option to opt out: our company came up with this once, and didn't communicate properly. i wasn't aware of this and later found out they deducted money from salary and given to charity. i felt cheated. had a fight with HR. It is a really bad idea to assume consent than asking for consent.
@@brokenrecord3523 I'd assume the person is thinking about taxes. Which is silly if you'd actually work through exactly what taxes are supposed to be going toward and how much you'd lose if you didn't have any taxes at all funding certain things. I've heard worse going on in Italy
@@gaerekxenos I suppose it's like taxes in that you can opt out if you have enough money/power to figure out how not to pay. As for not liking how your taxes are spent - totally separate conversation.
“Behavior science can be used for good”. The statement presupposes that the charities that were defaulted within the large corporation weren’t huge NGOs that just trade money with each other.
Not to mention that the company probably made the donation under their name in order to get a tax reduction by using their employees money. I would never classify this example as 'good'
@@robertocurti577 the taxes have very little to do about it. it’s all about the ESG scores to keep Black Rock and the WEF happy. My daughter has a job “volunteering” next year at her university and will receive $10k per semester for it. (Mostly scholarship, some straight to her pocket )
I would also add to this that this sum was not paid by the middle- or upper management, but the people who actually keep the company going, the workers. Absolutely fucking shameless behaviour
behaviour science, particularly defaults, opt in vs opt out, can be used for good and bad things of course. of course you have to be aware of the bad default choice, [i.e. email spam requiring opt out, opt in the default] and create more good default choices in life.
The endowment effect makes a lot of sense though. If you already have it, you know that it suits you, functions well. When you buy something new, you’re on some level taking a leap of faith. This is also why, as Elon says about the car market, a new brand can’t do just a little better, it has to do a lot better. Because a familiar brand that you’ve used a lot has value in its familiarity to you
Tennis is a great example of over confidence because players tend to remember the good shots they make and rate themselves as if those shots represent their overall quality as a player. I am a below average driver. Though I feel like drivers in my city are on average getting worse. Or maybe as I improve I become more aware/less forgiving of their mistakes 🤔
'Defaults" in your example is manipulative. It's similar to this new things where everyone wants a tip for every traction. You go to the counter at the bagel shop, put in your order, the screen is then flipped around to you which presents you with options to give a tip...a tip for what? And the tip options are "defaulted" for you show you 25%, 20% and 18% and be defaulted on the 20%. 20% tip to stuff 6 bagels in a bag? This is using "defaults" to defraud people.
Why couldn't the second case be interpreted in strategical terms? A potential buyer has an interest in a price being low, a potential seller in the price being high. If I believe that my old car is worth more than the car retailer thinks, it may be because I want to get more money than he is willing to give. Each side will tend to start negotiations with an unreasonable offer, just in case. He didn't ask how much each person thought the cup was objectively worth, but how much they were ready to pay for it or as much they wanted to get from it. For me, these are two different questions.
The changing the default making a difference could also simply attributed to the employees not paying enough attention and didn't realize what was happening. Once they discovered it they were either too embarrassed or didn't want to go to the trouble of changing their choices. (Or the change procedure could be too difficult to make it worth it to them.) How much this would effect the difference I don't know but I suspect a large amount. Setting things to default is used in a lot of things, specially software, to achieve desired results. It generally takes hard heads like me to pay attention and I admit, if the default doesn't cost much I tend to not go to the trouble of changing.
re: the subject of defaults - this really highlights the stark comparison of wage structure in the UK vs US >> In the US employees of home depot are more likely to be needing charity while their Argos\Homebase counterparts are apparently doing well enough to consider contributing to charitable organizations. I'm gobsmacked.
Question about loss aversion: Is it because we view gains and loss in proportion to our initial sum? For instance, suppose we lost or gained $100, like your example at 0:44. In that case, the $100 loss would "hurt" twice as much as the gain would "help," like the study suggests. But now let's restart the thought experiment with $200 in our bank account. Of course, the $100 loss would cut the balance in half, leaving us with only $100 to remain. To make up for this loss, we would need to increase our balance by 100% (that is, we must double our money). Yet, on the other hand, a $100 gain would still be the same in absolute terms. But now that we have $300, the $100 we received is only 33.3% of our balance. So if we lost $100, the loss would be worth 100% of what we're left with in the end. But if we gained $100, the gain would be worth only 33% of our end-of-day balance. That's why I wonder if proportions skew our perspective, or if it's just a more innate, psychological bias.
I'm not sure about the endowment effect. Is negotiation expected? If yes, one could expect the effect sof bargaining for purchasing and raising the price for ending up with a good selling price.
