Photo: Jacques Nadeau Le Devoir
Consumers carry a great deal of attention to the savings of a few dollars on small purchases, but are willing to increase the price of their offer to purchase a home for tens of thousands of dollars to be able to enter the market.
Humans are creatures complicated enough — but this does not always appear in the influential field of study that is the economy.
The economic models that are based on ideas that we are devoid of emotions, however, have given way, in recent decades, a vision of a more nuanced view of our tics and our imperfections, which has popularized the economic studies behavioral.
Richard Thaler, a pioneer of this field of expertise that has won this year’s Nobel prize for economics for his work, said, in his acceptance speech, that his studies were interested in how to introduce the human in the economic theory as a fallible, oblivious, and procrastinators, in addition to being known for their excess of confidence.
The canadian Press has met some of the economists the most famous canadians to ask them what were the most important breaks between the rational thinking of the traditional economy and the world in which we really live.
Too little time, too little value
Jim Stanford, a former economist for the union Uniforms and the author of a Little self-defense courses in economics : the abc of capitalism, believes that one of the most common mistakes is not providing enough value at the time.
“People undervalue their own time, assuming that the time does not have the value visible, which is directly attached… But of course, the older we get, the more we realize that time is the most precious thing that is. “
This weakness is involved in everything — whether it is in the willingness to walk longer distances to pay a less expensive parking, to the omission of the time allocated to assembling a piece of Ikea furniture.
And when people do not attach high enough value at the time, this allows businesses and governments to take on more, free of charge, whether waiting for a response on the phone, working overtime without being paid, or by increasing the wait time to get work in an economy of small jobs, he adds.
“The fact that the time seems to be free leads to real inefficiencies in the way we organize things in the economy. “
The single thought
Trevor Tombe, an economist from the University of Calgary, says that many of the faults observed in behavioral economics can be seen in the debates on the public order.
One of the main problems, in his eyes, is the confirmation bias, which makes sure that people search for and interpret information that goes in the same direction as their own point of view. This phenomenon is exacerbated by social media and other tools that allow for the evacuation of differing opinions.
The effect of a false consensus is also at work. This includes the phenomenon by which people tend to think that their opinions are much more widespread than they really are.
“This is, in part, what leads the debate in the political arena or on the policies that are strongly polarized. “
The fear of missing something
Doug Porter, chief economist of the Bank of Montreal, said to have been struck by the way the people carry a great deal of attention to the savings of a few dollars and cents on small purchases, but are willing to increase the price of their offer to purchase a home for tens of thousands of dollars to be able to enter the market.
According to him, the “fear of missing something,” explains in part the performance of the real estate market in toronto this year, despite growing concerns vis-à-vis the existence of a bubble.
Mr. Porter believes that some changes may occur in the fundamentals of the market — and it is often difficult to know that one is in a bubble when it is in the middle of a bubble, but people should be cautious when they enter a market that seems to grow only because of speculation.
“We have to be careful when people buy because they believe that prices can only go in one direction only. They buy just because the price goes up, and not because things have fundamentally changed. “
Craig Alexander, chief economist of the Conference Board of Canada, is frustrated by the fact that people spend a lot more time to do research for small consumer purchases, such as televisions, rather than for financial decisions even more important.
He observed the same behavior in decisions related to savings reserved for retirement, buying insurance, and other economic decisions that may be intimidating (and possibly quite boring).
“Some people are frightened by the finance. They don’t understand the language, they are uncomfortable with the language, so they avoid it. And it is a natural tendency, but it can make people make bad decisions. “
The economic studies of the behavioral helped, by “pushing” people to make better decisions, such as entering them automatically in pension schemes, but without depriving them of the possibility to unsubscribe to freely choose something else.
Frances Woolley, a professor of economics at Carleton University, observes all kinds of tics behavioral in the case of gratuities.
The suggestion to leave a tip of 15% to 25% on a payment terminal leaves people to believe that this amount is reasonable, ” noted Ms. Woolley. This is an example of” grounding effect “, that behavioural economics is defined as the fact of relying too heavily on first piece of information offered.
This field of study also explains that people are always going to do something like leave a tip because other people are already doing, ” she adds.
But as an economist, she is always perplexed by such a culture of tipping, which can ensure that a server in a large restaurant luxury eventually win more than, say, a health-care worker with children.
“Do we really need brilliant people, with a sense of business, who are working as waiters in luxury restaurants ? Because that is what we are going to have if be server allows you to earn a his life that other comparable jobs. “
Economists are not normal
Chris Ragan, chair of the Commission of the écofiscalité of Canada, claims to have learned, in his work surrounding the carbon price, as economists are not normal people, and they think differently than most people on the subject of key measures, such as price.
According to him, a part of the negative reaction in the face of carbon pricing is due to the fact that many people do not see a price increase, and not the system that is put in place behind this pricing.
“The economists see prices as a resource allocation, such as a transmission signal, and, with time, the behavior changes to adjust to price changes “, he says.
“Economists do not see just a price, but a price system, which plays a role super essential in the organization of the company and in the allocation of resources. Normal people don’t think like that. “