How Little Things Affects Basic Decisions

Our everyday activities we do, we think that these are minimal activities and cannot really have a large effect or if can there is nothing we can do that can prevent them. But there are many theories that can come to our help in reality which the book Freakonomics outlines.

The book outlines and makes us aware of things that we didn’t have an idea also about affecting us from raising children to selling a house, our everyday life’s simple decisions.

We have the ability to challenge our natural instincts or wisdom in making such decisions by understanding them in detail and theories that govern our thinking.

Incentive— A Way to Influence the Decision

Our instincts on many decisions are affected by incentives and some other unseen irrational factors if looked at in detail and that in turn can affect our wallet, pride, and even conscience.

Incentive is a word we listen to way too often in economics and public policy studies and even in the smallest of businesses because it is sought to be a very effective measure of driving people in a certain way but what we can observe here is that incentives are context-dependent, it might work in a certain condition but not in other, because the other factors are totally contrasting.

Incentives can often have unintended consequences on people’s behavior. Incentives often operate in an environment where small changes can have a dramatic impact, and not always in the way those initiating the changes would hope. For example, you must have seen policy’s failing which was planned to affect in a certain way but took a different turn due to unforeseen factors. So it’s necessary while setting incentives what other factors can play and whether they might displace existing ones.

How Too Much or Too Little Information Affects a Decision

Then, the author in Freakonomics comes to the next most important word, information. Information can not only make decisions better but selective information can ruin it more than that is used for economic benefit by a lot of people like when estate agents encourage you to take the first decent offer on your house, it is not to maximize your profit but their own.

The same information when portrayed by inciting fear and anxiety to cheat layman’s and agree on them to make haphazard decisions. Too much information can make someone anxious whereas less can make things look suspicious. Hence, the right amount of information needs to be taken and given to make things go ahead profitably morally.

Risk of Assessment as a Way of Influencing a Decision

The last being assessment of risks. We make these small decisions every day, every decision has a number of risks associated with it, some may be very evident and most are hidden. People worry disproportionately about risks that are particularly prominent or over which they have little control. And that is connected with our incapability sometimes to incorrectly locate the causes of the risks or issues.

This book, Freakonomics, not only mentions these issues that we face, but these are outlined to make us conscious and aware of every decision we make. We build an understanding of why we react the way we react and how understanding this could help us in hundreds of ways and failures which can be prevented.