Re:The Bias Bias in Behavioral Economics
by agent008t on Tuesday February 12, 2019 @04:16AM
(#19142131)
Behavioral economists recognize two kinds of biases: cognitive and emotional. Cognitive are the kinds of biases you refer to - when someone makes a suboptimal decision because of failing to do proper research, properly take on new information, etc.
But then there are emotional biases, for example the loss aversion bias. Investors tend to hold on to their losing investments to avoid realizing a loss and sell their winning investments to lock in a profit. This is irrational - investors achieve subpar returns because of this - and often cannot be resolved with education.
Accounting for cognitive or longterm costs - using the concept of bounded rationality - would not make emotional biases disappear or make them invalid.
But then there are emotional biases, for example the loss aversion bias. Investors tend to hold on to their losing investments to avoid realizing a loss and sell their winning investments to lock in a profit. This is irrational - investors achieve subpar returns because of this - and often cannot be resolved with education.
Accounting for cognitive or longterm costs - using the concept of bounded rationality - would not make emotional biases disappear or make them invalid.