More than half the population CAN be better than average at driving, if the remaining minority are sufficiently deficient at driving, so it pulls the whole average down. Personally, I think around 10% of drivers are so inept at driving that most of the rest of us are thereby better than average. Basically, I don't think driving skills are normally distributed.
I think "better than average" obviously means "better than the median driver" in this context. In everyday talk, that is what phrases like "the average student" or "the average worker" mean. People were not asked to assert how good they were on a certain scale, but to compare themselves with others.
@@freyc1 "Average" is still a comparison to others. We shouldn't excuse wrong use of terms, especially in something like statistics where the meaning can change dramatically. We already live in a world that is woefully statistically illiterate, we shouldn't encourage it further.
@@Schrodinger_ A median implies a comparison to others too. But you can hardly quantify how good a driver you are, so the statistical concept of "average" wouldn't really make sense, here. Using a word in a different (and perfectly correct) sense is not "encouraging statistical illiteracy". Words just have different meanings in different contexts. We should deal with it.
I mean, in order to calculate an average in the strict (mathematical) sense of the word, you need a certain type of quantity. It is meaningful to say that a length is twice as big as another length. But what would it mean to be twice as good at driving as another driver? I can judge who is the better driver between two people, at best. But it would be arbitrary to say that one is four and half or sixteen times better than the other, as far as I can see.
@@freyc1 I mean... I don't know of a way to quantify driving ability but that doesn't mean it's not quantifiable. And the statement that it's "statistically impossible for more than half to be better than average" only makes sense if it _is_ quantifiable, so I have to assume it is just to make sense of that statement. And no, I don't accept that using "average" to mean "median" is a "perfectly correct" way of using that word. I understand words can have multiple meanings, but making one of those meanings something that clashes with its definition within the same field can only serve to cause confusion. It would be like allowing the term "absolute zero" to be another way of saying "freezing". People already confuse "0 Celsius" with "0 Kelvin", so making "absolute zero" another term for the freezing point of water would just confuse people who are learning about different temperature units.
Insurance was a bad example. Insurance actually makes sense because it helps mitigate the potential large loss of a very very expensive procedure. You could, though, argue particular types of insurance do not make sense -- such as dental insurance -- because they have a relatively small cap on what the expense will be (you will likely not have to pay any more than 20k for a dental procedure max).
There are other things in play as well regarding insurance. For example, it is a requirement to have either car insurance or to leave an extra large deposit with the Department of Motor Vehicles in the event an accident happens where I live. Some people simply are not able to afford that lump sum immediately, being possibly around x10 the amount you would pay in a year for insurance. Not having insurance nor making the deposit is considered illegal. I guess if you want to twist that around, that can be counted as "loss aversion" with 'breaking the law' being your alternative... but that is almost an idiotic way of twisting that around as there is so much risk involved not to mention that it is now a question of morality
Think the proposed evolutionary roots of some of these behaviors really help get an intuitive understanding for what is happening on the inside of a person and why. Sunk cost fallacy for example seems like too obvious a mistake to be happening so frequently, until you hear about the idea of not admitting to prior mistakes as a way to uphold your reputation. Once the reputational damage from showing uncertainty and switching course midway becomes part of the calculation, so once the social costs and benefits are considered, formerly puzzling behaviors start to make sense. It might just be worth it, more often than not, at least in some enviorments, to keep sinking recources into failed ventures if this makes you look better, less weak, allows your supporters to also save face, etc. Which also suggests that when the group of people you're dealing with are more aware of this specific dynamic, it might become more and more worthwhile to be more willing to accept failure and abandon projects. It might even mean that in a group hyper-aware of sunk cost fallacy, you might be better of accepting defeat on things you don't actually think were bad investments, just to keep others from thinking less of you for acting in a way they percieve as irrational and below par.
What the HomeBase people did in England is illegal in America ... it's called "negative crossoff." Someone at your bank, say, develops a new program and puts you in it, THEN sends you a letter saying if you don't explicitly opt out of this program, you'll stay in it. Sometimes they "forget" to notify you altogether (you're serving overseas and it's "difficult" to contact you ... the major difficulty being that they'd rather just take your money)
I do wanna preface by saying I understood the driver example and the behavioural science aspect of it, but the math idea was a little off You can definitely have more than 50% be above average if your data lands in a bimodal distribution. An example would be where we split our drivers fall into two groups: 60% of people who are “good” drivers and 40% of people who are “bad drivers” and we rate them on a scale from 1-10 of driving skill. and of those two groups the good drivers are centred around 8 whereas the bad drivers are centred around 3, then the average works out to be around 6. And therefore we have more than 50% being above average. The median would be the middle value exactly and would be the value that you can’t have more than 50% be above. That being said this was an awesome video and as a socially awkward mf with an EQ of -5 behavioural science is very useful for me to function in society
I just came across your channel. You present well and look to have some interesting videos, so thanks. I noticed in this video you spelt insurance as “insurace” at around 1min in :).
