Behavioral Economics: Crash Course Economics #27
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- čas přidán 18. 06. 2024
- Why do people buy the stuff they buy? In classical economics, most models assume that consumers behave rationally. As you've probably noticed in your real life, in case after case, people don't actually make rational decisions. There can be emotional or social reasons for all this irrationality, and behavioral economics tries to address this. We'll talk about risk, nudge theory, prices and perception, and the ultimatum game. So, let's get irrational, in a logical way, of course.
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That AC/DC belt ... 😂
+Αργυρης Χατζηηλιας there were at least 2 different ones that I saw just in this episode which makes me wonder 1.) how many he has and 2.) just how big a fan is he?
+roguedogx good one lol
Did you notice the color change between the beginning and the end?
he wore it in the last video, too.
He wears it in every episode!
The main points :
1.Bounded rationality🧠
2.Lack of information🤷
3.Manipulate non interinsic attributes of price💝
4.Framing effect💍
5.Psychological pricing👨🏫
6.Nudge theory😕
7.Risk(neutral & averse)🤑
a good read for this,
Thinking, Fast and Slow by Daniel Kahneman
I've seen a lot of good books on behavioral econ lately. It's really coming into its own.
I've seen a lot of good books on behavioral econ lately. It's really coming into its own.
Yes!
Afiq Azraei I had that book a year ago.
been there, done that
Finally! This is the sort of economics lecture I have hoped to learn. Thank you. This explains a lot I've wondered about for years.
Obviously that Belt buckle falls into the category of "irrational decision"
When I started my first economics course, I thought that the basic assumptions of classical economic theory were stupid. Humans are not rational beings, just that we have the capacity for reason. Our behavior is at times predictable, meaning that the majority of us can be manipulated by others.
I feel one of the first things economics students should learn is behavioral economics (but I think it should be common sense anyway). I'm glad that Crash Course decided to make this video, so I thank you on a job well done.
+Andre Lee Real economists don't usually rely on classical economic ideas -- instead, they construct new mathematical models tailored to specific problems.
+blownspeakersss
I know that, and I greatly respect that part of economics. As a lover of mathematics and computer science, specific algorithms and objective models make sense.
My problem is not with modern economists, but with the way it is taught. I feel irked by the introductory focus on classical economic thought (my textbook almost has an obsession with that). I know it's important, but the fact that it doesn't adhere to what I or my peers have experienced in life, seriously alienates us from really loving the subject and trying to find real-world applications.
I still think the rational decision-maker is very useful most of the time. But there are instances where biases kick in and are crucial to explain the economic phenomena.
I have watched all of your episodes so far and I have to say they are extremely informative. I don't know what I would have done without them. Thank you for making these
You guys make complicated theories look incredible easier than they are. Thanks a lot.
Corporations are masters of behavioral economics. They know what will make consumers behave irrationally and against their own interests and they capitalize on that. They know that they have an information advantage over essentially everyone, and they capitalize on that. Particularly in labor they make sure labor has less information than they do. Every boss tells you "never discuss your salary with anyone else" That's market manipulation.
+Paul Peterson Yeah it quite interesting that businesses knows this very well. But the economist that tend to be very pro business and anti-state control tend to ignore these factors. It is almost like there trying to cover up how businesses exploit irrational behaviour. (Though I think a lot of it is just ignorance.)
I heard that first on "Adam ruins everything". He basically says that people often prefer to talk about sex than talk about their salaries.
@@Ryosuke1208 it's hard being open about one's wages. I generally am, although I don't like when my little brother brings up the question in front of people who don't need to know, like other kids and adults. I'm very capable of sharing such information with other adults, but kids don't need to know.
Yet mainstream economics worship the free market and says everyone is rational and good in the sense that we're all angels and won't do bad things like what you said.
@@therealnoodles7638
Nope.
They forgot a third attitude towards risk. If you take the envelope for more than $50, you are called Risk Seeking.
Nudge, by Richard Thaler, has also been a joy to read!
