Richard Thaler's book The New Behavioral Economics will be useful to those traders who want to delve into the psychological aspects and fundamentals of economics. They say that the price takes into account everything, but the correct interpretation of many economic events from the point of view of the human factor helps to make the right decisions without succumbing to market provocations.
In other words, the book by an American professor specializing in behavioral (behavioral) economics helps to understand how economic events affect the behavior of people, and why the latter behave differently in apparently similar conditions.
Richard Thaler was nominated for the 2017 Nobel Prize for his research in the field of economics in connection with human psychology in the book The New Behavioral Economics. Today, despite his advanced age (born in 1945), he actively teaches at the University of Chicago. The American professor became widely known thanks to his theory of pushing when making decisions. In other words, it is called the theory of controlled choice.
In The New Behavioral Economics, Thaler notes that man is generally extremely rational in his behavior with regard to all economic aspects. In any case, he seeks to earn more with minimal labor or material investment. But how to attach to this rational desire to increase one's income the feelings and emotions of a person? Richard Thaler managed to build a real bridge connecting two seemingly completely different sciences: sociology (social psychology) and economics. Thaler's theory became known as behavioral economics.
Richard Thaler collaborated for a long time with renowned scientists Daniel Kahneman and Amos Tversky, who formulated the so-called "prospect theory" with which Thaler's new behavioral economics is closely related. The bottom line is that people's choices are often based more on emotions than actual facts. Therefore, many make completely opposite decisions under the same circumstances. Both scientists are sure that a person's choice in making decisions can be selectively influenced, moreover, without distorting the original facts at all. To do this, it is enough to slightly change the presentation of these facts.
Richard Thaler's book "The New Behavioral Economics" helps to take a fresh look not only at trading, but at our whole life as a frequent series of illogical and wrong decisions and teaches us not to give in to emotions at turning points.
Name In: The New Behavioral Economics. Why do people break the rules traditional economy and how to make money on it?
Year: 2015.
Language: Russian.
Format: FB2, EPUB.
Current page: 1 (total book has 29 pages) [accessible reading excerpt: 7 pages]
Richard Thaler
New behavioral economics. Why people break the rules of the traditional economy and how to make money on it
Dedicated to:
Victor Fuchs, who gave me a year to think, and Eric Wanner and the Russell Sage Foundation, who supported the crazy idea.
Colin Camerer and George Loewenstein, pioneers of irrational behavior.
The basis of political economy and, in general, any of the social sciences is, undoubtedly, psychology. Maybe one day the day will come when we will be able to deduce the laws social science from the principles of psychology.
VILFREDO PARETO, 1906
Richard H. Thaler
misbehaving. THE MAKING OF BEHAVIORAL ECONOMICS
Copyright © 2015 by Richard H. Thaler
All rights reserved
© Translation. A. Prokhorova, 2016
© Design. LLC "Publishing House" E ", 2017
Richard Thaler(b. 1945) is one of the leading modern economists, known for his work with Nobel laureate Daniel Kahneman; author of the "nudge theory" ("controlled choice"). Advisor to Barack Obama.
Economic theory outdated. "Rational man" is too limited a model to explain our decisions and actions. This book rethinks everything you know about human behavior and helps you get the most out of it.
How does the magic effect of "free" offers, which are widely used by advertisers.
How to plan the initial choice of the consumer, on which all subsequent ones will then depend.
Irrationality is not random and not meaningless - on the contrary, it is quite systematic and predictable. How to find patterns?
You will learn to predict the behavior of employees and customers, plan resources correctly and create those products and offers that will hit the bull's-eye and cause a stir.
......“The true genius who laid the foundations of behavioral economics is also a born storyteller with an incomparable sense of humor. All these talents are reflected in the book.
Daniel Kahneman, Nobel Laureate in Economics, bestselling author of Think Fast, Decide Slow
"One of the most important insights in modern economy. If I were lucky enough to be stuck in an elevator with any intellectual, I would undoubtedly choose Richard Thaler.
Foreword
Before we begin, I want to tell you two stories - about my friend Daniel Kahneman and about my mentor Amos Tversky. These stories give an idea of what to expect from this book.
Please Amos
Even for those of us who can't remember where we last put our keys, there are unforgettable moments in life. These may be public events. If you and I are about the same age, that event could be the assassination of John F. Kennedy (at the time I was in my first year of college, the news caught me on the basketball court in the gym). For anyone old enough to read this book, another such event could be September 11, 2001, when I just got out of bed and listened to National Public Radio trying to make sense of it.
The news of a dying friend is always shocking, but Amos Tversky was not the type of person to die at the age of fifty-nine. Amos, whose work and speech was always precise and flawless, on whose desk there was nothing but a notebook and a pencil, was not just dying.
