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Wednesday, April 10, 2013

Irrational Behavior

One of the things that I didn't like about studying economics was the belief that every decision maker was acting perfectly in their best interest to maximize their utility. If you've every spent time in the company of other people you'll quickly see that either this isn't true or people get their kicks from screwing their future selves over. Behavioral economics exists to try to close the gap and explain whey we do the things we do, even when those things do not seem to be in our best interests.

Behavioral economics gives a few reasons we don't act perfectly rational such as:

1. We have limited perceptual abilities. You can use optical illusions as a prime example of this. Our brains use cues and clues from the visual environment to try to determine what is gong on. Sometimes we fill in details that aren't there. Because all of our senses use short cuts, there are various situations where we can't make good decisions because we can't perceive what's really going on.

2. We are stuck in societal constraints. For example, it would make more sense to give cash than to give gifts. Giving a gift is a risky process because we have no idea what the person will like.Because society prefers gift giving to giving cash, people end up with stuff they don't like. Since our behavior is guided by societal demands, we make errors.

3. We are hard wired to make some mistakes. Times we should probably do the opposite of what we feel are when we want revenge, when we are sad, when we are angry. Basically we are emotional rationalizers rather than logical beings that feel emotions. Because our inner selves are constantly in turmoil, we cannot make correct decisions all of the time.

There are other reasons for being irrational but you get the idea, we make mistakes and many of those mistakes are unavoidable. So the next time someone does something that doesn't make a whole heap of sense, cut them some slack, they're only human. Tell me what irrational behavior drives you crazy in the comments and thanks for stopping by for I day!

6 comments:

  1. Lashing out at others upon hearing bad news. Wouldn't it be more rational to seek/invite comfort?

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    1. I agree. I like to be by myself when I hear bad news but it doesn't make sense to get angry or annoyed at people who are trying to help.

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  2. Giving/helping someone out with strings and attitude and persecution complex that one attaches to it. LIke one doesn't feel bad enough already to have had to ask or put their hand out. I cannot stand that! Give/help and let it go... or just don't do it at all.

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    1. That's true Maddy. It took me a long while to learn that if you give a gift it should be a true gift and no matter what the other person does with it or whether or not they appreciate it shouldn't determine whether or not you give the gift.

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  3. So basically we are designed to stuff up? Probably arrogance is the irrational behaviour (or I think it's irrational) that annoys me the most.

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    1. Good point. Why be full of yourself. You can be confident in your abilities but you have to have some humility no matter how good you are in order to learn.

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Hey I appreciate you leaving your thoughts behind! Be well my friend.