Semantron 23 Summer 2023


financial or costly incentives is both astonishingly effective and extremely useful in maximizing social welfare, to an extent beyond any traditional policy.

Moreover, the role of heuristics, given that their effects are so difficult to quantify on a wider scale, can often be attributed to events of which they likely held no such significant sway, to their undeserved reputational detriment. For example, Lewis’ argument 21 that Trump’s presidential victory was a result of the use of heuristics at the ballot box is a flawed one, which attempts to scapegoat the result of wider socioeconomic circumstances on human irrationality. Similarly, wider assumptions and bad economics can lead to a general mistrust and unwarranted predisposition against the use of heuristics, which if acted upon can lead to an opportunity cost of efficiency for firms, policymakers, and consumers alike.


Agent: an actor within an economic model who has consequential decision-making capabilities, most typically as a consumer or a producer. Anchoring bias: a mental shortcut in which prior given information, even if irrelevant, is used to inform value judgements and decision-making on secondary information or choices, often leading to a disproportionate favouring of the anchored information. Availability bias: a mental shortcut in which the most salient, frequently accessed, and short-term information is disproportionately applied by an individual in judging the likelihood of a given outcome. Confirmation bias : a mental shortcut in which information is disproportionately positively viewed, analysed, weighted or remembered due to its alignment with an individual’s personal beliefs, beyond a realistic threshold, or is manipulated in such a way that it is aligned with this personal viewpoint. Correlation coefficient: a number less than the modulus of 1 calculated to represent the linear interdependence of two variables or data sets. Decoy good: an undesirable additional good used to anchor perspectives on other goods, usually to the end of incentivizing increased spending. Default bias/inertia: a tendency to accept the current state from a given list of options because of both a lack of effort in desiring to change it, and the assumption that a default is most likely to be the best option, given that it has been preselected. Duopoly: a market in which there are only two sellers of a product. Ego depletion: the reduction in decision-making capabilities of the brain, particularly in being able to accurately reflect preferences, due to overuse or fatigue, usually both mental and physical. First degree price discrimination: a type of price discrimination also known as perfect price discrimination, in which sellers are able to price units differently for each unit consumer, at the maximum point of each buyer’s willingness to pay. Fixed menu: a scenario in which a market for goods and services at a point in time is both limited in choice options and fixed in price, e.g. a supermarket. Heuristics : mental shortcuts enabling individuals to make decisions, pass judgement, or quickly solve problems using minimal effort. Loss aversion: a mental shortcut which disproportionately weights psychological losses over gains, generally resulting in reduced risk taking and a predisposition towards negative perspectives. Market equilibrium: a point at which consumers’ willingness to pay at a given quantity of a good is equivalent to producers’ willingness to sell at the same quantity .

21 Silverman, G. (2016) American Psyche: Michael Lewis on the triumph of irrational thinking . Financial Times. American psyche: Michael Lewis on the triumph of irrational thinking | Financial Times (


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