Understanding the Scitovsky Paradox in Welfare Economics

Posted on November 5, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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According to colleague Dan Ariely PhD, the Scitovsky Paradox and using the Kaldor–Hicks criterion, allocation A may be more efficient than allocation B, while at the same time B is more efficient than A.

Moreover, the Scitovsky paradox in welfare economics which is resolved by stating that there is no increase in social welfare by a return to the original part of the losers. It is named after the Hungarian born American economist, Tibor Scitovsky. According to Scitovsky, ther Kaldor-Hicks criterion involves contradictory and inconsistent results.

What Scitovsky demonstrated was it is possible that if an allocation A is deemed superior to another allocation B by the Kaldor compensation criteria, then by a subsequent set of moves by the same criteria, we can prove that B is also superior to A.

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Understanding the Edgeworth Paradox in Economics

Posted on November 4, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Irish economist Frances Edgeworth put forward the Edgeworth Paradox in his paper “The Pure Theory of Monopoly”, published in 1897.

It describes a situation in which two players cannot reach a state of equilibrium with pure strategies, i.e. each charging a stable price. A fact of the Edgeworth Paradox is that in some cases, even if the direct price impact is negative and exceeds the conditions, an increase in cost proportional to the quantity of an item provided may cause a decrease in all optimal prices. Due to the limited production capacity of enterprises in reality, if only one enterprise’s total production capacity can be supplied cannot meet social demand, another enterprise can charge a price that exceeds the marginal cost for the residual social need.

And so, according to colleague Dan Ariely PhD, the Edgeworth Paradox suggests that with capacity constraints, there may not be an equilibrium.

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TENDENCY: Consistency and Commitment

Posted on June 1, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters and AI

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Consistency and Commitment Tendency: Human beings have evolved – probably both genetically and socially – to be consistent.  It is easier and safer to deal with others if they honor their commitments and if they behave in a consistent and predictable manner over time. This allows people to work together and build trust that is needed for repeat dealings and to accomplish complex tasks. 

In the jungle, this trust was necessary to for humans to successfully work as a team to catch animals for dinner, or fight common threats.  In business and life it is preferable to work with others who exhibit these tendencies.  Unfortunately, the downside of these traits is that people make errors in judgment because of the strong desire not to change, or be different (“lemming effect” or “group-think”).  So the result is that most people will seek out data that supports a prior stated belief or decision and ignore negative data, by not “thinking outside the box”. 

Additionally, future decisions will be unduly influenced by the desire to appear consistent with prior decisions, thus decreasing the ability to be rational and objective.  The more people state their beliefs or decisions, the less likely they are to change even in the face of strong evidence that they should do so.  This bias results in a strong force in most people causing them to avoid or quickly resolve the cognitive dissonance that occurs when a person who thinks of themselves as being consistent and committed to prior statements and actions encounters evidence that indicates that prior actions may have been a mistake. 

According to colleague Dan Ariely PhD, it is particularly important therefore for advisors to be aware that their communications with clients and the press clouds the advisor’s ability to seek out and process information that may prove current beliefs incorrect.  Since this is obviously irrational, one must actively seek out negative information, and be very careful about what is said and written, being aware that the more you shout it out, the more you pound it in.

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SEX: Bereavement Style

Posted on April 20, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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According to colleague Dan Ariely PhD, Bereavement Sex is one of those coping mechanisms that sounds strange but makes sense when you think about it. In the face of loss, our brains crave connection and comfort.

Engaging in sex after a significant loss can be a way to feel alive and regain a sense of control. It’s a testament to our complex emotional wiring, where grief and intimacy intertwine.

Psychology Today: https://www.psychologytoday.com/us/blog/all-about-sex/201911/myths-and-the-truth-about-sex-after-grieving?msockid=2d99b4712dfb6dde0d66a1522c226c4e

So, while it might seem odd, it’s just another way our brains handle the roller coaster of emotions.

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COGNITIVE BIAS: Negativity V. Pessimism

Posted on March 30, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Negativity bias is not totally separate from pessimism bias, but it is subtly and importantly distinct. In fact, it works according to similar mechanics as the sunk cost fallacy in that it reflects our profound aversion to losing. We like to win, but we hate to lose even more.

And so, according to cognitive scientist Mackenzie Marcinko PhD, when we make a decision, we generally think in terms of outcomes—either positive or negative. The bias comes into play when we irrationally weigh the potential for a negative outcome as more important than that of a positive outcome.

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Pessimism bias on the other hand, is a cognitive bias that causes people to overestimate the likelihood of negative things and underestimate the likelihood of positive things, especially when it comes to assuming that future events will have a bad outcome.

For example, the pessimism bias could cause someone to believe that they’re going to fail an exam, even though they’re well-prepared and are likely to get a good grade.

According to colleague Dan Ariely PhD, The pessimism bias can distort people’s thinking, including your own, in a way that leads to irrational decision-making, as well as to various issues with your mental health and emotional well being.

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INATTENTIONAL Blindness

Posted on March 11, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Inattentional Blindness: Is a psychological phenomenon where individuals fail to notice unexpected stimuli in their visual field when their attention is focused on a specific task or object.

