Underestimation of money growth and pensions: Experimental investigations. ESRI WP611, February 2019

People underestimate long-term growth in savings because they linearise exponential growth – a phenomenon known as exponential growth bias (EGB). This bias has implications for multiple financial decisions, particularly those relating to pensions. We hypothesised that underestimation might be even more severe for regular savings relative to lump sums, because savers need also to estimate accumulation. The additional cognitive load could strengthen EGB, or individuals might underestimate accumulation in addition to EGB. Four experiments investigated: (1) whether underestimation of money growth is greater for long streams of regular savings than for lump sums; (2) whether underestimation occurs when questions are framed intuitively as the cost of delaying starting a pension; and (3) whether practice with a calculator designed to illustrate the cost of delay attenuates underestimation. Individuals were more likely to underestimate money growth from regular savings than from lump sums, because they failed to accumulate contributions in addition to displaying EGB. Underestimation was substantial and persistent. Practice with a calculator partially attenuated underestimation, primarily among individuals with higher educational attainment and without a pension. Overall, these findings imply that across multiple judgements, decisions and frames, individuals substantially underestimate money growth, reducing the attractiveness of saving

U.S. Beer Flows & the Impact of NAFTA

After World War II and up until the 1980’s, the liberalization of trade was realized on a multilateral basis. World trade grew at twice the pace of GDP growth (Krueger, 1999). However, starting in the mid 1980’s, preferential trading arrangements (PTAs) increased in numbers. Perhaps the most influential PTA ever to be signed could be the North America Free Trade Agreement, or simply NAFTA, which came into effect January 1, 1994. The agreement established a free-trade area between its member countries- US, Canada and Mexico- in which all tariffs would be phased out between them, but each country would maintain its separate national barriers against the rest of the world. A lot of attention has been paid to the impact of NAFTA on the welfare of its member countries and on the rest of the world. This paper will focus on the impact of the agreement on the US’s beer trade flows by analyzing annual import and export data using several methods. To our knowledge there is no precedent for such research. Section II provides a brief review of the conclusions and methodology of existing works on NAFTA trade issues, as well as some important aspects of the agreement. Section III provides an overview of the world beer industry, and the NAFTA member countries beer markets. Section IV provides in great detail the methodology that we will employ. The focus of Section V is to explain the results obtained. Section VI provides conclusions and implications for further research on this subject. References and other sources can be found in Section VII.beer trade on US market, NAFTA

The framing of options for retirement: Experimental tests for policy. ESRI WP604, December 2018

We hypothesise and confirm a substantial framing effect in relation to whether people opt for an annuity on retirement. Two laboratory experiments were conducted in collaboration with a national pensions regulator. Individuals demanded a higher annuity rate when pensions were initially conceived of as an accumulated lump sum – a “nest egg” or “pension pot” – than when they were initially conceived of as retirement income. The effect was recorded using both a matching and a choice procedure. Effect sizes implied more than a doubling of demand for annuities at market rates. While mindful of the need for caution in generalising from hypothetical laboratory studies, the findings have potentially strong policy implications. The framing of pension products in marketing materials and disclosures may have substantial effects on financial risks borne in later life

Dynamics of leg muscle function in tammar wallabies (M. eugenii) during level versus incline hopping

The goal of our study was to examine whether the in vivo force-length behavior, work and elastic energy savings of distal muscle-tendon units in the legs of tammar wallabies (Macropus eugenii) change during level versus incline hopping. To address this question, we obtained measurements of muscle activation (via electromyography), fascicle strain (via sonomicrometry) and muscle-tendon force (via tendon buckles) from the lateral gastrocnemius (LG) and plantaris (PL) muscles of tammar wallabies trained to hop on a level and an inclined (10°, 17.4% grade) treadmill at two speeds (3.3 m s^(-1) and 4.2 m s^(-1)). Similar patterns of muscle activation, force and fascicle strain were observed under both level and incline conditions. This also corresponded to similar patterns of limb timing and movement (duty factor, limb contact time and hopping frequency). During both level and incline hopping, the LG and PL exhibited patterns of fascicle stretch and shortening that yielded low levels of net fascicle strain [LG: level, -1.0±4.6% (mean ± s.e.m.) vs incline, 0.6±4.5%; PL: level, 0.1±1.0% vs incline, 0.4±1.6%] and muscle work (LG: level, -8.4±8.4 J kg^(-1) muscle vs incline, -6.8±7.5 J kg^(-1) muscle; PL: level, -2.0±0.6 J kg^(-1) muscle vs incline, -1.4±0.7 J kg^(-1) muscle). Consequently, neither muscle significantly altered its contractile dynamics to do more work during incline hopping. Whereas electromyographic (EMG) phase, duration and intensity did not differ for the LG, the PL exhibited shorter but more intense periods of activation, together with reduced EMG phase (P<0.01), during incline versus level hopping. Our results indicate that design for spring-like tendon energy savings and economical muscle force generation is key for these two distal muscle-tendon units of the tammar wallaby, and the need to accommodate changes in work associated with level versus incline locomotion is achieved by more proximal muscles of the limb

Dynamic test/analysis correlation using reduced analytical models

Test/analysis correlation is an important aspect of the verification of analysis models which are used to predict on-orbit response characteristics of large space structures. This paper presents results of a study using reduced analysis models for performing dynamic test/analysis correlation. The reduced test-analysis model (TAM) has the same number and orientation of DOF as the test measurements. Two reduction methods, static (Guyan) reduction and the Improved Reduced System (IRS) reduction, are applied to the test/analysis correlation of a laboratory truss structure. Simulated test results and modal test data are used to examine the performance of each method. It is shown that selection of DOF to be retained in the TAM is critical when large structural masses are involved. In addition, the use of modal test results may provide difficulties in TAM accuracy even if a large number of DOF are retained in the TAM