BETA Podcast: Interview with Dr Gigi Foster

BETA Podcast: Interview with Dr Gigi Foster

Domestic Policy Behavioural Economics
Thursday, 26 April 2018

Department of the Prime Minister and Cabinet

Image of Dr Gigi Foster. Text reads Dr Gigi Foster, Beta Podcast

In this podcast, BETA interviews Dr Gigi Foster, Associate Professor at the University of New South Wales Business School. With a background in ethics, politics and economics, Dr Foster’s interests lie in education, social influence and the multidisciplinary aspects of human behaviour in groups.

Dr Foster speaks with BETA about how to take account of concepts such as loyalty and greed in existing economic frameworks. She also talks about mathematically modelling the dynamics of love, and exploring whether social norms prevent women from earning more household income.

Dr Foster also talks about her favourite behavioural bias, and how she applies behavioural economics in her everyday life.

For further details on BETA and behavioural economics in government policy, please visit the BETA website.

Disclaimer: BETA's podcasts discuss behavioural economics and insights with a range of academics, experts and practitioners. The views expressed are those of the individuals interviewed and do not necessarily reflect those of the Australian Government.

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Transcript

Elaine Ung: Hello and welcome to another episode of BETA's podcast series. BETA or the Behavioural Economics Team of the Australian Government is part of the Federal Department of the Prime Minister and Cabinet, and our mission is to advance the wellbeing of Australians by applying behavioural insights to public policy and administration. In fact, BETA’s about to host the 2018 Behavioural Exchange Conference (or BX2018) to build skills and knowledge to support this mission. Stay tuned to the end to hear more on BX2018. My name’s Elaine, and I'm part of the team. In this podcast series, we're interviewing a whole range of academics and practitioners in the field of behavioural economics and behavioural insights.

Today, I'm meeting with Dr. Gigi Foster. We're so excited to have Dr. Foster with us today whose research has many linkages to practical policy outcomes. She has a bachelor of arts from Yale, majoring in ethics, politics, and economics, and a PhD in economics from the University of Maryland. Dr. Foster's research interests and contributions lie in the areas of education, social influence, and in behavioural economics and the multidisciplinary aspect of human behaviour in groups. Hopefully, we'll get to hear her speak more about that later in the podcast. Welcome, Dr. Foster.

Could you give us a bit of background, please? Who you are and where you've come from?

Dr Gigi Foster: Sure. I work as an associate professor at the University of New South Wales in the School of Economics. I've been in Australia since 2003. I was born in the United States and went to school there at various places. I got my undergraduate degree from Yale University in ethics, politics, and economics—that was my major. And then I worked in the consulting world for a couple of years in New York City for a human resource consultancy, and then decided that I just was not going to be able to stomach being a nine-to-five working stiff, so I decided to apply to graduate schools.

I had actually thought I might go to law school, but my father told me there are too many lawyers already in the world, so that actually did prompt me to not go to law school and to try economics instead. I got my PhD in 2003 from the University of Maryland. I had my children while I was in graduate school, moved out here, married an Australian, which was the reason to come to Australia, and actually first came to Adelaide, and then in 2009, moved to Sydney.

Elaine Ung: Great! How did you get interested in behavioural economics?

Dr Gigi Foster: I guess I've always had a really strong interest in human behaviour, partly because my mother was a cognitive behavioural psychologist and my father was an engineer. And economics gives you a lovely combination of the structure of engineering, the notion of whole systems analysis and trying to optimise systems to achieve a particular objective—which of course in economics is really about social welfare—and the psychological angle gives you interesting questions to ask and thoughts about, "Well, how could we in fact intervene to get a better outcome for people who have certain kinds of psychologies, mental traits, habits?"

I think those two things combined, the engineering and the psychology, to make me interested in issues of human behaviour, particularly group influence, and then also issues of how do we intervene in societies as a government, how do we even intervene in families, as the—whatever role you play at a family, to try to get a better outcome for people's welfare.

Elaine Ung: That's great. Could you please share with us some of your research and also what you're working on now?

Dr Gigi Foster: Yeah, sure. I think the most exciting project that I've worked on is one that's still ongoing. It's one of these massive undertakings, which will probably take at least until I retire to make me feel that I'm satisfied with the work that I've produced. The first thing that come out of it is a book in 2013 with my co-author and friend, Paul Frijters. This is An Economic Theory of Greed, Love, Groups, and Networks.