This occurs because the brain prioritizes processing information relevant to the task at hand, leading to a temporary inability to perceive other, potentially significant details in the environment. Experiments, such as the famous “invisible gorilla” study, illustrate how people can completely miss prominent objects or events when their attention is directed elsewhere.

And, according to colleague Dan Ariely PhD, inattentional blindness highlights the limitations of human perception and attention, emphasizing that what we see is often influenced by where we focus our cognitive resources.

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EDUCATION: Books

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PT BARNUM: Forer Bias Effect

Posted on March 4, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Dr. David Edward Marcinko MBA MEd CMP™

SPONSOR: http://www.MarcinkoAssociates.com

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As in the case of Declinism, to better understand the Forer effect (commonly known as the Barnum Effect), it’s helpful to acknowledge that people like their world to make sense. If it didn’t, we would have no pre-existing routine to fall back on and we’d have to think harder to contextualise new information.

Note: Phineas Taylor Barnum (July 5, 1810 – April 7, 1891) was an American showman, businessman, and politician remembered for promoting celebrated hoaxes and founding with Jim Bailey the Ringling Bros. and Barnum & Bailey Circus. He was also an author, publisher, and philanthropist although he said of himself: “I am a showman by profession … and all the gilding shall make nothing else of me.” According to Barnum’s critics, his personal aim was “to put money in his own coffers”. According to Wikipedia, the adage “there’s a sucker born every minute” has frequently been attributed to him, although no evidence exists that he had coined the phrase

With that, if there are gaps in our thinking of how we understand things, we will try to fill those gaps in with what we intuitively think makes sense, subsequently reinforcing our existing schema(s). As our minds make such connections to consolidate our own personal understanding of the world, it is easy to see how people can tend to process vague information and interpret it in a manner that makes it seem personal and specific to them. Given our egocentric nature (along with our desire for nice, neat little packages and patterns), when we process vague information, we hold on to what we deem meaningful to us and discard what is not. Simply, we better process information we think is specifically tailored to us, regardless of ambiguity.

More specifically, according to colleague Dan Ariely PhD, the Forer effect refers to the tendency for people to accept vague and general personality descriptions as uniquely applicable to themselves without realizing that the same description could be applied to just about everyone else (Forer, 1949). For example, when people read their horoscope, even vague, general information can seem like it’s advising something relevant and specific to them.

Remember, we make thousands of decisions every day, some more important than others. Make sure that the ones that do matter are not made based on bias, but rather on reflective judgment and critical thinking.

EDUCATION: Books

SPEAKING: Dr. Marcinko will be speaking and lecturing, signing and opining, teaching and preaching, storming and performing at many locations throughout the USA this year! His tour of witty and serious pontifications may be scheduled on a planned or ad-hoc basis; for public or private meetings and gatherings; formally, informally, or over lunch or dinner. All medical societies, financial advisory firms or Broker-Dealers are encouraged to submit a RFP for speaking engagements: MarcinkoAdvisors@outlook.com 

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INVESTING Psychology

Posted on February 21, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Dan Ariely PhD

THE IRRATIONAL ECONOMIST

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Of course you don’t need a human financial advisor … until you do. Today, we’ve had unfettered internet access to a wide range of investments, opinions and models for at least two decades. So, why the bravado to go it alone; fifteen positive years for equities, since 2009! Yet, the DJIA, S&P 500 and NASDAQ just plunged and plummeted today!

The financial advisor’s role is to remove the human element and emotion from investing decisions for something as personal as your wealth. Emotion drives the retail investor to sell low (fear) and buy high (greed). This is the reason why the average equity returns for retail investors is less than half of the S&P 500’s returns.

No, of course you don’t need a human financial advisor … until you do.

And when you do, it may be too late.

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GLOW: Complimentary Effect

Posted on February 16, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Complimentary Glow Effect is when something looks better simply because it’s next to something else that’s attractive. It’s like standing next to a supermodel to get a boost to your own appearance.

Marketers use this all the time by pairing products with glamorous images to make them more appealing. It’s a visual trick that our brains fall for every time.

So, according to colleague Dan Ariely PhD, the next time you’re tempted by a shiny new gadget, remember: it might just be basking in the complimentary glow of clever marketing.

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DISCOMFORT: Cognitive Dissonance

Posted on January 26, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Cognitive Dissonance is the discomfort experienced when holding conflicting cognitions, like believing in healthy eating while munching on a doghnut. It’s a mental tug-of-war that makes us squirm.

To reduce this discomfort according to colleague Dan Ariely PhD, we often change our beliefs or behaviors to align them. This is why smokers might downplay the health risks of smoking. Understanding cognitive dissonance helps us recognize these mental gymnastics and strive for consistency in our beliefs and actions.

So, next time you feel that mental itch, it’s cognitive dissonance asking for some resolution.

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EGO: Protection & Defense

Posted on January 25, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Ego-Protection refers to psychological strategies individuals use to defend their self-esteem and sense of self-worth against threats or failures. This can include attributing failures to external factors, minimizing the importance of negative feedback, or comparing oneself to others in ways that maintain a positive self-image.

