The economists of the world make on amazingly stupid assumption: “Man is a rational animal” and this leads them to a belief ‘therefore he will do things which are best for him’. This means he will:

a) choose the most profitable options – financially rational

b) he will take a long term view of things

c) he will eat well, exercise well, save and invest well – because these are good for him

d) he will take care of his health

All of this is wrong. First of all he suffers from a lot of biases. Behavioral science deals with this field and talks of things like ownership bias, sunk cost fallacy (that is also not understanding costing!), cognitive dissonance, sticking to old dogma, etc.

If man were rational, then, there should be no Cognitive Dissonance at all.

We all KNOW that in the long run the following things are bad:

Over eating (all of us are almost always guilty of this crime), Lack of exercise (all the webistes in the world urge you to exercise for at least 3-4 hours a week, but we can ignore), unprotected sex (even Aids could not stop us from this), and generally a poor lifestyle.

All these give us short term pleasure = and LONG TERM AND WEALTH worries.

For long term good we have to SAVE and INVEST. We hate this. Hence it has to be learnt. Now.

I hope I have kept it simple……..

 

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