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domenica 18 novembre 2012



Accordingly with main authors of behavioral economics (Kahnemann-Tversky, 1979, 1981; Ariely, 2008; Slovic 1982; Duncan Luce and Raiffa, 1957; Gibbson, 1992), we consider that behavior can be irrational but logically or statistically and probabilistically previewed on the base of analysis of precedent cases and probabilistic happenings, and this is our personal belief. Taxation should be looked and seen finally more like “individual social action of purchase something without any formal alternative”, more than simple duty (i.e. military service has economic implication for a subject, but it is to be seen more like influencing social sphere, just like having or not a passport or respecting civil laws). If we could look toward action of payment of taxes like an individual economic behavior, then we could state that such action is ruled by behavioral economic rules.

D.Ariely (2008),  “Previdibilmente irrazionale – le forze nascoste che influenzano le nostre decisioni”,  Rizzoli, Bologna
G.Brusa (2008), “La Percezione del Valore”, Maggioli, Rimini
R.Duncan Luce, H.Raiffa (1957): “Games and Decisions”, Wiley, New York
R.Gibbons (1992), “Game Theory for Applied Economists”, Princeton University Press
D. Kahneman – A.Tversky (1979), “Prospect Theory: An Analysis of Decision Under Risk”, Econometria, 47(2), 263-291
D. Kahneman – P. Slovic - A.Tversky (1982), “Judgment under Uncertainty. Heuristics and Biases”, New York: Cambridge University Press.
D. Kahneman – A.Tversky (1981), “Variants of uncertainty” Cognition, Volume 11, Issue 2, March 1982, 143-157
D.Kahneman, A.Krueger, D.Schkade, N.Schwarz, A.Stone (2006), “Would you be happier if you were richer: A focusing illusion”, Science 312 (CEPS Working Paper No. 125)
P.Kotker (2009), “Marketing Management”, Pearsons, 12 ed.
P.Krugman (2006), “International Economics: Theory and Policy” (with M. Obstfeld),  Addison Wesley, 7th Edition
O.Morgensten, J.Von Neuman (1944), "Theory of Games and Economic Behavior", in
O.Morgensten, G.L.Thompson (1978), "Mathematical Theories of Expanding and Contracting Economies", in
G.Pellicelli (2010), “Il Marketing Internazionale”, ETAS, Milano, 5 ed.
A.Ries,  J.Trout (1981), “Positioning, The battle for your mind”, Warner Books - McGraw-Hill Inc., New York
L.Scaini (2011), “Level of spread as a mean of marketing for state issued bonds in financial crisis situation”, in “Economics: modern state and priorities of development”, Section 1. Economy and management of national economy, 25.V.2012
D.Trevisani (2001), “Psicologia di marketing e comunicazione”, Franco Angeli, Milano
D.Trevisani (2003), “Comportamento d’acquisto e comunicazione strategica”, Franco Angeli, Milano
G.Zaltaman (2003), “How custumer think: Essential insights into the mind of the market” Harward Business School Press, Boston 2003

Body of Article
1.  Theoretical Proposal: problems connected with behavioral approach
Considering taxation like an institution and mandatory payment (in common we refer under this word “taxation” to fees, taxes and contribution”, regardless of the formal difference that may anyway influence the practice of our theoretical proposal), it is not possible to refer to this accordingly with behavioral rules of economy, so the intention to change the point of view is not servant to our goal, but servant to a different perspective on a certain action, to investigate it under the focus of social sciences and to suggest a more profitable action less focalized on its cost and more on its services’ value.
Moreover we are not going to discuss about ethical or functional value or importance of taxes, but we’re focalizing on the action itself and on the motivation of this action, mostly investigating it throughout eyes of people paying (buyer).
We believe this practice is more individual then social and should be related to a non-social behavior of economy, very rarely find, anyway.
Payment of taxes is, moreover, sort of economic and financial action, even though pretty unusual, and this is ruled and probably better understood if considered like a purchase action.
Problem may be seen under different lights, all probably true, and rebuiltable under a different angle:
·       Taxes are a payment for services and not for goods, so there is no direct connection with purchasing;
·       Even such services are not always directly connected with the act of payment (like for insurance) or with any tangible result (paying for welfare but will result after decades of work, after retirement);
·       Often people pay for something in order to obtain the opposite (people pay for health and hope not to visit an hospital, for weapons, but hope in peace);
·       State has no competitors and taxes, often, have no clear alternative. In some very liberistic and market-oriented system, people may choose among different alternatives, like private insurances, private social expenses or state offered or warranted ones.
2.  Theoretical Proposal: reasons of considering the proportion taxes:purchase=service “x”:good
So, we are stating that considering taxes like sort of atypical payment for goods or services, where there is no freedom of choice and mostly no direct consequences between purchase and good/services paid and a kind of purchase without social interaction (the service purchased is not shared with other people of the same social group), it is considerable a sort or behavior that has very little similarity in economy.
We also state that this is a behavior connected with economy, since there is effectively a payment for something and the consequential purchase –in some form- of something related to such financial value and by consequence it (such “payment”) must be considered like such action, with same motivation and consequences.
Under this point of view, motivation must be discovered, pumped and shared with people paying and purchasing something, just like in every other economic and market field.
We can simplify the whole matter writing it under the form of a proportion:


Here we state that A is any purchase and B is any good or service purchased, A1 are taxes (seen like purchase of some sort of service, call it a duty or a choice) and B1 is what taxes are paid for. The matter stays in B1, seen like the profit or gain of a certain action A1, with a cost.
We believe that B1 is not adequate to Balance the total cost (psychological and real, Trevisani, 2001, 2003) represented by A1, whilst B is motivating in a proper way A, via stimulation of people’s motivation center. It was already explored by more authors in Microeconimcs (Kahnemann, Tversky 1979; Morgensten, Thompson, 1978; Morgensten, Von Neuman, 1944; Kahnemann, Slovic, Tversky, 1982).
Now, we should focalize on these questions:
·       Any purchase happens why?
·       What makes it happen and influences its success or not?
The same concept, discovered, developed and used for market purchases, must be related also to a non-good and non-willed cost (tax), creating a correct motivation, in order to avoid the competitor’s offer, present, latent and dangerous for every business.

3.    Theoretical Proposal: pros of considering how behavior influence A->B , it may influence A1->B1
Now, referring to behavioral economy, marketing, and other connected sub-sciences, such as retail and consumer psychology, is well-known and proofed a tight connection between perceived value of a good as main motivator of some purchase (Brusa, 2008; Kahnemann, Tversky 1979; Morgensten, Thompson, 1978; Morgensten, Von Neuman, 1944; Kahnemann, Slovic, Tversky, 1982 ).
The action’s cost (A) is split between real cost (monetary) and psychological cost (Trevisani, 2001, 2003): it is the effort to reach the selling place, or the cost of separation from another good –replaced- or from some other that won’t be purchased by lack of money, or different other possibilities.
Good “B” must cover with its inner value (perceivable by buyer) all such costs to represent a gain and not a loss, otherwise the only way to perform that action “A” is represented by a need or a total lack of other choices, including a non-purchase (“A minus 1”).
We shortly remark that in marketing, meaning “every action of putting a product on a market” (whatever product is, real or service and whatever market it is, place or group of people), perceptions are more important than reality (Kotler, 200912, pg 228).
So, the second case A1->B1 is connected with taxation, and we are going to demonstrate it now.
It is not senseless also to remind that a perceivable value is not represented by price.
In case of lack of experience of a certain good and in case of lack or promotion of such good, price may surely represent a valid hint (Pellicelli, 20105), but this situation is very rarely find, so price indicates simply a cost (or a sum of money) that a certain market player is able to spend to obtain something: it is gain.

4.  Theoretical Proposal: demonstration of taxes as purchase of goods without perceivabe value
In our proportion, we stated that “B” is the good represented by a price that a buyer must spend through an action of purchase “A” to gain all the related perceived values.
In fact, as a cost is made by two different and related sub-costs (real, or monetary and psychological), as gain is made by two different forms of gain (Trevisani, 2001, 2003).
The two forms of gain are: real (or monetary gain), mostly represented by its price, and telling to buyer how much is the inner value of something, and psychological value.
The psychological value represents all the hidden gains that a buyer will acquire through a certain purchased object (for example brand works like this, adding sort of emotional value to a certain object, like a bag, and making it more desiderable and expansive).
The psychological value represent the balance of a monetary cost when it is impossible or just too hard to evaluate the physical value of a good (like a branded garment, or bag).
“A” as an action of purchase happens whenever “B” can represent to the actor of “A” (buyer) a system of gains superior than the whole system of costs (or loss).
“A1” as an action of payment and so purchase of something happens in every condition (of loss or gain) being “A1” compulsory and mandatory, despite of what “B1” represents for an actor of “A1”.
Every good or service “B” purchased on the market through action “A” has a cost (even when it is “free” or “gratis”, due to its psychological cost) balanced by its perceived value and transformed into a purchase if Total Gains of B> Total Costs of A, whilst the action “A1” leads to a purchase “B1” that not referred to any perceived gain (real or psychological) in any case, due to its mandatory aspect.
In fact, being mandatory, there is no need to offer any perceived value of “B1”, States seems to believe.
This approach is actually wrong, considering the proportion offered and the behavioral economy’s point of view of a tax payer (who is really a state service buyer) who wants to sustain the costs “A1” spending his money for a good or service “B1” that must be seen like able to balance “A1” and possibly offering a gain, like for every other action “A” and good or service “B”.
Problem, so, lies in:
·       a wrong approach to what tax is and how it must be seen,
·       in a lack of knowledge of psychology of people seen like buyers,
·       in a lack of marketing strategy for States and taxes,
·       in a lack of understanding of how mind works processing A1->B1, non dissimilar from A->B.