According to colleague Dan Ariely PhD, ego-protective mechanisms help people cope with setbacks and maintain mental well-being, although they can sometimes prevent individuals from learning from mistakes or accepting constructive criticism.

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PRE-PROCUREMENT: Pre-Purchase Ownership

Posted on January 21, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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According to colleague Dan Ariely PhD, Pre-Procurement Ownership is when you start to feel ownership over something before you actually have it. It’s like mentally moving into a house or car before you’ve signed the papers and moved in or driven away

This psychological quirk makes us more likely to commit to purchases because we’ve already imagined them as ours. Marketers exploit this by encouraging us to “try before you buy.”

So, next time you’re trying on a new men’s suit or woman’s skirt, be aware: your brain might already be claiming ownership.

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COGNITIVE Dissonance

Posted on January 16, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Cognitive Dissonance is the discomfort experienced when holding conflicting cognitions, like believing in healthy eating while munching on a donut. It’s a mental tug-of-war that makes us squirm.

To reduce this discomfort, we often change our beliefs or behaviors to align them. This is why smokers might downplay the health risks of smoking. Understanding cognitive dissonance helps us recognize these mental gymnastics and strive for consistency in our beliefs and actions.

So, according to colleague Dan Ariely PhD, the next time you feel that mental itch, it’s cognitive dissonance asking for some resolution.

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MUTISM Selective

Posted on January 14, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Selective Mutism: Some people experience selective mutism, a condition where intense trauma or anxiety leaves them temporarily unable to speak. It’s a defense mechanism that shields them from emotional overwhelm. It is characterized by:

  • A person’s inability to speak in certain social settings, even though they are otherwise capable of speech.
  • Triggers for selective mutism can include specific situations, places, or people.
  • People with SM can speak comfortably and communicate well in other settings, such as at home with family.

For many, according to colleague Dan Ariely PhD, this silence is involuntary, reflecting how deeply emotions affect speech.

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BIAS: In-Group Favoritism

Posted on January 14, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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In-group bias refers to the unfair favoring of someone from one’s own group. You might think that you’re unbiased, impartial, and fair, but we all succumb to this bias, having evolved to be this way.

That is, according to colleague Dan Ariely PhD, from an evolutionary perspective, this bias can be considered an advantage—favoring and protecting those similar to you, particularly with respect to kinship and the promotion of one’s own line.

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ADAPTATION Release

Posted on January 11, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Activation due to release from adaptation = Extra activation caused by stimulus change = (Response to the two different stimuli paired together) – (Response to same stimuli presented without the change) E.g. (1/4 + 4/1) – (1/1 + 4/4) To look for adaptation paralleling same/diff perception. Make a contrast weighting each adaptation release value by the subject’s behavioural responses on that part of the same/different curve. Rajeev Raizada – UW MRI talk, Oct

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Release from Adaptation is the joy you feel when something changes after becoming accustomed to it. It’s like the relief of a cool breeze after a hot day. Our brains get used to stimuli, making them less noticeable over time. When there’s a change, it’s like hitting the refresh button on our senses.

This is why, according to colleague Dan Ariely PhD, novelty feels so exciting and routine can become dull. So, inject some variety into your life to keep things fresh and enjoy the small releases from adaptation.

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WILLIAM JEVONS Efficiency Paradox

Posted on January 7, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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William S. Jevons Paradox suggests that increases in efficiency lead to even larger increases in demand; according to colleague Dan Ariely PhD.

The Jevons Paradox is when making something work better actually leads to using more of it, not less.

Imagine you have a really fast bike that makes you use less energy to speed up. Because it’s so good, you want to bike everywhere, even more than before. Now, even though your bike is better at saving energy, you end up using it so much that you may use even more energy overall

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CONFABULATION Bias

Posted on January 6, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Confabulation Bias is the creation of false memories without the intent to deceive. Our brain fills in gaps, sometimes creating memories that feel real but are entirely fabricated.

According to colleague Dan Ariely PhD, this can happen especially when memory gaps are subconsciously filled to maintain coherence.

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MORALITY Priming

Posted on January 5, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Morality Priming refers to subtle reminders of ethical principles that can make us behave more responsibly. It’s like an internal nudge that brings our conscience to the surface.

And, according to colleague Dan Ariely PhD, by focusing on moral standards, people are often encouraged to act more honestly, even in small, everyday decisions.

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MAURICE ALLAIS: Behavioral Finance Paradox

Posted on January 5, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Reporters

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For Question 1, people preferred Prospect A to prospect A , which means: (0.11) u( 1,000,000) > (0.10) u( 5,000,000) For Question 2, people preferred Prospect B to prospect B, which means: (0.10) u( 5,000,000) > (0.11) u( 1,000,000) Allais Paradox. shows that, individuals’ decisions can be inconsistent with Expected Utility Theory.

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Allais Paradox is a change in a possible outcome that is shared by different alternatives affects people’s choices among those alternatives, in contradiction with expected utility theory.