Def my favorite CrashCourse. Behavioral Econ and Game Theory are my favorites in Econ so far, both in Crash Course and when I study Economics in general.
My favorite field of Economics! Thanks guys, loving the work!
This was probably the most interesting video yet! Thanks guys!
You really found your stride in this episode. I've enjoy all of your productions, but this will be one that I'll revisit and carry with me. Thank you.
Three Wolves Moon FTW!!!
If you’re into this stuff, check out the paper “Prospect Theory: An Analysis of Decision Under Risk” by Daniel Kahneman, Amos Tversky. It was a game changer!
Public - "Pollution is killing us! Stop pollution"
Business - "We can reduce pollution but it'll increase our costs which will raise prices for consumers"
Public - "We don't want to pay."
Government - "We can force businesses by law to stop pollution"
Public - "Stop big government!"
Public - "Stop pollution!"
Yeah, people are rational.
Reducing pollution is like reducing the deficit. It's not gonna work unless it's completely halted
+Nolan Thiessen lol yep
+Nolan Thiessen that or simply not unified.
Don't generalize
***** You have to generalize in a macro economic setting.
I love these videos! You guys really make learning so much more fun!
"Only 25% fat", had me keeled over with laughter. Thank you Crash Course for another fantastic video, keep up the great work.
I scrolled down to the comment section just to find this!
Thanks. This was the best CCM Economics yet!
So informative - My favourite episode yet.
behaviour economics is sexy
ifkr it makes so much sense and also makes economics in general more easier to understand.
You guys are amazing. I love the way you two explain economics jargon. #GreetingsFromHolland
Taking behavioral economics this semester. Crash course makes it interesting and easy to understand !
Good intro to the topic. Have to say I particularly liked nyan-mongol :-)
My fav video in these series so far.
Mongols are the exception to Behavioral Economics.
Waltham1892 lol
Haha
*mongoltage*
Arguably 7:29 supports cost/benefit thinking because in the experiment, food that's less convenient to reach requires more effort to get which could be considered cost. The food that is easier to reach and therefore has less "cost" seems to be more popular.
My favorite episode so far. Seriously considering becoming a patron! Also everyone read Kate Raworth's book called: Doughtnut economics
Love it. It makes a complicated subject digestible to even the simplest minds. Yum pureed knowledge. I always wanted that kiddy register.
Thanks for your knowledge and sacrifice.
So good thanks for the upload
thank you. this was simply and clear.
Awesome episode.
really interesting and well made videos!
I love this series!
Love these guys
I read an article about the ultimatum game. Declining an offer makes sense if you play with someone you know because social agreement is a recourse that people value.
This is amazing I was just looking at the book Nudge yesterday. Love this topic. I'm an MBA student in Chicago and I'm beginning to realize I love Economics more and more. I wonder how this applies to the Armed Forces. I'm in the Army and this topic may be worth a closer look there. #DFTBA #Nudge #behavioraleconomics
I love these episodes!
You guys are amazing thank you !
Great episode!
WOOH LEARNING!
These two old people drinking wine ( minute 3:05 ) are one of your favourite aren't they?
+Christoph Geske They are our favourite, bar none. -Thought Café James
Damn welcome to crash course Mr Clifford! :)
I m in love with these videos
When discussing rationality in CZcams comments, make sure to keep in mind that it's not conventional rationality or logic that is being referenced in these discussions. It's simple logic, meaning a>b and b>c, so a>c. Don't go into discussions based on your ideas of common sense or rationality.
great video. so helpful. tanks
finally, some economic lectures that are less theoretical and more on the practical side :)))
awesome lecture guys
okay, up to this point i was undecided on crash course econ, but you guys killed it on this one. very well done.
Do you mean you like it or don't?
+Nicolino Will He likes it.
+Nicolino Will His undecidedness dies.
rip
Nicolino Will i liked it. this is the first one that i thought they were putting together useful and fundamental information.
great info, thanks a lot
The Ultimatum game is a Newcomb-type problem. If people think you won't accept an unfair bargain they're more likely to offer a fairer one.
