Bryan Caplan  

Motivating Sheep

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Perhaps the greatest truth about human nature that you do not find in the typical economics textbook is that people are sheep. Most human beings don't like to be different from the others around them; they want to fit in - to look, sound, and act "normal." (Perhaps the best discussion of this is in Gaetano Mosca's The Ruling Class; unfortunately, it is apparently not yet online).

The urge to be normal is most obvious in K-12 education, when conforming to changing fashions becomes a full-time job. But adults are basically the same, just a little more subtle. How much would you have to pay typical adults to wear shorts at a formal gathering of people they are sure to never meet again? How much would you have to pay the typical man to wear a dress?!

But if people are sheep, doesn't it undercut a great deal of economics? Economists are always arguing that you can change behavior simply by changing prices. But if people are desperate not to be square pegs, they might lack the courage to switch to currently unusual behavior just because the pay is better.

In fact, I'll warrant that if you pulled people at random out of a crowd and offered them decent money to do something weird, most wouldn't do it. That's precisely what an interesting paper in Public Choice by Werner Guth and Hannelore Weck-Hannemann found. They gave randomly selected students a chance to sell their vote for a fair bit of money. And even though many of those students didn't vote, very few were willing to publicly take the cash.

It is not too difficult, however, to reconstruct economics on a "sheepish" foundation. All we need to realize is that there are degrees of sheepishness. In any society, 5 or 10% care primarily about money, not what other people think about them. (Or perhaps they reason that once they're rich enough, people will think what they want them to think!) When prices change, the money-focused people change their behavior. That makes changing behavior less weird, which makes slightly more sheepish people willing to change their behavior. And that reduces the stigma further, and so on.

Unless the initial stigma is overwhelming, then, it is easy to get big swings in behavior even though most people are suckers for peer pressure.

Thomas Nechyba's model of welfare and illegitimacy is a nice example. Who would have thought that paying unwed moms for out-of-wedlock births would have led to a lot more of them? Was AFDC really such an attractive deal, considering all the social disapproval unwed moms still faced? The weakness in this argument is that some women were swayed by the money, which reduced the stigma, leading more potential moms to change their behavior... and off we go.

Economics should recognize that people are sheep because it's true. But I believe it would also improve economic pedagogy. When economists explain the effects of rent control, for example, it can sound a little paranoid. First, rent control... and before you know it, landlords are setting fire to their own buildings! A more plausible story is that rent control leads a few landlords to unscrupulous behavior, which makes it seem more normal...

You get the idea.


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COMMENTS (20 to date)
Deb McAdams writes:

Huhh?

What about this is outside of normal preferences?

Someone won't sell his vote in public for one price, but will for a higher price - that demonstrates the relative preference of that person for money as compared to the good of not being seen selling a vote.

If people are sheep, it does not undercut standard econ theory at all.

John Thacker writes:

Deb McAdams-

What he is saying is that some people might not be willing to sell their vote for $50 if no one else is doing it, but once many people do it, their demand curve shifts. It's true, it doesn't violate economics at all (one merely assumes that the decreasing stigma decreases the cost and loss in utility of making the choice) but it still isn't emphasized that much.

People don't instantly find any economic equilibrium. But some people find it, and people are very good at copying successful strategies, or copying something when it seems like you'll lose out if you don't something when "everybody else is doing it." We like to look at economics as static, and with instantaneous reactions to changes, but that isn't true.

Joey writes:

Oh, Brian, you are *so* not a sheep, because you are so quirky and wear shorts all the time! Congratulations!

shenji writes:

I don't know if by recognizing people as sheeps is accurate enough and might to too much of a generalization.

what about those people who fake to conform in order to take advantage of the situation? perhaps the social norm is merely a guise to hide people's real intentions to make money. I doubt any rational person would result to complacency. The 5% or 10% might just be the people who were willing to actually not lie about their intentions. Heck, I lie all the time to my college friends just to make them think I'm not doing anything to build my credentials.

maybe the "social equilibrium" is just a cover up that people tell themselves to keep us on the positive side? I just think there's more to this than just categorically stating "people are sheeps."

