Two economists have been collecting data to assess whether online friends are good for the soul. The quick answer: not really

Eliza was the first software to simulate human conversation. It was developed in the mid-1960s by Joseph Weizenbaum, a computer scientist at MIT. The most famous version mimicked a psychotherapist, thus hiding its conversational incompetence: “Men are all alike.” “In what way?” “They’re always bugging us about something specific or other.” “Can you think of a specific example?” “Well, my boyfriend made me come here.” “Your boyfriend made you come here?” And so on.

It was a clever program but Professor Weizenbaum, who died in 2008, was disturbed by the fact that several people seemed to find talking to Eliza genuinely therapeutic. Computers, concluded Weizenbaum, might not be terribly good for our emotional wellbeing.

These days, concern has moved to the amount of time we spend checking social networks – even if our online friends are, presumably, human beings. Two economists, John Helliwell and Haifang Huang, have been collecting the data necessary to assess whether such online friends are good for the soul. The quick answer: not really.

Helliwell and Huang analyse a Canadian social survey of 5,000 people called the “Happiness Monitor”, which measures how happy, stressed or satisfied with their lives people are, using a variety of standard questions. The Happiness Monitor also asks people how many friends they have in their real-life social network, as well as how large their online network is.

They find that having troops of friends is correlated with a sense of wellbeing. (As is common with such exercises, the direction of causation is unclear: perhaps happy people attract friends.) The effect is substantial: having twice as many friends is associated with the same increase in happiness as having a 50 per cent increase in income. But move the social network online, and larger networks do nothing for our happiness. Millions of digital sceptics will be unsurprised.

I am sceptical about the value of Facebook myself, but the most natural reading of Helliwell and Huang’s results is that a Facebook “friend” is not necessarily a friend at all, just a setting that tells software whose status updates to show us. The Happiness Monitor doesn’t even use the word “friend” when asking about the size of online social networks. (I have 73 Facebook friends and 65,000 Twitter followers, and it is not clear which represents the size of my online social network.)

Another study, by Fenne Deters and Matthias Mehl, published late last year in Social Psychological & Personality Science, asks a different question about our online socialising: how do we feel when we post status updates to Facebook? And how do we feel if nobody responds? Deters and Mehl ran a randomised trial with 102 students at the University of Arizona. The control group was given no specific instructions; the treatment group was asked to post more status updates “than they usually post per week”. Some ignored the instruction – but those who did not said they felt less lonely. It would be easy to over-interpret these results: the sample is small and there is something artificial about posting updates to Facebook in response to the request of an experimental psychologist.

The study is intriguing. It did not seem to matter whether anyone responded to the status updates. Perhaps people felt that they were being read even if there was no feedback; or perhaps responses came via email, text or face to face, unseen by the experimenters.

Or perhaps Facebook updates make us feel connected even though nobody out there is listening. That suggests a curious view of social networking: it may have little to do with true socialising. We may simply feel satisfied with the illusion that someone is paying attention. Joseph Weizenbaum, the creator of Eliza, would not have been surprised.

Also published at ft.com.

Auctions seem a fine way of assessing willingness to pay, writes Tim Harford

‘For those seeking a way out of the economy cabin, a number of airlines, including Virgin Atlantic, Etihad, Austrian Airlines and Tap Portugal offer a facility whereby you tell them what you are prepared to pay to get upgraded.’
Financial Times, May 15

Am I supposed to be impressed? Isn’t the normal method of being upgraded to pay for it?

I think the distinction here is that traditionally, the customer – or the customer’s employer or client – pays the sticker price to fly business class or first class. This new scheme invites the customer to suggest the price. The airline will sit on that bid for a while, see whether better offers come in and, depending on how busy the front of the aeroplane is, will accept or reject the offer.

I see – that is a change.

Yes, but not a big change. A well-designed auction flushes out information about what people might be willing to pay, and charges accordingly. In some markets that is a very useful innovation, but there’s a reason why Tesco doesn’t run auctions when you pop in to buy milk.

It’s too much hassle, of course.

