. Many people are “rationally inattentive” to inflation, as economists put it. That means an occasional focus on the subject may actually help people avoid overreactions to price blips.

    “There’s evidence of rational inattention,” says Alberto Cavallo, the Douglas Drane Associate Professor in Information Technology and Management at the MIT Sloan School of Management, and a co-author of the study. “People are paying attention when they need to.”

    And now for the bad news.

    People have terrible memories,” Cavallo says. “Even in a place like Argentina, which has so much inflation, where this is so important to correctly estimate, people have no clue what past prices were. They tended to think past prices were much lower than they were, so they thought inflation was much higher than it is.” Overall, Cavallo adds, “There is often an upward bias in inflation expectations.”

    The paper, “Inflation Expectations, Learning, and Supermarket Prices,” appears in the newest issue of the American Economic Journal: Macroeconomics. In addition to Cavallo, the authors are Guillermo Cruces of the National University of La Plata, in Argentina, and Ricardo Perez-Truglia of the University of California at Los Angeles.

    Statistics vs. store prices

    The study derives its findings from a series of online and offline surveys in both the U.S. and Argentina — in some cases conducted right after people have gone shopping in supermarkets.

    The two countries were chosen as sites for the study precisely because of their contrasting inflation histories. The U.S. inflation rate was 1.8 percent over the five years before the study, while in Argentina the inflation rate was 22.5 percent. That helped the scholars to examine what effect the experience of high or low inflation may have.

    The study produced multiple results. The researchers found that people in Argentina do tend to have absorbed more information about inflation than people in the U.S. — and as a consequence, they have more firmly entrenched ideas about the subject. For instance, respondents in the survey placed quite different amounts of emphasis on how much that new information would affect their views.

    In the U.S., people assigned a weight of just 15 percent to prior beliefs when it came to making assessments about future inflation; in Argentina, people assigned a weight of about 50 percent to their prior beliefs.

    “I think there’s good evidence in the paper that countries with higher inflation rates historically have people paying more attention, and thus stronger priors,” Cavallo says.

    That also fits with the notion on “rational inattention,” since in the U.S., where inflation rates are lower and more stable, people can afford to have accumulated less information about the subject in the past.

    “In the U.S., if inflation is 2 or 3 percent, it won’t change dramatically, and you are not affected too much,” Cavallo explains. “In Argentina, knowing what the inflation rate will be in the future is key for your salary. If it’s going to be 30 percent or 15 percent, that question becomes much more important.”

    It is also the case that people pay more attention to select prices they personally encounter, not to aggregate inflation statistics, even if the larger data sets may be a better guide to overall prices. Based on a series of questions to consumers, the researchers found that people are willing to give specific supermarket prices more weight in their inflation expectations, compared to the aggregate (but more abstract) data.

    “Within each country, we found people react more to the information of individual products,” Cavallo notes.

    Additionally, the study found, in the U.S., 29 percent of the variation in inflation expectations is due to perceptions of past inflation, whereas in Argentina, 60 percent of the variation in expectations stems from perceptions. Meaning: People’s memories of past inflation vary widely.

    As Cavallo observes, this could be a defense mechanism deployed by some people, since expectations tend to overshoot actual inflation increases.

    “In a country like Argentina with high inflation, it’s better to have an upward bias,” he says. “It’s a protective mechanism to think things are going to be worse than they actually are.”

    Great expectations

    The current paper is related to an extended series of studies Cavallo and his colleagues have undertaken on inflation. Cavallo and MIT Sloan economist Roberto Rigobon are co-founders of the MIT-based Billion Prices Project, an innovative program launched several years ago that tracks prices in real time, partly as a way of evaluating the accuracy of official inflation statistics.

    The current papers bears on the practices of monetary policy — the interest rates set by central banks. The so-called “real” interest rate consumers grapple with is a combination of the listed interest rates of lenders as well as inflation expectations.

    If people expect inflation to be higher than interest rates, they will — in theory, at least — be more likely to buy products now, averting future inflation, rather than depositing money at low rates. In turn, that behavior could have significant macroeconomic effects.

    Cavallo thinks the current study can help clarify for policymakers how people sort through information and shape their expectations in the first place.

    “One policy implication is that governments can provide [people] either better aggregate statistics or better individual examples,” Cavallo says. “I think they should … make sure they communicate clearly to consumers [and] speak about goods that are important. We’re basically seeing how much people learn from the information we give them.”


  9. Academic motivation suffers when economic mobility seems out of reach

    July 29, 2017 by Ashley

    From the Northwestern University press release:

    New studies from Northwestern University show that high school and college students from low socioeconomic status (SES) backgrounds are much less motivated to overcome academic hardships when they have doubts about the likelihood of people from their backgrounds achieving upward mobility.