So Homebase spent money on consultants to influence how their employees spent their money. Simply a waste, it did nothing for their shareholders. And it appears that the company chose the charities- who's to say that the charities were helping people more than their employees?
On Mental accounting. One possibility is that benefit of acquiring car faster outweighs monetary gain acquired from clearing debt faster? Even if he spends more money it still can be rational decision. He might have some road trip planned that he wanted to go to his entire life and he is willing to sacrifice more money. Value of something is not always equal to value of money used to get that something. I would expect that behavioral economists would be aware of such basic concept from economy.
You can’t. It’s an incredibly incestuous system. Though there are professors that protest the system by making all their research and papers available publicly. For the most part scholarly work is only available to scholars or to those who subscribe to the journals.
Hi. I just came across your videos. Lots of interesting topics. I have a question about the default opt-out example. Do you think that it being a moral issue effects the outcome? So for example, if they were asking if employees they wanted to buy a morning donut and defaulted to yes, would there be a boost in donuts purchased over the long term? In the example of participating in a charity, with nothing defaulted you are actively making a decision to help others, whereas with it defaulted, you have to make an active decision that "I do not want to help" which seems like it might be morally harder.
I think that the effect is greater if the default is in line with people’s intentions and values. But in general, whatever is defaulted, most people go for. Love donuts btw.
Getting employees to donate from their paycheck is genius: as a company you pay them less AND you're the one benefiting from their donations via tax breaks, getting some of their hard-earned money back into your pockets! And it makes them look great! Sometimes supermarkets do it as well where I live, asking clients to add a few euros more for a charity. Basically for every euro (or dollar) you give you're actually donating up to 60 cents to the company and the rest actually goes to the charity. I'd rather donate a lot more directly and get the tax break myself!
I doubt the interpretations that these are examples of irrationality. When you read a balanced article that gives arguments to both sides, and it causes you to entrench your prior view, what might be going on is that you've cognitively "stood up to the opposition" by coming up with rebuttals to the arguments you reject while you were reading. It's like "is that the best the other side you can do?" Beeing slightly entrenched in your views can also have pro-social value as you can become a representative for defending that view in your community, which may be good for the "marketplace of ideas." Regarding the mug case--there is a cost to a transaction, any transaction--for example, you need to have some degree of trust in the other party, you might fear they will come knocking on your door later to reverse it etc. You need some extra money/discount to make bothering to transact worth your while. Also, valuing things you own is more likely to make you maintain these objects properly, be happy with what you have emotionally, more likely to get use-value from the item, and give you the verve to drive a harder bargain in the event you do sell (and vice versa for the buyer who wants to pay less). It's not that people are irrational, but that we need a more nuanced view of rationality which classical economics has not always sought out.
Maybe the second effect and the first are the same?... Like, if someone doesn't want to lose something they would value it more than someone that could have something.
Defaults: Again, this is just rational behavior based on trust. If you trust the source you'll go with it's recommendation in the absence of overriding factors. If you didn't trust them you wouldn't be involved with them to make a choice in the first place, again, unless there's overriding factors.
One should apply concept of critical thinking before totally believe any of these. 1. Loss Aversion. Half true. It's not that most people averse loss, or otherwise there wouldn't gamble and buy lottery. Assuming that this month you have $1000 dollar left. Logically, you would not toss a coin to lose $900 of head and gain $900 if tail. Because the event that you have $100 left is a much worse situation than the benefit from you you having $1900. It is just logic. 2. Endowment effect. Not often true. This suffers from the effect of sampling bias. That mean out of 100 objects you currently own. There are certainly some objects that you like more than the others. Mugs, for example, the mug that you currently use is more often than not, your favorite mug, or otherwise you wouldn't be using it. If you are asked to sell other forgotten mugs you kept in your drawer, you might be selling it to the highest bidder. Also, there is an additional cost when one tries to sell something, if this cost is magically removed, then you might be selling a lot of your stuff. Also, there is a cost of obtaining the same objects eg. travel time and expense to market. 3. Confirmation bias. Yes. True. Many human are jerks. To be a better person, one should reduce your own confirmation bias. 4. Mental Accounting. Well, maybe in some human and it's borderline mental illness in my opinion. I don't suffer from it. 5. Defaults. Huh... Human are just lazy to go through all the process of getting thing done. There are naturally cost and time required in doing so, and no, half-forcing employees to donate is not necessarily a good thing. 6. Overconfidence. Yes, I suffer from this very often too. Again, to be a better person, one should reduce your own overconfidence. Estimate your own ability more accurately. That said, we are human after all and can make mistake in doing so. Thank for reading!
