Behavioural Economics Quotes

We are a society of notoriously unhappy people: lonely, anxious, depressed, destructive, dependent — people who are glad when we have killed the time we are trying so hard to save.

Psychologists tell us that in order to learn from experience, two ingredients are necessary: frequent practice and immediate feedback.

The purely economic man is indeed close to being a social moron. Economic theory has been much preoccupied with this rational fool.

Worldly wisdom teaches that is it is better for reputation to fail conventionally than to succeed unconventionally.

Of course, coaches are Humans. They tend to do things the way they have always been done, because those decisions will not be second-guessed by the boss. As Keynes noted, following the conventional wisdom keeps you from getting fired.

If a measurement matters at all, it is because it must have some conceivable effect on decisions and behaviour. If we can't identify a decision that could be affected by a proposed measurement and how it could change those decisions, then the measurement simply has no value

If a product is perceived as unique but not perceived as useful why would anyone think of buying it ?

Traditional Economics is about how people SHOULD behave Behavioural Economics is about how people ACTUALLY behave

Like casinos, large corporate entities have studied the numbers and the ways in which people respond to them. These are not con tricks - they're not even necessarily against our direct interests, although sometimes they can be - but they are hacks for the human mind, ways of manipulating us into particular decisions we otherwise might not make. They are also, in a way, deliberate underminings of the core principle of the free market, which derives its legitimacy from the idea that informed self-interest on aggregate sets appropriate prices for items. The key word is 'informed'; the point of behavioural economics - or rather, of its somewhat buccaneering corporate applications - is to skew our perception of the purchase to the advantage of the company. The overall consequence of that is to tilt the construction of our society away from what it should be if we were making the rational decisions classical economics imagines we would, and towards something else.

We don’t have to stop inventing abstract models that describe the behavior of imaginary Econs. We do, however, have to stop assuming that those models are accurate descriptions of behavior, and stop basing policy decisions on such flawed analyses.

Raza : “ The bow and arrow was once the pinnacle of weapons technology. It allowed the great Genghis Khan to rule from the Pacific to the Ukraine. Today-- whoever has the latest Stark weapons rules these lands. Soon it will be my turn “ End of scene Today picture Fortune 500 CEOs whispering to their top men “ Today – whoever has the latest sales weapons rules the world . Soon it will be our turn – thanks to Invisible Selling - Behavioural Economics & More . Get that Rai bloke to train all our guys

Colonialism and its attitudes die hard, like the attitudes of slavery, whose hangover still dominates behaviour in certain parts of the Western hemisphere. Before slavery was practised in the New World, there was no special denigration of Africans. Travellers to this continent described the inhabitants in their records with natural curiosity and examination to be expected of individuals coming from different environments. It was when slave trade and slavery began to develop ghastly proportions that made them the base of that capital accumulation which assisted the rise of Western industrialism, that a new attitude towards Africans emerged. 'Slavery in the Caribbean has been too narrowly identified with the man of colour. A racial twist has thereby been given to what is basically an economic phenomenon. Slavery was not born of racism, rather racism was the consequence of slavery.' With this racial twist was invented the myth of colour inferiority. This myth supported the the subsequent rape of our continent with its despoliation and continuing exploitation under the advanced forms of colonialism and imperialism.

Past success is not just not a guarantee of future success - it is a strong indicator of future failure because success builds ego & a know it all approach which can be fatal

Most people including senior sales & marketing professionals in Fortune 500 companies do not know much about the latest evidence based sales strategies

There is nothing common sensical about selling . If that was the case everybody would be a billionaire

Most books in the world are written to cure insomnia . This one is to cure inaction

Invisible Selling is like a superpower . It can be used like Superman or like General Zod. I request you to use it like Superman & not like Zod

2. We can’t do evidence-based policy without evidence.

One overly simplistic idea is that we can improve student performance by just by giving financial incentives to parents, teachers, or kids. Unfortunately, there is little evidence that such incentives are effective, but nuances matter.

Most people are under the impression that if they know about a subject or an industry they don’t need to understand invisible selling By that logic the guy with the best memory in an industry should be the most successful person in that industry - never happens

Because learning takes practice, we are more likely to get things right at small stakes than at large stakes. This means critics have to decide which argument they want to apply. If learning is crucial, then as the stakes go up, decision-making quality is likely to go down.

Most people pick up a book without any clear objective . That is why most of them don’t finish reading that book . Most that finish reading a book don’t understand it . Most that understand don’t remember . Most that remember – don’t implement ! & hence most book buyers are just wasting their time !

The interview started. Hearing a friend tell an old story about you is not an exciting activity, and hearing someone praise you is always awkward. I picked up something to read and my attention drifted— until I heard Danny say: “Oh, the best thing about Thaler, what really makes him special, is that he is lazy.” What? Really? I would never deny being lazy, but did Danny think that my laziness was my single best quality? I started waving my hands and shaking my head madly but Danny continued, extolling the virtues of my sloth. To this day, Danny insists it was a high compliment. My laziness, he claims, means I only work on questions that are intriguing enough to overcome this default tendency of avoiding work. Only Danny could turn my laziness into an asset.

