Behavioral economics and innovation
“The emerging field of behavioral economics offers a radically different view of how people and organizations operate (…) cognitive biases often prevent people from making rational decisions”
Read Dan Ariely’s article, “The End of Rational Economics,” on Harvard Business Review.
When addressing decision making, some economic theories rely on straightforward assumptions about our collective behavior. But, quite a few of the most elegant economic and financial models turn out to amount to logical fallacies.
As an example, just last year, Alan Greenspan, the Federal Reserve’s former chairman, confessed that markets had not operated as expected since corporations had not acted on behalf of their shareholders’ best interest, thus leading to the current economic crisis. Back in the 90s he also talked about “irrational exuberance” when referring the stock market boom.
It pays to look a the next level of detail as far as research in “human factors” is concerned. This should result in policies and services based on how different people experience decision making as well as the diverse nature of our thought processes, which involve emotions and cognitive biases.
J. de Francisco blogging from Madrid on July 5
Human emotions is a very complex being & it is difficult to change some one unless one goes into self realization. Many of the issues faced in today’s economy is primarily due to leadership behavior & self containment, it is high time for leaders to be straight in thoughts & keep evaluating (emotional intelligence). One need to play reflective analysis how his emotional leadership drives the moods and actions of the organization & then with equal discipline, to adjust his behavior accordingly. It sounds very difficult to digest but this has direct impact on employees & innovations in company thus leading to innovative & customer focused products impacting P&L.
Sathya
July 7, 2009 at 9:11 pm