Uncertainty in decision making has always fascinated Yoram Halevy. 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 directs 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 under uncertainty. I find it fascinating that all decisions taken by economic agents involve some kind of uncertainty: you buy stocks in the stock-market, you move all the way from Spain to study at UBC, etc. The uncertainty concerning the outcomes of these decisions is truly complex! In economics we often assume a simplified model of how agents make decisions: the Expected Utility Theory model, but we know it does describe human decisions well. In spite of that, 99.9% of the research conducted in Economics is based on this (wrong) model!
We have strong evidence, based both on introspection and experiments, which show that people dislike situations in which they are not faced with objective probabilities. We call this behavior ambiguity aversion. But there are now new experiments demonstrating there are dimensions of ambiguity which have been overlooked so far. In particular, the correlation between random events has not been sufficiently explored. For example, when 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 success are positively or negatively correlated? Are you averse to the correlation even if you don’t know it? This project started as a thought experiment, then moved to an actual laboratory experiment and then we returned and asked ourselves how the observed behavior can be modelled. 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 recovered ("estimated") preferences. The question is what can we infer about the preferences of the consumer from her choices in a market where she faces a budget constraint. Most of the techniques that are used in economics are based on statistical estimation procedures and what we try to provide is a tool that is based on the fact that if the agent faced a budget constraint and chose something, it will reveal to an outside observer that this is the agent's preference. The challenge is to extract as much information as possible about the preferences from every single choice, without making auxiliary assumptions.
I have also been studying for a while people's choices over time, and in particular if they are consistent. It has been traditionally accepted that if you ask decision makers to plan for the future and then allow them to revise their decisions some time later, they would often choose to revise. It turns out this does not happen so often, and when it does - it is not necessarily for the reasons we conjectured.
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 that suffered a terrible hyperinflation during those years (up to 400% per year), but since everything was indexed the economy seemed to be functioning. Then a stabilization plans was implemented and everything went back (more or less) to normal! I thought this was magic and I had to understand it. Initially I thought I would do macroeconomics, but I was really bothered by the assumptions used to construct the models used in macro. Thus I decided to concentrate on 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 adopting the viewpoint of a researcher. So then we have 15-20 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 the PhD students into the research frontier.
There are fascinating questions to answer in economics and by doing so you are trying to understand things in a uniform and consistent framework: behaviour of individuals, markets and societies. It is so complicated and we know so little about it!