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Economics Nobel to Thaler:

Fairness, Rationality, Self-Control

By Shlomo Maital

   Univ. of Chicago Professor Richard Thaler has won the 2017 Nobel Prize for Economics. Thaler is a behavioral economist, and has according to the Nobel committee “incorporated psychologically realistic assumptions into analyses of economic decision-making. He has shown how the following three traits affect individual decision-making, as well as market outcomes:

   Limited rationality: Thaler developed the theory of mental accounting, explaining how people simplify financial decision-making by creating separate accounts in their minds, focusing on the narrow impact of each individual decision rather than its overall effect. He also showed how aversion to losses can explain why people value the same item more highly when they own it than when they don’t, a phenomenon called the endowment effect. Thaler was one of the founders of the field of behavioural finance, which studies how cognitive limitations influence financial markets.

   Social preferences: Thaler’s theoretical and experimental research on fairness has been influential. He showed how consumers’ fairness concerns may stop firms from raising prices in periods of high demand, but not in times of rising costs. Thaler and his colleagues devised the dictator game, an experimental tool that has been used in numerous studies to measure attitudes to fairness in different groups of people around the world.

   Lack of self-control: Thaler has also shed new light on the old observation that New Year’s resolutions can be hard to keep. He showed how to analyse self-control problems using a planner-doer model, which is similar to the frameworks psychologists and neuroscientists now use to describe the internal tension between long-term planning and short-term doing. Succumbing to shortterm temptation is an important reason why our plans to save for old age, or make healthier lifestyle choices, often fail. In his applied work, Thaler demonstrated how nudging – a term he coined – may help people exercise better self-control when saving for a pension, as well in other contexts.”

Thaler’s book on Nudge (designing behavioral ways to nudge behavior and decisions in a desired direction) has been put into practice, especially in Britain, where a unique Nudge team was assembled to advise the British treasury.

 

 

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Nobel for Physiology: How We Rise and Shine!

 By Shlomo Maital

 

     The Nobel Prize season is upon us! The first prize, for physiology or medicine, was awarded to three researchers who discovered how living things tell the difference between night and day (the 24-hour body clock):

     According to the Nobel committee’s citation, Jeffrey C Hall, Michael Rosbash and Michael W Young were recognised for their discoveries explaining “how plants, animals and humans adapt their biological rhythm so that it is synchronised with the Earth’s revolutions.”   The team identified a gene within fruit flies that controls the creatures’ daily rhythm, known as the “period” gene. This gene encodes a protein within the cell during the night which then degrades during the day.

   According to Paul Nurse, at the British Crick Institute:

   “Every living organism on this planet responds to the sun ….   All plant and animal behaviour is determined by the light-dark cycle. We on this planet are slaves to the sun. The circadian clock is embedded in our mechanisms of working, our metabolism, it’s embedded everywhere, it’s a real core feature for understanding life.”

      This Nobel Prize highlights the competitive nature of science:

“While all three laboured to isolate the period gene, publishing was something of a race. While Hall and Rosbash collaborated, Young was working on the puzzle independently. Both teams reported their findings in 1984.”

      Experts tell us that it is wise to rise and retire at the same time each day, to regulate our biological clock. I like to rise at 5 a.m.   Now I know that somewhere, a gene is turning on a protein that gets me going.   The experts say, “Our [internal] timer is constantly struggling to reset to what environment people are exposed to. If you shift your clock every week by six hours or three hours, that puts an enormous pressure on your body.”

What kind of personality does it take to win a Nobel? Well – crazy, eccentric, nose-to-the-grindwheel, obsessive-compulsive, super-nice? Yes, all of the above.

   Bambos Kyriacou, professor of behavioural genetics at the University of Leicester, who is friends with all three winners and a former colleague of two, said the trio were very different people. “Jeff [Hall] is eccentric … brilliant but eccentric,” he said. “Michael [Rosbash], there is no stopping him – he is just going 100%, he will die with his boots on in the lab, and Michael Young is the most charming, nicest one of them because he is polite and pleasant, whereas the other two aren’t like that, they are just crazy,” Kyriacou added.

Remember the Name! Tu YouYou, Nobel 2015!

By Shlomo Maital

Tu Youyou

   Chinese scientist Tu Youyou has won China’s first Nobel Prize for Science – other ethnic Chinese have won Nobels, but Dr. Tu is the first to win one for work done entirely within China – and under really touch circumstances.

   Tu is 84 years old. She did her work under Chairman Mao.   During the cultural revolution, engineers and scientists were suspect. Her husband, an engineer, was sent to the country to work on a farm.   Tu was allowed to do her research, only because Mao wanted to find a remedy for malaria, which was afflicting North Vietnam soldiers during the Vietnam War.

