Behavioral Economics 101

First and foremost, I would like to apologize for a very cliched title. But, somehow, this does capture attention; at least for a first few lines.

Talk to any classical economist and you will undoubtedly hear of rational being in the first couple of sentences he/she speaks. This concept of rational being was first propounded by Adam Smith, widely regarded as the father of modern economics way back in 1776. According to this concept, humans behave in a perfectly rational manner wherein they always strive to maximize their utility. This was the most fundamental axiom on which economic theories were based for almost two centuries. And it is somewhat fascinating to note that rationality was taken as an assumption for such a long time without anyone bothering to actually treat it as a variable while developing theories.

This finally changed when two brilliant guys, Daniel Kahneman and Amos Tversky put rationality to test and came out with surprising results. Their research married economics and psychology which came to be known as behavioral economics as a couple. This was late 1970s. Advancements in behavioral economics provided a whole new dimension to marketing, advertising, HR management, public relations, designing and several other segments.

This is a new and exciting science and though, it has taken the economic research world by rage, India happens to be largely insulated from this knowledge. Yes, it has made inroads in industry applications but research wise, country is still in very nascent stages.

OK, this is getting a bit textbook pattern. This is a science best learned best learned by practical experiments. So, let’s dive into knowledge.

THE MUMBAI LOCAL EXPERIENCE:

Everyone’s familiar with overwhelming crowd of Mumbai’s notorious local trains. But if you have traveled in them (Yes, you can. It’s easier than climbing Everest), you will notice an interesting behavior. First, let me give a little background. There are two classes in local trains – first and second. Only difference between the two is there are cushioned seats in the first class and plastic ones in the second. Dimensions, number of fans, ventilation and all other things are the same. Except for the fare. First class tickets are almost 10 times costly than the second class ones for the same distance. The seats are designed to accommodate 3 adults but can squeeze in 4. As you can expect, four chaps do cram up on seats in second-class compartments. But even during super-dense peak hours, you won’t see 4 people on a seat in the first class compartment.

Now, one might argue that this is because of significantly higher fares people pay to travel in first class. But consider that all the people in a particular coach or class have paid the same fare. So, a fourth guy might turn up and say to the seated passengers, “Don’t give me your shit about how much you paid to get into the first class. I have paid the same. So move your ass and give me some space!” But this does not happen in first class. Anytime.

The reason for this behavior lies in the fact that first class passengers are highest paying guys on the train. This gives an elitist complex to the people. They feel they should conduct themselves in a more civilized manner. To get a better perspective of the feeling, consider Indians following traffic rules when they visit developed nations and not giving a rat’s ass back home. Or refraining from spitting in a mall while all other public spaces are painted betel red.  

So, now one might wonder what would happen if the railways come up with a new class? Say, the super first class? It’s way more comfortable, has air-conditioning and always smells fresh in the humid city weather. And not surprisingly, fare’s almost double the fare of a first class. What would happen to the behavior of first class passengers? And more importantly, what would happen to the number of first class passengers?

Given the reason of elitist complex, it won’t be very difficult for many to guess the number of people on a seat in the first class coach. Yes it should be 4. And now shifting focus to the numbers. A very rational argument would be number of passengers in first class compartment would go down. This would because with the super first class opening up, passengers with a higher propensity to spend would move away for better facilities. And as second class passengers would have never spent on a first class ticket, they would definitely not do so after the super first class becomes operational. That’s classical economics for you – rational and convincing. Sadly, that’s not how people behave. We have inherent biases (technically heuristics) that clouds textbook rationality.

Let’s consider a situation before actually addressing this issue. You are on a first date at this fancy restaurant and your date is really confused about her wine. What would be your suggestion? You are uncertain about your future prospects with your date and the first rational thought would be to order the cheapest one. But at the same time you don’t want to look as a cheap steak and you too end up in a dilemma. And then you find a middle path and suggest a medium priced wine.

