Originally created 3/10/2008
“Why do people do things like this? From the perspective of neoclassical economics, self-punishing decisions are difficult to explain. Rational calculators are supposed to consider their options, then pick the one that maximizes the benefit to them. Yet actual economic life, as opposed to the theoretical version, is full of miscalculations, from the gallon jar of mayonnaise purchased at spectacular savings to the billions of dollars Americans will spend this year to service their credit-card debt. The real mystery, it could be argued, isn’t why we make so many poor economic choices but why we persist in accepting economic theory…As an academic discipline, Ariely’s field—behavioral economics—is roughly twenty-five years old…Though Tversky and Kahneman’s research had no direct bearing on economics, its implications for the field were disruptive. Can you really regard people as rational calculators if their decisions are influenced by random numbers? (In 2002, Kahneman was awarded a Nobel Prize—Tversky had died in 1996—for having “integrated insights from psychology into economics, thereby laying the foundation for a new field of research.”)” – Elizabeth Kolbert, “What was I Thinking?”, The New Yorker, February 25, 2008
“The field of our science is human action, not the psychological events which result in an action. It is precisely this which distinguishes the general theory of human action, praxeology, from psychology. The theme of psychology is the internal events that result or can result in a definite action. The theme of praxeology is action as such….Action means the employment of means for the attainment of ends…. Acting man is eager to substitute a more satisfactory state of affairs for a less satisfactory. His mind imagines conditions which suit him better, and his action aims at bringing about this desired state. The incentive that impels a man to act is always some uneasiness.” –Ludwig von Mises, Human Action, pages 11-13, written in 1949
This quote addresses many of the things described in a recent New Yorker article while also alluding to some of the primary differences between the Austrian school of economics and the neoclassical school. It is interesting to note that the article presents its psychological anomalies challenging economics as “new”; Mises ran into this sentiment over 50 years ago and mentions psychoanalysis specifically in Human Action. Neoclassicals do indeed view humans as automatons, a sort of robot that always acts in its best interest. This is one of the base assumptions of a lot of mainstream econ articles is that humans are such automatons—it makes them easier to jam into a mathematical model. Austrian are generally subjectivists, and they consider humans to usually pick what they perceive to be the best option, whether or not it actually is (as the article suggests). Thus the motivation for the action, whether it is a psychological anomaly or not, isn’t part of economic theory. That doesn’t mean it isn’t important; it certainly is. We may be able to identify certain people as acting insanely or irrationally – indeed the market helps us identify these things.
Economics can be considered a scientific method for formulating a system of coordination of human action to allocate scarce resources. Unfortunately one cannot run controlled experiments, which are the best way to prove any scientific theory but it does seem, whether going with the pure Austrian method of a priori reasoning and/or using some empirical observations (such as North Korea vs. South Korea or East vs. West Germany) that certain systems stand out from others. Those that recognize private property rights and free market environment appear to provide a better system of coordinating by distinguishing the costs and benefits of the aforementioned human action. However, Austrians recognize (or should) that humans are flawed and thus, as the article points out, may make the “incorrect” or least “objectively” beneficial action. It does however encourage people to make the more “correct” choice because of competition between individuals over resources. If one person is able to produce a good or service, or purchase a good or service at less cost, the more costly provider will tend to be pushed out of the market. An important thing to remember though is that the market will not guarantee the best option will be chosen. Indeed, in the subjectivist conception, there is no objectively best option—only what flawed humans perceive to be their best option. If a horribly inefficient method of providing a good or service is being used, the market does not guarantee it will be remedied. However given that man is generally a varied and creative animal and thus can imagine all manner of improvements in his conditions. These improvements may or may not work out (there are always business failures and bankruptcies). Along the same lines, “growth” is not the goal of a well-functioning economy in my opinion; hence the consumption fetish that much of the mainstream has is problematic. The goal is coordination of subjective preferences. If everyone preferred to live as an ascetic, then the economy would never “grow” in the traditional sense—and there would be nothing detrimental about that fact.
This leads me back to the article which tries to suggest little psychological tricks to get people to choose certain actions. As long as those actions aren’t the product of coercion (as coercion implies shifting the costs of something onto another person rather that the beneficiary of that something entailing most of the costs; or that the threat of destructive action is replaced for a tradeoff between productive actions), I have no problem with carrying them out. Perhaps it will produce a more efficient result; the costs of carrying out the actions in a free market versus the benefits from them would indicate whether or not they would. The system of coordination for the actions should be of importance for economists; the motivations behind the actions are, somewhat, of little consequence, though interesting from other points of view. The so-called “behavioral economics” isn’t much different than behavioral psychology and thus outside of the much of the purview of economics.
Back in the day, I was a massive Garfield fan. Many of my contemporaries were Calvin and Hobbes denizens. A solid comic, but one that exited stage left too early and always had a smug air of superiority. The snowmen Calvin used to make though were magical. Garfield was a solid standby. There was not anything too deep going on in there, usually a couple of cheap jokes and a witty remark. John Arbuckle, Garfield’s jackass owner, was often the funniest part of the strip. And thus, an inspired photoshop artist decided to take Garfield out of the picture entirely. Thus, in his words, “the result is an even better comic about schizophrenia, bipolor disorder, and the empty desperation of modern life? Friends, meet Jon Arbuckle. Let’s laugh and learn with him on a journey deep into the tortured mind of an isolated young everyman as he fights a losing battle against loneliness in a quiet American suburb.”
Here’s some of my favorite ones:
What portends in the future of this website (now serving you with 28 days without a federal investigation):
“I got flagged the first time as a result of my post on Canada placing the US on its terror watch list. Among other things, mention of Guantanamo, Afghanistan, torture, and terrorism set the software off. A couple of posts later, I did a parody of an interview with al-Quaeda representative Ayman al-Zawahri. This seemed to set them off, too. They wanted to know what my connections were to the group – I guess they were obligated to ask. The thing that really got them in that article was an offhand remark about the weaponization of smallpox based on some work an Australian research group did with mousepox.”
Maybe not, unless saying Lindsay Lohan’s Mean Girls should been a porn movie tricks the software too. The Jesus Quintana memorial “sex offender” list does not count. Speaking of sex crimes…
The economy, terrorism, global warming…but who really discusses the challenges facing America. Like skull-fucking. The Ocular Penetration Restriction Act of 2007:Vodpod videos no longer available.
This Week’s Stephen Colbert’s Guitarmageddon Toss of the Gauntlet:
THE CLASSICS It’s a bit strange that perhaps the greatest of 80’s rock ballads was written in 1991. A combination of symphony and rock and Axel Rose’s horrific vocals, this was 1980s rock at its most baroque; and its most impressive. Bout time we had a throwdown with that Guitar Hero sellout, Slash:
Obligatory Jimi Jam – A shout out to St. Louis’s own Chuck Berry that doesn’t involve taping women pooping, whose song Johnny B. Goode Jimi Hendrix covers in this live clip:
Double Black Diamond: I just assume use the above clip for double black diamond as well. HE PLAYS THE GUITAR WITH HIS TEETH.
For acoustic guitar fun: From the film The Life Aquatic with Steve Zisou, Seu Jorge performs a subdued “Changes”:
If You Don’t Like This Video, I Don’t Like You:
Baby Got Back:Vodpod videos no longer available.
SIGNED: MCWOP, FAIT A ST. LOUIS, 3/4/08