Research papers
The Colour of a Free Ride (The Economic Journal, 2021)
with Paul Frijters
We use a natural field experiment to estimate the causal effect of race on discretionary favours in the marketplace. Test customers are randomly assigned to board public buses with no money to purchase a fare, leaving the bus driver to voluntarily decide whether to offer them a free ride. Based on 1,552 transactions, we uncover strong evidence of racial bias: bus drivers were twice as willing to let white testers ride free as black testers (72% vs. 36% of the time). Signals of wealth and patriotism improve minority testers’ outcomes. Our results show that white privilege extends to unregulated daily interactions.
Media Coverage: New York Times, Washington Post, The Atlantic, Forbes, Wikipedia, WBS News
How do humans respond to large realized losses? (Journal of Economic Psychology, 2025)
with Nick Powdthavee
In a controlled field setting, in which the majority of people in our sample lose more than £90,000, we examine how human beings respond to major financial losses. University ethics boards would not allow this kind of huge-loss phenomenon to be studied with normal social-science experiments. Yet the scientific and practical issues at stake are unusually important ones. In the analyzed gameshow setting, individuals are handed £100,000 in cash. They then have to make risky decisions. Facing a sequence of seven questions, individuals are required to distribute their cash endowment over a set of possible answers. Participants lose any cash placed on a wrong answer. In a sample of British participants, we find that people become increasingly more cautious as they lose more of their cash endowment. A realized prior loss of £75,000 or more increases the propensity to fully diversify by 50 percentage points compared to a prior loss of £25,000. We find a similar cautious response in a smaller sample of US participants when the stakes are raised to $1 million US dollars. Our study appears to be the first to be able to calculate systematically how human beings react to large and unrecoverable financial losses.
Indirect Reciprocity and Prosocial Behaviour: Evidence from a Natural Field Experiment (The Economic Journal, 2018)
with Andreas Leibbrandt
Some of the greatest human achievements are difficult to imagine without prosociality. This article employs a natural field experiment to investigate indirect reciprocity in natural social interactions. We find strong evidence of indirect reciprocity in one‐shot interactions among drivers. Subjects for whom other drivers stopped were more than twice as likely to extend a similar act to a third party. This result is robust to a number of factors including age, gender, social status, presence of onlookers, and the opportunity cost of time. We provide novel evidence for the power of indirect reciprocity to promote prosocial behaviour in the field.
Media Coverage: Wall Street Journal
Is Envy Harmful to a Society's Psychological Health and Wellbeing? A Longitudinal Study of 18,000 Adults (Social Science & Medicine, 2018)
with Andrew Oswald
Nearly 100 years ago, the philosopher and mathematician Bertrand Russell warned of the social dangers of widespread envy. One view of modern society is that it is systematically developing a set of institutions -- such as social media and new forms of advertising -- that make people feel inadequate and envious of others. If so, how might that be influencing the psychological health of our citizens? This paper reports the first large-scale longitudinal research into envy and its possible repercussions. The paper studies 18,000 randomly selected individuals over the years 2005, 2009, and 2013. Using measures of SF-36 mental health and psychological well-being, four main conclusions emerge. First, the young are especially susceptible. Levels of envy fall as people grow older. This longitudinal finding is consistent with a cross-sectional pattern noted recently by Nicole E. Henniger and Christine R. Harris, and with the theory of socioemotional regulation suggested by scholars such as Laura L. Carstensen. Second, using fixed-effects equations and prospective analysis, the analysis reveals that envy today is a powerful predictor of worse SF-36 mental health and well-being in the future. A change from the lowest to the highest level of envy, for example, is associated with a worsening of SF-36 mental health by approximately half a standard deviation (p < .001). Third, no evidence is found for the idea that envy acts as a useful motivator. Greater envy is associated with slower -- not higher -- growth of psychological well-being in the future. Nor is envy a predictor of later economic success. Fourth, the longitudinal decline of envy leaves unaltered a U-shaped age pattern of well-being from age 20 to age 70. These results are consistent with the idea that society should be concerned about institutions that stimulate large-scale envy.
Media Coverage: New York Times, Freakonomics Radio
Evolution of Well-Being and Happiness After Increases in Consumption of Fruit and Vegetables (American Journal of Public Health, 2016)
with Andrew Oswald
Objectives. To explore whether improvements in psychological well-being occur after increases in fruit and vegetable consumption.
Methods. We examined longitudinal food diaries of 12 385 randomly sampled Australian adults over 2007, 2009, and 2013 in the Household, Income, and Labour Dynamics in Australia Survey. We adjusted effects on incident changes in happiness and life satisfaction for people’s changing incomes and personal circumstances.
Results. Increased fruit and vegetable consumption was predictive of increased happiness, life satisfaction, and well-being. They were up to 0.24 life-satisfaction points (for an increase of 8 portions a day), which is equal in size to the psychological gain of moving from unemployment to employment. Improvements occurred within 24 months.
Conclusions. People’s motivation to eat healthy food is weakened by the fact that physical health benefits accrue decades later, but well-being improvements from increased consumption of fruit and vegetables are closer to immediate.
Policy implications. Citizens could be shown evidence that “happiness” gains from healthy eating can occur quickly and many years before enhanced physical health.
Media Coverage: New York Times, TIME Magazine, CNN, Washington Post, Times of India, MyFitnessPal (200+ million users)
The Midlife Crisis (Economica, 2023)
with Osea Giuntella, Sally McManus, Andrew Oswald, Nattavudh Powdthavee, and Ahmed Tohamy
This paper documents a longitudinal crisis of midlife among the inhabitants of rich nations. Yet middle-aged citizens in our datasets are close to their peak earnings, have typically experienced little or no illness, reside in some of the safest countries in the world, and live in the most prosperous era in human history. This is paradoxical and troubling. The finding is consistent, however, with the prediction—one little-known to economists—of Elliott Jaques (1965). Our analysis does not rest on elementary cross-sectional analysis. Instead, the paper uses panel and through-time data on, in total, approximately 500,000 individuals. It checks that the key results are not due to cohort effects. Nor do we rely on simple life satisfaction measures. The paper shows that there are approximately quadratic hill-shaped patterns in data on midlife suicide, sleeping problems, alcohol dependence, concentration difficulties, memory problems, intense job strain, disabling headaches, suicidal feelings, and extreme depression. We believe that the seriousness of this societal problem has not been grasped by the affluent world's policy-makers.
Media Coverage: New York Times, Fortune, The Times, The Spectator, Freakonomics Radio, Wikipedia
Economic choices and status: measuring preferences for income rank (Oxford Economic Papers, 2013)
with Paul Frijters
We report on the trade-offs that 1,068 Australian university students make between absolute income and the rank of that income in hypothetical income distributions. We find that income rank matters independently of absolute income, with greater weight given to rank by males, migrants, and individuals from wealthy families. Rank-sensitive individuals require as much as a 200% increase in income to be compensated for going from the top to the bottom of the income distribution. Migrants residing abroad for longer periods of time, and with more affluent job titles, are more likely to compare themselves to others at the destination. A dynamic choice model of compensating incomes predicts the average respondent to need a permanent increase in income of up to $10,000 (70%) when moving from a society with a mean income of $14,000 (e.g., Mexico) to a society with a mean income of $46,000 (e.g., the USA).
Conspicuous Consumption, Conspicuous Health, and Optimal Taxation (Journal of Economic Behavior & Organization, 2015)
with Paul Frijters
We present a simple model of status-seeking over multiple socioeconomic domains by introducing the concept of conspicuous health as an argument in the utility function, in addition to the well-established conspicuous consumption term. We explore the implications of such a utility function for optimal non-linear taxation, where an increase in concerns for conspicuous health has an opposite effect on the marginal tax rate, compared to an increase in concerns for conspicuous consumption. Using life satisfaction panel data from Australia, along with an improved measure of exogenous reference groups (that accounts for the ‘time era’ of respondents), we find empirical evidence of a comparison health effect.