Arnold Kling  

Notes on Masonomics, 1: Reason without Rationality

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In chapter one of his economics textbook Hidden Order, David Friedman writes,


Economics is that way of understanding behavior that starts from the assumption that individuals have objectives and tend to choose the correct way to achieve them.

...For a familiar example of rational behavior without reasoning, consider the situation of an infant...When he is hungry or wet, he makes loud and unpleasant noises...I doubt that babies think through the logic of their situation--but they take the action most likely to achieve their ends.

This is the Chicago viewpoint, which celebrates rationality that does not come from reasoning. In contrast, Masonomists are fascinated by reasoning that does not necessarily produce rationality. Consider Robin Hanson:

Most folks say they prefer truth, but the folks most vocal about loving "truth" are usually selling something. For preachers, demagogues, and salesmen of all sorts, the wilder their story, the more they go on about how they love truth...Academics, gamers, poker players, and amateur intellectuals of all sorts are proud of the fact that their efforts reveal truth, and they make sure you notice their proficiencies...

The people who just want to know things because they need to make important decisions, in contrast, usually say little about their love of truth; they are too busy trying to figure stuff out. These are the "truth lovers" I most respect in the sense of trusting their efforts to be directly targeted to actually uncovering truth. Sellers, hobbyists, and do-gooders are instead more likely to pretend to seek truth while actually seeking cash or respect.

Read the whole thing. His conclusion is that the fact that so few people are willing to pay for truth is an indicator of how few truth-lovers there are. (me: but there are lots of people willing to pay for newspapers, books, etc. Also, there may be free-rider problems with paying for truth). Pointer from Tyler Cowen.

Masonomics looks at the human brain as an organ that is highly evolved to engage in deception, including self-deception. It can reason without necessarily being rational. The way I see it, Masonomics does not necessarily agree that humans tend to choose the best ways to achieve their objectives. Instead, we are limited by our capacity for self-deception, among other shortcomings.

Humans tend to make many mistakes. One way to reduce mistakes is to consult other people on decisions, or even to outsource decision-making to others. Tyler Cowen is intrigued by mechanisms in which the outsourcing choice is voluntary, made by the individual. For example, you ask the waiter to recommend something at a restaurant. One can think of government regulation as the outsourcing of individual decision-making, but with the outsourcing choice not made by the individual.



COMMENTS (15 to date)
Peter Twieg writes:

Actually, as to Robin's argument, I'm not sure that I would conflate a willingness to buy information and a willingness to buy truth for its own sake. There are a variety of ways which we could imagine the former not really entailing the latter. I'd even venture to say that someone can be a "truth-lover" while at the same time placing little valuation on actually knowing and understanding the given truth themselves. For example, I might have a sizeable willingness to pay to see the Riemann conjecture solved, but given that the solution would be so far beyond my comprehension I can't really justify personally valuing knowledge of the solution very much to myself.

Maybe this isn't a hair Robin would split, but it's one which I think might be important.

AC writes:

Do you really want to stick with this name "Masonomics"? I don't know of a good alternative, but this seems doomed to non-acceptance.

Robin Hanson writes:

People can want to read newspapers to prepare themselves for conversations where they signal that they are up on the latest issue fashions, and have clever things to say about them.

Bob Murphy writes:

The people who just want to know things because they need to make important decisions, in contrast, usually say little about their love of truth; they are too busy trying to figure stuff out. These are the "truth lovers" I most respect in the sense of trusting their efforts to be directly targeted to actually uncovering truth. Sellers, hobbyists, and do-gooders are instead more likely to pretend to seek truth while actually seeking cash or respect.

I wonder what he thinks of Brad DeLong's blog's subtitle? (If you don't think that works, try it out first on Fox News' motto.)

Fenn writes:

I hope this post means that Masonomics book is percolating and not that a blog series will be its surrogate.

As an economics illiterate, I found Hidden Order quite exciting for a while, but I was skimming by the end.

The House Price Paradox smacked of the free market fundamentalism that Henderson and Roberts preach here.

Happily, the preachers on the site are balanced out by a couple of teachers.

Peter Boettke writes:

Arnold,

There is nothing really unique about the position that you lay out. Lin Ostrom used to refer to her approach as "rational choice as if the choosers were human", and James Buchanan wrote "Natural and Artifactual Man" which is a reflective essay on who the human chooser is in economics inspired by a reading of Shackle's Epistemics and Economics. Kirzner contrasts human actors (entrepreneurs) with economic agents (Robinsian maximizers). I recommend look at various essays by Hayek were he discusses the cognitive limits of man, especially the essays in Individualism and Economic Order. And finally Carl Menger where in contrast to Veblen's lightening calculator of pleasure and pain, a view of man as caught between alluring hopes and haunting fears is laid out.

All of these citations I am sure are available on this web-site in the Library of Liberty. Heck, even Smith and Hume had this notion of man as a rational chooser but with limited capacity.

The theory of an economy of automa is what took hold of the imagination of economists mid 20th century, not before, and we are relaxing it now. Phil Mirowski's Machine Dreams is very good on this as a history of how economics was transformed during the 1930s-1960s. But the writers that I cited earlier either were not impacted by this intellectual movement or they resisted it at the time and to this day.