The Allais paradox is a choice problem designed by Maurice Allais 1953 to show an inconsistency of actual observed choices with the predictions of expected utility theory theory.

According to colleague Dan Ariely PhD, the Allais paradox demonstrates that individuals rarely make rational decisions consistently when required to do so immediately. The independence axiom of expected utility theory, which requires that the preferences of an individual should not change when altering two lotteries by equal proportions, was proven to be violated by the paradox.

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OUTCOME: Bias

Posted on January 3, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Outcome bias is judging a decision based on its result rather than the quality of the decision at the time it was made.

It’s like saying a bad poker play was smart because you won the hand. Or, a bad stock picker or financial advisor was good because the price went up!

According to psychologist and colleague Dan Ariely PhD, this bias ignores the process and focuses solely on the outcome. It’s why we celebrate lucky breaks and criticize thoughtful risks that didn’t pan out.

So, the next time you’re evaluating a decision, focus on the reasoning behind it, not just the end result.

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PROPORTIONALITY: Cognitive Bias

Posted on December 30, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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The proportionality bias, also known as major event/major cause heuristic, is the tendency to assume that big events have big causes. It is a type of cognitive bias and plays an important role in people’s tendency to accept conspiracy theories. Academic psychologist Rob Brotherton summarized it as “When something big happens, we tend to assume that something big must have caused it”.

IOW: Proportionality Bias is the inclination to believe that the magnitude of an event’s cause must be proportional to the event’s outcome. It’s like thinking a huge disaster must have a huge cause. This bias simplifies our understanding of complex situations but often leads to misconceptions. In reality, small causes can have large effects, and vice versa.

Related: https://medicalexecutivepost.com/2022/09/09/accuracy-versus-precision/

And so, to overcome proportionality bias according to colleague Dan Ariely Phd, consider all possible explanations, regardless of their size. Remember: sometimes big things happen for small reasons.

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COGNITIVE BIAS: Envy and Jealousy

Posted on December 28, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Envy / Jealousy: This bias also relates to the contrast and social proof biases.  Prudent financial and business planning and related decision-making are based on real needs followed by desires.  People’s happiness and satisfaction is often based more on one’s position relative to perceived peers rather than an ability to meet absolute needs. 

The strong desire to “keep up with the Jones” can lead people to risk what they have and need for what they want.  These actions can have a disastrous impact on important long-term financial goals. 

According to colleague Dan Ariely PhD, clear communication and vivid examples of risks is often needed to keep people focused on important financial goals rather than spurious ones, or simply money alone, for its own sake.

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ULYSSES PACT: Will Power and Self Control

Posted on December 20, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

DEFINED

Staff Reporters

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Taking away a future choice from oneself to avoid anticipated willpower failures.
The present self trying to help the future self resist temptation.

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Ulysses Pact is a commitment made with oneself to accomplish a tough goal by limiting the choice to back out, boosting the chances of success by removing tempting alternatives.

According to colleague Dan Ariely PhD, it’s a self-control strategy that’s especially useful for resisting short-term temptations.

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Survivor’s Guilt

Posted on December 19, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Survivor’s Guilt is the feeling of guilt experienced by those who have survived a tragedy when others did not. It’s like winning a lottery you didn’t want to enter. This emotional response can be overwhelming, as survivors question why they lived while others didn’t. It’s a mix of empathy, remorse, and a search for meaning in the randomness of survival.

According to colleague Dan Ariely PhD, If you or someone you know is dealing with survivor’s guilt, remember: it’s a natural reaction, and seeking support can help navigate these complex feelings.

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MINING: Sympathy on Social Media

Posted on December 17, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

DEFINITION

By Staff Reporters

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Sympathy Mining is the act of exaggerating personal problems to gain sympathy or attention. While it may fulfill a need for validation, it can strain genuine connections.

Someone who deliberately entices others into showing sympathy by utilizing social media with non-descriptive &/or ambiguous statements designed to invite further questioning and therefore garnering sympathy with their reported issue.

According to colleague Dan Ariely PhD, over time, onground or online sympathy mining can erode trust, especially if it’s clear that issues are exaggerated.

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LIMERENCE Romantic Attachment Intensity

Posted on December 16, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

VERSUS MERETRICIOUS RELATIONSHIPS

DEFINED

By Staff Reporters

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Limerence is an intense romantic obsession that can feel all-consuming, marked by daydreaming and emotional highs. It’s often mistaken for love, though it may not lead to a lasting relationship.

Limerence is a state of mind resulting from romantic feelings for another person. It typically involves intrustive and melancholic thoughts, or tragic concerns for the object of one’s affection, along with a desire for the reciprocation of one’s feelings and to form a relationship with the object of love.

According to colleague Dan Ariely PhD, the focus in limerence is more on idealization than on genuine connection, making it feel overwhelming but often one-sided.

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Meretricious, on the other hand, describes a situation where two people live together in a relationship that resembles marriage but lacks the official legal status of marriage. This means they may share a home, finances, and a life together, but they haven’t gone through the legal process to be recognized as married. This concept is often discussed in family law and property law, especially when these “live-in-lover” relationships come to an end.

