One of the big lessons from behavioral economics is that we make decisions as a function of the environment that we're in.
The idea that you will make the right decision every time is very unlikely.
We usually think of ourselves as sitting the driver's seat, with ultimate control over the decisions we made and the direction our life takes; but, alas, this perception has more to do with our desires-with how we want to view ourselves, than with reality.
It is very difficult to make really big, important, life-changing decisions because we are all susceptible to a formidable array of decision biases. There are more of them than we realize, and they come to visit us more often than we like to admit.
We are all far less rational in our decision-making than standard economic theory assumes. Our irrational behaviors are neither random nor senseless: they are systematic and predictable. We all make the same types of mistakes over and over, because of the basic wiring of our brains.
I don't want to say that the poor are inherently cognitively diminished, but at the end of the day of making difficult, tough decisions, it's very hard to have the energy to think about things with the right mindset.
If we all make systematic mistakes in our decisions, then why not develop new strategies, tools, and methods to help us make better decisions and improve our overall well-being? That's exactly the meaning of free lunches- the idea that there are tools, methods, and policies that can help all of us make better decisions and as a consequence achieve what we desire-pg. 241
A very simple bad decision is to get into debt. And that is very expensive.
We should teach the students, as well as executives, how to conduct experiments, how to examine data, and how to use these tools to make better decisions.
If you think of people as making decisions actively, every time we think about the cup of coffee, we say, "How much will I enjoy the cup of coffee, what else could I not do in the future because I buy this cup of coffee?
Linking financial element to energy consumption I think has a huge role if you think about a display instrument that could teach us about what we are using, how much it costs us, how much it is saving, and therefore change our decisions.
None of us always make the best financial decisions.
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