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Objective Prosperity: How Behavioral Economics Can Improve Outcomes for You, Your Business, and Your Nation

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Objective Prosperity

How Behavioral Economics Can Improve Outcomes for You, Your Business, and Your Nation

by

Roger D. Blackwell, Ph.D., Retired Professor, The Ohio State University

and

Roger A. Bailey, Ph.D., Clinical Assistant Professor, The Ohio State University

COMING AUGUST, 2022

Print – ISBN: 978-1-944480-77-6

EPUB – 978-1-944480-78-3

PDF eBOOK – 978-1-944480-79-0

SKU: DR881 Category: Product ID: 30833

Description

Objective Prosperity

How Behavioral Economics Can Improve Outcomes for You, Your Business, and Your Nation

by

Roger D. Blackwell, Ph.D., Retired Professor, The Ohio State University

and

Roger A. Bailey, Ph.D., Clinical Assistant Professor, The Ohio State University

COMING AUGUST, 2022

Print – ISBN: 978-1-944480-77-6

EPUB – 978-1-944480-78-3

PDF eBOOK – 978-1-944480-79-0


Regardless of how you earn a living, you have likely taken time during the pandemic to take stock of where you are and where you want to be in the future. These evaluations inevitably lead to the question: “How do I get there?” The answers may seem hard to find at times, and for a good reason. Every person comes from a different background, with different skillsets, constraints, weaknesses, and strengths. Identifying ways to increase your prosperity is made even more challenging by the reality that the success of your nation’s economy can have a dramatic effect on your own success. Politicians, prickly pundits, and pompous TV personalities will promise answers for you and your nation, but consider this: Are there really one-size-fits-all answers to improve prosperity?

To be clear, this is not a book of simple answers to all of the world’s problems. There are certainly enough “expert opinions” on the planet to go around. Instead, this book provides a method for you to arrive at your own answers not driven by upcoming elections and TV ratings. Throughout the text, there will be a number of explanations, recommendations, and examples to identify solutions to improve your own prosperity and to evaluate the policies that seek to improve the economy around you.

If you want to get the most out of this book, consider a few ground. First, try to approach the examples with as little bias as possible. Consider that this is far easier said than done. Biases, positive or negative, are learned predispositions to the environment around us. Just like every person has different strengths and weaknesses, every person also comes with different biases. Strong beliefs about the way things should be should not stop you from being able to evaluate a situation thoroughly and carefully. This book provides a behavioral-economics-based (data-based) view of prosperity that avoids the pitfalls of using preformed opinions and subsequent biases. In short, drop the dogma and dig into the data!

Second, this book will walk you through the opinions of multiple sources. Evaluation of the authoritative opinions of others allows you access to valuable information you may not otherwise consider. However, like every person, these sources will frequently have a slant to them (politically or otherwise), and yes, some may even include false or misinterpreted information! To help maintain objectivity, you should consider sources from different perspectives, not just those you are most comfortable with. The frequent quotes and references in the text provide further resources, but also highlight the importance of evaluating expert opinions in drawing conclusions for yourself.

In addition to the above, each chapter includes a few “Keys to Prosperity.” These examples, quotes, and discussions are provided as practical insights from the authors. Consider these a base point to work from as you evaluate your own situation, the situation of those around you, the current state of your nation’s economy, and how you might take action to improve your prosperity in light of these things!

Excerpt from the Introduction

Regardless of how you earn a living, you have likely taken time during the pandemic to take stock of where you are and where you want to be in the future. These evaluations inevitably lead to the question: “How do I get there?” The answers may seem hard to find at times, and for a good reason. Every person comes from a different background, with different skillsets, constraints, weaknesses, and strengths. Identifying ways to increase your prosperity is made even more challenging by the reality that the success of your nation’s economy can have a dramatic effect on your own success. Politicians, prickly pundits, and pompous TV personalities will promise answers for you and your nation, but consider this: Are there really one-size-fits-all answers to improve prosperity?

