Datafy that Nudge
Posted: 26 May 2014 Last revised: 27 Jun 2017
Date Written: May 25, 2014
In the emotional world ruled by story telling (Mackay in madness of crowds); psychology and emotion remain the new bestsellers. This, of course, is a change from the economists who were forced to concede ground to the psychologists after a few hundred years when Daniel Kahneman became the first psychologist to get a Nobel Prize for economics in 2005. The Psychology story is slowly gaining ground with the fundamentalists and technicians. A host of economic historians like Joseph Schumpeter (Kitchin, Benner, Juglar, Kuznet) came and went away explaining the structure underlying the story. But the intra-discipline push and pull continues. Coming to look at it closely, it seems like a full circle. Louis Bachelier took the bell curve and fitted it to finance; first 60 years his work was ignored, later he was celebrated and recently sidelined just because the bell curve he used seemed to be fatter at the tails. Pareto, the father of microeconomics introduced statistics to economics. Pareto's 80-20 principle is an unchallenged universality but still ignored by the main stream.
The statisticians might just be ready to take the baton back over. In any case even if they do (statisticians, mathematicians) and find a few more universal laws, or redefine them, like they did a few 100 years back, that will not change or stop the society from listening and believing to cause and effect stories. The society loves them, especially the ones which they can relate too. This is why we have a market, a buyer and a seller of stories, eating into the popularity pie, turn by turn, irrespective of content. This is not my subjective opinion, this is history, which is, fortunately (unfortunately) bigger than societal memory. A month old HBR Blog update by Justin Fox summarizes my view very well. "The idea of a paradigm shift comes from Thomas Kuhn’s 1962 book The Structure of Scientific Revolutions. Kuhn, a physicist turned philosopher of science, had spent a year in the late 1950s at the then-new Center for Advanced Study in the Behavioral Sciences at Stanford and been struck by how the assembled psychologists, economists, historians, sociologists, and the like often disagreed over the very fundamentals of their disciplines. Physicists, in his experience, didn’t do that. This wasn’t because they were any smarter than social scientists, Kuhn concluded. It was because they had found a paradigm within which to work." I don't necessarily agree (I have my share of disagreements) with the physicists part regarding the framework, but I think Kuhn's opinion about intra-subject conflicts (inter-subject opinion is more divergent) clearly illustrate how subjectivity is all around us; a better story. Thaler's and Sunstein's Nudge is another good story; a psychological story; which I also like. As I think it's helpful in decision support for individuals and the society at large. It's the underlying assumptions, which I feel looks at psychology as a primary cause standing on its own, never requiring a framework to rest on.
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