Misbehaving: The Making Of Behavioral Economics Quotes
"Even for those of us who can’t remember where we last put our keys, life offers indelible moments."
"When you have the flu you feel like you are going to die, but when you are dying, most of the time you feel just fine."
"The problem is with the model being used by economists, a model that replaces homo sapiens with a fictional creature called homo economicus."
"By realizing this, I was able to set the kind of exam I wanted but still keep the students from grumbling."
"In the eyes of an economist, my students were 'misbehaving.'"
"Ironically, the existence of formal models based on this misconception of human behavior is what gives economics its reputation as the most powerful of the social sciences."
"But as we will see, those situations are the exception rather than the rule."
"Behavioral economics is more interesting and more fun than regular economics. It is the un-dismal science."
"The problem with a slow hunch is you have no way to know whether it will lead to a dead end."
"In every case, economic theory had a highly specific prediction about some key factor—that the theory said should not influence decisions."
"The fact that we experience diminishing sensitivity to both gains and losses has another implication."
"Losses hurt about twice as much as gains make you feel good."
"The pleasure which we are to enjoy ten years hence, interests us so little in comparison with that which we may enjoy today."
"The money paid for the dresses was gone, and wearing the dresses would not get it back."
"A purchase will produce an abundance of acquisition utility only if a consumer values something much more than the marketplace does."
"The typical bar player usually aims at the ball closest to a pocket and shoots, often missing."
"Getting a great deal is more fun than saving a small and largely invisible amount on each item."
"The beauty of this plan is that it doesn’t matter. Merely having a place where these pieces are stored in a folder on my computer labeled 'outtakes' has been enough to reduce the pain of cutting some of my favorite passages."
"The existence of budgets can violate another first principle of economics: money is fungible, meaning that it has no labels restricting what it can be spent on."
"Like most aspects of mental accounting, setting up non-fungible budgets is not entirely silly."
"The problem with the learning story is that it assumes that we all live in a world like the Bill Murray movie Groundhog Day."
"The same behavior occurs with health clubs. If you buy a membership to a gym and fail to go, you will have to declare that purchase as a loss."
"If someone even more brilliant than Barro comes along and thinks of an even smarter way for people to behave, should that too become our latest model of how real people behave?"
"The idea of modeling the world as if it consisted of a nation of Econs who all have PhDs in economics is not the way psychologists would think about the problem."
"To understand the consumption behavior of households, we clearly need to get back to studying Humans rather than Econs."
"Removing the cashews is smart because eating the entire bowl will ruin your appetite."
"The only circumstances in which you would want to commit yourself to your planned course of action is when you have good reason to believe that if you change your preferences later, this change of preferences will be a mistake."
"We propose that at any point in time an individual consists of two selves."
"To some extent, the planner is trying to get the doers to act more like Econs."
"The planner has two sets of tools she can use to influence the actions of the doers."
"The strategy of using programmable safes, each containing one energy bar, achieves much more satisfaction than the guilt-induced diet."
"If you gouge them at Christmas they won’t come back in March."
"Economic theory has been much preoccupied with this rational fool."
"The purely economic man is indeed close to being a social moron."
"People start out these games willing to give their fellow players the benefit of the doubt."
"For years after Samuelson’s paper, economists assumed that the public goods problem could not be solved."
"Some people donate to charities and clean up campgrounds."
"Repeated play of the Public Goods Game does not teach people to be jerks; rather it teaches them that they are playing with (some) jerks."
"If the market works well, the six subjects who value the tokens the most, the ones on the left, will end up owning the tokens."
"The endowment effect experiments show that people have a tendency to stick with what they have."
"Loss aversion and status quo bias will often work together as forces that inhibit change."
"We are nice to people who treat us nicely and mean to people who treat us badly."
"By taking on the twenty-three projects, the firm expects to make $11.5 million."
"In many situations in which agents are making poor choices, the person who is misbehaving is often the principal, not the agent."
"The only way you can ever take 100 attractive bets is by first taking the first one."
"If you look more often, you will see more losses."
"The chance of losing money in Samuelson’s original 100-bet game is small."