To be clear, this is not a book of simple answers to all of the world’s problems. There are certainly enough “expert opinions” on the planet to go around. Instead, this book provides a method for you to arrive at your own answers not driven by upcoming elections and TV ratings. Throughout the text, there will be a number of explanations, recommendations, and examples to identify solutions to improve your own prosperity and to evaluate the policies that seek to improve the economy around you.

If you want to get the most out of this book, consider a few ground. First, try to approach the examples with as little bias as possible. Consider that this is far easier said than done. Biases, positive or negative, are learned predispositions to the environment around us. Just like every person has different strengths and weaknesses, every person also comes with different biases. Strong beliefs about the way things should be should not stop you from being able to evaluate a situation thoroughly and carefully. This book provides a behavioral-economics-based (data-based) view of prosperity that avoids the pitfalls of using preformed opinions and subsequent biases. In short, drop the dogma and dig into the data!

Second, this book will walk you through the opinions of multiple sources. Evaluation of the authoritative opinions of others allows you access to valuable information you may not otherwise consider. However, like every person, these sources will frequently have a slant to them (politically or otherwise), and yes, some may even include false or misinterpreted information! To help maintain objectivity, you should consider sources from different perspectives, not just those you are most comfortable with. The frequent quotes and references in the text provide further resources, but also highlight the importance of evaluating expert opinions in drawing conclusions for yourself.

In addition to the above, each chapter includes a few “Keys to Prosperity.” These examples, quotes, and discussions are provided as practical insights from the authors. Consider these a base point to work from as you evaluate your own situation, the situation of those around you, the current state of your nation’s economy, and how you might take action to improve your prosperity in light of these things!

Contents

 