6:48 Well in this case the default option is what people would label as the more moral choice, to donate money to a charitable issue. So the act of deviating from the default is negative, and even an immoral person would know at the very least that if they want to appear more moral in this instance for some reason, keeping the default option, doing nothing, is the way to do it. Basically there's a force outside of apathy that is motivating people to do nothing. I wonder if this type of situation would play out the same way if the standard morality of the default and second choice were switched, or if neither had any strong moral implications at all.
This is basically manipulative and by definition evil. No real acts of charity or kindness are done forcefully or by "accidental" non-consensual default.
@@El_King911 sure but sometimes people do the right thing because they know that the wrong thing would be bad optics, socially. It will make people see them as a bad person to do the wrong thing. If someone estimates that backlash to be large enough, they will be motivated to do the right thing even if they aren't doing it **because** it's the right thing.
This over reliance on money handling reminds me of math and time limits as a crutch for measuring IQ. Being specifically trained to not be scammed is a skill, not intellect. It's like saying people who learn to play the violin are smarter than people who don't. That's not how it works.
That endowment effect is crap. Awful "study." Obviously I wanna sell for more than I'm willing to pay, that's called profit seeking and it's not magic. The idea is that I'm willing to come down if you haggle. That has absolutely nothing to do with mine vs yours or even the value of the mug, it's just the basics of sales. You ask for as much as you can possible imagine getting. It's price discovery.
Forcing the employee to opt out is a nasty stunt. Even those who were well informed about their options might feel "guilted" into playing along. In fact, since their employer is apparently desirous of raising funds for charity, the employee may feel that opting out will effect their future prospects with the employer, and they might just be right. I actually donate a pretty healthy percentage of my income. Probably more than most. But that is strictly my decision and nobody else's business. I do not like being asked because I always think there is a judgment attached. I would be very uncomfortable if the entity asking for my money was my emplyer.
Psychology is built on a pretty wobbly foundation so I wouldn't take any of these concepts as "fact". If all people were risk averse, casinos wouldn't be as profitable as they are and car insurance wouldn't need to be mandate by state laws. Taking employees funds by default is wrong on so many levels.
Unfortunately, none of these are definitive. Situational with good likelihood of being true or applying? Sure. Always going to apply or be true? No. There is a slight bit of over-generalization going on with these, and they are not going to apply to every person. One of the biggest flaws with Behavioral Science is the lack of proper and consistent measurement criteria and values -- those change from person to person. What one person might consider a "6" might be considered a "7" for someone else, or what someone might consider to be a "headache" might actually straight up be a "migraine" for someone else (or actually should be considered a migraine but they are too stupid to realize it is a migraine and not a headache since headaches are considered a 'minor discomfort' instead - hi, that's me being the idiot here btw). Another example is test scores -- 50% is considered barely passing in some places, 50% where I'm at is considered a failing score with 60% being the benchmark for barely passing A lot of the studies in Behavioral Science are just straight up garbage because they cannot possibly ever account for any sort of consistency with how people mark and value things. What exactly *is* considered "average" in the first place? What *are* the standards if there is no defined benchmark? There's nothing there to quantify anything properly in many of these studies, so much that there isn't a proper foundation for anything to be built on in the first place. I'd almost want to say they're building a castle in the sky -- except unfortunately my desired plan is to almost literally build a castle in the sky eventually, and even *that* is going to need some type of a foundation to even be started in the first place so it isn't even a good comparison/analogy anymore - so even a castle in the sky would ironically have a better foundation to build off of than a number of these studies =/
option to opt out: our company came up with this once, and didn't communicate properly. i wasn't aware of this and later found out they deducted money from salary and given to charity. i felt cheated. had a fight with HR. It is a really bad idea to assume consent than asking for consent.
It's theft, pure and simple. May as well break into someone's house and steal their tv because they didn't say you couldn't.
@@rarefruit4173 in what way?
@@brokenrecord3523 I'd assume the person is thinking about taxes. Which is silly if you'd actually work through exactly what taxes are supposed to be going toward and how much you'd lose if you didn't have any taxes at all funding certain things. I've heard worse going on in Italy
@@gaerekxenos I suppose it's like taxes in that you can opt out if you have enough money/power to figure out how not to pay. As for not liking how your taxes are spent - totally separate conversation.
6:52 Neglecting informed consent in order to manipulate people... not quite what I'd call "doing good".
this is manipulative and in my opinion straight up evil
“Behavior science can be used for good”. The statement presupposes that the charities that were defaulted within the large corporation weren’t huge NGOs that just trade money with each other.