Thus, they were asking: do higher intelligence test scores from about age 20 predict better educational outcomes, higher social position, and arguably more pro-social behaviours in the thirties? The answer was: they did. They then asked if this was due to (confounded by) parental socio-economic status; it mostly wasn’t.

There is so much confusion about branding even at top levels of The Fortune 500 it makes one wonder how they got successful in the first place ! Brace yourself ! Here is the shortest scientific statement on branding you ‘ll ever hear ! It appears simplistic – I assure you it is anything but . If you really understand it & internalize it – you ll be like an Avenger – a superhero in a herd of weaklings Here it goes ! A successful brand is one that is perceived to be USEFUL & UNIQUE

rash of suicides caused by the economic breakdown and, according to him, the inconsiderate behaviour of the banks and building societies.

If we’re going to be friends with benefits, I want private health and dental.” Dear

People will do anything for FREE – even pay for it !

2 Rules For Success #1 : Never Reveal All You Know

Invisible Selling is so non linear that people with a high IQ cannot just stumble upon Invisible Selling They have to study it

People’s brains have changed & are changing everyday ( & in some ways have remain unchanged for millions of years )

Want to be a business superman ? Be a favourman !

Plenty of people take great pride in their intuition & fail badly . Most of the best decisions in the word have been counter intuitive

People having a high IQ tend to be good only at certain types of thinking

Most books just drone on & on till you feel like tearing your hair & blurting out “ Is there a point here ?

So much can be learnt by observing motivations of our ancestors

When we were cavemen scarcity of food meant we would die fast . Hence scarcity rings alarm bells of anxiety

Literally, time is money. Starting to save now instead of later lessens the amount you will need to contribute.

Economic conditions may differ from period to period, but human psychology is embedded among us and will not change.

people are more likely to keep what they start with than to trade it, even when the initial allocations were done at random.

Traditional economics assumes that every human being has a super computer between his ears , knows everything , analyzes everything & decides logically . No human being works that way

It’s common to associate the ‘goodness’ or ‘badness’ of behaviour with the ‘goodness’ or ‘badness’ of the motivations that drive it. But the nobility or ignobility of individuals’ motivations often bears no relationship, and in some cases even exhibits an inverse relationship, to the nobility or ignobility of the outcomes these motivations create. Sometimes the basest of intentions can produce the best of outcomes.

This reflects a general tendency. People are more willing to lie by omission than commission. If I am selling you a used car, I do not feel obligated to mention that the car is burning a lot of oil, but if you ask me explicitly: “Does this car burn a lot of oil?” you are likely to wangle an admission from me that yes, there has been a small problem along those lines. To get at the truth, it helps to ask specific questions.

Most books use simplistic statements like “ Focus on what you want & not on what you don’t want “ or “ To really become rich you need to know how to earn money “ which are silly & don’t tell you what exactly to do

If I were to tell you – I am the only trainer in the world that wears only purple clothes & accessories – I may certainly be perceived as unique but you would think -how would that uniqueness create utility for you ?

other words, while the behaviour patterns of archaic humans remained fixed for tens of thousands of years, Sapiens could transform their social structures, the nature of their interpersonal relations, their economic activities and a host of other behaviours within a decade or two.

In other words, while the behaviour patterns of archaic humans remained fixed for tens of thousands of years, Sapiens could transform their social structures, the nature of their interpersonal relations, their economic activities and a host of other behaviours within a decade or two.

For four decades, since my time as a graduate student, I have been preoccupied by these kinds of stories about the myriad ways in which people depart from the fictional creatures that populate economic models. It has never been my point to say that there is something wrong with people; we are all just human beings—homo sapiens. Rather, the problem is with the model being used by economists, a model that replaces homo sapiens with a fictional creature called homo economicus, which I like to call an Econ for short. Compared to this fictional world of Econs, Humans do a lot of misbehaving, and that means that economic models make a lot of bad predictions, predictions that can have much more serious consequences than upsetting a group of students. Virtually no economists saw the financial crisis of 2007–08 coming,* and worse, many thought that both the crash and its aftermath were things that simply could not happen.

When capital has bumped up against limits to profit-growth in the past, it has found fixes in things like colonisation, structural adjustment programmes, wars, restrictive patent laws, nefarious debt instruments, land grabs, privatisation, and enclosing commons like water and seeds. Why would it be any different this time? Indeed, a study by the ecological economist Beth Stratford finds that when capital faces resource constraints, this is exactly what happens: it turns to aggressive rent-seeking behaviour. It seeks to grab existing value wherever it can, with clever mechanisms to suck income and wealth from the public domain into private hands, and from the poor to the rich, exacerbating inequality.

Think of an untreated sex addict who spends hours every night until the early hours watching pornography on the internet instead of spending that time with their wife or husband, and then becomes so tired due to the late nights that their professional life suffers. The sex addict’s behaviour will cause resentment, destroy trust and create economic insecurities in the family and home.