DEDICATION.. 5

Preface. 7

Additional Comments by Roger Bailey. 11

Contents. 14

Introduction. 18

Essential Topics of Economics. 20

What is the “Economy”?. 25

Who Gets How Much?. 28

Chapter 2. 37

Behavioral Economics: 37

Something Old, Something New.. 37

The Original Economists. 40

Something Borrowed.. 42

Something New: Behavioral Economics. 46

Daniel Kahneman. 47

Chapter 3. 53

Who Controls the Economy?. 53

Time and Money Budgets. 56

Chapter 4. 66

How People Buy Goods and Services. 66

Why People Buy. 70

It is Not the Product; It is the Benefit. 79

The Road Map. 80

Chapter 5. 84

National Prosperity: Lessons from History. 84

An Ancient Example. 86

Economic Prosperity and Global Dominance. 90

Rise of Nation States. 93

The Sun Never Sets. 94

Creating a Culture of Prosperity. 98

Chapter 6. 104

How to Be Prosperous Instead of Poor. 104

It is a Marshmallow World.. 107

Behavioral Antidotes to Racism.. 109

Recognizing the Problem.. 114

Historical Examples of Anti-Racism.. 118

Does It Take Money to Make Money?. 122

Personal and National Prosperity. 127

The Problem of Homelessness. 128

Income and Wealth Are Different. 131

How to Be an Einstein at Investing. 132

Avoiding the Opposite of Wealth: Live Debt-Free. 134

Chapter 7. 136

The Ironic Inequality Paradox. 136

Inequality: For Better or Worse?. 137

Questions About Piketty’s Analysis. 138

Capital Versus Value Creation. 142

Poverty Versus Mobility. 145

Education: Key Attribute of Human Capital 146

What is Happening to the Middle Class?. 149

Generating High-Income Jobs. 151

Learning from Billionaires. 152

Chapter 8. 157

Unintended Consequences of. 157

Well-Intentioned Policies. 157

Lessons From Finance. 158

Even Great Ideas Have Consequences. 160

Is Anyone Anti-Antibiotics?. 161

Free College Tuition. 162

Forgiving Student Debt. 164

Wealth Taxes. 167

Legalizing Marijuana and CBD.. 170

Immigration Policies. 173

Mandatory Minimum Wage. 177

Financial Transaction Taxes (FTT). 184

Medicare for All 186

Just the Facts!. 189

Chapter 9. 192

Collectivism or Individualism: 192

Which is Best?. 192

Examples at the Extremes. 193

Nordic Socialism.. 195

Rise and Fall of Collectivism.. 201

Russian Collectivism.. 201

The China Evolution. 207

Emerging Market-Driven Nations. 211

Collectivist Corruption. 214

The Merits of Meritocracy. 216

Evaluate a Policy on the Spectrum.. 220

Chapter 10. 222

Your Personal Path to Prosperity. 222

The Value of Values. 229

Your Personal Values for Prosperity. 232

Instrumental Values for Life. 235

.. 237

Roger’s Rules for Success. 237

Index. 239

Other Books By Roger D. Blackwell 243

Credits. 246

About Rothstein Publishing   247

Foreword by John Mariotti

FOREWORD                                                                                     by John Mariotti

STOP reading! Now, do I have your attention? NO – DON’T STOP reading!

Don’t make the mistake I almost made of being put off by “Economics” in the subtitle. At first, I questioned, “who wants to read a 250-page book on economics?” Then I read a little more, skipped and skimmed based on the Preface. My first impression was wrong, as I found when I got deeper into the book’s content.

I kept on reading, often peeking ahead to see where the book was going. The more I read, the more I liked it. I quickly realized that “prosperity” could also describe success, survival, happiness, and a host of other desirable outcomes. I also learned a lot along the way, because the book is very rich in wisdom, and experience. I’ve known Roger Blackwell for 40 years and I’ve learned that when he has something to say – I listen!

I soon realized that the combination of “consumer behavior” and “economics,” (i. e., “behavioral economics”) is very powerful. Each of us will find our own treasures in this book. When I wondered how to stay on the path to prosperity, the “Keys” kept helping me.

There are few things more powerful than understanding why people behave the way they do. Here, the leading teacher of consumer behavior for the past half-century, with an accomplished marketing and economics colleague, explains it. I saw that not only individuals but also groups (companies, organizations, and even countries) were made up of people behaving in ways that serve their self-interest, seeking rewards and prosperity.

Few books contain and explain so much content to help readers understand this. Everyone has similar objectives: success, gratification, recognition, and, ultimately, prosperity – each defined in their own unique context and terms. As I read further, chapters describe how diverse people learned and earned, or fought, to achieve prosperity (including enduring unintended consequences of even good ideas). This book is a virtual treasure chest of knowledge and understanding, about how behavioral economics helps people reach their ultimate objective – prosperity.

Suddenly, I found myself at the end, reading “Roger’s Rules for Success.” I was gratified, wiser, and far more aware of many things that I didn’t understand as well before. Above all, I was happy I didn’t take my own opening advice and STOP reading. I hope you will not stop but keep on reading. FYI: I  found this book so rich in content, that it deserves a second or third reading.

 

John Mariotti

President & CEO, The Enterprise Group

Chairman of World Kitchen

Former President, Rubbermaid, Office Product Division

Former President, Huffy Bicycles

Former Chairman & Director, World Kitchen LLC

Powell, Ohio

July, 2022

Preface by Roger Blackwell Ph.D.

If you have ever heard Economics called “The Dismal Science,” prepare to reset and propel your thinking about economics at quantum speed. Would you call it “dismal” to know how poor people of diverse racial, ethnic, and educational backgrounds escape poverty and become prosperous? Do you know how the ironic inequality paradox allows some people born in the bottom twenty percent to elevate themselves to the top twenty percent? Would you call it dismal or exciting to learn how, starting around age 45, to gradually become very prosperous with nothing more than what you have earned and learned working many years in a retail store?

