Behavioral Economics

The rule I have adopted for this blog is one post a day. The reason for this rule is that I wish to guard against the blog taking away time from my academic research. So far, my one post a day rule appears to be working. Today, though, I don’t feel like working on this data set I am assembling. So here is post number four.

Greg Mankiw has linked to a story – which he was pointed to by Marginal Revolution – on Ulrike Malmendier. Malmendier is a UC Berkeley economist whose research is in the field of behavioral economics. What Malmendier has found is that people are not quite a rational as traditional neoclassical economics purposes.

An article at American.com details her research on rationality. For me the interesting story was that people’s spending on health club memberships appears to be non-optimal.

The idea that people do not always behave in a fashion consistent with neoclassical rationality is one of the major themes we touch upon in The Wages of Wins. Specifically, as detailed many times in this forum, we find that decision-makers in the NBA over-value scoring and undervalue many other aspects that contribute to wins in the NBA.

Non-optimal decision-making was also uncovered by Cade Massey and Richard Thaler in a study of the NFL and the draft. This research was also touched upon at American.com and also in this forum last April.

The story of how people process information – when they get it wrong and when they get it right – is one of the more important tales we can tell with data from sports. And when we get to the sequel to The Wages of Wins it will be this story that we will likely focus much of our attention upon.

– DJ