Behavioral Economics: Every Action has a Value or a Cost

by Jim Cathcart

When you apply the science of economics to the study of human behavior some wonderfully useful insights occur. For example; once you realize that there is a tangible and measurable value to behavior, you will begin to think about them differently.
I recently addressed a group of about 400 Taxation Professionals, numbers people who work in a world of documentation, compliance regulations and statistics. When I presented this concept to them they instantly “got it” and, in fact, at the end of my speech they lined up to shake my hand and tell me how much they liked this way of thinking about behavior.
Here is the gist of the idea:
Every action we take or fail to take can be tracked sooner or later by measuring its value or cost, e.g. if we fail to prepare for an important event there will be a true cost to our lack of preparation. If we develop the habit of reviewing what we need to know just prior to meetings in which we will use the knowledge, then we will be able to participate in the meeting more spontaneously and usefully.
Behavioral Economics has three main components:
1. How we Think
2. How we Relate
3. How we Act

If people in an organization understand and embrace the purpose, vision, mission and values of the organization then they “embrace its genetic code.” These people bring more value to their work than their counterparts who think differently.
When you find meaning in what you do, you bring more value to how you do it.
This is merely one component of How we Think.
The ways in which people communicate or “Relate” to each other has a measurable value as well. Coworkers who don’t communicate openly and freely often operate with incomplete information and erroneous assumptions. This can have disastrous consequences financially.

There are three essentials for any relationship, whether it is with customers, colleagues or supervisors. These are:

  1. Both parties must be committed to making the relationship successful. Nobody can bear the full burden alone.
  2. Communication must be open and frequent. The truth must be told always and bad news must travel fastest of all.
  3. Both parties must know what the others expect from them. Clear agreements are essential.

The ways in which we relate to each other have a tangible economic impact.
How we act both on and off the job will ultimately show up in our productivity. Bad health has an impact of clarity of thought, ability to perform and on attitude. Lack of organization produces unnecessary errors plus a waste of time and resources. Certain work habits have more value than others. There is a cost to each of our habit patterns.
In short, if we think about our behavior as having an economic impact, we will be more motivated to change unproductive behaviors and adopt profitable ones. It’s time the “human factors” in business were placed at the TOP of our priority list, where they belong.
In the final analysis, “it’s the people, stupid!”

Jim Cathcart

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