Do you know how to grow up in one of the poorest nations in the world, called by some a “malaria-infested swampland” and see it become a nation more prosperous than the United States? Do you believe people in the Netherlands or Saudi Arabia are more prosperous? Do you know how the United States started equal in per capita income with the rest of the world to become one of the wealthiest nations in the world (but not the wealthiest)?

If you already know the answers to these questions, you probably don’t need to read this book other than, perhaps, to have facts that will help you explain to friends who may not know them. But if you choose to read the rest of the book, you will find these answers and more about how to increase your own prosperity as well as understand why nations are poor or prosperous. And, perhaps, you will conclude the study of Behavioral Economics is not dismal, maybe even delightful.

Behavioral Economics is considered a new field of study by some, but as you will see in Chapter Two, it has many of the attributes of traditional wedding attire, “something old, something new, something borrowed, something blue.” If you already know a lot about economics, you can skip Chapter One, but you may want to review it to be sure you understand two concepts essential to understanding how you prosper and contribute to national prosperity.

You may be tempted to go straight to the two most practical chapters in the book, “Why Some Nations are Rich and Other Nations Poor” and “How to Be Prosperous Instead of Poor.” (Chapters 5 and 6). If you want to read those chapters first, that is reasonable, maybe to apply those principles to your life immediately. But if you want to know who controls future prosperity, perhaps it will be profitable to read Chapters Three and Four which document who controls future prosperity for both nations and individuals like yourself. Spoiler alert! It is not the President of the United States or even the Chairman of the Federal Reserve.

Is inequality getting better or worse? You may find the discussion of that issue in Chapter Seven ironic and paradoxical. You will probably also find that Chapter Eight raises issues you may not have considered in the past but that are critical to your future. And please don’t read Chapter Nine until you have fully considered all the earlier chapters. Finally, when you arrive at the concluding chapter, the content of this book is summarized in Ten Rules that helped me survive and sometimes thrive in a life spanning many decades. They are not presented as suggested rules for you but perhaps as motivation to write down your own rules for the rest of your life.

After forty previous books, there was only one good reason for me to write another – to help you understand your own prosperity and typical income as well as wealth of people living in the nation. While this book is based on empirical research – the kind that helps people receive promotions as a professor and accumulate enough wealth to donate my career salary back to the university where I taught for forty years – it is also based on practical lessons growing up in the Missouri Ozarks, learning the only people who do not work on a farm are those who do not want to eat.

When I was in high school, at age 16, I began working at a local radio station as a janitor and progressed to higher positions, working full time while attending Northwest Missouri State before transferring to Missouri University to receive my bachelor’s and master’s degrees and a Ph.D. from Northwestern University, all without financing from parents or accumulating debt myself. You can read more details in the concluding chapter of this book, but from life and parents, I learned you do not have to have money to obtain a quality education. Where there is a will, there is a way for poor people to achieve a good education. This book describes how.

While reading this book, you will observe something different than most books: no footnotes. Decades ago, books included numerous citations at the bottom of pages, slowing reading substantially. To solve this problem, reader-oriented authors began putting citations at the end of chapters or the end of the book. Even with this improvement, printed citations were sometimes out of date or limited in scope.

I have taken a behavioral approach, omitting footnotes in this book. If there is a term such as a demand curve or an author such as Daniel Kahneman about which you would like to learn more, you are encouraged to use your favorite search engine to get a recent explanation with as much detail as you prefer.

At The Ohio State University, I had the incredible learning experience of teaching over 65,000 students, mainly in the business school but also courses in Thanatology and Health Care Economics for the Medical School. I was also a member of the Black Studies faculty for a few years, reflecting a life-long interest in cross-cultural research, civil and human rights, and upward mobility among under-served minority groups. My primary research area was behavioral aspects of marketing, co-authoring Consumer Behavior, a text translated into Russian, Portuguese, Spanish, French, Korean, and other languages used in universities and organizations in many countries. The success of that and other texts was the catalyst for being invited to teach and do research in 39 countries on six continents, learning from personal observation what makes some people poor and some prosperous.