Partly that – although it is possible to run auctions incredibly quickly and cheaply in some circumstances. Every time you type in a search term on Google, the company runs a quick auction to decide which adverts to display. But Tesco doesn’t need to bother trying to figure out how to run auctions because it already has a fantastic amount of information about willingness to pay in general. It may also have information about your own shopping habits through which it can offer selective discounts.

And the same must be true for airlines.

Yes. Airlines are always tweaking the prices of their seats on each particular flight as the departure date looms and the plane starts to look full or empty. The auction may generate a bit of extra information, and therefore a bit of extra cash, but it seems marginal. My theory is that airlines want to differentiate between people who insist on flying business class and people who are willing to take a chance that they will not. A good way to offer different prices to these people is to sell some seats upfront and others in a more opaque auction.

Still, you’re making auctions sound rather passé.

This idea seems passé, but auctions certainly aren’t. The Bank of England uses auctions to determine how to inject liquidity into the banking system, for instance. This is a challenge because the problem is multidimensional: the BoE could offer loans backed by all sorts of different collateral, but would rather lend against safe collateral than riskier stuff. The potential interest rates at which the loans might be made depend on how desperate the system as a whole is for liquidity, but the spread between loans on safe collateral and loans on dodgy collateral should also vary depending on demand. Paul Klemperer, an economist at Oxford university, calls this general problem a “product mix auction” and has figured out a way to make the process run instantaneously, rather than dragging out for weeks as government auctions of yesteryear used to do.

It’s a long way from Sotheby’s, though. Or for that matter, a long way from eBay.

Both Sotheby’s and eBay accept proxy bids that come into play only when needed, and that is the key to Prof Klemperer’s scheme. And Sotheby’s could use a product mix auction to sell off a wine cellar, full of cases of similar but not identical wines. But you are right: auctions are becoming automated and a lot of auctions take place without us puny humans knowing. Your electricity supplier may soon be installing a computer that will vary the price of electricity by the second, and if prices are high some of your appliances will drop out of the bidding: the lights will dim, the fridge will allow the temperature to rise a little, the immersion heater will wait for a more propitious moment. An auction is a natural way for the computers to determine who gets priority.

I, for one, welcome our new silicon masters. Anything else?

You can already auction off your time to the highest bidder through Amazon’s “Mechanical Turk”, an online marketplace for small tasks requiring a bit of human judgment. It’s possible that sort of thing might become more widespread. On which point, I’ll have to leave you. This conversation was pleasant enough but I’ve just received a better offer.

Also published at ft.com.

We expect successful people to be attractive, writes Tim Harford

‘Governor Chris Christie, who once famously called himself “the healthiest fat guy you’ve ever seen”, disclosed Tuesday he had secretly undergone weight-loss surgery, a major new step by the potential Republican presidential contender to address both his health and a political vulnerability.’
Associated Press, May 7

I always thought Governor Christie was too fat to be president.

You shouldn’t judge a book by its cover, even if it is a padded cover. Mr Christie claims the surgery was for health reasons anyway.

I’m sure I don’t know the inside of Mr Christie’s mind, even if I do now know more about the inside of his abdomen than I care to. I just think the American electorate, like many electorates, judge politicians at least in part by their appearance.

That does seem to be true. Presidential elections are usually won by the taller candidate, for example. The last president to be elected who was shorter than the average American man was William McKinley; that was in the 19th century. Most presidents have good hair. Every president so far has had a penis.

Quite – none of these are terribly profound indicators of political competence.

Don’t be quite so sure of that. Nobody doubts that striking looks are an asset for a film star or a model. Perhaps they make other people more productive – people in sales, for instance. We do know that more beautiful people tend to earn more; slimmer people tend to earn more; taller people tend to earn more and better-groomed people tend to earn more. Maybe this is discrimination, or maybe beautiful people are better at their jobs. After all, we want politicians to speak persuasively. Why shouldn’t we want them to look persuasive, too? Or maybe something else is going on.

Such as?

It’s possible that physical appearance is correlated with something else we care about. People have made the same complaint about Mr Christie’s weight as they made about President Barack Obama’s nicotine habit: that it showed a lack of willpower. Admittedly, that’s not a very good argument – being fat is a pretty weak indicator of low willpower and one would hope that the campaign trail would provide a slightly better guide to a politician’s character.

