Bounded Rationality in Education

Topics: Cognition, Daniel Kahneman, Decision making Pages: 8 (2869 words) Published: November 7, 2012
I am inspired most by the cognitive bias and the risk control of the decision- making while learning this course. Having been engaged in the financial industry for years, I am deeply aware of the fact that most individual investors tend to perform those bounded rationalities for characteristics of decision-making while making investment, but I can’t find out the reason for their existence. After learning this course, however, I feel suddenly enlightened. The phenomenon that has bothered me so long is caused under the influence of the cognitive bias and emotion which will affect the risk assessment and judgment made to the investment object. In western countries, most families make investment mainly in dominant financial assets including stock, bond, real estate and insurance and have strong awareness of the risk averse in above fields. Meanwhile, there’re many organizations and books about the decision-making that are referred to by the individual investor. In Chinese families, in addition to the above investment of the financial assets, the investment of the family education, as a special form which involves all Chinese people, takes a large proportion. This is because a long-term funding is made by parents ever since their kids are born as a result of the non-free education in China. “Never let children lose at the starting line” and “education is the largest investment” are two popular education ideas in our country, which comprehensively inflect the current situation of Chinese families’ investment to the children education. As parents put the entire earning into their kids, a good return is surely expected. But since income is companied with risk, Chinese education investment, therefore, belongs to the risk investment and, meanwhile, has the specific characteristic that is not covered in western theory. The invest object in this essay is mainly about the education domain in China, I think it’s also necessary to apply the theory of this course to avoiding the influence of the cognitive bias as well as the mental trap and the irrationality in the education investment. By introducing the behavioral motive of the education investors, I intend to master its pattern and make judgment of the irrational behavior, which, I believe, will help protect the interest of the family investor. Finding

The misunderstanding of the family education investment in China is generated mainly because investors, i.e. parents, make blind investment without thinking about their economic conditions, the investment risk as well as the personalized growth of their children. In traditional Chinese culture, parents’ education investment to their children is unconditional and selfless, which lead to a lack of scientific and rational planning as well as decision in the education investment in many families and, meanwhile, cause some misunderstandings. The “following blindly” phenomenon of purely pursuing high and abroad education is becoming more and more violent. Considering the cognitive bias of investors, the education investment with high expectation and input, instead of bringing expected return to the family members, leads to extra economic burden and, at the same time, might influence the development of the educatees’ career in the future. As attention has been paid to the generation of the misunderstanding of the education investment behavior, many scholars make analysis in terms of the government policies, the social environment, the high education and other macro level. Through learning the course, I, on the other hand, would like to say that the education investment is mainly from the cognitive bias while investors make their decision. The cognitive bias includes all kinds of decision-making bias caused by the restraint of investors’ cognitive psychology and external environment. The cognitive bias of the decision-making of the family education investment is generated under the influence of the external...
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