   Tu sought a remedy in traditional Chinese medicine,   found promising candidates, then did proper scientific trials on them, until she narrowed the field down to what is today known as “artimesinin”, a key element in anti-malaria medicine today.   Her discovery, part of Mao’s “Project 523”, has saved countless lives.   There must be a great many more wonderful rememdies hidden in traditional Chinese medicine, waiting for proper clinical trials.

     Congratulations, Tu Youyou. Your work was done “to you”, “for you”, for the millions who die of malaria, especially children. Well done! Many more Chinese Nobel prizes will follow, I’m sure.

Conquering Ebola:  How They Did It

By Shlomo Maital

ebola

  As usual, the deaths and suffering from Ebola got far more media attention than the team of brave and creative people who have conquered it. (Global New York Times, Aug. 1-2, 2015, p. 6)

  It started in Canada.  Researchers at the Public Health Agency of Canada created an experimental vaccine (yup – that’s right,  a government agency!).  They took a piece of the virus’s covering and combined it with an animal virus (vesicular stomatitis virus), to set off an immune reaction against Ebola. I can only imagine the risks involved in working with such a virulent and often-fatal virus, in a lab. 

   A private biopharm company, NewLink Genetics, based in Ames Iowa, licensed the breakthrough vaccine, and last November, Merck, Big Pharma, did too. 

   The clinical trial was crucial.  It was led by the WHO,  Guinean Health Ministry, Doctors Without Borders, Epicentre Research and the Norwegian Institute of Public Health.

    Among the clinical trial innovations: a beer-keg-shaped storage device, the Arkteck, that kept the vaccines at minus 80 degrees without electricity, so that they could be transported.   The keg was invented by Global Good, a collaboration between an investment company Intellectual Ventures and Bill & Melinda Gates’ Foundation.

     None of those vaccinated in the trial,  about 4,000 people, contracted the disease, even when exposed to it.  The main use will be to vaccinate medical workers exposed to Ebola, rather than huge populations.

     What do we learn from this?  Simple.   To tackle a really hard problem, you need to put together global collaborations – governments, NGO’s, companies big and small, volunteers, African governments,   and they need to work together seamlessly, each contributing his or her own creativity and energy.  In the end, courageous lab workers did the job, but it took the whole ‘village’ to save a child, or many many of them. 

    The whole ebola virus vaccine eco-system deserves a Nobel.

How Teachers Ruin Inquiring Minds – And Why They Must Stop

By Shlomo Maital

elevator-cover one half

Illustration by Avi Katz

    Thanks to my outstanding colleagues at Technion’s Center for Improvement of Teaching and Learning,  our MOOC (massive open online course), Cracking the Creativity Code: Part One – Discovering Ideas,  launched on the Coursera website on May 18, and has over 6,000 students enrolled, worldwide, from Qatar, India, China, Iran, Iraq and Saudi Arabia, among others.   The course is based in part on the book by the same name by  Ruttenberg & Maital.

   Part of the course involves “chat” forums,  organized as ‘forums’ on topics the students themselves initiate. 

   Lizzie writes:  “My 7th grade teacher’s response to many a question was ‘don’t show your ignorance by asking that’.   Which didn’t reduce my ignorance but did get me to stop asking questions and start hating school instead of loving it.”   Malgorzata responds: “Oh yes. I have suffered high school phobia because of it. Constant bullying by teachers was unbearable.”

    How many teachers encourage questions?  How many shut them off, destroying the spirit of inquiry and love of learning?  Are teacher training schools helping teachers encourage students’ questions, rather than shutting them off? 

   Javier writes about how his teacher, in Barcelona, requires the students to copy verbatim a short story.  He tried an experiment – writing with his eyes closed, to see if he could write straight lines without looking.  The teacher ridiculed him before the class.  End of experiment.  Could the teacher have responded:  Class! Javier is trying to write with his eyes closed.  Let’s all try it.  Let’s see what happens.  Javier, thank you for this interesting idea.!

     There are millions of superb, dedicated teachers all over the world, educating the next generation, overworked, underpaid, underappreciated.  But there are still too many to believe they should be teaching the laws of algebra, rather than (in addition) why mathematics is interesting and fun to explore.    

    The Nobel Laureate in Physics Isidore Rabi tells this story:  When he came home from school, his mother never asked him, what did you learn today in school? Instead she asked, Isador, did you ask good questions in class today?   He attributes his success as a scientist to his mother and to her question.   How many Nobel Prizes are we destroying, by shutting off kids’ questions?

     

Nobel Prize for Economics: Jean Tirole Takes on the Giants!

