In a new Cognition paper, Barbara Pavlek, @replicatedtypo & I try to "reverse-engineer" cash. The design of coins is adapted to our cognitive biases. Knowing them, we can uncover hidden patterns in coined currencies. Thread (1/10).https://tinyurl.com/rxyr968
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If true, that's a problem. The mistakes we make when counting coins are expensive. The way cash appears to us also has economic consequences: our perceptions of value are influenced by the size or aspect of coins & bills (even if it's not relevant). Psychology matters. (3/10)
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We show 2 things about today's coins. (1) coin designs are more distinctive for higher-value coins; (2) coin sizes track coin values logarithmically. These two features were derived from cognitive mechanisms. (4/10)
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Cognitive linguists show that our categories obey an "informativeness-simplicity trade-off". When we name colours, or kinship ties, there are things we tend to lump together (older & younger sisters), while we distinguish others (fathers & mothers). (5/10)
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A simple system has few categories: it is easy to remember & use. An informative system has more categories & is more precise. Languages manage to solve this tradeoff by having more categories for important things (close kin; warm colours), fewer categories for the rest. (6/10)
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What does that mean for coins? We predicted that coin designs & colours should mark out the differences between coins that matter. In all currencies, high denominations are spaced farther apart (compare 1–2 cents vs. 25–50 cents). Confusing them is more costly. (7/10)pic.twitter.com/9B04stJmQ7
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We show that coin designs are more likely to differ between coins that differ more in value. Value differentials are bigger for coins with different designs or colours. This keeps the cost of mistaking one coin for another low, yet keeps the currency visually simple. (8/10)pic.twitter.com/T6TQLkw7kK
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We also show that coin sizes track coin values logarithmically. Reasons to expect this come independently from economics (marginal utility theory) & psychology (the view that our minds represent magnitudes with log functions, applied to money by dehaene handle).(9/10)pic.twitter.com/eqLuNd0Gf8
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So most coins are fine pieces of engineering. But what about that Lincoln penny study? Well, the subjects were actually quite good at remembering the features that set the penny apart from other coins. They forgot what was irrelevant. (10/10)
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As usual the full data & code are open & accessible on the Open Science Framework, along with our preregistration. https://osf.io/2vuba/ ; and an OA preprint:https://osf.io/2qc4s/
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