Merriam-Webster dictionary defines “labor” as: a : expenditure of physical or mental effort especially when difficult or compulsory. b (1) :human activity that provides the goods or services in an economy (2) : the services performed by workers for wages as distinguished from those rendered by entrepreneurs for profits.” But, says Prof. of Behavioral Economics, Dan Ariely, On an intuitive level most of us understand the deep interconnection between identity and labor… ‘What do you do?’ has become as common a component of an introduction as the anachronistic ‘How do you do?’ once was—suggesting that our jobs are an integral part of our identity, not merely a way to make money…” Here is Ariely describing the psychology behind how we view labor: Like Rats In A Maze? As mentioned in a previous post, behavioral economics differs from standard economics because it doesn’t assume that people are strictly rational. Ariely describes this difference in the perception of labor: … the basic economic model of labor generally treats working men and women as rats in a maze… all the rat (person) wants to do is to get to the food with as little effort as possible. But if work also gives us meaning, what does this tell us about why people want to work?” Blogging As An Example In his book, The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home, Ariely looks into what motivates so many people to write blogs: … blogs have two features that distinguish them from other forms of writing. First, they provide the hope or the illusion that someone else will read one’s...
From a rational perspective, we should make only decisions that are in our best interest (“should” is the operative word here)… and choose the option that maximizes our best interests… Unfortunately, we’re not.” This is where behavioral economics enters the picture. In this field, we don’t assume that people are perfectly sensible, calculating machines. Instead, we observe how people actually behave, and quite often our observations lead us to the conclusion that human beings are irrational.” The above and subsequent quotes are taken from Dan Ariely’s book, The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home. Ariely is a Professor of Psychology and Behavioral Economics at Duke University and author of other works on behavioral economics. Standard Economics Vs. Behavioral Economics: A Matter Of Perspective? … there is a great deal to be learned from rational economics,” he says, “but some of its assumptions—that people always make the best decisions, that mistakes are less likely when the decisions involve a lot of money, and that the market is self correcting—can clearly lead to disastrous consequences.” Social And Market Forces The Financial Crisis … think about the implosion of Wall Street in 2008 and its attendant impact on the economy. Given our human foibles, why on earth would we think we don’t need to take any external measures to try to prevent or deal with systematic errors of judgment in the man-made financial markets?” This is where behavioral economics veers far from standard economics, because it seeks to look at human evolution and psychology in addition to standard economics, in order for social and...
