In those days where some people already call for Chinese-style control of personal activity to stop the spread of the coronavirus, I am happy to report that Alisa Frik and I finally managed to publish our paper about the value of privacy.
Frik, A. and Gaudeul, A. (2020), “A measure of the implicit value of privacy under risk”, Journal of Consumer Marketing, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JCM-06-2019-3286
In that paper, also available here, we argue that the economic value of privacy must be measured in its proper context, that is, when there is a *risk* to privacy.
We argue that letting people choose between some money and playing lotteries with their private information is more informative and relevant than asking them to “buy” or “sell” their private information. Below is the type of decisions people made.
From people’s decisions, we derive estimates of how much they value privacy that are more reasonable and reliable than standard “Willingness to Pay” (WTP) and “Willingness to Accept” (WTA). Furthermore, our estimates are more directly useful for economists than attitudes to privacy derived from surveys.
The private information we got from people were answers to a survey on attitudes to a range of policy issues. If people lost the privacy lottery, then their answers were revealed to others. Not a big deal, but reviewers gave us a hard time… publishing privacy research is hell!
In our case, we show that knowing that you are already exposed to a privacy risk does not lead you to value privacy less. People do not lose interest in protecting their remaining privacy risk. Loss of control does not lead to abdication, unlike suggested by some.
This later finding is a “null” result, but it is an important one, and it would be great if it was replicated. If so, it would explain why people do not give up trying to maintain a private sphere even under constant State intrusion into their private lives.
We had a great last lecture by Stephan Klasen, the driving force behind the establishment of development economics as the main topic in the department of economics in Gottingen.
A very strong team of development economists has developed around him. It would take several pages to list all connected members but there is for example the Research Centre “Poverty, Equity and Growth in Developing Countries”, the Research Training Group “Globalization and Development” (GLAD), various chairs established at his instigation over the years, including the Chair of Behavioral Development Economics (Marcela Ibañez), at which I work, and people like Inmaculada Martínez-Zarzoso, Holger Strulik, Krisztina Kis-Katos, Sebastian Vollmer, etc, etc, etc, etc… This is not to mention all his international contacts and the various people he collaborates with outside Göttingen. This reminds me a bit of how Jean-Jacques Laffont and Jean Tirole established industrial organization at the University of Toulouse.
Sadly enough, his forces have been declining over several years due to a degenerative disease, and he has now to retire, way prematurely (he is only in his 50s!). Again, this is similar to how Jean-Jacques Laffont prematurely died of a cancer.
I really hope that his work and achievements will be maintained and even grown by the current and future team of development economists in Gottingen.
There were many hommages to his work and personality, including two funny presentations, one by Isabel Günther, about the 7 main lessons of working with Klasen (including, you just can’t compete with Klasen :)), and then another one by young researchers here, a pastiche of a development economic paper based on a survey of people related to him, grading econometrically how increasing closeness to Klasen affected his colleagues.
As for me, the main thing that impressed me from the testimony of others were his ability to be constructive, generous and not too critical in his relations with others, and also how he chose research areas in which he had faith and that were important. I will strive to get inspiration from this.
The year started with a one-month research stay in March in Grenoble, where I worked with Paolo Crosetto at the GAEL, an INRA laboratory. We analyzed data from a recent experiment of ours about the dynamics of the attraction effect. I also took the opportunity to visit the GATE-CNRS laboratory at the University of Lyon, where I met Marie-Claire Villeval, and the GREDEG-CNRS laboratory at the Université of Nice Sophia Antipolis, where Dominique Torre invited me. I also taught a seminar on writing in the sciences, which was attended by PhD students at GAEL.
Shortly after my return, I started a new project with Ann-Kathryn Blankenberg and Paolo Crosetto about the impact of licensing terms on group work in innovative projects. For this, we let experimental participants play the Scrabble game under different licensing conditions. We were exceptionally fast in designing and running the experiment, which we did in October during a further one-week visit to Grenoble.
In between all this we had a seminar visit by Robert Sugden in May, who presented his new book on The Community of Advantage, and why unstable and context-dependent preferences do not justify paternalistic interventions.
I managed to switch in July from the chair of microeconomics, chaired by Claudia Keser, to the chair of behavioral development economics, chaired by Marcela Ibanez Diaz. This was a very welcome switch from a personal and professional point of view. Development economics at the University of Göttingen is very dynamic, and I really admire the courage and resourcefulness of those PhD students and professors who do field research in developing countries.