When a meretricious relationship ends, it can lead to disputes about how to divide shared property and whether one partner should provide financial support to the other. Courts look at several factors to help decide these issues. For instance, they consider how long the couple has been together, how they managed their finances, and whether they intended to be committed to each other like a married couple. These factors help the court understand the nature of the relationship and the expectations of both parties.

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CURIOSITY? Mental Buzz!

Posted on December 14, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Curiosity is the itch you can’t scratch, the mental mosquito buzzing in your brain. It’s what makes you click on “One weird trick” articles and peek into your neighbor’s shopping cart. This insatiable desire to know drives innovation, learning, and sometimes, regrettable internet searches. Like a cat with nine lives, curiosity keeps us exploring and questioning, even if it occasionally leads us to the wrong conclusions.

So, according to Dan Ariely PhD, go right ahead, embrace your inner Sherlock Holmes, and keep asking “Why?”

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INCENTIVE BIAS? In Medicine and with Physicians?

Posted on December 12, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

DEFINITION

By Staff Reporters

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Incentives: It is broadly accepted that incenting someone to do something is effective, whether it be paying office staff a commissions to sell more healthcare products, or giving bonuses to office employees if they work efficiently to see more HMO patients.  Some experts even suggest there are five specific components1 that should be built into an overall physician incentive program:

  • Appropriate financial incentives.
  • Managed-care efficiency incentives.
  • Group citizenship.
  • Patient satisfaction.
  • Group profitability.

What is not well understood is that the incentives cause a sub-conscious distortion of decision-making ability in the incented person.  This distortion causes the affected person – whether it is yourself or someone else – to truly believe in a certain decision, even if it is the wrong choice when viewed objectively.  Service professionals, including financial advisors and lawyers, are affected by this bias, and it causes them to honestly offer recommendations that may be inappropriate, and that they would recognize as being inappropriate if they did not have this bias. 

According to colleague Dan Ariely PhD, the existence of this bias makes it important for each one of us to examine our incentive biases and take extra care when advising physician clients, or to make sure we are appropriately considering non-incented alternatives.

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MYOPIA: Prime Financial Earning Years

Posted on December 12, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

COGNITIVE BIAS

SPONSOR: http://www.MarcinkoAssociates.com

By Staff Reporters

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Myopia makes it hard for us to imagine what our lives might be like in the future.

For example, because we are young, healthy, and in our prime earning years now, it may be hard for us to picture what life will be like when our health depletes and we know longer have the earnings necessary to support our standard of living.

According to colleague Dan Ariely PhD, this short sighted cognitivebias makes it hard to save adequately when we are young, when saving does the most good.

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RICHARD EASTERLIN: Happiness Paradox

Posted on December 11, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Richard Easterlin PhD, Paradox: For countries with income sufficient to meet basic needs, the reported level of happiness does not correlate with national income per person.

According to colleague Dan Ariely PhD, one explanation is that my happiness depends on a comparison between my income and my perceptions of the average standard of living. If everyone’s income increases, my increased income gives a short boost to my happiness, since I do not realize that the average standard of living has gone up. Some time later, I realize that the average standard of living has also gone up, so the happiness boost produced by my increased income disappears. It is the contradiction between the point-of-time and time series findings that is the root of the paradox: while there is a correlation at a fixed point, there is no trend over multiple points.

That is, in the short run, everyone perceives increases in income to be correlated with happiness and tries to increase their incomes. However, in the long run, this proves to be an illusion, since everyone’s efforts to raise standards of living lead to increasing averages, leaving everyone in the same place in terms of relative income.

Various theories have been advanced to explain the paradox, but the paradox itself is solely an empirical generalization. The existence of the paradox has been strongly disputed by other researchers.

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MEMORY: Fallible & Impressionable

Posted on December 10, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Memory is Fallible/Memory is Impressionable: This concept refers to the inherent unreliability of human memory and its susceptibility to distortion and manipulation. Memory is not a perfect recording of events; instead, it is reconstructive, meaning that when we recall information, our brains can inadvertently alter or fill in gaps based on existing beliefs, emotions, or narratives. This can lead to the incorporation of false details that align with what we already know or expect to be true, resulting in vivid but inaccurate recollections.

Consequently, according to colleague Dan Ariely PhD, our memories can be influenced by suggestion, context, and social pressures, making them susceptible to biases and inaccuracies, much like a “con man” leading us to believe things that may not reflect reality.

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The “Shadow Self”

Posted on December 7, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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The Shadow Self is like the dark twin you never knew you had. It’s the part of your personality that lurks in the background, hiding your less-than-perfect traits. Think of it as the villain in your personal movie, full of suppressed desires and impulses.

According to colleague Dan Ariely PhD, acknowledging your shadow self can be a bit like therapy – uncomfortable but ultimately enlightening.

So, embrace your inner Darth Vader, and you might just find a better balance between light and dark.

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MENTALITY: Mob and Herd … and More!

