Comments by "Wandering Existence" (@WanderingExistence) on "John Stossel"
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@grondhero Rational choice theory has been debunked and companies use it apart of their business models. If you still think RCT is a law of econ, you don't know econ, Kirby.
"Because humans are emotional and easily distracted beings, they make decisions that are not in their self-interest. For example, according to the rational choice theory, if Charles wants to lose weight and is equipped with information about the number of calories available in each edible product, he will opt only for the food products with minimal calories. Behavioral economics states that even if Charles wants to lose weight and sets his mind on eating healthy food going forward, his end behavior will be subject to cognitive bias, emotions, and social influences. If a commercial on TV advertises a brand of ice cream at an attractive price and quotes that all human beings need 2,000 calories a day to function effectively after all, the mouth-watering ice cream image, price, and seemingly valid statistics may lead Charles to fall into the sweet temptation and fall off of the weight loss bandwagon, showing his lack of self-control.
Applications
One application of behavioral economics is heuristics, which is the use of rules of thumb or mental shortcuts to make a quick decision. However, when the decision made leads to error, heuristics can lead to cognitive bias. Behavioral game theory, an emergent class of game theory, can also be applied to behavioral economics as game theory runs experiments and analyzes people’s decisions to make irrational choices. Another field in which behavioral economics can be applied to is behavioral finance, which seeks to explain why investors make rash decisions when trading in the capital markets.
Companies are increasingly incorporating behavioral economics to increase sales of their products. In 2007, the price of the 8GB iPhone was introduced for $600 and quickly reduced to $400. What if the intrinsic value of the phone was $400 anyway? If Apple introduced the phone for $400, the initial reaction to the price in the smartphone market might have been negative as the phone might be thought to be too pricey. But by introducing the phone at a higher price and bringing it down to $400, consumers believed they were getting a pretty good deal and sales surged for Apple. Also, consider a soap manufacturer who produces the same soap but markets them in two different packages to appeal to multiple target groups. One package advertises the soap for all soap users, the other for consumers with sensitive skin. The latter target would not have purchased the product if the package did not specify that the soap was for sensitive skin. They opt for the soap with the sensitive skin label even though it’s the exact same product in the general package." - Investopedia, behavioral economics
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@grondhero The stock market is the worst example you could have given. People buy more when there's euphoria at a high price and end up selling when there's panic and fear at a low price. Is buy high, sell low a rational investment thesis, Kirb??? Euphoria and fear are emotions, and they often dominate the market. Behavioral economics and behavioral finance aren't "just another perspective", they have lots of Nobel winning empirical studies and profitable business models that show humans often don't act in their own self-interest. Behavioral economics is relatively new, I think it shows that classical liberals are stuck in the past, learn something new ffs.
Warren Buffett has made a lot of his money by "being greedy when others are fearful and fearful in others are greedy".... That's sage investment advice that entirely centers around emotions and irrationality. Bahahahahaha, but yeah, you're smarter with econ than the guy who earned $110 billion by utilizing stock market irrationality; the very thing you say is false! Oh, boy, your humorous propaganda about rational choice theory is richer than Buffet himself.
Keep on being a classical liberal NPC
E: Warren Buffett's actually now worth $125 billion after buying (being greedy) more companies in this fear ridden market... Are you really going to go toe-to-toe in investment decisions against Warren Buffett??
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@jimwerther Ummm, that Churchill quote was about Democracy... "Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed it has been said that democracy is the worst form of Government except for all those other forms that have been tried from time to time.…" - Winston S Churchill, 11 November 1947
lmao, my laziness?? I've spent hours copy and pasting quotes, but you guys can't even be bothered to look up behavioral economics. Humans aren't always rational actors, they're emotional beings full of biases- I'm actually being pretty patient with you guys because I know humans are irrational so I understand why you're being irrational. Let's look at some more points;
"Behavioral finance has revealed that real people do not behave like the rational actors predicted by mainstream theories and the efficient markets hypothesis."...
"Real traders and investors tend to suffer from overconfidence, regret, attention deficits, and trend-chasing—each of which can lead to suboptimal decisions and eat away at returns."
4 Behavioral Biases and How to Avoid Them
By TIM PARKER Updated July 25, 2021
Fact checked by PETE RATHBURN
Let me guess you think going through the effort of correcting your Churchill quote and finding another web page on behavioral economics is "lazy"... Maybe next time you should double check your quote, Mr. LazyJim. Lmao, you guys are hilarious. Just read some behavioral finance, It's an interesting subject that can help you earn money off of people's irrationalities- The article and I have said Buffett made his money this way, as illustrated by Buffets quote "be greedy when others are fearful and fearful when others are greedy". But please continue to believe that humans are completely rational and don't suffer from emotions, like fear and greed, that caused them to make suboptimal decisions for themselves ;) Do some more reading, Mr. LazyJim.
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@jimwerther So instead of admitting you made a mistake you double down and call them the same thing, lol. Democracy and capitalism aren't completely linked... That ideology is called liberalism and it expanded in the late 1700's. There are illiberal examples of capitalism, and examples of democracy without private property. Do you think kibbutz' were capitalistic in their use of democratic voting? (To be clear, whether they succeeded or not is not the issue, rather was their democracy "capitalistic"?)
You're the one who started calling me lazy but then are offended by me calling you the same name? That's a little hypocritical, Jim. Sorry I misspelled a few things; it's called dyslexia. I'm glad you as a teacher, understand learning difficulties... You sure sound like a great teacher /S I don't think Morgan Housel is a deity, but it's obvious you think Sowell is- The irony is too funny. You can't even respond to my behavioral economics points??? *Just like all the rest, you'll ignore addressing behavioral economics* just like the petulant child you are. It's obviously a waste of time to talk to you because you won't address the main issue here; behavioral economics. You are ridiculous, and to have the audacity to call me the embarrassment. Sounds pretty lazy (lazy is your word, not mine, so don't cry about it, Jim).
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