Employing Behavioral Economics to tackle Air Pollution

Disclaimer: This post is part of a series of essays I wrote at the Young India Fellowship. This particular essay was written as part of the Critical Writing course on Mind, Society and Behavior.

In the World Development Report 2015- Mind, Society and Behavior published by the World Bank Group, the team of authors led by Karla Hoff and Varun Gauri try to establish the incredible need of governments and policymakers to be aware of human irrationality and using this understanding to develop better policies. In the first chapter, entitled ‘Thinking Automatically’, the report states that there are two principal systems of thinking: automatic and deliberative. Next, supported by evidence from various studies, they try to show how the automatic system is responsible for making the bulk of our decisions despite being extremely error prone and biased. Finally, the chapter seeks to explain the various predictable cognitive biases that our automatic systems are prone to and how to use these biases to frame and design better choice architectures that could nudge people towards making better decisions.

The chapter begins by noting the seminal works of Daniel Kahneman and Amos Tversky which led to the foundation of the field of Behavioral Economics and the understanding that humans don’t always evaluate all information and choices equally before making their decisions; a central assumption of the Standard Economic Theory. Although such a deliberative system does exist, it is extremely slow and resources hungry. Therefore, humans prefer employing a faster, although the error-prone, automatic system of thinking that generates simpler models using limited information and leads to faster decision making.

The chapter then goes to explain various biases in assessing information that arises on account of using the faster, automatic system. The first is framing, where individuals tend to give more weight to information that is of little or no relevance. Governments are aware of this particular kind of irrationality and there are examples that exist that show them actively trying to counter it (For example, the ban on leading questions in a court of law). It is indeed possible to use framing to counter climate change behavior among individuals. Running advertisements and posting billboards detailing graphic damages caused to individuals will go a long way in sensitizing people about the magnitude of the problem.

The second effect is that of anchoring where the automatic system tends to cling on to a piece of irrelevant information in order to interpret a choice context; sometimes extremely erroneously. Examples of this include the tendency of people to bargain to reduce the price of an auto ride by 10 rupees but forego similar bargaining activity of even the order of, say a thousand rupees, when buying a car worth more than a lakh.

The anchoring bias also sheds light on something called the ‘peanuts effect’ wherein people tend to ignore the consequences of small monetary transactions as they are viewed as being worth ‘peanuts’ or effectively nothing. However, when added up, these ‘peanuts’ become of immense value and could lead to non-trivial benefits if they were not ignored in the first place. This particular effect is of great significance to climate change policies as well. When individuals pollute the environment, they rationalize their actions by telling themselves that their small act is ‘peanuts’ or of little significance to the magnitude of the total pollution in the environment. Therefore, it is important that people be made aware of the total mess they create, on average, in a year as a result of ignoring these small but numerous acts.

The next section of the chapter focused on biases that arose on account of assessing value. The two primary effects described were the potency of default options and the phenomenon of loss aversion. In the former, people are extremely prone to taking the default option presented by their choice architecture. A study in the United States found that the number of colleges that high school students applied to increased from three to four when the number of free test score reports increased by the same value. Such a minute change, the report demonstrated, had extremely far-reaching consequences.

In the context of air pollution, this effect has potentially far-reaching consequences. The objective of a policy must be to present default options that are environmentally friendly and introduce greater inertia in switching. For instance, making public transportation cheaper, comfortable and more readily available will lead people to make it their default, more convenient choice over personal transportation. Similarly, introducing a ‘firecracker permit’ for consumers will severely deter them from applying for such a permit and in the process, buying firecrackers too.

The phenomenon of loss aversion is rooted in the idea that people are more averse to losses than they are to gains of similar magnitude. This effect has been observed and studied in various circumstances such as improving the performance of school teachers and their classrooms. Although the proponents of nudge strongly believe that their methods are ethical and do not interfere with free will, loss aversion policies prove to be an exception. Loss aversion tends to be principally rooted in fear and manipulating people’s fears to achieve results, no matter how beneficial they are,  is an inherently unethical thing to do. That being said, policies rooted in this bias may prove to be immensely effective. During festivals such as Diwali, the lower income groups tend to burst a disproportionately larger number of firecrackers. It is, therefore, possible to introduce a policy where the Government provides a ‘gift’ to everyone in the lower income group but with the condition that they stand to lose their claim if they burst firecrackers or obtain a permit as explained earlier.

