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Balanced Fare: We Report, You Deride

Thursday, July 31, 2003

Sports, Decision Theory, And Rational Behavior

The NY Times takes us out to the ball game with Richard Thaler, U of Chicago economist, Steven J. Sherman, a psychology professor at Indiana University, and David Romer, an economist at Berkeley.

We love this game. We also love the fact that the reporter makes it all the way through this story without mentioning "Moneyball" by Michael Lewis.


...But there is also a more serious undercurrent to the work. In recent years, economists and psychologists have become increasingly interested in the ways that people do not act rationally. Known as behavioral economics, the field examines why stock-market bubbles happen and why many people do not save enough money for retirement, among other things.

Sporting events, which are played out step by step in the most public of settings, allow the researchers to determine the precise moment that somebody veers from good sense.

"My justification for doing this is that it's the one really high-stakes activity where you get to watch all of the decisions," Thaler said. "If Bill Gates invited me to watch all of his decisions, I'd talk more about that."

As the article notes, you get to watch all the decisions, and similar decisions have been addressed hundreds of times before. The more you think about this, the more you realize that all those hours spent watching baseball were not wasted. Well, for Yankees fans, anyway - it's hard to imagine a positive lesson that could be drawn from watching the Red Sox or the Mets. Other than the importance of keeping one hand on the remote, that is.

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