Behavioral Economics Quotes

Terror Management Theory

I'm enjoying Wray Herbert's On Second Thought, which explores the many "mental shortcuts" used by the "down and dirty," "low road," "quick processing" system of our "parallel processor" brains. From Wikipedia, "Heuristic ( /hjʉˈrɪstɨk/; or heuristics; Greek: "Εὑρίσκω", "find" or "discover") refers to experience-based techniques for problem solving, learning, and discovery. Where an exhaustive search is impractical, heuristic methods are used to speed up the process of finding a satisfactory solution. Examples of this method include using a rule of thumb, an educated guess, an intuitive judgment, or common sense."

In Chapter 19 Herbert explores the "Grim Reaper Heuristic," about how our mind copes and keeps at bay the existential pain that humans experience because of mortality salience (we're aware of our own mortality). In this chapter he mentions "Terror Management Theory."

Again, from Wikipedia, "Terror Management Theory (TMT), in social psychology, states that human behavior is mostly motivated by the fear of mortality. According to TMT theorists, symbols that create cultural worldviews are fiercely protected as representations of actual life. The Terror Management Theory posits that when people are reminded of their own deaths, they more readily enforce these symbols, often leading to punitive actions, violence, and war. Experiments have been performed to lend evidence to TMT, primarily carried out by Sheldon Solomon, Tom Pyszczynski, and Jeff Greenberg, seeking to provide proof that mortality salience, or the awareness of one's own death, affects the decision-making of individuals and groups of people.

The theory purports to help explain human activity both at the individual and societal level. It is derived from anthropologist Ernest Becker's 1973 Pulitzer Prize-winning work of nonfiction The Denial of Death, in which Becker argues all human action is taken to ignore or avoid the inevitability of death. The terror of absolute annihilation creates such a profound -- albeit subconscious -- anxiety in people (called cognitive dissonance) that they spend their lives attempting to make sense of it. On large scales, societies build symbols: laws, religious meaning systems, cultures, and belief systems to explain the significance of life, define what makes certain characteristics, skills, and talents extraordinary, reward others whom they find exemplify certain attributes, and punish or kill others who do not adhere to their cultural worldview. On an individual level, how well someone adheres to a cultural worldview is the same concept as self-esteem; people measure their own worth based on how well they live up to their culture's expectations."

On Second Thought: Heuristics and Framing

Once again, the pioneering research of Daniel Kahneman and Amos Tversky serves as the foundation for this breezey Malcolm Gladwell-type book, On Second Thought, by Wray Herbert. I never tire of reading about heuristics and Prospect Theory. Check out the subtle visual pun on the cover design.

From the almighty Amazon, "Our lives are composed of millions of choices, ranging from trivial to life-changing and momentous. Luckily, our brains have evolved a number of mental shortcuts, biases, and tricks that allow us to quickly negotiate this endless array of decisions. We don’t want to rationally deliberate every choice we make, and thanks to these cognitive rules of thumb, we don’t need to. 


Yet these hard-wired shortcuts, mental wonders though they may be, can also be perilous. They can distort our thinking in ways that are often invisible to us, leading us to make poor decisions, to be easy targets for manipulators…and they can even cost us our lives. 


The truth is, despite all the buzz about the power of gut-instinct decision-making in recent years, sometimes it’s better to stop and say, “On second thought . . .”


The trick, of course, lies in knowing when to trust that instant response, and when to question it. In On Second Thought, acclaimed science writer Wray Herbert provides the first guide to achieving that balance. Drawing on real-world examples and cutting-edge research, he takes us on a fascinating, wide-ranging journey through our innate cognitive traps and tools, exposing the hidden dangers lurking in familiarity and consistency; the obstacles that keep us from accurately evaluating risk and value; the delusions that make it hard for us to accurately predict the future; the perils of the human yearning for order and simplicity; the ways our fears can color our very perceptions , and much more. 


Along the way, Herbert reveals the often-bizarre cross-connections these shortcuts have secretly ingrained in our brains, answering such questions as why jury decisions may be shaped by our ancient need for cleanliness; what the state of your desk has to do with your political preferences; why loneliness can literally make us shiver; how drawing two dots on a piece of paper can desensitize us to violence, and how the very typeface on this page is affecting your decision about whether or not to buy this book.   


Ultimately, On Second Thought is both a captivating exploration of the workings of the mind and an invaluable resource for anyone who wants to learn how to make smarter, better judgments every day."

Behavorial Economics

One of my favorite topics is "Behavioral Economics," which uses psychology and "Heuristics"to explain why we often make irrational economic choices. Much of modern economics and psychology is built upon the work of Daniel Kahneman and Amos Tversky. Richard Thayer join in on the economics work.

Malcolm Gladwell's Masterworks

Three outstanding popular science books by Malcolm Gladwell, who has spawned a whole style of writing, emulated by so many others.