Economics: Spock vs. Homer Simpson

Economics, Daniel Morris, Portland Oregon
Classical economics is built on the assumption that people make rational decisions based on the desire to increase their economic well-being.

In some groups where I participate, we are reminded of an ongoing conflict between our internal Mr. Spock and our Homer Simpson.

Spock is logical, rational, and predictably boring. If we were all Mr. Spock there would be no need for traffic cameras because everybody would be on their best behavior and follow the traffic rules. There would be no need for welfare and government aid as we would each be responsible for each other and ourselves. If we all were Mr. Spock we would all drive Yugoslavian Yugos.

Fortunately, we have our Homer Simpson. Homer is where we find Love; remember love isn’t rational. Homer is also where we find art, poetry, and music as these are emotionally charged, illogical and yet help us feel alive, living and connected with each other and our communities. Because we all have some part of Homer in us, we can leave the Yugo behind and move toward a fast and fun Ferrari.

It takes both our rational self and our irrational self to progress. Behavioral economics is the study of the “Ying and Yang” of how we individually make choices and allocate our scarce resources

How Do We Communicate: Let’s State Our Choices Better

As governments, NGOs (Non-Governmental Organization), and businesses have learned, sometimes we should state our choices better to help people make Better Choices. For example, let’s use your company’s 401k. Instead of making it an Opt-in process where we must fill out paperwork to make the decision, make it an Opt-out where the default is to “save for retirement” and make it so that it requires more work to change the default decision.

Understanding that default setups are almost universally accepted is important. Assume for a moment you believe that organ donation is a critical social value. You also understand that the DMV is instrumental in this process as identification on a driver’s license is the universal indicator for organ donation. Today, drivers must Opt-in, and decide to become an organ donor. Flip that and now they must Opt-out. The difference is clearly more organ donors. Now, opting in and opting out shouldn’t really change people’s behavior but it does. And knowing about this is helpful toward the design of your products and services.

Just Food for Thought…

Daniel Morris
Daniel frequently provides Media Content via Workshops, Podcasts and Printed Articles on topics like Cross-Border Transactions, Wealth Preservation and Planning, Global Banking and many other high-level financial topics that serve and demonstrate the Value of our Global Network that should be of interest to those who need Private High-Wealth Services. If you wish for Daniel to speak to you or your Professional Group, please contact us.

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