The image (and jingle) of the bells of Salvation Army volunteers is almost as synonymous with the holiday season as Santa Claus himself. However, the New York Times reported last month that a change may be coming to a street corner near you; the charity has begun testing the use of a digital donation system called Square that would allow passersby to donate via credit card, rather than have to worry about scrambling for loose change.
The article mentions two potential benefits of this kind of system. First, people are less likely to carry cash on them as they were in the past, and so Square’s credit card system provides people with a quick, simple, and convenient way to donate when they don’t have any real money handy (and with 1 in 7 Americans carrying at least 10 credit cards, this shouldn’t be a problem). Second, a credit card system would be safer because donations would not be vulnerable to theft like money in the kettle has always been.
Still, this credit card system may unintentionally have another significant benefit: it may lead people to want to donate more money than they would otherwise. There is a concept in behavioral economics known as the “pain of paying.” Simply put, it hurts us to spend (and part with) our money. And since buying things with a credit card is a less direct, less tangible way to part with money than using cash, it can feel less painful, and therefore lead people to spend more.
Assuming that this effect generalizes from buying products to donating to charities, Square’s credit card system may actually lead to larger total donations for the Salvation Army, whether it is because more people decide to donate, or because more money is donated by each individual. (Not to mention the possibility that people may feel silly choosing “loose change”-style amounts (e.g., 35 cents) to donate via credit card, and so may round up to the whole dollar for that reason alone).
So Square’s credit card system may, through behavioral economics, lead people to be more generous with their donations to the Salvation Army. If the Salvation Army uses this new system and winds up faring well, perhaps other charities should take note and consider implementing such a system as well.
Have a happy holiday season, everyone! And remember that doing the most good may be just a swipe away.
~Jared Wolfe~
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Like One day a few years ago I passed a street teeming with panhandlers, begging for change. And it made me wonder what causes people to stop for beggars and what causes them to walk on by. So I hung out for a while, engaging in a bit of discreet peoplewatching. Many people passed the beggars without giving anything, but there were a few who stopped. What was it that separated those who paused and gave money from those who didn’t? And what separated the more successful beggars from those who were less successful? Was it something specific about their situation, or their presentation? Was it the beggar’s strategy?
To look into this question, I called on Daniel Berger Jones, an acting student at Boston University who had just finished hiking around Europe. Not having shaved in months and already looking pretty scruffy, he was ready for the job (plus as part of his training to be an actor I figured it would be good for him to learn how to beg for money – at the time he did not see that particular benefit). So I found a street corner and placed him there to take on the panhandling trade. I asked Daniel to try a few different approaches to begging and to keep track of the approaches that made him more or less money. (Of course, after the experiment was over we donated all the money that he made to charity). The general setup was what we call a 2×2 design: When people walked by, Daniel would either be sitting down (the passive approach) or standing up (the active approach) and he would either look them in the eyes or not. So there were times when he was 1) sitting down and looking people in the eyes, 2) sitting down and not looking people in the eyes, 3) standing up and looking people in the eyes, or 4) standing up and not looking people in the eyes.
Daniel got to work, scrounging for money. He stayed on his corner for a while, trying the different approaches. And it turned out that both his position and his eye contact did, in fact, make a difference. He made more money when he was standing and when he looked people in the eyes. It seemed that the most lucrative strategy was to put in more effort, to get people to notice him, and to look them in the eyes so that they could not pretend to not see him.
Interestingly, while the eye contact approach was working in general, it was clear that some of the passersby had a counterstrategy: they were actively shifting their gaze in what seemed to be an attempt to pretend that he wasn’t there. They simply acted as if there was a dark hole in front of them rather than a person, and they were quite successful at averting their gaze.
