SCIOPS 01.31: Behavioral Economics

Quick: your money or your life!

A simple decision, right? If you’re getting mugged, it’s easy enough to prioritize. With a gun in your face the rational decision is obvious. Money may not be able to buy you love, but it sure as hell can’t bring you back from the dead.

Not all economic decisions are so straightforward, but there’s still a gun in your face eventually. If you don’t believe me, refuse to pay your bills for the next six months. Sooner or later, some armed thug is going to come to your house and evict you. Don’t resist: your money or your life.

The control systems of late capitalism stand on the foundation of stolen land, coerced labor, and the monopoly of force owned by the Nation-State, a fully owned subsidiary of The Corporation, Inc. Everything is owned and everyone is in debt. So what can we do, except wake up in the morning and try to scrape up a little more dough?

There are something like four million people in the greater Seattle area. Many of them have too much money. You can tell someone with too much money – they tend toward conspicuous displays, like peacocks but with Chinese-made polyester feathers.

###### {too much money}

Everyone else in the Puget Sound has one simple mission: find people with too much money, and take it. Surprisingly, most people don’t turn to mugging as the answer. (Which is weird, because the richest people in the area are Bezos and Gates and god those people look like they need a swirlie.)

No, most people work hard at jobs that don’t pay them enough, and then spend more money than they have on things they don’t need. That’s the essence of capitalism, and even the suit-and-tie astrologers known as “economists” have begun to admit it.
The Nobel in Economics just went to Richard Thaler
for his work on
behavioral economics
the study of how people actually make economic decisions.

For hundreds of years people have believed in – or acted like they believed in – Adam Smith’s imaginary “rational actor”. The rational actor makes decisions for his own best interest, and the sum total of all those people making good decisions is the Market, which makes the best decisions. It’s the fundamental myth of capital. And it’s not true.

Behavioral economists know that people almost never make rational economic decisions. We use rules-of-thumb instead of proper research, we are easily fooled by our own cognitive biases, and we don’t know how to take everyone else’s irrationality into account. It’s a free-for-all of guesswork and attempted mind control.

Think about it: if humans always made rational economic decisions, would car salesmen be able to pull all their dirty tricks? Dominance tactics, handshake hypnosis, bait-and-switch, low-balling, cross-selling… the list goes on. Humans are emphatically not rational actors.

What Thaler has shown is that people make irrational decisions in consistently irrational ways . This means that we’re predictable, we’re subject to unstoppable ancient forces of stupidity and we can’t just wish our way past them. Every individual thinks that they have a special resistance to advertising – “oh, I don’t even look at them” or “I just zone out the commercials, they don’t affect me”. But if everyone were that special, who would buy the car-window flags or the pre-ripped jeans or the special limited-edition Mickey Mouse watch?

So we must approach our everyday buying and selling decisions with the same attitude that we use in assessing fake news or any other cognitive threat. We must treat rationality as a martial art , a trained faculty, a discipline. If we must buy and sell, if we must accrue money to justify our continued existence on the earth, then we must do it with the attitude of warriors.

Constant vigilance. The most dangerous enemies are the ones with the biggest incentives. Money is an exploit, a backdoor into your brain, a trap for your rationality.

Your money or your mind…

– Max

P.S. I wanted to recommend a consumer-research site here, but my preferred site has just had a major facelift due to being bought by the New York Times Company. I can’t speak to the accuracy of new content like “The Best Dog Boots”, but I still advise you to look at Wirecutter if you’re about to make a major purchase. Their testing and recommendation model takes a lot of the cognitive load out of the shopping process. For an example I can personally vouch for, check out the Best Headlamp article .


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