"sometimes the best explanation for why something isn't done when economics suggests that it should be done is simply that people don't understand economics."
I've often wondered if a previously untapped (and possibly lucrative) avenue in counciling/therapy isn't 'personal optimization.' Economics essentially assumes that economic man can make all sorts of wildly difficult calculations in his head. Yet experimental psychology has shown beyond a shadow of a doubt that humans are simply unequipped for even relatively simple calculations, and instead resort to hueristic "calculations." For example, consider the number of people who die unnecessarily because they fall prey to the availability hueristic and crash on the road instead of flying. Indeed, if calculating probablities were so intuitively easy, we wouldn't need probability theory--yet understanding probabilities are essential to understanding risk, which is essential to optimizing. Isn't it? It seems like I've seen several methods for calculating the value of people's time, their tastes for risk, their utility from income, inter alia. Wouldn't it be possible to apply those methods to individuals, do the calculations, and then offer a menu of options (how many hours to work, how much insurace to purchase, how many hours of TV, etc.) that should help maximize their welfare given the constraints they face in life? Seriously. Am I completely nuts? Or does this seem possible? -jsh ===== "...for no one admits that he incurs an obligation to another merely because that other has done him no wrong." -Machiavelli, Discourses on Livy, Discourse 16. __________________________________________________ Do You Yahoo!? Sign up for SBC Yahoo! Dial - First Month Free http://sbc.yahoo.com