"The law of large numbers says that if you repeat some gamble enough times, the outcome will be quite close to the expected value."
"It is much easier to detect that we may be in a bubble than it is to say when it will pop."
"A good lawyer could have you declared legally insane for turning down this gamble."
"In a rational world, prices only change in reaction to news."
"The efficient market hypothesis could be reconciled with our results if the Loser stocks had high betas."
"Imagine trying to convince economists that fashion matters."
"Nothing attracts attention more than a good fight."
"It is reasonable to think that stocks that are priced 'too low' will eventually beat the market."
"The existence of a multitude of smart traders who are constantly on the lookout for violations of the law of one price guarantees that it should hold."
"It was as if we had discovered a unicorn and then had a long fight about what to call the color of the beast’s coat."
"The interesting problem Owen had spotted was a blatant violation of the law of one price involving a company called 3Com."
"In the summer of 1999, when the stock of any respectable Silicon Valley technology company seemed to double every month or two, 3Com was being neglected."
"3Com management adopted a plan of action to increase its share price, and the plan involved divesting itself of its interest in Palm."
"What difference does it make whether Palm is located within 3Com or out on its own?"
"Instead, they implied that Palm would somehow be magically worth more as a separate company than as a part of the parent company."
"Puzzling as it might be, carving out Palm seemed to work."
"The way the spin-off would work is that initially only 5% of the value of Palm would be sold to outside investors."
"Investment bankers marketing the shares of Palm to be sold in the initial public offering had to determine what price to charge."
"The stock market was saying that the remaining 3Com business, a profitable business, was worth minus $23 billion."
"Why buy Palm directly when you can get more shares for less money by buying 3Com, plus get a stake in another company thrown in for free?"
"This was a colossal violation of the law of one price."
"You need some investors with an inexplicable desire to own a pure, unadulterated version of Palm rather than one watered down with extra money and a share of a profitable company."
"The smart-money trade in this situation is to buy undervalued 3Com shares and sell short an appropriate number of shares of Palm."
"But things don’t always work out so well for the smart investors."
"The LTCM example illustrates what Andrei Shleifer and his frequent coauthor Robert Vishny call the 'limits of arbitrage.'"
"If policy-makers simply take it as a matter of faith that prices are always right, they will never see any need to take preventive action."
"Central banks around the world have had to take extraordinary measures to help economies recover from the financial crisis."
"When you want to encourage someone to do something, make it easy."
"We can't do evidence-based policy without evidence."
"If we can anticipate errors, we can devise policies that will reduce the error rate."
"Ethical nudges must be both transparent and true."
"It is difficult to calculate exactly how much money was saved, since most people do pay their taxes eventually."
"Nudges are effective for Humans, not for Econs, since Econs are already doing the right thing."
"Nudges are supposedly irrelevant factors that influence our choices in ways that make us better off."
"Not every idea will work; any scientist can attest to this fact of life."
"A billion here, a billion there, pretty soon you're talking about real money."
"Nudges are merely tools, and these tools existed long before Cass and I gave them a name."
"People can be nudged to save for retirement, to get more exercise, and to pay their taxes on time."
"Behavioral scientists have a lot of wisdom to offer to help make the world a better place."
"Let's use their wisdom by carefully selecting nudges based on science, and then subjecting these interventions to rigorous tests."
"The failure to do so amounts to serious misbehaving."
"Much has changed. Behavioral economics is no longer a fringe operation."
"After a life as a professional renegade, I am slowly adapting to the idea that behavioral economics is going mainstream."
"We need more evidence-based economics, which can be either theoretical or empirical."
"To really convince yourself, much less others, we need data, and lots of it."
"If you don't write it down, it doesn't exist."
"Good leaders must create environments in which employees feel that making evidence-based decisions will always be rewarded."
"All economics will be as behavioral as it needs to be."
"A lazy man does not manage to write a book without a lot of help."
"If Jesse ever writes a book, buy it. It will be fantastic."
"The University of Chicago Booth School of Business provided financial support for this project."
"France Leclerc continues to put up with me when she would rather be traveling the world."
"He read every word of this manuscript at least twice."