Lisa Donchak's blog

Pirates are awesome. Economics: also awesome. The combination?

A recent report uses data from 1500 Somalian pirates to look at the future of international piracy. The conclusion? Incidents of piracy are on the rise.

Today, at WFS2011, I joined members of the Weiner, Edrich, & Brown team on a panel about Youth Trends. I identified three trends related to the internet and social media: Real Names, Reputation, and Regulation. The internet is no longer in its "Wild West" stage of growth; these three themes all fall under the umbrella of increasing accountability.

Have you ever been overwhelmed by a restaurant menu with far too many options? The Cheesecake Factory is notorious for this — they hand out a Bible-sized booklet of different dishes you can choose from. Most of us feel a little lost examining these menu treatises. How can we possibly decide on what to eat when there are so many options?

There's a faction of behavioral economists who think that too much choice is a bad thing; we, as humans, don't know how to optimize our choices when presented with more than six or seven options. Are they right?

About three months ago, I embarked on a less-than-epic, although very entertaining, quest to confirm or deny the famous Six Degrees of Separation experiment, originally conducted by Stanley Milgrim. My goal was to send out letters, as in the original experiment, and have those recipients do their best to get those letters to a named someone in Boston. Each link in the chain would write down their name on the letter, and, by the end, we’d have a list of how many people the letter went through to get to that final person.

Well, it’s time to report out on that experiment. Get ready to have your mind blown.

Not one letter made it to my contact in Boston.

Why did this happen?

One of my favorite parts about the tech revolution is the sheer amount of data that we, as end users, generate. I’m thrilled when companies or organizations use data, voluntarily offered by their users, to write impromptu market research reports. It’s even more exciting when market research isn’t their core competency.

Politicians are locked in an epic battle of economic ideas. If they can’t come to a consensus on the fiscal budget, the government faces a shutdown of indeterminate length.

These budget negotiations are not a game. Or are they? Regardless, game theorists will attempt to analyze them.

Last week , I attended a Less Wrong meetup. For those who don’t know what Less Wrong is, they define themselves as a “community blog dedicated to refining the art of human rationality.”

According to the invitation, attendees were required to “Come prepared to reveal something you’re consistently irrational about.” Initially, I wasn’t hooked. However, like a song that you can’t get out of your head, my mind kept coming back to the topic .

Last week, my roommate bought a Kindle. Since then, he hasn’t stopped talking about it. Mainly, he’s wanted to get me to borrow it to read Henry Hazlitt‘s book Economics in One Lesson. The book, published in 1946, is an introduction to free market economics, and is a seminal text on economic principles. Tax season being upon us, I filed my taxes last night. Afterwards, I started reading Hazlitt’s book. His “one lesson” seemed pointedly relevant to this time of year.

In spite of, or perhaps because of, Matthew Broderick thinking that yelling “Learn!” at a computer will actually make it do so, WarGames is a pretty fantastic movie. Released in 1983, the science-fiction film tells the story of David Lightman, a computer hacker played by Broderick, who accidentally finds his way into a military supercomputer programmed to predict outcomes of nuclear war. Lightman gets the computer to run a nuclear war simulation, which causes an international nuclear missile scare and almost single-handedly starts World War III.

Behavioral economics as we know it today is not behavioral economics as it will be in five, ten, or fifty years. Right now, the field of behavioral economics is basically acting as a wake-up call to economics. Behavioral economics is saying, “Hey, traditional economics: we humans aren’t as smart as you give us credit for. People aren’t 100% rational. Let’s figure out how and why, and if we can some predictable, systematic way of modeling that irrationality, so much the better.