The tailor as hacker

Everquest pizza

Why economists shouldn’t believe in economics

Robert Frank is among the most brilliant economists currently working today, with a terrific grasp of how emotion plays into decision-making; his book Luxury Fever does a great job, for example, of explaining why envy often makes a lot of sense. Today he wrote a column for the New York Times talking about some intriguing experiments testing the attitudes of economists — and how they compare to non-economists. As Frank writes:

In an experimental study of private contributions to a common project, two sociologists from the University of Wisconsin, Gerald Marwell and Ruth Ames, found that first-year graduate students in economics contributed an average of less than half the amount contributed by students from other disciplines.

Other studies have found that repeated exposure to the self-interest model makes selfish behavior more likely. In one experiment, for example, the cooperation rates of economics majors fell short of those of nonmajors, and the difference grew the longer the students had been in their respective majors.

Economists are, in short, more likely than you or I to be selfish creeps. Or to put it another way: The problem with economists is that they actually believe economic theory. For Frank, this is a problem because it’s part of why so much economic theory does such a spectacularly bad job of explaining our everyday lives, and also why governments that try to craft policy according to rational-actor thought tend to screw things up.

Of course, it’s still theoretically possible to defend rational-actor thought. You could argue that sure, maybe people on an individual level do not make careful, rational money decisions — but in the agregate, the ur-decision of the masses is rational. In this formulation, rationality arises as a form of emergent behavior, out of the zillions of seemingly irrational decisions of everyday folks. Like a recessive gene, the rationality of buying stock in BagofRocks.com or springing for a pair of $300 Nikes or voting for George Bush’s hallucinogenic tax cuts was present, but merely latent or deeply buried. If you really believe that, though, I got a bridge here in Brooklyn you wanna look at.

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I'm Clive Thompson, the author of Smarter Than You Think: How Technology is Changing Our Minds for the Better (Penguin Press). You can order the book now at Amazon, Barnes and Noble, Powells, Indiebound, or through your local bookstore! I'm also a contributing writer for the New York Times Magazine and a columnist for Wired magazine. Email is here or ping me via the antiquated form of AOL IM (pomeranian99).

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