By Shlomo Maital

Tirole

Jean Tirole

  The Nobel Committee that selects winners for the Economics Prize has sent a message.  This year (today, actually) they announced the winner is Jean Tirole, a French economist, who teaches at Toulouse, and who studied at MIT.  He is honored for the following (according to the London Guardian):

  “This year’s prize in economic sciences is about taming powerful firms,” Staffan Normark, permanent secretary of the Royal Swedish Academy of Sciences, said as he named Tirole the winner of the 8m kroner (£700,000) prize.

Tirole, 61, began his work on regulation and oligopolies in the 1980s and published an influential book in 1993 with the late Jean-Jacques Laffont on regulation. The judges said Tirole is “one of the most influential economists of our time”.

 They added: “He has made important theoretical research contributions in a number of areas, but most of all he has clarified how to understand and regulate industries with a few powerful firms.”

   The panel said Tirole had shown the “deep and essential differences” between regulating companies in different sectors, such as telecom companies or banks. Imposing caps on prices could reduce the influence of monopolies in some sectors, but not in others, the judges said, pointing to Tirole’s use of game theory and contract theory.

    “In a paper last year, Tirole scrutinised, with Roland Bénabou, the pay and motivation structure  in industries such as banking. They write about a “bonus culture that takes over the workplace, generating distorted decisions and significant efficiency losses, particularly in the long run”.

Tirole did not share the prize but won it alone.   It is the first time since 1999 that an American has not at least shared the Economics Prize.  

   Will policymakers and politicians listen to Tirole?  Yesterday I spoke with a family friend, a lawyer, who is leading a class action suit against a Detroit mortgage bank.  He affirmed that the U.S. Justice Dept. has never prosecuted a single criminal case against Wall St. offenders, who nearly destroyed the world.  They’re just too powerful, he said.   Some groups spend $400,000 A DAY on lobbyists in Washington.  Apparently, it’s a good investment.     I am fantasizing a court case,  criminal case, in which Jean Tirole is called as a witness for the prosecution.

Too Small to See? A Nobel for 3 Who Pioneered

By Shlomo Maital

  Nobel chemisry

The 2014 Nobel Prize for chemistry was won by two Americans and a German: Eric Betzig, Stefan Hell and William Moerner. Their work greatly extended our vision into the smallest of molecules, in part enabling nanotechnology.

     Hell, born in Romania, heads a Max Planck Institute in Gottingen, Germany. Moerner is from Stanford University; and Betzig, from the Howard Hughes Institute in Virginia.

   According to CNN: “Back in 1873, science believed it had reached a limit in how much more of a detailed picture a microscope could provide. At the time, microscopist Ernst Abbe said the maximum resolution had been attained.”   As with so many Nobel prizes, the three winners simply did not accept the statement, “we’ve reached the limit —   no more can be done.”

   The three scientists, according to the Nobel Prize Committee, did this: “….Due to their achievements, the optical microscope can now peer into the nanoworld,” the committee said.   “The importance can’t be overemphasized: Now, scientists can see how proteins in fertilized eggs divide into embryos, or they can track proteins involved in Alzheimer’s or Parkinson’s diseases.”    

   Betzig and Moerner found a way to make single molecules ‘glow’ using fluorescent microscopy.   Hell found a way to use two laser beams to make the molecules glow.   This is creative thinking. Rather than conventionally illuminate molecules with photons, why not make the molecules themselves into little ‘lamps’?

     “Guesswork has turned into hard facts and obscurity has turned into clarity,” the Nobel Committee added.   The work of the three has “blurred the boundary between chemistry and biology”, by enabling us to see right inside single molecules.

   Thank you, scientists!

Lighting Up Our World with LED: 2014 Nobel in Physics

By Shlomo  Maital

Winners of the 2014 Nobel Prize in Physics

 Three Japanese scientists have won the 2014 Nobel Prize for Physics, for their contribution – lighting up the world with LED – light emitting diode technology.

   According to today’s New York Times:  The three scientists, working together and separately, found a way to produce blue light beams from semiconductors in the early 1990s. Others had produced red and green diodes, but without blue diodes, white light could not be produced, the Royal Swedish Academy of Sciences said in its prize citation. “They succeeded where everyone else had failed.”   The Nobel committee said that light-emitting diodes, or LEDs, would be the lighting source of the 21st century, just as the incandescent bulb illuminated the 20th.

    The New York Times noted:    “The LED lamp holds great promise for increasing the quality of life for over 1.5 billion people around the world who lack access to electricity grids,” the Nobel committee said. “Due to low power requirements, it can be powered by cheap local solar power.”

   According to Wikipedia,  “a light-emitting diode (LED) is a two-lead semiconductor light source:  basic …  diode, which emits light when activated.  When a voltage is applied to the leads, electrons are able to recombine with electron holes within the device, releasing energy in the form of photons. This effect is called electroluminescence, and the color of the light (corresponding to the energy of the photon) is determined by the energy band gap of the semiconductor.” 