Harry Potter Vs Lord Voldemort Invisible Selling is like magic . It can be used as if you are Harry Potter or as Lord Voldemort . I request you to use it like Harry & not like Voldemort . Also the understanding of it will protect you from people who use these powerful strategies to hijack your rational brain & sell useless products to you or influence you in a harmful way Hence deploy ethically & protect smartly

Do you remember my friend Fumiko Kobayashi? She loaned me a book by a university professor named Taki Sugiyama Lebra, Japanese Patterns of Behaviour, and she writes that death, particularly voluntary death, is surrounded in this country by a heroic, romantic, aesthetic and emotional aura. She says we often find it hard to communicate and use suicide to make our ideas, or beliefs, or sufferings known. I don't know whether I believe that or not.

Mainstream economics takes the particular features of capitalism – a very recent form of economic organisation in human history – as if they were universal, timeless and rational. It treats market exchange as if it’s the essential feature of economic behaviour31 and relegates production or work – a necessity of all provisioning – to an afterthought. It also focuses primarily on the relationship between people and goods (what determines how many oranges we buy?) and pays little attention to the relationships between people that this presupposes.

If the State uses this power systematically in order to force the community to accept a particular sort of money whose employment it desires for reasons of monetary policy, then it is actually carrying through a measure of monetary policy. The States which completed the transition to a gold standard a generation ago, did so from motives of monetary policy. They gave up the silver standard or the credit-money standard because they recognized that the behaviour of the value of silver or of credit money was unsuited to the economic policy they were following.

Neoliberalism doesn’t want to do away with politics – neoliberalism wants to put politics at the service of the market. Neoliberals don’t think that the economy should be left in peace, but rather they are for the economy being guided, supported and protected through the spreading of social norms that facilitate competition and rational behaviour. Neoliberal economic theory isn’t built on keeping the hands of politics off the market, it’s built on keeping the hands of politics busy with satisfying the needs of the market. It’s not true that neoliberalism doesn’t want to pursue monetary, fiscal, family or criminal policies. It is rather that monetary, fiscal, family and criminal policies should all be used to procure what the market needs.

Unfortunately, the critics of economics have had a tendency to discuss the whole structure as a tissue of misconceptions. It is a critique that fails. The strength of economics is its considerable, if far from complete, understanding of the flows and comparative advantages that underlie trade, jobs, capital and incomes, and the logic of optimising behaviour, all backed by glittering accomplishment in mathematics. That makes it a powerful analytical instrument, so that just a few misconceptions – such as a failure to understand the informal economy or resource depletion – have leverage: like a baby monkey at the controls of a Ferrari, they can turn it into an instrument with extraordinarily destructive potential. If it were a tissue of errors, it would not be dangerous: it is its 90 percent brilliance which makes it so.

What is the good of drawing up, on paper, rules for social behaviour, if we know that, in fact, our greed, cowardice, ill temper, and self-conceit are going to prevent us from keeping them? I do not mean for a moment that we ought not to think, and think hard, about improvements in our social and economic system. What I do mean is that all that thinking will be mere moonshine unless we realise that nothing but the courage and unselfishness of individuals is ever going to make any system work properly. It is easy enough to remove the particular kinds of graft or bullying that go on under the present system: but as long as men are twisters or bullies they will find some new way of carrying on the old game under the new system. You cannot make men good by law: and without good men you cannot have a good society. That is why we must go on to think of the second thing: of morality inside the individual.

We live in a world where we have to sacrifice our comfort for the sake of others. Where we have to go an extra mile to meet others' needs. Where we have to dig deep in our resources to please others. I have gone out of my comfort zone for some people. Some people have gone out of their comfort zone for me. And I'm grateful. It's life. It's a common thing. There is no right or wrong to this behaviour. We do it because either we want to or that we must. By the way, our self-sacrificing service can be unhealthy to us. Some people burn themselves down trying to keep others warm. Some break their backs trying to carry the whole world. Some break their bones trying to bend backwards for their loved ones. All these sacrifices are, sometimes, not appreciated. Usually we don't thank the people who go out of their comfort zone to make us feel comfortable. Again, although it's not okay, it's a common thing. It's another side of life. To be fair, we must get in touch with our humanity and show gratitude for these sacrifices. We owe it to so many people. And sometimes we don't even realise it. Thanks be to God for forgiving our sins — which we repeat. Thanks to our world leaders and the activists for the work that they do to make our economic life better. Thanks to our teachers, lecturers, mentors, and role models for shaping our lives. Thanks to our parents for their continual sacrifices. Thanks to our friends for their solid support. Thanks to our children, nephews, and nieces. They allow us to practise discipline and leadership on them. Thanks to the doctors and nurses who save our lives daily. Thanks to safety professionals and legal representatives. They protect us and our possessions. Thanks to our church leaders, spiritual gurus and guides, and meditation partners. They shape our spiritual lives. Thanks to musicians, actors, writers, poets, and sportspeople for their entertainment. Thanks to everyone who contributes in a positive way to our society. Whether recognised or not. Thank you. Thank you. Thank you!

