Rational?

Forbes reports that according to work done by Sendhil Mullainathan at Harvard, consumers may be much less rational than traditional economics would suggest:

"It turned out that having a wholesome, happy female picture in a corner of the (loan solicitation) letter had as much positive impact on the response rate as dropping the interest rate by four percentage points. Says Eldar Shafir, professor of psychology and public affairs at Princeton and a coauthor of the study: "I didn't know that, nobody expected that."

The degree to which investors make rational decisions is a central issue in behavioral economics and important to making good investment decisions. These results are surprising, but not that surprising, makes me wonder if John Bogle has ever bought something from a pretty face.

Timothy Burger
timothyb(at)timothyburger.com