Extending the same behavior in local trains. Again, your reputation is under purview by the large number of people who see you getting into the train. Also, a factor of social confidence crops up which was rather absent in the date scenario. You again start thinking on similar lines. It would be outrageous to spend so much on the super-first class. But I am also not so poor that I travel in the cheapest coaches. I should definitely buy a first class ticket. Thus, overall number of passengers in first class compartments would increase. This line of thought is used in a variety of businesses and unknowingly, we succumb to our heuristics to make an irrational decision. A very popular application of this phenomenon is in designing of menus. Such menus would have items with largest profit margin as the second most expensive item. And not surprisingly, they would also be the best selling items!

Human brain is plagued with several such biases that lead us to making choices that might not be in our best interest. Many breakthroughs have been made in uncovering these faulty perceptions by some fantastic experiments conducted by eminent cognitive scientists. This article has convincingly (?) covered just one of those biases. If I have succeeded even partially in flashing up your interest in this fascinating science, I would recommend books by Dan Ariely and Tim Harford. They are a treat to read!

Note: I wrote this article almost 8 months back for my college magazine. But, the coordinator resigned and so did the idea of publishing this post. Also, considering the unfeasibility of the local train experiment, all the arguments I have presented are based and/or directly inspired on published research conducted by recognized cognitive scientists. All the observations regarding passenger behavior are based on regular travels in local trains for over 20 years coupled with discussions with several ‘local’ friends. A deviation was pointed out by my friend Apeksha that fourth seat syndrome does exist in ladies first class compartments. So, it would be considerable to exclude them from this hypothesis.

Forecasting life after college

First two paragraphs of this post are very general in nature. Obviously, outliers exist that don't fit this description. Personal views third para onwards.

Technically, it wouldn't be fair to forecast life after college as we all know, its a great shock and equations alter significantly. But I am referring my predictions on interactions, observations and literature (source: Quora) of the alumni. And even though we can always bullshit about the ideals of individuality, harsh truth remains almost everyone gets institutionalized willingly or unwillingly. Right from the time we enter these much-hyped residential campuses, our habits start converging - from GPLs to those panic driven 'one night stands' during exams (for the uninformed, that's the max action you can expect in one night stands at our campuses) to insane puke-filled nightouts, we all follow similar trends. Our trajectories are pretty similar even before entering college, in spite of very different histories. Class toppers, teacher's favorite, revered by juniors, you pretty much get the idea. So, yes alumni can be a decent proxy.

Here's my projection of life few years down the time. You have a stable job in your hand. Either after a MBA from IIM or MS or scraping experience from job(s). Money would be good, but might be less than personal, parental and societal expectations. Things like CPI are statistically insignificant now. You are married to a pretty lady your parents scouted for you or are in a relationship which is still a big deal among your friends (well, some things probably never change). A vast majority of your social circle still revolves around your college friends. You meet them over a beer almost every weekend. You come back to college once in a while and drench yourself in nostalgia. Supervisors have replaced professors but well, juniors are still juniors. No longer are profanities so common and finally you have mastered the MS Office point lingering in your resume since high school. Formal pants now dominate your wardrobe. Fine dining is no longer a taboo and saal mai ek vacation toh banta hai boss! Overall, life is peaceful.

And that's what I dread. A peaceful but mundane life. Not that I detest the mentioned pleasures but there would be something lacking. I have always dreamt of a life fueled by excitement and passion. Something that a regular 9 to 5 job fails to provide. And that seems increasingly likely that I will end up in one with the way I am progressing in my career. My college days have made me realistic enough to realize I am not one of those outliers to easily break free from the highly probable lifestyle. But I need to. If not the easy way, then by some other way. I so need to find a direction to live not only peaceful but also purposeful life. I have no idea how would I find my answers. People tell me everyone goes through this phase and one should not take drastic steps while in this stage. Sounds rational enough. But rational thinking also handicaps us to utilize the amazing potential trapped in 'leap of faith'. Sometimes, it is important to trust our guts and that's exactly how I aim to find my answers. Sounds vague and emotion-driven, right? And I have made a right start. This is something new for me. Here's to the new beginnings! 

