The podcast and self-proclaimed "American Conversation with Global Attitudes" website www.radioopensource.org has been watching, interviewing and reading a lot about behavioral economics. This means they've been dissecting behavioral economics and behavioral finance, which are closely related fields that apply scientific research on human and social cognitive and emotional biases to better understand economic decisions and how they affect market prices, returns and the allocation of resources.
Recently, Christopher Lydon, host of RadioOpenSource.org, interviewed Cuss Sunstein author of Nudge. Sunstein is himself a demonstration of the spread of the new thinking from psychology and economics to law and politics. From the University of Chicago Law School, where he taught alongside Barack Obama for a dozen years, he has just moved permanently to Harvard, where he and Obama seem still to be channeling each other.
Lydon quotes, in his wonderfully articulate style, Sustein on the website:
VOTE OBAMA
Recently, Christopher Lydon, host of RadioOpenSource.org, interviewed Cuss Sunstein author of Nudge. Sunstein is himself a demonstration of the spread of the new thinking from psychology and economics to law and politics. From the University of Chicago Law School, where he taught alongside Barack Obama for a dozen years, he has just moved permanently to Harvard, where he and Obama seem still to be channeling each other.
Lydon quotes, in his wonderfully articulate style, Sustein on the website:This started with psychology. Two Israelis Daniel Kahneman and Amos Tversky did a bunch of amazing experiments in the 1970’s where they said people use some mental shortcuts in trying to think about risk. If a recent event, for example, is in your head, say it involves a crime or a misfortune or something wonderful happening, then you will think it’s really probable that the crime or the misfortune or the wonderful thing will happen. This way of thinking migrated first into economics. There has really been a revolution in economic thinking because economists are trying to do their work with a realistic rather than artificial sense of what human beings are like. The idea is that we can do economics with Homer Simpson as our types rather than doing economics with computers as our types. People just aren’t computers. When Homer, in one episode, went to buy a gun, the gun owner told him that him that there is a three day waiting period. And Homer responded: “What? Three Days? I’m angry now!” So that captures people’s passion and focus on the short term, and it also captures how law and policy can help a lot.In conclusion, we aren't so RATIONAL, we are more IRRATIONAL...
VOTE OBAMA
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