while the behaviour patterns of archaic humans remained fixed for tens of thousands of years, Sapiens could transform their social structures, the nature of their interpersonal relations, their economic activities and a host of other behaviours within a decade or two. Consider a resident o Berlin, born in 1900 and living to the ripe age of one hundred. She spent her childhood in the Hohenzollern Empire of Wilhelm II; her adult years in the Weimar Republic, the Nazi Third Reich and Communist East Germany; and she died a citizen of a democratic and reunified Germany. She had managed to be a part of five very different sociopolitical systems, though her DNA remained exactly the same. This was the key to Sapiens' success. In a one-on-one brawl, a Neanderthal would probably have beaten a Sapiens. But in a conflict of hundreds, Neanderthals wouldn't stand a chance. Neanderthals could share information about the whereabouts of lions, but they probably could not tell - and revise - stories about tribal spirits. Without an ability to compose fiction, Neanderthals were unable to cooperate effectively in large numbers, nor could they adapt their social behaviour to rapidly changing challenging. (p. 38)

As the following pages deal with the practising life, they lead - in accordance with their topic - to an expedition into the little-explored universe of human vertical tensions. The Platonic Socrates had opened up the phenomenon for occidental culture when he stated expressis verbis that man is a being potentially 'superior to himself'. I translate this remark into the observation that all 'cultures', 'subcultures' or 'scenes' are based on central distinctions by which the field of human behavioural possibilities is subdivided into polarized classes. Thus the ascetic 'cultures' know the central distinction of complete versus incomplete, the religious 'cultures' that of sacred versus profane, the aristocratic 'cultures' that of noble versus common, the military 'cultures' that of brave versus cowardly, the political 'cultures' that of powerful versus powerless, the administrative 'cultures' that of superior versus subordinate, the athletic 'cultures' that of excellence versus mediocrity, the economic 'cultures' that of wealth versus lack, the cognitive 'cultures' that of knowledge versus ignorance, and the sapiental 'cultures' that of illumination versus blindness. What all these differentiations have in common is the espousal of the first value, which is considered the attractor in the respective field, while the second pole consistently functions as a factor of repulsion or object of avoidance.

Presentism, neglect of the future (along with forgetfulness and contempt for the past) is the paradoxical characteristic of a society and elites who have nothing but the words progress, innovation, modernity on their lips in every domain, including the economic. As soon as one is no longer ‘in love’ as depicted in television shows, as soon as sexual desire fades, one separates from one’s current partner. Marrying for superficial reasons, one separates for superficial reasons. Moreover, this compulsive and immature sort of behaviour is found not only in relationships but also in eroticism and sex in general, always under the sign of speed, immediacy, and instant gratification. Conjugal love and even sex are no longer savoured but consumed or indeed devoured, as if by fire. Despite a form of pseudo-maturity demanded in all domains, especially sexual, and an ideology of liberation, Westerners since the 1960s (the baby boom generation to which I belong) have had difficulty proceeding to the psychological stage of adulthood, that of building for the long-term. This is true even in fields very different to those of sex and relationships, and include those of politics and economics. It is the generalised reign of immaturity and improvidence. Marriage is then conceived as a sort of game, and it ends as soon as one blows the final whistle. Unrestrained enjoyment, the slogan of May ‘68,[27] inspired by a cheap, boorish hedonism, has actually passed into our mores.

All addictions — whether to drugs or to nondrug behaviours — share the same brain circuits and brain chemicals. On the biochemical level the purpose of all addictions is to create an altered physiological state in the brain. This can be achieved in many ways, drug taking being the most direct. So an addiction is never purely “psychological” all addictions have a biological dimension. And here a word about dimensions. As we delve into the scientific research, we need to avoid the trap of believing that addiction can be reduced to the actions of brain chemicals or nerve circuits or any other kind of neurobiological, psychological or sociological data. A multilevel exploration is necessary because it’s impossible to understand addiction fully from any one perspective, no matter how accurate. Addiction is a complex condition, a complex interaction between human beings and their environment. We need to view it simultaneously from many different angles — or, at least, while examining it from one angle, we need to keep the others in mind. Addiction has biological, chemical, neurological, psychological, medical, emotional, social, political, economic and spiritual underpinnings — and perhaps others I haven’t thought about. To get anywhere near a complete picture we must keep shaking the kaleidoscope to see what other patterns emerge. Because the addiction process is too multifaceted to be understood within any limited framework, my definition of addiction made no mention of “disease.” Viewing addiction as an illness, either acquired or inherited, narrows it down to a medical issue. It does have some of the features of illness, and these are most pronounced in hardcore drug addicts like the ones I work with in the Downtown Eastside. But not for a moment do I wish to promote the belief that the disease model by itself explains addiction or even that it’s the key to understanding what addiction is all about. Addiction is “all about” many things. Note, too, that neither the textbook definitions of drug addiction nor the broader view we’re taking here includes the concepts of physical dependence or tolerance as criteria for addiction. Tolerance is an instance of “give an inch, take a mile.” That is, the addict needs to use more and more of the same substance or engage in more and more of the same behaviour, to get the same rewarding effects. Although tolerance is a common effect of many addictions, a person does not need to have developed a tolerance to be addicted.