5.  Practical proofs in actual context, and possible corrections
We want to investigate every single point in short, to concentrate on a possible change of point of view and consequential solution that could be practically followed.
As for the wrong approach on what tax is and how it must be seen, can be easily corrected thanks to the behavior economy theory and game theory (Kahnemann, Tversky 1979; Morgensten, Thompson, 1978; Morgensten, Von Neuman, 1944 ) and approaching the two main players under a microeconomical doctrine like company offering good/service (State) and consumers buying goods/services (citizen), in order that both pars may obtain a kind profit (non just financial).
As for the lack of knowledge of psychology of people seen like buyers, it is connected easily to the previous point, since the main player understands that is offering something in a competitive market and in competition with something else, so trying to create sharing values and perceivable ones. State should ask itself: “how many citizens/buyers understand what they pay for/buy, what the value/gain and how to make the action (A1 as well as A) clear and desiderable compared to B1 as well as to B?” It is a concept derivated by game’s theory (Kahnemann, Tversky 1979; Morgensten, Von Neuman, 1944; Duncan Luce, Raiffa, 1957; Gibbons, 1992) and it shows a good way to practice and proof it.
It reveals a lack of marketing strategy for States and taxes, a total imposition (literally) without offering any perceived gain, and in many cases, offering services “B1” clearly below basic expectation.
This again proof that in the actual context there is lack of understanding, or even total misunderstand, how mind works processing A1->B1, non dissimilar from A->B. In that market case (A->B) there is third player on the market, and, completely unseen, it is present also in the service’s market case A1->B1.
Such competitors called “tax evasion” is really representative of all goods and services “B” that offer a better perception of value than “B1”, being the action “A” less expansive (in the whole real and psychological evaluation) than “A1”, even risking legally and criminally through evasion or non-payment.
We stated above that real cost of “A” is balanced by psychological gain of “B”, so for the equivalent A1->B1. Therefore, the psychological cost of “A” is balanced by the real gain of “B”, so for the equivalent A1->B1.
Taxes offers no services with a perceivable value (psychologically) and the psychological cost of A1 offers not real gain in B1 therefore the action of evasion meets no obstacles from any real gain in the real value of B1. We could say, theoretically and by what we observe it also practically, that branded clothes, exotic holydays, fancy life-style count more than safe cities, services running properly, healthy medical service and good state education.
State forgot that competition involves them not only and always less in terms of wars, or international political competition, but economical, financial, and in terms of more services better offered.

6.  Conclusions
It can be shortly referred some example of anti-evasion campaign forwarded by some State: in Italy, during strong crisis in years 2011-2012 the message showed different services with evident problems such as a motorbiker policeman without gasoline pushing his vehicle, some nurse and doctor without any stretcher, teachers without books.
Well accordingly with important researches leaded by authors like Kahnemann, Tversky 1979; Slovic, 1977; Kahnemann, Slovic, Tversky, 1982; Morgensten, Thompson, 1978; Morgensten, Von Neuman, 1944, Trevisani, 2001, 2003; Duncan Luce, Raiffa, 1957; Gibbons, 1992) is probably wrong to show the negative effect of something to demonstrate what should be done. It creates the “fear effect”, and it is known to be a motivation for irrational actions, such as evasion, in this specific case (Ariely, 2008; Scaini, 2012).
What could probably results more effective is to explain objectively and not persuasively (for some difference, cfr. Pellicelli, 20105), the effect of payment, better than the effect of non-payment, forcing the target of such message to elaborate the opposite effect of payment, especially because it is totally under discussion that such target (buyer of services = payer of taxes) can really desire that such services work properly, being index of a non desiderable situation (lack of health -> hospital; lack of education -> school; lack of security -> police, lack of peace -> army).
In the end it seems useless – and even having a counter-effect- saying that “if u do not pay happens this (bad consequences)”.
It would be better. Accordigly with experimentation under games theory (Duncan Luce, Raiffa, 1957; Gibbons, 1992 ) “if you pay happens something positive”.
Make it a positive economy for positive results, or, as stated “Would you be happier if you were richer?” (D.Kahneman, A.Krueger, D.Schkade, N.Schwarz, A.Stone, 2006),
Luca Scaini

