Interesting Quote on Politics and Economics
This is from a book i just found out about today By Bryan Caplan called The Myth of the Rational Voter: Why Democracies Choose Bad Policies.
This quote stuck out and seemed relevant.
"Most people do not think politically, and they do not think like economists, either. People exaggerate the risk of loss; they like the status quo and tend to regard it as a norm; they overreact to sensational but unrepresentative information (the shark-attack phenomenon); they will pay extravagantly to punish cheaters, even when there is no benefit to themselves; and they often rank fairness and reciprocity ahead of self-interest. Most people, even if you explained to them what the economically rational choice was, would be reluctant to make it, because they value other things--in particular, they want to protect themselves from the downside of change. They would rather feel good about themselves than maximize (even legitimately) their profit, and they would rather not have more of something than run the risk, even if the risk is small by actuarial standards, of having significantly less."
This quote stuck out and seemed relevant.
"Most people do not think politically, and they do not think like economists, either. People exaggerate the risk of loss; they like the status quo and tend to regard it as a norm; they overreact to sensational but unrepresentative information (the shark-attack phenomenon); they will pay extravagantly to punish cheaters, even when there is no benefit to themselves; and they often rank fairness and reciprocity ahead of self-interest. Most people, even if you explained to them what the economically rational choice was, would be reluctant to make it, because they value other things--in particular, they want to protect themselves from the downside of change. They would rather feel good about themselves than maximize (even legitimately) their profit, and they would rather not have more of something than run the risk, even if the risk is small by actuarial standards, of having significantly less."
Comments
Just turning the supposition around....
http://en.wikipedia.org/wiki/Sunk_cost#Loss_aversion_and_the_sunk_cost_fallacy
I would contend that it is about neither ethics nor irrationality. The problem here is with economics. Here's a classic economics game.
Economists will say that the second player punishing the the first for lowballing the division of money is irrational. But notice what happens, because everyone will lowball, the first player knows he must offer at least a modestly fair amount. So the first play tends to offer an amount the second will accept.
What economists call irrational is actually a complex behavior pattern that society adheres to because it is the most universally beneficial. The problem is this is too complicated for economists to calculate a value for, so they ignore it and then make incorrect announcements that people behave irrationally.
I heard a funny quote once: An economist is someone who will tell you today, why the prediction they made yesterday didn't happen.
I think there are behaviors that have allowed people to survive and evolve to this point. Behaviors that helped us thousands of years ago that allowed us to survive tough winters, droughts, without government assistance and the consideration of the future direction of the fed funds rate.
Exactly. Let's hear it for a rational definition of rational behavior.
Well, Kant would say that it is rational to be moral.
JS Mill would say that maximizing good consequences and minimize bad consequences for the most number of people is one way of being moral.
Aristotle said (way before both) that it is in our own self-interest to be moral (ethical.)
I say that in a capitalist democracy, economics drives morality. If it makes money, it's "good" and "moral."
Subprime loans were doing "good" work for low income homebuyers back in the day. Now they're considered "bad."
Economics is just politics with a euphemized name. The rules and laws are just there to give you a sense of order, but the real order is money = power and democracy is a thin veneer of "pretend" to make people feel good about their slavery.
Some interesting context, this is not always true. It is true today, but not always. Here's a very interesting article I recently read, which describes an alternative interpretation. I can't state that this is accurate, but it is thought provoking.
For those who don't like to read full articles, here's the quick summary.
There are 4 types of people : the strong, the smart, the financially savvy, and the serfs (names in the article are warriors, intellectuals, acquisitors, and laborers). A social cycle exists during which each class in order is in control of society. When warriors run the show, they put order into the word. Eventually the intellectuals flourish in that environment and being producing works of art and such. But soon, intellectual endeavours are taken for granted, and everyone just wants to get rich. At that stage, those who are rich begin to despise the labors making them rich. Meanwhile warrior types and intellectual types are forced to consolidate into the acquisitor or laborer classes to make ends meat. The gap between rich and poor grows until it erupts in social unrest. Following social unrest, the warriors generally assert control and the cycle begins again.
Again, I cannot prove or disprove this theory, but it meshes well enough with my understanding of history that it is worth considering. If it is accurate, it predicts are nearing a revolution, followed by a more militant age.