It was great video thank you ❤️
i really love the last experience with bonus
Very useful, thanks
An interesting topic. have to check it out :)
Great video
I'm currently doing my master's degree which relates to behavioral economics, and it would be awesome if you can provide us with the references you used to create the video
so we can read more about it :)
Nice ACDC buckle.
that AC/DC belt though :) thanks for good lecture
That was pretty helpful
You guys are my saviors 😢(crying of happiness)
great explanation
I like these videos! All of them. Thank you for keeping the politics out of it.
yes thank you for this series. is it weird that this is what I watch when I can't sleep at night?
All discussion about economics is political, due to the fact that it is a social science, and studying society implies studying people with different ideals and perceptions.
Every economic theory applies slightly differently depending on the society it's in, the only unbiased way to present it is to take no example at all, or to admit the example is purely fictional, in which case it becomes abstract math, it isn't economics anymore.
So, while I love these videos as well, they are still political if we consider them to be about economics.
Economics is Political. The first Economist were studying Politics, like Adam Smith and Karl Marx. Politics is the study of how to distribute resources and Economics is the study of those resources. They are intrinsically linked.
@@emoore29681 If its weird, then I am weird too
Nudge theory, of course, should not be confused with noodge theory. Noodge theory is a formula for figuring out how much grief your mom will give you for forgetting to phone her.
Gave me a good chuckle. Thanks, mate.
That AC/DC belt is eye catching.. and changes colours. This guy
Classical economics operates mostly on 'ceterus paribus', but as the world become more complex, more factors can't be ignored and multiple theories emerged into new understanding (Complexity Theory)
For good reading on the cafeteria food-choice results as well as other interesting factors that subconsciously influence what and how much we eat, I recommend works by Brian Wansink including Mindless Eating: Why We Eat More Than We Think.
Thank you!
I'v watched all the episodes up to this point. I find the rivalry Jacob has with Physics hilarious
this videos are the best
Can you please do a video focussing on Short Run vs Long Run cost curves, specifically in micro economics????
My favorite example of loss aversion is WOW, instead making it so if you played to long you lost experience, they made it so if you didn't play for a while you would get bonus experience even though the actual experience you got didn't change.
this video is excelent!
Love the crash course history references.
I kept expecting them to point out that the most irrational decision of all is this man's belt
Masterpiece
ive not particularly liked the series, but this episode is good. i think its because there's less of the unnecessary funny antics that can get rather cringey. not to say its bad, but its just my opinion. keep up the good work!
Really useful video. Is there a way to the find the sources for the studies mentioned?
Richard Thaler got the nobel prize for economics this year (2017) and he studies behavioral economics!
The problem with gathering information about a product is making sure the information is accurate. Businesses have an incentive to put their best foot forward and avoid any negative news. Companies have been known to flood review sites with fake reviews and put legally required nutritional information in a hard-to-find spot. Look at how small "artificially flavored" is on the next fruit product you buy.
These are the concepts I missed in my introductory economy/management class. Very good.
We always assumed a rational consumer, but we knew that at smaller scales, and even big scales as well in the right conditions, that breaks down. And small scale is very important to SME's and first-timers, to whom the classical economics/marketing class helps little.
This video was really well done and very insightful, thanks y'all :)
This is very interesting, some things here could be embedded within product design
I was distracted by that AC/DC belt buckle!!!
So, in a way, classical economics is like classical physics as in that it explains the COLLECTIONS of instances, the combined effect, the big picture. Whereas behavioral economics is like quantum physics, as in that it deals with individual instances, that may be difficult or impossible to predict.
Thomazo Not really, that’s a bad comparison. I think you mean Neo Classical Economics. Classics Economics is typically synonymous with Political Economy. The Neo Classical Economics is the mainstream Economics taught in Undergraduate college Micro Econ courses. Theres a heavy emphasis on simplifying assumptions about rationality that Behavioral Economics challenges
Curious, in the 3 groups bonus experiment, won't it have a negative impact on morale for the 3rd group? So while it might work out in the short term, I'd expect a higher quit rate for the third and perhaps degradation of performance over time.
