Using Psychology to Save You From Yourself

This article Using Psychology to Save You From Yourself was very interesting. I learned about behavioral economics, defined as "a school of economic thought greatly influenced by psychological research — which argues that the human animal is hard-wired to make errors when it comes to decision-making, and therefore people need a little 'nudge' to make decisions that are in their own best interests." Apparently obscure psychological research into human decision-making back in 1955 later revolutionized economics. Daniel Kahneman, an Israeli psychologist, won a Nobel Prize in economics for his work on the subject of the "illusion of validity," a phrase he coined. "From stockbrokers to baseball scouts, people have a huge amount of confidence in their own judgment, even in the face of evidence that their judgment is wrong," according to the article.

Kahneman worked with psychologist Amos Tversky cataloging the ways the human mind systematically misjudges the world around it. Enter economist Richard Thaler, now a well-respected professor at the University of Chicago, who was intrigued by the idea of integrating psychological research and economics. The three of them began to publish their ideas, and initially, mainstream economists largely rejected the work. Economists had been working under the assumption that rational human beings can be counted on to make the best choice for themselves. The new research countered that notion and presented evidence (through research, of course) that flawed decision-making occurs more often than not.

Cass Sunstein and Thaler wrote a book titled Nudge: Improving Decisions About Health, Wealth and Happiness. Sunstein, a Harvard Law professor, is President Obama's pick to head the Office of Information and Regulatory Affairs, and apparently there are a number of high-level appointees now working in the Obama administration who favor this kind of approach. There is also a blog called Nudge which I found interesting.

Looking back at how many times in my lifetime my judgment turned out to be WRONG - big-time - I am glad to know research backs up this judgment about my judgment.