Posted on December 5, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

MODERN DAY SOCIAL INFLUENCERS

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Mob Mentality can occur in unfamiliar groups, social cues disappear, and behavior becomes influenced by the crowd. Mob mentality shows how people sometimes act in ways they wouldn’t alone, following the group’s lead. According to colleague Dan Ariely PhD, this effect can create a loss of personal accountability, leading to behavior that may not align with personal values.

Herd mentality is the tendency for people’s behavior or beliefs to conform to those of the group they belong to. The concept of herd mentality has been studied and analyzed from different perspectives, including biology, psychology and sociology. This psychological phenomenon can have profound impacts on human behavior.

QUESTION: What about social media sites and modern influencers today! So-called celebrity endorsements and political elections, too?

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“FREE STUFF”: Powerfully Irrational

Posted on December 2, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

BEWARE THE PSYCHOLOGY OF HOLIDAY SHOPPING!

[Online -OR- Onground]

By Staff Reporters

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Power of Free

Who doesn’t love free stuff? The word “free” is like a magic spell that makes our rational minds go on vacation.

According to colleague Dan Ariely PhD, the power of free compels us to grab things we don’t need and make questionable choices. Why buy one and get one free when you can get two for the price of one? It’s the same deal, but free feels better.

IOW: Like other heuristics, the Power of Free is a mental shortcut that allows us to bypass rational thought and save effort to make quick decisions. Studies of the Power of Free have shown it to be closely linked to the Affect Heuristic. Specifically, it is linked to emotional and social thinking rather than transactional thinking. People become influenced by emotion and obligated to socially acceptable behaviors.

CITE: https://www.r2library.com/Resource/Title/0826102549

For example, say, a yoga studio charges extra to use their mats. This leads more people to pay the fee and use their mats for convenience. Then, say, the same yoga studio removed the extra fee more people would bring their mats from home instead of feeling guilty about borrowing one for class.

Removing a dollar value increases its inherent value and makes it more desirable. The type of product matters too. People are more likely to opt for a free product that is fun rather than functional. This is because emotion is more powerful than rational thinking under the influence of the Power of Free.

In another example, people are more likely to say “yes” to a free piece of cake or sample size of perfume than furniture polish or a bag of white flour.

So, next time you find yourself going to a free financial planning or retirement seminar with free dinner, or a free medical screening test, or free stock market portfolio review, just blame it on the irresistible and irrational power of free.

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GOAL GRADIENTS: Motivational Theories

Posted on December 1, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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The Goal Gradient effect is the phenomenon where people accelerate their efforts as they approach a goal. It’s like a runner sprinting to the finish line.

According to colleague Dan Ariely PhD, our motivation peaks when we see the goal within reach, driving us to work harder and faster. Marketers use this by showing progress bars and loyalty rewards. Knowing about the goal gradient can help us set milestones and maintain motivation throughout our tasks.

So, break your big goals into smaller ones and watch your productivity soar as you get closer to each milestone.

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CONVERSATIONAL “Switch Tracking” Ad Argumentum

Posted on November 26, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Switch Tracking is the art of changing the focus of an argument or conversation to another topic. It’s like sleight of hand for your words. When the discussion gets uncomfortable, switching tracks can divert attention and defuse tension. Politicians are masters of this, skillfully shifting topics to avoid tough questions.

According to psychologist and colleague Dan Ariely PhD, while it can be a useful tactic, be aware when it’s being used on you. Stay focused on the main issue, and don’t let switch tracking derail your conversation.

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ILLUSORY: Correlation

Posted on November 25, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

CORRELATION IS NOT CAUSATION

By Staff Reporters

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According to colleague Dan Ariely PhD, Illusory Correlation is the perception of a relationship between variables when none exists. It’s like thinking that carrying an umbrella causes it to rain. Our brains are pattern-seeking machines, often connecting dots that aren’t actually connected. This bias can lead to superstitions and incorrect beliefs.

The illusory correlation occurs when someone believes that there is a relationship between two people, events, or behaviors, even though there is no logical way to connect them. The illusory correlation fools us into believing stereotypes, superstitions, old wives’ tales, and other silly ideas. Sometimes, the perceived connection between two events is harmless. It’s silly to think that a certain number always brings you luck. But forming these connections is completely normal. To avoid illusory correlations, rely on data and evidence rather than anecdotal observations.

So always remember: correlation does not imply causation, no matter how convincing it seems.

More: https://medicalexecutivepost.com/2024/06/05/correlation-is-not-causation/

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SOCIAL COMPARISON THEORY: Downward and Upward

Posted on November 24, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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According to some studies, as much as 10 percent of our thoughts involve comparisons of some kind. Social comparison theory is the idea that individuals determine their own social and personal worth based on how they stack up against others. The theory was developed in 1954 by psychologist Leon Festinger. Later research has shown that people who regularly compare themselves to others may find motivation to improve, but may also experience feelings of deep dissatisfaction, guilt or remorse, and engage in destructive behaviors like lying or disordered eating.

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Downward Comparison is the act of comparing oneself to others who are worse off to feel better about one’s situation. It’s like looking at someone else’s messy desk to feel better about your clutter.