Granted, I understand the point you are trying to make. But I'd rather not people see this and try to apply it only to be adversely affected later.
Just a quick note. From what I understand, electron 'orbits' are actually just probability distributions. We call these "orbitals" which is kind of a misnomer. As for classical mechanics, yes it can tell us a lot about gravitational situations, but they weren't so good with Mercury.
I guess that would be a better analogy. Mercury was a challenge for Newtonian mechanics rather than electrons.
+Matt Smith That is what I was thinking. They could have talked about General Relativity instead; but that was not the point.
The instinct for risk aversion makes sense. I'm doing OK right now. Winning more would be great but I don't know if I can afford to lose, so even if the wins would outweigh the losses long term, I can't guarantee that I can survive a loss. I think we evolved to have risk aversion. Those that risked didn't survive.
Bottom line as with my Industry Landscape Architecture and Urban Design, 'Its about people...stupid'. I spend so much time talking to clients about just people and their often irritational, emotion based ways, with all the present cognitive research we can actually improve the experience of the majority by small nudge changes, the classic being desire lines....
A really excellent video...this type of behavioral science needs to be at the centre of more industries to avoid a seemingly rational expectation to an often irrational end user.
This is a huge subject as we have the nature, nurture, environment, expected cultural rules, length of time for a decision, empath or sociopath and everything in between....
It's ultimately not about boxes, but evolution and a framework to be adapted as we evolve, messy sometimes for sure, but a lot less damaging than dictact's from above....
Aaaaaaah Food and Drink Couple strike again! 2:55
My head cannon is this is more than stock footage and is actually some kind of inside joke.
THANK YOU :D
Love that AC/DC belt!
Economics and Behavioural Patterns - Under Rated Love story
Great effort (Y)
The 100$ gamble vs. 49$ certainty is actually perfectly rationnal when you take into account the law of diminishing returns that you mentionned earlier.
100$ might give me 6 utils, and 50$ might give me 4 utils. 50% chance to have 6 utils isn't as good as 4 utils.
Cool ACDC belt, Jacob!
Classical economic theory still holds true for most of the phenomenons explain in this video. Framing is the instance for which further deliberation from my end is needed.
Take for instance risks, and let us assume a utility function as follow:
f(x) = x*p ; where x = cash and p = probability
1. You can indeed take the 50/50 bet of obtaining either $100 or $0.
2. Otherwise, you can simply opt to receive $50.
The expected utility for both options is $50 as (easily) proven below.
f(100) = 100*.5 = 50
f(50) = 50*1 = 50
What this video tries to illustrate is that if you were instead given the choice between
{1. You can indeed take the 50/50 bet of obtaining either $100 or $0.
{2. Otherwise, you can simply opt to receive 50>n
and you decided to choose the second option, you are an irrational consumer because your expected utility would be less than 50.
BUT
Economics teaches us that individuals can obtain or lose utility from anything. In this case, we can adjust our initial equation by including the utility humans may get from certainty (indeed, this is implied, but reasonable nonetheless).
If we input such benefit someone may get into the equation, we can end up with an equation as such:
f(x) = x*p + 10*p
Note: the number 10 is hypothetical and should be determined on an individual basis.
The new equation depicts that this specific individual obtains more utility from certainty (aka more probability of getting money), and can gain up to 10 units of utility.
Under this new model that takes into account the utility a person gets from certainty, the rational decision is to choose the $50 payout.
f(50) = 50*1 + 10*1 = 60 > f(100) = 100*.5 = 50
Yet again, microeconomics is truly based on implications and the rationale behind it will never mirror the world we tread. Hope this provoked some thought and changed the way you perceive decision making.
Crash Course Econ is just the best
He's wearing an AC/DC belt. I am in bro. I'll buy whatever you are selling.
The standard example for this topic used nowadays is the "rested XP bonus" in World of Warcraft, which gamer love! It was actually a "played for too long penalty" during the WoW beta and beta-tester hated it with passion. The game designers didn't change any number, just the name of the mechanic.