This is not a hypothetical example. In the middle of the nineteenth century Karl Marx reached brilliant economic insights. Based on these insights he predicted an increasingly violent conflict between the proletariat and the capitalists, ending with the inevitable victory of the former and the collapse of the capitalist system. Marx was certain that the revolution would start in countries that spearheaded the Industrial Revolution – such as Britain, France and the USA – and spread to the rest of the world. Marx forgot that capitalists know how to read. At first only a handful of disciples took Marx seriously and read his writings. But as these socialist firebrands gained adherents and power, the capitalists became alarmed. They too perused Das Kapital, adopting many of the tools and insights of Marxist analysis. In the twentieth century everybody from street urchins to presidents embraced a Marxist approach to economics and history. Even diehard capitalists who vehemently resisted the Marxist prognosis still made use of the Marxist diagnosis. When the CIA analysed the situation in Vietnam or Chile in the 1960s, it divided society into classes. When Nixon or Thatcher looked at the globe, they asked themselves who controls the vital means of production. From 1989 to 1991 George Bush oversaw the demise of the Evil Empire of communism, only to be defeated in the 1992 elections by Bill Clinton. Clinton’s winning campaign strategy was summarised in the motto: ‘It’s the economy, stupid.’ Marx could not have said it better. As people adopted the Marxist diagnosis, they changed their behaviour accordingly. Capitalists in countries such as Britain and France strove to better the lot of the workers, strengthen their national consciousness and integrate them into the political system. Consequently when workers began voting in elections and Labour gained power in one country after another, the capitalists could still sleep soundly in their beds. As a result, Marx’s predictions came to naught. Communist revolutions never engulfed the leading industrial powers such as Britain, France and the USA, and the dictatorship of the proletariat was consigned to the dustbin of history. This is the paradox of historical knowledge. Knowledge that does not change behaviour is useless. But knowledge that changes behaviour quickly loses its relevance. The more data we have and the better we understand history, the faster history alters its course, and the faster our knowledge becomes outdated.

Poverty wasn't an issue that came up much back then; sure, every once in a while in our crusade against the trio of ’isms, somebody would bring up “classism,” and, being out-P.C.-ed, we would dutifully add “classism” to the hit list in question. But our criticism was focused on the representation of women and minorities within the structures of power, not on the economics behind those power structures. “Discrimination against poverty” (our understanding of injustice was generally construed as discrimination against something) couldn't be solved by changing perceptions or language or even, strictly speaking, individual behaviour. … For us, as students, to address the problems at the roots of “classism” we would have had to face up to core issues of wealth distribution — and, unlike sexism, racism or homophobia, that was not what we used to call “an awareness problem”.

At that time, a grand Arabic project emanating from Cairo had credibility. That is not true today. The relative standing of Egyptians (the country, the people and the culture) in the Arabic milieu has significantly declined. The major socio-economic challenges that ordinary Egyptians have struggled with for thirty-five years have exacted their price on the country's living standards, income levels, educational quality, as well as on the people's skills, aptitudes, behaviours and attitudes. Such deterioration was taking place while many Arab countries, especially in the Gulf (but also in the Levant), were improving their indices in all these areas.

Anger and fear are disabling trait behaviours, instilled in the opponent with care.

In sum, the most commonly used stock and bond market benchmark indexes cause economic harm, distort pricing information, and cause financial behaviours that are inimical with the EU’s aspirations for a competitive low carbon economy.

Tony Windsor puts the economic doomsaying down to the Opposition Leader: ‘Abbott’s behaviour in relation to a lot of this has been absolutely disgraceful.

Taken together, these subsidies distort behaviour and trade in unhelpful ways. They have created products that make no economic sense in the rest of the world, such as making sugar from corn.

Hans Kundnani, research director at the European Council on Foreign Relations and once a journalist in Berlin, seeks to relate Germany’s past to its recent behaviour in the eurozone crisis. He argues that history is in danger of repeating itself — not on the battlefield, but in the economy. His thesis is that today’s European Union is seeing a rerun of “the German question” that emerged after the founding of the Prussian empire. This time, Germany is not a military power but an economic one. Its economy is too dominant to preserve a stable balance with its eurozone and EU partners, yet too weak to enforce economic stability from above, he says. He calls it a “geo-economic semi-hegemon”, with the potential to cause a bitter and possibly disastrous conflict with its closest partners. Kundnani’s thesis is tempting. He believes that even today, Germans still feel they are victims — in the eurozone, suffering from the spendthrift behaviour of the southerners. A fear of Germany’s half-hearted hegemony is certainly shared in countries such as France, Italy and Greece. But this is not how Germans see themselves. The Germany that grew out of Stunde Null — the “zero hour” of 1945 — is a very different place from the insecure empire inaugurated by the Prussian Kaiser. The second world war, that greatest of self-inflicted national disasters, left the country divided and economically devastated. It has been overcome but not forgotten.

isn’t the initial loss that does for him, but the stupid plays he makes in an effort to deny that the loss has happened. The great economic psychologists Daniel Kahneman and Amos Tversky summarised the behaviour in their classic analysis of the psychology of risk:

I set a goal, I met it, I proved that I could meet it, and now the hell with it.” Dear

Now, in the modern money economy everything in the nature of a social-economic occurrence consists in human actions and behaviour.

