Mainstream and behavioural economics are two sides of the same coin
The term ‘economics’ tends to incite a lot of passion. For many people it typifies a cold, emotionless perspective on life that just looks at money. It represents the cynical world view of those who, as Oscar Wilde said, “know the price of everything and the value of nothing”.
There are undoubtedly people — probably even economists — who do fit that description. But the idea that economics is all about bankers and big business, about commerce and making profits, is not just undeserved. It is also inaccurate. …
Is it irrational to favour people with whom you have something important in common?
Imagine the prime minister of your country is not someone you naturally align with: in fact, you’d rather see him or her defeated at the next election. But then you suddenly learn that your PM is a life-long supporter of the same football team that you have been a fan of since you were a kid. What effect does this new knowledge have on you?
This very thing happened to Samuel Salzer, one of my fellow behavioural practitioners and an ardent Tottenham Hotspur fan, who recently learned that the Swedish Social Democratic premier, Stefan Löfven, has also been a Spurs…
Markets enable prices to reach a level that satisfies both sellers and buyers, but that doesn’t necessarily mean that they see that price in the same way
Do you know what a kilo of brown rice costs, a 350g pot of salt, or a pack of four sponge wipes? If you are like me (and I do the weekly shop!), in all likelihood the best you can do is give a pretty wide price range for these products. As long as the price is within that range, you’d put these items in your trolley without giving it more thought.
You trust that the price is reasonable, because you assume the supermarkets compete with each other in an open, free market, where overpricing items in comparison with their…
We often assume we are entitled to something, but that is literally only half of the story
Years ago, my (British) colleagues and I had what we thought was a brilliant idea for a practical joke. We were in a French chateau, at a debriefing session concluding a large international project with ten Germans on the team. Our plan was to sneak into the meeting room late that evening with all our spare towels, and place them on the chairs, a reference to a curious German tourist custom.
Well, perhaps not that curious. You may remember that, once upon a time, German citizens holidaying around the Mediterranean had a reputation of getting up at the crack of…
When a renowned behavioural scientist gets embroiled in a case of fabricated data, there may be some lessons for us all
When a behavioural science paper is discovered to have been using fraudulent data, the field understandably experiences some mild, but distinct tremors. If the co-author who was responsible for the data happens to one of the field’s most famous scientists, the tremor becomes a proper shockwave. What has been going on?
Data detectives at work
It concerns a study from 2012, which suggested that asking individuals to sign a declaration of honesty at the beginning of a self-report form (rather than at the end, as usual) makes them complete it more honestly, based on two lab experiments and a field experiment. In the lab…
Human behaviour continues to be an inexhaustible source of wonder and fascination — even when on holiday
Unexpectedly, your correspondent had an opportunity to return to his native country at short notice for a brief holiday after skipping the annual tradition last year. And yet again, it provided ample educational entertainment (or entertaining education) for any behavioural economist, accidental or not. Take a seat, and prepare for some anecdotes.
International travel has become a bit more complicated since the beginning of 2020. One of the first tasks — other than booking the ferry crossing between the UK and France — was to figure out what hoops we’d need to jump through to get to our destination. Thanks…
The good news is that we are prosocial; in other news, it comes with strings and conditions attached
Take a look around you. Unless you’re in the middle of a nature reserve, miles from human settlements, most of what you see is the result of people working together — buildings, machines, clothes, food, transportation, you name it. And even beyond the stuff that is constructed, or made in factories, we can see collaborative efforts everywhere.
Think of the arts (yes, orchestras and bands obviously, but even solo musical artists rely on others to get their music to their audiences), or of sports (yes, team sports obviously, but individual athletes too rely on others to coach them or supply…
Much of what we think we know is built on the powdery sands of conjecture and assumptions
Imagine you are joining a new company. Together with 15 other newcomers (about whom you know nothing), you are invited to an induction course. On the first evening, before dinner, you will be able to spend half an hour chatting with just one of them. You receive list of photos of each participant, from which you can either choose one, or indicate that you have no preference. What would you decide?
I conducted this exercise with a group of clients a while ago, using synthetic, photorealistic portrait images. There is little doubt that someone’s face provides no meaningful information about…
A board game with a small human illustrates how much emotions influence our decisions
The other day, Jenny and I played a game of Ludo with Luka. Its rules are simple enough to make it quite suitable for a five-year-old, even though some more strategic aspects are a bit beyond him. What I didn’t expect was the way in which it would capture some essential aspects of how we make decisions — and I am not thinking of game theory (which is outside my expertise anyway).
In case you are not familiar with Ludo (the name of which signifies “I play” in Latin), it goes as follows. Two, three or four players each have…
One of our more intriguing and widespread beliefs is that when others appear to pay for something, it is actually free to us. But looks can be deceptive…
Imagine that you are retiring from a job at a large firm, and a dinner is organized in your honour. On the occasion you are presented with a final cheque, but the amount is rather lower than you expected. When you inquire about it, the explanation you receive is that the cost of the dinner has been deducted. How would you feel about that?
This is exactly what happened to economist Robin Hanson’s mother, according to a recent tweet. It did not provide any details, but let us assume that the cheque did not represent her final monthly wages (in…
