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“Money doesn't buy you happiness, but lack of money certainly buys you misery."-Daniel Kahneman
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has won the Nobel Prize in Economics, 2017, for his work into how psychology informs economic decision making. Daniel Kahneman, the Princeton psychologist who shared the 2002 Nobel Prize in economics for his role in developing the field of behavioral economics, is a night person. Early on Monday morning, he went to sleep at around 3 a.m.,which meant that he missed the call at 6:49 a.m. from his closest friend and longtime research collaborator, the University of Chicago economist Richard Thaler, who had just been named the sole recipient of the 2017 prize.
Behavioral Economics
(Click to expand the collapsible Link to quickly navigate to the relevant information)Behavioral Economics
People’s emotions and thoughts can affect how they make decisions about making/spending/saving/investing money.
Behavioral Economics, a new significant field of economic research, is the study of the effects of psychology on economic decision making.
Standard Economics: People always make rational decisions...without letting their emotions cloud their judgement …
The rational model of decision making involves:
identifying and clarifying the problem
prioritizing goals
generating and evaluating options
comparing predicted results of each option with the goals
choosing the option that best matches the goals
monitor the implementation
the above model assumes that decision making is:
consistent
based on accurate/correct information
free from emotion and prejudice
rational
In Behavioral Economics:
In Behavioral Economics:
People generally act on “rules of thumb” as opposed to rational thought. People believe that they get what they pay for in their decisions to purchase. However, sometimes cheaper products are just as good, if not better, than the branded more expensive ones. In such cases it would be rational to buy the cheaper products. In reality, most people buy the more expensive products, with the wrong perception, in many cases that there are superior.
Framing -People decision in purchasing is affected/framed by how the product/price is presented. Framing can be seen when stores advertise discounts. Example: a product has a price of 3.99 euro but it is not selling very well. Two stores selling the same product have each devised a way to help its selling by advertising a discounted price... Both stores decide to sell this product for 0.99 euro. The first store advertises the product to be sold at 75% off the original price without mentioning the original number. The second store advertises the product to be sold with a discount of 3.00 euro off the original price.. The first store will have more buyers than the second one.The 75% of the customers perceived a lot more than just 3.00 euro off. How the discount was presented affected the traffic and subsequently the sales of the two stores.
Behavioral Economics focus on market inefficiencies and can explain outcomes when something other than the expected happens. This concept applies to the stock market.
Herding-following the crowd. People may rationally understand that doing these things will make the economy worse, but because everyone else is doing it, they do it, too.
In times of economic recession, Behavioral Economics can explain and predict how people will respond.
Richard Thaler on the Future of Behavioral Economics
(born March 5, 1934) is an Israeli American psychologist and winner of the 2002 Nobel Memorial Prize in Economic Sciences. He is notable for his work on the psychology of judgment and decision-making, behavioral economics and hedonic psychology.
@Google Talks is proud to welcome hero of psychology, Daniel Kahneman.
Daniel Kahneman quotes:
“Money doesn't buy you happiness, but lack of money certainly buys you misery."
"We can be blind to the obvious, and we are also blind to our blindness."
“The psychologist, Paul Rozin, an expert on disgust, observed that a single cockroach will completely wreck the appeal of a bowl of cherries, but a cherry will do nothing at all for a bowl of cockroaches.
"We're generally overconfident in our opinions and our impressions and judgments."
Behavioral Economics - A conversation with Richard Thaler
is a Lebanese American essayist whose work focuses on problems of randomness, probability and uncertainty. His 2007 book "The Black Swan" was described in a review by Sunday Times as one of the twelve most influential books since World War II.
Nassim Nicholas Taleb quotes
"Debt is a mistake between lender and borrower, and both should suffer."
"I lift heavy weights and sprint, but I am so bad at it that I develop severe injuries."
"Governments that try to shoot for a surplus hardly ever reach it."