Tall politicians win elections, but you can’t gain height through sheer determination.

Height is interesting for a different reason. There is a correlation between being tall and having a good job, and the natural explanation for that is some kind of discrimination. But the economists Anne Case and Christina Paxson argue that height is also correlated with intelligence, even for children. What seems to be going on is that poorly nourished children will tend to lose out both mentally and vertically.

I know some tall people who are pretty dim.

Of course you do. These are just statistical tendencies. When we make a snap judgment about someone because they are fat, or short or ill-groomed, we are doing both them and ourselves a disservice. Which leads to another intriguing possibility: that years of these unfair snap judgments make pretty people self-confident and ugly people shy, hesitant or bitter – and so the superficial judgments eventually become self-fulfilling.

That sounds very speculative to me.

There is some evidence for the idea, though. Two researchers, Markus Mobius and Tanya Rosenblat, confronted their experimental subjects with a series of maze puzzles, asking them to guess how quickly they could solve the mazes before inviting them to have a go. More beautiful subjects were more self-confident, but not actually any better at the task. So perhaps there is something in the idea that our appearance ends up having important effects on personality.

We’re faced with an embarrassment of riches.

True. There are many reasons why appearance may be correlated with success in life. But one study by the economist Daniel Hamermesh cleverly isolated the purely superficial effect. Professor Hamermesh looked at candidates who stood for election to an association more than once, and showed that their chances of success rose when they used a more flattering photograph.

Voters can be so superficial.

It is disappointing – especially since this should, in theory, have been the world’s most rational electorate: the members of the American Economic Association.

Also published at ft.com.

Are smartphone patents helping innovation – or strangling it?

I’ve been thinking about a remarkable industrial designer, a man who built on previous innovations to produce an indispensable product and a corporate titan. Not Steve Jobs, of course, but Isaac Singer, the developer of the first commercially successful sewing machine.

Singer and Jobs have something else in common: their products both became embroiled in bitter legal wrangling over patents. Jobs told his biographer, Walter Isaacson, that “I’m going to destroy Android, because it’s a stolen product. I’m willing to go thermonuclear war on this.” Singer threatened to kick Elias Howe down the stairs when Howe demanded cash from him for infringing Howe’s patent.

The courts eventually backed Howe, but many other patents existed and soon the entire US sewing machine industry seemed more interested in suing rivals than selling sewing machines. That will surprise nobody who pays attention to the legal battles over smartphone patents – and many observers have come to the conclusion that patents are not helping innovation, but strangling it.

Is that true? Patents give a temporary monopoly to inventors. This will raise prices and constrict supply, which is bad. But in the long run the patent should promote innovation by encouraging inventors to develop new ideas. This is a balancing act, not a matter of moral or practical absolutes.

But the sewing machine patent wars, and the modern smartphone litigation, show us that the balancing act is more complex when a technology may embody many different patents. According to one well-publicised estimate, there are 250,000 patents relevant to a modern smartphone. Even if the number is one-tenth of that, it suggests an impossible thicket of intellectual property through which a company must hack to bring a cool new product to market.

A key issue is something called the hold-up problem. If a $1bn product depends on 1,000 patents, it is clearly impossible to pay the typical patent holder more than $1m. But any patent-holder could try to extort many times that amount by threatening to block the whole project.

Large firms have responded to this problem by buying or developing large collections of patents. This gives them the ability to launch countersuits, and that threat should make rivals reasonable. But although defensive patenting looks like a pragmatic solution, it has costs and limits. The wave of defensive applications swamps patent offices, which means more poor-quality patents and longer delays.

“Patent trolls” – a derisive name for companies that make money purely from their patents – have less to lose in a patent war but although some are legitimate, others are extortionists. And while established players may reach cosy understandings, a young company with a new idea may find it impossible to break into a market that is thick with defensive patents. If only the big boys can play the patent game, innovation will suffer.

It’s clear that some industries are plagued by nuisance lawsuits. According to a survey by economists Bronwyn Hall and Dietmar Harhoff, firms complaining of infringement win more than half of court cases involving non-software patents, but only 13 per cent involving software patents. That suggests software suffers from weak patents and aggressive litigation, perhaps in the hope of extorting a settlement. It is not a good sign.

