Behavioral economics is a pretty popular topic nowadays. (see here for an overview and some history of the subject if you are not familiar.) This is not at all surprising to me, since, well, *I* chose to study it, and who wouldn’t be fascinated by the study of human behavior as it relates to money and life choices? So I have some material that I hope will keep you entertained for the weekend.
The first is a video from NOVA on PBS entitled “Mind Over Money.” It’s subtitle says all you need to know – “Can markets be rational when humans aren’t?” The show is pretty good, and the page for the video has some interesting follow-up links about the disposition effect and the effect of emotion on decision-making. (Sidenote: What has happened to me in my old age? When I was a kid I would have kicked and screamed at the notion of watching anything that came from PBS, and now…)
(Update: Bonus points for those who can explain why the people in the dollar bill auction aren’t behaving nearly as irrationally as they seem to be.)
The second resource is an article from the McKinsey Quarterly called “A Marketer’s Guide to Behavioral Economics.” The authors seem to be explicitly stating what I’ve thought about for a while- if researchers are learning how people make decisions about what to buy and how to spend money, it’s only a matter of time until marketers figure out that they should be using this information to their advantage. I think Harvard Business School has figured this out, since a lot of the behavioral economists are in the Marketing group.