The hottest Behavioral Economics Substack posts right now

And their main takeaways
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My Intellectual Heroes, Part 3

Life Since the Baby Boom • 1383 implied HN points • 12 Feb 25
📖 Philosophy Behavioral Economics Cognitive Psychology Human behavior Intellectual history Decision-making
  1. Daniel Kahneman showed that people often don’t act like the rational thinkers we expect. He studied how we make decisions and found many biases that affect our judgment.
  2. He worked with Amos Tversky and together they explored how our minds trick us. Their ideas laid the foundation for behavioral economics, changing how we think about choices.
  3. Kahneman's book 'Thinking Fast and Slow' explains our two types of thinking: fast reactions and slower, more careful thinking. Understanding this can help us make better decisions.

The Rich and the Cheap

Bet On It • 392 implied HN points • 29 Jan 25
🇺🇸 U.S. Politics Tax policy Regulation Wealth Inequality Behavioral Economics Political theory
  1. High taxes or regulations on wealthy people might not work out as planned. Just because the rich can afford it, doesn't mean they will stick around to pay it.
  2. Many wealthy individuals are also frugal. When taxed more, they might choose to earn less or stop certain activities to avoid those costs.
  3. Large companies may appear to afford extra taxes and regulations, but they can choose to cut back on what they do instead. This means the burden of such policies can end up hurting regular folks more than the rich.

Wokeness Dismantled, Part 3

Life Since the Baby Boom • 1613 implied HN points • 09 Dec 24
🇺🇸 U.S. Politics Political theory Environmental Policy Social Psychology Behavioral Economics Public Goods
  1. The Tragedy of the Commons shows how individual self-interest can harm the common good. If everyone takes too much from a shared resource, like a pasture, it can lead to disaster for everyone.
  2. Not all experts agree on how to manage shared resources. While Garrett Hardin warned about the dangers of overuse, Elinor Ostrom showed that communities can effectively cooperate to manage their resources without strict government control.
  3. Trusting science can sometimes mean questioning popular beliefs. It’s important to look at different viewpoints and actual case studies to understand how people manage shared resources.

penn and telling on themselves

bad cattitude • 236 implied HN points • 11 Dec 24
🇺🇸 U.S. Politics Political strategy Cognitive Bias Media influence Public Perception Behavioral Economics
  1. People often manipulate others by framing arguments to control how they are interpreted. It's important to recognize when this happens.
  2. Noticing manipulation techniques helps you see the truth and reduce their power over you. Asking critical questions can keep you grounded.
  3. Instead of trusting distant opinions, focus on building trust with close friends and family. This creates a solid foundation for your beliefs.

Some Austrian Answers

Bet On It • 306 implied HN points • 25 Nov 24
🇺🇸 U.S. Politics Economic Theory Libertarianism Philosophy Behavioral Economics
  1. The author's views on Austrian economics have not changed much over the years, but they've become more open to certain ideas, particularly regarding human behavior in economics.
  2. They believe that Austrian economists should focus more on using empirical psychology and less on philosophical debates to better understand economic behaviors.
  3. The author finds that reading Austrian economists has inspired new libertarian policy ideas and encourages others to do the same for creative thinking.
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Emotional infiltration

Internal exile • 52 implied HN points • 03 Jan 25
🕹 Technology Data Privacy AI Ethics Digital Culture Behavioral Economics Social media
  1. Technology is moving toward an 'intention economy' where companies use our behavioral data to predict and control our desires. This means we might lose the ability to understand our true intentions as others shape them for profit.
  2. There is a risk that we could become passive users, relying on machines to define our needs instead of communicating and connecting with other people. This can lead to loneliness and a lack of real social interaction.
  3. Automating responses to our needs, like with AI sermons or chatbots, might make us think our feelings are met, but it can actually disconnect us from genuine human experiences and relationships.

Why we should look for the good reasons behind our behaviour

Optimally Irrational • 77 implied HN points • 12 Dec 24
📖 Philosophy Cognitive Science Evolutionary Psychology Decision-making Behavioral Economics Human behavior
  1. Understanding our behavior is important because it's not just random; it comes from a long history of survival and adaptation. We should look for reasons behind our choices instead of labeling them as irrational.
  2. Historically, research has focused a lot on cognitive biases, making it seem like humans are mostly flawed thinkers. Now, there's a shift towards recognizing our mental processes can also be adaptively efficient.
  3. Many behaviors that seem like mistakes may actually be smart solutions given the complex decisions we face. It's better to explore the reasons behind behaviors to find their potential usefulness.

Markets as Error Correction Processes

Knowledge Problem • 196 implied HN points • 01 Feb 24
💼 Business Economics Markets Institutions Behavioral Economics Entrepreneurship
  1. Markets are error correction processes that help us adapt to changing conditions and create value.
  2. Individual adjustments in response to price signals lead to error correction in markets.
  3. Through adaptation, decentralized coordination, knowledge ecosystems, and error correction, markets enable us to achieve more and flourish compared to other social institutional frameworks.

