Sunday, March 05, 2006
Should you behave like economists assume you do?
As we've discussed several times now, economists assume that more choices improve individual welfare. Further, economists typically assume that people will rationally consider all available choices and make the choice which maximizes their welfare.
We've also discussed a potential limitation to this approach. Decision costs and regret costs imply that more choices (or at least awareness of more choices) might lower individual welfare.
Here is some interesting research on the tradeoff between more choice and individual satisfaction. The authors grouped people into two groups -- maximizers (those who exhaustively consider all available choices) or satisficer (those who find and settle on something adequate) and examined how these people performed on the job market.
They find that "maximisers had found jobs that paid 20 per cent more on average than the satisficers jobs, but they were less satisfied with the outcome of their job search, and were more pessimistic, stressed, tired, anxious, worried, overwhelmed and depressed."
These results are provocative, but you should interpret them with caution. First, it is not obvious how easy it is to group people into maximizers or satisficers accurately. Second, even if you could accurately measure this stuff, it is hard to establish a causal link between this variable and outcomes. There are obviously potentially omitted variables in the analysis.
We've also discussed a potential limitation to this approach. Decision costs and regret costs imply that more choices (or at least awareness of more choices) might lower individual welfare.
Here is some interesting research on the tradeoff between more choice and individual satisfaction. The authors grouped people into two groups -- maximizers (those who exhaustively consider all available choices) or satisficer (those who find and settle on something adequate) and examined how these people performed on the job market.
They find that "maximisers had found jobs that paid 20 per cent more on average than the satisficers jobs, but they were less satisfied with the outcome of their job search, and were more pessimistic, stressed, tired, anxious, worried, overwhelmed and depressed."
These results are provocative, but you should interpret them with caution. First, it is not obvious how easy it is to group people into maximizers or satisficers accurately. Second, even if you could accurately measure this stuff, it is hard to establish a causal link between this variable and outcomes. There are obviously potentially omitted variables in the analysis.
// posted by BW @ 10:45 AM 
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