Amos kept his illness a secret while he was still able to go to work. Until the last moment, only a few people were in the know, including two of my close friends. We weren't allowed to tell anyone but our wives, so for five months we took turns comforting each other while we had to keep this tragic fact to ourselves.
Amos did not want the public to know about his illness, because he did not want to play the role of a dying man in his last days. I had to finish the job. He and Danny decided to publish a book: a collection of articles by their own and other authors in the field of psychology that they had pioneered - the study of judgment and decision making. They called the book Rational Choices, Values and Frames.
Basically, Amos wanted to do what he loved: work, spend time with his family, watch basketball. In those days, Amos discouraged condolence visits, but “working” visits were allowed, so I came to see him about six weeks before he passed away, under the slight pretense of discussing the final draft of our joint article. We devoted some time to work and then watched the playoffs of the National Basketball Association (NBA).
Amos showed wisdom in everything he did in his life, and this extended to his illness. After consulting with experts at Stanford about his prospects, he decided that wasting the last months of his life on useless treatment that would only make him worse but add only a few weeks, he decided that it was not worth it. He managed to keep a sharp mind. He explained to his oncologist that cancer is not a zero-sum game: "What hurts my tumor doesn't necessarily benefit me." I once asked him on the phone how he was feeling and he said, “You know, it’s funny, but when you just have the flu, you think you’re dying, but when you really die, you feel quite good.”
Amos passed away in June and was buried in Palo Alto, California where he lived with his family. Amos' son Owen gave a short speech at the memorial service, reading a note Amos had written to him a few days before his death:
...Over the past few days, I've been noticing that we've been telling each other funny, funny stories to be remembered, at least for a while. It seems to be a long Jewish tradition to pass on history and wisdom from one generation to another not through lectures and textbooks, but through anecdotes, funny stories and jokes on the topic.
After the funeral, everyone gathered at the Tversky family home for the traditional shiva. It was Sunday afternoon. At some point, some of us quietly moved to the TV to watch the end of the NBA playoff game. We were a little embarrassed, but Amos' son, Tal, defuse the situation: "If Amos were here, he would offer to put the funeral on tape and watch the game at that time."
Since the first day I met Amos in 1977, I have consistently applied the same method of evaluating each of my articles: “Would Amos like this?” My friend Eric Johnson, discussed below, can confirm that one of our joint papers could not be published because of this three years after it had already been accepted by the journal. The editor, reviewers and Eric were all happy with the result, but Amos saw one flaw and I wanted to fix it. I've been tinkering with this article while poor Eric had to apply for a new position without this article on his resume. Fortunately, he had written many other works by that time, so this delay did not cost him new job, but Amos was satisfied with the changes made.
When I started writing the book, I took seriously the words of Amos from the note that his son Owen then read, because this book is not one of those that economics professors usually write. This is not a scientific treatise and not a scientific controversy. Of course, in these pages I will refer to the results of research, but other than that, you will find tales, funny (hopefully) stories and even funny cases here.
Danny talks about my virtues
One day in 2001, I was visiting Danny Kahneman in Berkeley. We sat in the living room chatting about this and that. Suddenly, Danny remembered that he had arranged a telephone interview with Roger Lowenstein, the correspondent who wrote the New York Times article about my work. Roger, being among other things the author of the famous book When Geniuses Fail, naturally wanted to talk about me with my old friend Danny. I found myself in a predicament. Should I leave the room or stay and listen? "Stay," Danny said, "it might even be fun."
The interview has begun. Listening to your friend tell stories about you is not the most interesting thing to do, and listening to someone praise you is quite embarrassing. I picked up something to read and turned my attention to the text, when suddenly I heard Danny say: "Well, the best quality of Thaler, which really distinguishes him from others, is his laziness."
What? Indeed? I won't deny that I am lazy, but does Danny really think that laziness is my only positive quality? I started waving my arms and shaking my head as hard as I could, but Danny kept talking, extolling the virtues of my laziness. To this day, he claims it was a compliment. Being lazy, he says, means that I only undertake to work on issues that are interesting enough to overcome my reluctance to work. Only Danny could turn my laziness into dignity like that.
And now you have this book in your hands. Before you continue reading, you should keep in mind that it was written by a certified lazy person. And that, as Danny said, means that I only included the really interesting facts, at least in my opinion.
I. How it all began: 1970–1978
Presumably insignificant factors
Early in my teaching career, I managed to inadvertently antagonize students in my microeconomics course, and for the first time, it was not because of what I said in class. It all happened because of the midterm exam in the middle of the semester.