At some point, something very interesting happened. There was another beggar on the street – a professional beggar – who approached young Daniel and said, “Look kid, you don’t know what you’re doing. Let me teach you.” And so he did. This beggar took our concept of effort and human contact to the next level, walking right up to people and offering his hand up for them to shake. With this dramatic gesture, people had a very hard time refusing him or pretending that they did not seen him. Apparently, the social forces of a handshake are simply too strong and too deeply engrained to resist – and many people gave in and shook his hand. Of course, once they shook his hand, they would also look him in the eyes; the beggar succeeded at breaking the social barrier and was able to get many people to give him money. Once he became a real flesh and blood person with eyes, a smile and needs, people gave in and opened their wallets. When the beggar left his new pupil, he felt so sorry for poor Daniel –and his panhandling ineptitude– that he actually gave him some money. Of course Daniel tried to refuse, but the beggar insisted.
I think there are two main lessons here. The first is to realize how much of our lives are structured by social norms. We do what we think is right, and if someone gives us a hand, there’s a good chance we will shake it, make eye contact, and act very differently than we would otherwise.
The second lesson is to confront the tendency to avert our eyes when we know that someone is in need. We realize that if we face the problem, we’ll feel compelled to do something about it, and so we avoid looking and thereby avoid the temptation to give in and help. We know that if we stop for a beggar on the street, we will have a very hard time refusing his plea for help, so we try hard to ignore the hardship in front of us: we want to see, hear, and speak no evil. And if we can pretend that it isn’t there, we can trick ourselves into believing –at least for that moment– that it doesn’t exist. The good news is that, while it is difficult to stop ignoring the sad things, if we actively chose to pay attention there is a good chance that we will take an action and help a person in need.
A few days ago I woke up at 5:00am to drive to the airport for a trip to Chicago. I got to the airport on time, went through security and arrived at my gate with time to spare. I went through all the motions of boarding the plane, waiting to take off, and finally leaving the ground. As we were in the air, we were informed of inclement weather in Chicago and told that we would have to land somewhere else (South Bend, Indiana). So we were diverted to wait for the weather in Chicago to clear up. When the weather eventually improved, we refueled and finally took off. I missed an important lecture and felt that I had wasted most of my day.
When I think back to my day of traveling, I can’t help but cringe at the thought that my expected two-hour trip took six hours. And even though I have taken many flights longer than six hours in the past without feeling bitter, this experience was particularly annoying for two reasons.
The first reason has to do with the nagging feeling of idleness that I experienced when I was stuck on the plane on the ground, just waiting. And this reminds me of a lesson on the design of air travel: There once was a clever engineer who noticed that the carousels for luggage are spaced at different distances from different gates – some farther and some closer to where the passengers were deplaning. And this engineer redesigned the allocation of carousels such that they minimized the distance to their gate, and therefore minimized the amount of walking that passengers would have to do to pick up their luggage. A few airports implemented this highly efficient system and patted themselves on the back. They were very pleased with their improvement – that is, until people started complaining.
Of course, everything that the engineer predicted was true. By refining the assignment of carousels to match up with their corresponding gates, people had to walk less and could get to their luggage faster. The problem was that this system worked too well, and passengers were beating their luggage to the carousels. When they arrived, they had to twiddle their thumbs while they waited for their luggage to catch up with them.
Think about these two ways to get your luggage: With the original airport design, you walk ten minutes, but when you finally get to the carousel, your baggage gets there a minute after you (taking 11 minutes). In the other, you walk three minutes, but when you arrive you have to wait five minutes for your luggage (taking 8 minutes). The second scenario is faster, but people become more annoyed with the process because they have more idle time. As Sir Arthur Conan Doyle, Sr. noted, “I never remember feeling tired by work, though idleness exhausts me completely.”
The “good news” is that airports quickly reverted to their former (inefficient) system, and we now walk farther to our suitcases just to avoid the frustrations of idleness.
Now, it’s one thing to waste time, but it’s particularly bothersome when you feel like you are backtracking. In my case of flying to Chicago, the trip took a detour that sent me in away from my final destination. This is the second reason that my flight experience was so irritating — it included an element of backtracking in the opposite direction of my goal.
Let’s think about this idea with another example. Imagine that you are taking the train from point A to point B. You can choose between two paths, both taking four hours but with one key difference: In Trip 1, you take the slow train from point A to B. In Trip 2, you take the fast train, but the train passes B and continues for another hour until it gets to C, and then you change trains and backtrack for an hour to B. It turns out that the second approach is more irritating, even though we should care only about the time and not the direction of progress.
