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Seminar: Karna Basu (Hunter College)
Dr. Karna Basu is an associate professor of economics at Hunter College and CUNY's Graduate Center. He was a postdoctoral fellow at the University of Chicago from 2006 to 2009.
Dr. Basu's research centers on the intersection of behavioral economics and development, with a particular focus on informal banking. His research has been published in journals such as the Oxford Economic Papers, Journal of Public Economic Theory, Journal of Development Economics and The New England Journal of Medicine.
Dr. Basu holds a BA from Yale University and a PhD from the Massachusetts Institute of Technology.
Presenting on --
Title: "A Miscalculated Risk: Investment choices under exponential growth bias"
Abstract: "Exponential growth bias” – the tendency to underestimate exponential growth – has been shown to affect how much people save and borrow. I develop a simple theoretical framework to show that this bias, through its interaction with individual risk preferences, also affects how people save and borrow. Relatively risk-tolerant consumers will choose inefficiently safe investments, appearing more risk-averse than they are. In contrast, relatively risk-averse consumers will choose
inefficiently risky investments, appearing less risk-averse than they are. I present survey data to support this hypothesis. The model introduces a new perspective on some apparent anomalies in intertemporal choice and raises additional considerations for consumer protection and financial literacy programs.
Location: Hunter West 1537 (Economics Conference Room)