I designed the exam test so that its results allowed students to be divided into three groups: stars who perfectly mastered the material, average students who caught only the basic concepts, and laggards who did not understand anything. In order for me to get this picture, the test had to have questions that only the best students could answer, which means that the test was difficult. The results of the exam showed that I achieved my goal - there was a wide spread of marks - but when the students received their results, they raised a fuss. Their main complaint was that the average number of points they managed to score was only 72, with a maximum possible score of 100.
What was not clear to me in such a reaction was that the average number of points did not affect the distribution of marks in any way. The standard was the rating scale, where the average number of points corresponded to the marks "4" and "4+", while a very small number of students received a mark below "3". I assumed that a low GPA could be misinterpreted, so I explained to the students how their scores would be translated into grades. Those who scored more than 80 points receive "5" or "5-"; those who scored more than 65 points receive "4", "4+" or "4-"; and only those whose score was less than 50 could actually get a score below "3". This distribution of grades was no different from the standard, but it did not have any effect on the mood of the students. They were still resentful and treated me accordingly. As a young professor who doesn't want to lose his job, I was determined to do something to save the day, but I didn't want to simplify the tests I designed to do so. How to be?
Finally, I had an idea. For the next exam, I designed a test that had a maximum score of 137 instead of 100. This time, the exam was slightly harder than the first, so students were only able to answer 70 percent of the questions correctly, with an average score of as much as 96. But my students were happy! The new GPA didn't affect the final grades, but everyone was happy. Since then, every time I have taught this course, students have always taken tests with a maximum score of 137. I chose this number for two reasons. Firstly, this way the average score dropped out just in the range of 90-99, while some students scored even a little more than 100 points, which made them delighted. Secondly, in order to calculate the grade, it was necessary to divide the points scored by 137, which is not so easy to do mentally, so most students did not bother to do this. To prevent you from thinking that I was somehow deceiving my students, I included this explanation in bold type in the course description: “The maximum score that can be scored on the exam test is 137 instead of the usual 100. This does not on the final mark for the exam, but obviously you like it better. Indeed, after I made these changes to the test, no one ever complained that my exams were too difficult.
From an economist's point of view, my students' behavior was "wrong." I mean that such behavior went against the ideal behavioral model that is at the center of what we call economic theory. An economist will never see the difference between a score of 96 out of 137 (70%) and 72 out of 100, but my students did. By realizing this, I was able to maintain the format of the exam that I needed, protecting myself from student dissatisfaction.
For forty years after leaving school, I studied similar cases where people behaved in any way, but not like the fictional creatures that inhabit economic models. I have never sought to show that there is something wrong with people; we are all just human beings, homo sapiens. Rather, I saw the problem in the model that economists use, the model that replaces homo sapiens (reasonable man) with homo economicus (rational man), whom I like to call Rational for short. Unlike the fictional world of the Rationals, Humans often misbehave, which means that economic models give erroneous predictions, the consequences of which can be much more serious than the bad mood of a group of students. In fact, no economist foresaw the 2007-2008 crisis, and worse, many believed that both the crisis and its aftermath were something that simply could not happen.
Ironically, the existence of formal models based on such a misconception of human behavior is what has earned economics its reputation as the strongest of the social sciences. Its strength lies in two aspects. The first aspect is absolutely indisputable: of all researchers of social reality, economists are the most influential when it comes to social policy. In fact, they monopolized the sphere of political consulting. Until recently, other representatives of the social sciences were rarely invited to take part in the discussion of political decisions, and if they were invited, their role was rather modest, as if they were children who were placed in the same room with adults at a family dinner, but at a separate, children's table.
Another aspect is that economics is also considered the strongest social science in the intellectual sense. Intellectual advantage is based on the fact that economics has a single, underlying theory from which everything else flows. If you say "economic theory", it will be clear to everyone what is meant. No other social science has such a theoretical basis. More often than not, theories in other disciplines are highly specific: they explain what happens in a particular set of circumstances. Economists compare their science to physics: economics, like physics, relies on several key postulates.
The basic postulate of economic theory says that a person makes a choice based on a possible optimal outcome. Of all the services and goods that a family can buy, she will choose the best that she can afford. Moreover, it is believed that Rationals make their choice impartially. In other words, we choose based on what economists call rational expectations. If those who start new business, are convinced, on average, that their chances of success are 75%, then this can be considered an indicator that reflects the actual number of those who are successful. Rationals do not overestimate their capabilities.
Another postulate is conditional optimization, which means that the choice is made with a limited budget. This postulate is connected with another important concept of economic theory - equilibrium. In conditions competitive markets where prices are free to rise and fall, these fluctuations occur so that supply equals demand. Simply put, we can say that Optimization + Equilibrium = Economics. This is a very strong combination, other social sciences cannot boast of something similar.
