[Music] according to this year’s Nobel Prize
according to this year’s Nobel Prize
according to this year’s Nobel Prize winner in economics richard thaler the
winner in economics richard thaler the
winner in economics richard thaler the world consists only of two types of
world consists only of two types of
world consists only of two types of people humans and economists now before
people humans and economists now before
people humans and economists now before I continue I would like to know whether
I continue I would like to know whether
I continue I would like to know whether there are any economists in the room so
there are any economists in the room so
there are any economists in the room so ok they are almost extinct so so well
ok they are almost extinct so so well
ok they are almost extinct so so well I’m an economist but sometimes I’m human
I’m an economist but sometimes I’m human
I’m an economist but sometimes I’m human too
too
too like the other day I think it’s what it
like the other day I think it’s what it
like the other day I think it’s what it was a month ago that my daughter came to
was a month ago that my daughter came to
was a month ago that my daughter came to me and told me that she wanted to sell
me and told me that she wanted to sell
me and told me that she wanted to sell lottery tickets for a gymnastics club
lottery tickets for a gymnastics club
lottery tickets for a gymnastics club maybe you are familiar with his lottery
maybe you are familiar with his lottery
maybe you are familiar with his lottery and I replied the way daddies do I said
and I replied the way daddies do I said
and I replied the way daddies do I said that’s really a cool idea and without
that’s really a cool idea and without
that’s really a cool idea and without further thinking I bought three tickets
further thinking I bought three tickets
further thinking I bought three tickets and then she left the house and all of a
and then she left the house and all of a
and then she left the house and all of a sudden the economists in me woke up and
sudden the economists in me woke up and
sudden the economists in me woke up and the economists in me went online to look
the economists in me went online to look
the economists in me went online to look up the prices and the arts of this
up the prices and the arts of this
up the prices and the arts of this lottery and started to calculate the
lottery and started to calculate the
lottery and started to calculate the expected return on investment well just
expected return on investment well just
expected return on investment well just to show you what kind of gig I am here’s
to show you what kind of gig I am here’s
to show you what kind of gig I am here’s the proof and and you know what it’s
the proof and and you know what it’s
the proof and and you know what it’s really a bad investment
really a bad investment
really a bad investment so the economists in me would never ever
so the economists in me would never ever
so the economists in me would never ever buy such a ticket and the gambler in me
buy such a ticket and the gambler in me
buy such a ticket and the gambler in me would not buy a ticket either because
would not buy a ticket either because
would not buy a ticket either because any other lottery would be more
any other lottery would be more
any other lottery would be more attractive to participate in and if I
attractive to participate in and if I
attractive to participate in and if I would care about charity I everybody
would care about charity I everybody
would care about charity I everybody would have been better off if I would
would have been better off if I would
would have been better off if I would just have transferred my money
just have transferred my money
just have transferred my money immediately to the gymnastics club so
immediately to the gymnastics club so
immediately to the gymnastics club so there I was mister economist with my
there I was mister economist with my
there I was mister economist with my three tickets and in the meanwhile my
three tickets and in the meanwhile my
three tickets and in the meanwhile my daughter was selling these tickets out
daughter was selling these tickets out
daughter was selling these tickets out on the street and I sort of felt sorry
on the street and I sort of felt sorry
on the street and I sort of felt sorry for her so let me introduce you to my
for her so let me introduce you to my
for her so let me introduce you to my daughter there she is
daughter there she is
daughter there she is and let us just imagine that she would
and let us just imagine that she would
and let us just imagine that she would ring your doorbell
ring your doorbell
ring your doorbell would you buy a ticket if she would ask
would you buy a ticket if she would ask
would you buy a ticket if she would ask you
you
you I guess so right well it turned out that
I guess so right well it turned out that
I guess so right well it turned out that within an hour she came home and she had
within an hour she came home and she had
within an hour she came home and she had sold her entire booklet over 20 tickets
sold her entire booklet over 20 tickets
sold her entire booklet over 20 tickets so I raised the question to myself why
so I raised the question to myself why
so I raised the question to myself why on earth are we making decisions that do
on earth are we making decisions that do
on earth are we making decisions that do not make sense from an economic point of
