We make choices every single day; it is an inevitable action that all living creatures must perform. Choosing to wake up early versus sleeping in, or eating a healthy meal versus an unhealthy meal. Although many of us believe that, past the childhood stage, we have the authority to make these choices, today we have people whose job it is to nudge you in the direction they think best, whether or not we are aware. Formally this field goes by the name of “choice architecture”, which was made popular by economist Richard Thaler, through his book “Nudge”. Choice architecture emphasizes Continue reading Are the Choices We Make Truly Ours?
As you’re reading the words “Buddhist Economics” you may jump to the conclusion that it seems like an oxymoron. But the field and study of Buddhist economics, which has some overlap with areas of behavioral economics, is one that is starting to develop and even be taught at schools like UC Berkely. I love economics, but after every course I took I felt unsettled with the underlying assumptions the models make about us as humans, and how related fields such as finance and marketing are heavily focused on making money and convincing people to spend it on things they don’t Continue reading Is Buddhist Economics an Oxymoron?
The other day I called United Airlines to see if I could catch the second leg of my flight home from Scotland, at London Heathrow since I would already be there at the time of my departure. They responded with a, “yes, but this change will be a fee of $800”, to which I declined as it was more than half the ticket price. This got me thinking, why would an airline charge me so much to not board part of my flight, even if I paid for the entire ticket. The answer is hidden city ticketing. Hidden city Continue reading How Flying Further Can Save You Money
What can explain why we do something out of the goodness of our heart, or put ourselves into dangerous situations and perform heroic acts? Most heroes that you ask will tell you that they acted instinctively and unconsciously, and didn’t stop to think. But clearly if we all stopped to think about helping and saving others from a purely economical standpoint, there would be a sharp decline in heroic acts. So why do we continue to put ourselves in situations that can be proven to always leave us with lower payoffs? Some explanations turn to the long run and karma; Continue reading The Game of Genuine Altruism
Arizona State University recently announced that they will be offering “pay- as –you- pass” online college courses. How this will work is that students can enroll in freshman courses online free of charge. The initial offerings include math, humanities, arts and design, social-behavioral sciences, and natural sciences. The catch is that the student only has to pay if they pass the class and intend to use the credit. This idea was put in place primarily with the hope that it would help certain students reduce the risk of going into huge debt on their path to attempting to obtain a college diploma. Continue reading A Risk Averse Student’s Dream
How can it be that the fastest growing and most profitable U.S. airline is the one most complained about? The most common reason that people don’t travel is the airfare price, which combined with Spirit airline’s odd success proves that cheap ticket prices are what fliers care most about. You have to plan months in advance just to feel like you are still overpaying for your ticket. Then when you get to the airport and run into a slew of other fees, ranging from checking baggage to being forced into purchasing overpriced airport food. For some people, the fees don’t Continue reading Most Hated and Successful US Airline
In economics we define signaling, in simple terms, as a message sent to a receiver containing information about the party sending it, which is assumed to be credible. A well-known example is sending signals with education. When you walk into a doctors office and see his framed diplomas from prestigious medical schools you trust him more. These diplomas are a signal from the doctor to the patient about their credibility and ability to perform. But this definition involves two parties, one sending and one receiving the information. A concept that is largely overlooked in the field of economics is “self-signaling”. Continue reading Self-Signaling: Why Wearing Fakes Makes us Cheat More
Last week I talked about ambiguity aversion; how we prefer known risks to unknown risks. Although guilt aversion does not revolve as much around probability, it does play a large role in gift giving and shopping. To put this idea into context, behavioral economist Dan Ariely describes a scenario in which you encounter a coat at a store that you would like to buy, but realize it’s twice as expensive as you originally guessed and decide you cannot justify buying it. You get home to see that your significant other has bought you the exact same coat out of your Continue reading Is Amazon Prime a Method of Guilt Aversion?
If you are familiar with the idea of risk aversion, our innate preference for a sure outcome over a gamble that would result in an equivalent or higher expected value, the concept of ambiguity aversion is very similar. It claims that people show a preference for known risks over unknown risks. Ambiguity aversion differs from risk aversion because it applies to situations in which probabilities of outcomes are unknown, while risk aversion is based on scenarios where a probability can be assigned to each possible outcome. The famous experiment used to describe this idea, the Ellsberg paradox, begins by presenting Continue reading Ambiguity Aversion: Avoidance of the Unknown
The other day I decided to venture back into the world of eBay after taking a 2-year hiatus- a result of never being able to win any items. Having forgotten about why I left the trading medium, I was soon reminded when I was attempting to bid on a used bike lock that had one day remaining, 4 bids, and a going price of $15 that I was willing to outbid. My first instinct was to bid just a little more than 15, as to not increase the final price by too much if I were to win. One hour Continue reading Bidding on eBay Shouldn’t Be So Hard