I honestly think that practice should be illegal. Many charities are not well run and simply "giving to charity" means almost nothing.
Not to mention that the company probably made the donation under their name in order to get a tax reduction by using their employees money. I would never classify this example as 'good'
@@robertocurti577 the taxes have very little to do about it. it’s all about the ESG scores to keep Black Rock and the WEF happy. My daughter has a job “volunteering” next year at her university and will receive $10k per semester for it. (Mostly scholarship, some straight to her pocket
)
I would also add to this that this sum was not paid by the middle- or upper management, but the people who actually keep the company going, the workers. Absolutely fucking shameless behaviour
behaviour science, particularly defaults, opt in vs opt out, can be used for good and bad things of course. of course you have to be aware of the bad default choice, [i.e. email spam requiring opt out, opt in the default] and create more good default choices in life.
The endowment effect makes a lot of sense though. If you already have it, you know that it suits you, functions well. When you buy something new, you’re on some level taking a leap of faith. This is also why, as Elon says about the car market, a new brand can’t do just a little better, it has to do a lot better. Because a familiar brand that you’ve used a lot has value in its familiarity to you
7:13. These organizations weren't giving anything, their employees were.
What behavioral principle is that?
Just started my behavioral economics degree and your videos really help me out!
I’m glad!
Tennis is a great example of over confidence because players tend to remember the good shots they make and rate themselves as if those shots represent their overall quality as a player.
I am a below average driver. Though I feel like drivers in my city are on average getting worse. Or maybe as I improve I become more aware/less forgiving of their mistakes 🤔
'Defaults" in your example is manipulative. It's similar to this new things where everyone wants a tip for every traction. You go to the counter at the bagel shop, put in your order, the screen is then flipped around to you which presents you with options to give a tip...a tip for what? And the tip options are "defaulted" for you show you 25%, 20% and 18% and be defaulted on the 20%. 20% tip to stuff 6 bagels in a bag? This is using "defaults" to defraud people.
Good video. We need a lot more of these: succinct, topical, and informative. Well done.
Why couldn't the second case be interpreted in strategical terms? A potential buyer has an interest in a price being low, a potential seller in the price being high. If I believe that my old car is worth more than the car retailer thinks, it may be because I want to get more money than he is willing to give. Each side will tend to start negotiations with an unreasonable offer, just in case. He didn't ask how much each person thought the cup was objectively worth, but how much they were ready to pay for it or as much they wanted to get from it. For me, these are two different questions.
Great insights, the only one I disagree is the one with the defaults. I think the explanation is much simpler. People are lazy and didn't read.
The changing the default making a difference could also simply attributed to the employees not paying enough attention and didn't realize what was happening. Once they discovered it they were either too embarrassed or didn't want to go to the trouble of changing their choices. (Or the change procedure could be too difficult to make it worth it to them.)
How much this would effect the difference I don't know but I suspect a large amount. Setting things to default is used in a lot of things, specially software, to achieve desired results. It generally takes hard heads like me to pay attention and I admit, if the default doesn't cost much I tend to not go to the trouble of changing.
The endowment effect can be seen as sellers want to make gains and buyers want to make economies.
re: the subject of defaults - this really highlights the stark comparison of wage structure in the UK vs US >> In the US employees of home depot are more likely to be needing charity while their Argos\Homebase counterparts are apparently doing well enough to consider contributing to charitable organizations. I'm gobsmacked.
This was excellent. Thank you.
Question about loss aversion: Is it because we view gains and loss in proportion to our initial sum?
For instance, suppose we lost or gained $100, like your example at 0:44. In that case, the $100 loss would "hurt" twice as much as the gain would "help," like the study suggests.
But now let's restart the thought experiment with $200 in our bank account. Of course, the $100 loss would cut the balance in half, leaving us with only $100 to remain. To make up for this loss, we would need to increase our balance by 100% (that is, we must double our money).
Yet, on the other hand, a $100 gain would still be the same in absolute terms. But now that we have $300, the $100 we received is only 33.3% of our balance.
So if we lost $100, the loss would be worth 100% of what we're left with in the end. But if we gained $100, the gain would be worth only 33% of our end-of-day balance. That's why I wonder if proportions skew our perspective, or if it's just a more innate, psychological bias.
If I had to guess, our brains are wired to avoid risk/pain more than pleasure seeking. Your idea is great as well. Diminishing returns of more $
I'm not sure about the endowment effect. Is negotiation expected? If yes, one could expect the effect sof bargaining for purchasing and raising the price for ending up with a good selling price.
More than half the population CAN be better than average at driving, if the remaining minority are sufficiently deficient at driving, so it pulls the whole average down. Personally, I think around 10% of drivers are so inept at driving that most of the rest of us are thereby better than average. Basically, I don't think driving skills are normally distributed.