What we try to do in this book is take the economic framework that is familiar to mainstream theorists, and even practitioners in government and industry, and try to add to it tractable reduced form concepts that have been explored a lot in other social sciences, so groups, group influence has been explored in sociology, anthropology, social psychology. Loyalty and love have been potentially explored in psychology, although not as much as one would think, and the idea of networks and how they can start as economic phenomena and then turn into political phenomena, that's been analysed a lot in political science, so we're trying to encapsulate these crown jewels of other social sciences and bring them into the tractable and simplified frames that economists use that they need, that they offer the world for understanding it, and then generating policy advice.

This is a huge project because it's essentially trying to reduce this immense complexity of human behaviour. Particularly in relation to how societies are built from the individual up to the groups that varies, different overlapping groups we see in societies in a way that keeps the analysis tractable and simple enough that we can actually do something with it, so there's a lot of outgrows of that project.

At the moment, I'm working on a paper modelling the dynamics of love in a mathematical form, so generating phase diagrams to explore basically what happens when certain ingredients are fit into a model where we think it's a reasonably good map of what actually happens within a person when they're falling in love, which is not entirely a conscious process, so you have to incorporate some elements that are outside the control of the individual. What ingredients then are necessary to sustain love? What might threaten it? All of these things from a mathematical perspective, which allows us to get more tractability.

I'm also working on, in terms of something that's a little more I guess tangible, a paper with a co-author named Leslie Stratton about the interesting idea, which has been published recently in one of our top journals in 2015, I think, that there may be norms in society that prevent women from earning more than 50% of the household income at their household or at least that women shy away from this. We want to test and see whether this is actually true using HILDA, which is Australian data, and also see whether if it is true or to the extent that it's true, is it more true in certain kinds of couples than others? Joint investments like children and actually getting married rather than just cohabiting may change people's adherence to these kinds of norms, and we've studied norms in other papers together using HILDA as well.

I guess finally, there's a project that I'm really interested in. I'm really excited about optimal histories, and the idea here is that history is really just—it's a fabrication: it's a collection, a selected collection of things that may have happened, and every nation has an option about how to try to push the construction of its history that's fed to its citizens. What we want, of course, as economists is again maximum welfare, so how to build a history that actually maximises welfare. The most pro-social providing kind of stories of what this group and that group that have come together now in the one country, how they've interacted in the past, how they might go forward in the future. This is something that is very sensitive, but I see it's very fundamental to the kind of interventions that economists could be advising upon for governments to do because governments have all sorts of levers related to how to construct their histories from education systems through to national days.

Elaine Ung: Wow, it sounds so fascinating and interesting, and also demonstrates how it crosses across all the different disciplines, and that's what we see in BETA as well. A lot of the behavioural economics is not just one field.

Could you give us an example of some of your research that demonstrates the potential of behavioural economics?

Dr Gigi Foster: There are many different possible ones I'm thinking through my mind now. I would say one interesting project that I've been working on is in relation to corruption: it's how people manage to maintain elite subgroups that capture a surplus that actually belonged to the whole group. This is something relevant in Australia. You may have heard of the book Game of Mates: How Favours Bleed the Nation. It's a book that came out middle of last year by Paul Frijters, my co-author on An Economic Theory, and Cameron Murray, another economist. It documents, in different industries in Australia, how there has been rent capture and sustained rent capture by certain cliques at the tops of industries.

Now, as economists, we are interested in figuring this out, "How does this happen? How does it get sustained?" because again, we want to maximise social welfare, aggregate total welfare, right? For example, in this line, I have a paper also with Paul about the welfare costs of the banana import restrictions in Australia. Banana import restrictions are often defended on the basis that, "Well, we need to have a pure food supply in Australia. We need to protect Australia from bugs and horrible diseases." The reality is that most diseases already exist here, and there are plenty of countries which grow bananas and manage to combat the diseases.

In fact, what happens when we protect, supposedly protect Australia in this way is we're really protecting the banana industry, which only employs a few thousand people compared to the millions of Australians who have to pay $18 a kilo for the bananas if the Queensland banana supply gets wiped out by a hurricane and this is what we study. We find massive welfare costs from that policy. I've also done lab experiments that examine the kinds of voting rules and institutions around decision-making, leadership decision-making that you'd want to have in place if you want to discourage the formation of exclusionary subgroups who then capture a total pie and basically just divide it amongst themselves and exclude some minority permanently, essentially, from accessing any of the pie.

In one of the experiments we actually had a little revolution on our hands where the excluded bunch just refused to even play, and we’d just delay, and delay, and delay, and we had to stop the session early because we couldn't get through it because they were so angry. So we think we're studying something important.

Elaine Ung: Absolutely. You've talked about quite a few different behavioural biases and the different concepts that you've come across in your research. Is there a single one that you would consider your favourite or a special one to you?

Dr Gigi Foster: As I said, I've always been interested in group influence, and so anything that mediates the influence of a group on the individual for me is very powerful. We are different people in different settings. I have another paper about that essentially that talks about the fluidity of self. Economics has this fiction that a person is always fixed, and this is obviously wrong. We don't have fixed preference maps, et cetera, so I think the idea that we are in fact fluid, and flexible, and influenced by our groups is something that is extremely powerful and often overlooked in a lot of policy settings and also in a lot of academic settings.

Elaine Ung: Right, and that's what we're recognising now and hopefully being able to use a lot of that information and that research in policy making. Do you apply any of these behavioural biases or behavioural economics to yourself?

Dr Gigi Foster: Sure. Well, I study love, so in studying that, I've developed a model of it arises, and how it's sustained, and how it can die, and so I definitely,—you know it's a very shocking thing to apply that to your own loves, right, but I have done that mainly because I consider myself a steward of my own relationships as everybody does, and I want to use the best tools I have to be a good steward of those relationships. So I do put emphasis on the kinds of things that my theory says are important in sustaining love or in avoiding it if I don't want to go there in a particular situation, so that's definitely something.

I've also really come back to my roots in terms of understanding how important cognitive and metacognitive skills are. Thinking about a situation gives you such incredible power in controlling what happens to you and what your behaviours end up being, right? This notion that behavioural insights or behavioural economics is all about how people are weak and they need to be shepherded this way and that because they're going to have all these limitations and heuristics that are wrong and all this.

Yeah, okay, on average, but an individual can combat that through mental techniques, mental efforts. It does take effort, but to engage that, to get in the habit of engaging your own mental strengths so that you maintain mental flexibility, you maintain perspective, you create contrast in your life so that you can actually experience things and you can make better judgments. That's been, for me very, very important, so I always try to,—even though I have a great life and I could have I suppose one of these happiness scales of, "You're always on a 9 out of 10." I could have that, but I try to expose myself to a three or a four on a regular basis. I make myself suffer a little bit because then I really enjoy being at that nine, and otherwise I wouldn't. So the idea that contrast is important is something I use a lot.

Elaine Ung: Great, and so one final question then. What's next on your agenda?

Dr Gigi Foster: Well, I'm going to keep trying with this book, and basically, the project that it outlines, which is to do more integration. The main thing I want to do in that area, I suppose as a public service to economics, is to try to recruit really good mathematical theorists. Theorists in our discipline typically get trained using an apprenticeship model, which I didn't go through. I can follow a theory, but I've not built them from scratch myself in a mathematical sense. I can build them in conceptual ways, but in terms of the maths involved,—I mean, it's just incredibly complex what we're trying to do so we need theorists who are extremely well-tooled up, but who also believe in the enterprise. Which is to abandon the idea that it's really socially valuable to continue to model very stylised, highly unrealistic states of worlds which don't really exist in real life, where you can't apply the recommendations or the implications of the model to any real-world setting. I find that useless. So I want to recruit some theorists from that monastic clan into the job of actually writing down a holistic theory that is more matched to how people really make decisions in the real world.

Elaine Ung: Wow, sounds like a lot of interesting things in the pipeline, and we can't wait to see more of your work in the future.

Dr Gigi Foster: Thanks, Elaine.

Elaine Ung: Thank you so much for your time.

Dr Gigi Foster: No worries.

Elaine Ung: If you'd like to know more about Dr. Foster and her research, you can find her list of publications on the UNSW Business School website.

I’m also really excited to share that BETA is bringing BX back to Australia. Last year it was held in Singapore, and before that, at Harvard University. This year, we’re bringing it to Sydney. Our speaker line-up includes Nudge co-author and Harvard professor Cass Sunstein, John List, Chairman of the Department of Economics and Professor at the University of Chicago, Dr Elise Payzan-LeNestour, Associate Professor from UNSW, Elizabeth Hardy, Senior Leader of the Behavioural Insights team of the Canadian Government, Tim Soutphommasane, Australian Race Discrimination Commissioner, and many, many more.

From behavioural economics 101 to workshops on specific policy issues, there’s something for everyone. Learn more or register now on the website: www.bx‑2018.org. Once again, I'm Elaine, and you've been listening to a BETA podcast. You can hear our previous episodes at www.pmc.gov.au/beta. Until next time.