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Dunaway Lecture Series

Mispredicting Our Own Preferences: Evidence and Economic Implications

presented by

Professor Matthew Rabin
Pershing Square Professor of Behavioral Economics
Harvard University

Thursday, April 7, 2022 at 7:30 pm
108 Bessey Hall (434 Farm Lane)


Abstract

Psychological evidence and (increasingly) empirical economics indicate that there are systematic ways that we all tend to mispredict our own future tastes and behavior. This includes the wide-ranging tendency to project our current tastes into the future, even in cases where we have plenty of experience of predictable changes. We tend to under-appreciate adaptation to circumstances, the power of good and bad habits, and the role of transitory factors in our feelings. After reviewing some of the evidence and briefly explaining how economists formulate numerical models of this phenomenon, some of the implications are drawn out, showing why people may overpursue wealth, fall into addictions that are psychologically and financially costly, purchase durable consumer goods that we soon lose interest in, and make hard-to-reverse life decisions, such as getting married or divorced, quitting a job, retaliating against perceived mistreatment, or even commiting suicide while in the grip of temporary emotions, and the role that regulations might play in improving behavior.

Bio

Matthew Rabin is the Pershing Square Professor of Behavioral Economics in the Harvard Economics Department and Harvard Business School. Before that, he spent 25 years at the University of California, Berkeley Economics Department.  His research focuses primarily on incorporating psychologically more realistic assumptions into empirically applicable formal economic theory. His current topics of interest include errors in statistical reasoning and the evolution of beliefs, effects of choice context on exhibited preferences, reference-dependent preferences, and errors people make in inference in market and learning settings. He received his PhD from MIT in 1989, the same year he joined the Berkeley faculty as an assistant professor. He is a member of the Russell Sage Foundation Behavioral Economics Roundtable and co-organizer of the Russell Sage Summer Institute in Behavioral Economics. He has been a visiting professor at MIT, London School of Economics, Northwestern, Harvard, and Cal Tech, as well as a visiting scholar at the Center for Advanced Study in Behavioral Sciences (at Stanford) and the Russell Sage Foundation. Professor Rabin's honors include Most Likely to Express His Opinion (Springbrook High School); Alfred P. Sloan Research Fellow; Graduate Economics Association Outstanding Teaching Award; MacArthur Foundation Fellow; Econometric Society Fellow; John Bates Clark Medal from the American Economic Association; and Fellow of the American Academy of Arts and Sciences.

 

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Michigan State University Department of Economics