Note to Washington: You Cannot Separate Human Psychology from Economics

The Huffington Post is talking about Obama’s handling of the economy and the world view of his economic advisers now that Larry Summers is resigning. Those policies — the bailout of Detroit automakers, an $814 billion stimulus package, subsequent programs under TARP, Cash for Clunkers and the administration’s unlimited backstop of Fannie Mae and Freddie [...]

from Joshua Kennon

The Price of Happiness? Science Confirms It Is $75,000 Per Year

In a major peer-reviewed study from Daniel Kahneman and Angus Deaton from the Center for Health and Well-being at Princeton University, the great debate of psychology – can money buy happiness? – has finally been answered.  It turns out, it can up to a point.  This isn’t some quick news poll either, it is a [...]

from Joshua Kennon

How We Used Shares of Coca-Cola to Teach My Youngest Sister About Investing (and Why the Cycle of Consumption and Financial Stress Starts as a Teenager for Most Americans)

When I was a senior in high school, I bought my youngest sister, who was first grader at the time, a single share of Coca-Cola common stock for her 6th birthday.  I had it framed with an engraving of the first part of Deuteronomy 8:18 placed under it, “You shall remember the Lord your God, [...]

from Joshua Kennon

Mental Model: Veblen Goods

In today’s installment of our mental models catalog, we are going to discuss Veblen goods, which are a special type of item that would appear, at first glance, to violate the law of supply and demand relationships to prices. Veblen goods are a type of commodity, product or service for which demand increases the higher [...]

from Joshua Kennon

How to Solve the Trade Deficit – Part IV

This is part of my special on How to Solve the Trade Deficit. You can read Part I, Part II, or Part III if you missed them. The Increased Competition for Jobs Is Domestic, As Well You mention that standards of living have fallen, despite gains in things like iPods with 25,000 songs and the [...]

from Joshua Kennon

How to Solve the Trade Deficit – Part III

This is Part III of my special on How to Solve the Trade Deficit.  If you missed the earlier parts, you can read Part I or Part II first. How to Solve the Trade Deficit – Knowledge Workers vs. Manual Workers In many ways, your question about the trade deficit has very little to do [...]

from Joshua Kennon

My Sister Is Getting Married in 36 Hours

In 36 or so hours, my younger sister, Kelsey, is getting married t0 a wonderful man named Tyler, meaning Caleb, Harley and I will soon have a new brother-in-law. This afternoon, they met at the church to go over the procedure that will be followed Saturday (I stopped by with a psychology book to read [...]

from Joshua Kennon

Mental Model: Satisficing

Satisficing: A psychological and economic phenomenon that results from consumers choosing a product that meets criteria at an adequate level, rather than expending a great deal more time to find a fully optimal solution. Put another way, people are not looking for optimal solutions in their life.  They are looking for a combination of “just [...]

from Joshua Kennon

The Psychology of Human Misjudgment by Charlie Munger

By Charlie Munger (Warren Buffett’s partner at Berkshire Hathaway) Speech at Harvard Law School (1995) Transcription of The Psychology of Human Misjudgment, comments [in brackets] by Whitney Tilson.  Note from Joshua Kennon: I’ve written a lot about Charlie Munger over the years, especially the influence he has had on my life and how we run [...]

from Joshua Kennon