The final sections of the chapter explain the intention-action divide wherein individuals, despite being in possession of complete information and knowledge of the right action, tend to act in a manner that is counter-intuitive. Various policies such as SMS Reminders and Cash Awards in a variety of fields have proven to be effective in bridging the intention-action gap. In the context of air pollution in Delhi, it would be extremely useful to apply the aforementioned principles in deterring farmers from burning their crops just after harvest.

People tend to think automatically and in the process, employ biases and make suboptimal decisions. This review carefully analyzed the various biases and their natures and how they can be used to effectively combat the pollution in a high-risk city such as New Delhi. The Government must make it a point to dispel the peanuts effect and educate how small actions lead to extremely large consequences. It could also introduce banners and ads that explicitly describe what air pollution can do to their health. Its policies regarding environmentally harmful products must always be attached to providing better options to the point where it becomes the default and introducing inertia and artificial supply shortages to environmentally problematic ones. It could also look into policies that offer conditional rewards and exploit the effect of loss aversion. Finally, it can take steps to bridge the gap between intention and action by notifying perpetrators (such as crop burners) of their harmful activities on time.

Finance and Dystopia

 

I don’t know why but it gets really hard to do anything once you’ve progressed to the middle of the summer vacation. It took an immense amount of effort to do something that was even worth mentioning here in spite of there being a post drought for almost a week. Nevertheless, I did finally manage to read up Anthony Burgess’ A Clockwork Orange (the only book I hadn’t read in Goodreads’ Top 10 entries in the Best Novellas list). The book was a pain in the beginning. It took time to get used to Burgess’ lingo. The issues the book raised were definitely worth some thought but overall, I’d consider it a one-time read.

I had thoroughly underestimated the vastness of Udacity’s Intro to Artificial Intelligence course. I must have spent over 15 hours on it cumulatively and I’m not even halfway through. But the amount  I’ve learnt is immense. AI is seriously something I see myself pursuing and studying in the future. Up until now, I’m done with 10 units of the course with 12 more to go. Hopefully, I’ll follow up with courses which treat its sub branches in depth.

Rommel Rodriguez’s Everything You Wanted To Know About Business and Economics presented a lot of useful information about the Indian Economy and the working of Stock Markets. The writing wasn’t exceptional but it is one book I can fall back on if I needed help with almost anything to do  with money.

Lastly, I’ve started reading Philp Pullman’s His Dark Materials. The Golden Compass has turned out to be a pretty interesting and easy read so far. I hope series lives up to its third place on BBC’s Big Read List.

Irrationally Yours

 

It takes a certain amount of audacity to openly challenge the merits of a theory that has earned its creator a Nobel Prize in Economics. But that is exactly what Dan Ariely does in discrediting Gary Becker’s Simple Model Of Rational Crime (SMORC) in his book The Honest Truth About Dishonesty. I became a fan of the former MIT Professor’s writings, theories and experiments when I read his book Predictably Irrational a few weeks back (See Human Behavior and Irrationality). I was a little skeptic about reading his later works. For one, they had lower ratings on Goodreads and I had a feeling I wouldn’t experience nearly as many ‘Aha!’ moments if I read them. Going through more all of Malcolm Gladwell’s major works, Daniel Kahneman’s Thinking Fast And Slow and Ariely’s Predictably Irrational, I thought I had covered the majority of ideas existing in the nascent field of Behavioral Economics. I was wrong.

