Quotes About Decision-making

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.

Many smokers, drinkers, and overeaters are willing to pay third parties to help them make better decisions.

individual risk taking, especially in the domain of risks to life and health.

Econs do not suffer from self-control problems, and so temptation is not a word that exists in the economists' lexicon. As a result, most of the world's regulators have not thought much about the problem. But when the dessert cart comes by, we humans often cave. The next thing we know we are fat.

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.

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.

Hundreds of studies confirm that human forecasts are flawed and biased. Human decision making is not so great either. Again to take just one example, consider what is called the "status quo bias," a fancy name for inertia. For a host of reasons, which we shall explore, people have a strong tendency to go along with the status quo or default option.

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?

One way to salvage the Becker conjecture is to argue that CEOs, coaches, and other managers who are hired because they have a broad range of skills, which may not include analytical reasoning, could simply hire geeks who would deserve to be members of Becker's 10% to crunch the numbers for them. But my hunch is that as the importance of a decision grows, the tendency to rely on quantitative analyses done by others tends to shrink.

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

Like most aspects of mental accounting, setting up non-fungible budgets is not entirely silly. Be it with mason jars, envelopes, or sophisticated financial apps, a household that makes a serious effort to create a financial plan will have an easier time living within its means. The same goes for businesses, large or small. But sometimes those budgets can lead to bad decision-making, such as deciding that the Great Recession is a good time to upgrade the kind of gasoline you put in your car.

If learning is crucial, then as the stakes go up, decision-making quality is likely to go down.

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.

It is usually good to provide people with lots of options, but when the question is complicated, sensible choice architecture guides people in the right directions.

people make good choices in contexts in which they have experience, good information, and prompt feedback—say, choosing among ice cream flavors.

dumb principal" problems.

Knowing something about the cognitive system has allowed others to discover systematic biases in the way we think.

Marriage might be seen, in part, as a solution to a self-control problem, in which people take steps to increase the likelihood that their relationship will endure. If divorce is difficult, then marriages are more likely to be stable. Marital stability is usually good for children (though children can also benefit from the end of a bad marriage).

This confirmed my longheld suspicion that many people use spreadsheets as an alternative to thinking.

In our understanding, a policy is "paternalistic" if it tries to influence choices in a way that will make choosers better off, as judged by themselves. 3