[lbo-talk] definitive evidence on the housing bubble

JBrown72073 at cs.com JBrown72073 at cs.com
Thu Feb 3 11:39:57 PST 2005



>A more likely explanation is that people cognitively frame their credit card
>debt in a way that minimizes the extent of that debt i.e. by concentrating
>on the marginal effect of every purchase ("its is just a few dollars")
>while losing sight from the big picture. Another example is the endowment
effect
>(see my previous posting) that prevents them form using their savings to
>reduce their credit card debt and thus avoid paying high interest charges.
>
>Cognitive framing is a far superior explanation of economic behavior that
>the rationality (or lack thereof) assumption.
>
>Wojtek

Sure, I don't have an argument with that. I'm just saying the credit card companies are the ones congitively framing the damn thing that way. Millions of dollars in advertising are needed to hold these lies firmly in place. I get at least 3 credit card offers in the mail a week, promising the earth at 2.9% interest. Mailing me all that paper and plastic must cost a good bit.

They're not just going with the flow, they're spending good money to conceal what might otherwise be obvious. They wouldn't need to do that if people were just hapless.

Jenny Brown



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