The Upsides of Irrationality seemed like a sequel to Predictably Irrational. And unlike many of the ‘sequels’ in non-fiction, it had a set of ideas that were novel and different from its predecessors. And although this opinion is not shared by the majority of the 50,000 plus readers that rated Ariely’s books, I thought this was actually better than Predictably Irrational. But I’m probably being biased because of the kind of topics he covered. Ariely’s research on how online dating works and its failure to act as an effective medium gave  me a lot of insights into how to actually approach the concept of social discovery, something that I intend on working on as a long term goal.

As I had done with Predictably Irrational, I am going to summarize the major ideas presented by the book so that the reader (and later on, I) can look it up quickly when necessary.

• Although it may sound counter-intuitive, handing out large bonuses to senior executives decreases their performance. This is because performance v/s rewards follows an inverse U curve. Rewards entail higher performance only up to a certain point and then proceeds to actually hamper it.
• Even though people in the workplace work for money, it is incredibly important that they believe that what they are doing is meaningful and beneficial to a certain group of people. If made to do meaningless tasks, people will slack and perform below expectations, even if they are being paid for performing the task.
• We tend to overvalue the things we create or have believe had some part in its creation. This is probably the reason why we tend to love products which we have customized or had a small role in building (such as IKEA furniture).
• Similarly, we tend to think of ideas that we have generated to be vastly superior. This happens even if the ‘original’ idea has been subconsciously planted in our heads. Conversely, we have a hard time accepting the novelty and brilliance of the ideas of others, especially rivals. This is one of the reasons Sony refused to create its own version of the iPod and chose to stick, rather unsuccessfully, to its rapidly out-dating Walkman.
• We tend to exact revenge even if it ends up resulting in an economic loss to us. The rational economic model effectively disappears in the face of a scorned man/woman. We also tend to turn a blind eye towards who we are exacting revenge on i.e we are unable to differentiate between principal and agent.
• We adapt to happiness and pain faster than we think. Although this may sound counter-intuitive, it is best to experience pleasure over spaced intervals and pain all at once in one shot.
• The parameters on which dating sites match people or which we think are important are effectively useless in fostering happy, long lasting relationships. What people want in their partners and what they say they want are different things. A more effective method of online dating would be having prospective couples experience something on the internet (such as art, music or movies) together and see how they like spending time with each other virtually.
• We tend to be more responsive to pleas which have an emotional connect than statistics. People are more likely to donate for a little girl having cancer than donate for a tsunami relief fund which has claimed the lives of over 10,000 people.
• We tend to make bad decisions when in an unstable emotional state and that bad decision persists and eventually turns into bad habit as humans tend to recall past activities but not past emotional states.

Illustrative of couple representing online dating

Ariely’s third book, The Honest Truth About Dishonesty had him explaining man’s constant struggle towards balancing a cost-benefit analysis of every situation (as suggested by the SMORC model) and his efforts to maintain his self-image of an honest, wonderful person.

What may come as a severe blow to the SMORC model and traditional economics in general is the fact that humans don’t tend to be more dishonest in the face of a larger gain or if the probability of getting caught is reduced. Alternatively, it depends on a variety of psychological factors such as the ability to rationalize, the distance from cash, altruism, moral code reminders etc. I must confess my love for the field of Behavioral Economics increases by the day. I’m pretty sure I’ll be picking up more books on the subject in the near future. It has this uncanny ability of making you feel powerful, of giving you an image of yourself as a person who understands the other far more and far better than the vice versa.

Pop Psychology

 

I had stumbled upon Gladwell when I spotted his Outliers, as one of the few recurring books in most Business books lists on Goodreads. As a result, I ended up giving it a try. And as I had mentioned in The Secret of Success, it was a thoroughly interesting read. The book make me look into his bibliography and try out his other books as their themes were something I thought I’d be deeply interested in. Fortunately, my intuitions weren’t wrong.

