New Caltech assistant professor of economics Kirby Nielsen thought she wanted to be a surgeon in college. She studied biology and worked as an EMT (emergency medical technician), taking ambulance rides as part of her education. Eventually, however, she realized she did not want to be a doctor, or even a biologist; it was economics that most captured her interest. Ultimately, she found her way to the field of experimental economics.
She earned her PhD in economics from Ohio State University in 2018, and then served as a postdoctoral fellow in economics at Stanford University from 2018 to 2020.
Specifically, Nielsen's work focuses on individuals' decision-making behavior and uses experiments to study how people perceive risk and uncertainty. The results of her research can better inform how people make decisions in a range of areas, including financial investments and healthcare, as well as managerial decisions in the workplace.
We met with Nielsen over Zoom to discuss her research and her transition to Pasadena in the midst of a pandemic.
Can you tell us more about your pre-med college years?
I went to undergrad at Rice University in Houston, primarily because I wanted to be pre-medicine. I was an EMT for my first year of college, and then later I did an internship at Scripps Research Institute in Florida, which was closer to home; I grew up in south Florida.
At Scripps, we trained fruit flies to recognize different smells to study learning and memory. It was a great experience, but I came to realize I didn't care that much about fruit flies. That was the turning point. I liked doing research, but I didn't love biology. When I thought about what would be my favorite subject to research, I kept coming back to my favorite subject in high school, which was economics. That's when I started to learn about researching human behavior in economic contexts, which led me to experimental economics.
What does behavioral and experimental economics entail?
Whenever I tell people I am an economist, they think I must study the stock market. But behavioral economists study behavior and how it relates to various kinds of markets and interactions. Experiments are a tool we use for studying this behavior. While a lot of experimental economics work is about studying strategic interactions between two parties, my focus is more on individuals and how they perceive risk and uncertainty.
Caltech has a long history of being a powerhouse in experimental economics, which is why it is so exciting to work here. Experimental economics is becoming more mainstream but it's still relatively new in the broad scope of economics. Not all schools are as friendly toward experiments. Here, I have a supportive department and there are so many people I can talk to in this field. Also, Caltech as a whole is very research-focused, and it's exciting to be around both faculty and students who value and prioritize research.
How do the experiments work?
Before the pandemic, we would bring people into a computer lab to participate in the experiment, but we can also do these studies online. Generally, the participants click through questionnaires or other programmed interfaces. The main thing in economics is that we incentivize all the choices we are asking people to make. You can't just ask people to make a bunch of decisions and pay them $20 at the end, because they might just click to get their payment.
The amount you are paid, or whatever you receive from the experiment, needs to be tied to the decision that you actually make. A big part of experimental design is incentivizing these choices so people truthfully tell you what their preferences are. It can be a fun challenge to find new and unique ways to incentivize some decisions.
Can you tell us about some of your current research?
One question we are looking at now is how past experiences affect your future risk-taking. We basically find that if the risk goes well, then you are more likely to take a risk again. And if the risk goes poorly, you become less likely to take the risk. That sounds sensible but it depends on what type of risk it is. Take the lottery. That's a long-shot risk. There's a small chance of winning but when you win, you sometimes win big. And then when you don't win, you don't lose that much for a scratch-off ticket. In this case, if you lose, you actually become more likely to take risk because the amount you win can cover your losses.
Another example is the stock market. If your stock goes down, are you going to pull your stock and try to buy a new stock to cover the loss? We are trying to understand how people respond to uncertainty in everyday life. This kind of research can help us better inform financial decisions, for example how people invest their money.
Another set of experiments is looking at how people get information about uncertain events. At least so far, the literature has assumed that getting information earlier can only help you: The more you know, the more informed your decisions will be. But we see people avoiding information in some settings. Why are they doing this?
In our project, we are comparing when people like to receive information about something that's already happened in the past, such as a medical test, versus learning about something that's resolving over time, such as an election. What we find is that people are more likely to avoid information in the latter case, where a situation is not resolved. It's the rollercoaster of emotions that people don't seem to like.
This kind of work has applications in several areas, but the health domain is an obvious example, because people tend to avoid information, such as finding out whether they have a gene for a certain disease. The way information is presented to people may make them more likely to get a genetic test or not.
Some of this research sounds like psychology. How is behavioral economics different from psychology?
Behavioral economics is more focused on topics that are economically relevant. For example, rather than just understanding your personality, we really want to know how this comes to bear in markets where a lot of people are interacting. But we borrow a lot of insights and methodologies from psychology, which is part of what makes behavioral economics such a fun area to work in. Behavioral economics is the intermingling of psychology and economics, so I get to combine the cutting-edge tools from both fields to better understand behavior.
How are you liking Pasadena so far?
It's weird to move to a new place and not go anywhere because of the pandemic, so it's hard to give a complete answer to this question. I don't know the restaurants yet because we have been doing just takeout. But so far, I do really like spending time outside, hiking, and that sort of thing. Coming from south Florida, where it is entirely flat, I don't think I saw a mountain for the first 16 years of my life. Every time I look up at the mountains, I'm fascinated. I'm making up for lost time in that regard.
I also spend my time with two cats, Ender and Aslan. We adopted them just after moving to Ohio and starting grad school. They've had to move around a lot, but they seem to be enjoying life here in Pasadena. I do find that I spend a disproportionate share of my time taking pictures of them. I can't help it!