Economic Psychology

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Economic Psychology

How and why markets aren't rational. Navigational tips for charting the Bermuda Triangle of human economic behavior.




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How you behave with money is primarily about how you behave, not about money.
 
Somewhere in my vast 'archive' (archive implies structure and order--I only wish this were true of mine) is the final report, with many interesting findings and citations. However, the main point and in fact the only point I remember is this:

Behavior around money (e.g., generosity vs. stinginess; openness vs. secrecy, exploitation vs. collaboration) is a reflection of the essential relationship between two or more parties. The relationship is the driver, not the cash. Therefore, if we want to understand, predict, or influence peoples' economic behavior, the first step is to acquaint ourselves with the principles that govern human behavior as a whole. From there, we can move to the subtopic of human economic behavior. Since there are multiple 'drivers' of human behavior and many of them (e.g. peer pressure, status seeking, etc.) are scarcely-if at all-rational, it seems clear that the basic assumption (aka 'the rational man hypothesis') upon which so many business decisions are made is *just a little bit* flimsy.