American - Economist | 1972 -
January is always a good month for behavioral economics: Few things illustrate self-control as vividly as New Year's resolutions. February is even better, though, because it lets us study why so many of those resolutions are broken.
Sendhil Mullainathan
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Maybe poverty is a special case of something else. That something else is 'scarcity,' and anyone who has the experience of 'having very little' experiences the same psychology.
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I worry about growing income inequality. But I worry even more that the discussion is too narrowly focused. I worry that our outrage at the top 1 percent is distracting us from the problem that we should really care about: how to create opportunities and ensure a reasonable standard of living for the bottom 20 percent.
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Marketing is selling an ad to a firm. So, in some sense, a lot of marketing is about convincing a CEO, 'This is a good ad campaign.' So, there is a little bit of slippage there. That's just a caveat. That's different from actually having an effective ad campaign.
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Busy people all make the same mistake: they assume they are short on time, which of course, they are. But time is not their only scarce resource. They are also short on bandwidth. By bandwidth I mean basic cognitive resources - psychologists call them working memory and executive control - that we use in nearly every activity.
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Time can be dissected easily: an hour can be cut up in many ways. Fifteen minutes on this memo, a five-minute walk to another meeting, 30 minutes at that meeting and then 10 minutes debriefing. Oh, and maybe a quick phone call on the walk to that meeting. The busy are expert at dissection: that's how they make it all fit.
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The problem with data is that it says a lot, but it also says nothing. 'Big data' is terrific, but it's usually thin. To understand why something is happening, we have to engage in both forensics and guess work.
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If you send out one coupon with a deadline of a week and another that must be used within the next month, you end up having more redemptions with the one week deadline. It's really amazing. With the month deadline you have four times as much time, but people tend to say they'll use it in a few weeks' time and then they don't do it.
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If you have urgent current expenses to cover, then future priorities like college and retirement fall off your radar because they are simply less pressing. Scarcity of attention prevents us from seeing what's really important. The psychology of scarcity engrosses us in only our present needs.
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As a researcher, every once in a while you encounter something a little disconcerting. And this is something that changes your understanding of the world around you, and teaches you that you're very wrong about something that you really believed firmly in.
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No one would say, 'Hey, I think this medicine works, go ahead and use it.' We have testing, we go to the lab, we try it again, we have refinement. But you know what we do on the last mile? 'Oh, this is a good idea. People will like this. Let's put it out there.'
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The amount of resources we put in are disparate. We put billions of dollars into fuel-efficient technologies. How much are we putting into energy behavior change in a credible, systematic, testing way?
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