Behavioural Economics can predict irrational human behaviour
There are 8 prevalent behavioural biases identified by BE which resonate with my previous article on Meta Dilemmas:
- Endowment Effect: tendency to place more value on expected losses than expected gains (also known as Risk Aversion)
- Status Quo Bias: tendency to stick with current state of affairs even though we can see clearly better alternatives
- Framing Bias: tendency to draw conclusions according to the way something seems as opposed to reality
- Availability Bias: tendency to rely on easily available information rather than seeking out harder to obtain but more accurate/relevant info
- Confirmation Bias: tendency to prioritise evidence which accords with our pre-existing beliefs
- Choice Overload: where we have so many options we don't make any decision
- Overconfidence: tendency to rate ourselves more knowledgeable and skilful than we actually are
- Money Illusion: tendency to judge prices and interest rates at nominal rates rather than taking into account inflation
The article explains how the current global financial crisis could be analysed behaviourally as a large number of players in the market all succumbing to 3 main BE biases - overconfidence, confirmation bias and availability bias.
About Ken ThompsonKen Thompson delivers keynote conference speeches, workshop facilitation and in-house consultancy in four key business areas:
- Creating High Performing Teams in enterprises including Virtual and Mobile Teams (based on the Bioteams Book)
- Establishing effective Collaborative Business Networks enabling companies to co-operate effectively in areas such as sales and product development (based on the book - The Networked Enterprise)
- How to use the latest social media technologies including blogging and online communities to promote enterprises, brand, organisation or event
- Development of graphical on-line interactive Business Games, Dashboards and What-if Simulators for organisations to support Performance Improvement, Strategy Development and Executive Team Development.
Bioteams Books Reviews
How to identify someones main worry about a coming change. I found this technique in a book a long time ago – "The Secret Language of Success: Using Body Language to Get What You Want" by Dr. David Lewis (1989). I confess I never got round to testing it properly but it sounded intriguing so I pass it on - "buyer beware".