Nobel Prize for Economics

                                          Nobel Prize for Economics

 After all, what is Behavioral Economics, which has been awarded this year's Nobel Prize, let's learn.

In the matter of money, people do not take decisions with just the mind. Human emotions often dominate the mind, so to understand economic matters one needs to understand psychology along with economics. This is called Behavioral Economics, for which this year Richard H. Thaler has been awarded the Nobel Prize.

Man's relationship with money is complicated. Greed, fear of the future, and guilt arising out of spending are the emotions that increase this confusion. Through Behavioral Economics we try to understand the habits related to money. You can also learn about some of these habits.  

1. 'Pain of Paying'

 Scholars believe that when we separate the money from our pockets, we suffer. This problem is more when we are giving money in the form of notes. This problem is less when buying credit cards or borrowed goods. She goes. This is the reason that people often buy non-essential items while purchasing borrowed goods in installments or spending through credit cards. Meaning that if the time of payment and the time you purchase are separated then this problem is reduced. Taking advantage of this weakness of human nature, companies lure 'buy now and pay later'. So if you want to control your expenses, do not use a credit card and pay for the goods at the same time.

2. Criminalization related to expenditure

 Spending money brings guilt. Many people are unable to spend money despite being able to because their mind feels more guilty about spending. Suppose a woman likes a saree, but she feels that the shopkeeper is telling her some more price. She does not buy it. Seeing this, her husband buys the same sari the next day and gives it as a gift. Just in financial terms, the wife should be angry because the sari has been purchased at a higher price than the original price and thus the loss has been done. But she is happy. The price of the saree is the same in rupees, but due to being brought by someone, the pen of paying is not felt. And hence the psychological price has changed despite the economic price being the same. To deal with this guilt, many companies tell in their advertisement that they will invest a part of the money received from your purchase in some good work such as children's education etc. The lesson is that companies should not get seduced by advertisements, but the purpose is not to serve society but to make you free from guilt and light your pocket.

3. Money does not cost the same

Behavior Economics tells us that the color of every penny is different for humans. The money received in the salary is spent economically, while in the case of bonus, extravagance takes place.

4.Neutral Theory

The Nudge Theory of Behavior Economics says that people's decisions can be changed not only by showing fear of law or punishment but also by 'nudge' i.e. suggestion or encouragement. Suppose every time, while paying money with a credit card, a message comes on the mobile that do you really want to spend? Then you will postpone some shopping. (This is another thing credit companies never do, but they want you to spend unnecessarily, default so that they can earn profit by imposing penalty on you.) In a buffet people will pick up the same dish which is kept at their eye height. According to the Nudge Theory, if you want to get people to say 'yes' to a particular thing while filling a form, instead of asking them first you assume their 'yes' (default choice) and then ask if you are in this scheme If you want to be included 'No', then tick the box.

These days governments are using this nudge to deduct the amount of insurance from people's bank accounts. A separate Yes is not done to get insurance. It is considered the default choice. Many people consider the use of such 'Naj' to be wrong. It is like taking advantage of human weakness of the people and violating their right to choose. 

There is talk of Naj Theory in the media about the Nobel Prize, but in reality this theory is old. This time the Noble Richard is not found on Nudge Theory but on Endowment Effect, Dictator Game and Loss of Edition

5. Endowment Effects

Theler explains through his famous Theory of Endowment effect that people value something more simply because it belongs to them. An experiment was done to explain it. People were given a coffee mug and then told them you would Would you like to exchange for chocolate? Everyone refused because they thought coffee mugs are more valuable. Now another group was given chocolate and asked if you would take a coffee mug instead? They also refused because they found chocolate more valuable. This is the reason that people are unable to sell their old and useless goods and junk gets collected in the houses.

6. Dictator Game

According to Thaler's theory, humans distribute money in such a way that they also get more and do not accuse them of being greedy. Suppose you are given ten thousand rupees and asked to share with one of your companions. If you just look at it financially, you will either give five thousand to both or you will keep the whole ten thousand yourself, but in reality, people do not do so. Most people will keep 7 to 8 thousand rupees themselves and give two or three thousand companions so that their greed is also fulfilled and they themselves do not fall in their eyes.

7. Loss of Edition

People work not for profit but to avoid loss, twice as much misery than it takes to earn a hundred rupees.

Assure people in the business that they (customers) have been profitable by dealing with you.

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