At the same time, I was writing the introduction to my habilitation, which I submitted in July to the faculty of economics at the University of Jena. The written part was accepted in December, and I did my the oral examination this January. The topic of the presentation was how to foster trust in experts, a presentation I did in German, but for which there is also an English version. My habilitation was approved so I am now habilitated, which will help in finding professorships.
Vacations in July were very welcome, which I spent in Paris with a friend, the Ile de Ré, where my father resides, and Bagnères de Luchon in the Pyrénées, from which I hiked in the surrounding mountains.
At the end of the year, I went to the 2018 North American ESA conference in Antigua, Guatemala, where I participated in the workshop on the analysis of choice process data. This was my first trip to Central America, and this was very enjoyable and interesting. I was impressed by the intensity of the rain and by the volcanoes that surround the city.
I also wrote a research bid with Katharina Gangl, an economic psychologist at the Georg-Elias-Müller-Institut für Psychologie in Göttingen, with whom I work on the psychological impact of online feedback for service providers.
I finally took some vacation at the end of the year, doing a Sesshin (intensive meditation retreat) with my Zen group in Göttingen (https://www.lebendiges-zen.de/zendo-goettingen/). That was really quite tough, but a good alternative to the usual Christmas/New Year celebrations!
Together with Professor Claudia Keser, we report experimental results on the differences between the social preferences of democratic leaders and those of leaders who are chosen at random or meritocratically.
We contribute to the debate about the best forms of government by showing the positive impact of using a democratic procedure to select decision makers. We compare democratic leaders with leaders who are chosen based only on their qualification for the role. We find that democratic leaders in our experiment are more concerned about efficiency and the welfare of others.
This research is very relevant nowadays because, unlike predicted by Francis Fukuyama, democracy appears to be on the retreat globally. Indeed, Ian Morris, in a short article for the IAST, predicts the end of democracy.
We think that it is therefore interesting to point out some behavioral consequences of the use of different types of leader selection procedures. Not all leaders are alike, and democratic leaders are particularly concerned about balancing efficiency and the welfare of others. Whether that is good or bad depends on whether we think that it is important to consider both of those aspects when making policy decisions…
Some interesting recent articles to put this research in context include:
After many years with no real vacations, I was reminded of that possibility by the human resource department at the University of Göttingen, and I therefore took a 3-week vacation to go to the Pays Basque (French Basque Country).
I spent the first 10 days in Bayonne, where my grandfather grew up alongside his brother who became a local politician. I kept busy trying to follow attractions in and around Bayonne, and still, there were a lot of things I did not have time to do. The area is very well networked with bus lines and there are bikes to borrow for free from the Tourism Office.
There are many events going on the whole summer, like open air markets, choir singing and sport events. There are also many things to visit, like the Musée Basque in Bayonne, the Izadia Nature Park in Anglet, the beach in Biarritz, and the Arènes in Bayonne, where corridas take place.
I also used that time to prepare the next 10 days, which I spent hiking in the Pyrénées. I used to do this often during my PhD in Toulouse but I gave my previous hiking equipment away. I therefore had to get a lot of equipment anew, including a rucksack, a canteen, a camping stove, a compass, and a duffel bag.
Before leaving for 10 days out in the mountains, I did a little training walk from Bayonne to the Croix de Mouguerre, which commemorates the campaign of Soult against the invading troops of Wellington at the end of Napoléon’s empire in 1813-1814. This was a place my grandfather spoke about. He was a retired general when I knew him, doing archaeological digs into protohistorical defensive enclosures. He also researched the military history of the region, in particular the famous battle of Saint Pierre d’Irube, close to where he lived.
After final adjustments following this training walk, I took the train to Bidarray and started the GR10, which is a hiking path all though the Pyrénées from the Atlantic to the Mediterranean. This was the middle of the day, hard work going up, indeed I stopped every hour for rest. This was very slow, I was definitely not at the top of my form! In the evening, I found a nice place close to a spring, next to the pass of Harrieta, where I slept in a small recess in a cliff.
In the morning, you could not see more than 10 meters ahead due to the fog, but the way was very well marked. I reached Saint-Etienne-de-Baïgorry in the evening, for a day of rest. On that day, I was lucky because a festival of Basque rural sports (Force Basque) was organized, which was very entertaining.