Gladwell’s books effortlessly covers a variety of different fields such as Psychology, Marketing, Economics and Sociology to give us intriguing stories and novel insights into the human behavior. Some have branded his writing as pop psychology because of the kind of reach he has despite writing on a subject that is relatively lesser known. His David and Goliath was an ode to all the underdogs who overcame great difficulties to triumph over their Goliaths. The story of how dyslexia actually helped Gary Cohn become the president of Goldman Sachs and how Frierich’s troubled childhood was majorly responsible for him pioneering an approach towards the treatment of leukemia shows us how our perceived weaknesses can often be turned into our greatest strengths. Everyone saw David’s size as his weakness. But his size gave him his speed which turned out to be the deciding factor in Bible’s most famous battle.

FILE – In this Aug. 15, 2014, file photo, a lighted sign marks the Goldman Sachs trading post on the floor of the New York Stock Exchange. Goldman Sachs reports quarterly financial results on Thursday, July 16, 2015. (AP Photo/Richard Drew, File)

Blink! strongly reminded me of the concept of System 1 proposed by Daniel Kahneman in his magnum opus, Thinking Fast and Slow. Essentially, Gladwell tries to educate us about the extraordinary power of subconscious cognition and how we can learn to control and use its power. Through case studies of the FACS, Blink! tells us of the remarkable story of Ekman and his lifetime effort to categorize facial expressions. By the time he was done, his subconscious could recognize with incredible accuracy as to whether a person was lying, flirting, had malicious intentions, faking etc. This, to me, was the zenith of the power of human intellect. Blink! also made a strong case about how our unconscious also tends to stereotype and create prejudices that lead to ugly outcomes.

The latest book I read, The Tipping Point, was an attempt at explaining the cause of social epidemics. Often, we are amazed by the meteoric rise of a product or a person over an extremely short period of time. Gladwell’s theory that epidemics rely on 3 phenomena: The Law of the Few, The Stickiness Factor and The Power of Context gives a very compelling explanation towards understanding epidemics. Personally, I feel this is one book every person in marketing must read. The insights into some of the biggest hits such as Hush Puppies shoes, Sesame Street and Airwalk will definitely serve as a good guide as to how to go about marketing a particular product. The last few chapters strongly reminded me of Freakonomics as The Tipping Point went about trying to understand the intricacies of suicide and smoking. Overall, these were books I thoroughly enjoyed. And I’ll have to admit that few books have given me so many novel insights and theories as this one has. It is genuinely refreshing to read something that surprises, especially when you’ve read most of the popular literature of that particular genre.

Summer Reading II: Non-Fiction

 

In the previous post, I had listed down books which predominantly fell into the fiction genre. In contrast, this post will focus primarily on non-fiction. However, before I start listing down my favorites of the genre, I’ll be doing a short section on contemporary fiction first for the sake of achieving a sense of completion.

Contemporary Fiction

To be honest, I haven’t read a lot of contemporary fiction. I haven’t all the books listed over here. I’ve included them purely on the basis of the recommendations of the online community as well as a few credible friends.

• The Fault in Our Stars- John Green
  Two terminally ill teenagers meet and fall in love. This books is an absolute favorite among my female friends. Get ready to get all teary eyed.
• The Kite Runner- Khaled Hosseni
  Set in modern Afghanistan, The Kite Runner chronicles the lives of two young Afghan boys as they witness the fall of the Afghan monarchy, the Soviet intervention and the rise of the Taliban regime.
• Q&A- Vikas Swarup
  The book on which the Oscar winning movie Slumdog Millionaire is based on, Q&A offers us a glimpse into the dark, macabre lives of children in Mumbai’s slums. After reading the book, you’ll genuinely happy and content with the quality of life you’ve got.
• The Book Thief- Markus Zusak
  Few books have left me in such a maelstrom of emotions as The Book Thief. Set in Nazi Germany and narrated by Death Himself, it is the story of 13 year old Liesel Meminger as she struggles to find happiness and meaning through books.
• Midnight’s Children- Salman Rushdie
  When a book wins the ‘Booker of Bookers’ in both the 25th and the 40th anniversary of the prize, you know it has to be something spectacularly good. Set in post-colonial India, with its magical realism, Midnight’s Children is just that. A must read for every literature aficionado.

