Psychology definitely plays a role in biasing how people interpret things they see and their priorities, but I think much of this is better understood through an economic lens.
If you consider the actions you take to preserve your privacy, it's a strategy you developed over time. And no one can claim to have a formula for devising the perfect strategy when there are non-trivial unknowns. This isn't just common, but normal in economics.
An economic actor can a. estimate the potential costs and benefits, b. observe other actors' strategy and outcomes but must ultimately c. execute their own strategy.
None of these are fully rational, and you have scarce resources (time & money, ability to survey the problem, limited exposure to the actions and consequences of other actors) to allocate to A and B.
If everything works, you stick to your strategy. If you get burned, you adjust your strategy in response. (Though a strategy may be "eat a cost less than $X.")
And if you observe it working for others or others getting burned, you might also adjust your strategy. This does lead to a natural selection of successful strategies; actors are "eventually optimal."
Real human behavior is influenced by a lot more factors than simple profit optimization. Psychology is not at the point yet where we could attribute exact reasons why someone made a particular decision at a particular time, but I suspect that in a lot of cases things like 'because (I thought) everyone else was doing it' or 'I thought about what <person or group> would say' would feature prominently.
While I love reading about insights from behavioral economics I don't completely understand the internet obsession over psychological biases, mental models and other related topics in this cluster.
I'm often trying to understand how to actually apply this kind of knowledge into my daily life. I think Kahneman has himself said you can't protect yourself from it even if you are aware of the biases.
A lot of the interest in these topics seems disproportionate relative to their applicability.
It's widely acknowledged in behavioral economics that biases have their uses. In fact, usually the phrase used to describe them is "Heuristics and Biases"[1].
It's first and foremost a heuristic -- a reasonably good way to generate good behavior. Secondarily, in certain specific situations, it causes non-optimal behavior.
Human judgment is often flawed due to various psychological biases and tendencies hardwired in our brains through evolution, such as incentive-caused bias, consistency and commitment bias, and deprivation super reaction syndrome.
Figures like B.F. Skinner and Ivan Pavlov conducted important experiments demonstrating how reinforcement and conditioning shape human and animal behavior.
Marketing, advertising, and product design frequently exploit psychological tendencies like contrast effects, reciprocity bias, and social proof to influence consumer choices.
Board of directors are often ineffective at reining in CEOs due to psychological factors like commitment to prior decisions and not wanting to undermine authority figures.
Understanding psychological tendencies can help avoid being manipulated and make better decisions by considering disconfirming evidence and alternatives objectively.
Applying insights from psychology and economics together gives a more holistic view of human decision-making than either field alone.
Education should teach about these psychological tendencies so people can recognize their own biases and make more informed judgments.
Case studies of companies like Coca-Cola and mistakes of leaders like John Gutfreund demonstrate impacts of psychological factors consequentially.
Figures like Charles Darwin and Sam Walton applied self-awareness of psychological tendencies to achieve remarkable success and wisdom.
Secretive conventions and forcing priority on difficult tasks can help overcome natural human biases revealed through experiments.
I find it odd that economists generally ignore the field of human psychology / behavior in their assessments.
Psychology, especially social psychology, is an epistemological disaster area[1][2] and everyone would be better off ignoring its "findings", not just economists.
I find it odd that economists generally ignore the field of human psychology / behavior in their assessments.
Things like mental and physical health, addictions and substance use, thought manipulation and mind control, the fears and desires, sexual fantasies, even popular movies and music affect the economy greatly.
Not just a little bit, but greatly. A CEO's addiction to cocaine or promiscuity will have an impact on his company's bottom line. A young man starts a disrupting startup because he got inspired by a sci-fi movie a couple of years earlier.
Adam Smith's "invisible hand" is "invisible" because those forces can't be explained by the mechanistic rules of economics or mathematics.
We just need to look elsewhere for a comprehensive picture.
What makes customers choose a product over the other ? Why do some companies retain great talent better than others - and hence reap greater profits ? How does pop music affect industrial design ?
Of course, human behavior and psychology is hard to quantify, that is why it's being left out, but I think we can start to make these connections now that we have the tools and information available.
Take Google and Facebook - these companies make their profits from advertising.
Tens of billions. Add the profits of the media market - print, tv, radio.
Now consider how all that advertising affects the demand curve in all the other industries.
And it's not just the quantity, it's also the quality of advertising - today's ads are scientifically designed to drill their way into our subconsciousness. The colors, the sounds, the motions, the emotions - all of these are carefully weighted so as just to make you want a certain brand over the other.
And now my favorite part - is there a connection between advertising, corporate profits, pollution and climate change ?
I think there is and it's a great one. To conclude, I think regulators should look at all these factors much deeper, determine the connection between mind and economy and exercise their influence by tuning other parts of society, not just traditional economic levers.
