Archive — Behavioural economics
If you say something is “likely”, how likely do people think it is?
Very interesting analysis of how people perceive what probability is meant by phrases such as “likely” or “real possibility”. It turns out there is a lot of scope for misinterpretation.
However I would quibble with the following:
You are trying to assess the probability that the [product launch] doesn’t happen. The way to frame your bet might be: “If the product fails to launch, I receive $1 million, but if it does launch, I get nothing.”
Now imagine a jar full of 25 green marbles and 75 blue marbles. You close your eyes and select a marble. If it’s green, you receive $1 million, and if it’s blue, you get nothing. You know you have a one in four chance (25%) to get a green marble and win the money.
Now, which would you prefer to bet on: the launch failure or the draw from the jar?
An interesting thought experiment, but not quite true. People prefer to receive an amount of money sooner rather than later. So you’d still rather place the bet on the jar, even if you thought the probability of product failure was 25% — because you wouldn’t receive the money until the unspecified future date.
Thanks to my colleague Lauren Tormey for the tip.
The endowment effect: Why you can’t let go of your possessions
Insights from behavioural science on why people overvalue possessions they already own.
Psychologists have also concluded that this overvaluation may stem from our sense of ownership itself. We value something more simply because it is ours. If we own a car, laptop, or watch of a certain model, we would similarly overvalue that same object owned by someone else because we own one ourselves.
The amazing psychology of Japanese train stations
How Japan uses behavioural science (nudge theory) to keep its railways flowing efficiently.
Tokyo is home to the world’s busiest train stations, with the capital’s rail operators handling a combined 13 billion passenger trips annually. Ridership of that volume requires a deft blend of engineering, planning, and psychology. Beneath the bustle, unobtrusive features are designed to unconsciously manipulate passenger behavior, via light, sound, and other means. Japan’s boundless creativity in this realm reflects the deep consideration given to public transportation in the country.
Nick Clegg meets Richard Thaler: ‘All it would take to stop Brexit is a couple of dozen brave Tories’
The Guardian set Nick Clegg up for a Skype interview with Richard Thaler, who has recently been awarded the Nobel economics prize.
Thaler was a big influence on the Conservative–Liberal Democrat coalition and it is clear from this interview that Thaler and Clegg admire each other somewhat.
At times the interview may come across to some as typical smug metropolitan centrist dadism, with the pair shaking their heads at how stupid everyone else is being. But when you read Nick Clegg’s anecdote about speaking to a voter in Chesterfield, you understand why he feels that way.
I remember speaking to a guy leaning on the fence outside his house and saying: “Any chance you’ll vote for the Liberal Democrats?” And he said: “No way.” And I said: “Why not?” And he said: “Because of all these asylum seekers.” And I knew for a fact that not a single asylum seeker had been dispersed to Chesterfield. So I said to him: “Oh, have you seen these asylum seekers in the supermarket or the GP’s surgery?” And he said something to me that has remained with me ever since. He said: “No, I haven’t seen any of them, but I know they’re everywhere.”