Bryan Caplan  

Crampton Reviews Ariely

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Regulatory Hindsight and the H... Three Moldbug Quotes...

Here's former Econlog guest blogger Eric Crampton's review of Ariely's Predictably Irrational. Highlight:

Taken as a set of lessons for self-improvement, the book is very good...

But these sorts of private solutions don’t seem to be Ariely’s main interest. He wants instead that public policy be used to help us do better... Besides overplaying the strength of behavioural results, he more importantly ignores that those same behavioural problems plague both MPs and the bureaucrats that might be charged with helping us, with the added complication that they have far less incentive to fix any problems that they might cause.

Ariely still hasn't reached the top of my queue, but since Eric and I have a separated-at-birth level of agreement on all things (we even independently starting reading The Lord of the Rings aloud to our respective wives), I'm almost sure to agree in the end.


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COMMENTS (10 to date)
Lee writes:

"those same behavioural problems plague both MPs and the bureaucrats that might be charged with helping us"

Do you endorse this criticism, Bryan? It doesn't make sense. Suppose most people behave in a predictably stupid way when buying a car. Then of course a congressman is likely to exhibit the same stupid behavior when buying a car, but not when passing legislation to help people curb their stupid behavior.

John V writes:

Lee,

your comment is a little off base.

If people are stupid when buying a car, it's their problem and their pain...regardless of their reasoning as to why they did it. But, if you dig deep, it's probably not irrational....just misguided. And that's not the same thing.

If a poltician is stupid when making laws, it's our problem and pain....regardless of whether he was being rational (which he probably was) or misguided (which he probably was)

Besides, how would a politician curb this stupid behavior exactly?

Eric Crampton writes:

The whole thing is here, for those interested.

Kurbla writes:

It is very simplistic logic. The counterexample:

Behavioral problem: 20% of people do not vaccinate themselves even if the treat of epidemic is serious; they are lazy or procrastinate or behave like they are immortal or they do not care for their lives or they believe in conspiracy theories or they have mortal disease already ...

Epidemic starts. The vaccine is 99% effective. If government orders obligatory vaccination, spreading of the virus is stopped and only few initial victims die. If decision is left to the individuals, virus spreads and kill many people, INCLUDING 1% of those who vaccinated themselves.

Conclusion: this centralized decision is beneficial - even for those who would vaccinate themselves on their own. Is the behavioural problems of the employees in the agency that ordered vaccination same as the problem of general population? Sure, 20% of them wouldn't vaccinate themselves on their own. Does it invalidates their decision? No, it is completely irrelevant.

Eric Crampton writes:

Kurbala: Once we give government the power to make us do things for our own good, how do we restrict it to only doing things like mandating vaccinations and keep it from doing things like regulating whether we can eat fatty foods? It's a dangerous road. Read Ed Glaeser's article, or, better yet, listen to his EconTalk interview!

James writes:

kurbala:

It's fine to call other people's thinking simplistic from time to time, but you might not want to do so in the same comment where you compare a best case version of government intervention with a worst case example of private behavior as though it were evidence in favor of interventionist approaches.

BR writes:

Effective and efficient communism would be easy compared to trying to out-regulate irrational behavior.

Consider the example of three products:
(1) a candybar which provides utility in taste what it lacks in nutrition,
(2) an ear of corn which provides utility in nutrition what it lacks in taste, and
(3) an ear of corn picked too early which is slightly less tasty and nutritious than its younger sibling #2.

Due to the inferior reference point, consumers faced with these options would overwhelmingly select the better ear of corn over the candybar, despite the equivalent level of utility offered by each.

Ariely would have the government legislate to prevent this phenominon. I don't have the time to read legislation complex enough to fix the corn/candybar problem, nor do I have the money to finance the enforcement of it. Multiply the complexity of the corn/candybar dilemma by all of the potentially hazardous tradeoffs made every second... and suddenly teaching 6 Billion humans to make more rational decisions seems like a much more reasonable option.

Eric Crampton writes:

The NZ Parliament is looking at a bill that would give Ministry of Health broad regulatory powers over anything affecting health. See the Press article, here. It's expected that this will lead to regulation on the advertising of fatty foods, and may also make vaccination compulsory. The Green Party, ever the inconsistent defender of some civil liberties, objects to the vaccination part but strongly favours regulating what we're allowed to eat. Never mind that there's at least a plausible (though debatable) argument about public health risks from epidemics and there's no defensible argument that externalities require regulating how many potato chips we can eat. Hopefully, the bill doesn't make it through before Labour is tossed out in the upcoming election -- they're currently behind in the polls by 20 points.

It irritates me when economists who ought to know better help support this sort of nonsense by drawing over-broad policy conclusions from a few behavioural anomalies while never considering Demsetz's now 40-year-old insistence on comparative institutional analysis.

Kurbla writes:

Eric, in my opinion people control the government easily and effectively already.

Eric Crampton writes:

Kurbla: that might well be the problem. If you've spent any time on this blog, you'll be at least somewhat familiar with Caplan's rational irrationality model, his evidence for that voters as voters have huge systematic errors, and how those errors translate into misguided policy...

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