not make sense from an economic point of
not make sense from an economic point of view are we stupid
view are we stupid
view are we stupid well whereas the Economist in us makes
well whereas the Economist in us makes
well whereas the Economist in us makes decisions based on costs and benefits
decisions based on costs and benefits
decisions based on costs and benefits and by doing so optimizes what we call
and by doing so optimizes what we call
and by doing so optimizes what we call his is instrumental utility the humans
his is instrumental utility the humans
his is instrumental utility the humans the human makes decisions in a different
the human makes decisions in a different
the human makes decisions in a different way a human does not only care about
way a human does not only care about
way a human does not only care about instrumental utility but a human also
instrumental utility but a human also
instrumental utility but a human also cares about his identity and he makes
cares about his identity and he makes
cares about his identity and he makes choices to confirm his identity and this
choices to confirm his identity and this
choices to confirm his identity and this gives him what we call expressive
gives him what we call expressive
gives him what we call expressive utility now what do I mean I mean that
utility now what do I mean I mean that
utility now what do I mean I mean that when we make our decisions we want to
when we make our decisions we want to
when we make our decisions we want to tell other people but especially
tell other people but especially
tell other people but especially ourselves who we are what we believe and
ourselves who we are what we believe and
ourselves who we are what we believe and what we value and every time we do so
what we value and every time we do so
what we value and every time we do so like for example being nice and
like for example being nice and
like for example being nice and charitable to the little girl we feel
charitable to the little girl we feel
charitable to the little girl we feel good about ourselves
good about ourselves
good about ourselves now this feeling this is the expressive
now this feeling this is the expressive
now this feeling this is the expressive utility I’m talking about now you and I
utility I’m talking about now you and I
utility I’m talking about now you and I we literally make thousands of decisions
we literally make thousands of decisions
we literally make thousands of decisions per day we make decisions about what we
per day we make decisions about what we
per day we make decisions about what we buy what we say what we do how we behave
buy what we say what we do how we behave
buy what we say what we do how we behave etc etc and with many of these decisions
etc etc and with many of these decisions
etc etc and with many of these decisions instrumental utility and expressive
instrumental utility and expressive
instrumental utility and expressive utility are not in conflict so for
utility are not in conflict so for
utility are not in conflict so for example when you buy your clothes or
example when you buy your clothes or
example when you buy your clothes or when you buy a car in those situations
when you buy a car in those situations
when you buy a car in those situations if you would like to confirm your
if you would like to confirm your
if you would like to confirm your identity you have to put your money
identity you have to put your money
identity you have to put your money where your mouth is and because of that
where your mouth is and because of that
where your mouth is and because of that the expressive part and the instrumental
the expressive part and the instrumental
the expressive part and the instrumental are perfectly in line but we are also
are perfectly in line but we are also
are perfectly in line but we are also making decisions that have low cost and
making decisions that have low cost and
making decisions that have low cost and low benefit and are completely
low benefit and are completely
low benefit and are completely inconsequential to our lives in those
inconsequential to our lives in those
inconsequential to our lives in those decisions we don’t have to put our money
decisions we don’t have to put our money
decisions we don’t have to put our money where our mouth is but still we open up
where our mouth is but still we open up
where our mouth is but still we open up our mouth now does that mean that if we
our mouth now does that mean that if we
our mouth now does that mean that if we are behaving like this
are behaving like this
are behaving like this we are irrational are we stupid then
we are irrational are we stupid then
we are irrational are we stupid then well in order to answer that let me show
well in order to answer that let me show
well in order to answer that let me show you an equation because we economists we
you an equation because we economists we
you an equation because we economists we love equations and so this is the
love equations and so this is the
love equations and so this is the decision-making process of a human now
decision-making process of a human now
decision-making process of a human now if we buy a lottery ticket
if we buy a lottery ticket
if we buy a lottery ticket from a little girl we may obtain
from a little girl we may obtain
from a little girl we may obtain negative instrumental utility but as
negative instrumental utility but as
negative instrumental utility but as long as the positive expressive utility
