Microeconomics journal

John Doe

Econ 1B: XXXX

TTH:

Journal 1

  Why Is Economics Dead Wrong About How We Make Choices?

1. Summary:

In “The Irrational Consumers: Why Economics is Dead Wrong About How We Make Choices”, Daniel McFadden claims that purchasing behavior shown in the average customer cannot be simply explained by economics. However, by studying the psychology of customers, it appears that consumers are more likely to buy something when there are only few choices for them. Consumers do not like making choices when there are so many different options given to them because it takes too much effort and time to make decisions. Instead of acting rationally, consumers tend to behave base on their habits and social standards. Additionally, he believes that economic choices can make people uncomfortable about purchasing. In the article, the author uses a “fight or flee” example to illustrate his point (Thompson). When consumers face with a tough decision, they are willing to flee to something that they are already familiar with. Furthermore, the author also talks about “hyperbolic discontinuing” behavior (Thompson). Consumers are more likely to make irrational choices when they have to wait in the current time than at a later date.

2. Critical Analysis:

I believe that McFadden makes many good observations on consumer choice and behavior. I also believe that humans do not act like economic machines. Sometimes, when people make decisions, they act irrationally and emotionally. I can personally relate to the burden he describes of having to make decisions. When I go to a new restaurant with a large menu, I usually tend to “flee” to an easy decision or something I am already familiar with instead of “fighting” to make a decision about something new. I went to Hunan Chili King restaurant today for the first time. The restaurant had a big menu, and I did not want to read it since there was too much work for me to do. Instead of taking the time to think about my different options I just ordered typical Hunan dishes that I used to have at other restaurant. I can also relate to the way McFadden’s “hyperbolic discontinuing.” I recently purchased a new glasses frame when I went to the eye doctor. The employee told me that they didn’t have the black frame that I wanted and said I would have to wait 7 days for them to order a new pair for me. Instead of making the rational choice of waiting, I purchased a dark navy pair that they had in the store. If they had told me that I would have to wait 3 days for the blue pair and 10 days for the black pair, I would have chosen my desired color. Instead, I bought a color I didn’t like and ended up returning it to order the black pair.

3. Critical Question:

Making decision easier and distinct will encourage to people to make new choices and decisions, additionally, it will also improve the businesses’ efficiency. Are there any ways for businesses to make decisions easier for people? Is there a way to encourage people to make decisions and try new products?