Of course this is a monumental task for humans, but AI might just be perfectly suited for this type of analyses.
Well, that's a big weakness of these theories, I think. My question is not terribly complex or dependent on unusual or unrealistic situations.
I would also note that sometimes, people operating off a 'psychologist' basis like you've identified, misunderstand the critiques of others as being also 'psychologist'. For example, the Hayekian critique of central economic planning is often characterized as a psychological argument that "people are naturally selfish and greedy". Thus, if you can get them to stop being so selfish, the objection is overcome. However, what the critique is actually about is inherent limits to knowledge and information, which would apply regardless of psychology.
It might be my ignorance of the topic but it seems to me that behavioral economics seems to have a major blindspot with respect to the computational & informational complexity costs of decision making processes (which are as real as any other kind of cost).
This could also be because it's more "interesting" to come to conclusions like "here's a pernicious irrational bias that most people have" instead of "people are essentially rational within their informational and computational limits".
You may wish to look into behavioral economics [1], a system of psychology + decision making that looks deeply at how individuals often do go against their economic (and other) self-interests.
This is a peeve of mine: It's not "behavioral economics". It's social and organizational psychology. Virtually all the research has been done by psychologists. For example, Daniel Kahneman, Economics Nobel Laureate, is a Psychologist.
"Smart" people and the media have been obsessed with "rationality", (pseudo-)math and quantitative research, until it finally emerged in the economistic world view that people are - surprise, surprise - not that rational; something that psychologists have known for ages.
Right now, economics is sort assimilating a lot of psychological insights, which is good for humanity, but it's not economics, the original creativity stems from psychology.
This is one reason the field of behavioral economics is important to society: there are things that an individual or company would never publicly admit to doing — but which they're fine to admitting under NDA, to be used as a datapoint in an anonymized dataset used in academic research.
So, while no individual company will tell you that everyone's using dark patterns or hiring their friends, behavioral economists can put forth evidence-backed arguments that this is the case — and so save you the trouble of bothering to chase the Carrot.
There's a huge subfield, called behavioral economics, in which economists study the ways human behavior deviates from utility maximization. It's been around for 70 years or so.
The whole field of behavioral economics [1] examines this question. It sees human rationality as sharply bounded [2] with an enormous set of cognitive biases. [3] The field is seen as a direct challenge to the notion of humans as rational actors.
If you want examples, they are legion. Addicts, for example, clearly don't act in their own rational self interest. Whether it's substances (e.g., alcohol and other drugs) or experiences (like gambling and gaming), whole industries are built around exploiting people's inability to act in their self interest.
Another example is advertising. In economic theory, advertising and PR are about informing people, giving them new facts. But when you look at actual advertising, it's about giving them new feelings, about manipulating their decidedly non-rational behavior.
And there are plenty more. If you look the kinds of things consumer protection agencies get up to, you'll find plenty of examples.
Amusingly, all such theories tend to be based in the assumption that the humans in the market will be perfectly informed and perfectly rational, but there's an article on the front page about the irrational biases people have when participating in markets...
You’ve got some reading up to do on behavioral economics. Humans (real ones, not model economic actors) can’t and don’t make optimal decisions except in very special circumstances.
I derive my conclusion based on articles I read in financial/economic press.
I know that's not a very good heuristic, but somehow I feel like economic thought is mostly based on mathematical models and political science, while the study of human behavior and more generally, human mind is left to psychologists/psychiatrists as something marginally useful.
I think economics and society in general would benefit greatly from a more unified theory.
I'm sure that hedge funds do exactly this and reap great returns as a result.
> Classical economics thinks of people as "rational utility-maximizing actors", which doesn't approximate reality in quite a lot of ways. There's been a move toward more sophisticated models - like that people minimize regret more than they seek the optimal reward ("rational actors with regret minimization")
Even when entities (corporations, for example) are trying to maximize utility, and an optimal decision is desired, there are issues with how much time and resources can be spent making decisions, so optimality has to be bounded in various ways (do you wait for more information? Do you spend more time and compute on calculating what would be optimal? etc.).
If you consider the actions you take to preserve your privacy, it's a strategy you developed over time. And no one can claim to have a formula for devising the perfect strategy when there are non-trivial unknowns. This isn't just common, but normal in economics.
An economic actor can a. estimate the potential costs and benefits, b. observe other actors' strategy and outcomes but must ultimately c. execute their own strategy.
None of these are fully rational, and you have scarce resources (time & money, ability to survey the problem, limited exposure to the actions and consequences of other actors) to allocate to A and B.
If everything works, you stick to your strategy. If you get burned, you adjust your strategy in response. (Though a strategy may be "eat a cost less than $X.")
And if you observe it working for others or others getting burned, you might also adjust your strategy. This does lead to a natural selection of successful strategies; actors are "eventually optimal."
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