Yes, You’re Irrational, and Yes, That’s OK

Berreby_BREAKERIllustration by Michael Meister

The insight that will save you from being manipulated.

Sound like six of one, half-dozen of the other? Many would say so. But that can change when a third person is added to the mix. Suppose candidate number three has a meager income and isn’t as financially astute as choice number two. For many people, what was once a hard choice becomes easy: They’ll pick the better moneybags, forgetting about the candidate with sex appeal. On the other hand, if the third wheel is a schlumpier version of attractive number one, then it’s the sexier choice that wins in a landslide. This is known as the “decoy effect”—whoever gets an inferior competitor becomes more highly valued.

The decoy effect is just one example of people being swayed by what mainstream economists have traditionally considered irrelevant noise. After all, their community has, for a century or so, taught that the value you place on a thing arises from its intrinsic properties combined with your needs and desires. It is only recently that economics has reconciled with human psychology. The result is the booming field of behavioral economics, pioneered by Daniel Kahneman, a psychologist at Princeton University, and his longtime research partner, the late Amos Tversky, who was at Stanford University.

It’s all about leveraging the unconscious factors that drive 95 percent of consumer decision-making.

It has created a large and growing list of ways that humans diverge from economic rationality. Researchers have found that all sorts of logically inconsequential circumstances—rain, sexual arousal (induced and assessed by experimenters with Saran-wrapped laptops), or just the number “67” popping up in conversation—can alter the value we assign to things. For example, with “priming effects,” irrelevant or unconsciously processed information prompts people to assign value by association (seeing classrooms and lockers makes people slightly more likely to support school funding). With “framing effects,” the way a choice is presented affects people’s evaluation: Kahneman and Tversky famously found that people prefer a disease-fighting policy that saves 400 out of 600 people to a policy that lets 200 people die, though logically the two are the same. While mainstream economists are still wrestling with these ideas, outside of academe there is little debate: The behaviorists have won.

Yet for all their revolutionary impact, even as the behaviorists have overturned the notion that our information processing is economically rational, they still suggest that it should be economically rational. When they describe human decision-making processes that don’t conform to economic theory, they speak of “mistakes”—what Kahneman often calls “systematic errors.” Only by accepting that economic models of rationality lead to “correct” decisions, can you say that human thought-processes lead to “wrong” ones.

But what if the economists—both old-school and behavioral—are wrong? What if our illogical and economically erroneous thinking processes often lead to the best possible outcome? Perhaps our departures from economic orthodoxy are a feature, not a bug. If so, we’d need to throw out the assumption that our thinking is riddled with mistakes. The practice of sly manipulation, based on the idea that the affected party doesn’t or can’t know what’s going on, would need to be replaced with a rather different, and better, goal: self knowledge.

Nowadays, that fast-food company trying to get you to eat fries and the Health Department trying to get you not to both use techniques drawn from behavioral economics—framing and priming you to make certain choices. Welcome to the new era of “choice architecture,” “behavioral marketing,” and “nudge.”…



Nostalgia Just Became a Law of Nature


Photo by pretty life photography

New theories have mixed perception and knowledge into the hardest of sciences.

Imagine Ruskin’s surprise, then, were he to learn that the mathematics of perception, knowledge, and experience lie at the heart of modern theories of the natural world. Quite contrary to his stern intuition, quantitative relationships appear to tie hard, material laws to soft qualities of mind and belief.

The story of that discovery begins with the physicist Ludwig Boltzmann, soon after Ruskin coined his phrase at the end of the 19th century. It was then that science first strived, not for knowledge, but for its opposite: for a theory of how we might ignore the messy details of, say, a steam engine or chemical reaction, but still predict and explain how it worked.

Boltzmann provided a unifying framework for how to do this nearly singlehandedly before his death by suicide in 1906. What he saw, if dimly, is that thermodynamics is a story not about the physical world, but about what happens when our knowledge of it fails. Quite literally: A student of thermodynamics today can translate the physical setup of a steam engine or chemical reaction into a statement about inference in the face of ignorance. Once she solves that (often simpler) problem, she can translate back into statements about thermometers and pressure gauges.