Yet we should not lose hope. The sewing machine companies eventually pooled their patents and competed on the high street rather than in the High Court. And despite apparently endless litigation, there seems to be plenty of innovation in the smartphone industry. The patent system is not a total failure – but on present evidence it is hardly a total success.

Also published at ft.com.

New research shows with horrible clarity what a wretched trap long-term unemployment is becoming

When my friend Nicola quit her job in educational publishing, it was for understandable reasons: one of her colleagues was a bully, her boss was providing little support and work had become miserable. (I’ve changed her name.) She had a strong CV, a husband with a steady job and young children to spend time with so she decided to resign before finding a new job. She’s now been unemployed for a year and a half.

So many economies have been depressed for so long that Nicola’s predicament is common. But new and unpublished research from a young Lebanese PhD student, Rand Ghayad of Northeastern University in Boston, shows with horrible clarity what a wretched trap long-term unemployment is becoming.

(April was a good month for economics students elsewhere in Massachusetts: Thomas Herndon of the University of Massachusetts, Amherst, delivered a reputational kneecapping to Harvard professors Carmen Reinhart and Ken Rogoff when he discovered a spreadsheet error in their much-trumpeted paper “Growth in a Time of Debt” as part of a course assignment.) (Here’s our coverage on “More or Less” – MP3.)

Ghayad used a computer program to generate job applications that were standardised but varied along a few parameters – whether the imaginary applicant had worked in the relevant industry, had hopped a lot between jobs, and how long the applicant had been unemployed, if at all. Ghayad mailed 4,800 of these CVs off to apply for 600 vacancies, chosen to reflect a variety of city locations, seniority and industry. He then recorded which applications were offered an interview.

Unsurprisingly, candidates with recent relevant experience were at an advantage, and a history of job-hopping did not help. But what was astonishing was the effect of long-term unemployment. Applicants with experience from the wrong industry who had been unemployed for 14 weeks or less were more than three times as likely to receive a call from the employer than applicants with experience in the right industry but who had been unemployed for six months or more. Regardless of sector, employers are, apparently, more interested in shunning the long-term unemployed than in looking for relevant experience.

The implications for Nicola and others like her are clear. But it is puzzling that employers put such emphasis on avoiding the long-term unemployed. A long period of unemployment is a negative signal, of course – it suggests that the applicant might not have been trying, might be getting rusty or might have been interviewed and rejected several times by other employers. But quite why it is such an overwhelming stain on a CV is not clear. Six months isn’t even a long time – in Europe, you don’t even count as long-term unemployed until you’ve been looking for work for a year.

Ghayad believes the evidence suggests that employers are using long-term unemployment as a quick – perhaps even automated – reason to disqualify applicants for oversubscribed vacancies. He thinks the policy implications are that the US needs more economic stimulus, because only a surge in employment would force employers to give the long-term unemployed a chance.

What’s certainly clear is that this reluctance to hire the long-term unemployed is one way in which the recession is leaving long-lasting scars. This has happened before: one of Margaret Thatcher’s less trumpeted achievements was a rise in the equilibrium unemployment rate that lasted into the mid-1990s. One likely cause was simply the number of people who became severed from the labour market in the deep recession of 1981.

I asked Ghayad, 27, why he’d chosen a PhD in economics. He had a simple answer: “I graduated during a recession and I couldn’t find a job.” Silver linings, for some.

Also published at ft.com.

Human cost of an embargo would be higher than the recent factory collapse, says Tim Harford

‘The EU is considering moves against Bangladesh, including restricting trade access to the European single market, in an attempt to press the country to improve its labour practices after last month’s deadly factory collapse.’
FT.com, May 1

Quite right, too. The Rana Plaza collapse was appalling. Truly shocking.

It was. It is not the only thing that is shocking about Bangladesh, though. For every 1,000 children born there, 46 will die before their fifth birthday. The rate in the UK is five per 1,000, so you could say that Bangladesh’s lack of development is responsible for the other 41. Across Bangladesh, that is 123,000 preventable deaths a year, just of children. That’s one Rana Plaza collapse every weekday.

So you think “don’t touch the precious sweatshops because they’re good for the economy and the economy is good for the little children”?

