You believe you are smart, rational and always taking the best decisions the situation permits. Well, think again.
Richard Thaler, the Nobel Laureate economist thinks otherwise and Eshe Nelson says, you would do better to pay attention.
So how exactly are we working against ourselves?
– Loss aversion and anchoring – Will you pay the same amount you are asking for for something you intend to sell? Our feeling of loss is greater than gain – of the exact same size.
– Planner Vs Doer – ‘We’ve all been there, torn between making a sensible decision that sets us up well for the future and something that provides more immediate gratification.’ Sounds familiar? Go to the gym and put that slice of Cheese cake down.
– Availability heuristic – ‘This means judgements tend to be heavily weighted on the most recent piece of information received or the simplest thing to recall.’
– Status Quo Bias – We will stick to status quo rather than change for big gains even if it is a small cost – like a difficult conversation.
It is a good time to read Thaler’s book Nudge: Improving Decisions about Health, Wealth and Happiness with which he co wrote Cass Sunstein.
Where I learnt it #240
The flaws a Nobel Prize-winning economist wants you to know about yourself https://qz.com/1098078/behavioral-economics-the-flaws-that-economics-nobel-prize-winner-richard-thaler-wants-you-to-know-about-yourself/