The ignorance that Boltzmann relied upon was maximal: Whatever could happen, must happen, and no hidden order could remain. Even in the simple world of pistons and gases, however, that assumption can fail. Push a piston extremely slowly, and Boltzmann’s method works well. But slam it inward, and the rules change. Vortices and whirlpools appear, streams and counter-streams, the piston stutters and may even stall. Jam the piston and much of your effort will be for nothing. Your work will be dissipated in the useless creation and destruction of superfluous patterns.

How that law works itself out—how waste occurs in the real world, beyond the ideal—was unavailable to Boltzmann. The thermodynamics of the 19th century needed to wait for equilibrium to return, for all of these evanescent and improbable structures to fade away. Our ignorance in the equilibrium case is absolute: We know that there is nothing more to know. But in a world out of equilibrium we know there is something more to know, but we do not know it.

Non-equilibrium thermodynamics was unexplored territory for many years. Only in 1951, 45 years after Boltzmann’s death, were we able describe how small adjustments that kick a system ever so slightly out of equilibrium vanish in time, through something called the Fluctuation Dissipation Theorem. Compared to quantum mechanics or relativity, neither of which were subjects until the time of Boltzmann’s death, but which threw up surprise after surprise for decades, thermodynamics appeared to operate on glacial scales…



Thoughts on Bankruptcy by Voltaire

Robert Couse-Baker (CC BY 2.0)

Robert Couse-Baker (CC BY 2.0)

By Marcie Gainer

Excerpted from Voltaire’s Philosophical Dictionary.

Few bankruptcies were known in France before the sixteenth century. The great reason is that there were no bankers. Lombards, Jews lent on security at ten per cent: trade was conducted in cash. Exchange, remittances to foreign countries were a secret unknown to all judges.

It is not that many people were not ruined; but that was not called bankruptcy; one said discomfiture; this word is sweeter to the ear. One used the word rupture as did the Boulonnais; but rupture does not sound so well.

The bankruptcies came to us from Italy, bancorotto, bancarotta, gambarotta e la giustizia non impicar. Every merchant had his bench (banco) in the place of exchange; and when he had conducted his business badly, declared himself fallito, and abandoned his property to his creditors with the proviso that he retain a good part of it for himself, be free and reputed a very upright man. There was nothing to be said to him, his bench was broken, banco rotto, banca rotta; he could even, in certain towns, keep all his property and baulk his creditors, provided he seated himself bare-bottomed on a stone in the presence of all the merchants. This was a mild derivation of the old Roman proverb–solvere aut in aere aut in cute, to pay either with one’s money or one’s skin. But this custom no longer exists; creditors have preferred their money to a bankrupt’s hinder parts.

In England and in some other countries, one declares oneself bankrupt in the gazettes. The partners and creditors gather together by virtue of this announcement which is read in the coffee-houses, and they come to an arrangement as best they can.

As among the bankruptcies there are frequently fraudulent cases, it has been necessary to punish them. If they are taken to court they are everywhere regarded as theft, and the guilty are condemned to ignominious penalties.

It is not true that in France the death penalty was decreed against bankrupts without distinction. Simple failures involved no penalty; fraudulent bankrupts suffered the penalty of death in the states of Orleans, under Charles IX., and in the states of Blois in 1576, but these edicts, renewed by Henry IV., were merely comminatory.

It is too difficult to prove that a man has dishonoured himself on purpose, and has voluntarily ceded all his goods to his creditors in order to cheat them. When there has been a doubt, one has been content with putting the unfortunate man in the pillory, or with sending him to the galleys, although ordinarily a banker makes a poor convict.