I think "better than average" obviously means "better than the median driver" in this context. In everyday talk, that is what phrases like "the average student" or "the average worker" mean. People were not asked to assert how good they were on a certain scale, but to compare themselves with others.
@@freyc1 "Average" is still a comparison to others. We shouldn't excuse wrong use of terms, especially in something like statistics where the meaning can change dramatically. We already live in a world that is woefully statistically illiterate, we shouldn't encourage it further.
@@Schrodinger_ A median implies a comparison to others too. But you can hardly quantify how good a driver you are, so the statistical concept of "average" wouldn't really make sense, here. Using a word in a different (and perfectly correct) sense is not "encouraging statistical illiteracy". Words just have different meanings in different contexts. We should deal with it.
I mean, in order to calculate an average in the strict (mathematical) sense of the word, you need a certain type of quantity. It is meaningful to say that a length is twice as big as another length. But what would it mean to be twice as good at driving as another driver? I can judge who is the better driver between two people, at best. But it would be arbitrary to say that one is four and half or sixteen times better than the other, as far as I can see.
@@freyc1 I mean... I don't know of a way to quantify driving ability but that doesn't mean it's not quantifiable. And the statement that it's "statistically impossible for more than half to be better than average" only makes sense if it _is_ quantifiable, so I have to assume it is just to make sense of that statement. And no, I don't accept that using "average" to mean "median" is a "perfectly correct" way of using that word. I understand words can have multiple meanings, but making one of those meanings something that clashes with its definition within the same field can only serve to cause confusion.
It would be like allowing the term "absolute zero" to be another way of saying "freezing". People already confuse "0 Celsius" with "0 Kelvin", so making "absolute zero" another term for the freezing point of water would just confuse people who are learning about different temperature units.
Insurance was a bad example. Insurance actually makes sense because it helps mitigate the potential large loss of a very very expensive procedure. You could, though, argue particular types of insurance do not make sense -- such as dental insurance -- because they have a relatively small cap on what the expense will be (you will likely not have to pay any more than 20k for a dental procedure max).
There are other things in play as well regarding insurance. For example, it is a requirement to have either car insurance or to leave an extra large deposit with the Department of Motor Vehicles in the event an accident happens where I live. Some people simply are not able to afford that lump sum immediately, being possibly around x10 the amount you would pay in a year for insurance. Not having insurance nor making the deposit is considered illegal. I guess if you want to twist that around, that can be counted as "loss aversion" with 'breaking the law' being your alternative... but that is almost an idiotic way of twisting that around as there is so much risk involved not to mention that it is now a question of morality
Think the proposed evolutionary roots of some of these behaviors really help get an intuitive understanding for what is happening on the inside of a person and why.
Sunk cost fallacy for example seems like too obvious a mistake to be happening so frequently, until you hear about the idea of not admitting to prior mistakes as a way to uphold your reputation. Once the reputational damage from showing uncertainty and switching course midway becomes part of the calculation, so once the social costs and benefits are considered, formerly puzzling behaviors start to make sense.
It might just be worth it, more often than not, at least in some enviorments, to keep sinking recources into failed ventures if this makes you look better, less weak, allows your supporters to also save face, etc.
Which also suggests that when the group of people you're dealing with are more aware of this specific dynamic, it might become more and more worthwhile to be more willing to accept failure and abandon projects.
It might even mean that in a group hyper-aware of sunk cost fallacy, you might be better of accepting defeat on things you don't actually think were bad investments, just to keep others from thinking less of you for acting in a way they percieve as irrational and below par.
What the HomeBase people did in England is illegal in America ... it's called "negative crossoff." Someone at your bank, say, develops a new program and puts you in it, THEN sends you a letter saying if you don't explicitly opt out of this program, you'll stay in it. Sometimes they "forget" to notify you altogether (you're serving overseas and it's "difficult" to contact you ... the major difficulty being that they'd rather just take your money)
I do wanna preface by saying I understood the driver example and the behavioural science aspect of it, but the math idea was a little off
You can definitely have more than 50% be above average if your data lands in a bimodal distribution.
An example would be where we split our drivers fall into two groups: 60% of people who are “good” drivers and 40% of people who are “bad drivers” and we rate them on a scale from 1-10 of driving skill. and of those two groups the good drivers are centred around 8 whereas the bad drivers are centred around 3, then the average works out to be around 6. And therefore we have more than 50% being above average. The median would be the middle value exactly and would be the value that you can’t have more than 50% be above.
That being said this was an awesome video and as a socially awkward mf with an EQ of -5 behavioural science is very useful for me to function in society
Are people with gambling problems problematic for the loss aversion idea?