mercoledì 30 maggio 2012


1.  Theoretical Proposal

In a limited and certain period of time where stock market or bond market is in presence of one or more of the following situations:

·       lack of state bonds market capitalization,

·       general lack of cash and liquidity in private or public system (ie state, banking, or corporate liquidity),

·       under the presence of certain specific risky situations such as demarketing from state bond investment in advantage of private investments or disinvestment from state bond stock, especially for lack of trusting and high financial performances of other (mainly private) shares investments,

some state or issuer of government bonds (so we mean both private or public issuer) could use some financial means and marketing means connected with behavioral economic to attract more investors to its offers (in form of bonds), better then to let market and investor “flow” toward other competitive bonds or shares issued by other issuer public or private, following the basics of market theory.

We suggest that a State could issue bonds with a reasonably higher financial performance (in percentage) than the performance of equivalent bonds issued by other Countries, in order to:

1.    offer a lower perception of risk (Kahnemann, Tversky, 1979; 1981),

2.    offer a more competitive product of investment (Krugman, 2006),

3.    stimulate demand accordingly to main kynesians economical laws (Kahnemann, Tversky, 1979; 1981; Kahnemann, Slovic, Tversky, 1982; Kahneman, Krueger, Schkade, Schwarz, Stone, 2006),

4.    offer a better and higher financial performance in a certain and equal range of time than a more competitive investment product (such as other bonds, of private or state issuing).

Statement is that any single merchant of goods (as well as issuer of bonds) could offer an higher value (such as discounts or various promotions as well as a better financial performance of a bond) increasing the value of a good or issued bond making it more competitive and attractive for market, stimulating demand of a certain good offered or bond issued and “playing a spread” with another good as well as another bond, to obtain a better position of values of his offered goods (Zaltaman, 2003; Ries and Trout, 1981).

2.  Actual Context

In the latest (but not last, we believe) financial crisis hitting globally in 2011-2012 and more in depth the EUROZONE and still persisting, has been noticed a gradual but quick and constant increase of the spread played between main and reference bonds (issued by leading euro economy, Germany) and other euro nations (France, Italy and Spain as main economies of the area). The spread played between bonds had such movement:

Mainly during 2011-2012 the situation of uncertain, lack of liquidity for investments, risk of state default played a bonds’ spread considered generally too wide between ones issued by Germany and others issued by other economies of the same area and tied to the euro.

Assuming that majority of people tend to prefer to make a earn, than to avoid a loss (financial theory of expected income), then the only way to follow such line is to offer any superior advantage that is significantly superior than the perception of a possible loss (Kahnemann’s “sunk cost” theory).

But, accordingly with financial behavior, such micro-economical theory can be indeed systematically violated and people would not prefer to invest in a better earn than a lower and safer one (in the present case, to invest in german low-profit bund then –for example- Italian high-profit bot).

We believe that representing to some person the fact that a missed earn is a loss, they could violate any sort of “survival instinct” and behave in an irrational way (Ariely, 2008; Kahnemann, Tversky, 1979, 1981).

Playing the spread could be both a marketing tool and a behavioral tool to influence the financial behavioral rules in a certain moment.

3.  Supporting Literature

Mainly, we refer to two kind of studies: macroeconomic studies, resumed under Krugmann, 2006, where it is stated that

In such common mathematical function and economical case, as the demand decreases as the price increases and the growing availability can be expected that the 2 functions are brought together in a point at which the report is true and there is a balanced market. Therefore, the function is stated for a condition of equilibrium. Moreover it is stated that there is the possibility to use some marketing-financial means to compete against other price-based competitors (in this case, other public issuers of bonds), like the common case of different governments or states issuing bonds, actually in a situation of risk and lack of market capitalization (2011-2012 crisis).

The second topic is microeconomy, where since the latest years of the 70ies, where conducted innovative researches mainly by Kahnemann and Tversky (1979, 1981), then followed by other authors, like Slovic (1982) and others (1986) and finally published in form of divulgation by Ariely (2008), who stated that in case of uncertainty people could systematically violate the basic human decision-making principles of rationality.

