Posted on 01/16/2008 1:25:06 AM PST by forkinsocket
Evolution accounts for a lot of our strange ideas about finances.
Would you rather earn $50,000 a year while other people make $25,000, or would you rather earn $100,000 a year while other people get $250,000? Assume for the moment that prices of goods and services will stay the same.
Surprisingly -- stunningly, in fact -- research shows that the majority of people select the first option; they would rather make twice as much as others even if that meant earning half as much as they could otherwise have. How irrational is that?
This result is one among thousands of experiments in behavioral economics, neuroeconomics and evolutionary economics conclusively demonstrating that we are every bit as irrational when it comes to money as we are in most other aspects of our lives. In this case, relative social ranking trumps absolute financial status. Here's a related thought experiment. Would you rather be A or B?
A is waiting in line at a movie theater. When he gets to the ticket window, he is told that as he is the 100,000th customer of the theater, he has just won $100.
B is waiting in line at a different theater. The man in front of him wins $1,000 for being the 1-millionth customer of the theater. Mr. B wins $150.
Amazingly, most people said that they would prefer to be A. In other words, they would rather forgo $50 in order to alleviate the feeling of regret that comes with not winning the thousand bucks. Essentially, they were willing to pay $50 for regret therapy.
(Excerpt) Read more at latimes.com ...
The article asserts that people AREN’T “rational” about “economics.”
The fallacy here is a false reification—i.e., the notion that “economic” choices involve ONLY something called “money” and “goods and services” that are sold by businesses.
As has been pointed out by other posters: The man making half as much as others will have a very hard time finding a wife, whereas the man who is poorer absolutely but wealthier relatively will find a wife easily and enjoy high social status. The fallacy in the question lies in the assumptions about what “goods and services” are actually “for sale” in a society.
Amazingly, it is apparent that most people are idiots...and it is being born out watching this primary season.
My thoughts exactly. Assuming I could still work to earn more money, I’d take the second option.
Exactly. Because the price of goods is related to the amount of money chasing those goods, under the first option prices would stabilize to a point where you would enjoy a much greater standard of living than under the second. While your nominal income is greater in the second option, your real income is greater in the first.
Also, assume that monkeys are flying out of my butt.
I would say that people interviewed are implicitly rejecting the assumption that “oh lets hold inflation fixed”. Bwhaha. Yeah right.
Very unrealistic.
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