Love your work! BUT - Please listen to "If books could kill", your perspective on some of these will change!
I just came across your channel. You present well and look to have some interesting videos, so thanks.
I noticed in this video you spelt insurance as “insurace” at around 1min in :).
Insurace?
Title this The Origin of Predatory Microtransactions in Games.
So Homebase spent money on consultants to influence how their employees spent their money. Simply a waste, it did nothing for their shareholders. And it appears that the company chose the charities- who's to say that the charities were helping people more than their employees?
I thought he was going to say "It's time you subscribed" in the opener.
On Mental accounting. One possibility is that benefit of acquiring car faster outweighs monetary gain acquired from clearing debt faster? Even if he spends more money it still can be rational decision. He might have some road trip planned that he wanted to go to his entire life and he is willing to sacrifice more money. Value of something is not always equal to value of money used to get that something. I would expect that behavioral economists would be aware of such basic concept from economy.
Where can I find this kind of literature without any academic affiliation? Thanks in advance!
You can’t. It’s an incredibly incestuous system. Though there are professors that protest the system by making all their research and papers available publicly. For the most part scholarly work is only available to scholars or to those who subscribe to the journals.
Hi. I just came across your videos. Lots of interesting topics. I have a question about the default opt-out example. Do you think that it being a moral issue effects the outcome? So for example, if they were asking if employees they wanted to buy a morning donut and defaulted to yes, would there be a boost in donuts purchased over the long term? In the example of participating in a charity, with nothing defaulted you are actively making a decision to help others, whereas with it defaulted, you have to make an active decision that "I do not want to help" which seems like it might be morally harder.
I think that the effect is greater if the default is in line with people’s intentions and values.
But in general, whatever is defaulted, most people go for. Love donuts btw.
Entertaining content, I'd polish my science communication skills tho, etymology mainly.
I liked your The Chase effort Pete..What do you think of your behavior towards Bradley?
Getting employees to donate from their paycheck is genius: as a company you pay them less AND you're the one benefiting from their donations via tax breaks, getting some of their hard-earned money back into your pockets! And it makes them look great! Sometimes supermarkets do it as well where I live, asking clients to add a few euros more for a charity. Basically for every euro (or dollar) you give you're actually donating up to 60 cents to the company and the rest actually goes to the charity. I'd rather donate a lot more directly and get the tax break myself!
I doubt the interpretations that these are examples of irrationality. When you read a balanced article that gives arguments to both sides, and it causes you to entrench your prior view, what might be going on is that you've cognitively "stood up to the opposition" by coming up with rebuttals to the arguments you reject while you were reading. It's like "is that the best the other side you can do?" Beeing slightly entrenched in your views can also have pro-social value as you can become a representative for defending that view in your community, which may be good for the "marketplace of ideas." Regarding the mug case--there is a cost to a transaction, any transaction--for example, you need to have some degree of trust in the other party, you might fear they will come knocking on your door later to reverse it etc. You need some extra money/discount to make bothering to transact worth your while. Also, valuing things you own is more likely to make you maintain these objects properly, be happy with what you have emotionally, more likely to get use-value from the item, and give you the verve to drive a harder bargain in the event you do sell (and vice versa for the buyer who wants to pay less). It's not that people are irrational, but that we need a more nuanced view of rationality which classical economics has not always sought out.
Maybe the second effect and the first are the same?... Like, if someone doesn't want to lose something they would value it more than someone that could have something.
Defaults: Again, this is just rational behavior based on trust. If you trust the source you'll go with it's recommendation in the absence of overriding factors. If you didn't trust them you wouldn't be involved with them to make a choice in the first place, again, unless there's overriding factors.
Love your video but the focus jumps need some fixing
One should apply concept of critical thinking before totally believe any of these.
1. Loss Aversion. Half true. It's not that most people averse loss, or otherwise there wouldn't gamble and buy lottery. Assuming that this month you have $1000 dollar left. Logically, you would not toss a coin to lose $900 of head and gain $900 if tail. Because the event that you have $100 left is a much worse situation than the benefit from you you having $1900. It is just logic.
2. Endowment effect. Not often true. This suffers from the effect of sampling bias. That mean out of 100 objects you currently own. There are certainly some objects that you like more than the others. Mugs, for example, the mug that you currently use is more often than not, your favorite mug, or otherwise you wouldn't be using it. If you are asked to sell other forgotten mugs you kept in your drawer, you might be selling it to the highest bidder. Also, there is an additional cost when one tries to sell something, if this cost is magically removed, then you might be selling a lot of your stuff. Also, there is a cost of obtaining the same objects eg. travel time and expense to market.
