Explore the concept of bounded rationality and how real-world scenarios defy the rationality assumption. Discover surprising insights from the Cab Driver Study and stock market behavior. Challenge traditional notions in economics and advocate for a more nuanced understanding of human behavior.
Behavioral economics challenges traditional rational decision-making assumptions in economics.
Real-world scenarios often defy traditional economic models, showcasing the complexities of human behavior in decision-making.
Deep dives
Tax Refunds Impact on Low-Income Households
Receiving a tax refund can be significant for low-income households, often equivalent to multiple months' worth of income. Initiatives like Refund to Savings aim to encourage savings by offering free tax filing services for low and moderate-income households. By making small changes to online tax software like TurboTax, they have increased savings deposits by over $94 million for around 65,000 savers, showing the impact of simple adjustments on financial decisions.
Anomalies Challenge Economic Laws
Behavioral economics challenges traditional economic assumptions of rational decision-making. Richard Thaler's observations of seemingly irrational behaviors like valuing possessions more once owned, led to a series of articles highlighting anomalies in economic theories. This led to the inception of behavioral economics, diverging from the neoclassical economic view of rationality in decision-making.
Cab Drivers' Work Decisions
A study on New York City cab drivers revealed an interesting phenomenon where drivers worked shorter hours on days with higher earnings and longer on slower days, contrary to rational economic predictions. This behavior showcased how real-world decisions often deviate from traditional economic models, questioning the assumption of rationality in economic choices.
Royal Dutch Shell Stock Pricing Anomaly
The pricing of Royal Dutch Shell stocks demonstrated deviations from the traditional economic law of one price due to a historical merger agreement. Researchers found fluctuations in the value ratio between Royal Dutch and Shell, challenging the efficient market hypothesis and highlighting how real-world market behaviors often defy standard economic predictions.
For decades, neoclassical economists clung to the belief that humans are rational decision-makers, but a daring group of social scientists dared to question this notion. Join us as we explore their pioneering work, from the revolutionary concept of bounded rationality to the eye-opening Cab Driver Study. Through meticulous observations and rigorous analysis, these trailblazers shattered the status quo, ushering in a new era of economic thought.
Discover how real-world scenarios defied the rationality assumption, from the baffling fluctuations in stock market behavior to the surprising insights gleaned from everyday decision-making. As we unravel the complexities of economic behavior, we invite you to join us on a radical journey of discovery and transformation. Together, let's challenge traditional notions, advocate for a more nuanced understanding of human behavior, and pave the way for a brighter future in economics and beyond. This is more than just a podcast—it's a revolution.
Discover
Are humans really rational decision makers?
The radical concept of bounded rationality
The surprising ways in which workers don’t optimize their earnings
How the stock market defies pure rationality
Get the Snipd podcast app
Unlock the knowledge in podcasts with the podcast player of the future.
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode
Save any moment
Hear something you like? Tap your headphones to save it with AI-generated key takeaways
Share & Export
Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode