The Danger of Collective Irrationality

(Photo credit: Lam Yik Fei | New York Times) The best game I have ever played on my phone is called Risk. Originally a board game, the online phone version was also made available. To explain it very briefly: it starts with occupied territories randomly assigned to you. Every round, you get a few additional …

The (Psychological) Costs of Calculating Costs

(Picture by Kaufdex) It is widely believed that, to make a good decision, we have to be aware of the costs and benefits and calculate them. Most economists and people who have been trained in economics believe this, including me in the past. Why did I hold that belief only in the past, but not …

Dream Big, Think Twice: Decision Making in Life, Business and Politics

(source: pixabay) Once upon a time, a leader of a group of people initiated a movement to develop their residence. A lot of schemes were included in this movement. One of them was to get many regular households to create steel, because he thought it would significantly contribute to the economic development. He also urged …

The Supermarket Challenge (Choice Overload and Bounded Rationality)

I can be a terrible person to go grocery shopping with, and recently I have come to understand why. If you ever go grocery shopping with me, you would see me standing in front of the fridge, wondering which milk would be the best, or standing in the vegetable section, wondering which vegetable I should …

No Ala Carte

In the U.S., it seems like the society expects everyone to choose one side (left or right) and that determines your position on all social and political issues. And the existence of two parties (minor parties can be ignored) allows very little diversity. But the society is much more diverse. Individuals want to choose what …