Monday, June 01, 2009

Today's Class

Today's lecture slides are available here.

Here's the related video:

Here's another talk by Dan Gilbert:

I thought that the video shown in class was enlightening. The thing that came to mind was the fact that swimming pools are more dangerous then tornadoes or airplane crashes. This makes me think of our current policies that we implement. We tend to implement policies that are on issues that people understand/fear the most (i.e. tornado disasters). Could we be putting in policies that are ineffective or more costly than a policy that we may see some actual value from? Who knows this idea might just balance the budget.
The idea of comparing with the past changes the value over time was very interesting. Behavior economist makes me rethink of the purchases I've made. The video clip's message is similar to that of the book Predictably Irrational. Both good pieces.
Mike brought up an interesting point. Are our policies ineffective because we are targeting about the wrong thing? Policy mistakes are bound to happen but are they really mistakes or are they just the best response to the ever-changing situation?
Watching this speech and presentation by Dan Gilbert really made me think of how many ridicules purchases I have made, and how lazy I really have been when it comes to saving money. I found this speech to very instructive, in how I should rationally approach decisions when it comes to purchasing a good or product. I have countless times done exactly what he was talking about in his car example, regarding saving 100 dollars, I have many times settled to not save money because the amount of money saved was only a small fraction of what the total cost of that good was, instead of simply saving money when I could. Beyond the idea of poor decision making with money, the idea of how people poorly distinguish statistics and problem solve in their daily lives, and how peoples perceptions are easily manipulated by what they commonly see in the media and in common life.
The video was very interesting and entertaining, it definately made me think. He almost made it seem that humans are fairly dumb, and don't think when asked a simple question they just answer. For example would you rather have the salaries. 60,50,40k or 30,40,50k and most said the second choice, which in my mind makes no sense why anybody would answer that. But it also made me think about decisions i've made, and I hardly ever do it, but I won't ever waste another 1$ on a lottery ticket.
I agree with Brandon. I too have made some quick purchases thinking that the gains I get from my purchase is greater than the real value. And those "comparing the past" deals have bitten me in the ass before, especially because those "sale" prices usually intrigue me.
I had to watch it twice because I see myself acting irrational in all of his examples. And now I know who to blame, the media. Especially in regards to the lottery ticket example, make absolutely no sense at all if you feel like you may have a chance to win yet if all tickets purchased were by the same person, you won't buy it. There is now difference at all, wow! Individuals for some reason or another people determine their self-worth by comparing to others. Why??? Why do us humans have to validate our standing compared to whatever or whoever? Next on my list is to invent a pill that takes away our mental need for comparison......I believe this increase aggregate utility and as an economist that's what we want!!
As interesting as some of the findings were in the video, I still cant get the fact out of my mind that swimming pools were more dangerous than tornadoes or airplane crashes. I remember having a class once where someone said they were scared of riding in planes and this whole class argument arose about how although plane crashes were more unlikely, the chances of survival were obviously much higher for other accidents. I honestly would still rather take my chances with with being stuck out in the water fighting waves or in a town with a tornado other than be in a plane where the engines blow up.
The past change the values and the swimming pools are more dangerous are the two things I remember in mind. Right now, I will have different thinking about the value of the good I bought. And for swimming pool, even thought the swimming pool is more dangerous, no one want to involved in a airplain crash rather than swim in a swimming pool. It;s a really interesting point.
This video was an excellent example of applying economic ideas to realistic situations. Actually, I should say that this video showed how economic ideas are often inaccurate representations of real life. I found the example about someone choosing not to drive across town to get a $100 discount on a car very intriguing. When thinking about this situation, I thought of another common occurrence: tax returns. From personal observation, I know that people often buy things out of the ordinary when they receive their check. People think, "well since I just got this chunk of money, I can splurge and go buy that stereo." This reasoning confounds economists because people change their spending thresholds depending on short-term shocks.
Perception and the power of the human brain.. I really wish the video wouldn't have cut out, but besides that I found it interesting and engaging while completely relevant. In the world of business and econ, the brain may act as an economists own worst enemy in terms of comparing the past to future choices. Also, the presentation on increasing wages was a startling find. I wish he wouldve explored the influence of social norms on our decisions to chose a job becuase I believe in many professions we are pressured by our peers to reject a career path with diminishing returns. It would be important to also mention the example on deaths by disasters versus drownings and plane crashes. It baffles economists how people are more scrared and willing to pay more to prevent less likely unnatural deaths that are constantly on tv as opposed to more common, more preventable deaths.
I thought the video was extremely interesting and very eye opening, in particular the segment on how people interpret and even based on the kind of shock factor an even can bring like the gun/pool example. I personally did not know that a child was much more vulnerable to drowning in a pool than to be harmed while in a house where a gun was kept. I would have made the same choice the parents in the example had, and would be very uncomfortable leaving my kids (if i had them) in a house with a gun. The though of a child drowning is of course tragic and by no means any less sad then a child accidentally shot with a gun but the image and stigma surrounding a gun leaves a much harsher impression in my mind.
This video is totally awesome. It brings out many simple point of view in our daily life that we never notice. I like the part where he said about lottery. I used to buy lottery once a week for few months. Every time I dreamed and excited about to become a rich man. However, it never happened. But the weird thing is that, every time you lose, you always feel like giving yourself a change. I spent quite a fortune on and on until I realized it's entirely wasting money. The example in the video is perfect. Maybe some rich person in the world has countless lottery tickets, which lead the winning chance to decrease. It is totally interesting to see everything in world with economicst point of view.
This video reminds me of the book predictably irrational and how we as humans will act so irrationally that it is predictable. His examples of how a 100 dollars is a hundred dollars no matter how you save it. Ive always had a tough time with this because it clearly makes perfect sense but situations in life always give someone different perspective to act differently then expected. We are constantly doing things that don't make sense, Purchasing a shirt that's 50% off 20 bucks inst saving 10 dollars its wasting 10 dollars because the shirt wasn't necessary, but I can not help but purchase the "good" deal.
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