Raising an Objection

So, there has been a quite an uproar over Palash Sen’s comments at Mood-I. Though I feel the situation was blown greatly out of proportion and I feel there should be ample tolerance for humor, it certainly raised an important issue of the targeted misbehavior towards the minority sex at IITs. Although most of my judgments are based on my experience at the Kanpur campus, I know for sure, such prejudice exists at other campuses too.

What I have observed over past three years is that an abnormally high percentage of boys don’t really understand the existence of a thin line between profanity and vulgarity. I am well aware of the fact that this phenomenon is a part and parcel of any existing social fabric but the proportion of such elements in IITs is concerning ( I, by any means, do not imply that most of boys fall in this category. They form a negligible percentage indeed. What I am focusing is on the comparison of negligibles.)  Coming back to point, using profanities against girls in private is somewhat acceptable but inciting a mob of over 200 juniors to publicly shower choicest indecent remarks on girls over petty things such as inter-hall competitions and ‘honor’ of one’s hall is ridiculous.

Another aspect that disturbs me is how extreme objectification of women openly in a co-ed institution is very well acceptable. The tradition of a particular dance form and the tone during GBMs are vivid examples.

I realize I might sound as a feminist but all I am trying to point out we guys should exhibit a certain level of respect and decency towards girls in campus (on a similar note to our behavior outside campus.) In fact, from my experience, certain girls from campus can be way cooler and fun than those outside campus. Just senselessly branding them is something I wish we can avoid.

Things I learnt as a summer intern

I was always under the expectation that my internship would be a fabulous experience. In fact, it was supposed to be a part of my eventful post-sophomore summer. Partly, it was because of rosy internships a couple of friends had in the preceding winter. But just a week into the internship, my expectations were boomed. It was a wreck-job and I just waited for the clock to tick and weekend to arrive to escape back into life. It just feels so enriching now that the misery is finally over.

But, reflecting over the last 50 odd days, there comes a realization that learning does not stop even in such difficult times. It might not happen in a direct manner but at the sub-conscious level, you do feel that the experience ingrained some knowledge in you. We need to work a bit on introspection but that 'hidden' knowledge would surely shape up in your observable world. Here's what I learnt -

• Passion is important. This is something I realized very early in my internship. Inspired by various popular science books on economics, I felt type of industry is of no importance as long as we are working in our field. Not true. At least in my case. Unless I am passionate about the industry I am working in, I won't find any meaning to the work I am doing. Henceforth, I will make it a point to only work in industries I believe in.

• Jobs kill ambition. I learnt this at the other end of internship. Towards the end, I got just a bit more accustomed to my schedule. The impending paycheck made me accept the situations and switch off my expectations. And then I saw people all around me in local trains (there were familiar faces by now) and I can look into their eyes how they have accepted every push and nudge that comes across as a routine. I know it's highly likely I would land up in a job eventually but I would surely find a way to fuel my ambitions relentlessly.

• Knowledge is all around us. Everyone knows how painful it is to travel in Mumbai local trains. And I did that. During peak hours. Six days a week. Let going the physical trouble, it was a treasure of learning. It was a wonderful opportunity to study behaviour of people in high stress situations. Though my first class coach sandwiched between a second class compartment and first class ladies only section, I observed several attitudes and nuances characteristic of a particular class. This in turn, gave me confidence to frame models that would not only increase revenues for railways but also provide passengers with a much better travel experience. So, yes, even from terrible experiences, with a right frame of mind, we can extract knowledge. My internship and this blog, after all, stand testimony of that fact.
    
• Reading between the lines. Till now, my conversations were largely dominated with friends, family and teachers who were very direct in putting across their point. So, even though I was already acquainted with this necessary worldly skill, it was only now that I actually put it to use. My superior was very secretive and knowing his vulnerabilities from reading between the lines gave me a psychological edge in subsequent conversations.
    
• Being shameless. Other than being secretive, my boss was also an asshole. Most of the interns were first-timers and initially there was a natural reluctance to voice objections. He would use that to his advantage and make us work overtime over menial work while not following any work ethics himself (would almost always arrive only by lunch hour and disappear for hours to get a haircut). Now as interns, we were ready work our asses off, but only if work was meaningful which was not in this case. And then we turned shameless. We would leave office dot in time and would flatly refuse to stay even a minute longer. He was playing games even for paying stipend and then again, this quality of being shameless prevailed in the battle of egos.  

