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  1. #1
    Senior Member Survive & Stay Free's Avatar
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    Default Behaviourial economics

    How many people have read about behaviourial economics? I'm reading a book called predictable irrationality, which I have to say has been surprising for combining pretty dense but interesting scientific research with readability, on the topic. It is one of the better books on the topic too.

    Anyway, having read about behavioural economics, which I think is the sort of psychological research meets economics fusion which has been a long time coming, I dont think it would be possible to continue to believe any of the naive paradigms like free market libertarianism which are around.

    Has anyone else any familiarity with the topic at all? I'm trying to read between the lines and see if there has been a sort of unacknowledge argument or discourse going on between authors like the one I'm reading and others, like the undercover economist, about just how rational or rationalising we are.

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    The Eighth Colour Octarine's Avatar
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    I'm not that familiar with the field, but I have read that book a few years ago. I found it interesting, if a little lacking in scope - the problem with most of the experiments he cited is that they did not account for the fact that people can learn and improve their decision making over time. We might still see some 'irrationality', but it could be different in form than hypothesised in those simple experiments.

    If you look at the 'cognitive error' that people make when analysing the Monty-Hall problem for example, we realise that although our intuition is wrong for the synthetic case, it happens to be true for the real case. So we are predictably irrational, but perhaps more in the way that we generalise about scenarios.

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    Away with the fairies Southern Kross's Avatar
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    I haven't read anything but I've seen a few great TED lectures on it. Its an interesting subject.
    INFP 4w5 so/sp

    I've dreamt in my life dreams that have stayed with me ever after, and changed my ideas;
    they've gone through and through me, like wine through water, and altered the colour of my mind.

    - Emily Bronte

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    Senior Member Survive & Stay Free's Avatar
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    I think its interesting and useful to have a contrasting alternative to what I do believe IS the naive psychology which underpins classical economics and its revivers in libertarian circles.

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    Economics is an interesting subject in that a majority of its basic principles and assumptions are demonstrably wrong. For instance, the idea that individuals are rational and that they maximize utility is both woefully inadequate and hopelessly optimistic, yet this idea is the stuff that more advanced theories are based on.

    Economic theories will eventually have to take into account a combination of game theory, consistent cognitive errors, irrationality, and common biases in order to have any hope of providing accurate information.

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    The Eighth Colour Octarine's Avatar
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    If you saw the papers people produce in economics these days, you'd realise that is exactly what they are trying to do.

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    Trying, yes, but people seem to have trouble letting go of the old theories to make way for new ones.

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    Senior Member Survive & Stay Free's Avatar
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    Quote Originally Posted by dala View Post
    Economics is an interesting subject in that a majority of its basic principles and assumptions are demonstrably wrong. For instance, the idea that individuals are rational and that they maximize utility is both woefully inadequate and hopelessly optimistic, yet this idea is the stuff that more advanced theories are based on.

    Economic theories will eventually have to take into account a combination of game theory, consistent cognitive errors, irrationality, and common biases in order to have any hope of providing accurate information.
    Well that's what behavioural economics aims to do, some of the greatest ideas that I've read about in this book but which I've seen in play already have been the way in which relativity is used to sell, so when pitching you someone a company will offer three things, one of which is definitely a decoy and which you're not expected to buy but which makes the other two offers look even better or perhaps you're offered three things, one you know nothing about or is more expensive than what you want, one is the real pitch, the other is inferior or apparently so at first inspection, they are only really trying to sell you the real pitch.

    This in itself made me reflect on how research is used by huge corporations to manipulate more often than its used by the average individual to garner insight and defend themselves from the manipulation.

    There's also some great points about habits and habituation, the ways that companies attempt to utilise what is know about that, and the extent to which a single choice you make today, about anything, could be setting in train a series of choices building on and from that which could lead up to a single radical or catastrophic choice because of the habits and patterns engendered from it.

    I heard Eric Fromm write about that but in a less clear, much less scientific way, his theorising wasnt even as long term and it was based upon scriptural sources more an anything else talking about becoming "hard hearted", so he suggested that at the point you say to someone you know is unhappily married and you find attractive, would you like to go for coffee, you have free will, you're making a choice but by the time you're checking into a hotel with illicit affairs in mind you dont.

    Which links with stuff in the behavioural canon too about bio-chemical arousal states and decision making, the sexy ladies in the Lynx ads make a lot more sense now (though I'll stick with right guard myself).

    There's some stuff I understand less well but its essential to the scuppering of price calculation theories and theorising about demand and supply, which is major because it was the calculation debate which was supposed to be the intellectual rocks upon which socialism was wrecked. The essential crux oc the issue is that those are not independent variables, so drops in price to do not always occasion rises in demand, in fact sometimes drops in price make things less desirable, there is a bit about an idea of "anchoring" which is a process were by people arrive at what they consider are reasonable or expected prices to begin with and judge variations from there.

    I personally liked the contradiction between social and market values, it illustrates a point I've thought about for a while, that you could go and have a great christmas dinner with family, better than you would get in any restaurant but if you seriously suggested paying for it you could cause war with your family. The reason being that there are some actions in some contexts which are judged "too precious to be paid for", obviously contradictions arise when these are labour intensive and require a lot of sacrifice and could be gendered or some how else discriminatory or when they arise between strangers whose interactions are generally governed by market values.

    I'm interested how those spheres cross over and which expands and which contracts at any time, the perrenial nature of capitalism and free markets, often linked to the arguments for their natural law basis, ignore the fact that in pre-modern societies market values were often an elite preserve, everyone else lived in a world governed more by social values, ie obligations, indenture, loyalty, feilty (spelling). Modern libertarians tend to consider that there are no non-market values in any discussion I've had with them.

  10. #10
    Order Now! pure_mercury's Avatar
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    There are no contradictions between the findings of behavioral economists and libertarian economic philosophy. Free market economists do not need to rely on the assumption of perfectly rational actors. So. . . yeah.
    Who wants to try a bottle of merc's "Extroversion Olive Oil?"

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