Duane Gran writes:

A curious thing is that most people who ascribe to the "people are sheep" view think they are unique and not sheep-like, just as most people think they are above average. I'm not sure if Bryan feels this way, but I'm suspicious whenever I hear it proclaimed.

Because I take an interest in men's fashion I suggest that his description of clothing norms is about 30 years out of date. If you want to be a non-conformist today you should wear a tie and/or jacket. Even in routinely formal environments, where the majority wear suits, there exists a good deal of variation in the execution of the garment. What looks sheepish from afar contains a diversity when looked upon closely. Could this all be a matter of perspective? One person sees a sea of boring suits and I see a pageantry of fabric and sartorial decision?

Tom Kaminski writes:

2 points related to Brian's post:

1) In the welfare example that he gives, the mechanism for change is the much maligned "slippery slope": a more-or-less minor social change gives rise to another minor change, then another, and so on. Over time fundamental principles that almost everyone once believed in get undermined. For years I have heard people assert that this is one of the classic logical fallicies, yet my experience is that it is the most common mechanism of social change in modern society.

2) One is more likely to expect sheep-like behavior from the less educated (see, for example, the preceding post on "cognitive ability and decision making"); but I have spent my entire life in academia, and the herd instinct (or is it "flock" instinct) there is astonishing. For people who pride themselves on their ability to think new thoughts, the variety of their social and political views is remarkably limited. I recently heard a commencement address given by a distinguished bio-engineer who contributed greatly to gene sequencing; after giving an interesting talk on the future of bio-technology, he felt compelled to throw in his political views, which were the same soft mush of liberal nostrums that are typical of academic political thought. (For instance, he said that we could eliminate poverty worldwide for the amount of money we are spending on the war and reconstruction in Iraq--I assume he read Jeffrey Sachs's latest book.) This is a SMART man who has contributed greatly to scientific progress, yet his ideas on social problems are right out of the 1970s. But all of my academic colleagues applauded wildly whenever he made some simple minded remark. Ah, sheep--they should have all shouted "BAAAAAAAA."

Rick Gaber writes:

I'm too groggy today to sythesize these thoughts, but let's reference the differences in personality types in regards to who adopts new patterns of behavior and when. The chart near the bottom of this page, for example distiguishes among what they call "innovators," "early adopters," "early majority," "late majority," and "laggards."

In regards to their importance I'm reminded of an old saying (sometimes attributed to Thomas Jefferson) which says, “In matters of fashion, swim with the current. In matters of principle, stand like a rock.”

Mr. Econotarian writes:

Tom is so right about otherwise learned people who are ignorant of economics. How can be help to "herd the sheep" to economic literacy?

Lancelot Finn writes:

Well-fed people are more sheeplike than starving people.

This is why it's important that the threat of starvation be ultimately present. When people are afraid, they'll cross psychological Rubicons they would never cross otherwise. And an entrepreneurial society needs that.

Deviation from norms can be good or evil; saintly or entrepreneurial, on the one hand, criminal on the other. To get people to choose the former deviations rather than the latter, it helps to have religion, providing people with moral rules and threatening them with punishment in the afterlife.

Religious faith and laissez-faire capitalism are a great combination for spurring economic creativity.

I don't see the importance of this at all. There's a price to be paid for not being normal. If that price exceeds the money being offered to be 'not normal'; no sale.

Cardozo Bozo writes:

I've heard the sheep argument before, but I'm not 100% sure that cause & effect are correctly aligned.

I'm a classic "not sheep." I really couldn't give a crap what anyone else thinks on a given matter. I'm not sure that I'm part of any 10% minority in this respect though. My aunt Patty is constantly worried about what other people think, and acts sheep-like, but only when she's off her meds. Properly medicated she's as independent as anyone else I know. I think "not sheep" is the normal human condition.

BUT, it's another normal human condition to punish people who are different. I don't wear a suit to a job interview because I'm a sheep, I wear a suit because I want the job. I know that if I wear shorts and a t-shirt, and another candidiate equally (or even slightly less) qualified wears a suit, he'll get the job and not me. I'll be punished for being different. This happens all the time. It's most obvious in 7th grade, but it certainly doesn't stop there.