If the EU does impose some sort of sanction on the country, the human cost is likely to be far higher than that of Rana Plaza. Bangladesh has been a development success story; poverty is high but falling fast. Literacy and life expectancy are improving. That appalling under-five mortality rate of 4.6 per cent used to be far worse – 20 years ago, it was 12 per cent. When we see the pictures of the Rana Plaza wreckage, it’s easy to imagine a backdrop of stagnation, complacency and despair in which nothing ever changes, no matter how awful the tragedy. But the true context is a country making rapid improvements in nutrition, health, education and women’s employment. If the EU’s threat galvanises improvements in wages, working conditions and building standards – all of which Bangladesh can afford – then good. But if the threat were to be carried out, that would be a disaster, albeit one that will not be televised.

But we’re culpable here – western companies bought clothes from the Rana Plaza factories.

Are we now so obsessed with brands that human misery only counts when we can connect it to something we can buy on the high street? The most notorious example was when, in 2010, 10 workers at a Foxconn electronics factory in China killed themselves – a shocking fact that tarnished Foxconn’s most famous customer, Apple, and caused millions of iPhone owners to feel faintly guilty. But the factory employed an astonishing 400,000 people; so the reported suicide rate, rather than being shockingly high, was implausibly low, a sixth of the Chinese average.

I understand that rich-world consumers can frame all these tragedies as part of their own personal drama. That doesn’t mean multinational companies can get away without taking action.

What action do you want them to take? While a few, such as Primark, have said they will take some responsibility, others have distanced themselves from the disaster. There is a record here: Nike’s supply-chain practices have been under the human rights spotlight for many years, and the company has responded by trying to improve working conditions. It has found it difficult because the systems are complex, fluid and messy. Even if a local factory satisfies every demand for decent working conditions, it can easily outsource production to the likes of Rana Plaza. There is a risk that, while lesser brands (or non-branded industries) do as they please without scrutiny, high-profile companies decide it would be easier simply to pull out.

But that risk might persuade the Bangladeshi government to sort out local regulations.

Let’s hope so. And charities, or development agencies such as the World Bank, can add a carrot to that stick through what is known in the jargon as “capacity building” – that is, helping governments draft sensible regulations, put together a bureaucracy capable of enforcing them and so on.

One other thing: poor countries need to allow trade unions to operate – unlike in Bangladesh, where union activists have been harassed and even killed.

It’s not like an economist to back trade unions. I thought you were all Thatcherite?

There have been times and places where unions have been a force for chaos and stagnation. Bangladesh in 2013 isn’t one of them. Ultimately, whatever western consumers demand, what determines whether rules about working conditions are upheld is that workers on the factory floor have a voice and some power.

Also published at ft.com.

Teachers are better placed than anybody to generate new research questions, based on years of observation of subtleties that would escape any educational statistician

A while ago, my daughter’s school explained to parents that they were reorganising literacy classes, moving to mixed-ability groups. My wife asked a simple question: “What is the evidence behind the decision to change?” The result was blank incomprehension. Evidence?

Only a couple of generations ago, most doctors had a similar attitude to evidence-based practice. Fancy statistical procedures were thought to be no match for experience, especially since every case was unique. Randomised trials were all very well in theory, but unethical in practice. That scepticism has now been completely transformed in medicine: evidence trumps seniority, while individual judgment is bolstered by online libraries full of careful analysis.

Teachers have allowed themselves to be left behind in the evidence revolution. I sympathise with the profession which is constantly second-guessed by parents and school inspectors. Teachers have grown used to fad after fad being hurled at them from the Department for Education.

But I agree with Ben Goldacre – epidemiologist and author of an excellent polemic on evidence-based education commissioned by the DfE itself – when he argues that if the teaching profession embraced the evidence-based approach, it would enhance rather than diminish its independence from government. The facts, after all, rarely slot neatly into political ideologies. At a recent dinner organised by the Wellcome Trust, the British educational establishment – with, alas, only one teacher present – discussed the issue. The longstanding tension between teachers and governments was clearly recognised as an obstacle – but it’s one that can be sidestepped if teachers themselves seize the evidence agenda.