Bankrupts were very favourably treated in the last year of Louis XIV.’s reign, and during the Regency. The sad state to which the interior of the kingdom was reduced, the multitude of merchants who could not or would not pay, the quantity of unsold or unsellable effects, the fear of interrupting all commerce, obliged the government in 1715, 1716, 1718, 1721, 1722, and 1726 to suspend all proceedings against all those who were in a state of insolvency. The discussions of these actions were referred to the judge-consuls; this is a jurisdiction of merchants very expert in these cases, and better constituted for going into these commercial details than the parliaments which have always been more occupied with the laws of the kingdom than with finance. As the state was at that time going bankrupt, it would have been too hard to punish the poor middle-class bankrupts.

Since then we have had eminent men, fraudulent bankrupts, but they have not been punished.

– See more at:

British people are sexually uptight, dirty and drink too much – according to Spanish book

by Lamiat Sabin

British people like to drink too much and would rather complete a crossword than have sex, according to a book published in Spain.

Alberto Letona somewhat helpfully seeks to dispel the idea that Brits are hooligans who get blind-drunk in Spanish resorts by replacing them with a few dubious stereotypes of his own.

The author of Sons and Daughters of Great Britain describes the populace of Britain as stingy and liking alcohol too muchaccording to The Times.

Brits also have trouble with intimacy, allegedly. It is a “trait” that has long been lampooned in home-grown classic sitcoms such as Fawlty Towers, in which hotel owners Basil and Sybil do not even share the same bed.

The long-standing class system also gets a good dressing-down as he criticises the way British people seek to keep up appearances or hide their real intentions with niceties.

The former journalist, who is married to a British teacher and had lived in St Andrews and London, writes: “Middle-class people are more given to hypocrisy.

“They might say ‘Ring me and I’ll take you for lunch’ when it is the last thing they want to do. The upper class do not need to pretend to be friendly.”

Personal hygiene habits are also scrutinised. As seen through the eyes of Mr Letona, British people do not wash as often as the Spanish and our toilets are apparently not as clean either.

As well as pitting Hispanophone readers against the “British way” of life, the author also argues that English people, in particular, are jealous of other nations of the UK and that Scots are more generous and lively than the English.

He writes: “The English appear jealous of the Scots, Welsh and Irish with their own parliaments. They do not seem happy with their national identity.”

But, not all is lost. According to Mr Letona, our fish and chips and Sunday roasts are unrivalled. And he admires our ability to convert our symbols into souvenirs for tourists.–according-to-spanish-book-10077016.html


In “Paranormal” Europe, Banks Will Pay You To Borrow, And Charge You To Save

Source: Zero Hedge

A month ago, we wrote about a bizarre situation involving Denmark’s now totally broken monetary system, where as a result of an unprecedented scramble to weaken the currency in order to preserve the peg to the Euro the central bank unleashed a historic rate-cutting scramble, where in 4 consecutive rate cuts its pushed the interest rate to an unheard of -0.75% (while at the same time being the first modern central bank to unveil what we dubbed “Bizarro Backdoor QE“). The culmination of this series of events was the surreal realization by some debtors that the bank would now pay them the interest on their new or existing mortgage.

The insanity was only compounded when one considers that in the vast majority of European countries, depositors are already (or will soon) pay for the “privilege” of providing banks with unsecured funds (in the US, JPM recently also started charging some customers – mostly corporate and hedge funds- for holding their deposits).

In short, this is what Europe has become: savers – those who diligently put away the fruits of their labor – are now forced to pay, using banks as an intermediary, and subsidize the the debtor: spenders, who live beyond their means, and who in increasingly more frequent situations are now paid to take out even more debt! Call it monetary socialism.

Which is probably why with a one month delay, none other than the NYT decided to cover precisely this topic with “In Europe, Bond Yields and Interest Rates Go Through the Looking Glass

Here is the story in a nutshell, shown with pictures so even central bank idiots and other economist PhDs will get it:

A Denmark bank will pay Eva Christiansen, left, $1 a month for taking out a loan. Ida Mottelson’s bank will charge her to hold her money:

The key highlights from the NYT story:

At first, Eva Christiansen barely noticed the number. Her bank called to say that Ms. Christiansen, a 36-year-old entrepreneur here, had been approved for a small business loan. She whooped. She danced. A friend took pictures.