Poetry

• The Prophet-Khalil Gibran
  The magnum opus of my favorite poet, The Prophet is filled with timeless advice on everything imaginable: love, work, family, children, relationships, hate. And the lines are so beautiful that they are bound to strike a chord with your heart.
• Gitanjali- Rabindranath Tagore
  This work by Tagore made him the first non-European in history to win a Nobel Prize. And it wasn’t without good reason. Even though I read the translated version, I found his verses to be overwhelmingly euphonious.
• 20 Love Songs and a Song of Despair– Pablo Neruda
  The champion of passion and unrequited love, Pablo Neruda has given words to the ardor of countless lovers across the globe. This is a collection of some of his very best (See Twin Geniuses: Tagore and Neruda).
• Essential Rumi- Coleman Barks
  The translated works of 13th century Sufi mystic poet Rumi, Essential Rumi is a treasure trove of wisdom imparted by the mystic almost over a millennium ago. Like Gibran, Rumi’s lines will definitely manage to reach the deepest centers of your heart.

I realize that the poetry I’ve listed are all translated works. If you want to read ‘pure’ English poetry, look for the works of William Blake (Songs of Innocence and Experience), Walt Whitman (Leaves of Grass), Emily Dickinson, Robert Frost, T.S.Eliot, Alfred Lord Tennyson and Edgar Allen Poe.

Biography

• Steve Jobs- Walter Isaacson
  What sets Walter Isaacson’s biography apart is its unapologetic honesty of the man who founded the most valuable company on the planet. Halfway through the book, I hated and loved Jobs at the same time. Very few books will give you such honesty.
• The Man Who Knew Infinity- Robert Kanigel
  My favorite biography, Kanigel’s account of Indian genius Ramanujan is probably the most comprehensive account you will get of the great mathematician’s life.
• The Accidental Billionaires- Ben Mezrich
  Although not a biography per se, Mezrich’s tale of the rise of Facebook and a bitter legal battle that ensued shortly after its launch makes it an exhilarating read.
• Surely you’re joking, Mr. Feynman!- Richard Feynmann
  The autobiography of one of the most eccentric physicists of the twentieth century, this book is an account of the craziest adventures and discussions undertaken by Feynmann.

Art, Culture and History

• Natasha’s Dance- Orlando Figes
  Russia has given some of the greatest authors in history. Russian novels and stories can pierce your heart like no other. This book is an account of the cultural history of Russia that gives us an insight into the kinds of developments that took place that led to the rise of the Russian arts.
• The Story of Art- E.M.Gombrich
  This introduction to art gives us an account of its history from cave paintings to experimental art of the 1960s.
• On Writing- Stephen King
  This semi-autobiography of King is an ode to the art of writing and the struggles and delights of being a writer.
• The Diary of a Young Girl- Anne Frank
  The unintentional autobiography of Holocaust’s most famous victim, The Diary of a Young Girl gives us a surreal glimpse into the lives of the Jews hiding in Nazi Germany.
• Unbroken- Laura Hillenbrand
  This collection of stories from World War 2 gives us accounts of survival, resilience and redemption showcased by civilians and armies alike.

Technology, Math and Startups

• Zero to One- Peter Thiel
  A collection of the notes of the class taught by founder of Paypal and Palantir, Peter Thiel, Zero to One is widely regarded as the bible of starting up.
• The $100 Startup– Chris Guillebeau
  This book is about micro-businesses and roaming entrepreneurs and how it is actually feasible making a living out of doing something that you love (See Microbusiness and Travel)
• The Code Book- Simon Singh
  One of my favorite non-fiction books of all time, The Code Book narrates the little told story of the art of security and secret writing.
• Fermat’s Last Theorem- Simon Singh
  This book is an account of a three centuries long struggle to prove Fermat’s Last Theorem; a proof which Fermat claimed not to have put on paper because it required too much space.
• God Created The Integers- Stephen Hawking
  With commentary from Hawking, God Created the Integers highlights the biggest mathematical breakthroughs in the history of mankind which went to shape human civilization as we know it.