My flight had both of these annoying principles, idleness and backtracking. We wasted lots of time, and we were diverted in the opposite direction. Now, I am positive that this will not be the last time that I experience these travel elements, so the question is how I will deal with these irritations in the future. To overcome the feeling of idleness, I can try finding something to make me feel that the time is spent productively (maybe I should start making lists of things to do and use idle time to manage these lists on my phone). And what about overcoming the annoyance of backtracking? Maybe ignorance really is bliss — and the only solution is not to think about the route that we are taking.
Taxes: Hate ’em? Love ’em? More, importantly, are they fair? We want to hear from you about this hotly contested topic of national debate!
We suspect that taxes might be influencing us – especially, our attitudes and productivity – in more ways than we realize. Help us find out, by taking this quick survey: https://danariely.qualtrics.com/SE/?SID=SV_didFPT05NQ1LsXy
The Center for Advanced Hindsight at Duke University is
Pleased to Coordinate and Host the Exhibition
Creative Dishonesty: Cheat Codes
on display at 2024 W Main St, Bay C, Durham, NC from
December 3, 2011 to January 31, 2012.
with an opening reception on
December 16, 2011 6 – 10 PM
As a magnanimous gesture of support for artistic ingenuity and creative perspectives, twenty artists were invited to create innovative and engaging artwork in response to research on behavioral economics, dishonesty, and cheating after attending an interactive forum at the Center for Advanced Hindsight.
With no limitation to the style or media of pieces created for “Creative Dishonesty: Cheat Codes,” a portion of the artists, which included sculptors, painters, and photographers, branched out stylistically from their normal medium, while others pushed conceptual boundaries.
Albert Gilewicz, a sculptor, utilized “Ethos” bottled water as the foundation for a sculpture exploring the truth behind branding and corporate marketing, compelling the viewer to confront the reality of selling their morality for the sum total of $0.05 donated to the development of drinkable water sources in Africa.
Artist Kerry Cox created an interactive installation that questions the nature of imagery as “moral” or “immoral” through audience participation. In a similar vein, Bruce Mitchell and Adrian Schlesinger created projects inquire how to classify an image as “art” after mechanical tools are used to enlarge, project, draft, and print.
Meet these artists and many others at the opening reception on December 16th from 6-10 PM! Pick their brains about the relationship between creativity, honesty, cheating, and the “fudge factor”. Join us on Third Friday for delicious food, wine, thoughtful artwork, and lively conversation at the Center for Advanced Hindsight, 2024 W Main St, Bay C, Durham, NC.
An exhibit catalogue, including reflections by the artists alongside responses from the curator and the researchers at the Center for Advanced Hindsight, will be published and available for purchase.
For more information about the Creative Dishonesty project, contact curator Catherine Howard atcreativedishonesty@gmail.com.
The Center for Advanced Hindsight at Duke University is
Pleased to Coordinate and Host the Exhibition
Creative Dishonesty: Cheat Codes
on display at 2024 W Main St, Bay C, Durham, NC from
December 3, 2011 to January 31, 2012.
with an opening reception on
December 16, 2011 6 – 10 PM
As a magnanimous gesture of support for artistic ingenuity and creative perspectives, twenty artists were invited to create innovative and engaging artwork in response to research on behavioral economics, dishonesty, and cheating after attending an interactive forum at the Center for Advanced Hindsight.
With no limitation to the style or media of pieces created for “Creative Dishonesty: Cheat Codes,” a portion of the artists, which included sculptors, painters, and photographers, branched out stylistically from their normal medium, while others pushed conceptual boundaries.
Albert Gilewicz, a sculptor, utilized “Ethos” bottled water as the foundation for a sculpture exploring the truth behind branding and corporate marketing, compelling the viewer to confront the reality of selling their morality for the sum total of $0.05 donated to the development of drinkable water sources in Africa.
Artist Kerry Cox created an interactive installation that questions the nature of imagery as “moral” or “immoral” through audience participation. In a similar vein, Bruce Mitchell and Adrian Schlesinger created projects inquire how to classify an image as “art” after mechanical tools are used to enlarge, project, draft, and print.
