[p2p-research] Resilience and scale invariance

[Stan Rhodes]

Not so hard to be both.

The word "relationship" carries with it some meaning that I'd rather
not imply.  All the biases and heuristics we use when making economics
decisions (including those with money) create a map of irrationality
that is very predictable (thus Dan Ariely's choice in title) in spots,
but does not lend itself to a grand theory.  These errors are also
incredibly hard to avoid, whether you expect them or not.  It's a bit
like an optical illusion: you know it's not real, but your brain can't
stop perceiving it as real.  We're hard-wired to make the same sorts
of mistakes, over and over.  For the most part, we have almost no
chance of "learning better" to prevent ourselves from making them.  I
do not think this is not a hopeless statement, but a realistic one.
We CAN develop methods, systems, and traditions that give more
immediate feedback, and lessen the impact of the mistakes we will
make.  Another bias is that when we learn about biases we usually
think we're less susceptible in the future, and are more confident we
won't make that mistake.  Ironic, eh?

Really, reviewing the literature is better (and easier for me!) than
me writing much about it.  A PhD student in London actually has a
"psychology of money" section of his psyblog that has a good
not-overly-technical overview of many of the biases we have, and
summarizes a number of studies (mostly experiments) in behavioral
economics: http://www.spring.org.uk/2008/04/psychology-of-money.php

The studies do not create a unified whole.  No model or theory exists
that explains it all, nor do I think there will ever be one.  For
example, expected utility theory had many holes, and in came prospect
theory, and it too has many holes, and so we tweak an assumption here
and there, test, and repeat.  It is closer to the mapping of terrain
than it is to finding a golden algorithm hidden in a black box.

Other avenues of research contain valuable insight, too: trust,
intuition, well-being, motivation, and so on.  Each can support or
undermine an assumption in the other, and in our thinking about how
socioeconomics works.

Also: I accidentally wrote "risk aversion" in the previous email when
I meant "loss aversion."  Sorry.

-- Stan

On Sun, Apr 19, 2009 at 4:21 PM, marc fawzi <marc.fawzi at gmail.com> wrote:
> I thought you were an economist :)
>
> Can you please elaborate further on the relationship people have to money,
> from a psychological point of view?
>
>