Science

• A Brief History of Time- Stephen Hawking
  Arguably the most famous science book of all time, A Brief History of Time gives the layman a glimpse into the wonderfully complicated universe that we live in and our struggle to understand it.
• A Short History of Nearly Everything- Bill Bryson
  This book on Big History gives us an account of the history of the Universe, from the Big Bang to the present day (See Big History)
• Chariot of the Gods- Erich von Daniken
  A bold hypothesis of how human civilization was shaped by extra terrestrial beings who visited Earth a long time ago, Chariot of the Gods is the quintessential account (and possibly proof) of panspermia and intelligent extra-terrestrial life.
• What If- Randall Munroe
  In this book, former NASA scientist and founder of xkcd comics Randall Munroe answers absurd questions regarding the world and the universe (See Of Science and Comic Books)

Philosophy and Religion

• The God Delusion- Richard Dawkins
  The bible of atheism, The God Delusion argues how the probability of a supernatural being existing is almost zero if the theory of evolution is to be believed.
• The Dhammapada- Anonymous
  The Dhammapada is a collection of the Buddha’s teachings and gives us a glimpse into the teachings and principles of Buddhism.
• History of Western Philosophy- Bertrand Russell
  History of Western Philosophy is an account of every major philosophical thought from the time of the ancient Greeks to the present

Economics and Psychology

• Freakonomics and Superfreakonomics- Steven Leviit and Stephen Dubner
  The craziest economics books you can find, Freakonomics and Superfreakonomics tell us about the hidden side of everything. Why do drug dealers live with their moms? Why should suicide bombers buy life insurance? How did legalization of abortion lead to a drop in crime rate in the US? Read the books to find out.
• Thinking Fast and Slow- Daniel Kahneman
  The bible of Behavioral Economics, Thinking Fast and Slow is one of the best books you’ll read on the subject (See Revisiting Psychology)
• Predictably Irrational- Dan Ariely
  Like the previous book, this too gives us an insight into the anomalies and idiosyncrasies of human behavior. A must read for anyone who plans on starting a business or is in marketing or public relations (See Human Behavior and Irrationality)
• Economics in One Lesson- Henry Hazlitt
  A champion of the Austrian School of Economic Thought, Hazlitt tries to explain the problems with traditional economic principles through a series of well known historical cases.
• The Man Who Mistook His Wife For A Hat- Oliver Sacks
  A brilliant account of the strangest cases encountered by Sacks in his medical career, this book is a must read for anyone with the slightest interest in Clinical Psychology.
• Interpretation of Dreams- Sigmund Freud
  One of the pioneers of the field of Psychology, Freud sets out to explain how our dreams can tell us much about our deepest desire, passion, pain and ambition.

And I shall stop here. I think I have covered a majority of the major fields of interest. Yet, I understand that one person’s experience with books leads to the creation of a relatively skewed list. Again as before, this list is in no ways exhaustive of any kind. There are plenty of amazing books I haven’t listed or have missed out on. Please feel free to list them in the comments.

Human Behavior and Irrationality

 

After reading Daniel Kahnemann’s Thinking Fast and Slow (see Economics in One Post), I became a fan of Behavioral Economics. The branch conveniently combined two of my favorite social sciences: Economics and Psychology. So, I decided to revisit the topic again by picking up a couple of books that were highly regarded, at least in the Goodreads community.

The first was SuperFreakonomics, a sequel to the hugely popular Freakonomics by Steven Levitt and Stephen Dubner. And although the authors promised a better book in its preface, I thought the original was better. The case studies and questions answered in the book were not as flabbergasting or surprising as the ones contained its predecessor. Freakonomics enthralled me in its very first chapter by establishing a direct link between the legalization of abortion and declining crime rates in America. In contrast, some of the things mentioned in the successor such as prostitution being profitable because of it being illegal and an elaborate explanation of the bystander effect wasn’t all that fascinating. Maybe I do injustice to the book as I had already read extensively about a majority of what had been presented. To its credit though, I found the last chapter and the epilogue particularly interesting. The story of IV, its fight against global warming and the extremely wrong notions we hold about the dangers of climate change had me hooked. The epilogue on Capuchin monkeys being taught the concept of currency made for a good ending to a ‘freak’ book. When the monkeys learnt the value of money and how to use it, what is it that they first discovered?

