[Photo credit: Lending Memo]

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. …

A gantry above a smart motorway in the UK
A gantry above a smart motorway in the UK
Featured image: Department for Transport/Flickr CC-BY-ND 2.0

Is there a “natural” state of things that is inherently superior?

You’re happily driving along on the motorway. It is quite busy for a Tuesday afternoon, and there is a slight drizzle. Suddenly, the red engine management warning indicator on your dashboard comes on. You slow down and move towards the edge of the motorway… but there is no hard shoulder! You are on a “smart” motorway! Thankfully, there’s a refuge 200m ahead. But surely, this cannot be safe? A motorway without a hard shoulder, that is almost against nature, isn’t it?

Smart motorways were first introduced in 2006 in the UK. They don’t have much in the way of intelligence…

Five petrol hoses in different colours
Five petrol hoses in different colours
(Featured image: Roman K/Flicker CC BY-ND 2.0)

What money means in economic terms, and what it means to us, are two — or many more — different things

Imagine you have just spent £70 (€80, $95) on something, only to realize that what you have bought is going to be of no use, and that there is no way you can return it for a refund. It’s the kind of experience that would leave even a seasoned stoic a little upset. But why is this? Is that because of the magnitude of the amount, or is there more to it?

Money has the same value for everyone — a pound is a pound — and you can buy exactly the same thing with any pound. That characteristic essentially…

Close up of an old cash register/till
Close up of an old cash register/till
(featured image: David Trawin/Flickr CC BY-SA 2.0)

Are our principles absolute and unassailable, or are they for sale?

In Florida, the COVID-19 vaccination rate among the staff of nursing homes and other long-term care facilities is, by any standard, worryingly low, at barely 38%. Yet in one facility, more than 80% of the staff are fully vaccinated. This remarkable feat was achieved after management offered their people a bonus of $1000 ($100 upfront and the remainder as soon as at least 75% got their jabs). What is going on here?

Staff member Tammy Chandler had her doubts, in particular because she doesn’t quite trust such a new vaccine, but she concedes the bonus pulled her over the line…

A type case containing lead type
A type case containing lead type
(featured image: Thomas Quine/Flickr CC BY 2.0)

There is one heuristic we use a lot. We also misuse it quite a bit.

(Warning: this piece contains references to activities which may temporarily not be available in your area.)

Bedtime was not always quite sleep time, back when my age could still be expressed as a single digit. Often, my younger sisters and I (we all, conveniently, slept with our bedroom doors open) used to play a guessing game for as long as it took for us to finally doze off. Two of us needed to find out, by asking yes/no questions, what the third one was thinking of. …

The lid of the box of the board game “Why”
The lid of the box of the board game “Why”
hick(featured image: allaboutfunandgames.com)

The power of a word that, despite its brevity, is verily a key to wisdom

Long ago, even before I was “age 12 to adult”, a friend of mine had a copy of the board game “Why”. Vaguely inspired by (and clearly seeking to capitalize on the popularity of) a TV show introduced by Alfred Hitchcock at the time, it taught me one of the very first English words (after “I”, “you”, and “Paperback writer”). Little did I know at the time, though, how important that little word really was.

My friend and I didn’t play the game very often, but I do remember that winning it required establishing “why” a murder was committed. I…

Two winner’s trophies side by side
Two winner’s trophies side by side
(featured image: Arek Socha via pixabay)

Economics is part and parcel of most human interaction, but does that mean we understand it?

My very first post hereabouts carried the somewhat bold title, “We are all economists”. Even if we know nothing about economics, we do face competing calls on our scarce resources (money, time, or attention, for example) that cannot all be fulfilled at the same time, and we need to make trade-offs in order to resolve this. Two core aspects of economics happen to be the allocation of scarce resources and trade-offs, so the claim that early post makes is not without merit.

We have been paying attention to how we allocate scarce resources since long before, in 1776, Adam Smith…

Wooden collection box with the inscription ‘Thank You’
Wooden collection box with the inscription ‘Thank You’
(featured image: Howard Lake/Flickr CC BY-SA 2.0)

Should we be guided by our head or by our heart? Or is this the wrong question?

If you want to share some of your wealth with others, there are literally thousands of charities that are happy to take your money and distribute it to the needy on your behalf. But which charity is best? Even if you have a preference for a particular kind of beneficiary you want to support, there are often still many organizations that serve your particular preferred target. How to choose between them?

If you were an effective altruist, you would — as the name suggests — look at the effectiveness of the charities’ work. The extent to which they realize their…

Person indicating they don’t know something
Person indicating they don’t know something
(featured image: wayhomestudio via Freepik)

There are many things about which we don’t know much, but that ignorance doesn’t stop us having an opinion

An indoor swimming pool. The smell of chlorine in the air is palpable, and the kids are coughing. You’re not the only person to notice, and another parent asks what you think an acceptable concentration of chlorine in the air should be. You take a wild guess: “4ppm?” The other person seems to be in the know: “It’s 2ppm now,” she says. “Oh, then it should be less,” you state.

There doesn’t seem to be anything amiss with this conversation. You are not a chemist or a health and safety expert, so you had no real idea. You nevertheless gave…

A set of old fashioned scales with a clock on one side and piles of money on the other
A set of old fashioned scales with a clock on one side and piles of money on the other
(Featured image: Mona Tootoonchinia via Pixabay)

Time is money, it is often said, but that doesn’t mean “no time” is equivalent to “no money”

We are social beings, but we are also economists: we interact with others in various social relationships, and at the same time these relationships sometimes make material demands on our scarce resources, notably money and time. These can be sizeable (a friend can invite us to her wedding on a Caribbean beach), or rather modest (an evening out with colleagues, with a show and a nice meal, or perhaps just a coffee and a chat with an acquaintance). …

Koen Smets

Accidental behavioural economist in search of wisdom. Uses insights from (behavioural) economics in organization development. On Twitter as @koenfucius

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