Welcome to our second episode of the Qwoll podcast “Boundlessly Curious” in which we interview behavioral economist, Dr. Sherry Banuri. Questions explored What is behavioral economics all about? Are markets perfect, are people rational? What can behavioral sciences teach us about goal achievement? How can we apply lessons from the book “Thinking Fast and Slow”? Overview of the podcast Why behavioral economics? What is it all about? (Minutes 2-6) One of the things that hooked Dr. Banuri in is in understanding systems and wanting to predict where the future is going to go… “The economy is a supremely complex thing” and distilling it into something simpler and easier to understand is “brilliant” We tend to assume people are rational and calculating, but then we see a divergence with our math and the real world. As he got into deeper into economics, he realized this interest in mapping human behavior Are people rational, are markets perfect? (Minutes 7-15) We’ve had experiments with central planning and price fixing and it doesn’t really hit the efficiency of a perfectly competitive market; on the other hand we don’t really have great perfectly competitive markets either Behavioral economics was kind of looked down on, but what’s ‘turned the tide’ is that human behavior is not random; we make predictable errors which are possible to model On topics such as labor supply, or negotiating deals, people often do not rationally optimize; they deviate from the predicted outcome due to factors like fairness, happiness, and social pressures Tell us about your new book, The Decisive Mind? What are you after? (Minutes 16-26) Dr. Banuri wants to help people change their behavior in order to reach goals more effectively. There’s something called the intention-action gap. For example, I have an intention to lose weight, but my actions are not in line with my intentions; how does one close that? With the book, he wants to help people think through these things ahead of time. “I’ve personally had a lot of challenges that I’ve had to overcome, and I think science has something for us to learn from here,” he says. He believes we need to put in the work ahead of time, it’s a framework which can be applied flexibly When you stop following your intention / plan, does it lead you into a worse rabbit hole? (Minutes 27-32) More or less, yes, we start to relate sadness, guilt and other negative emotions to that experience, and we try to avoid that We generally try to avoid bad information about ourselves which is why 80% of people, when asked, believe they are ‘above-average’; so we have this and other biases Psychology plays a big role in understanding human behavior, although economists tend to draw a line between them What’s “Thinking Fast and Slow” all about and how it can be applied? (Minutes 32-39) The author, behavioral economist Daniel Kahneman, simplifies logic into two thinking systems - System 1 and System 2 In System 2, “thinking slow”, we are rational and calculating, but this requires quite a lot of brain power; System 1 is “thinking fast”, we use gut feelings and have a default behavior Generally we have a preference for System 1, because System 2 is energetically costly, so we need to make System 1 work for us Applications for learning and other things (Minutes 39-45) Learning is tiring and requires cognitive capacity, timing is important; learn when you have energy! About Dr. Sheheryar (Sherry) Banuri is an associate professor in behavioral economics at the University of East Anglia in Norwich, UK. He’s studied topics like motivation and incentives and how these things play a role in labor, public service and economic development. He’s the author of soon to be two books. Qwoll is a lifelong learning startup based in Berlin, Germany with a mission to 'perpetuate curious minds'. Founder & host Kyle Blackwell holds an MBA degree from IE Business School and an undergraduate degree from William & Mary.