Meet these artists and many others at the opening reception on December 16th from 6-10 PM! Pick their brains about the relationship between creativity, honesty, cheating, and the “fudge factor”. Join us on Third Friday for delicious food, wine, thoughtful artwork, and lively conversation at the Center for Advanced Hindsight, 2024 W Main St, Bay C, Durham, NC.
An exhibit catalogue, including reflections by the artists alongside responses from the curator and the researchers at the Center for Advanced Hindsight, will be published and available for purchase.
For more information about the Creative Dishonesty project, contact curator Catherine Howard at creativedishonesty@gmail.com.
Here I discuss Chapter 11 from Upside of Irrationality, Lessons from Our Irrationalities: Why We Need to Test Everything.
Did you know that free checking works by exploiting the everyday cash shortages of the poorest in our country? There is a company that dresses it up and sells it to banks.
I recently moved to Durham from Boston, and as it goes I had to set up new accounts to establish services for my loft. Part of this task involved deciding on a bank to take my deposits and facilitate payments. I set up a simple matrix to help me decide on a bank that included two simple categories: proximity and fees. There were plenty of banks within a reasonable distance to me, but where my matrix failed was in the fee category.
Apparently, “free” checking accounts are now ubiquitous. Sounds good, right? Not for me. I work in behavioral economics. Free checking looks to me like Winnie the Pooh walking out of a XXX movie theater. In other words, innocence doesn’t have sweat on its sneaky brow. There is no such thing as free, it’s just hiding. Cost can be intangible, but this is not the case with free checking. So, who pays for free checking for all of us? Consumers with illiquidity issues, and these are the people who need their money the most. There cannot be a worse target. What used to be called a penalty fee for overdrafting an account is now called a convenience fee or value added service. How appealing. These fees add up and happen frequently enough to offer free checking.
I had to ask, from whom are all of these banks getting this bright idea? I found that banks of all sizes offer free checking, so this tells me that there must be a third party facilitator. I searched for B2B bank products under the granddaddy of all bank facilitators, Fiserv, and smiling at me like Miss America with AIDS was none other than Carreker.
Carreker calls it Revenue Enhancement and it is a very attractive service for any bank that puts money before fairness to consumers. Carreker enables a bank to collect on penalty fees and clear transactions in real time, which is how Carreker can boast that the bank will see immediate results. It is not because they have done something truly beneficial for the customer. Most of all, Carreker actually controls the overdraft decisions. They have their hand on the penalty revenue throttle. As a customer’s account goes negative, they can allow the customer to overdraft not once but for several transactions, thus incurring high fees. Senior Vice President and Managing Director of Carreker Revenue Enhancement, Jeff Burton, claims that the “fee income market is fine” provided that you [the bank] position yourself with Carreker to share in the wealth.
Aggressive revenue seeking has changed the manner of normal operations into more of a production model. Banks now call overdraft penalties by a new name: exception revenue. Furthermore, they want you to see it as if they are doing you a favor and that it is okay, in fact perfectly fine as you now know, if you need to overdraft your account. The negative connotation has been replaced by the notion that your bank is forgiving and would never prevent you from making that gratifying purchase. It is not right to allow customers to pay an average of 9 X $30 if they miscalculate their account balance. Alas, Carreker does not stop with their exception revenue system.
Burton states that they have gone as far as to create a special framework for one of their clients to allow them to profit from payday loans. This is what they call their approach to increase overall revenue and customer utilization. I’m not sure about you, but I am not here to be “utilized.” Carreker will continue to innovate new ways to capitalize on the hardships of consumers. Most frighteningly, they are not just an idea firm because they actually provide the framework, algorithms, and integration to allow the bank to carry on these evil deeds.
For what’s it’s worth, I changed my decision matrix to seek a bank that had all around low fees, so I can avoid living off of the money of people who desperately need it. I’m still looking.
~Myles Leighton~
Here I discuss Chapter 10 from Upside of Irrationality, The Long-Term Effects of Short-Term Emotion: Why We Shouldn’t Act on Our Negative Feelings.