Luigi Zingales: evaluation

Transcript context

…I’m also struck by some of your work on behavioral economics. I like very much the paper where you take some investors, and instead of showing them Visconti’s The Leopard, you show them a horror movie and you see what happens to the risk premium. There’s another paper I want to ask you about. It’s about impatience and procrastination. It’s often the case the same people who are very impatient and procrastinate — and you give the example of people who were very impatient to get a check — they’ll even settle for a much smaller sum of money to get the check now. Then they get the check, and they don’t cash it or spend it or do anything with it. They get it, and then they procrastinate. What’s the underlying view or model of human behavior that causes impatience and procrastination to go together? Oh, you’re setting me for a very low standard. I don’t think I have a model that includes everything. This is part of a larger experiment, which to some extent is still undergoing. With a colleague at Northwestern, we study an entire cohort of MBA students at Chicago, 550 people. Many experiments that are done around the world are done with undergrads. Most of them are the poorest undergrads, because they’re the ones that desperately need money, so generally art majors, not really representative of businesspeople. A lot of people in economics dismiss some of these results because they say, “Oh, these are the weird guys. They’re not the ones that will run big corporations, blah‑blah‑blah.” We started with a sample that, hopefully, will run big corporations and statistically has run big corporations. What we find in many of the deviations that behavioral economics find are present in our sample. The particular experiment that Tyler is talking about is at the end of a bunch of games that won an amount of money that was going from $0 to $300 — some people were winning a significant amount of money, $300. We offer them to delay the delivery by two weeks with value interest rate in some cases at 10 percent over two weeks. 10 percent over two weeks, over $300, is both percentage‑wise huge but even $30 is not trivial, at least for me. It may be for my students, it’s more important. These guys really give up receiving $30 over two weeks to get the check in the mail that day. However, this is not the only clever thing we’ve done in that particular study — we follow when they cash that check. On average it was two weeks, but 10 percent never cash it. They lost it. [laughter] They are so eager to get the stuff. I think if I had to give a sense, it’s the salience of this. Honestly, these people, everybody should have accepted delayed payment because we checked, 90 percent of them were not maxed out on their credit cards. What it means receiving a gift in cash, a check — it’s not even a gift in cash — today over two weeks. Once you know you’ll receive it, we think we were fairly credible as a faculty promising. I think the credibility issue was not major. If you know you won $300, you can go spend it today on your credit card and get the check two weeks from now. The fact that you want to have it now, I think is an interesting aspect about saliency. The fact that once you have it you relax and you forget to cash it is, I think, really interesting by itself. Speaking of procrastination and impatience, what’s your view on the future of the European Union? It seems to me it cannot fully integrate, because unlike with North and South Italy, there you actually have a fully integrated electorate. Right? You have a single set of elections where you choose a national leader, and everyone more or less accepts it. It’s really hard for me to see that for Europe. I suppose my expectation will be that the ties become weaker and weaker, Schengen falls away, there’s not a fiscal union. The euro becomes a bit more like a currency board. National central banks keep certain kinds of liabilities. What’s your prediction for 20 years from now? European integration: more of it, less of it? What’s the underlying model?…

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