[Cyrus]

You want to buy a new car.

And since you are a diligent fellow, you purchase all the trade magazines, google the internet, etc, to identify the best value for your budget range. After a week's thorough research, and scanning over oodles of statistics, opinion polls, experts' polls, etc etc, you have narrowed it down to the best car for you, the Croco 8000 (for example), which combines the best safety, speed, etc, for the price costs that you can afford. Alright! You settle on the Croco 8000 and decide to buy it first thing Saturday morning.

The same evening you are invited to a cocktail party and, you mingle, the issue of your new car comes up. A man you met at the party, and had a long and very enjoyable talk about favourite movie actresses, tells you that the Croco 8000 is an unreliable car. Why, only last week his first cousin had a near fatal accident because the steering wheel locked when making a turn! And the price is a ridiculous theft; it should retail much, much lower.

You are shaken in your conviction. Next morning, you strike off the Croco 8000 from your list and start looking anew.

...What happened here, if you step back and think about it a little, is that you have chosen one man's anecdotal (and possibly not very reliable) testimony against the combined wisdom of experts and the buying public. This, however, is not an atypical scenario *. This is how a lot (if not most) people take decisions!

Although "mathematics" (i.e. probability theory, algebra, game theory, etc) often provides us with the correct choice, we humans do not always (or usually) follow its advice -- for many reasons.

And the people who behave this way (i.e. "irrationally") are NOT just people with mediocre intelligence. David Sklansky speculated elsewhere that around 5% of the people have the ability to get a PhD in Physics, implying that approximately that percent of people have what is commonly termed "the smarts". But a whole bunch of choice experiments conducted with psychologists, economists or statisticians as subjects, have shown that they are no different at all from "common people" in terms of heuristics! (And, sometimes, the self-correction factor of the experiment's subjects is insignificant even after the subjects have been properly trained for the kind of choice they will be presented with.)

Now, is that really "the smarts"? [img]/images/graemlins/cool.gif[/img]

A work is waiting to be written about people's choices in gambling games, and particularly poker, and about the potential for driving (controlling) those choices. Perhaps when I go to jail.


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* : The example is lifted from Thaler.