On to other thoughts; am I looking at things the correct way.

 

As I said last week, it was my last post for a while on the subject of money and morality.  Although I have noticed an overabundance of current articles on the state of personal debt and the impact it will have on the economic future.  I guess I will have to be content with being ahead of my times.  If only a couple of weeks ahead (ha ha).  Didn't someone once say that you do not have to be smarter than everyone just a day earlier?  The basic premise of these articles is that consumers still have "covid" savings remaining and they continue to spend it.  The articles go on to predict that these savings (and credit) will dry up in the 4th quarter of this year and that will trigger a recession.  How they can predict this stuff I have no idea.  As I said last week I am tired of economics.  If you are interested you can read this article

So on to something new.  Well, not really new, I am still interested in decisions and how we make them.  As a result of previous posts why we opt for courses of action that are not in our best interests.  This topic has interested me more and more.  As I said a lot of the interest was generated by my previous posts.  Just the option of spending all of your discretionary income rather than saving some of it is a dangerous course.  I think most people would agree that having some savings is a good idea.  I has many benefits, you earn interest on the savings,  you have a slush fund for emergencies.  On the down side you may have to forgo a night out to dinner or and new toy.  Most would concede that the benefits outweigh the costs.  Another example why would one choose to get a tan by lying in the sun.  It has been proven that even with sun screen "tanning" can lead to serious diseases.

So I have decided to look at the science behind all of this.  The obvious, I am not a trained psychologist or neurologist.  So as I delve into this topic I have very little idea of the validity of any information I review.  Using the "smell test" and my innate common sense I should be able to make some headway into this topic.  Specifically I am looking at two distinct thoughts.  The first is get a general idea of how our minds work and the second is a specific look at an assumption that is used in economics.

I have always envisioned the brain like a computer.  Our brains are composed of neurons, cells that we assumed made a series of logical, rational decisions. This is a pretty standard view of our brains and how we envision them working.  I also think that it is a bit of an aspiration.  Or maybe more bluntly we all hope our brains a logical and rational.  think of the following process:  I am out of milk; I must go to the market, search for car keys, acquire car keys, it is cold, go to closet to get jacket,  proceed to car and so on and you have milk.  A series of inputs and responses to achieve an end.  If I can only remember what I needed the milk for in the first place.  It is all logical and rational.  I am reading a book called Thinking.  One of the authors puts forth the idea that this is an over simplified model of the brain.  He has started to think about neurons not as simple logical switches but as "agents".  These agents have agendas and may work much more autonomously than simple logical switches.  I stated earlier that I have very little background in this field so I am unable to confirm or dispute this premise in any way.  However it does make me think that my way of viewing the brain may be totally incapable of helping me describe it.

The second thought came from a podcast called the Hidden Brain, specifically episode 16 from January 11th, 2016.  The guest Richard Thaler (an economist) talks about getting a cab in New York on a rainy day.  It is generally a difficult task.  In pleasant weather people in New York tend to walk, on rainy days they take cabs.  An easy conclusion is that with more people taking cabs there will be fewer cabs available.  However the actual answer is much more subtle.  A cab driver rents the vehicle for a fix time frame.  So what most cab drivers do is they set an amount target.  Once that target is achieved they return the cab and go home.  On sunny pleasant days it takes longer to get to that target amount.  However during rainy weather a cab driver is very busy and will reach their target sooner.  In the end this results in fewer cabs available because they have met their target and they have finished working.  This however is contrary to standard economic theories.  Standard economic theory would expect cab drivers to work longer during rainy weather because there is an opportunity to make even more money.  Who is to say what is "rational"  The tactic of setting a monetary goal each day and calling it a day after that goal is reached appears to be quite rational.  Misidentifying what is rational may be also part of the process.  Cab drivers working extra on rainy days could be described as "optimizing".  People may not be out to optimize there environments maybe they just want to get home and be with there families.

As I said I have very little way of verifying a lot of what I have been reading but that is how we start learning things.  I can still conclude that my way of looking at how our brains work may be over simplified.  Also what I may accept as rational may not be the same as others.  Regardless it is an interesting topic.