PROBLEM 1. Assume yourself richer by $300 than you are today. You are offered a choice between A. A sure gain of $100, or [72%] B. A 50% chance to gain $200 and a 50% chance to lose $0. [28%] PROBLEM 2. Assume yourself richer by $500 than you are today. You are offered a choice between A. A sure loss of $100, or [36%] B. A 50% chance to lose $200 and a 50% chance to lose $0.

The problem with this argument is that it can be hard to find a true expert who does not have a conflict of interest. It is illogical to think that someone who is not sophisticated enough to choose a good portfolio for her retirement saving will somehow be sophisticated about searching for a financial advisor, mortgage broker, or real estate agent.

Wealth, too, is often separated into various mental accounts. At the bottom of this hierarchy sits the money that is easiest to spend: cash.

As I have learned over the years, and will discuss further in subsequent chapters, the reluctance to experiment, test, evaluate, and learn that I experienced at General Motors is all too common.

Economists have not always been so dense about self-control problems. For roughly two centuries, the economists who wrote on this topic knew their Humans. In fact, an early pioneer of what we would now call a behavioral treatment of self-control was none other than the high priest of free market economics: Adam Smith. When most people think about Adam Smith, they think of his most famous work, The Wealth of Nations

It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” People

Smith did not regard economic freedom as the sum of politics, nor did he believe that self-interest is the only, or even the most important, motive governing our economic behaviour. A market can deliver a rational allocation of goods and services only where there is trust between its participants, and trust exists only where people take responsibility for their actions and make themselves accountable to those with whom they deal. In other words, economic order depends on moral order.

Those scientists who believe in Scientism and hold that the experimental method is the only arbiter in all matters of life need to look no further than the field of economics where the tools and concepts of physics are applied. Even though science cannot be arbiter in morals, defining motives, public policy and politics, but it cannot even be a perfect and sufficient tool in explaining economic behaviour by taking the analogy of animal behaviour which is based on self-interest and survival instincts.

After the lockdown, when markets become less active, the subject of mainstream economics faces another tough ground. There are millions of poor people who do not have work. When lockdown happens, a great many people find resource markets stalled where they used to get income. More than ever, such crises necessitate the flow of resources from the haves to the have-nots. But, frozen goods and resource markets cannot help much, especially the poor and vulnerable people. That is where, pro-social behaviour and beyond-market distribution of resources is necessary. However, mainstream economics treats altruism as ‘impure’. It looks at altruism in the paradigm of pursuing self-interest.

Motivation for moral behaviour and pro-social cooperative response has to come from somewhere else. In poor countries like Pakistan, people with surplus resources are engaging in charity, donations, and volunteering. Empirical evidence in Pakistan in multiple research studies has found that faith is the biggest motivation behind charitable donations and it encapsulates and is associated with other humane motives. This trend is also seen in other parts of the world. But, economics is largely silent and irrelevant when it comes to exchange, allocation and distribution of economic resources outside of markets.

In basic microeconomics textbooks, even when welfare gets attention, it is in the domain of efficient outcomes. Redistribution through taxes is first introduced as a big ‘no go’ domain with concepts of deadweight loss. However, inefficiency out of market behaviour and market outcomes is plainly ignored and overlooked. Approximately, $600 million daily is needed to feed every extremely poor person, yet about $2.75 billion value of food is wasted every day, according to Food and Agriculture Organization. Consequently, 9 million people die every year from hunger while one-third of all food is wasted. This gross inefficiency in economic resources is not captured or discussed. According to Food and Agriculture Organization of the United Nations, globally, per capita food supply increased from about 2,200 kcal per day in the early 1960s to more than 2,903 kcal per day by 2014. But under capitalism, the market allocates goods including even food to only those who can pay its price. It does not make a difference whether the willingness to pay is less than the price due to ‘preference’ or due to ‘poverty’. Yet, mainstream economics claims consumer sovereignty.

In the earlier era, the subject of economics was geared to human needs. Now, the prime emphasis is on market behaviour and market outcomes based on choices under uncertainty and scarcity. The emphasis on choice behaviour subtly and inadvertently makes economics and most of its contents largely irrelevant for poor people.