However, there is a problem: the postulates on which economic theory is based are not flawless. First, the optimization problem for ordinary people often turns out to be too complicated, so that even getting close to solving it, sometimes, is not possible. A simple trip to the grocery store with the smallest assortment leaves the family with a million different shopping options that fit into family budget. Does the family really choose the best possible under such conditions? In addition, in life we are faced with many much more difficult situations than shopping for groceries, for example, when it comes to choosing a career, a mortgage, or a life partner. Given the frequency of poor decisions made in these situations, it is difficult to support the claim that all such decisions are rational choices.
Secondly, a person makes a choice not at all impartially. The word “arrogance” may not be in the dictionary of economists, but it is still an integral feature of human nature, and besides it there are many other biases that cause people to make biased decisions, all of which are documented by psychologists.
Thirdly, the optimization model leaves out many factors, such as those described in my story about the exam for 137 points. In the world of Rationals, there is a whole list of things that supposedly don't matter. No Rational will buy a large portion of any food for dinner on Tuesday just because he was hungry when shopping on Sunday. Hunger on Sunday would be considered a non-significant factor in deciding how much food to buy on Tuesday. The Rational will not choke and finish a big dinner on Tuesday when he is no longer hungry, just because he has already paid for this meal and will not allow the money to be wasted. For the Rational, the cost of food that was paid for a few days ago does not matter for the decision made today about how much to eat. The rational also will not wait for a gift on the day of the wedding anniversary or birthday. What is so special about a date? In general, the idea of giving gifts will be incomprehensible to Rationals. The rational knows that the best gift is cash: with them, the hero of the occasion can buy what is optimal for him. But if your wife isn't an economist, I wouldn't recommend giving cash as a gift on your next anniversary. Think about it, even if your wife is an economist, giving money is still not a good idea.
You know, and I know, that we do not live in the world of Rationals. We live in the world of Humans. And since most economists are people too, they also know that we do not live in the world of Rationals.
Adam Smith, the father of modern economic thought, openly acknowledged this fact. Before writing his main work, The Wealth of Nations, he published another book, which he devoted to the topic of human "passions" - this term also does not appear in any economics textbook. Rationals have no passions; they are cold-blooded optimizers. Think of Captain Spock from Star Trek.
Nevertheless, this model of economic behavior, designed for a population consisting entirely of Rationals, has flourished for many years and has helped the economy to take the influential position in which it now sits. Over the years, critics' remarks have been countered by weak excuses and implausible alternative explanations for those empirical observations that challenge economic postulates. But gradually, these remarks gave rise to studies that significantly raised the stakes in this dispute. It's pretty easy to ignore the story about test scores. It is much harder to ignore studies that describe poor choices in more meaningful areas of life, such as managing savings for retirement, choosing a mortgage loan, investing in the stock market. And it is absolutely impossible to turn a blind eye to the series of "booms", "bubbles" and "busts" that we have seen in the financial markets since October 19, 1987, the day when stock prices fell by more than 20% worldwide, although there was no news item about it. After that, the shares of high-tech companies first soared and then collapsed. This collapse quickly turned into a "bubble" in housing prices, which burst and led to the global financial crisis.
Time to stop making excuses. We need an updated approach to conducting economic research that recognizes the existence and significance of Humans. The good news is that we won't have to throw away everything we know about how economies and markets work. Theories based on the assumption that every person is a Rational should not be rejected. They are useful as a starting point for building more realistic models. Also in some individual cases When the human task is fairly simple, or when economic actors have the appropriate specialized skills, Rationals' behavior patterns can provide a reasonable representation of what is going on in the real world. But, as we shall see later, such situations are the exception rather than the rule.
Moreover, a major part of the job of economists is to collect and analyze data about how markets function. This work is carried out with great care and requires expert statistical skills. It is also important that the bulk of such research is not based on the assumption of rational human behavior. Over the past twenty-five years, economists have added two research tools to their arsenal that have expanded their ability to study the world. The first is the randomized controlled trial, a method that has long been used in other scientific disciplines, particularly in medicine. The goal of a typical study using this method is to find out how people react to certain "exposures". The second method is to use either naturally occurring experiments (for example, when some people sign up for the program and others do not), or complex econometric techniques that allow you to determine the impact of "exposure", although no one has specifically designed the situation for this purpose. These tools have stimulated research on a number of issues that are important to society. Similar studies have examined the impact of factors such as getting more education, being in a class with fewer students or a better teacher, getting management consulting services, getting help finding a job, getting a prison sentence, moving to a neighborhood. with more low level poverty, getting medical insurance from Medicaid and so on. All of these studies show that much can be learned about the world without applying the rational behavior model, and in some cases, the studies identify situations that can serve as material for testing these models in order to see how the model corresponds to real human behavior.