We would tie the financial behavior in a certain time of crisis or uncertainty to such theory where it is stated that people are usually believed to prefer a higher profit than a low risk action (micro-economical classical theory), but it is empirically proved that in a certain context they could see a “missed earning” like a “loss of money (sunk cost)”.

4.  Practical proofs

Such vision helps us to understand how people could make a sort of irrational action in opposition to the popularly and academically accepted micro-economic theories (behavior of the agents are rational decision-making always to maximize utility).

It seems easier for financial players to renounce a discount, better then accept an higher price even if final difference between starting and final price is the same.

In the present context, we can assume that for investors it is easier to accept a higher interest (reducing cost later of investment) than to accept a “discount of interest rate motivated by a higher reliability of the issuer of a bond”, beeing seen like a  higher price to pay for the same product.

In fact placing bund by german issuer resulted in being more problematic than Italians due to an obvious higher profit, claimed as a factor of weakness or consequential to a lower trustfulness in Italian economy, whilst it could (and must) be used as a tool to attract investors in any case of lack of liquidity.

We do not argue that interest rate (moreover, spread), increases accordingly with trustfulness in a specific issuer of bonds, we suggest the possibility to use such spread as a tool of attraction and better positioning in the mind of buyers, so a marketing tool able to modify the perception of values and transforming a non-investment in a sunk cost, as stated by Kahnemann.

5.  Conclusions

Under the point of view of maximization of profit, it is possible to use the level of rate of interest to “play actively the spread” vs other similar investment products, just like a marketing tool or market means of attraction of “buyers” (or investors).

As well, under the point of view of minimalization of risks (irrational financial behavior), we could say that the only way to “push people to buy” (in a strict marketing promotional meaning) a more risky investment product, such as a govern bond with a lower rating, is to play the spread of interest rate, forcing perception of value like a sunk cost, id est to make perceivable by people that a missed investment or higher rate of interest is like or worse than a loss of money.

Now, we remark that it is possible and sensed to use rules of economic behavior connected with perception of risk and perception of value to favorite the found rising when the stock market of bonds registers a decrease or lack of founds.

In the lastest period issuers noticed that most of investors prefers to limitate and contain risks better than to rationalize investing in profiteable bonds.

We noticed indeed that Countries like Italy (or even USA) registered a good result in placing their bonds, more than “placement” (another marketing term) operated, for example, by France and Germany, Countries with better financial perfomances and a consequential lower rate of interest.

If the spread level is logically consequential (bond must offer a better profit if they offer lower warranties), it should also be artificially and speculatively used to increase the found rising in case or recession.

The reason why we believe that Kahnemann’s theory can be applied to such field is that an issued bond with a reasonably higher performance (such as Italians versus Germans) where rised on the bonds market with easyness better then law performancing bonds with evident lack of risk, proving that for investors a lower interest is equivalent to a loss or sunk cost.

D.Ariely (2008),  “Previdibilmente irrazionale – le forze nascoste che influenzano le nostre decisioni”,  Rizzoli, Bologna
R.Duncan Luce, H.Raiffa (1957): “Games and Decisions”, Wiley, New York
R.Gibbons (1992), “Game Theory for Applied Economists”, Princeton University Press
D. Kahneman – A.Tversky (1979), “Prospect Theory: An Analysis of Decision Under Risk”, Econometria, 47(2), 263-291
D. Kahneman – P. Slovic - A.Tversky (1982), “Judgment under Uncertainty. Heuristics and Biases”, New York: Cambridge University Press.
D. Kahneman – A.Tversky (1981), “Variants of uncertainty” Cognition, Volume 11, Issue 2, March 1982, 143-157
D.Kahneman, A.Krueger, D.Schkade, N.Schwarz, A.Stone (2006), “Would you be happier if you were richer: A focusing illusion”, Science 312 (CEPS Working Paper No. 125)
P.Krugman (2006), “International Economics: Theory and Policy” (with M. Obstfeld),  Addison Wesley, 7th Edition

A.Ries,  J.Trout (1981), “Positioning, The battle for your mind”, Warner Books - McGraw-Hill Inc., New York
H.Tajfel (1999), Gruppi Umani e Categorie Sociali, Bologna: Il Mulino
J.Trout, S.Rivkin (1996), “The New Positioning: The latest on the worlds #1 business strategy”, McGraw Hill, New York
G.Zaltaman (2003), “How custumer think: Essential insights into the mind of the market” Harward Business School Press, Boston 2003