After retiring from Ohio State, my understanding of poverty and prosperity was enriched further while teaching General Educational Development (GED) classes for almost six years to inmates at the Federal Correctional Institution in Morgantown, West Virginia. There is nothing quite as educational about how people escape (or do not escape) from project housing in the hood and other dysfunctional backgrounds as the daily teaching of former drug dealers. The GED students were often members of gangs, cartels, and other diverse occupations (including a former Mafia hitman studying economics, math, government, grammar, and literature. In prison, when you teach math, explaining the metric conversion of grams to ounces, it is not unusual to be asked, “Is that with or without the bag?”

I taught students in prison how to obtain a GED and, when they left prison, how to get a job, but the GED students in prison taught me even more about the realities of poverty, crime, and injustice. Nelson Mandela was correct when he said no one understands a nation as well as people who spend time in its prisons. You can read additional details of my life, in both prosperity and prison, in You Are Not Alone and Other Lessons a Teacher Learned from Parents, Professors, and 65,000 Students.

While writing this book, I asked Dr. Roger Bailey for advice and help. His insights as a marketing professor at Ohio State and his strong background in Economics and Quantitative Methods were invaluable to improving and extending many areas of the book. I asked him to join me as co-author, which he graciously accepted. We might not agree on every detail in the book, but hopefully his addition will make it more useful to you.

 

Roger Blackwell, Ph.D.

Columbus, Ohio

July, 2022

Additional Comments by Roger Bailey

First, I want to reiterate that this book is the brainchild of Dr. Blackwell, and I was very happy to join him and contribute my ideas and perspectives along the way. It is our sincere belief that every reader will take away something useful from the concepts and examples presented in the following chapters.

To point out another perspective that complements Dr. Blackwell’s, I’ll return to his comment about economics being called “the dismal science.” This term for economics was coined in the 1800s by Thomas Carlyle. One view of economics at that time, proposed by Thomas R. Malthus, was that food would always be scarce and that poverty and hardship were unavoidable. Subsequently, many concluded that the “dismal science” phrase described the bleak outlook of economics for humanity.

This general view is consistent with many people’s views of economics, business, and prosperity today. Most humans care about the well-being of other humans. It is easy to see the vast differences in wealth and prosperity across the globe and conclude that financial success requires a person (or a nation) to treat others poorly. In other words, prosperity appears to come from ill-gotten wealth. If this is your view of the world, this book will challenge that perspective.

The reality is that becoming more prosperous does not require you to mistreat others. Moreover, being a compassionate person does not require you to forgo successful strategies and sound business practices to improve the prosperity of you and your country. However, improving prosperity does require careful thought, planning, and methodical consistency toward your goals.

This book presents the view that economics, specifically behavioral economics, can be combined with an objective view of a situation to identify solutions for improving prosperity. The views in this book are consistent with fairness, empathy, and a desire to confront the problems in the world. On the other hand, this book will also objectively present the traits and characteristics of both individuals and nations that have consistently led to prosperous outcomes in the past.

Going back to Thomas Carlyle’s view of economics, a brief investigation of his history reveals that he was anti-Semitic, racist, and had contempt for the notion of equal rights. Also, note that some of the first abolitionists in history were economists. In the 1770s, Adam Smith used economic theory to present a strong argument against slavery. Given Carlyle’s pro-slavery views, it is widely believed that Thomas Carlyle’s labeling of economics as “dismal” was a way to discredit a field that confronted his own bigoted beliefs. We hope you will agree that there is nothing dismal about the recommendations of this book!

In closing, the goal of this book is for you to come away with a “solutionist” perspective. Regardless of your political persuasion or your current financial situation, this book will provide you with tools for improving your own situation as well as for evaluating solutions and policies to improve the prosperity of your nation. After all, as you will see in the coming pages, your success can very much depend on the prosperity of those around you!

 

Roger Bailey

Clinical Assistant Professor

Fisher College of Business

The Ohio State University

July, 2022