“I think I was so happy I got the loan, I didn’t hear everything he said,” she recalled.

And then she was told again about her interest rate. It was -0.0172 percent — less than zero. While there would be fees to pay, the bank would also pay interest to her.

… some corporate bonds, which are generally deemed less creditworthy than government bonds, are falling into the negative territory, including some issued by Nestlé and Novartis, a Swiss pharmaceutical company. While they did not initially have negative yields, investors bid up their prices after they were issued. “This is obviously a once-in-a-lifetime and once-in-history phenomenon,” said Heather L. Loomis, a managing director at JPMorgan Private Bank, who specializes in bonds, “and it is hard to make sense of it.”

Ms. Christiansen, a sex therapist, took out a loan to finance a website called LoveShack that is part matchmaking site, part social network. For her, the full novelty of her loan didn’t sink in until a spokeswoman for the bank called her back.

“She said, ‘Hi, Eva, they have contacted us from TV 2’ — it’s a big station in Denmark, one of the biggest — ‘and they would like to talk to you because of this loan,’” Ms. Christiansen said. “Then I was really like, ‘O.K., this is big.’”

She said she was generally aware of what the Danish central bank was doing, but fuzzy on the specifics and had not paid close attention to the issue until she realized she might be asked about it in front of a camera.

“When I was contacted by the television, I was like, ‘O.K., I need to know something,’” she said, laughing, during an interview at her office, where two distant windmills were visible outside the windows. “So I actually called my bank adviser and said, ‘Can we please have a meeting?’ Because all these financial terms, I’m not used to them,” she said. “If I talk about something, I’d like to know something about it.”

Some other Danes are facing a related, if somewhat opposite, issue.

Last month, Ida Mottelson, a 27-year-old student, received an email from her bank telling her that it would start charging her one-half of 1 percent to hold her money. “At first I thought I had misunderstood this, but I hadn’t,” she said.

Ms. Mottelson is studying for a master’s degree in health sciences, and lives in Odense, a city about 100 miles west of Copenhagen. She said she had been following the news about the central bank, but called her own bank just to make sure she was reading the email correctly.

“I asked him supernaïvely, ‘Can you explain this to me?’ And he tried, but I got the feeling he was like, come on, just move the money and you’ll be fine.”

She does plan to move her money to another bank. “I’m not an expert,” Ms. Mottelson said, “but to me it sounds so weird that you have to pay to have your account at a bank.”

You are right, Ms. Mottelson: it is. And it will only get much weirder from here. Because we have now gotten so far past the looking glass into a world in which the central banks have broken every correlation and logical relationship so profoundly, that nothing makes sense any more; whoever, before the now inevitable grand reset when everything finally collapses under the unsustainable weight of the global house of cards, things will only going get even stranger…



French and Americans: Freedom ‘Brothers at Odds’ (O Globo, Brazil)


By Helio Gurovitz

Translated By Brandi Miller

“Ask an American what he or she thinks of the French: They are arrogant they’ll say, stuck in the past, a culture that thinks it’s superior, lazy, defenders of privilege, a set-in-their-ways society, hostages of an economic model whose wreck is evident – and a curse in the United States: ‘socialists.’ Now, ask any Frenchman what he or she thinks of Americans: A smug, unrefined people who don’t understand life’s pleasures, don’t know how to eat or drink, only think about money, weapons and power, have delusions of grandeur and disrespect the privacy of others – a futile people, superficial and in France an expletive: ‘uncouth.’ …Yet the gigantic monument that impresses everyone upon arrival at the port of New York was a French gift. The original statue, smaller it is true, is in Paris, not far from the Eiffel Tower. Both recall the old Enlightenment ideal that unites the two peoples even today: liberty.