The next day, I made my way towards St Jean Pied de Port, a relatively easy portion of the GR10. I slept under a cross in an open field above the city, which I then reached in the morning. I spent the day visiting the city and resting by the river, before making my way up on the way to the Harpéa, a cave that is also still used for herding.
I stopped on my way to sleep again under the stars on top of a hill, the wind was really strong during the night. I then made my way up to the sources of the Nive, a river that ends up in Bayonne. I spent the afternoon there, meeting a nice and interesting German lady, whom I redirected to some other better trails where to enjoy the surrounding mountains at her level of experience.
I then went way up to the Harpéa, in which I had to take refuge during the night because of rain and thunder. Those were of really quite high intensity the whole night, indeed, people asked me the following days how it was up there that night because they also heard it and felt it down in the valleys. Funnily, a few pigs took refuge there also during the night, waking me up frightened. I hung my hammock to a barrier leading to the grotto in order to avoid sleeping on the floor at their level! I have my standards! :-)
In the morning, again very dense fog, but easy way following the road to the plateau of Azpegi. Early human inhabitants buried their dead in dolmens there (neolithic era), and later left their ashes in cromlechs. Those are still visible there, but really difficult to find when, as on that day, fog is impenetrable.
I reached an unattended refuge at Azpegui, which had a very good spring, which I used to wash much of my equipment. Weather was now sunny which allowed me to also dry it. At the refuge came a Spanish family from Saint James of Compostella, up there with their car, who took their dinner there and generously shared their cheese, bread and chorizo with me.
In the evening, since the refuge had a fireplace, I decided to made a nice fire, but it turned out the fireplace did not draw well at all, and the whole refuge became very smoky! I had to open the door and the windows to get rid of that. The night was disturbed by a car travelling couple, who, despite the refuge being forbidden for car tourists, spent their night there. They certainly were not fit for it, and could not sleep well on the floor, waking me up several times with their noise as they constantly tried to find a comfortable position. I hope they will have learned a lesson from this bad night :-\ As for me, after a few nights outside, sleeping rough on the hard floor was not an issue. ;-)
In the next day, I went back down in France, in the opposite direction to the pilgrims of Saint James, who were going up in droves from Saint Jean Pied de Port, exhausted from what was for many of them the first stage on their walk. I let the bulk of them pass by, watching them go by at the pass of Ronceveaux, before then making my way down.
I made my own pilgrimage 20 years ago, so it was fun for me to make some part of the way in the opposite direction 20 years later. I had not had the opportunity to do so, because I did not use the Camino Frances to go back, I rather used the Camino del Norte along the coast, and then the Camino Aragonés to cross the border to France at the col du Somport.
Finally, after a too long day of walk, I arrived to the nice Gite Azkorria in St Jean Pied de Port, where the breakfast bread was really good. I spent two days there resting a bit, enjoying the city, going to watch pelotaris (players of Basque pelota), and getting some fresh food, fresh news and fresh books.
New paper out at the Journal of Economic Psychology. Our topic is barriers to exit from collaborative work. This is research done with Paolo Crosetto and Gerhard Riener. We conclude that higher barriers are better.
Trump would approve!
Gaudeul, A., Crosetto, P., & Riener, G. (2017). Better stuck together or free to go? Of the stability of cooperation when individuals have outside options. Journal of Economic Psychology, 59, 99–112. https://doi.org/10.1016/j.joep.2017.01.005
More seriously, the issue is whether people should be free to leave a joint project as they please, or if there should be costs in doing so.
The answer is that it is better to be in an environment that discourages exit. This is because people underestimate the benefits of collaboration. They are too pessimistic about the likelihood that other people in the project will stay.
They leave because they expect others to leave!
Our experiment is particularly interesting because outcome of the project is stochastic. There is no guarantee that a given effort will output a given return. That makes it particularly difficult to track the level of effort exerted by others. This is relevant for a wide range of collaborative projects, where many external factors can influence the outcome. You then cannot know why the success failed.
Perfect environment for people with a paranoid personality disorder!
I should say that this topic is under-researched and there are good opportunities to further this work. One could look at a stochastic prisonners’ dilemma, like in Compte & Postlewaite (2015)¹, and add the option to exit. This would allow to test their model of “plausible cooperation” in stochastic environments.
All this to say, there is work to do, everybody welcome!