3. Confirmation bias. Yes. True. Many human are jerks. To be a better person, one should reduce your own confirmation bias.
4. Mental Accounting. Well, maybe in some human and it's borderline mental illness in my opinion. I don't suffer from it.
5. Defaults. Huh... Human are just lazy to go through all the process of getting thing done. There are naturally cost and time required in doing so, and no, half-forcing employees to donate is not necessarily a good thing.
6. Overconfidence. Yes, I suffer from this very often too. Again, to be a better person, one should reduce your own overconfidence. Estimate your own ability more accurately. That said, we are human after all and can make mistake in doing so.
Thank for reading!
Cool Intro 😂👌
6:48 Well in this case the default option is what people would label as the more moral choice, to donate money to a charitable issue. So the act of deviating from the default is negative, and even an immoral person would know at the very least that if they want to appear more moral in this instance for some reason, keeping the default option, doing nothing, is the way to do it. Basically there's a force outside of apathy that is motivating people to do nothing.
I wonder if this type of situation would play out the same way if the standard morality of the default and second choice were switched, or if neither had any strong moral implications at all.
This is basically manipulative and by definition evil.
No real acts of charity or kindness are done forcefully or by "accidental" non-consensual default.
@@El_King911 sure but sometimes people do the right thing because they know that the wrong thing would be bad optics, socially. It will make people see them as a bad person to do the wrong thing. If someone estimates that backlash to be large enough, they will be motivated to do the right thing even if they aren't doing it **because** it's the right thing.
What is on that piece of paper at 1:05? p.s. when it comes to "Overconfidence," just know that fully half of all drivers are below average. 🤣
This over reliance on money handling reminds me of math and time limits as a crutch for measuring IQ. Being specifically trained to not be scammed is a skill, not intellect. It's like saying people who learn to play the violin are smarter than people who don't. That's not how it works.
I see not one, not two but three potential problems with experiment about endowment effect.
That endowment effect is crap. Awful "study." Obviously I wanna sell for more than I'm willing to pay, that's called profit seeking and it's not magic. The idea is that I'm willing to come down if you haggle. That has absolutely nothing to do with mine vs yours or even the value of the mug, it's just the basics of sales. You ask for as much as you can possible imagine getting. It's price discovery.
Forcing the employee to opt out is a nasty stunt. Even those who were well informed about their options might feel "guilted" into playing along. In fact, since their employer is apparently desirous of raising funds for charity, the employee may feel that opting out will effect their future prospects with the employer, and they might just be right. I actually donate a pretty healthy percentage of my income. Probably more than most. But that is strictly my decision and nobody else's business. I do not like being asked because I always think there is a judgment attached. I would be very uncomfortable if the entity asking for my money was my emplyer.
Also isn't your channel famous for the studies are crap reveals?
It is not impossible for most people to be above average. That would be the median. Am I the only one who notices this?
These are so bad. This is why psychology is considered a pseudo-science. I wouldn't wipe my ass with these studies.
Psychology is built on a pretty wobbly foundation so I wouldn't take any of these concepts as "fact". If all people were risk averse, casinos wouldn't be as profitable as they are and car insurance wouldn't need to be mandate by state laws.
Taking employees funds by default is wrong on so many levels.
It is possible for more than 50% to be better than average -.-
Unfortunately, none of these are definitive. Situational with good likelihood of being true or applying? Sure. Always going to apply or be true? No. There is a slight bit of over-generalization going on with these, and they are not going to apply to every person. One of the biggest flaws with Behavioral Science is the lack of proper and consistent measurement criteria and values -- those change from person to person. What one person might consider a "6" might be considered a "7" for someone else, or what someone might consider to be a "headache" might actually straight up be a "migraine" for someone else (or actually should be considered a migraine but they are too stupid to realize it is a migraine and not a headache since headaches are considered a 'minor discomfort' instead - hi, that's me being the idiot here btw). Another example is test scores -- 50% is considered barely passing in some places, 50% where I'm at is considered a failing score with 60% being the benchmark for barely passing
A lot of the studies in Behavioral Science are just straight up garbage because they cannot possibly ever account for any sort of consistency with how people mark and value things. What exactly *is* considered "average" in the first place? What *are* the standards if there is no defined benchmark? There's nothing there to quantify anything properly in many of these studies, so much that there isn't a proper foundation for anything to be built on in the first place. I'd almost want to say they're building a castle in the sky -- except unfortunately my desired plan is to almost literally build a castle in the sky eventually, and even *that* is going to need some type of a foundation to even be started in the first place so it isn't even a good comparison/analogy anymore - so even a castle in the sky would ironically have a better foundation to build off of than a number of these studies =/
cringy
Dude. You're rich.