Dumb stuff that smart people do.

   Economics assumes that people are on the average rational. But Richard H Thaler didn’t agree. He would joke,

  “As far as economics is concerned, even smartest people used to commit the dumbest stuff. They go on making the same mistake on and on.

People are always predictably, consistently irrational.”

He had a lot of examples up his sleeves. Like these 3.

   1. People will sit through a Cinema hall, knowing fully well in the first 10 minutes itself, that it will be awful to sit for 3 hours. Yet they will continue to sit through that because they don’t want to waste the ticket money.

  But in the course, they will spend double the amount on snacks for cutting boredom.

2. Suppose, you have gone to purchase a radio for 1000. At the mall, you are told that a ‘Sale’ offer would give you a discount of 100 but tomorrow. What will you do?

  Come tomorrow, of course.

   You have gone to purchase a big TV. The same discount offer of 100 is also available. Will you wait for one more day? Certainly no. Ha.

  Now, 100 is 💯. It’s purchasing power remains same whether it’s a TV discount or from radio. Yet ask any shopper !

3. The New York Cab drivers ply their taxi for a maximum 12 hours in a day. Some day, they will quit early, some other day they will work full 12 hours.

   How do they decide when to finish ? It seems they have worked out a target, say Rs 500. So they work till they reach that magic figure.
On a busy day, they will earn Rs 500 in 6 hours and quit. On a lean day they slug for 12 hours to reach the target.

   Is it not dumb ? On a busy day their earning rate is Rs 80/ hour. That day they quit early. On the lean day it’s 40/hour. And they go on and on for 12 hours.
Can you believe that these jokes earned him the 2017 economics Nobel and created a new economics stream.

He created the behavioral economics: a pleasant combination of psychology and finance.