From oil spills to war, anybody can make errors of judgment, but some lapses turn out to be eye-wateringly, jaw-droppingly expensive. And embarrassing. According to Gary Belsky and Thomas Gilovich in Why Smart People Make Big Money Mistakes, people could avoid making major fiscal errors by application of what is emerging as a new science, ‘behavioral economics.’ This grew out of Israeli studies that were conducted thirty years ago; the studies examined the impact of rewards and punishments in judgment-making. Belsky and Gilovich argue that in order to overcome blind spots that lead to financial errors, people must grasp the underlying psychological causes behind those decisions, both large and small – from buying/selling a house or stocks/shares, to grabbing supermarket bargains, betting and tipping. Decisions may turn out to be wrong only … Read entire article »