Dan Ariely: What Is Behavioral Economics?

[Music] behavioural economists are interested in the same topics that economists are interested in why people buy how we make decisions what are the right mechanisms in the market and so on but the starting point is different rather than assuming people are rational and then take the implications of that we have no prior beliefs we said let's just see how people behave let's put them in a situation in the lab in the field let's see how they behave and then as a consequence let's make the implication and because in those situations people often don't behave rationally the implications are often very different from the implications from standard economics so they're many many examples of course for irrationality there's one way to be rational and many ways to be irrational we exhibit lots of those a good way to think about it is to think about emotions so think about it imagine that you were in the jungle 20,000 years ago and you saw a tiger what do you want you want a a human being in that situation to stop to pause to think to take out a little Excel spreadsheet and calculate what should I do should I arrange ooh they stay what's the cost what's the benefit of course not what you want is to click to create a situation in which this person runs as fast as they can the moment they see the tiger and that's basically how emotions work when we see something that puts us in danger or have to do something with the sexual behavior we turn our cognition off it's not that we think and we feel we just feel emotion take over and then they just execute a command say run as fast as you can don't think don't calculate don't don't do anything now emotions still work in the same way these days even though we don't have Tigers but now the revoke by other things somebody cut in front of us in the highway we have some anger towards somebody somebody in customer service upsets us all kinds of other things happen emotion just work in the same way even though nowadays they're not as relevant to those situation there is hope and I think the hope basically has kind of multiple legs to it the first thing is that I'm hoping that when people see a mistake that they know about it they might be able to fix it so for example it turns out that free is a very big allure when we see something that is free we often go for it even if it's not good for us but it turns out it if it wasn't free if it was costing us a penny or 10 cents or a dollar we will not have the same allure to it so one of the suggestions I have to people is when something is free ask yourself would I still do the same thing even if it was costing me a penny or 10 a 10 cents and there's a range of those things there's a range of things in which we can read a paper or a book or kind of have an idea but what are some irrational behaviors that other people are exhibiting and of course it's always easy for us to see what other people are exhibiting irrationalities and then use it as a mirror and say oh I can see this behavior I see that when I date I juggle too many options I see that when I shop I make this mistake I see when I make these mistakes and let me think about how to prevent it so that's the first hope the second hope is for things that we would do that would prevent us from getting into this mistake so for example have you ever gone to lunch when you are vowing to be on a diet and then the waiter comes with the chocolate souffle and you say today I'll have the chocolate souffle of course we all do it we do it repeatedly surprisingly how repeatedly or have you ever had a situation which you said I'm going to only practice safe sex I really don't want any STDs and then you come to the moment of temptation and they thought about condom going to get it and so on is just not high on your priorities happens very often now in those cases it's not something you can at the moment fix you can't see the chocolate souffle or be sexually aroused and say oh let me let me fix that I understand this is a rational behavior so in those situation what we need to do is to think ex ante and try to prevent ourselves from doing that and there's a whole range of those things we could say I know that I don't like to exercise so let me create appointments with friends so that they will force me to go I know I have a tendency to have unprotected sex let me have condoms with me even if I don't think it's necessary let me tell the waiter at the beginning of the meal let me ask them not to show me the dessert tray there's all kinds of mechanisms like [Music]

Channel: Big Think

Views: 124,846

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Keywords: bigthink, Big Think, BigThink, BigThink.com

Id: wpMLYh-UIsA

Length: 4min 44sec (284 seconds)

Published: Wed Jun 01 2011

Reddit Comments

[u/samshab]

"The thought about condom. Going to get it and so on, is just not high on your priorities. Happens very often."