Intuition wnd Behavioral economics - 1

Intuition

judgement that just seems true or correct and that doesn’t originate in conscious perception or introspection

Moral Intuition

More closely resembles thoughts than feeling and persist over time and we can grow and develop

Criticism of the use of Moral Intuition

Historical reflective criticism: Intuitions can be wrong and have been wrong in the past

Psychology Criticism: We are often unaware of what influences us

Arguments in favor of moral intuition

Profs rejects the notion that all intuitive judgements are unreliable

Intuitive judgements are not any more flawed than introspective or perceptive judgements

Under certain conditions, intuition works and it works well

Helpful Heuristics (rule of thumb) for using intuition

1. Careful with emotions

2. Keep it simple

3. Careful with contradictions

Two Types of decision making

Classical view and Behavioral economics view

Classical View/Home economics

Assumes people are rational, disciplined and disinterested, making them unbiased by personal interests. Can be reliable in promoting their own self-interests

Behavioral Economics

• Recognizes that people are flawed decision makers (human) and thus:

  • Are sometimes irrational 

  • Sometimes we act against our own self-interest

Sysem 1 Thinking

Called the Automatic system:

Operates automatically like a gut reaction, requires little or no effort, affords us no sense of voluntary control

System 2 thinking

Called the reflective system:

Involves effortful mental activity(conscious thought), Associated with subjected experiences of agency, choice and concentration

Focus is?

Selective, what we choose to focus on blinds us to other things

Examples of System 1 thinking?

Examples of System 1 thinking?

Illusions

ways our moral perception is distorted, can be visual and cognitive

The Three Heuristics defined by Thaler + Sunstein

Anchoring, Availability, and Representativeness

Anchoring

Decision making or assessment of something that is informed by our current position/perspective. We tend to over or underestimate things based on our comparisons with things we already know.

Availability

Decision making or assessment of something that is driven by salience or how readily something comes to mind

Representativeness

Decision making or assessment of something based on the stereotypes we hold (biases and things we think are a trend)

Flaws and Foibles in our cognitive approaches:

Optimism and overconfidence, Gains and losses, Status Quo Bias, and Framing

Optimism and Overconfidence

Many people think they’re better than the average even if that may not be true

Gains and losses

People are loss averse, we hate losing much more than we like winning. Does not matter what the activity is, this applies equally to risky behaviors and risk-adverse behaviors.

Status Quo Bias

We like to keep things the way they are.

One of the causes of this is lack of attention because it is just easier to leave it as it is, the “whatever” effect

Framing effect

The way we say or present something, can have a big influence

Writing from Kahneman talks about?

System 1 and 2 thinking and moral illusions.