Economists Do It With Models

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People Are Funny (Funny Strange And Funny Haha), Halloween Edition…

October 31st, 2009 · 4 Comments
Behavioral Econ · Books · Decision Making

Happy Halloween everyone! I always procrastinate on putting a costume together unless I have a definite plan in mind (last year I was Sarah Palin, in case you were curious), so now it’s the big costume day and I’m still brainstorming. This is how the conversation has gone down on Facebook thus far:

Me: Rachel: You should go as “Moral Hazard” for Halloween. Me: YES. Totally better than going as “that girl who half-assed her Halloween costume.”

Friend 1: Please link to visualization of costume concept. This I gotta see. 🙂

Me: *sigh* I’m going to have to do something funny now aren’t I…

Friend 1: I’m thinking a costume similar to a 1920s flapper, but instead of booze and cigarettes, she’s got derivatives and credit default swaps… If you have a Halloween date, he/she can be government bailouts; maybe make this person look like Uncle Moneybags from the Monopoly board game, or “Helicopter” Ben Bernanke even, decked out in a 1930s aviator outfit. Or am I making the concept too abstract?

Friend 2: I’m going as unpriced externalities this Halloween.

Me: Negative or positive? (and the conversation has reached a new low)

Friend 3: Lovely. Quite relevant, considering the times.

Friend 4: I think you could probably turn a “that girl who half-assed her Halloween costume” into a solid “marginal utility.” It is better than wearing some dead leaves and brown grass and going as “the tragedy of the commons.”

These people all made me think that perhaps I should have put more thought into an econ-related costume, for the sake of visual humor if nothing else. In my defense, my mom and I at least made sure that Gizmo was appropriately-attired for the occasion:

(“There’s no need to fear, Underdog is here!” And yes, I might have dressed up as Sweet Polly Purebred. Don’t you judge me. I would just go with this as a costume, but it doesn’t work without Underdog, and I can’t get people to let Gizmo into bars. Something about him drinking all the tequila, I’ve been told…)

In true “Economics is Everywhere” fashion, I want to share a snippet with you from Nudge: Improving Decisions About Health, Wealth, and Happiness about the biases in the thought processes surrounding crucial Halloween candy decisions:

Naive diversification apparently starts young. Conside the following clever experiment conducted by Daniel Read and George Loewenstein on Halloween night. The “subjects” were trick-or-treaters. In one condition, the children approached two adjacent houses and were offered a choice between the same two candy bars (Three Musketeers and Milky Way) at each house. In the other condition, they approached a single house, where they were asked to “choose whichever two candy bars you like.” Large piles of both candies were displayed to ensure that the children would not think it was rude to take two of the same. The two conditions produced quite different results. In the house with both kinds of candy, every child selected one of each candy. In contrast, only 48 percent of the children picked one of each candy when they were choosing in sequence in two houses.

Simply stated, we can be tricked into having a preference for variety. Similar studies show that people exhibit more of a preference for variety when asked to choose two candy bars at the same time, even though one is for future rather than present consumption, than they do when asked separately for candy bar choices for immediate consumption and consumption a week from now. (In other words, if you ask me now what candy bars I want now and a week from now, I might say one 100 Grand and one Whatchamacallit, though if you asked me separately at each point in time I would probably want the 100 Grand in both instances. It should not surprise you that I like candy bars named after money. In reality, however, I would consistently take Laffy Taffy over almost all other options.)

While, in the candy context, this may seem like a trivial bias, the desicion-making flaw extends to more important tasks such as investment decisions. Isn’t it a little spooky (pun intended) to think that your retirement savings depends on whether you were asked up front versus over time how you wanted to invest your future savings?

Tags: Behavioral Econ · Books · Decision Making

4 responses so far ↓

  • 1 Rachel // Nov 2, 2009 at 12:08 am

    There are so many fabulous economic concepts which can be turned into Halloween costumes! This year I was an indifference curve and am considering dressing up as price elasticity next year.

    PS- Gizmo’s costume is wonderful!

  • 2 econgirl // Nov 2, 2009 at 2:02 pm

    Um, I am very curious as to what the human incarnation of an indifference curve looks like…VERY VERY curious. You should post a fan photo on the FB page:

    http://www.facebook.com/economistsdoitwithmodels

    Or just email me the picture, you know, whatever…and what would a price elasticity costume look like exactly?????

  • 3 Rachel // Nov 2, 2009 at 6:11 pm

    My thoughts for the price elasticity costume would basically just be a play on words. I was thinking of attaching price tags to rubber bands and pinning them onto some outfit that fit the theme. The idea hasn’t been fully thought out; however, I have until next Halloween to figure it out.

    As for the indifference curve, I’ll shoot you an e-mail.

  • 4 econgirl // Nov 3, 2009 at 2:59 pm

    From Planet Money:

    Putting some of your economic Halloween photos on Facebook. If you haven’t shared yours yet, email planetmoney@npr.org./CK

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