Gaudeul, A. and M.C. Kaczmarek (2016): “Many a slip between the cup and the lip”: The effect of default-based nudges on prosocial behavior and attitudes, CEGE Discussion Paper, No. 297, https://ideas.repec.org/p/zbw/cegedp/297.html
We investigate the merits of nudging as an approach to promote public welfare. Our paper presents the results of a controlled experiment on 988 participants. This experiment was not designed to evaluate the effectiveness of a nudge in terms of influencing people’s short-term decisions (this has been done ad nauseam). Rather, we examine whether the act of yielding to or opposing a nudge affected people’s subsequent attitudes and actual behavior in a charity-giving context.
By revealing the longer term impact of a default-based nudge, we reveal possible issues with the acceptance and effectiveness of paternalistic interventions in terms of their longer-term effect on people’s attitudes and behavior. This is a new area of research but we mention in our introduction a few existing publications on the topic.
Multicollinearity is the issue when explanatory variables in a regression are not independent of one another. When I was taught applied econometrics, I was told that I should not worry about multi-collinearity because the problem is very rare, and if it was the result of a misspecification, then my software would warn me about it.
However, it seems that my teachers were too optimistic and that it is still worth it to warn people about the problem and teach them how to identify it. Indeed, no one seems to have noticed the issue in a paper by Ingrid Rohde and Kirsten Rohde, which was published this year in the Journal of Risk and Uncertainty:
The authors look at a problem that I am also working on, namely how people react to social risks. Social risks are risks that affect me and another person at the same time but possibly in different ways. One issue that I find interesting is that risks that lead to ex-post equality are particularly risky at the social level, while risks that lead to ex-post inequality are less so. If people dislike ex-post inequality, then they have to accept higher levels of collective risk. But do people care about collective risk? That is the question I investigate in my working paper:
Gaudeul, Alexia, (2016), Social preferences under risk: Minimizing collective risk vs. reducing ex-post inequality, CEGE Discussion Papers No 283, University of Göttingen, Department of Economics, http://EconPapers.repec.org/RePEc:zbw:cegedp:283.
I can illustrate the negative relation between those two aspects of risk in the following graph, where my payoffs are in red and the payoffs of the other person are in blue. There are two possible futures depending on a random event. One future and its resulting payoffs is on top, the other future is on the bottom. This first graph shows a situation with a high level of collective risk where payoffs are equal ex-post.
The second graph below shows a safe social situation (overall wealth does not vary) where the distribution of payoffs changes depending on the random event. Note that the risk for me (blue) is the same in both graphs.
What Rohde and Rohde tried to do is to look at the choices of people between social lotteries, index lotteries by their level of collective risk and ex-post inequality, and determine what drives the choice of people. The issue is that collective risk and ex-post inequality are mathematically related, so the regressions in Rohde and Rohde suffer from multicollinearity.
To illustrate, if I take the authors’ indexes of collective risk and ex-post inequality and other indexes of the properties of their lotteries (table 2), I find that
ex post inequality= -0.1*collective risk-0.1*ex-ante inequality+1.1*individual risk
with a R² of 97%.
When I checked the authors’ regressions with their data, which they sent me, I found that the variance inflation factor (VIF) in their main regression (Table 6) was 11.45, which is really very high.
Other indications that something was wrong was the change in the sign of the parameter on ex-post inequality in their regressions depending on the specification (table 6, γpost=0.680, then -0.295, then -0.093) and the authors’ inability to distinguish between their hypotheses in a non-parametric way (page 117).
Finally, and most significantly in my opinion, the authors’ conclusion on page 119, which is that people like ex-post inequality and higher social risk, flies in the face of common sense — and worse yet, contradicts my findings ☺ I think I would have missed the econometric issues with their paper if the authors’ conclusion had been less preposterous.
In my own paper on the topic, I look at the same issue but rather than vainly trying to distinguish those two aspects of social risk econometrically, I underline ex-post inequality in one condition, and I underline collective risk in the other, by changing the visual representation of payoffs. In the graphs below, I show the same social lottery, but in the first case payoffs are shown side-by-side, so the focus is on ex-post inequality, while in the second case payoffs are shown added-up, so the focus is on collective risk.
Differences in choices across subjects who were presented either one or the other representations allowed me to conclude that people care most about ex-post inequality and only very little about social risk. Beyond those results, I also found that only a minority of subjects do consider the risk carried by the other subject in their decision. However, preferences of that minority are sufficiently one-sided to have a significant overall effect against ex-post inequality in outcomes.