For economic theory, the assumption that all people act rationally is for the most part not critical, even if those whose behavior is being studied are not experts. For example, the assumption that farmers use more fertilizer when the price of fertilizer falls is a safe bet, even if many farmers slowly change their behavior in response to changing market conditions. Such an assumption is reliable because it is inaccurate: what is predicted is just the direction of the effect of the treatment. The equivalent of such an assumption would be to say that when apples fall from a tree, they fall down, not up. The assumption itself is correct, but it is not a law of gravity.
Economists are in a quandary when they make a narrowly specific assumption that can only be true if all actors are economically savvy. Let's say scientists have found that farmers will benefit if they use more or less fertilizer than usual. Assuming that everyone will do the right thing once they get the right information, then there is no other option than to advise that the results of the study be made public. Publish the study, give farmers free access to the publication, and let the magic of the market take care of the rest.
However, this is bad advice, unless all farmers are really Rational. Perhaps multinational companies will take advantage of the latest research, but how will farmers in India or Africa behave?
As another example, if you assume that everyone will make the necessary savings for retirement, which is typical of any Rational, and accordingly conclude that you should not try to help people save (say, by developing a retirement plan), then you will miss the chance to improve the well-being of many people. And if you think that financial bubbles are theoretically impossible, and at the same time you are the head of central bank, then you run the risk of making serious mistakes - Alan Greenspan, to his credit, admitted that this is exactly what happened to him.
There is no need to stop inventing abstract models that describe the behavior of fictional Rationals. But we need to stop believing that such models accurately describe people's behavior and stop making political decisions based on such unreliable analysis. We need to start looking at those supposedly unimportant factors that I will call PFM for short.
It's hard to change a person's mind about what he eats for breakfast, not to mention the tasks he's been working on all his life. For years, many economists have resisted the call to use more accurate characterizations of human behavior to build their models. Yet the dream of a renewed economic theory has come true thanks to the emergence of a large number of young creative economists who are ready to take risks and break with traditional approaches to economics. Thus, a direction called "behavioral economics" arose. This is not a new discipline: it is still the same economics, but significantly enriched with knowledge from the field of psychology and other social sciences.
The main reason that people were included in economic theories is the desire to improve the accuracy of the forecasts that are built on the basis of these theories. But there is another plus in the fact that real people now appear in the models. Behavioral economics is more interesting and curious than ordinary economics, it is no longer a dull discipline.
Behavioral economics is now a growing branch of economics, and most of the leading universities in the world already have researchers working in this area. Recently, representatives of this direction and other scientists involved in the study of human behavior have become part of the community of political consultants. In 2010, the British government supported the creation of a Behavioral Analysis Team, and now other countries are joining this movement to create special research teams with the authority to incorporate the findings of other social sciences into formulated solutions in the field of public policy. Business is also trying to keep up, realizing that a deeper understanding of human behavior has the same importance for success, like knowledge financial reporting and management of the company. After all, companies are run by Humans, and their employees and customers are also Humans.
This book is the story of how all these changes happened, or at least the way I observed it. Although I am not the author of all the studies described - as you already know, I am too lazy for this - I was present at the birth of behavioral economics and participated in its formation. Following Amos' command, I will tell many stories in this book, but the main goal remains to tell how everything happened and what we have learned from going through all the events described. Not surprisingly, we have experienced many skirmishes with traditionalists in economics. These clashes were not always easy and painless, but, like any negative experience on the way to the goal, these events later turn into great stories, and the battles that we had to endure, in the end, only strengthened the position of behavioral economics as a new direction.
Like any story, my narrative is not built on the rise, when one idea logically leads to the next one. At different times and with different speed a lot of ideas came up. As a result, the presentation of facts in this book follows both chronological order and thematic logic. Here is a summary of what to expect. We will start from the very beginning, from the time when I graduated from university and began to collect examples of cases of misbehavior that did not correspond to the models that the professors taught us. The first chapter of the book is devoted to those early years when everything started from scratch, and some of the difficulties that many of those who questioned the expediency of the undertaking successfully coped with. After that, we will turn to a number of issues that occupied me for the first fifteen years of my research career: mental accounting, self-control, honesty, and finance. I want to show some interesting observations that I and my colleagues made on this segment of our common path, so that you can apply them and begin to better understand the behavior of your relatives in the human pack. You may also find useful insights into how you can try to change the way people think, especially when they have spent a lot of effort maintaining the status quo. Then we'll talk about recent studies that have focused on New York taxi drivers, NFL recruiting, game show contestants with big cash prizes. At the end we will find ourselves in London, at number 10 Downing Street, where a new set of interesting challenges and opportunities is now being formed.
