Take a better decision
BEHAVIORAL ECONOMICS IN PILLS
Behavioral economics is discipline which studies the effects of psychological, cognitive and emotional, cultural and social factors on the decisions of individuals and highlights how these choices are far from those hypothesized by the standard models of classical economic theory.
His behavioral models integrate the studies of psychology, of neuroscience And of the microeconomics.
The study of behavioral economics examines i limits from the rationality in decisions, not only of individuals, but also of the markets and the mechanisms that guide the policy.
Here is an elegant example of nudge in the Church of St. Josef in Horgen.
The 2 CHF coin stick on the marble represents:
an anchor in relation to the minimum recommended offer
information immediately available to the multilingual community
Cognitive Dissonance (Leon Festinger, 1957) in Decision making
I would like to buy a Ferrari. (But I can't afford it .... ☹️)
I will buy a Smart, it's easy to park
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Herd behavior:
when you think what your friends are doing is the right thing to do.
So you do it!
The elegant graphic representation of the Prospect Theory shows loss aversion in the area of gains (I am happy and for the time being I am not willing to change anything) and risk tolerance in the area of losses (I have nothing more to lose, risk ).
It all depends on the positioning of the reference point. Where is yours right now?
Immediate emotions: when we are in the phase of evaluating the available choice options, some arouse emotions in us that can already be useful in orienting our evaluation.
And so the toss of a coin can be a shortcut to rationalize the decision we have already unconsciously made.
Thaler argues that humans make decisions based on emotions and only rationalize them later.
Perfect decisions belong to the homo oeconomicus drawn by classical economic theories. An imperturbable and capable decision, in every condition of choice, to select, evaluate the available options and then decide by performing complex logical-mathematical calculations.
But we know that in reality this individual does not exist. We know that there are common individuals characterized by limited rationality (Simon) and with limited time available, which, in order to survive in an uncertain world, they are satisfied with sufficiently good decisions which they arrive also thanks to mental shortcuts (Kahneman), to adaptive forms of reasoning, to rules of thumb (Gigerenzer).
We mere mortals know that the perfect decision does not exist.
Image Flexform
What would our everyday life be like if we were not capable of an adequate behavior of evaluation, choice, decision?
Do I accept this new job offer? Shall I move to another city? Do I marry? Shall I call a friend that I haven't heard from long time?
Procrastination is the consequence of the inability to decide, that's the maintenance of status quo: an immobile life spent lying on a couch waiting for events to decide for us.
So we might as well choose, decide, risk maybe using some heuristics or rules of thumb (Gigerenzer); rules that allow us to decide quickly but nevertheless with high precision.
"Reason wants to make the right decision, anger wants the decision it has already made to seem right at the start"
Lucius Annaeus Seneca; Roman philosopher, playwright and politician.
A Cordoba 4 bC.
Ω Rome on 19 April 65 aC.
Evidently BE has ancient roots ....
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The Affect Heuristic (Slovic) describes how often, when making decisions, we rely on our emotions rather than on tangible information.
The affect heuristic is driven by System 1 thinking, and is called into question to explain the negative correlation between benefits and risk perception: our emotions influence our risk assessment, which in turn influences our behavior.
When we are in a positive mood we tend to perceive a certain option as low risk and high benefits. Conversely, when we experience a negative mood we perceive the option as high-risk and with few potential benefits.
So if we have an important decision to make and are feeling particularly emotional, it may be a good idea to postpone the choice at a moment when we are in a neutral mood.
Of course, in the working life of Stephen Hawking, mathematician, science wrtiter and authoritative physicist-theorist known throughout the world especially for his studies on black holes, quantum cosmology and the origin of the universe, there was only room for theories and absolutely rational decisions; it could not have been otherwise.
But in his private life, will there have been a room for emotions, for "mental shortcuts"?
From the movie "We are the Millers"
"NO RAGRETS" scene
In a decision it can be essential to understand which of the various alternatives you are not willing to give up; this is to avoid post decision regret.
The regret is a painful negative emotion, which arises from counterfactual thinking: that is, when, after a series of evaluations and reasoning related to the outcome of the decision taken, we discover that our present situation would have been better if we had acted in a different way (Zeelenberg 1999). In other words, we blame ourselves for making the wrong choice.
If our actor had decided to finish his studies, he could have been tattooed "NO REGRET". But for him continuing to study" was certainly not among the contemplated options!
First impressions of an individual serve to guide our actions in a way that satisfies both the need for tangible rewards and the need for affiliation.
First impressions are based on quick and spontaneous processes (System 1) and are difficult to change over time.
If the first impressions about a person are negative we will decide not to meet him/her never again.
In Italy we say: "Every left is lost". That is to say : every opportunity ignored it is definitively lost, forever and we will never have any confirmation of our decision.