So much for introspection. Yes, there was a lot to learn from this experience. Much of it could not even be documented for lack of realization. But still, the experience was not pleasant. And yes, I did wait for the check to clear before publishing this rant!

Mind Uninterrupted

I wrote the following piece when I was not really in the best of my moods. I sat on it for a few days before publishing it because of the completely unorthodox phrasing of the post. There's absolutely no continuity but it has a kind of different charm, atleast for me.  

    Well, I have already written about all the shit I wish to do but I have not at all said a bit about myself. So, as everyone reading this knows, I am Aman Pandya(just a formality). I study at the much-hyped Indian Institute of Technology, Kanpur(there will be seperate blog about the 'much-hyped' part). I am from the city of dreams, Mumbai. And here comes the first irony - people come to Mumbai to pursue their dreams and I am the asshole who has run away from it. But, as I have realised, my life is full of such ironies and I have adapted myself to plainly ignore them. Or so I feel. For if that were true, I wouldn't be writing this piece in the middle of a night after a heck of a day with an 8 am class which I just can't miss(fuck this wieghtage on attendence). And yeah I am also listening to these songs which I normally don't give a damn. Hmm, this realization makes me feel pathetic. Getting back to ironies, I am doing a Bachelors in Science majoring in Economics- a Humanities thing from the nation's supreme technological institute and moreover I am really happy doing it instead of engineering. Well, a change of track, and I wonder how much music influences human psych. Damn, this psychology course is really getting over my head. Jumping to Mumbai, I really love my city and really find it painful to exist anywhere less urban than it. Why the heck did I write that line? Perhaps I find it amusing to mock all other places of India or it's just that I really wanted to use the phrase 'less urban than'. I am writing arbitly. If I were speaking this, perhaps I would have been drunk. Was there alchohol in the Tropicana pack I last gulped? Oh, now I get, this is how it seems when you bring out every thought of yours and this also gives a title to this post. Obviously, I can't imagine to talk so much shit in normal life but that's the brain dominating mind thing I feel. This track is really amazing, do listen it - In the presence of enemies by Dream Theatre. Now I am really sleepy. Later folks.

The Bucket List

   It has hit me hard, not completely sunk in too, but for sure with all this uncertainty over what I wanna do, I am in all probability just left with three years of student life.  It's a pretty long time as such but considering how my freshie year passed by, I seriously think I need a to-do list. One which keeps me from not being a student till the time really arrives. And here's how it compiles:


1. Spend 24 hours at a stretch at the P K Kelkar Library.
Status: Missed a great opportunity this sem. But I have 4 more left.
Closing Remark: Spent 16 hours once. The retro furniture definitely needs an uplift.

2. A 24 hour gaming session.
Status: I was somehow disoriented this sem on gaming scene. I will be back stronger.
Closing Remark: Incomplete. I am yet to decide if its a good thing or bad.

3. Get a 10 pointer.
Status: What was I thinking when I wrote this?
Closing Remark: Again. What was I thinking when I wrote this?

4. Hit on some IITK prof's chick daughter.
Status: I am told all of them study in colleges outside Kanpur. And when they are here, I am home. So, chances are bleak.
Closing Remark: Well, I am no longer that silly teenager who wrote that line.

5. Indulge in a full-on physical contact fight bang in the middle of LHC.
Status: Who's up for a fight?
Closing Remark: Incomplete.

6. Travel without a reserved ticket on a long distance train.
Status: Can say I did that partially. A friend without a reserved ticket tagged along with me. So, pretty much got a feel of things.
Closing Remark: Done.

7. Go on a date.
Status: Seriously, am I that bad around girls?
Closing Remark: Done.

8. Be a part of car-race on the lanes of IITK.
Status: Really tough. But as a consolation, had a cycle race from Main Gate to OAT.
Closing Remark: Just. Too. Ambitious.

