There are numerous new studies on behavioral economics which seem to say that one’s usual instincts and hard wired mental models are incorrect. This results in mistaken behavior with outcomes that one had hoped to avoid. In other words, the mind is actually misleading you, even if you think that you have superior instincts and intellect. Someone had said that intelligent people are in fact the easiest to fool, being adept in abstract reasoning but ungrounded in reality, lacking street smarts or down to earth skills (i.e. repairing a lawn mower, etc.). The Chinese have a saying that knowledge not used is useless knowledge, hence, putting scorn on intellectuals who learn from books. There is a backlash on smart people but there is another problem in saying that down to earth folks have more wisdom. For example, the predilection for huge homes, despite the absence of need, or the practicality of large spaces that are unutilized, the urge for bigger and better whether housing or food portions, or indulgences in the scale of a Las Vegas production. Bigger is always better. One starts to doubt himself if one does not follow the crowd, or wallow in envy if one does not follow the Joneses, like in the hysteria after the terror attacks, to be unpatriotic even when profiling Muslims and Middle Eastern men as described in the book ‘Zeitoun.’
On the other hand, the recent book ‘Scarcity’ reflects the opposite reaction, where one is pound foolish but penny wise, striving to save dollars and cents but splurging on large purchases (i.e. Mac Mansions). Hence the mind is a beast to be tamed, far from the logical computer like efficiency that people sometimes think it is, perhaps like Sherlock Holmes who solves difficult crimes but resorts to smoking opium as a way to relax. Improving one’s mental skill while destroying his faculties in the long run by taking drugs, plus the risk of being addicted, a story never fully explored by Arthur Conan Doyle. Or someone like Bill Clinton, brilliant as a policy wonk and a superior politician, but self-destructive in his urges, resulting in disgrace in an otherwise brilliant career, though still popular despite his follies. Similarly in investment behavior, despite the proven method of Warren Buffet, as most investors still buy during bull markets and sell in bear markets, buying flashy overvalued stocks and disdaining value stocks. Perhaps like buying a luxury car, expensive to maintain and not fuel efficient but with sexy styling. But one never knows, living in a materialist consumer society, when not shopping is considered a sin, not spending a sickness. What is the use of money when unused?
What does behavioral economics tell us? That man is a victim of his passions, succumbing to the desires of the body, forever looking for release and instant gratification. The rare individual who is self-controlled is viewed as an aberration; a savant or dyslexic or an idiot. It is an uncommon trait that a whole discipline in economics is devoted to disproving one’s instincts, one’s supposedly rational mental capacity. ‘To one’s own nature be true’ is a good saying, never to be swayed by fads or by media. An individual thinker is rare, for someone to make his own mind and stick to his own reasoning even against the common norm. Behavioral economics is about irrational behavior, the lack of financial literacy, or unwise thinking that maybe fueling the trend towards a data driven life. To get objective facts and be guided by data, not by the mind when following one’s instincts. Often times, the correct outcome is counterintuitive, not the expected behavior. For example, when a politician disdains war (Ron Paul or Barack Obama), preferring diplomacy and negotiation, which conservatives consider incorrect, not bombing Iran, or toppling the Syrian government. Hence, not going to war is as a mistake, a sign of weakness when it may be the wisest thing to do. But one never knows, considering the superior arsenal one possesses; what is the purpose of advance weaponry when unused?
Obesity is another example of irrational thinking. An article in Time says that counting calories is the incorrect way to lose weight. It is not the quantity that matters but quality. In other words, one should eat less complex carbohydrates and sugar, but instead eat lots of fruits and vegetables even healthy fats in foods like avocado, olive oil and nuts. The key is metabolism and one should focus on foods that will aid metabolism. In other words, eating less and exercising more will not help you achieve the goal of losing weight but choosing the type of foods that will improve metabolism. Experts now say that eating less and exercising more only works for a select group of people. Hence, eating less carbohydrates and exercising in the gym is the wrong behavior when trying to lose weight. Who would have thought that was the case? But the data from the studies show otherwise. Data trumps everything.