Are you making rational choices?

For those of us who hope citizens are making rational decisions about which candidates and ballot measures to vote for, a look at the cell phone business can be discouraging. When we are acting like consumers and choosing which cell phone to buy and which calling plan to choose, we do not go for the one that is cheapest, which would surely be rational. According to an article in the NY Times, many consumers opt for complicated plans that cost more in the end raather than choosing the most economical. When Apple first released its i-phone, the plan was to charge consumers $500 for the phone and then $20 a month for full service. People didn't like that. The i-phones didn't start selling well until Apple dropped its price to $199 and raised the monthly cost to $30, even though over a two year period the consumer pays more. Other cell phone companies have tried offering a flat price for each call rather than a certain number of free minutes plus very expensive prices for additional minutes. People didn't seem to like the variation in their bills, so that idea failed. By now most people have adapted to the strange world of cell phone pricing, but perhaps we should take some lessons from it for civic activities. People can't be won over entirely by the cost/benefit of a particular measure. They must be persuaded that the idea appeals to them on more than the basis of cold logic. Economists are coming to realize that emotions play a far more important role in people's choices than their theories had admitted. It's time to look at people rather than theories in economies and in public life.

How can I possibly understand the crisis?

As we try to follow news about the financial crisis that's hit us all, most of us wonder what's meant by all the jargon tossed about by reporters and commentators. Many people who are not trained in economics have had to try to learn a lot of terms very quickly and many of us have failed. At last we have a helpful source online. It's called the Financial Crisis for Beginners and it's part of a blog written for the general public by experts in the financial field. The blog itself, called The Baseline Scenario, provides frequent updates of what's going on in the world of finance. The authors also write articles for the New York Times and the Atlantic, which can be located through the blog. Not all of it is easy reading, but the writing is clear and the subject is important. It's worth spending some time trying to understand what's going on. It may not make you feel better, but at least you'll feel a little less confused and helpless in the face of all the changes we've seen.