Ferdinand Rauch, Shaun Larcom and Tim Willems on #homoeconomicus

http://www.economics.ox.ac.uk/Department-of-Economics-Discussion-Paper-Series/the-benefits-of-forced-experimentation-striking-evidence-from-the-london-underground-network

  • A tube strike in London increased social welfare…
  • … because 5% of passengers, forced to experiment because their normal route was not available, found a new route that they stuck with afterwards, saving themselves an average of 20 seconds per trip…
  • … and this outweighed the time everyone else lost during the 2-day strike.

I like this story mostly because:

  • who, really, would have guessed?…

… but also because:

  • it tends to support the idea that we are “fools to ourselves” (or more formally, that behavioural discount rates do not represent real costs).

As the abstract says, Search costs are unlikely to explain the suboptimal behaviour. Instead, individuals seem to under-experiment in normal times, as a result of which constraints can be welfare-improving.

Published by

Paul Hodson

Head of Unit "EnergyEfficiency" at European Commission, Directorate-General for Energy

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.