Behavioural economists and tyrants

Andrew Furguson in the Weekly Standard exposes behavioural economics.

[B]ehavioral economics is just conventional 1960s liberalism—and conventional 1960s economics, too—that assumes the free market itself is a kind of unending con game, with the smart guys exploiting the saps. As an advocate for the market’s hapless victims, the government has the responsibility to undo the con, a task that will require only the smartest administrators operating according to only the latest scientific research and making the most exquisite moral judgments.

This sort of thinking gives rise to the out-of-control regulators that are gaining more and more authority.

A regulator who always assumed that man was other than rational was inviting himself into a position where he could exert a control over his fellow citizens that wasn’t proper for a true democrat. Self-government demands this deference. It won’t work otherwise.

“Ultimately,” the economist Brian Mannix wrote not long ago, “we insist that our regulators start from a presumption of rationality for the same reason that we insist that our criminal courts start from a presumption of innocence: not because the assumption is necessarily true, but because a government that proceeds from the opposite assumption is inevitably tyrannical.”

(HT: Stephen Kirchner)

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14 Responses to Behavioural economists and tyrants

  1. pedro

    That line from Mannix is a ripper.

  2. C.L.

    “Where will we be in 50 years”?

    Brian Mannix

  3. Michael Sutcliffe

    That line from Mannix is a ripper.

    Except that there’s no need for an apology: people are predominantly rational and it’s perfectly reasonable for governments to count on that when making policy. There may be blips here and there, but there will be nothing that will overturn that premise.

  4. Michael Sutcliffe

    That line from Mannix is a ripper.

    Except that there’s no need for an apology: people are predominantly rational and it’s perfectly reasonable for governments to count on that when making policy. There may be blips here and there, but there will be nothing that will overturn that premise.

  5. conrad

    I quite like what I’ve seen in behavioral economics — I think it’s important to know about systematic deviations from what you would expect based on systems that simply try to maximize outcomes. If people abuse it for policy reasons, it’s not the fault of the people doing behavioral economics. The same is really true of any area — it’s the people that interpret the data incorrectly that are at fault, not the people finding interesting things.

  6. Tillman

    It’s an interesting analogy.

    If you take it to its logical conclusion, then you would agree that in circumstances where it has been established that there is a market failure (analogous to a jury finding a person is guilty of an offense), it is appropriate for the state to use its coercive powers to remedy the market failure (analogous to punishing the convict).

    As for Ferguson’s point, it ignores that a large part of what regulators do is to simply impose disclosure requirements on regulated persons i.e. to increase the rationality of the actors in the system.

    Anyway, in a completely unregulated economy, it really is largely a case of smart guys (or, more accurately, better informed guys benefitting from economies of scale) exploiting saps.

    This isn’t a lesson of “conventional 1960s liberalism”; it’s a lesson learned from watching the Jay Goulds and the J.D. Rockefellers from a hell of a lot earlier.

  7. JC

    …it’s a lesson learned from watching the Jay Goulds and the J.D. Rockefellers from a hell of a lot earlier…

    Rockefeller lowered the price of gasoline from around 500 bucks a barrel to the point where the average person could use it and buy a car.

    Gould developed railways so food from a long distance could get to the markets thereby lowering transportation costs by multiples.

    These people were saints and the attempts to make them appear otherwise is a shocking/frightening misreading of history.

    Rockefeller buying competitors helped introduce huge benefits through economies of scale.

    The dishonesty about Rockefeller is obvious if people thought about it. His objective was to lower the price of gasoline and sell more which contradicts the narrative those who try to destroy his reputation suggest about him.

    As I said in the early part of the week. Rockefeller should be sanctified by the Catholic church as he performed a real miracle (lowering gas prices) and did more far humanity than 99.99999999999999999999%.

    The guy is a freaking hero.

  8. Dandy Warhol

    I’m with Conrad.

  9. Tillman

    Rockefeller made a lot of things happen faster than they otherwise would have.

    But if you let either Rockefeller or Gould act without restriction it would have been the demise of the free enterprise system.

    You would have ended up with a form of corporatism.

    Look, probably plenty of the oligarchs in Russia have done good things to modernise the economy. But would you want to import the Russia system?

    And since Rockefeller was a devout Baptist I don’t think he would have been too interested in being canonised.

    And to call Gould a saint is laughable.

  10. daddy dave

    Also human cognition often breaks down in silly and contrived conditions. You end up with things that are “lab effects,” that get someone a publication and add to the long list of “cognitive errors” but really don’t advance our understanding of people much.
    .
    Also there’s, not quite an “agenda” behind it, so much as a temperament. I think people often like to pull down those who appear to have all the answers; and anything that can undercut enlightenment style models of rationality or human ingenuity is fun. It’s fun being the provocateur.

  11. daddy dave

    This is why we don’t have computers that can do true AI. Because models are useless if their main job is to explain how you will respond to instructions like:
    .
    “you can deduct 5 dollars from the 95 I gave you earlier if you choose to give up one of these three tokens, but only if your partner pays more than 5 dollars for tokens that you don’t have when the dealer gives you 10 dollars, but you can deduct 10 dollars if you give your partner 5 dollars for taking 5 dollars from the dealer to buy 2 tokens, unless those tokens are tokens that you already own.”
    .
    (that’s a parody btw, no economic/psychological experiment has that exact task)

  12. “But if you let either Rockefeller or Gould act without restriction it would have been the demise of the free enterprise system.

    You would have ended up with a form of corporatism.”

    What on earth would make you say that? Furthermore, it makes no sense at all.

    …and why did allowing Bill Gates to act without restriction result in the demise of the market system?

    The competition that has emerged as a response has benefitted us all.

  13. Michael Sutcliffe

    “But if you let either Rockefeller or Gould act without restriction it would have been the demise of the free enterprise system.

    You would have ended up with a form of corporatism.”

    For about 25 seconds……..

  14. Again, I find myself wondering what words mean in the libertarian context. What does “inevitably tyrannical” mean? Does it have any reference to actual tyrants, either in Greece where the term was coined or in the twentieth-century wold? Hitler? Stalin? Or, looking at those more amenable to right-wing views, Trujillo, who was supposed to engross 75% of the GNP of the Dominican Republic? Or does it simply mean a government that levies income tax?
    Myself, I favour the tyrant referred to in Douglas’ South Wind: he allowed you to set your own tax level. Just as much as you thought was fair, with nobody trying to influence your opinion in the slightest. Absolutely free choice.
    And if he thought it wasn’t enough, he’d cut your hand off.

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