Richard Thaler's "Misbehaving" Volume 1 // Part 3

Part 3 of this blog is where things have to get a little wonky. Self-Control, Thaler's (the author)  intended part 3, is only a measly 2 chapters/14 pages, so to keep my sanity and at least some level of actual interest with this post, I will be adding on part 4, Working with Danny. This part will give me access to 7 chapters of additional writing to work with. Furthermore, as I continue into my 4th and last installment in the first half of these blog posts, I will pair the last three chapters, Finance, Welcome to Chicago, and Helping Out, into one large part to alleviate the same sparse content problem as Part 3, as well as make sure the entire book is analyzed in the blog. 

Chapter 3 of the book, Self-Control, is split into two sections; Willpower? No Problem and The Planner and The Doer. The Chapter opens with a small introduction by Thaler explaining why this section needs to exist in addition to its rather strange origins. Bringing back our favorite tool, the Econ, Thaler explains that there are many instances in life where humans break the code of what an Econ would do. For example, Thaler mentions how a dietician does not buy any ice cream despite wanting some, or a smoker buys cigarettes one pack at a time despite knowing they would be better off financially buying a whole case. In both cases, an optimizing Econ would simply pick the option that correlates with wants or needs, but humans don't. The dietician and the smoker know the existence of their respective temptation would create unnecessary stress and tension. This is called self-control, which doesn't really exist in an Econ because it doesn't need to when you know the perfect option every time. Thaler then goes on to explain that many Professional Economists don't know how to explain the self-control phenomena using economic theory because you can't. In reality, modern-day economic theory, while not obviously stating so, presumes assumptions about self-control that are not based on truth. Everyone has things in their life that they desire but know shouldn't have, so that's how Thaler went about solving a problem that technically does not exist. Now, on to the actual chapter. 

Section 1, Willpower? No Problem, begins by laying the basics for why we as humankind seem to like things now rather than later, which is the core trait responsible for why things are tempting. Thaler goes through a myriad of famous economic writing in order to string along a core theme that seems to go throughout centuries of research, before finally resting on what it has become known as today, discount utility. In short, given the option between a nice dinner tonight or the same dinner in a year, almost everyone is going to pick the earlier option, but why? As Thaler explains, through some weird brain chemistry, we tend to "discount" things that are in the future vs the present, although the degree and commonality of said discounting varies widely from person to person. This then helps begin to explain the self-control problem. A smoker wants all the cigarettes right now but knows it is better to have them both now and later, so he is, in a way, optimizing. Thaler explains the problem is not that humans lack willpower, but that we simply force ourselves to be patient and sometimes we don't. Thaler then goes on to spend the rest of the chapter going on a long tangent about all the little details of discount utility, so for the sake of not being boring, I will move on. 

Section 2, The Planner and The Doer, was quite difficult for me to understand during my first read-through, or even my second and third. The section is essentially just a really long explanation of the idea of discount utility paired with some strange economic research. All in all, it didn't really give me much other than a headache and a strange craving for Oreos (it's what the experiment was based on). The one idea I was able to understand is what the section is named for, the difference between planning and doing. Many people plan on doing certain things, whether it be losing weight, joining a new social outing, or even curbing a nasty habit, but then often times nothing ever changes in the long run. This is due to the fact that often times our motivation reward systems peak right when we plan to do something and then crash when push actually comes to shove. This is why when it's time to actually put on running shoes and work out, our couch looks comfier than ever. 

Chapter 4 of the book, Working with Danny, is split into three rather short sections; What Seems Fair?, Fairness Games, and Mugs. The Chapter gains its name from an economist whom Thaler spent a year researching, whose name was unsurprisingly Danny. All three sections, which content-wise are just one big section, see Thaler going in depth as to why what humans consider "fair" economically can vary widely from what an optimizing Econ would consider to be correct or fair. Thaler produced and elaborated upon multiple phone interview questions that he received data for and how these help to demonstrate human error when it comes to fairness. He stated right off the bat that oftentimes how people answered the questions (they were given a theoretical situation and then asked to choose between whether the action taken was fair or unfair) could be influenced both with surprising amounts of consistency and disturbing degrees of change. By altering the wording, names, and framing, Thaler and Danny were able to demonstrate that many times what people consider fair and unfair isn't actually based on objective fact but subjective opinion. Working off of this, Thaler explains that many times what ordinary people consider unfair would seem perfectly fair to an economist using economic theory. The laws of supply and demand can be used to show that whenever something has increased demand, the price increases. Yet, when someone is asked if it's fair for a water bottle seller to hike prices up during a drought, the answer seems to always lean unfair.