On the other hand, Upward Comparison is the act of comparing oneself to others who are better off to feel bad about one’s situation. It’s like looking at someone else’s neat desk and feel worse about your own clutter.

Finally, according to Dan Ariely PhD, these coping mechanisms boosts self-esteem or depress us with a sense of relief or dread. While helpful in moderation, relying too much on upward or downward comparisons can help hinder personal growth and/or depress growth or empathy; etc.

So, them sparingly and remember: upward comparisons can inspire you to improve and strive for better; while downward comparisons have the opposite effects.

MORE: https://www.verywellmind.com/what-is-the-social-comparison-process-2795872

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ABSURDISM versus NIHILISM

Posted on November 21, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Absurdism is the philosophical idea that life is inherently meaningless, but we should embrace the absurdity and create our own meaning. Think of it as existentialism’s quirky cousin. It’s like laughing at the cosmic joke instead of crying over spilled milk. Absurdism encourages us to find joy in the randomness and chaos of life.

So, according to colleague Dan Arily PhD, the next time you’re feeling overwhelmed by the lack of purpose, channel your inner absurdist and find humor in the absurdity of it all.

Nihilism, on the other hand, is the belief that all values are baseless and that nothing can be known or communicated. It is often associated with extreme pessimism and a radical skepticism that condemns existence. A true nihilist would believe in nothing, have no loyalties, and no purpose other than, perhaps, an impulse to destroy. While few philosophers would claim to be nihilists, nihilism is most often associated with Friedrich Nietzsche who argued that its corrosive effects would eventually destroy all moral, religious, and metaphysical convictions and precipitate the greatest crisis in human history.

In the 20th century, nihilistic themes–epistemological failure, value destruction, and cosmic purposelessness–have preoccupied artists, social critics and philosophers, alike. Mid-century, for example, the existentialists helped popularize tenets of nihilism in their attempts to blunt its destructive potential. By the end of the century, existential despair as a response to nihilism gave way to an attitude of indifference, often associated with anti-foundationalism.

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PSYCHOLOGY: Retrospective Framing

Posted on November 20, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Ever notice how memories change over time? That’s retrospective framing.

According to Dan Ariely PhD, our brains are like movie editors, constantly tweaking the past to fit our current narrative. Recall that terrible vacation where everything went wrong? Fast forward and now it’s a hilarious adventure. This mental editing helps us make sense of our lives and learn from our experiences.

So, just remember, the past is a story we keep rewriting, and sometimes those edits can be more fiction than fact

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GAMIFICATION: Motivation and Achievement

Posted on November 18, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Gamification is the application of game-design elements in non-game contexts to motivate and engage people. It’s like turning life into a video game with points, badges, and leader boards. This approach leverages our love for games and competition, making mundane tasks more enjoyable.

According to Dan Ariely PhD, whether it’s a fitness app tracking your steps or a learning platform rewarding your progress, gamification taps into our natural desire for achievement and recognition.

So, the next time you find yourself hooked on a task, thank the power of gamification for making it fun.

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PATTERNICITY: Apophenia vs. Pareidolia

Posted on November 16, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Patternicity is our brain’s tendency to find patterns in random data. It’s why we see faces in clouds or think the stock market follows our horoscope. According to colleague Dan Ariely PhD, this quirk helped our ancestors survive by recognizing predator shapes in the bushes, but in modern times, it can lead us astray. Our brains love making connections, sometimes too much, seeing patterns where none exist.

So, when you’re convinced that your lucky socks influence your team’s performance, remind yourself: it’s just your brain’s patternicity at work.

Apophenia vs. Pareidolia

Now, “Apophenia is the general term for the human tendency to see patterns in meaningless data that may involve visual, auditory, or other senses,” according to Dr. Harold Hong, a psychiatrist from Raleigh, North Carolina. He points out that pareidolia is a specific form of apophenia that refers to seeing visual patterns in random or ambiguous visual stimuli, such as seeing a face in the clouds.

Apophenia and pareidolia are common occurrences, says Hong, and challenges often only present when someone becomes fixated on specific patterns or details that others perceive as random. “While both phenomena are natural human tendencies, they can become concerning if someone starts to fixate on specific patterns excessively,” he says, noting that apophenia may be prevalent in certain mental health conditions, such as obsessive-compulsive disorder (OCD).

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BIAS: Of “Social Proof” and Influencers

Posted on November 15, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

INVESTING DEFINITION

By Dr. David Edward Marcinko MBA MEd

SPONSOR: http://www.MarcinkoAssociates.com

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Social Proof is a subtle but powerful reality that having others agree with a decision one makes, gives that person more conviction in the decision, and having others disagree decreases one’s confidence in that decision. 

This bias is even more exaggerated when the other parties providing the validating/questioning opinions are perceived to be experts in a relevant field, or are authority figures, like doctors, attorneys, financial advisors, teachers and/or people on television.  In many ways, the short term moves in the stock market are the ultimate expression of social proof – the price of a stock one owns going up is proof that a lot of other people agree with the decision to buy, and a dropping stock price means a stock should be sold. 

