3 BEHAVIORAL ECONOMICS ARTICLES WORTH READING (5/28)
Topics: Dodd-Frank, Debiasing, Executive Compensation
1. The Dodd–Frank Wall Street Reform and Consumer Protection Act was passed by the Obama administration to essentially ensure that financial advisers have to work with their clients' best interests in mind. The House Financial Services Committee approved a bill early this month to repeal and roll back significant pieces of the act. For advisers who do care about their clients’ needs, Kristen Berman discusses how 401(k) advisers can help clients' address unhealthy financial behaviors.
2. I had a conversation this week about some intriguing research on confirmation bias—our tendency to seek out information that corroborates previously established beliefs. We talked about the complexity of untangling ‘bad’ confirmation bias (for example, seeking out tenuous evidence that a much disliked president is showing signs of memory decline) from ‘good’ confirmation bias (confirming your preference of certain social situations over others). The Farnam Street blog extends this idea in an article on why you should seek out disconfirming evidence.
3. Finally, “If we want to get the best out of our executives, the ideal amount to pay them is“enough to take money off the table.” Prabhu Sivabalan and Stephen Woodcock discuss executive pay with Jenni Henderson and Josh Nicholas at The Conversation. It would be interesting to see more confirmatory research on this concept.