Financial Planning Insights from Behavioral and Causal Economics
Financial Planing Article – Causal Economics
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Financial Planing Article – Causal Economics
Behavioral Economics provides a set of powerful and specific types of irrationality that marketers should consider each time they consider customer/prospect engagement. Other articles here lay out many examples. We highly recommend that a BE audit (BEMA) be conducted around each and every communication, to ensure that all relevant insights of BE are leveraged. We
Most of us at times get caught up in heated debates about economic policies and their broader social context. We need to do this for sure. But., it’s key to keep in mind that economics is just a decision making model at the individual level and a coordination system at a macro level. Good policies
Nudging is all the rage. Many countries now even have their own nudging units. Nudging can potentially play a role in good policy toward desirable ends, given our innate irrationality. However it is vital that people still have the freedom to make irrational decisions. Unfortunately, amid all the buzz, nudging is out of the gate
The central idea behind Causal Economics is that optimal decision making happens when costs and resulting benefits are tied together. This is a simplification similar to that of boiling Behavioral Economics down to the idea of Nudging (a form of Libertarian Paternalism). Going a step further, Causal Economics asserts that people are rewarded for their
CE is a unifying theory of economics because the other major models of economics can be derived from it at both a micro and macro level. At a micro level, major decision models, such as BE and EU, can be derived from CE through particular restrictions. Specifically, cost and benefit, both deliberate and uncertain are
Nudge theory is powerful and top of mind with many of today’s government, academic and business leaders. It’s earned its place there. But, if one is to pick up on Phil Kotler’s comment that behavioral economics is a fancy new formalization of marketing, certainly it could be said that nudging is even more so directly
Many of the predictions of Causal Economics center on the impact of consolidated power, because that is one of the main conditions that allows for decoupling, driving up B/C ratios for those with power and driving down B/C ratios for those without power. Economic freedom and economic consolidation are at opposite ends of the spectrum.
Causal Economics provides a great deal of insight on compensation practices. It reinforces some well recognized practices, flags some areas of poor approaches and lays out potential new approaches. This post puts a few areas on the table for discussion. Good compensation systems always try to connect pay (the cost to the employer and the
It’s commonplace to see increasing real GDP as a measure of improved utility in society. But it’s less common to imagine an even better scenario of increasing real GDP and deflation. In such a situation, real incomes are increasing in a strong and sustainable fashion, as we’ll show here. The word ‘deflation’ itself conjures up