Quotes About Behavioral economics

Loss aversion helps produce inertia, meaning a strong desire to stick with your current holdings.

In economics (and in ordinary life), a basic principle is that you can never be made worse off by having more options, because you can always turn them down. Before Thaler removed the nuts the group had the choice of whether to eat the nuts or not—now they didn't. In the land of Econs, it is against the law to be happy about this!

Roughly speaking, losses hurt about twice as much as gains make you feel good. This

a nudge is any factor that significantly alters the behavior of Humans

The evidence suggests that when people get a windfall—and this seems to be the way people think about their tax refund, despite it being expected—they tend to save a larger proportion from it than they do from regular income, especially if the windfall is sizable.

Roughly speaking, losing something makes you twice as miserable as gaining the same thing makes you happy. In more technical language, people are "loss averse.

our understanding of human behavior can be improved by appreciating how people systematically go wrong.

One of the causes of status quo bias is a lack of attention. Many people adopt what we will call the "yeah, whatever" heuristic.

If you look at economics textbooks, you will learn that homo economicus can think like Albert Einstein, store as much memory as IBM's Big Blue, and exercise the willpower of Mahatma Gandhi. Really. But the folks that we know are not like that. Real people have trouble with long division if they don't have a calculator, sometimes forget their spouse's birthday, and have a hangover on New Year's Day. They are not homo economicus; they are homo sapiens.

people's choices are pervasively influenced by the design elements selected by choice architects.

That does not mean something is wrong with us as humans, but it does mean that our understanding of human behavior can be improved by appreciating how people systematically go wrong.

The money that has recently been won is called "house money" because in gambling parlance the casino is referred to as the house. Betting some of the money that you have just won is referred to as "gambling with the house's money," as if it were, somehow, different from some other kind of money. Experimental evidence reveals that people are more willing to gamble with money that they consider house money.

The false assumption is that almost all people, almost all of the time, make choices that are in their best interest or at the very least are better than the choices that would be made by someone else.

we will see, loss aversion operates as a kind of cognitive nudge, pressing us not to make changes, even when

quasi-hyperbolic discounting.

the planning fallacy—the systematic tendency toward unrealistic optimism about the time it takes to complete projects.

But if it is crazy to turn down the 100 bets, the logic of Samuelson's argument is just reversed; you should not turn down one! Shlomo and I called this phenomenon "myopic loss aversion". The only way you can ever take 100 attractive bets is by first taking the first one, and it is only thinking about the bet in isolation that fools you into turning it down.

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.

The bigger lesson is that once you understand a behavioral problem, you can sometimes invent a behavioral solution to it. Mental

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

The premise of the article, and later the book, is that in our increasingly complicated world people cannot be expected to have the expertise to make anything close to optimal decisions in all the domains in which they are forced to choose.

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

Choosers are human, so designers should make life as easy as possible.