Uncertainty in decision making has always fascinated Yoram Halevy, associate professor of the Vancouver School of Economics. His curiosity for the mechanisms behind economic decisions not only led him to complete a PhD in Economics at the Hebrew University of Jerusalem but also to move all the way to Vancouver to continue his research on behavioral choice patterns. Eager to combine theoretical and experimental tools to learn more about the way we make decisions he recently started the Experimental Lab at the VSE (ELVSE). Apart from running experiments in the lab he also teaches microeconomic theory, behavioral economics and experimental economics to undergraduate and graduate students.
I am currently involved in several projects. One of them is on choice of risk and uncertainty. I find fascinating that all decisions taken by economic agents involve some kind of uncertainty: you go in the market to buy some stocks, you come all the way from Spain to study at UBC, etc. The uncertainty in the outcome of those decisions is truly complex! In economics we assume a simplified model of how agents make decisions, the expectation theory model, but we know it is not fully right. In spite of that, 99.9% of the research conducted on the topic is based on that theorem.
We say that people do not like situations in which they are not given probabilities. We call it the ambiguity equation. There are famous experiments that demonstrate that the dimensions of ambiguity have been overlooked in the past. In particular the correlation of random variables has not been sufficiently explored. You come to UBC and you don’t know whether the professors, the dorms or your friends will be nice. Furthermore you are not aware of how those variables interact with each other. How do you take a decision if you don’t know if the factors that influence your choice are positively or negatively correlated? Are you adverse to the correlation even if you don’t know about it? I am always trying to do both theory and experiments: discipline the theory with experiments and the experiments by the theory.
Another project I have been working on has to do with revealed and estimated preferences. When you go in the market you face a budget constraint when making a decision. The question is what can we infer about the preferences of the consumer from his decisions. Most of the techniques that are used in economics are based on statistical estimation and what we try to provide is a tool that is based on the fact that if you gave me a budget line and I chose something it will reveal to you that this is my preference. And we want to capture as much of that as possible into your preference estimation.
I have also been working on choice over time, on whether people exhibit time consistency in their choices. It had been traditionally accepted that if you give decision makers something to plan for the future and you allow them to revise their decision some time later then they would always revise that choice. It turns out this does not happen so often.
It has a lot of consumption value. You enjoy what you do, you ask questions, you try to answer them, you try to challenge yourself and others (researchers, students,..). You push yourself and others to think about interesting problems, to look around and wonder about whether we are missing something that is evident.
When I was in high school. I grew up in Israel and there was a terrible hyperinflation there during those years (400% per year). But since everything was indexed the economy seemed to be functioning. Then stabilization plans came and everything froze! I thought this was magic and I had to understand it. I tried to do macroeconomics but I was really bothered by the assumptions used to construct the models. Thus I decided to concentrate in understanding and deconstructing the foundations of those assumptions.
I studied Economics and Statistics at the Hebrew University in Jerusalem. I was very curious about Economics since high school but I did not know if I wanted to become a professor at the time. I thought economic thinking was pretty cool and my teachers were very charismatic too so I was very tempted by academia.
Research first but I also enjoy teaching classes like ECON 490 and experimental and behavioral economics for PhD students. I like working with undergraduates that suddenly realize what research is about. In that class I get them involved in one of my research projects and they contribute to it by getting in the mind of a researcher. So then we have 90 people working on the development of an idea. It is amazing to see them going from sitting and nodding in a class to having so much input and thoughtful opinions about the project. The behavioural economics course is really fun too because you basically guide two PhD students to the research frontier.
There are fascinating questions to answer in economics and by doing so you are trying to understand things in a uniform framework: behaviour of individuals, markets and societies. It is so complicated and we know so little about it!