Econowmics Blog

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Opportunity Cost

Opportunity cost, to put it as simply as possible, is the price you have to pay in order to obtain something else. It is what you lose, to gain something else. Opportunity cost is a result of scarcity. We are not living in a fairy tale where everything is magically...

The False Mirror | René Magritte | 1928

Actor-Observer Bias

You  are  at  the  casino  watching  a  game  of  Black  Jack, when a player who has a hand of sixteen asks for another card.   You quip to yourself “What an idiot!   He should have held at 16.”   But who’s to say you wouldn’t have done the same?  After all, decision...

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Survivorship bias: dead men don’t tell tales

Diogenes was asked concerning paintings of those who had escaped shipwreck: “Look, you who think the gods have no care of human things, what do you say to so many persons preserved from death by their especial favor?”, to which Diogenes replied: “Why, I say that their pictures are not...

The False Consensus Effect

The False Consensus Effect

The false consensus effect demonstrates an inability of individuals to process information rationally, it suggests that conventional economic analysis of strategic behavior, which assumes unbiased expectation formation, is deficient. A Simple Theory of the False Consensus Effect, Young Park In a sense, every social observer is an intuitive psychologist who...