long as the positive expressive utility
long as the positive expressive utility of being nice and charitable is larger
of being nice and charitable is larger
of being nice and charitable is larger than the loss due to D and Samantha
than the loss due to D and Samantha
than the loss due to D and Samantha utility our total utility is positive
utility our total utility is positive
utility our total utility is positive and hence we are not irrational we are
and hence we are not irrational we are
and hence we are not irrational we are not stupid
not stupid
not stupid now of course I’m the first one to agree
now of course I’m the first one to agree
now of course I’m the first one to agree that this example is completely harmless
that this example is completely harmless
that this example is completely harmless so you may wonder why I’m telling you
so you may wonder why I’m telling you
so you may wonder why I’m telling you this now the reason that I’m telling you
this now the reason that I’m telling you
this now the reason that I’m telling you this is that the reason that I’m telling
this is that the reason that I’m telling
this is that the reason that I’m telling you this is that there are other
you this is that there are other
you this is that there are other situations where our decisions are less
situations where our decisions are less
situations where our decisions are less harmless and potentially really harmful
harmless and potentially really harmful
harmless and potentially really harmful On June 23 2016 the British electorate
On June 23 2016 the British electorate
On June 23 2016 the British electorate decided to leave the European Union in a
decided to leave the European Union in a
decided to leave the European Union in a referendum that is better known as
referendum that is better known as
referendum that is better known as brexit in the aftermath of this
brexit in the aftermath of this
brexit in the aftermath of this referendum different polls and studies
referendum different polls and studies
referendum different polls and studies have reported that over a million Li
have reported that over a million Li
have reported that over a million Li voters by now regret the vote this is
voters by now regret the vote this is
voters by now regret the vote this is about 6% of all casted votes and what
about 6% of all casted votes and what
about 6% of all casted votes and what these people have voted remain then the
these people have voted remain then the
these people have voted remain then the outcome would have been remained now
outcome would have been remained now
outcome would have been remained now these so-called regret voters have been
these so-called regret voters have been
these so-called regret voters have been portrayed by the media as being
portrayed by the media as being
portrayed by the media as being amazingly stupid don’t you agree but
amazingly stupid don’t you agree but
amazingly stupid don’t you agree but what if I would come along and tell you
what if I would come along and tell you
what if I would come along and tell you that these people
that these people
that these people whereas stupid or as rational as you and
whereas stupid or as rational as you and
whereas stupid or as rational as you and me when we buy a lottery tickets from a
me when we buy a lottery tickets from a
me when we buy a lottery tickets from a little girl let me just do a comparison
little girl let me just do a comparison
little girl let me just do a comparison between the two like buying a lottery
between the two like buying a lottery
between the two like buying a lottery ticket voting has a small cost of course
ticket voting has a small cost of course
ticket voting has a small cost of course you do not have to buy your ballot to
you do not have to buy your ballot to
you do not have to buy your ballot to vote but you have to inform yourself
vote but you have to inform yourself
vote but you have to inform yourself about the relevant issue and you have to
about the relevant issue and you have to
about the relevant issue and you have to travel to the polling station and this
travel to the polling station and this
travel to the polling station and this together takes time and you know what
together takes time and you know what
together takes time and you know what they say time is money now what about
they say time is money now what about
they say time is money now what about the expected benefit here it is also
the expected benefit here it is also
the expected benefit here it is also like a lottery because the expected
like a lottery because the expected
like a lottery because the expected benefit of an election also consists of
benefit of an election also consists of
benefit of an election also consists of a price and a probability the prize here
a price and a probability the prize here
a price and a probability the prize here is the policy outcome that you prefer
is the policy outcome that you prefer
is the policy outcome that you prefer and the probability is the probability
and the probability is the probability
and the probability is the probability that your vote is going to make the
that your vote is going to make the
that your vote is going to make the difference between leaf and romaine now
difference between leaf and romaine now
difference between leaf and romaine now a lis voter who wanted to remain but
a lis voter who wanted to remain but
a lis voter who wanted to remain but voted leaf he’s never going to win the
