Arnold Kling  

The Mind and the Market

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Pascal Boyer writes,

I am surprized, nay flabbergasted that there is no study of folk-economics in the social science literature. No-one (except Caplan and a few others) seems to study what makes people's economic modules tick. In psychology we have had decades of study of folk-physics, folk-biology, intuitive psychology and the like. Intuitive economics anyone?

....humans may be motivated to place their trust in processes that are (or at least seem to be) driven by agents rather than impersonal factors. This may be why there is a strong correlation between being scared of markets and being in favour of state interventions in the economy.

Read the whole thing. And ponder. Pointer from Joe Carter.

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COMMENTS (5 to date)
Slocum writes:

I have seen arguments by psychologists (e.g. Steven Pinker) that 'just price theory' is part of the intuitive economics package, but I don't know of any empirical research that shows the truth of that claim.

There is also, for example, empirical research that investigates the effect of exposure to market economies -- which has shown that people engaged in market economies are more likely to treat strangers fairly, for example. But that's not quite the same topic.

Thanks for the link. I had no idea that "folk physics" and "folk biology" had been studied. I will follow up on those, and related topics.

As for the point, culturally, even those who practice academic economics and advocate for the free market insist that markets are impersonal, non-personal: the Invisible Hand.

It is no surprise that we learn government processes even in grade school with elections for class officers, student council, etc.; and in high school and college, certainly, we repeat this endlessly with extra-curricular clubs. Except for the marketing club (perhaps), none is really run as a business. Often, once officially recognized, the club receives a subsidy from the student government. I never knew a club (not even a marketing club) that sold multiple votes with multiple shares of membership.

We do not even speak of our work in economic terms, but in social: "My father is a die maker"; rather than "My father invested his education money in die making and sold an exclusive contract to the UAW which subleases him to General Motors."

The examples can go on at length.

Changing that paradigm is a serious challenge, far beyond educating past folk physics.

Arthur_500 writes:

Economics by its nature is a study of how people act. Certainly there is an attempt to quantify things with models. However, we have limits on when a substitution will actually kick in, for example.

Then there is marketing. Do we give people a check or do we reduce their taxes? If we give them a check they might save it with little bump to the economy. If we hide it in their paychecks they will simply spend it. This can change the outcome as people work with incomplete (or hidden) information.

I would argue all economics is behavioral or folk as a real economist will take the real actions of the population into consideration rather than simply taking a small sample and developing a model that meets that situation.

Psychology is a dismal science without reality anyway. That is exactly why I got into economics as it actually explains things.

John Fast writes:

I believe that people learn anti-market, pro-government biases by being taught lies in grade school and/or high school, specifically in their civics and American history classes.

Gabriel Rossman writes:

"Stuff I happened to be familiar with" != "the social science literature."

There is in fact a huge literature on how people understand exchange

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