Prostitution.

Maybe the Bible was right about it being the oldest occupation after all.

The second book by MIT Professor Dan Ariely, Predictably Irrational, is easily one of the best books I’ve read, almost matching the brilliance of Thinking Fast and Slow (Which makes me wonder if I’m such a huge fan of the aforementioned books because they are really that good or maybe because I simply love the subject). In my opinion, it is one book every person who wants to understand human behavior and improve their interactions must read. The premise of the book, as is the premise of the entire field of Behavioral Economics, is that humans aren’t inherently rational. We tend to make decisions factoring in our social, economic and cultural backgrounds, something that traditional economics doesn’t account for. And once we know about the anomalies in our behavior, it would benefit us immensely to correct it and act rationally (like the homo economicus) in the long run. I was so impressed by the lessons imparted in the book that I distilled them into the following points which I believe everyone must be aware of (and hopefully try to change).

• We judge everything relatively. So, if we are able to judge one product A to be clearly superior to another product B, we are more inclined to choose the former even in the presence of another product C with which comparison may be more difficult.
• We are extremely vulnerable to anchoring. Once we adjudge or are told of the price of a commodity to be X, we are likely to accept it and bargain only in very close proximity to X even if the good or service provided is not of that value (in direct conflict with the supply and demand theory).
• We respond irrationally to free incentives. When something is given out for free, we are extremely inclined to accept that offer even if it results in a net loss.
• There are two different set of norms we abide by: market and social. One needs to know which norm to appeal to and when. An intersection of the two norms will almost always lead to disaster. For example, you don’t offer to pay for the dinner your mother-in-law host for you.
• In a state of passion and sexual arousal, we tend to make decisions and harbor opinions that we might not abide with in a non-aroused state. This explains the myriad of teenage pregnancies despite extensive sex education in schools.
• We are less likely to procrastinate if we set deadlines that we cannot avoid or turn our backs on.
• We tend to value the things we own at prices which are abnormally high by traditional economic standards.
• We tend to live much better lives and be happier when we have fewer major options to choose from.
• The Placebo Effect is extremely powerful. It can make dubious surgical procedures seem like successful treatments. We are more likely to be cured of our illnesses when we intake costly medication as compared to inexpensive ones.
• We are more likely to cheat and steal in kind than in money. People find it easy to rationalize fraud which does not directly involve cash.

 

Revisiting Psychology

Last May, I was going through a course offered by UC Berkeley on Academic and Business Writing. In one of the modules, Writing in the Social Sciences, one of the writing assignments required that I go through a list of Psychological Experiments and write a brief article on one of them. I followed the link to the list and begin going through the list. I was hooked. Previously, I had never been exposed to the field of Psychology. The maximum I had read about the subject was a Horrible Science title, Bulging Brains.

The list prompted me to look into more articles on Psychology. Psychology probably has the most interesting experiments of all. And it makes us realize, indeed, how little we know about ourselves and the way we work.

It is perhaps due to its addictive nature that Psychology became the only subject where I actually ended up completing all the MOOCs that I had signed up for.

The three courses I had signed up for were Introduction to Psychology (University of Toronto), Social Psychology (Wesleyan University) and Psychology of Popularity (UNC Chapel Hill). The former two turned out to be some of the best MOOCs I’ve ever taken part in. While the former gave an overview of the entire subject, the latter delved into the most interesting branch of psychology: the one dealing with people and social interactions. Unfortunately, the Social Psychology course was archived so I kind of missed out on some of the most interesting parts of the course like peer reviews and the day of compassion.

After completing the three courses somewhere in the end of November (the winter vacation had begun), I took up The Psychology Book. It beautifully complemented the stuff that I learnt in the Intro course. This book also introduced me to the other titles in the amazing DK series of books.