voted leaf he’s never going to win the
voted leaf he’s never going to win the price so it’s like a lottery it’s a bad
price so it’s like a lottery it’s a bad
price so it’s like a lottery it’s a bad investment but the value of this bad
investment but the value of this bad
investment but the value of this bad investment has to be discounted by the
investment has to be discounted by the
investment has to be discounted by the fact that his individual vote will be
fact that his individual vote will be
fact that his individual vote will be decisive now in the British case which
decisive now in the British case which
decisive now in the British case which with over 30 million voters it means
with over 30 million voters it means
with over 30 million voters it means that the value it means that the
that the value it means that the
that the value it means that the probability that he will be decisive
probability that he will be decisive
probability that he will be decisive it’s basically zero so the expected
it’s basically zero so the expected
it’s basically zero so the expected benefit of his bad investment is also
benefit of his bad investment is also
benefit of his bad investment is also practically zero now what about the
practically zero now what about the
practically zero now what about the expressive utility here if you vote leaf
expressive utility here if you vote leaf
expressive utility here if you vote leaf you may well be able to confirm your
you may well be able to confirm your
you may well be able to confirm your identity of being dissatisfied with the
identity of being dissatisfied with the
identity of being dissatisfied with the government or just your national pride
government or just your national pride
government or just your national pride now if I would do the math here then
now if I would do the math here then
now if I would do the math here then given the fact that the instrumental
given the fact that the instrumental
given the fact that the instrumental part in the case of brexit has a value
part in the case of brexit has a value
part in the case of brexit has a value of zero it is very likely that the
of zero it is very likely that the
of zero it is very likely that the expressive part is going to determine
expressive part is going to determine
expressive part is going to determine decision the I’m sorry the decision so
decision the I’m sorry the decision so
decision the I’m sorry the decision so voting leaf whilst you are in phase
voting leaf whilst you are in phase
voting leaf whilst you are in phase of romaine is not stupid in fact
of romaine is not stupid in fact
of romaine is not stupid in fact elections are just lottery tickets and
elections are just lottery tickets and
elections are just lottery tickets and cute little girls in disguise now the
cute little girls in disguise now the
cute little girls in disguise now the last couple of years my colleagues and
last couple of years my colleagues and
last couple of years my colleagues and me have studied expressive voting
me have studied expressive voting
me have studied expressive voting behavior in the research lab and if one
behavior in the research lab and if one
behavior in the research lab and if one thing stands out then it is the fact
thing stands out then it is the fact
thing stands out then it is the fact that people vote differently in small
that people vote differently in small
that people vote differently in small groups when it’s very likely that the
groups when it’s very likely that the
groups when it’s very likely that the vote is going to matter compared to the
vote is going to matter compared to the
vote is going to matter compared to the same situation in large groups where it
same situation in large groups where it
same situation in large groups where it is unlikely that their vote is going to
is unlikely that their vote is going to
is unlikely that their vote is going to matter now this is due to expressive
matter now this is due to expressive
matter now this is due to expressive behavior and the consequence of it is
behavior and the consequence of it is
behavior and the consequence of it is that what is optimal for an individual
that what is optimal for an individual
that what is optimal for an individual can be suboptimal or even harmful for
can be suboptimal or even harmful for
can be suboptimal or even harmful for the entire population now I hope you
the entire population now I hope you
the entire population now I hope you realize that expressive decisions are
realize that expressive decisions are
realize that expressive decisions are all over the place just try to imagine
all over the place just try to imagine
all over the place just try to imagine how many of your decisions have low
how many of your decisions have low
how many of your decisions have low costs and low benefit in fact in 10
costs and low benefit in fact in 10
costs and low benefit in fact in 10 seconds from now my talk is over and you
seconds from now my talk is over and you
seconds from now my talk is over and you right afterwards have to make your very
right afterwards have to make your very
right afterwards have to make your very next decision well I leave it up to you
next decision well I leave it up to you
next decision well I leave it up to you where a debt decision is going to be
where a debt decision is going to be
where a debt decision is going to be instrumental or expressive thank you
”
Be First to Comment