On Insurance

Something to Consider • 59 implied HN points • 03 Jun 24
💰 Finance Insurance Risk management Economic Policy Behavioral Economics
  1. Moral hazard happens when people take more risks because they have insurance, like thinking they can be careless if they have fire insurance. This means insurance can't cover every behavior to keep premiums fair.
  2. A better way to provide insurance is to focus on events that you can't control, like natural disasters, rather than paying out for specific losses. This keeps people motivated to protect their property since their actions impact their safety.
  3. Government assistance can be more effective if it's tied to things outside a person's control, like race or family status, rather than just income. This way, people are still encouraged to work hard because their benefits don’t change based on their work efforts.

Humans—and GPT-4—are predictably irrational

The Counterfactual • 219 implied HN points • 07 Nov 23
🕹 Technology Artificial Intelligence Cognitive Science Behavioral Economics Language Models Decision-making
  1. Humans often make decisions based on emotions and biases, rather than pure logic. This means they're not always rational, which is important to understand.
  2. Large language models like GPT-4 can show similar irrational behaviors. They can make mistakes in judgment much like humans do, which gives insight into how we think.
  3. The way people attribute beliefs to others can change based on the situation. When faced with strong pressures, people are less likely to jump to conclusions about someone's beliefs.

Does a hundred wrongs make one right?

inexactscience • 59 implied HN points • 04 Mar 24
💰 Finance Behavioral Economics Investment Strategies Risk Assessment Decision Theory
  1. A famous bet involving coin flips shows how people's risk preferences can be inconsistent. People might reject a single gamble but accept multiple repeats because they think it lowers their risk.
  2. The original advice about investing suggests buying stocks when young and bonds as you age. However, Samuelson's argument raises doubts about this common belief, challenging how we think about risk.
  3. The idea of loss aversion helps explain why people might choose to repeat risky bets. People tend to feel the pain of losing money more than the joy of gaining, which can lead to seemingly irrational decisions.

Why do people hate redesigns?

UX Psychology • 178 implied HN points • 28 Oct 21
🕹 Technology UX Design Psychology User Research Behavioral Economics Cognitive Bias
  1. Users often hate redesigns due to familiarity bias, where they prefer the familiar even if the change is beneficial, and the endowment effect which makes them value what they already have more.
  2. Psychology plays a significant role in user reactions to redesigns, as habits are hard to change, leading to user dissatisfaction with altered interfaces.
  3. To improve user experience with redesigns, allowing opt-ins for changes can give users control, conducting thorough user research helps address pain-points, and making small, incremental changes can ease user adaptation.

Economics, Politics, and Institutions

Economic Forces • 3 implied HN points • 07 Nov 24
🇺🇸 U.S. Politics Political Economy Elections Regulation Institutional change Behavioral Economics
  1. Economists often view politics as a type of exchange, similar to market transactions. This means they see politicians as motivated by personal interests, like getting re-elected, but also recognize that politicians can care about the common good too.
  2. Jack Hirshleifer's insights emphasize that the rules of the game, like laws and property rights, shape how economics and politics function. We need to pay more attention to how these rules change over time.
  3. Applying economic thinking to political behavior can reveal new insights. Understanding how people make decisions outside of markets can enhance our grasp of human behavior overall.

Assessing altruism

Model Thinking • 19 implied HN points • 09 Jul 23
🔬 Science Behavioral Economics Altruism Child development Economic Theory
  1. Intergenerational altruism in the Barro-Becker model may need to be as low as 0.09 for a stable solution, which seems paradoxical considering the proportion of a parent's and child's consumption.
  2. Potential explanations for this paradox include scale economies in household production, children being viewed as 'utility monsters,' and parents seeing children as a prestige good.
  3. The discrepancy in altruism values between parents and consequences may imply that individuals are not consequentialists and may prioritize existing utility over potential future utility.

Understanding Mental Accounting How Our Minds Influence Financial Decisions

Mental Models • 42 implied HN points • 26 Jul 23
💰 Finance Behavioral Economics Financial Decisions Cognitive Biases
  1. Mental accounting involves dividing finances into separate 'mental accounts' based on different criteria.
  2. Psychological factors like framing effects and sunk cost fallacy contribute to mental accounting.
  3. Mental accounting impacts budgeting, debt management, and investment decisions, influencing overall financial well-being.

Week 30 - 🎣 The Hook Model: How to Create Addictive Products 🚀

The Product Channel By Sid Saladi • 30 implied HN points • 12 Mar 23
💼 Business Product Development Psychology Marketing Behavioral Economics Entrepreneurship
  1. The Hook Model is a four-step process that helps create habit-forming products.
  2. The Hook Model consists of Trigger, Action, Variable Reward, and Investment stages.
  3. Understanding the Hook Model can provide a competitive advantage by creating products that build customer loyalty.