   The three Japanese scientists managed  to achieve “the invention of efficient blue light-emitting diodes, which has enabled bright and energy-saving white light sources.”   Previously, light was created with LED technology, but in colors that did not enable replacement of the Edison incandescent bulbs. 

    Nakamura worked for a time for a Japanese company, Nichia. Nichia awarded him…$200 for his invention.   Nakamura left the company in 1999 to join U. of California, Santa Barbara, and sued the company for a fair share of the immense royalties. He settled for $8.1 million.

 

 

 

 

 

The ORIGINAL GPS: Our Brain

By Shlomo  Maital

Nobel

  The 2014 Nobel Prize for Physiology & Medicine has been announced.  It is shared between John O’Keefe, American-born scientist at University College, London; and a husband and wife team, May-Britt and Edvard Moser, at the Norwegian University of Science and Technology in Trondheim, Norway.

    Here is what they discovered:

    O’Keefe: How do we know where we are? How can we find the way from one place to another? And how can we store this information in such a way that we can immediately find the way the next time we trace the same path? This year´s Nobel Laureates have discovered a positioning system, an “inner GPS” in the brain that makes it possible to orient ourselves in space, demonstrating a cellular basis for higher cognitive function.    In 1971, John O´Keefe discovered the first component of this positioning system. He found that a type of nerve cell in an area of the brain called the hippocampus that was always activated when a rat was at a certain place in a room. Other nerve cells were activated when the rat was at other places. O´Keefe concluded that these “place cells” formed a map of the room.

    In other words:  many many centuries before GPS technology was invented,  our BRAINS developed their own internal GPS mapping system.  Amazing? 

    Moser’s:  More than three decades later, in 2005, May-Britt and Edvard Moser discovered another key component of the brain’s positioning system. They identified another type of nerve cell, which they called “grid cells”, that generate a coordinate system and allow for precise positioning and pathfinding. Their subsequent research showed how place and grid cells make it possible to determine position and to navigate.

     The discoveries of John O´Keefe, May-Britt Moser and Edvard Moser have solved a problem that has occupied philosophers and scientists for centuries – how does the brain create a map of the space surrounding us and how can we navigate our way through a complex environment?

     For those who are religious and believe in the Creator,  this amazing capability of the brain to orient us using specialized brain cells,  and creating grids, GPS coordinates and maps,  is a fine example of the miraculous nature of the human brain.  Congratulations to these scientists for helping us understand how this works!

 

Bob Shiller’s Nobel:  Finance IS a Force for Good!

By Shlomo Maital      

                                                                            Shiller

   Together with Eugeme Fama (U. of Chicago)  and Lars Hansen,   67-year-old Yale U. Prof. Robert Shiller won this year’s Nobel Prize in economics for  ‘contributions to our understanding of asset pricing’. 

     Those laconic words don’t begin to do justice to Bob’s contributions.  He was among the few lone voices who warned that America was in a housing bubble, that would soon burst.  He knew this, because he had developed a reliable, accurate measure of housing prices, the Case Shiller Index,  that is widely used.   Earlier he warned that the stock market was in a buble, in his 2000 best-seller Irrational Exuberance (the dot com bubble burst in March 2000). 

    I encounter many MBA students (some here at EDHEC) who are fascinated by the world of finance, but who are pondering whether to remain in the field, because of the downsizing and layoffs in finance, and because finance was given a bad name after the 2008-12 financial crisis, owing to a handful of scoundrels.  I urge them to remain in finance, and to innovate and reform the industry, and reinvent it.  And I always recommend that they read Shiller’s new book, Finance and the Good Society (Princeton U. Press, 2012).   Here is how Shiller frames his pitch:

“… finance should not be viewed as inherently or exclusively elitist–separating people into different income groups, or as an engine of economic injustice. Finance, despite its flaws and excesses, is a force that can help us create a better, more prosperous, and yes more equal society.    In fact, finance has been central to the rise of prosperous market democracies and is unimaginable without them.  Beyond headlines incriminating bankers and financiers as self-aggrandizing perpetrators of economic dislocation and suffering, finance remains an essential social institution, necessary for managing the risks that enable society to transform creative impulses into vital products and services, from improved surgical protocols to advanced manufacturing technologies to sophisticated scientific research enterprises to entire public welfare systems.  The connection between Wall Street and Main Street is as fundamental for society as is the connection between the brain and the nervous system in the human body.” 

    Finance specialists:  Stay the course!  Innovate, create, seek blue oceans.  Finance needs you,  Nobel Laureate Shiller says,  and I strongly agree. 

Blog entries written by Prof. Shlomo Maital

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