On “Irrational” Behavior

POSTED — September 18, 2016 — Behavioral Finance Puzzles

Many behavioral economists want to correct people's supposedly irrational behavior by teaching them statistics and arithmetic. But the world of human behavior has more than a strictly monetary and arithmetic dimension.

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A few days ago I got into a taxi on West End Ave and 70th Street to go to Chinatown. To the taxi driver I said: "18 East Broadway, in Chinatown," and then started looking at twitter on my phone and making some calls. Twenty five minutes later the driver stopped and I looked up and saw that I was at Broadway and 18th Street.

"No," I remonstrated, "I want to go to 18 East Broadway, in Chinatown." He headed off again, and I returned to my phone.

Twenty minutes later I noticed we were approaching South Ferry. Then, I realized, he was aiming for 18 Broadway.

"Damn it," I snapped, or something like that, now upset because I was late and because he'd done this twice. And I started to fume.

The driver got angry at my language, and instructed me not to talk that way. The meter read $25.80 and I was nowhere near where I had to be.  I considered getting out and starting again with a fresh driver, but there was no one around. Eventually he headed off to Chinatown with me in the cab. And he turned off the meter, assuming, I guess, that I had already been charged more than necessary.

Twenty minutes later I finally arrived in Chinatown. When I pulled out my credit card to pay him the screen in the back of the taxi didn't have a bill on it.

"How much do I owe you?" I asked.

Without turning back to face me, he declined my money. I tried to hand him $20 through the plexiglas divider. He declined and absolutely refused my money.

Well, I thought, OK. You made two successive mistakes by not listening to me and not asking for clarification, and so I got out, no choice really, getting a free trip that took more than an hour for what should have been 25 minutes at that time of day.

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Now: Did the driver not understand arithmetic, statistics, probability theory, the thousand numerical misperceptions the brain is heir to? Was he arithmetically challenged in turning down my money after an hour's trip? Or did he understand arithmetic, and yet find that something not purely economic counted for more than the money at that point? Was there a deeper rationality behind his economically irrational behavior?

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