Notes on Irrationality Course
:date: 2014-11-23 02:18:14 +0200
Topics in the course
psychology of money
labor and motivation
we are going to try to understand what causes irrational behavior
we don’t really know what to do
we really don’t know what we want
the extent we don’t know ourselves
how much do you love your spouse? with 3 reasons? with 10 reasons?
it’s very difficult to come up with 10 reasons. they stuck. people
infer that they love their SO less than those who look for 3 reasons.
same goes for bmw
Learning From Our Mistakes
what do our mistakes tell us?
we have many decision biases
our intuitions are often wrong and we don’t recognize our faults
we need to rely on empirical evidence from experiments
organ donation rates: belgium 98% vs. netherlands 28%
reality show in netherlands only made it so far
the only difference is the default choice
Choice Sets and Relativity
how often do you floss your teeth: 1 per day vs. 9+ per month
infer something about hygiene habit
answering to the left (1/day) makes one uneasy
answering to the right (9+/month) makes one more happy
answering to the left makes one “let’s call the doctor”, answering to
the right makes oen “i’m ok”
a change in momentary mindset affects long term judgment
rome or paris, which one do you want? rome + coffee is better done
rome - coffee
if we add an option that’s not desirable, we make the one desirable
hence a good option
decoy effect: asymmetric dominance
the market share reversed
when you provide a non desirable rome - option, you make more expensive
rome+ option desirable
bob frank says, father of economics is not adam smith but darwin
week 1 - office hours
there are two ways about thinking on rationality. (1) people have all
information and they can compare all things perfectly. (2) we understand
what drives our behavior. The course is interested mainly about the
the fact that we are capable of being altruistic also makes us
why do people listen to sad music?
Tactly correcting people: Not by pointing fingers but by pointing to
other people’s mistakes.
Is it ethical to run experiments on people’s behavior?
Are people really can make best decisions for themselves?
We need to be empirical about the ethical issues as well.
The more I study irrationality, the more I become pro-regulation.
I don’t think we understand what creates good education.
which force wins? the force says that’s illegal or that says everybody
film: harold and maude
aging and life cycle, and what causes people to be happy
Dating in the age of internet
Do we have insight to our romantic preferences?
Are there sec differences in preferences? (Man like looks etc.)
To what degree we have accurate insight about our romantic preferences?
Men prefer good looks over earning prospects and women prefer earning
prospects over good looks.
In tests, both of these were independent of the sex.
The previous study is about flesh and blood partners.
In the meta analysis, there wasn’t a statistically significant change
across genders about preferences.
Do people know what they want?
people who say who are attracted to looks, and those that say they don’t
attact to the good looking prospects in the same way
these were the students in the northwestern
for the middle aged people
two parallel lines, which appear to be relevant to two sets of people
people articulate some preferences but they don’t obey these when flesh
and blood partners appear before them
Instead of earning more, people prefer not to lose in their hand.
A supplier pays you in advance to cause loss aversion: People are more
People sell more TVs when their commission is prepaid, even though they
can make money more with the alternatives
*giden paranın etkisi gelecek paradan çok daha fazla*
ticket owners want $2000 whereas ticket buyers would only pay $100
Once ownership is established, people favor the object they own
Week 3 Guest: Sexual Economics
- Men demand sex more than women.
- This brings a whole new economy
- Week 3 Office Hours
Illegal downloading dishonesty
In Switzerland, not downloading but uploading is illegal
When the distribution cost is 0, we don’t see downloading as theft
The solution might be to make downloading harder
Medical Decision Making
Leukemia patients in deciding chemo
Chemo might save or shorten their life
People don’t know how much they can adapt to pain beforehand
They become happy even after disability or serious illness
Good deeds as bad behavior license
Sheets. Pairs of letters. People are asked to find pairs.
Three differnet conditions: 1) acknowledged 2) ignored 3) shredded
Average number of sheets is highest in (1). (2) and (3) are almost
It’s easy to make people feel good about their work
Simply ignoring them could be as destructive to shred their work
The cancellation of revolutionary project after two years work is
extremely demotivational. (Software company, probably Microsoft)
CEO didn’t acknowledge the importance of their employees work.
Appreciating the importance
How could the CEO have canceled the project without removing the
Purpose and meaning are important to people to invest money.
Extrinsic vs. Intrinsic motivation
What’s the issue with motivation?
More money = more motivation?
Feeling of completion?
All kinds of drivers about motivation: Feeling of completion,
The standard thinking: Motivation is directly related with money or the
There are some work that people do just for the money but not all
motivation is about money.
How much is the motivation can be driven by reward?
Pride + reputation + sense of purpose + meaning + camaraderie + helping
the world + money
Mountain climbing: All kinds of difficult peaks. Looks like pure misery
You get a sense that it would be better for them to lie on a beach
Not enjoying the top
The description of mountain climbing and beach clubs are different but
joy seems similar.
What would happen if you knew you can’t reach to the top?
We do things for all kinds of reason and money is one of them.
We can give people a sense of achievement.
What people aim for, strive for?
Merger cancellation story. Employee prepared a detailed merger plan and
felt down when the boss said it’s cancelled.
Book cancellation story. Editor began writing a book and felt down after
In these two stories, the tangible rewards are there, though the
participants felt pain for not accomplishing their task.
What happens when you write things nobody reads?
How does labor lead to love?
What are the cases in which our efforts lead us to love it?
Cake mixes: People hated them. Then egg theory developed. People can’t
relate to it if only thing they do is mixing it with water and baking
Our liking is not only related with what it is, but how much effort we
put into it.
Builders of origami paid more than evaluators.
The creators (mistakenly) though everyone would love their creations
Difficult origami builders loved it more, even if they are uglier
More effort leads to more love if they are able to complete their
Our love to our kids is partly due to them but partly due to us. The
love is in the eye of parent.
The effort we expend on our kids increase our love for them.
Allowing people to design their stuff increase their liking.
Higher effort may also lead them to abandon the work
Ikea effect works for ideas as well.
When someone expresses an idea, they become attached to it even if it’s
a stupid idea.
People like their solutions better than ours.
In an experiments, they are asked to use the exact set of 50 words and
There is something about the pride of creation
Alternating current vs. direct current. Edison fired Tesla, because he
hated alternating current
Even Edison could not overcome the preference for his own work.
Toothbrush theory: We have a toothbrush and don’t want to use another’s.
Theory is the same.
Pro: results in more time and passion devoted to our ideas
Con: Hinders our ability to consider other ideas
/Mine is the best./
Sony lost because of this.
The secret to a happy marriage is having life insurance but not too much