The other book written by Adam Smith

Before he wrote The Wealth of Nations, Adam Smith in fact studied happiness in detail and published a book called The Theory of Moral Sentiments. Anyway, how I found out about that is through this rather dated report on happiness published by a British investment bank. Here’s a link to it. Not the usual report you see from an investment bank but still it is a pretty interesting read. I am not sure how much of the research is done using statistically valid methods, but I will leave you to judge if the conclusions make sense.

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On Choices

Choices. We make so many of them each day. We decide what music we want to listen to, what we should eat for lunch, whether to reply to those messages, whether to pick up the phone when it rings, whether to stay up to watch another episode of How I Met Your Mother or to complete that overdue piece of work. Yet, how much control do we actually have over our own behaviour? Are we all Michelangelos carving out our own Davids or are we merely reacting to what happens around us? Neuroscience research thinks that it may be more of the latter. Most of us have the same thoughts from day to day, and much of our behaviour follow patterns that are driven by habits formed over long periods of time. It is not easy to break a bad habit or to form a new one in its place. Scientists have shown that it takes 66 days of repetition to install a new habit, and now, exactly how many of us can consciously plan and execute a plan for 66 days in a row?

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Should we discard the assumption of rationality?

Ever since I was introduced to economics, I was always troubled by one of its fundamental assumptions – the notion of rationality. Many bestselling economics books, such as Dan Ariely’s Predictably Irrational, and my once-favourite (yes, I finally found a new favourite!) book Freakonomics deal with this assumption. They discuss how restrictive and unrealistic it is, and how behavioural models provide much more accurate representation of human behaviour. To some extent, I agree with their conclusion, but in this post, I am going to argue that the rationality assumption is not as useless as many, especially A-level students, perceive it to be.

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