1. Economics and Decisions April 15, 2015

2. Decisions
In general our lives are about making one small decision after another
Abundance of choice is becoming a problem
You can only make a finite amount of choices in a given day
As the day goes on the mind becomes paralyzed to act or makes impulsive choices
View decisions as currency
Limited supply, used wisely
EVERY decision you make each day adds up

3. Decision Fatigue Warps judgment of everyone Helps explain why we
Get angry
Exceed our budget
Buy junk food
You can’t make decision after decision without paying a biological price
The drain of mental energy

4. Physiology You are not consciously aware of becoming mentally tired
Become low on mental energy
The more choices you make, the harder the next choice becomes
Brain looks for short cuts
Reckless & impulsive
Do nothing – eases short term mental strain & resist change in the long run

5. Once you are fatigued  reluctant to make trade offs
Advanced & taxing form of decision making
Look for one dimension – ex. price
Leaves you vulnerable to marketers who know how to time their sales
When decision fatigue sets in you tend to take the advice of “experts”
Responds strongly to immediate rewards
Drink soda & eat candy
Pays less attention to long-term prospects
How will this affect me in 20 years?

6. Willpower Weakens late in the day The diet dilemma
1. In order not to eat, a dieter needs willpower.
2. In order to have willpower, a dieter needs to eat.

7. Fewer decisions  less decision fatigue
No outward sign of decision fatigue
Propensity to experience everything more intensely
Frustrations seem more irritating
Impulsive behavior becomes more powerful
Illogical shortcuts that favor short term gains & delayed costs
Take the safer, easier option even when there are extreme costs involved

8. Good Decision Making State that fluctuates
People with the best self-control structure their lives to control willpower
Schedule (no back to back meetings)
Avoid temptations
Establish habits that eliminate the mental effort of making choices
Budget their decisions
Well rested & good nutrition

9. Reframing
Quick to dismiss small decisions as inconsequential (short run)
$4 latte each day
Look at their entirety (long run)
$1500 spent each year on coffee
Make certain decisions now in order to limit the need to make more choices later
Retirement savings

10. Self Control Not the final defense against disaster
Conserved by developing effective habits and routines
Reduce stress
Avoid crisis
Effectively manage time
Make big decisions early in the day

11. The best decision makers are the ones who know when not to trust themselves.