This is about much more than simply running randomised trials comparing different approaches to teaching. Consider the situation in clinical practice, as outlined by Professor Jonathan Shepherd, who argues that the secret is a tight plait of research, practice and continuing education. Trainee doctors are taught by practising clinicians. Those clinicians are also researchers, whose research agenda is closely influenced by their clinical experience. Research networks link together qualified researchers with GPs who have patients and research ideas. And once qualified, doctors continue to have the latest evidence pushed under their noses in the likes of the British Medical Journal.

In short, evidence-based practice in medicine isn’t a case of doctors, brainwashed into believing whatever clinical trials tell them, passively awaiting instructions. It’s a two-way street, where some of the best ideas for research are suggested by practitioners, and best practice spreads sideways from clinician to clinician rather than being handed down by diktat. There is nothing fundamental about education that makes this impossible – witness the “journal clubs” in Singapore and Shanghai, where teachers discuss and evaluate the latest research.

One can see why Dr Goldacre calls this a “prize”. Teachers are better placed than anybody to generate new research questions, based on years of observation of subtleties that would escape any educational statistician. There is, at last, some institutional support: the Institute for Effective Education at the University of York, for instance; or the Education Endowment Foundation, two years old this month, which is already running 50 randomised trials in schools, with a grant of £125m from the DfE.

“Trust me, I’m a doctor” was never an excuse for not collecting evidence. And “trust me, I’m a teacher” is not an excuse today. But being a teacher is a superb vantage point for building an evidence-based education system. It is an opportunity that teachers need to seize.

Also published at ft.com.

The UK minister responsible for the arts hopes cake can rescue a crumbling economy, writes Tim Harford

‘Maria Miller will tell arts leaders on Wednesday to stop moaning about government cuts and start making the case for how their organisations can boost economic growth.’
FT.com, April 24

Interesting. Any idea what the culture secretary means?

You mean, do I have any idea what she means, or does she have any idea what she means? The answer’s no, either way. Although she did say that “culture is able to deliver things which few other sectors can”, which suggests that she thinks it’s a bit like Federal Express.

She must have given some examples.

That’s the problem. Every example tells a different story. For instance, she was keen to talk about the £5m a year that the Yorkshire Sculpture Park contributes to the local economy, according to a report commissioned by the Yorkshire Sculpture Park.

The basic benefits measured here were that visitors to the sculpture park might spend money locally, and the park itself also spent money locally, perhaps by buying chocolate cake from Wakefield and selling it to visitors. There is no cost-benefit analysis, so no way of asking whether the Wakefield cake-baking industry might have been stimulated more effectively in another way. Nor is it clear how many of these cakes might have been bought anyway – or in some different part of Yorkshire or indeed the UK.

Still, it is undeniable: people visiting cultural attractions don’t just spend money in the gift shop, but in nearby hotels, restaurants and shops. There’s money to be made.

She must have had some broader vision of the economic value of the arts.

Perhaps. The Arts Council has published a handy guide for arts organisations figuring out their economic benefit and you would be surprised how much of it is about cake-sale uplift, although they do not put things in quite those terms. The guide also mentions that organisations which publish estimates of their value to the local economy do tend to get press coverage, so that’s good, I suppose.

Let’s have some other examples. You’re being mean now.

The culture secretary pointed out that our cultural fame helps foster trade relationships. Perhaps that’s true, but Germany seems to be doing pretty well on the old trade-relationship front despite the fact that its cultural image revolves heavily around Beethoven and Wagner.

Ms Miller was proud of the fact that Norman Foster’s architectural practice is doing well in Hong Kong. She celebrated the fact that the Buxton opera festival had a turnover of £1m, although if economic value is the topic, profit is typically a more interesting number than turnover. And she mentioned that the musical Matilda looks like doing jolly well on Broadway – well done to the Royal Shakespeare Company – while Skyfall, the latest James Bond movie, made an awful lot of money.

If you can see the overarching link between these examples, you’re doing better than I am.

Wasn’t Skyfall produced by Sony anyway?

I think so. Ms Miller also said that “arts and culture are now thought to be as valuable to Merseyside’s economy as The Beatles and football”. Apart from suggesting that The Beatles don’t count as culture, I have absolutely no idea what that means. It may be the cakes again, or something else.