9. Attend a rock concert. (The big ones I mean, not the kind at college fests)
Status: Missed a couple of ones for want off company. But I wont be missing one again, even if it means I am head-banging all alone.
Closing Remark: Poets of the Fall visited campus this year. I couldn't ask for anything more from my last semester at IIT-K.

10. Mess mai breakfast, every day for a week.
Status: Done.
Closing Remark: This was a common occurrence during the past 2 semesters. Might have done this for 6-8 weeks easily.

11. Let's make it even more interesting, every breakfast for that week in a fresh pair of clothes.
Status: Done.
Closing Remark: Just once. Too much effort.

12. Attend every lecture for a fortnight.
Status: Done. Man, I am on a roll here!
Closing Remark: Honestly, this is feasible only in the beginning of the semester. Or you happen to be that ultra-sincere academically focused chap.

13. Barge into a GBM and shower profanities on the HEC members.
Status: Wingies were part of this year's HEC. So, next year maybe.
Closing Remark: Who gives a fuck about GBMs?

14. A night-out in Cawnpore.
Status: Still searching for some lively hang-out places in the city.
Closing Remark: Kanpur is a sad city. Period.

15. Canteen mai doston k saath table bajake karaoke session.
Status: Well, I upgraded that to a real karaoke.
Closing Remark: I almost performed in Bon Voyage. And the karaoke session did happen with department people after a few beers.

16. Play football in the quad on a rainy day.
Status: Now that there's a dedicated football space, let's ignore this one.
Closing Remark: Ignored.

17. Attend a protest rally.
Status: Have been trying to mobilize a anti-mess rally in H3. Successful only in phases.
Closing Remark: Actively protested the Institute Blues' issue. Part of the core group that led the protest.

18. Go to a costume party.
Status: Unlikely in student life. Maybe will attend a marriage ceremony (I regard that as a costume party for older folks).
Closing Remark: Department photo-shoot. Department farewell. Batch video shoot.

19. Collect all the question papers of the semester, make paper planes out of them and go all the way to airstrip to fly them.(The lazyass that I am, I would need some company for motivation)
Status: Bless my laziness. That says it all.
Closing Remark: Boring.

20. Go to a student senate meeting, raise up some lame issues in a serious tone and witness the jugheads debating over them.
Status: Done.
Closing Remark: I had planned another round. But the item never got into agenda.

21. Get a makeover.
Status: I almost went bald last December. Epic Fail.
Closing Remark: Experimented with a new hair-cut in the final sem. It went well.

22. Finish a book during end-sems.
Status: Tried that this sem. But both books were drag.
Closing Remark: Done.

23. Wrap up a video-game during end-sems.
Status: Oh, I need to start gaming again.
Closing Remark: Incomplete.

24. Try out every eating place in the campus.
Status: Perhaps just the mess and canteen of GH-1 & 2 are due. Mainly because it's a bit awkward to eat there without some girls accompanying us. Ladies, are you reading?
Closing Remark: Except for the GHs, every other place tried and tasted.

25. Cycle all the way upto Lucknow.
Status: I trust Bumpy Trailers for this.
Closing Remark: We did Nawabganj Bird Sanctuary (~75 km). And a 100 km ride needs a little more conditioning.

26. Foodie trip across the city.
Status: Done with a couple of circles. Two more to go.
Closing Remark: This has been one of my favorite activities. I could probably shame a localite in this aspect.

27. Learn some new sports.
Status: Water-Polo, Volleyball & Touch-Rugby down. Lawn Tennis or maybe, Squash next.
Closing Remark: I regret not playing Hockey and Tennis.

28. Survive a day just on sweets.
Status: Gonna happen soon. Really soon.
Closing Remark: Done.

29. Sing in front of a large audience.
Status: Yaar audience jugaadne k suggestions?
Closing Remark: Ditched at the last moment. It was too complicated.

30. Learn a musical instrument.
Status: Already started with drums.
Closing Remark: Probably the biggest regret of my college life.
 
This is all I can think of right now. But, if you can think of some really ridiculous suggestions, do share them with me. In all probability, we would be partners in act. Thanks for reading my first piece on net and feel free to criticize every word of mine. Cheers\m/!