Maximizing Behavior


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A WWII Disney propaganda cartoon tells people to save for taxes--something not needed once tax withholding was introduced in 1943. The first part of the film raises the issue of whether people spend rationally over time, because if people did make sound decisions over time, would a film like this be necessary? Other things that are of interest in the film is the implicitly recognized tradeoff between guns and butter. There are also possible issues of war psychology, though I do not know how that fits an economics course. Perhaps it raises the issue of whether it is effective to appeal to motives other than self-interest.

Dan Ariely, author of Predictably Irrational, explains behavioral economics, which maintains that people are systematically irrational. If we recognize that we are not always rational, what can we do to compensate? Ariely says that standard economics assumes the world is as good as it can be and cannot be improved. Do you think most standard economists would agree? Why or why not?

Dan Ariely, author of Predictably Irrational, uses tickets to Duke University basketball games to illustrate loss-aversion or status-quo bias in this clip. Why do we value something differently when we own it than when we do not own it? Can you think of other examples?

Producers' and Consumers' Surplus Illustrated

The haggling scene from Monty Pythos' Life of Brian is funny because the seller views haggling not as a means to an end, but as an end in itself. Haggling is a contest to split up the surplus of a transaction, to determine how much each party gets of that surplus. Can you see how the notions of producer and consumer surplus are involved in this clip? Also, economics does not have a theory of what happens in the situation of one seller and one buyer. Does this clip do anything to explain why?


These links were checked on May 16, 2009.
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Copyright Robert Schenk