I have not in this book discussed homoerotic behaviour, and that particular form of male bonding and female bonding loosely called ‘the homosexual community’. These large subjects require extensive treatment. But, very briefly, it should be said here that there may be analytic and practical profit in seeing male homosexuality as a specific feature of the more general phenomenon of male bonding. For a variety of obvious and more subtle reasons, male homoeroticism is socially organized differently and occurs more frequently than the female variety. There are a host of other differences which, in part, reflect the biologically based patterns which must accompany such a profound matter as seeking erotic contact, establishing sexual identity, and defining sexual role. The effect of homoerotic relationships in work, political, and other groups is of considerable interest in terms of many of the questions I have raised in this book. From a strictly biological viewpoint, there is no good reason for forbidding or even discouraging homoerotic activity, though in terms of Euro-American family structure and sexual attitudes there may be sociological reasons. As I have tried to indicate, there are important inhibitions in much of Euro-American culture – if not elsewhere too – against expressing affection between men, and one result of this inhibition of tenderness and warmth is an insistence on corporate hardness and forcefulness which has contributed to a variety of ‘tough-minded’ military, economic, political, and police enterprises and engagements. Of course, a fear of homoeroticism is not the only reason for this – a number of others have been described here too. But homoerotic activity has been widely and powerfully defined as aberrant (though as Kinsey has suggested, about half American males have had homosexual activity, while at least a third have had experiences culminating in orgasm). Much guilt and uncertainty must plague many of the participants in these relationships. So must the insecurity about possibly being or becoming ‘queer’ or ‘bent’ among other men who may feel drawn to their colleagues and friends in ways I have described but whose repertoire of explanations of their feelings is overwhelmed by their community’s assertion that men tender with each other are unmanly and unreliable. It remains a worthy subject of exploration to learn more about the dynamics of tender male interchanges, both for the sake of scientific understanding, and perhaps for providing information on the basis of which greater sympathy and opportunity may confront persons often harassed and disdained by themselves as well as others. That this may accompany a changed ideal of manhood, of corporate structure, of political acumen, and of the role of hard dominance, is not accidental but intrinsic to the whole argument of this book.

Over the past thirty years the orthodox view that the maximisation of shareholder value would lead to the strongest economic performance has come to dominate business theory and practice, in the US and UK in particular.42 But for most of capitalism’s history, and in many other countries, firms have not been organised primarily as vehicles for the short-term profit maximisation of footloose shareholders and the remuneration of their senior executives. Companies in Germany, Scandinavia and Japan, for example, are structured both in company law and corporate culture as institutions accountable to a wider set of stakeholders, including their employees, with long-term production and profitability their primary mission. They are equally capitalist, but their behaviour is different. Firms with this kind of model typically invest more in innovation than their counterparts focused on short-term shareholder value maximisation; their executives are paid smaller multiples of their average employees’ salaries; they tend to retain for investment a greater share of earnings relative to the payment of dividends; and their shares are held on average for longer by their owners. And the evidence suggests that while their short-term profitability may (in some cases) be lower, over the long term they tend to generate stronger growth.43 For public policy, this makes attention to corporate ownership, governance and managerial incentive structures a crucial field for the improvement of economic performance. In short, markets are not idealised abstractions, but concrete and differentiated outcomes arising from different circumstances.

I believe that human preferences came to be what they are in those millions of years in which our ancestors (whether or not they can be classified as human) lived in hunting bands and were those preferences which, in such conditions, were conducive to survival. It may be, therefore, that ultimately the work of sociobiologists (and their critics) will enable us to construct a picture of human nature in such detail that we can derive the set of preferences with which economists start. And if this result is achieved, it will enable us to refine our analysis of consumer demand and of other kinds of behaviour in the economic sphere.

This book brings together the key insights I have discovered along the way—insights into ways of thinking that I wish had crossed my path at the outset of my own economics education, and that I believe should be part of every economist’s toolkit today. It draws on diverse schools of thought, such as complexity, ecological, feminist, institutional and behavioural economics. They are all rich with insight, but there is still a risk that they will remain separated in silos, each school of thought nestled in its own journals, conferences, blogs, textbooks and teaching posts, cultivating its niche critique of last century’s thinking. The real breakthrough lies, of course, in combining what they each have to offer and to discover what happens when they dance on the same page,

As our emerging self-portrait makes clear, we are motivated by far more than cost and price. So instead of turning first to markets to mediate our social and ecological relationships, the twenty-first-century economist would be wise to start by asking what social dynamics are already in play. What are the values, heuristics, norms and networks that currently shape human behaviour—and how could they be nurtured or nudged, rather than ignored and eroded?

This kind of herd behaviour can be highly contagious and highly uncertain. And it explains the unpredictability not only of the next chart-topping song but also of next summer’s fashion craze—not to mention the ‘animal spirits’ driving boom and bust in stock markets—revealing the strength of social networks in shaping our preferences, purchases and actions.

There is a ‘well-documented lifestyle effect’, he notes, in which ‘people outside the top 1 percent increasingly live beyond their means. Trickle-down economics may be a chimera, but trickle-down behaviourism is very real.