According to colleague Dan Ariely PhD, when these stressors become extreme, it is of paramount importance that all participants in the financial planning and investing process have a clear understanding of what the long-term goals are, and what processes are in place to monitor the progress towards these goals. 

Without these mechanisms it is very hard to resist the enormous pressure to follow the crowd; think social media and related influences.

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MEMORY: Fallibility

Posted on November 10, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Memory is Fallible. Think you have a great memory? Think again.

According to psychologist and colleague Dan Ariely PhD, memory is more like a game of telephone than a recording device. Each time you recall an event, your brain makes tiny edits, adding some flair or skipping the boring parts. It’s why you can’t remember where you left your keys but can vividly recall an embarrassing moment from high school.

So, the next time someone says, “I remember it like it was yesterday,” know that yesterday might be a heavily edited rerun.

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RECIPROCITY: Science “Sales” in Action

Posted on November 8, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

FREE SAMPLES

The Art of Giving – And Receiving – Value!

By Staff Reporters

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Imagine you’re at a party, and someone hands you a drink. Your first instinct? Find something to give back. This is [sales] reciprocity in action – our built-in psychological urge to repay kindness.

According to colleague Dan Ariely PhD, it’s like a cosmic balance sheet in our brains, ensuring we don’t owe anyone a favor. This is why companies give out free samples. They’re not just being nice; they know you’ll feel a pang of guilt if you walk away without buying something.

THINK: Free financial planning dinner seminar and prospecting event. That’s you – the Sales Prospect!

So, next time someone does you a favor, remember: it’s not just seller kindness, it’s science!

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HINDSIGHT BIAS: The “Curse of Knowledge”

Posted on November 6, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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The Curse of Knowledge and Hindsight Bias

Similar in ways to the availability heuristic (Tversky & Kahneman, 1974) and to some extent, the false consensus effect, once you (truly) understand a new piece of information, that piece of information is now available to you and often becomes seemingly obvious. It might be easy to forget that there was ever a time you didn’t know this information and so, you assume that others, like yourself, also know this information: the curse of knowledge.

Cite: https://medicalexecutivepost.com/2022/11/18/what-is-the-dunning-kruger-effect/

However, according to colleague Dan Ariely PhD, it is often an unfair assumption that others share the same knowledge. The hindsight bias is similar to the curse of knowledge in that once we have information about an event, it then seems obvious that it was going to happen all along.

I should have seen it [divorce, stock market crash/soar my smoking & lung cancer, unemployment, etc] coming!

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“HOT STATE”: A Decision Paradox

Posted on October 30, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

SPONSOR: http://www.MarcinkoAssociates.com

DEFINITION

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Ever tried making a decision when you’re angry or excited? According to colleague Dan Ariely PhD, that’s a hot state – when emotions run high and logic takes a backseat. It’s like trying to think clearly in the middle of a storm.

Be you a doctor, CPA, attorney, engineer, husband, wife, parent, teacher or all others. In a hot state, we’re impulsive, making choices we might regret later. It’s why cooling off before making big decisions is always a good idea.

So, when your emotions are boiling over, take a step back, breathe, and wait for the storm to pass. You’ll make better choices when you’re in a calm, cool state.

MORE: https://tinyurl.com/3hsnvx9r

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OBEDIENCE: To Authority is “Shocking”

Posted on October 24, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

QUESTION EVERYTHING?

By Staff Reporters

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Question: Why do we follow orders, even when they seem wrong?

According to colleague Dan Ariely PhD, Obedience to Authority is a powerful force, making us do things we wouldn’t normally do. Think of the infamous Milgram experiment, where people shocked others because a guy in a lab coat told them to do so. It’s our brain’s way of outsourcing decision-making to someone else. While it can keep society orderly, it also explains why people sometimes follow questionable orders.

Cite: https://www.simplypsychology.org/milgram.html

Milgram’s experiments posed the question: Would people obey orders, even if they believed doing so would harm another person?

Milgram’s findings suggested the answer was yes, they would. The experiments have long been controversial, both because of the startling findings and the ethical problems with the research. More recently, experts have re-examined the studies, suggesting that participants were often coerced into obeying and that at least some participants recognized that the other person was just pretending to be shocked. Such findings call into question the study’s validity and authenticity, but some replications suggest that people are surprisingly prone to obeying authority.

So, question authority [doctor, financial advisor, accountant, clergy, professor and lawyer, etc] – just not your GPS.

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ANCHORING: Initial Mental Brain Trickery

Posted on October 22, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

COGNITIVE BIASES

By Staff Reporters

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According to colleague Dan Ariely PhD, anchoring is the mental trick your brain plays when it latches onto the first piece of information it gets, no matter how irrelevant. You might know this as ‘ first impressions ’ – when someone relies on their own first idea of a person or situation.

Imagine you’re buying a car, and the salesperson starts with a high price. That number sticks in your mind and influences all your subsequent negotiations. Anchoring can skew our decisions and perceptions, making us think the first offer is more important than it is. Or, subsequent offers lower than they really are.

So, the next time you’re haggling or making a big decision, be aware of that initial anchor dragging you down.

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