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The author of the book, Chicago professor Richard Thaler, one of the advisers to US President Barack Obama, has thoroughly studied the emotions that drive the buyer and the difficulties that he faces during the decision to buy, choose a mortgage or pension fund. In his new book, Thaler shares the results of his research and continues the conversation he once started on the psychology of influence.
Last impression of the bookLord, how can we understand Your ways? Yes, you can speculate: is it necessary? In the sense of “does it need to be understood?”, - you can. Only - why? But intellectual speculation is also speculation that it is possible to spin the “spiral of infinity”, as the singer Zemfira sings: you can do an infinite number of iterations with this same “you can”.
But unlike fractal geometry, sophistic exercises will lead to absolutely nothing. Except medieval scholasticism. Do we need it? Why all this nonsense with speculation? Yes to the book, of course! "Behavioral Economics". behavioral economics. Yoly-paly - two supposedly sciences! Psychology and economics. Two "sciences". About and within the framework of which it is written, written, typed on the clave - a trillion gigs of information. And it's all science! Or so - "science"! With the appropriate entourage in the form of a Nobel lecture, where humanity appears in the faces of the members of the Royal Swedish Academy as students. Attentive "gurus". Tell me, people, how will it be arranged in this way, eh? You write something there according to some kind of "scientific" criteria, and about - on - Nobel! Wow, class! Why is that? Or, first, let's "rub" about whether all this is fair? No, let's first - why? Why a bunch of Nobels in economics. At the intersection of psychology and economics? Those areas of human thought that do not have scientific criteria. A priori unable to give at least some forecast for the future. And, therefore, well, not falling under the definition not only of exact sciences, but of sciences in general? And further. It is impossible to brush aside the fact that the vast majority of Nobel Prize winners in economics are Americans. Why is that? I am sure: everything is in strict accordance with the scientific forecasts and justifications of another "American" - the German Jew Karl Marx. "American" - let's not be deceived - a Jew. And here is one fundamental proposal! I repeat - the most important proposal. By the end of October, I will send a proposal to the Nobel Committee. In the "Justification" section, it will be written: for centuries of effective work in all branches of human activity. By the totality of merit, so to speak. As it is customary in Hollywood: "for the contribution." No, not for a passbook - for human history. So, what, or rather, who are we talking about? Who is the winner? Jewish mom, of course! Judging by the results, she does have something to present to the world and the Nobel Committee. So what does "behavioral economics" have to do with it? Well, about the Jewish mother - this is already clear, of course. How else is there? What preceded, what went next - after all, everyone there is entirely "Americans". Here's how to work! This is what collective leadership and collective responsibility are! Yet: why such an abundance of Americans in the economy? Why are dubious "scientific" disciplines on a regular basis at the peak of world recognition? And what does K. Marx have to do with it? Money. Nothing personal - money. The household economy is the engine of the market. And how they behave, households, members, so they spend. And these are no longer jokes of a dubious level and quality about the “Americans”. These are blood, sweat, tears, bodies, souls, meanings, goals. And who? Elites of the world. Tenevikov. That is, those who are in charge of everything. And gives meaning to everything. At least in the public sphere. In the free world. So to speak. Those who cannot be understood under any assumptions and an infinite amount of data. Impossible to answer for them main question Q: Why do they need so much money? After all, everything belongs to them? By the way, why do they need so much property? What for? The intellect is stupid and breaks down on the first and only question: why? When, even before leaving for the village, I sketched out some short summary, I got 8 points, of which I give only the following: 1. Level economic practice 2. Request for an appropriate level of research. 3. In general, a request for a result 4. Objective theoretical limitations (Gödel's theorem) 5. Hence - behaviorism as some kind of meaningful response to the challenge Do not keep up with the Americans in quotes and without, do not keep up. Because the level of US economic practice is only the sky higher. Whether we like it or not. And therefore, the entire train from the "superstructure": science, art, technology, and so on. Hence the request for an appropriate level of research. And in general - a request for a result. Because performance is the cornerstone of American culture. And this gives at least some chance not only to the loyal, but also to the competent, at least some. Unlike us, for example. But here is the objective complexity of predictability, the prognosis of reflection: Gödel with his theorem. Therefore - tolerances, only tolerances, probabilities and almost superposition. In terms of behavioral predictions. Money is nothing personal. By the way, "behavioral economics" is nothing more than a completely American scientific and practical tradition: behaviorism. Kind of a continuation. So to speak. Something like that. And where is the "behavioral economics" itself? Of course, in Behavioral Economics. Why retell what the inquisitive reader himself must reflect on??? And there is something to reflect on. Judge for yourself: Page 15 … economics is also considered the strongest social science in the intellectual sense. The basic postulate of economic theory says that a person makes a choice based on a possible optimal outcome .... In other words, we