Where did this infamous character come from? His most intimate early portrait was created by Adam Smith in two major works, his 1759 Theory of Moral Sentiments and his 1776 book known as The Wealth of Nations. Today Smith is best remembered for having noted the human propensity to ‘truck, barter and exchange’ and the role of self-interest in making markets work.2 But although he believed self-interest was ‘of all virtues that which is most helpful to the individual’, Smith also believed it was far from the most admirable of our traits, knocked off that top spot by our ‘humanity, justice, generosity and public spirit . . . the qualities most useful to others’. Did he consider humankind to be motivated by self-interest alone? Not at all. ‘How selfish soever man may be supposed,’ he wrote, ‘there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.’3 Furthermore, Smith believed that an individual’s self-interest and concern for others combined with their diverse talents, motivations and preferences to produce a complex moral character whose behaviour could not easily be predicted.

Out of sheer convenience, the vast majority of experimental studies, which have been conducted by academic researchers in North America, Europe, Israel and Australia, have used their own universities’ undergraduate students as their subjects. As a result, between 2003 and 2007, 96 percent of people studied in such behavioural experiments came from countries that were home to only 12 percent of the world’s population.

The form of argument used by Farjoun and Machover is rather alien to the tradition of political economy. The later has tended, from its inception, to look for explanations in terms of the actions of rational profit maximising individuals directing the economy towards some sort of equilibrium. Instead Farjoun and Machover, who were mathematicians not economists, imported the form of reasoning that had been used in thermodynamics or statistical mechanics. This branch of physics deals with the behaviour of large complex systems with huge numbers of degrees of freedom. The classical example of this type of system is gas composed of huge numbers of randomly moving molecules. In such a system it is fruitless to try and form a deterministic and microscopic picture of the interaction of individual molecules. But you can make a number of useful deductions about the statistical properties of the whole collection of molecules. It was from the statistical properties of such collections that Boltzmann was able to derive the laws of thermodynamics[Bol95]. What Farjoun and Machover did was apply this form of reasoning to another chaotic system with a large number of degrees of freedom : the market economy. In doing this they initiated a new discipline of study : econophysics. This, in a very radical way, views the economy as a process without a subject. It assumes nothing about knowing subjects, instead it attempts to apply the principle of parsimony. It assumes nothing about the individual economic actors. Instead it theorises the aggregate constraints and and statistical distributions of the system that arise from the assumption of maximal disorder. A such this approach is anathema to the subjectivist Austrian school9.

A government is challenged when its citizens refuse to pay taxes, serve in the armed forces, participate in elections, and so on, and it may meet the challenge either by strengthening its contingencies or by bringing deferred gains to bear on the behaviour at issue. But how can it answer the question: ‘Why should I care whether my government, or my form of government, survives long after my death?’ Similarly, a religious organization is challenged when its communicants do not go to church, contribute to its support, take political action in its interests, and so on, and it may meet the challenge by strengthening its contingencies or pointing to deferred gains. But what is its answer to the question: ‘Why should I work for the long-term survival of my religion?’ An economic system is challenged when people. do not work productively, and it may respond by sharpening its contingencies or pointing to deferred advantages. But what is its answer to the question: ‘Why should I be concerned about the survival of a particular kind of economic system?’ The only honest answer to that kind of question seems to be this: ‘There is no good reason why you should be concerned, but if your culture has not convinced you that there is, so much the worse for your culture.

full century on, John Maynard Keynes echoed Mill’s sentiments, asserting (rather wishfully) that ‘the day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied, by our real problems—the problems of life and of human relations, of creation and behaviour and religion’.

The distinguished economist and philosopher Amartya Sen famously called people who always give nothing in this game rational fools for blindly following only material self-interest: “The purely economic man is indeed close to being a social moron. Economic theory has been much preoccupied with this rational fool.

Further research by Ernst Fehr and his colleagues has shown that, consistent with Andreoni’s finding, a large proportion of people can be categorized as conditional cooperators, meaning that they are willing to cooperate if enough others do. People start out these games willing to give their fellow players the benefit of the doubt, but if cooperation rates are low, these conditional cooperators turn into free riders. However, cooperation can be maintained even in repeated games if players are given the opportunity to punish those who do not cooperate.

Prof. Lawrence Krauss writes: “The declaration of a First Cause still leaves open the question, ‘Who created the creator?’ After all, what is the difference between arguing in favour of an eternally existing creator versus an eternally existing universe without one?” Big Bang has proved that this universe had a beginning 13.7 billion years ago. It is not an eternally existing universe. The lifeless matter cannot be conceived as creating itself independently. We use matter and reshape it into different forms to make aeroplanes, rockets, spaceships, skyscrapers and expansive gardens. We, humans, having the power to form and deform matter through construction and destruction can also not be our own creators and this universe. We have barely come to exist since few hundred thousand years ago on this planet. We know and recognize by experience and observation our physical limits and fallibility. Our behavioural contradictions and fallacies are so much well documented that the busiest field in economics these days is behavioural economics.