Posted on 03/01/2008 8:02:52 AM PST by oblomov
As a young economics professor in the late 1970s, Richard Thaler began noticing small but nagging ways in which ordinary people defied the predictions of economic theory. A friend confided that he mowed his lawn to save $10, but winced at the suggestion that he mow someone else's to make $10. A colleague confessed that he'd never go out and buy a $50 bottle of wine for a family meal, but that he'd recently opened up a $50 bottle at dinner because it happened to be lying around. The textbooks assumed people would behave identically when equal amounts of money were at stake. But here they were doing completely different things depending on the context.
By the late '80s, Thaler had begun recording these observations in a column for a leading academic journal. The column laid the groundwork for a book, called The Winner's Curse, published in 1994. And the book widely signaled the arrival of a previously obscure sub-field known as behavioral economics. Behaviorists like Thaler believed that the perfectly rational, utterly selfinterested maximizers of economists' imaginations had little in common with actual human beings, who frequently err when making simple calculations, who have trouble with self-control, who often act out of altruism or spite.
But what's really interesting is how Thaler and his fellow behaviorists responded to this fairly critical insight. Though rational self-interest was the central tenet of neoclassical (i.e., modern) economics, they didn't take a wrecking ball to the field and replace it with some equally sweeping theory of human behavior. Instead, they labored to bring economics closer in line with how the world actually works, one small adjustment at a time. "'Discovery commences with the awareness of anomaly,'" Thaler wrote in the introduction to The Winner's Curse, quoting the philosopher Thomas Kuhn.
(Excerpt) Read more at tnr.com ...
Framing cap-and-trade as a free markets concept, for example, is disingenuous. A market is only free if I don't have to participate.
The most telling quote was this, however: "The staff kept saying, 'What he wants to know is that he's really talking to experts in the field. When you go see him, you know, make it clear that you're an expert.'"
Ah, expertise. Never mind that this economic "expertise" means an academic sinecure rather than actually participating in the economy. Technocratic liberalism is alive and well.
As an obsverable facet of human nature, of course, it roots go back a bit further.
this sounds like a sociopathic criminal mind at work. Brilliant in that sense. Keep the tax-payer dumb as a guy whose pocket's being picked. Wait a minute, the writer of the article fell for it.
That was the paragraph that caught my attention as well. If this is “Obama Inovation” book my tickets to Belize.
The philosophy that if you don’t have to send them more money out of your pocket when the return arrives, you’re content. The fact that 20-50% was taken out in paper is theoretical money. But heaven forbid you have to write a $120 check above and beyond the 50% the government already took - then it’s solid, then it’s real, then it hurts.
This article describes a pragmatic but intellectually grounded Obama far different from the leftist-idealist we have seen. He is well-prepared for the necessary “move to the center” once he defeats Hillary. He will be formidable opposition to any Republican candidate.
People will be happy with the automatic tax return as along as they believe they get a “refund” each year.
i’ve worked around young kids whose eyes were opened when they worked so much OT, expected so many extra$s, then got their paystubs. only way it strikes home. I think you are right on about the slyness of the approach.
“And yet, just because the Obamanauts are intellectually modest and relatively free of ideology, that doesn’t mean their policy goals lack ambition. In many cases, the opposite is true. Obama’s plan to reduce global warming involves an ambitious cap-and-trade arrangement that would lower carbon emissions 80 percent below 1990 levels by 2050.”
I would submit that the intellectually modest are modestly intellectual.
agreed.
The person who mows his own lawn doesn't have to worry about finding a trustworthy groundskeeper. A person who doesn't try to mow other people's lawns doesn't have to worry about finding a trustworthy customer. Thus, there is a clear incentive for a person to mow his own lawn but no one else's.
A colleague confessed that he'd never go out and buy a $50 bottle of wine for a family meal, but that he'd recently opened up a $50 bottle at dinner because it happened to be lying around.
Could he have instead converted the latter bottle into $50 cash? If not, it wasn't really a $50 bottle of wine any more.
While it's true that people often behave in ways that are not rational (especially in matters related to the probabilities of unexpected losses versus unexpected gains) I fail to see the above examples as signs of anything other than the author's ignoring certain economic factors.
I agree. Also, in the example of lawn-mowing, perhaps the homeowner simply enjoys caring for his own property, and would do far more than $10 worth of work in the process of mowing. And, in addition, this person might find the prospect of mowing another’s lawn for a mere $10 to be an insult.
In the case of the wine, what one can buy from a wine merchant for $50 would far surpass in quality what one might buy in a restaurant for $50. Th two cases are not contradictory behavior if the wine drinker perceives the $50 bottle at home to be a better value.
Why was the $50 bottle of wine "just lying around"? My interpretation would be that the person had been received it either as a personal or promotional gift. He might not have spent $50 on the bottle if given the choice, but once he has the bottle what's he supposed to do with it if not drink it?
pinging me to read later
Good responses to this anti-rational Economic Behaviorist stuff that the Left seems to think overturns Free Markets...how does this type of analysis apply to Public & Private criminal behavior?
The Obama topic this morning redirected me to this thread and the great writing contained therein.
Interesting and provoking thoughts by the writers - and this reader thanks you all.
FR is a natural resource waiting to be utilized for the benefit of all.
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