Now, after almost four months, I had this urge to delve into Psychology again. So, I picked a couple of books up: Oliver Sacks’ The Man Who Mistook His Wife For A Hat and Nobel Laureate Daniel Kahneman’s Thinking, Fast and Slow.

Following the trend of good fortune of picking up just the right books and courses of the subject, the two books, especially the latter, expanded my horizons of the subject like never before. Sacks’ tales of various kinds of peculiar mental disorders he had encountered throughout is medical life was a treat to read. Each chapter could very well serve as inspiration to a Memento like movie. I hadn’t found Clinical Psychology as interesting as the other sub-branches initially but this book changed that for good.

Thinking Fast and Slow definitely would rank somewhere at the top of my list of all-time favorite books of any genre. Reading the book felt like losing my psychological and mathematical virginity. Kahneman marvelously explains the faults of human behavior and how experts of some fields might not really be experts after all. His insights into the grave misconceptions we have about how the world around us works was certainly an eye opener. It is one book every overtly optimistic person must read. The book will bring you back to the ground and tell you, quite bluntly, how random and unpredictable and out of control the world really is. This is one book everyone ought to read. It might claim to teach you social psychology and behavioral economics. But I felt it did much more than that. It taught you life.

Economics in One Post

Ever since I entered college, I made it a point to delve into a branch of study which I normally wouldn’t have been exposed to. I read about Philosophy in my first semester, Mythology in the second and Psychology in the third. This semester, I wanted to devote my time to Economics.

I never had the chance of studying Economics in high school. My school did not offer it to Science students. I passed up an Economics elective in favor of Sociology last semester for the sake of grades. So, my knowledge of the subject had to come entirely from online MOOCs and a well researched list of books.

I audited Caltech’s Principles of Economics with Calculus course but dropped it after the third week. The course was too mathematical for my liking. I prefer to study Economics from the social science perspective. Also, I enjoy studying concepts via intuition rather than analyzing their mathematical models. As the title of the course suggested, it was heavily into Calculus. I spent the entire time calculating derivatives instead of learning economic principles. Maybe this would have changed later into the course but I simply didn’t have the patience.

I then picked up DK’s The Economics Book. Not exaggerating, this is probably the best textbook of any subject I’ve ever come across. It was extremely well structured and gave insights into every major school of economic thought in existence. It had sufficiently detailed articles tracing economics from the times of Aristotle to the 2008 Economic Depression. It took me half a month to go through the 330 odd pages but once I was done, I really felt like I had a decent grasp over the subject. So, if you are someone like me who wanted to learn Economics for the hell of it, look no further than this book.

My interest in the subject had piqued as a result of reading that incredible book. I was on the lookout for more.

I then picked up Freakonomics. Although not a book on Economics per se, it had the most incredible answers to the most incredible questions. The world is incredibly complex like our bodies. And economic solutions are sometimes like acupuncture. The solution to am economic problem might be in a field which may seem entirely unrelated. Take the premier example sighted by the book. Crime rates in the US declined not because of an improved economy, not because of stronger police forces, not because of stricter laws but due to the legalization of abortion!

Tim Harford’s The Undercover Economist was a decent book too. It is well worth a read for the common man who wants to know how the world around him works. But the book which absolutely blew my mind was Hazlitt’s Economics in One Lesson.

The Economics Book had acknowledged the growing traction and acceptability of a school of economic thought propagated by the Austrian School. The ideas presented in the book are no less than revolutionary. It disintegrates everything you may have thought was actually good for the economy. Minimum Wage Laws. Savings. Tariffs on trade. Machines stealing jobs. It annihilates any school of reasoning that supports socialism or government intervention. I’m in love with this book.

So far, I think I have a decent understanding of Economics. I’m partially tempted to apply for an internship at some Business School to learn more. Right now though, as far as Economics is concerned, I will be moving towards studying Game Theory in more detail. I’ve also added a couple of books on Stock Markets to my To-Read list. Hopefully, I’ll learn enough about investing to invest some money myself in the summers.