In short, it is not contemporary "Masonomics" that examined these questions effectively, it is the thinkers that inspired the GMU program to begin with from Hayek to Buchanan to Vernon Smith. Three Nobel Prize winners provides a good foundation from which to build a school of thought in economics.

Frank writes:

1. If mistakes are made because humans are error-prone, why does it help to have decisions made by other, or a greater number of, humans?
2. If I am so bad at making decisions, why am I good at deciding when to outsource and to whom?
3. Are you going to construct a social theory on the assumption that it is systematically true that others know better than I do what I will enjoy for dinner tonight?

Greg Ransom writes:

Contrast "Chicago" economics and "Mason" economics with the economics of Menger and Hayek.

In Menger and Hayek, pure reason can discover the pure logic of marginal valuation (see Menger, _The Principles of Economics_).

In Menger and Hayek, social institutions develop over time that facilitate the use of marginal valuation in the ordering of a person's resource using plans (e.g. relative prices and private property).

In Menger and Hayek, people improve their skills over time via imitation and trial and error, etc. and through such processes become more "rational" in various economic senses across periods of time.

Greg Ransom writes:

As I've but it in some of my work, Menger and Hayek show how the development of social institutions create institutional resources which allow individuals to become and behave "more rationally" than would be possible without those institutions, in the same way that Thomas Kuhn shows how the social institutions of science allow individual scientists to become and behave "more rationally" than would be possible without those institutions.

Sara E writes:

Regarding: Masonomics does not necessarily agree that humans tend to choose the best ways to achieve their objectives. Instead, we are limited by our capacity for self-deception, among other shortcomings.

This apparent conflict comes from an overly narrow perspective on "objectives". I would argue that maintaining certain beliefs, such as that one's self is good (or at least likable) and that life is predictable, are objectives in and of themselves. After all, what's the value of knowing the truth if you're too depressed to do anything about it? Self-deceptive reasoning may be a perfectly 'rational' way of meeting the dual objectives of 'understanding the world well enough to make useful predictions' WHILE 'thinking of oneself as likable'. Doing some form of reasoning moves us closer to objective one, but we limit our scope to avoid failing at objective two.

Doug writes:

"Humans tend to make many mistakes. One way to reduce mistakes is to consult other people on decisions, or even to outsource decision-making to others."

Um, I think you need to check your math.

"One can think of government regulation as the outsourcing of individual decision-making, but with the outsourcing choice not made by the individual."

If one's neigbor had a movement on one's foot, one could also think of the neighbor as giving a helpful and friendly shoe polish, just with the choice of having the polish not made by the recipient. But then one wouldn't know sh*t from shinola.

David writes:

Really interesting stuff.

Frank -- the answer to your first question is the condorcet jury theorem.

Doug writes:

David, that theory states that adding more people to a decision making process does not necessarily make the decision more likely to be right. In some cases it makes things better and in some cases it actually makes things worse. If humans with first hand, situation specific knowledge "tend" to make many mistakes, then there would seem to be a pretty good likelihood that those making up the rules would also tend to make many mistakes, especially where they are far removed from the situations in which the rules will be applied. If they are less than 50% likely to arrive at the correct decision, then the more of them there are, the more likely they are to make the wrong decision.

In any event, this does not answer the question of how a person who tends to make many mistakes will correctly choose when to outsource a decision, nor does it answer how a group of people with no situation-specific knowledge and no stake in the outcome will reach a better decision than someone with a knowledge and a stake in the outcome (as in selecting what's for dinner, for example).

Arare Litus writes:

@Peter Boettke,

I don't think Arnold is claiming uniqueness (??), in the sense of original, but rather is discussing the unique *bundle* and mixture and influences and direction of Masonomics. In any case original and unique is overrated.

http://arare-litus.blogspot.com/2009/04/original-versus-independent.html

One can make the same observation about Austrian Economics - most of the people claimed by Austrians can, and are, read and considered by others. Like most stories we backtrack from the present and make a trail to the present, but that is just a nice story. What matters is both the story that inspires us, and, more importantly, what we are doing with that story.

http://arare-litus.blogspot.com/2009/04/what-is-austrian-economics-what-is-its.html

"In short, it is not contemporary "Masonomics" that examined these questions effectively, it is the thinkers that inspired the GMU program to begin with from Hayek to Buchanan to Vernon Smith. Three Nobel Prize winners provides a good foundation from which to build a school of thought in economics."

Isn't Arnold saying the exact same thing (as your second idea in the above paragraph), except instead of keeping things abstract ("a school of thought in economics") he labels this with school with "Masonomics"?

Roger Koppl writes:

@ Pete Boettke

"The theory of an economy of automa is what took hold of the
imagination of economists mid 20th century, not before, and we are relaxing it now."

Sounds about right. But economists did not describe an economy of theoretically possible automata. They described an economy of magical automata that could instantaneously perform computational tasks that mathematical automata can perform at all, let alone instantaneously.

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