These are prejudices, of course. It’s worth remembering that a short time ago, the Americans turned a book about inequality by French “neo-socialist” Thomas Piketty into a best seller. And in Provence, one of the France’s most refined regions, the local population throngs McDonald’s to eat burgers and fries on Saturday nights. The Americans call them “French fries” whereas Provence dwellers adopted the Anglo term “potatoes.” French and Americans are like brothers living at odds, more similar than different. The root of this is in history. American Independence and the French Revolution have the same DNA, the result of an innovation in the world of ideas known as The Enlightenment.

France was the distribution center for Enlightenment ideas by way of a type of Internet of its time: the Encyclopedia. This story of this 18th century “super-information highway” is the theme of The Business of Enlightenment by historian Robert Darnton, an American impassioned with France and head of the Harvard University Library. Conceived of by philosophers, the Encyclopedia had, according to Darnton, a duel mission. First, it was a manifesto of the Enlightenment. It made reason – no longer divine inspiration or royal objectives – the center of ideas. Second, in entries written by specialists, encyclopedists undertook a methodical account on all accumulated knowledge. Professionalism should impose itself over nobility, royal privilege or divine right.

In its day, the Encyclopedia was the greatest editorial undertaking of all time. Its impact extended over more than fifty years. In the beginning it was banned, then released thanks to a brilliant editor that turned it into a best seller: Charles Joseph Panckoucke, a businessman from Lille and a kind of Rupert Murdoch of his time. It underwent multiple reissues, patches, corrections and supplements according to political and commercial demands. It was sold through a sophisticated system of subscriptions wherein portions were delivered as they were produced. The French editors used false advertising to sell subscriptions, became embroiled in hard-fought business disputes, Panckoucke was victimized by a disloyal partner, and authorities confiscated books and pirated copies throughout Europe. At the end of the century and all of this adventure, their editions even disseminated knowledge of the encyclopedias to the United States where Thomas Jefferson, former ambassador to France, convinced compatriots like Benjamin Franklin or James Madison to subscribe…



New study: Marijuana 144 times safer than alcohol

By John Vibes | True Activist

A new study, published in the journal, ‘Scientific Reports,’ suggests that smoking cannabis is roughly 114 times safer than drinking alcohol. Ironically, out of all the drugs that were researched in the study, alcohol was actually the most dangerous, and it was the only legal drug on the list. Just behind alcohol, heroin and cocaine were listed as the next most dangerous, followed by tobacco, ecstasy, and meth. The criteria that these drugs were arranged by, was according to the likelihood of a person dying from consuming a lethal dose.“The results confirm that the risk of cannabis may have been overestimated in the past. At least for the endpoint of mortality, the [margin of exposure] for THC/cannabis in both individual and population-based assessments would be above safety thresholds (e.g. 100 for data based on animal experiments). In contrast, the risk of alcohol may have been commonly underestimated,” the report states.Currently, the MOE results point to risk management prioritization towards alcohol and tobacco rather than illicit drugs. The high MOE values of cannabis, which are in a low-risk range, suggest a strict legal regulatory approach rather than the current prohibition approach,” the report continues.

While this is not the first study to rank marijuana very low in terms of danger, it comes at a time when the debate surrounding marijuana legalization is more heated than ever before, with more and more people agreeing that it is time to end prohibition. In reality, a prohibition of any kind is a scam, and the drug war is a racket of many prohibitions. What the drug war actually accomplishes is the establishment of black markets and gangs, the erosion of personal liberties, the expansion of the prison system and prison population as well as a constant excuse for frivolous government spending. This hypothesis has been tested time and time again, anytime throughout history where a ruling power has prohibited the consumption or possession of any item whatsoever.

This process was made quite clear during the alcohol prohibition of the 1920s and 1930s. As we saw with alcohol prohibition, making a substance illegal does nothing to stifle its use, but simply creates outlaws out of nonviolent people and foments a culture of violence that the rest of society is forced to deal with, even if they have no interest at all in the banned substance.

Prohibitions of any kind should be opposed, for the reasons I have laid out in the past. However, marijuana is of a specific immediate importance though, because of its ability to heal sick people and create more environmentally friendly industrial products. It is also one of the safest drugs known to our species…

This report originally appeared on True Activist.