I suppose if you want to define the Left's social politics in this century, it would be pushing the boundaries of what kind of differences are harmless, ergo, they don't need to be (and should not be) punished. The current social conservative forces claim they've gone too far, and are now protecing harmful differences. With respect to some, I think they may be "right."

Paul N writes:

Dude, I'm happy to take $ for my vote, and then vote for whomever I want anyway.

Trenchard Gordon writes:

People value conformity, just as they value fast cars and big houses. How does this particular value preference undermine economics?

ChrisW writes:

I suspect that there are just too many problem domains for a given person to attempt to make rational decisions in all of them. I invest a lot of time in learning about philosophy and economics so I can make the right political decisions. The guy sitting next to me right now invests his problem-solving resources in helping his "special needs" daughter prepare for a real life, and his athletic son train for sports. Neither of us have enough left over to, for example, learn enough about medicine so that we can do anything but "go with the flow" of what our doctors recommend.

So I think that all of us behave sheepish in some domains, and independent in others. An interesting question is the demographics of how these resources are allocated. What portion of the populace are thinking about economics? What portion ignores that but makes independent, well-informed choices regarding nutrition?

That said, there are some instances of sheepish behavior that I just can't account for. The first is with sports. People are strongly identifying themselves with a flock, to the point where they're saying "We won the game last night" -- when obviously the speaker had no participation whatsoever.

The second is driving behavior. It seems that there's an irrational (and usually incorrect) belief that the left lane gets you there faster, regardless of traffic conditions. I've been making the same commute for years and have been observing this studiously. In heavy traffic, the left lane moves no faster, and near exit ramps, the right lane moves faster as cars exit, freeing up space. Yet I see almost daily people illegally crossing into a merge-from-the-left, just to be there (I illegally cross to the right, and wave as I pass :). Similarly, I see lines 5-6 cars long at one toll lane on the left side, while I drive right up to the attendant in a right-hand lane. In these cases the cost of choosing a right-hand lane is trivial (or even negative in the case of the illegal lane changers); why do they then choose the left lane?

I agree.

In other words, "Baaah".

James writes:

A few posters have already made the point that a desire to conform doesn't have to undermine the rationality assumptions of mainstream economics. Conformity is just another good with a marginal rate of substitution, just like stupidity, insanity, impetuousness, ignorance, egalitarianism, cookies, water, etc. The one significant difference is that with conformity, there is a premium to buying in late. If you wait longer to conform, there will be more people doing whatever it is that you are conforming to, hence you get more conformity for the same price you might have paid to be an earlier adopter. One implication of this is that bubbles, manias, trends and jumps are within the scope of events anticipated by standard economic analysis. Just the same, I think Caplan is on the money when he talks about the implications for pedagogy.

John Sabotta writes:

You all may be sheep: I am Gloomy Bear

Half Sigma writes:

Excellent post. It recognizes that people's behavior isn't rational the way blind economists like to pretend they are.

But you could define the phenomenon in economic terms by explaining that people receive a psychological benefit from conforming, one they are willing to pay for with real money.

Scarily, it also leads to the conclusion that non-free societies can lead to greater happiness because such societies enforce conformity.

Tom West writes:

Religious faith and laissez-faire capitalism are a great combination for spurring economic creativity.

Agreed, but now having the wealth created by those two systems, are we not morally bound by those same religious beliefs to aid those who have failed ("deservingly" or "underservingly") under that system?

*That* is the contradiction in the system, and a damn fine contradiction it is, too.

Daniel Landau writes:

The notion that “people are sheep” assumes information is costless. In fact, information about what is the right course for any individual in a given situation has costs, often large costs. Following the crowd often reduces information costs. They aren’t getting hurt by doing ‘x’ so doing x is safe. Establishing that doing the nonconformist action ‘y’ is safe may take considerable time input

Because information, especially about how people are likely to behave in the future, is costly, people value conformity in others. In many situations, having team players around you is very valuable. In dangerous situations it can save your life. Conformity in dress, speech, etc. doesn’t prove you are a team player, but it makes it more likely.

Research is one area where conformity is not good. Thus, it hardly surprising that academics tend to look down on conformists. However, if you are going into combat, you sure want those alongside of you to be team players and follow orders.

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