Pursuit of Truthiness

my gut tells me I know economics

Archive for the ‘psychology’ Category

Why I Don’t Post About The Latest Outrage

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Most of all, because when a dozen of my Facebook friends are already posting about the same thing, it would be boring to repeat them.

But I also seriously wonder if making that 13th post might do more harm than good. Not just because it might lead people to hasty over-reactions that do obvious harm. But because talking about problems doesn’t always have therapeutic effects; sometimes it can very directly make things worse.

First, because it can be bad as therapy. Second, because making it seem as if the outrageous behavior in question is common makes people more likely to do it– even for the worst crimes. Finally, because making it seem as though more people are victims facing an unjust world they can’t do anything about removes their internal locus of control, leading to all manner of worse outcomes.

Near my house, there is a billboard that keeps a running count of how many transgender people have been murdered this year. I assume it was put there by some well-meaning group that sees raising awareness as a necessary first step to reducing the number of murders. But suppose there was a group whose goal was to make transgender people live in fear, scare others away from transitioning, and encourage more copycat murders- wouldn’t they want to put up the exact same billboard?

Next time you see some story that makes you angry, think before sharing it with everyone else. If it makes you feel better to post it, then I suppose you might as well, but please don’t post merely out of a misguided sense that you are necessarily making the world a better place by doing so.

Written by James Bailey

October 2, 2016 at 11:59 am

Thinking, Fast and Slow

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Daniel Kahneman’s new book amazes me. Not so much due to the content, though I’m sure that will blow your mind if you haven’t previously heard about it through studying behavioral economics or psychology or reading Less Wrong. It is the writing style: Kahneman is able to convey his message succinctly while making it seem intuitive and fascinating. Some academics can write tolerably well, but Kahneman seems to be on a level with those who write popularly with a living- the style of a Jonah Lehrer or Malcolm Gladwell, but no one can accuse the Nobel-prize-winning Kahneman of lacking substance.
This made me wonder if it is simply an unfair coincidence that Kahneman is great at both writing and research, or causation is at work here. True, in more abstract and mathematical fields great researchers do not seem especially likely to be great writers (Feynman aside). But to design and carry out great psychology experiments may require understanding the subject intuitively and through introspection. This kind of understanding- an intuitive understanding of everyday decision-making- may be naturally easier to share than other kinds of scientific knowledge, which use processes (say, math) or examine territories (say, subatomic particles) which are unfamiliar to most people. Kahneman says that he developed the ideas for most of his papers by talking with Amos Tversky on long walks. I suspect that this strategy leads to both good idea generation and a good, conversational writing style.

Written by James Bailey

April 13, 2013 at 12:34 pm

Institutionalism: Neoclassicism’s Big-Government Twin

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It was not inevitable that economics would end up in anything like its current form.

In fact, even well after much of the basics of economics were developed, Institutionalism remained as a viable alternative. In the 1920’s and 1930’s, two of the four major economics graduate programs in the US (Columbia and Wisconsin) were primarily Institutionalist. The Institutionalists thought of themselves as the wave of the future, creating a more scientific economics that would displace the old.

Nowadays, of course, if modern economists think of Old Institutionalists at all, they often say something like Ronald Coase did: “American institutionalists…. had nothing to pass on except a mass of descriptive material waiting for a theory or a fire”.

So what happened? What is Institutionalism? As you might expect, it focuses on institutions. These are notoriously tricky to define, but their definition is something like “rules both explicit (like laws) and implicit (like social norms)”. Their method was to try to be empirical (focus on the real world) and try to avoid unrealistic simplifying assumptions in theories.

The best-known example of Institutional empiricism is Wesley Mitchell’s founding the National Bureau for Economic Research (now a stronghold of orthodox neoclassical economics) to collect data about business cycles. In terms of goals, Institutionalists wanted to be scientific (which nowadays we might interpret as being impartial, doing positive rather than normative work), but also to achieve social control. According to Malcolm Rutherford, “the phrase ‘social control’ became almost a mantra for the Institutionalists of the time”. Institutionalist Helen Everett said that social control was “perhaps their central organizing principle”. By “social control”, the Instituionalists meant that they wanted society generally to control business, though I can’t help but hear the phrase as meaning that Institutionalists wanted themselves to control society and business. Certainly,  as the “social control” mantra suggests, they were almost always pushing for more government rather than less.

The best-known Institutionalist is Thorstein Veblen, the author of “Theory of the Leisure Class”, after whom Veblen goods are named. Reading his work I have thought he is funny and a master of criticism and satire, but it starts to grate that all his criticism is unconstructive. Apparently other Institutionalists agreed: Rexford Tugwell said Veblen “had discredited orthodox economics and had undermined the business culture” but that “all the constructive work remained to be done”, and Wesley Mitchell started trying in 1910 to push Veblen toward more scientific and constructive work.

Some criticism proved constructive, in that it spurred others to create new and useful tools. Institutionalist economists criticized neoclassicals for not being consistent with the findings of other fields, especially psychology. This should remind you of behavioral economics today, and it sounds quite reasonable to try to be consistent, but it also reveals a possible flaw in behavioral economics: sometimes, economics is actually right and psychology is actually wrong. At least, the early-1900’s psychology the Institutionalists wanted to incorporate was behaviorism (confusingly named since its ideas are unrelated to behavioral economics). Behavioralists wanted to refer only to observable things, not unobservable states of mind. This criticism helped spur the creation of indifference curves (so we don’t refer to cardinal utility, which was thought to be unobservable), and the general economist insistence on only using revealed preference. That’s right, two of the very things heterodox critics of economics like to complain about today were actually developed to answer a previous generation of heterodox critics.

The movement slowly faded away after World War II, after neoclassicals proved themselves more useful in the war planning, answered some critiques of institutionalists (through the Ordinal Revolution and the Keynesian Revolution), and Samuelson and Arrow pushed ahead with their mathematics.   The Institutionalists provide an important reminder that, for better or worse, economics does not have to be the way it is and may not remain this way forever. Institutionalism was the most recent movement to pose a credible threat to orthodox economics from the outside and fail to be co-opted (the way game theory is now at the core of neoclassical economics, and behavioral economics has been appended as an asterisk), but it may not be the last.

Written by James Bailey

April 12, 2013 at 12:29 pm

Does Politics Actually Make Us Dumber?

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It is sometimes said that while talking about politics the average person loses 15 IQ points. You could look for evidence that this effect persists with a classic priming experiment: people are randomly assigned to answer questions about either current political issues or something innocuous before taking an IQ test. See if the people who recently had politics on the brain did worse than those who didn’t.

This test may already have been done inadvertently by someone trying to figure out which political groups have higher IQ scores, since the same experiment could also provide evidence on that front.

Bonus: If the experiment finds the predicted effect, calculate what the lengthening US election cycle may be doing to average effective IQ (and therefore GDP, et c).

Written by James Bailey

August 12, 2012 at 4:49 pm