choose based on what economists call "rational expectation." Another postulate is conditional optimization, which means that the choice is made with a limited budget. P.24 I searched but could not find a source of data on occupational death rates. By comparing occupational death rates with the wage data I had, I was able to calculate how much wages would need to be offered in order for a person to be willing to risk their life doing dangerous work. Page 41 Man loves to make a profit, but even more man hates to make a loss. Page 45 Loss Avoidance: The loss is felt more strongly than the joy of an equivalent gain. This observation has become the most powerful tool in the arsenal of behavioral economics. Page 60. According to psychologists, in order to learn something from experience, two conditions are required: frequent practice and immediate results. Page 65. In a nutshell, we were interested in the question: "How do people think about money?". Recall from the description of the endowment effect that all economic decisions taken under the assumption of opportunity cost. The cost of dinner and cinema tonight is not equal to the financial cost, should also be taken into account alternative ways spending the same time and money. Page 66. If you understand opportunity costs, and if you have a ticket to a game that you can sell for $1,000, then it doesn't matter how much you paid for that ticket. The cost of watching a game is what you can afford with $1,000. Page 68. Unlike Rationals, People take into account another aspect of the purchase: subjective quality deals. This is what transactional utility reflects. Page 71. Several retail chains have tried over the years to tempt shoppers with something like "low prices every day," but these experiments have generally been unsuccessful. A one-time bargain is more fun than the opportunity to save a small and generally almost imperceptible amount of money on the regular purchase of individual products. Page 72. Large format discount chains like Walmart, Costco use a low price strategy every day, but do not eliminate transactional utility, quite the contrary - they convinced their customers that the essence of shopping is hunting for the best price, and stepped aside to strengthen this image. It is important for business owners to understand that everyone is interested in a good deal. Whether it's a sale or really low prices, shoppers are tempted to get a good deal. Page 82. Faulkner said that a writer must learn to kill his loved ones. Page 114. Our model is based on metaphor. We proceed from the assumption that at any given time an individual has two identities. One of them - the identity of the ant - plans for the future with good intentions and rational goal-setting, and the other - the identity of the dragonfly - lives today, carelessly going with the flow. Page 132. What makes people willing to pay more for beer from an expensive hotel restaurant, instead of buying it cheaper in a seedy shop? Or put another way, scientifically: what makes an economic transaction "fair" in the eyes of buyers? Page 133. "Gaujing" - the use of the current situation in the market, when, due to force majeure and monopoly, the seller who monopolizes the market raises the price of a "normal" product. The usual meaning of the verb "gauj" is to make a hole or passage with a sharp instrument. Page 136. …the perception of fairness is linked to the endowment effect. Both buyers and sellers feel that they are entitled to certain terms of trading that they are used to, so any deviation from these terms is considered a loss. Page 141. As usual in a situation where demand rises sharply, the seller must weigh everything carefully before making a choice between extracting short-term profits and the risk of long-term losses from lost customer loyalty, which are difficult to measure. Page 142. New York State and Uber have reached an agreement that, in the event of an abnormal market condition, Uber will limit the increase in the multiplier rate according to the accepted formula: first, it will have to determine the highest rates applied on four different days in the period of sixty days before the “anomalous state of the "market", and the highest price of these four should serve as a threshold for establishing a multiplier for the period of emergency. In addition, Uber, on its own initiative, offered to deduct 20% of the excess profits received these days in favor of the American Red Cross. Page 144. The concept of the Next restaurant in New York is extremely original. Three times a year, the restaurant's menu is completely updated. In terms of its theme, the menu is something unexpected every time: a dinner in Paris in 1906, Thai street food. When the restaurant was supposed to open, the owners announced that all food would be sold by tickets, the price of which would vary depending on the day of the week and time. Although economists offered the business owner just the opposite. Now the restaurant owner has started selling his online ticket service software to other restaurants. Page 159. According to the definition accepted in physics, an object remains at rest until something happens. People behave the same way: they stick with what they have until there is a good reason to change this state of affairs. At some point in time, a person reaches an age when it is no longer possible to say “promising” about him. Page 212. Keynes: "It is a commonly held truth that it is better to preserve a reputation to be wrong sometimes than to be right all the time." Now that's all for sure.Instead of describing what behavioral economics and its theory are, the author gives a description of a number of behavioral experiments and draws superficial conclusions based on them. The author does not show how these conclusions can be applied to the development of the economy and to improve people's lives. Often these experiments were carried out in the form of simple surveys or in laboratory conditions out of touch with life, which reduces their quality and the reliability of the results obtained.
