Manifold man

A good summary of the current direction of research in behavioral economics is available here. For the most part I think this trend is a pretty valid one in analyzing economic behavior, although for me personally the concept of rational “economic man” is a bit of a straw man, insofar as I always took it to be more of a conceptual ideal than an actual description of the way people behave. And, in addition, it seems to me that it is not just a matter of rationality in many of the examples of “irrational” economic behavior. It seems to me that rationality basically consists of acting and thinking in accordance with one’s goals and values. Obviously one would be inclined to see someone else as irrational for not acting in accordance with one’s own ideas even if they are acting consistently with their own.

Now, if one presumes that increasing one’s own wealth is the basic goal in life, then it is easy to see a whole gamut of common behaviors, from altruism to revenge, as irrational. But I believe that human desires are often a bit more complicated than this, or at least more indirect. Altruism may be inexplicable from a wealth-amassing perspective, but it follows logically from, and in fact is most often necessary to, most ethical systems. And even in terms of pure self-interest the neo-Darwinians have convincingly demonstrated a variety of scenarios in which it is beneficial. Or take the example from the article of people refusing to accept some amount of money from someone else who would take an unfairly larger share for themselves. Maybe from the perspective of wealth some money is better than none, but in terms of social status the accepting party would in a sense be accepting a subordinate position relative to the donor. By refusing the money an equality between the two is maintained, or the refusal could even serve as a bargaining chip to increase their share if negotiation or multiple offers are permitted in the scenario. Thus, in these instances the seemingly irrational behavior could be conducted according to a different set of principles, or they could be ways of seeking out long-term economic benefit beyond the immediate situation. This is not to say that some behaviors are not better than others at procuring economic benefits than others, but it requires a broad, long view to evaluate these. And beyond that, there is a kind of implicit judgment in the word “irrational” that all the behaviors so described are the result of ignorance, prejudice or inferior intelligence, which seems to me to indicate a rather narrow-minded view of human motivation.

One Response to “Manifold man”

  1. Dave Says:

    Economics is one of the most fascinating and opaque fields. Here are my unsolicited comments. The American economy is one of the chief wonders of the world.

    Strangely, the public is kept in fear by the press and politicians that jobs are being sent overseas and there is a huge balance of payments deficit. The public is not informed that the money that they spend on overseas goods, instead of investing or saving it themselves is then used by foreigners to capitalize our economy. From this follows jobs and cheap goods. Do Americans really want to make athletic shoes for a living and have to pay American wages and benefits when they buy those shoes? So why is there distress over foreign trade?

    Americans don’t want to do the “menial?, i.e. hands on jobs anyway. That is why hordes of foreigners are attracted to the country. It is even hard to get Americans to take heath care jobs. We import many foreign doctors and nurses. A lot of Americans don’t like to study hard or get their hands dirty.

    I have noticed that the really popular jobs that many educated youth are pursuing are built entirely on frivolity. I do not deplore this but am amazed that these positions sustain the economy and provide satisfying careers. Interior design, marketing things and creating movies and fashions, and the like are fields that my children’s friends are thriving in. Helping fields such as teaching, special education are paying well. The public is willing to spend millions on “educating? autistic children or even the severely neurologically damaged. Although not paying well, caring for the debilitated elderly is big and promises to get bigger. The much despised public sector, though inefficient, injects billions into the economy, though it is basically parasitic on the nongovernmental economy. I don’t see how, but the system I described above appears to be up to the job. That the private economy can live with this and other parasites is a tribute to its strength. We should be yelling halleluiah about this but we are not. Economics is the dismal science, but it is the beneficiaries who are dismal.

    The way people really make their living now is crazy. If a man tries to make a living feeding people by being a farmer, he will go bankrupt. Ninety nine percent of this is controlled by massive agribusinesses. We used to be sustained by farmers who used tools to grow food in the dirt. Now the only way for individuals to make a living in the plant growing business is to sell boutique farm “implements? and fancy “soils? to the idle rich, who grow food and ornamental plants as a hobby.

    Regular grocery stores sell at razor thin margins and are going bankrupt while specialty stores thrive by selling vastly overpriced organic and GMO free vegetables and filling their isles with phony herbal remedies while preening publicly about their social consciousness.

    Now big bucks are to be had selling gourmet fare to dogs and cats. “Nothing Says, ‘I Love You, Fido, Like Food With Gourmet Flair? reads yesterday’s Wall Street Journal Article. If you try to open a restaurant that serves old fashion bad coffee and bad pastries a cheap price you go bankrupt. You can’t compete with Mc Donald’s. To make a success of it you must create a boutique atmosphere such as Starbucks. Serve good coffee and bad pastries at outrageous prices.

    Machines and foreigners do the real physical work. We are pampered moneyed persons who work in air-conditioned service industries. The underclass who are unemployed because they can’t be bothered to get up in the morning, show up for a job or kowtow to an asshole boss like everyone else does are on perpetual vacation, maintained at better than world class nutritional standards by the taxpayer.

    This is great, but why do I hear so much bitter complaint?

    The level of frivolity rises ever higher. As you point out in you post on Las Vegas, the entire place is created out of nothing but human artifact. I have been there several times and I love it. Oddly, for an entirely money and frivolity driven venue, much of the pleasure you experience there is entirely free.

    Thus the article you site demonstrates that purely rational factors do not explain economic decisions. I agree.

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