"If you are in banking and lending, surprise outcomes are likely to be negative for you."
“The three most harmful addictions are heroin, carbohydrates, and a monthly salary.”
"Intelligence consists in ignoring things that are irrelevant."
"They are born, put in a box; they go home to live in a box; they study by ticking boxes; they go to what is called "work" in a box, where they sit in their cubicle box; they drive to the grocery store in a box to buy food in a box; they talk about thinking "outside the box"; and when they die they are put in a box."
Dan Ariely
Dan Ariely
The author of "Predictably Irrational", uses classic visual illusions and his own counterintuitive (and sometimes shocking) research findings to show how we're not as rational as we think when we make decisions.
Dan Ariely studies the bugs in our moral code: the hidden reasons we think it's OK to cheat or steal (sometimes). Clever studies help make his point that we're predictably irrational -- and can be influenced in ways we can't grasp.
Noreena Hertz
Noreena Hertz
We make important decisions every day -- and we often rely on experts to help us decide. But, says economist Noreena Hertz, relying too much on experts can be limiting and even dangerous. She calls for us to start democratizing expertise -- to listen not only to "surgeons and CEOs, but also to shop staff."
You need to deeply understand this generation...profoundly anxious, unique, distrustful, shaped by technology, global recession, terrorism, brutality...
Reality is often more messy and a neat model has many assumptions and consequently many flaws.
In times of economic recession Behavioral Economics can explain and predict how people will respond.
Amy Cuddy-Body language
Amy Cuddy-Body language
Body language affects how others see us, but it may also change how we see ourselves. Social psychologist Amy Cuddy shows how "power posing", standing in a posture of confidence, even when we don't feel confident , can affect testosterone and cortisol levels in the brain, and might even have an impact on our chances for success.
Daniel Kahneman quotes:
Daniel Kahneman quotes:
“Money doesn't buy you happiness, but lack of money certainly buys you misery."
"We can be blind to the obvious, and we are also blind to our blindness."
“The psychologist, Paul Rozin, an expert on disgust, observed that a single cockroach will completely wreck the appeal of a bowl of cherries, but a cherry will do nothing at all for a bowl of cockroaches.
"We're generally overconfident in our opinions and our impressions and judgments."
Avraam (National TV, CYBC)
Avraam (National TV, CYBC)
CYPRUS 2013.
https://drive.google.com/file/d/1PVKaTWVArsZZahqZmVTRiEvgvahlG0gv/view?usp=drivesdk
Many Cypriots saw their life savings vanish in March when authorities imposed losses on uninsured deposits in two of Cyprus’ banks – Laiki and Bank of Cyprus which were badly stung by an EU-sanctioned write-down on Greek sovereign bonds.
The recession
has made untamed jungles out of many office environments. Employees have had to adapt their behavior to the changing climate or suffer extinction...
The optimism bias
Are we born to be optimistic, rather than realistic? Tali Sharot shares new research that suggests our brains are wired to look on the bright side -- and how that can be both dangerous and beneficial
"Two things are infinite: the universe and human stupidity...and I'm not sure about the universe." - Albert Einstein.
"Managers make decisions based on a combination of intuition, experience and analysis."
We make important decisions every day and we often rely on experts to help us decide.
But, says economist Noreena Hertz, relying too much on experts can be limiting and even dangerous. She calls for us to start democratizing expertise, to listen not only to "surgeons and CEOs, but also to shop staff."
https://youtu.be/QcH_cifuv8I?si=4aVGXNPhluXwkZc4
Rory Sutherland
Rory Sutherland
It may seem that big problems require big solutions, but ad man Rory Sutherland says many flashy, expensive fixes are just obscuring better, simpler answers. To illustrate, he uses behavioral economics and hilarious examples.
Tweets by Noreena Hertz, Rory Sutherland and Dan Ariely.
Tweets by Noreena Hertz, Rory Sutherland and Dan Ariely.
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