What I remember from the studies cited in the book and the behavioral programs developed by the author:
- for the UK - tax increase programs;
- for American football teams - personnel policy: which players to attract to the club to achieve winning results and at what time, based on the regulations of the American Football League;
- for a small private office organizing skiing leisure - marketing activities to attract and increase customers.
The author in the book also praises himself for some innovations in the field financial markets, for the strategies he and his colleagues came up with that allow you to invest money smartly and profitably in securities, - but it is written (translated?) so clumsily that little is understood.
Hopefully, this is not all the useful things that Nobel laureate in economics Richard Thaler managed to accomplish in his 40-year (or more?) career as a behavioral economist, otherwise this is a small list.
From books on behavioral economics, you expect to reveal the theory, the structure of this doctrine. There is nothing of the kind in Thaler's book, and one gets the impression that this so-called behavioral economics, in general, has neither theory nor structure (sections of which it consists). Here, the traditional economic theory-economics has it, political economy has it, but behavioral economics does not. According to Thaler's book, behavioral economics is the conduct of behavioral psychological experiments, mainly in the form of surveys, and attempts to introduce conclusions based on them into traditional economic theory, into the practice of market relations, and into marketing. The goals of this are: more accurate prediction of the economic behavior of people, increase in sales, etc.
But in Thaler's book there are many autobiographical moments, the author writes with pleasure how he works at one university or some foundation, then at another. It follows from the book that this work comes down to writing articles in economic journals, various speeches to an audience, and scientific discussions with colleagues. The value of such work (“work”?) for the author is undeniable. And for society?
Richard Thaler
New behavioral economics. Why people break the rules of the traditional economy and how to make money on it
Dedicated to:
Victor Fuchs, who gave me a year to think, and Eric Wanner and the Russell Sage Foundation, who supported the crazy idea.
Colin Camerer and George Loewenstein, pioneers of irrational behavior.
The basis of political economy and, in general, any of the social sciences is, undoubtedly, psychology. Perhaps the day will come when we will be able to deduce the laws of social science from the principles of psychology.
VILFREDO PARETO, 1906
Richard H. Thaler
misbehaving. THE MAKING OF BEHAVIORAL ECONOMICS
Copyright © 2015 by Richard H. Thaler
All rights reserved
© Translation. A. Prokhorova, 2016
© Design. LLC "Publishing House" E ", 2017
Richard Thaler(b. 1945) - one of the leading modern economists, known for his joint work with Nobel laureate Daniel Kahneman; author of the "nudge theory" ("controlled choice"). Advisor to Barack Obama.
Economic theory is outdated. "Rational man" is too limited a model to explain our decisions and actions. This book rethinks everything you know about human behavior and helps you get the most out of it.
How does the magic effect of "free" offers, which are widely used by advertisers.
How to plan the initial choice of the consumer, on which all subsequent ones will then depend.
Irrationality is not random and not meaningless - on the contrary, it is quite systematic and predictable. How to find patterns?
You will learn to predict the behavior of employees and customers, plan resources correctly and create those products and offers that will hit the bull's-eye and cause a stir.
“The true genius who laid the foundations of behavioral economics is also a born storyteller with an incomparable sense of humor. All these talents are reflected in the book.
Daniel Kahneman, Nobel Laureate in Economics, bestselling author of Think Fast, Decide Slow
“One of the most important insights in the modern economy. If I were lucky enough to be stuck in an elevator with any intellectual, I would undoubtedly choose Richard Thaler.
Foreword
Before we begin, I want to tell you two stories - about my friend Daniel Kahneman and about my mentor Amos Tversky. These stories give an idea of what to expect from this book.
Please Amos
Even for those of us who can't remember where we last put our keys, there are unforgettable moments in life. These may be public events. If you and I are about the same age, that event could be the assassination of John F. Kennedy (at the time I was in my first year of college, the news caught me on the basketball court in the gym). For anyone old enough to read this book, another such event could be September 11, 2001, when I just got out of bed and listened to National Public Radio trying to make sense of it.
The news of a dying friend is always shocking, but Amos Tversky was not the type of person to die at the age of fifty-nine. Amos, whose work and speech was always precise and flawless, on whose desk there was nothing but a notebook and a pencil, was not just dying.
Amos kept his illness a secret while he was still able to go to work. Until the last moment, only a few people were in the know, including two of my close friends. We weren't allowed to tell anyone but our wives, so for five months we took turns comforting each other while we had to keep this tragic fact to ourselves.
