Interview with new faculty: David Freeman

David Freeman is our new faculty member who received his PhD from the University of British Columbia.

What attracted you to SFU Economics?

The department has large research groups in both economic theory and in experimental economics. There are many other faculty with overlapping research interest, making for an engaging intellectual environment.  Having a large, welcoming, and engaged group of young faculty, makes the department a fun place to be. 

Why did you decide to focus in behavioural economics?

First, behavioural economics addresses big policy issues where economics hasn’t always been an active participant in the policy debates.  A few examples of issues that behavioural economics addresses include addiction, undersaving, and the design of retirement plans.  So the field is very relevant to some important policy discussions in which economists are only starting to be active participant.  But the field is still young and there are a lot of issues to be worked out.

Behavioural economics can be extremely scientific, and I was attracted to the highly scientific approach taken by a subset of researchers in the area commonly known as decision theory.  Decision theorists write down precise mathematical models of decision-making that apply on a clearly-articulated domain.  This makes it clear how to test – and possibly reject – our models using economic data, including data from economics experiments. 

What issues are you currently researching?

Currently, my main project studies reference-dependent preferences.  New work motivated psychology has suggested that economic models should incorporate new variables, but often these new variables aren’t observed in the settings that economists typically study.

One such example is the literature on reference-dependent decision-making.  The idea behind reference-dependence goes something like this:

 Suppose I own a mug, and am offered to trade the mug for a pen; I might be biased towards the mug and would elect to keep the mug.  In comparison, if I owned the pen and was offered the chance to trade the pen for a mug, I might be biased towards the pen and would elect to keep the pen.[1]

In this example, owning a mug acts as a reference point that shapes how you value mugs and pens.  This type of psychology could apply in other environments –examples include investment and insurance decisions, and in choosing how many hours to work on a given day. A natural assumption is that a decision-maker’s reference point is consistent with what she expects.  But even with this assumption, we don’t naturally observe the reference point for a given decision in economic data! 

This motivates my work – I show how to characterize models of reference-dependent decision-making using only standard economic data.  The approach is very theoretical and constructive – it shows what types of data you should go looking for if you want to test or measure a model with expectations determining the reference point.

 Thank you Dave! We hope to see the exciting results of your research soon!  

[1] A branch of economics experiments that establish this type of behaviour was pioneered by Jack Knetsch, Professor Emeritus at SFU.