Behavioral Economics

It is ironic that Hillary constantly bashes Obama for being shallowand just giving good speeches because if you actually look at the thinking of the two candidates you see that Obama has some unique ideas while there is nothing that Hillary expouses that wasn't thought of sometime between January and June of 1932 by the FDR socialists. Hillary just wants to make programs mandatory, garnish wages and reduce the freedom of choice. One thing Obama's people have been discussing is the new concept of behavioral economics.

A simple example of behavioral economics just occurred tonight. Goat Girl and I have a mental checklist of grocery items and then have a written list of things that we do not purchase every week (like say coffee, which we buy in bulk infrequently). The two lists usually cost us between $85 and $100 if we shop at Krogers and $115 and $150 if we shop at Wal-Mart. Is Wal-Mart more expensive? Actually, almost every item that we routinely purchase is less expensive at Wal-Mart. Rational behavior is a basic assumption of modern economic theory,yet people do not behave rationally. If you have data on how people really behave then why not use that data rather than assume rationality? In the case of Goat Girl and myself we are obviously making more impulse buys at Wal-Mart. We can either continue to shop at Wal-Mart and vow to be more rational or we can just make the decision to shop at Krogers. We call Wal-Mart the $100 Store becausewe will spend $100 there even if we just go in for milk.

People behave irrationally when doing taxes, entering mortgage agreements, buying insurance, selecting a mate, voting, and selecting a favorite beer. The only thing more irrational than individual humans is groups of humans and human governments. Understanding the irrationality is essential to making good decisions. Assuming rational behavior assures bad decisions.