Behavioral Economics: The Science of Bad Buys

Yesterday, we asked the question whether or not the bad choices of the consumer aggregate proved that there was no free will, or just proved that pretty much everyone’s stupider than us. And, in that vein, Harvard Magazine as an interesting overview on behavioral economics and the theories on why people make logically moronic consumer choices.

It’s a meaty piece, and it covers a gamut of issues involved with the problem of people making bad choices. But the central theme in all of these problems, it seems, is not the comparative worth of alternate choices, but the method in which those choices are phrased.

A national chain of hamburger restaurants takes its name from Wimpy, Popeye
s portly friend with a voracious appetite but small exchequer, who made famous the line,
I
ll gladly pay you Tuesday for a hamburger today.
Wimpy nicely exemplifies the problems of
intertemporal choice
that intrigue behavioral economists like David Laibson.
There
s a fundamental tension, in humans and other animals, between seizing available rewards in the present, and being patient for rewards in the future,
he says.
It
s radically important. People very robustly want instant gratification right now, and want to be patient in the future. If you ask people,
Which do you want right now, fruit or chocolate?
they say,
Chocolate!
But if you ask,
Which one a week from now?
they will say,
Fruit.
Now we want chocolate, cigarettes, and a trashy movie. In the future, we want to eat fruit, to quit smoking, and to watch Bergman films.

Link: The Marketplace of Perceptions