Quotes About Economics

Bargains and Rip-Offs

The distinguished economist and philosopher Amartya Sen famously called people who always give nothing in this game rational fools for blindly following only material self-interest: "The purely economic man is indeed close to being a social moron. Economic theory has been much preoccupied with this rational fool.

Imagine that you are about to purchase a jacket for ($125)[$15] and a calculator for ($15)[$125]. The calculator salesman informs you that the calculator you wish to buy is on sale for ($10)[$120] at the other branch of the store, located a twenty-minute drive away. Would you make the trip to the other store?

it is thought to be somehow related to Adam Smith's invisible hand, the workings of which are both overstated and mysterious.

Economists have not always been so dense about self-control problems. For roughly two centuries, the economists who wrote on this topic knew their Humans. In fact, an early pioneer of what we would now call a behavioral treatment of self-control was none other than the high priest of free market economics: Adam Smith. When most people think about Adam Smith, they think of his most famous work, The Wealth of Nations

dumb principal" problems.

He tried his hand at doing some research on the psychology of the stock market, but grew frustrated with the reactions he got from the referees at mainstream finance and economics journals and eventually abandoned the research program.

people who are threatened with big losses and have a chance to break even will be unusually willing to take risks

app we particularly like is called Tally.13 (Full disclosure: Tally was started by Jason Brown, who, when he was a student at the University of Chicago Booth School of Business, took Thaler's class. We have no financial stake in his company.)

The fact that a loss hurts more than an equivalent gain gives pleasure is called loss aversion. It has become the single most powerful tool in the behavioral economist's arsenal.

When all economists are equally open-minded and are willing to incorporate important variables in their work, even if the rational model says those variables are supposedly irrelevant, the field of behavioral economics will disappear. All economics will be as behavioral as it needs to be. And those who have been stubbornly clinging to an imaginary world that consists only of Econs will be waving a white flag, rather than an invisible hand.

A bat and ball cost $1.10 in total. The bat costs $1.00 more than the ball. How much does the ball cost? _______ cents If it takes 5 machines 5 minutes to make 5 widgets, how long would it take 100 machines to make 100 widgets? _______ minutes In a lake, there is a patch of lily pads. Every day, the patch doubles in size. If it takes 48 days for the patch to cover the entire lake, how long would it take for the patch to cover half of the lake? _______ days

Loss aversion produces inertia, meaning a strong desire to stick with your current holdings. Loss aversion operates as a kind of cognitive nudge, pressing us not to make changes, even when changes are very much in our interests.

Economic theory textbooks would stop on the first page if the assumption of well-ordered preferences had to be abandoned, because without stable preferences there is nothing to be optimized.

professional money managers perform no better than simple market averages

One way to start to think about incentives is to ask four questions about a particular choice architecture: Who uses? Who chooses? Who pays? Who profits?

no propugnamos un gobierno más grande, sino sólo mejor gobernanza.

A nudge, as we will use the term, is any aspect of the choice architecture that alters people's behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates.

As a consequence, the heartland of America, filled with people who are often fundamentalist in religion, nativist in prejudice, isolationist in foreign policy, and conservative in economics, has constantly rumbled with an underground revolt against all these tormenting manifestations of our modern predicament.

It is actually a rather sorry tale. In the late nineteenth century most English economists thought that economics was about happiness. They thought of a persons happiness as in principle measurable, like temperature, and they thought we could compare one persons happiness with anothers. They also assumed that extra income brought less and less extra happiness as a person got richer.

It's a funny thing about capitalism: money you lose by slowing down is always more important than money you've already made.

It's a funny thing about capitalism: money you lose by slowing down is always more important than money you've already made.

Larger mines with direct access to the surface had long been laid with wooden rails to make coal and ore carts easier to move; moving a cart on rails required about one-sixth the effort needed to haul a sled or a cart on a dirt path.38 Moving coal to water on such rails—wagonways, they were called—would save money, time, and wear and tear. The earliest known English wagonway dates from 1604.

The substitution of the automobile for the horse left farmers poorer. "By using the power produced by gasoline instead of by corn- and hay-burning horses," a rural economist wrote in 1938, "we have deprived the farmer of a market for the crops from many million acres.