Wednesday Thoughts - Habits and Risk Aversion


If one has lived for long enough, they have found ways to automate the things they do, and it is often quite difficult to rid them of said things. You can’t teach an old dog new tricks, as they say. To oversimplify this truth, let us address it through the lens of habit formation. Habits are, in some sense, the automation of certain behaviors, which frees up the brain to perform other tasks, and the manifestation of these habits often relies on cues. In economics, habit formation depends on the concept that “a higher habit stock lowers utility.” Meaning, the more habits you have formed in the past, the less enjoyment you get from that habit in the present - diminishing marginal utility, as we say. If we all develop habits, as it seems like we do, what type of people form what type of habits?

I opine that those who are more risk-averse tend to be more comfortable with their habits. Risk aversion refers to the preference in preserving the stock of one’s wealth relative to the potential of an increase in wealth when the increase in wealth includes more uncertainty. Meaning, in this framework, people who are more content with their positions in life form habits that perpetuate their fortunes. Thus, how much habit formation have people had during the recent lockdowns?

During times of high stress, people tend to be more risk-averse. Their utility curve is more...curved. It would follow that people have created during the recent lockdowns more habits, consciously or subconsciously. The question is, are these habits good? Well, some of mine are not. I’ve become laxer on social etiquette because I don’t socialize much. I have also become more hawkish on hygiene, as I hope more people are. Because habits are formed when one has a goal, it makes sense that some are not reinforced when one’s goal is merely survival.

Prediction: Expect to see more display of “bad” habits when things go back to normal.

Following Thomas’ law [10]: all topics are philosophical, evolutionary, or cultural; if you push them far enough, here are some questions on this topic I would like to explore. The premise that habits are formed when one has a goal implies that you almost rarely develop good habits when you have bad aims, or actually, maybe you do. Are habits only good when they serve the purpose of the goal? Or is there an overall moral framework? How much does this have to do with parenting? Is parenting just helping your kid form good habits? Or is it teaching them to set reasonable goals to develop morally good habits?(This is not parenting advice) Are habits moral when the goal is good (or bad)? Are there ethically neutral habits?

Certainty rating: 43%

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