    The new studies extend previous research demonstrating that low-SES students who see education as a viable path to upward mobility are more inclined to succeed in their educational pursuits despite the numerous academic barriers facing students from disadvantaged backgrounds.

    “Prior research has shown that students from low-SES backgrounds are motivated to persist during difficult academic experiences when they feel school can concretely contribute to future socioeconomic success,” said Alexander Browman, lead author of the studies and a recent Ph.D. graduate in psychology from the Weinberg College of Arts and Sciences at Northwestern. “Our new studies extend this work by showing that this motivational pathway can be affected by whether or not they feel that that goal of achieving socioeconomic mobility is ultimately possible in the society in which they live.”

    In three studies, the researchers either measured students’ beliefs about how attainable mobility was in their society or presented them with information that suggested that mobility was more or less likely to occur in their society. They found that students from lower-SES backgrounds who had or were led to hold doubts about the likelihood of mobility were less inclined to persist when they faced academic difficulty.

    The authors highlight that these findings suggest new potential intervention strategies for motivating students to persist when they experience difficulty at school.

    At the same time, they emphasize that their results do not imply that low-SES students who underperform do so simply because they hold misguided beliefs about mobility that can be casually corrected.

    “The belief among some low-SES youth and young adults that mobility is unrealistic in their society is likely deep-seated, resulting from a lifetime of concrete experiences that cast doubt upon the plausibility that people from their background can experience mobility in that society,” Browman said. “What this implies is that in order to promote meaningful sustained academic effort, researchers, educators and policymakers should consider what sorts of systemic changes to the educational environment might provide these students with concrete routes to mobility that are viable for students from their backgrounds.”


  10. Study suggests faces can reveal economic status

    July 27, 2017 by Ashley

    From the University of Toronto press release:

    Put on a happy face, your success may depend on it, suggests a study by psychology researchers at the University of Toronto’s Faculty of Arts and Science.

    In a new twist on first impressions, the study found people can reliably tell if someone is richer or poorer than average just by looking at a “neutral” face, without any expression.

    People also use those impressions in biased ways, such as judging the rich faces more likely than the poor ones to be hired for a job, says the paper by Associate Professor Nicholas Rule and PhD candidate Thora Bjornsdottir in the Journal of Personality and Social Psychology.

    “It indicates that something as subtle as the signals in your face about your social class can actually then perpetuate it,” says Bjornsdottir. “Those first impressions can become a sort of self-fulfilling prophesy. It’s going to influence your interactions, and the opportunities you have.”

    Just as interestingly, the researchers found the ability to read a person’s social class only applies to their neutral face and not when people are smiling or expressing emotions.

    Their conclusion is that emotions mask life-long habits of expression that become etched on a person’s face even by their late teens or early adulthood, such as frequent happiness, which is stereotypically associated with being wealthy and satisfied.

    “Over time, your face comes to permanently reflect and reveal your experiences,” says Rule. “Even when we think we’re not expressing something, relics of those emotions are still there.”

    Using an annual median family income of about $75,000 as a benchmark, the researchers grouped student volunteers into those with total family incomes under $60,000 or above $100,000 and then had them pose for photos with neutral faces devoid of expression.

    They then asked a separate group of participants to look at the photos and, using nothing but their gut instinct, decide which ones were “rich or poor” just by looking at the faces. They were able to determine which student belonged to the rich or poor group with about 53 per cent accuracy, a level that exceeds random chance.

    “What we’re seeing is students who are just 18-22 years old have already accumulated enough life experience that it has visibly changed and shaped their face to the point you can tell what their socio-economic standing or social class is,” says Rule.

    The results were not affected by the race or gender of the face, or how much time people were given to study them. All of which is consistent with what is known about nonverbal behaviour.

    “There are neurons in the brain that specialize in facial recognition. The face is the first thing you notice when you look at somebody,” says Rule.

    “We see faces in clouds, we see faces in toast. We are sort of hardwired to look for face-like stimuli. And this is something people pick up very quickly. And they are consistent, which is what makes it statistically significant.”

    “People are not really aware of what cues they are using when they make these judgments,” says Bjornsdottir. “If you ask them why, they don’t know. They are not aware of how they are doing this.”

    The study of social classes as an undercurrent in psychology and behaviour is getting more recognition, says Rule. And with 43 muscles concentrated in a relatively small area, facial cues are one of the most intriguing areas in this field.

    “People talk about the cycle of poverty, and this is potentially one contributor to that,” says Rule.

    He says the next step might be to study older age groups to see if the patterns of facial cues become even more apparent to people over time.