You seem very cynical about funding the arts.

I’m not one who is cynical. The cynic is the person who deploys an economic methodology that cannot distinguish between a museum and a rollercoaster. It is worth asking, though, whether arts funding really constitutes the seed capital that the culture secretary and arts grandees sometimes like to talk about.

I’m looking at a list of the 32 organisations that have received more than £5m from Arts Council England. Opera, ballet, symphony orchestras and theatres all but run the show – mostly venerable institutions. Giving millions of pounds to the RSC, the National Theatre and the English National Opera may be worthwhile; it hardly constitutes “seed funding”.

But the RSC did produce Matilda and the National Theatre produced War Horse.

True. And if you add a few other famous cultural creations – Bond movies, The Lord of the Rings, Harry Potter and a cornucopia of Jane Austen adaptations – it’s hard to avoid the conclusion that the real source of ideas is the British novel, which seems to me to be resolutely unsubsidised.

Also published at ft.com.

This subject has been covered ad nauseam in the econoblogosphere, but I’m still proud of our short More or Less documentary on how a student undercut the economics paper that austerity-minded politicians love to cite.

For more free More or Less podcasts, click here.

New research by the Financial Conduct Authority shows how simple, low-cost research can yield substantial gains

This column will tell you:

• How to write an email that will produce the results you want;

• Why the scientific method can produce practical insights, quickly.

How can I promise this? I’ve just been reading up on the latest research from Paul Adams and Stefan Hunt of the Financial Conduct Authority – the UK’s shiny new financial industry regulator.

I am delighted to report that they’ve been trying to figure out how to write more effective letters. Better yet, to this end they have conducted a large randomised trial. The wonderful conclusion: science can help us write more clearly.

The letters in question were being written by a company to 200,000 former customers. The letters raised the prospect of a mis-sold product and offered the possibility of a refund. The question was: which wording would prod customers into claiming their money? The FCA researchers, in co-operation with the company in question, designed variants of the letter, mailed each variant to 1,000 customers, and compared the response rates.

The original letter looks brief and to the point, but on closer inspection it buries the key detail: the customer may be entitled to a refund. Response rates to this letter were dismally low, less than 2 per cent. Perhaps that is no surprise – the recipients were ex-customers with every reason to throw the letter in the bin, unopened.

The experiment did the sort of thing that profit-seeking companies have been doing for many years: it tested seven different tweaks to the way the letter was written or presented. There are 128 different ways to combine these seven tweaks, and with each of 128 variants sent to 1,000 customers the experiment had a lot of power to pinpoint even quite small effects.

Here are three tweaks that made little difference: printing “important: please read and act quickly” on the envelope induced a minuscule extra response; adding the regulator’s logo achieved nothing; using the company CEO’s name and signature instead of “customer services team” actually dissuaded people from responding.

But four other tweaks had substantial effects: first, cutting a paragraph of waffle that had helped to bury the message about the refund; second, pointing out that a five-minute phone call would suffice to make a claim; third, sending a follow-up letter. And twice as large as any of these effects was adding a couple of bullet points in bold at the top with the key message: you may deserve a refund; if so, call us.

This research has been marketed by the FCA as “behavioural economics exploring how people make financial decisions”, but like similar work on collecting fines and taxes conducted by the Cabinet Office’s Behavioural Insight Team, it is simpler and more pragmatic than that. There is no behavioural theory at play here, and nor do we really gain any insight into why consumers are reacting the way they do. But that’s fine. Simple, pragmatic research is a sensible thing for a regulator to be doing – and the cost of this kind of experiment is tiny relative to the potential gains.

True, the results are unsurprising: say what you mean; be brief; ask for action; follow up if you hear nothing. But this is important. It’s important because it shows a regulator with an interest in learning and improving, and it’s important because while the advice is commonsense, it’s advice that many people – and even more bureaucracies – fail to heed.

And even if the findings seem obvious, the effect is huge. The best letter received seven times as many responses as the original one. The three best tweaks each made more of an impact than the decision to send a letter at all rather than nothing. Brevity and clarity matter: advice worth taking next time you write an email.

Also published at ft.com.