Adam Smith Revisited: Beyond the Invisible Hand

Optimally Irrational • 7 implied HN points • 30 Aug 23
📖 Philosophy Behavioral Economics Social Dynamics Human Psychology Social Inequality
  1. Adam Smith's insights go beyond just the concept of the invisible hand in economics.
  2. Smith saw the benefits of market mechanisms but also criticized how powerful elites could exploit them.
  3. Adam Smith had a sophisticated understanding of human psychology and social interactions, anticipating concepts in behavioral economics.

Guiding Choices in UX: The Role and Ethics of Nudging

UX Psychology • 1 HN point • 01 Mar 24
🕹 Technology UX Design Behavioral Economics Psychology Ethics User Experience
  1. Nudging is a technique based on behavioral economics that gently guides people towards beneficial choices while allowing freedom of choice.
  2. Nudges leverage cognitive biases and mental shortcuts to influence behavior positively and enhance the user experience in various contexts.
  3. Using nudges in UX requires caution to avoid pitfalls like over-reliance on defaults, ethical concerns, undermining trust, and unintended consequences.

1 simple habit to be more persuasive

Stream of Consciousness • 1 HN point • 23 Feb 24
💼 Business Marketing Behavioral Economics Sales Persuasion
  1. Offering only one option reduces the perceived value of that option. Comparing it to alternatives makes it more appealing.
  2. When presenting a product, service, or idea, always contrast it with other options to enhance its desirability.
  3. The decoy effect showcases how introducing a less desirable third option can shift preferences towards a more expensive choice, highlighting the power of comparison.

Not Another Bias!

Optimally Irrational • 1 HN point • 26 May 23
🔬 Science Behavioral Economics Game Theory
  1. There is a renewed interest in understanding the adaptive explanations for human behavior, rather than labeling every cognitive bias as a flaw.
  2. The rationality wars have highlighted different perspectives on human decision-making, emphasizing heuristics and adaptive processes.
  3. Advancements in cognitive neuroscience and economic theory are shedding new light on biases, showing them as potential solutions to informational constraints.

Hard wired to deceive?

Musings on Markets • 0 implied HN points • 23 Dec 08
💰 Finance Investing Fraud Psychology Behavioral Finance Ethics Investment Fraud Behavioral Economics Psychology Risk management
  1. Larger brains in primates, including humans, are linked to higher chances of deceit. So, you might be more at risk of being misled by smart investors.
  2. We tend to lie often and it's a normal habit. This means that investment pitches can be filled with half-truths.
  3. People feel guilty about lying but that doesn't stop them from doing it again. Getting away with a lie encourages more lying.

Behavioral Corporate Finance 1: The Objective in Decision Making:

Musings on Markets • 0 implied HN points • 19 Jul 09
💼 Business Corporate Finance Decision-making Investor behavior Market Efficiency Finance Management Investing Corporate strategy Behavioral Economics
  1. Every business should have a clear goal for decision making. Traditionally, that goal is to make the company as valuable as possible, often by focusing on boosting stock prices.
  2. Behavioral finance points out that investors can act irrationally, which means stock prices might not always reflect a company's true value. Managers should be cautious about making decisions solely based on stock price reactions.
  3. It's essential for managers to aim for long-term value but also pay attention to market feedback. They can adjust their decisions to better connect with investors while still working towards the company's overall success.

Behavioral Economics: Thoughts on Value and Price

Musings on Markets • 0 implied HN points • 01 Mar 11
💰 Finance Behavioral Economics Investment Strategies Valuation Methods Market Dynamics
  1. Different analysts can value the same company differently because their psychology and perspectives affect their judgment. This is why some people become buyers while others are sellers.
  2. Prices can differ from actual value due to irrational investor behaviors, like panic selling or following trends. Even when people have similar information, their emotions can lead to significant price deviations.
  3. Behavioral economics helps us understand how and when prices will align with value again. Knowing this can guide investors on how long they might wait for their investments to pay off.

Peter Diamond’s Paradoxes

Something to Consider • 0 implied HN points • 30 Jul 24
💼 Business Economics Models Market Dynamics Behavioral Economics Price theory
  1. Peter Diamond shows that unrealistic economic models can help us understand real-world issues. By making certain assumptions, we can see how they lead to surprising outcomes.
  2. In his models, costs of searching for products can lead to prices behaving differently than expected. This means even in competitive markets, prices can be high if searching for the best deal is costly.
  3. Diamond’s examples suggest that different economic situations can lead to multiple levels of unemployment. People's expectations play a big role in how prices and unemployment behave in the market.

They’re burning morons.

The Jolly Contrarian • 0 implied HN points • 12 Mar 21
💰 Finance Market Trends Investing Cryptocurrency Behavioral Economics
  1. The market shows signs of being in a precarious situation, with unusual trends and behaviors reminiscent of past financial crises.
  2. Unconventional financial practices like tokenizing art and creating NFTs are gaining popularity, despite their questionable intrinsic value and ironic nature.
  3. Concepts like side letters in agreements and the use of cocktail napkins to seal deals highlight the complexities of legal and business negotiations, often blurring lines between formality and practicality.