Karl Arnold Belser
26 january 2016

My post Reflections of 2015 gives my view of the big picture purpose of human life on Earth in which I am not very optimistic. The other side is the personal, small picture, view which I write for my short term benefit. I want to be effective  in my interaction with other people and I want to be financially successful in investing. This is why I keep writing about behavioral economics.

I admit that it is hard for me to net out books on behavioral economics that might actually affect how I behave.

I just read two books by Dan Ariely, Predictably Irrational and The Upside of Irrationality. These books are a hodge podge of concepts and very difficult to summarize. Fortunately there are Summary of Predictably Irrational and Summary of The Upside of Irrationality on the Internet that I can reference. I will try to relate some of the ideas discussed in these books to my past blog posts.

The most important point, in my view, 
is from Chapter 4: The Cost of Social Norms from the book Predictably Irrational. In short there are two norms when quantifying the value of human effort, social norms and market norms. Social norms are essentially satisfaction Whuffie as I described in my post Unemployment and Satisfaction Whuffie. People are willing to do many things of value for no pay, things that if they were offered pay they would not do. Further once one has been offered pay for something that they are doing for free, they will usually never want to go back to doing the job for free. in other words: MARKET NORMS DRIVE OUT SOCIAL NORMS.

The most egregious example that I know of, which is not mentioned in these books, is when the US department of education decided to pay teachers for raising test score levels. This policy presumed that teachers would work harder with a money incentive. What actually happened in a few states was that some teachers cheated by correcting errors on the student's tests. Further, the rise in tests scores did not occur. I think that these teachers might now be demotivated because there conscientious effort (Whuffie) out of good will was thrown back in their face. The act was an insult to good teachers. This is an example in which central control helped to ruin the US educational system.

I observe that money is one of the fictions that human beings have invented as Harari describes in his book Sapiens. See my post A Short History of Mankind. There are moral hazards in the fictions that humans have invented.

There are, of course, many other irrational behaviors discussed in these books, but only social and market norms relate to my recent posts.
Last updated January 26, 2016
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