This is a peeve of mine: It's not "behavioral economics". It's social and organizational psychology. Virtually all the research has been done by psychologists. For example, Daniel Kahneman, Economics Nobel Laureate, is a Psychologist.
"Smart" people and the media have been obsessed with "rationality", (pseudo-)math and quantitative research, until it finally emerged in the economistic world view that people are - surprise, surprise - not that rational; something that psychologists have known for ages.
Right now, economics is sort assimilating a lot of psychological insights, which is good for humanity, but it's not economics, the original creativity stems from psychology.
you're working off the strawman version of rationality. people are are perfectly rational...from the perspective of small hunter gatherer tribes inconstant conflict for status and resources.
The "rationality" that a lot of traditional (micro-)economic arguments are based on is the one defined by rational choice theory (http://en.wikipedia.org/wiki/Rational_choice_theory). While economics may be moving on, many journalists, business people, politicians, etc. have not yet gotten the memo, and operate based on very flawed assumptions.
I thus thus didn't use a straw man, but rather the operational definition of rationality traditionally employed by mainstream lines of economics.
You're onto something with your definition in that a lot of friction and inefficiency today originates from people not coping well with an environment that is fast-changing and very different from our environment of evolutionary adaptiveness.
We were evolved to be rational, but only in the environment that we evolved from. The environment we have now is far from small hunter-gatherer tribes, yet we are still equipped with the same rationale mechanisms. Hence, it's not working out perfectly.
Maybe if we restructure our society to simulate what it once was or at least some parts of it, we can better utilize our rationale mechanisms.
I shouldn't say we evolved to be perfectly rational of course. it's more that we evolved to approximate rationality in a manner more efficient than actually calculating everything. see "how outfielders catch fly balls" as an example of a rationality shortcut.
Still, I'd rather see these resource being spent on educating the public on behavioral economics as suppose to using the knowledge to manipulate the public.
It's true that in most situations, indirect persuasion is more effective at influencing someone's behavior than direct preaching. However, at some point, the public needs "grow up" too, and always treating us like five year olds certainly won't stimulate this process.
"However, at some point, the public needs "grow up" too, and always treating us like five year olds certainly won't stimulate this process."
The public always has the ability to "grow up" as you put it but they do not want to. People are not motivated to take action if there isn't an immediate risk to their own personal well being. Risk has been taken out of many things that we do so now we can make ignorant choices without immediate consequences.
We keep falling off the bike, but instead of scraping our knee and learning not to fall, we have a security net there to save us over and over again.
I don't blame the government for treating us like 5 year olds when that is how a majority of people act.
But I also think it is possible to train yourself to manage your emotions better despite how strong our instinctual wiring is. This is evident in the long history of meditation practices.
So, it's good that the government is nursing us. And it will be even better if, in addition to that, they integrate meditation, behavior economics, entrepreneurial training courses, etc, into our education system. However, the current education system is far from that.
Hell. Madison Avenue has always listened to the scientists. Evidence-based blah blah. It's propaganda. That it's good propaganda doesn't make it good in any other context.
Is this what normal people read all the time? I mean, they make statements like this with no clarification at all:
"Our emissions are boiling the planet, and most of our energy use is unnecessary."
What's "unnecessary"? Energy drives modern technology, from your desk to your home to your doctor's office. Sure, if you don't care about quality of life, then energy use is unnecessary.
And while most scientists think our emissions are going to cause an increase in mean global temperatures over the next few centuries, "boiling the planet" is a long way off.
That's just one example out of a dozen. Is Time an editorial magazine, or is it supposed to be some sort of objective journalism?
That's not entirely a rhetorical question, I honestly don't follow dead tree media and never got into it much as a kid.
"Our emissions are boiling the planet, and most of our energy use is unnecessary."
What's "unnecessary"? Energy drives modern technology, from your desk to your home to your doctor's office. Sure, if you don't care about quality of life, then energy use is unnecessary.
Really? This is your complaint? By 'unnecessary,' we can reasonably presume that the author means 'needlessly inefficient.' That much is evident to any sincere reader of the article who cares enough about the pursuit of knowledge to abide by the principle of charity: Put the best face on the argument before you refute it, otherwise you are not contributing.
The straw-man argument, "Sure, if you don't care about quality of life, then energy use is unnecessary," is wholly beside the point.
And while most scientists think our emissions are going to cause an increase in mean global temperatures over the next few centuries, "boiling the planet" is a long way off.
Again, this cannot be a serious complaint. The phrase 'boiling the planet' is clearly a metaphor. A surface reading would be that we're just raising the temperature of the planet to an unhealthy extreme. A more nuanced reading reveals that the author means that we are raising the temperature of the planet to such a high temperature that we are going to cause irreversible change, such as when one boils food and finds that no amount of refrigeration will bring it back to it's former state. More simply, we are doing something analogous to sterilizing the planet, though to a lesser degree, in that many species may ultimately be made extinct.
That's not entirely a rhetorical question, I honestly don't follow dead tree media and never got into it much as a kid.
This is evident from the shallowness of your misguided critique. More practice at reading, dead-tree media or otherwise, might have made you a skillful enough reader to have been able to follow the plot here.
There's no need to be so aggressive. And I think I made it clear that the example I excerpted was only one of many offending sentences. I could easily pull others, if I were motivated to use my time in such a way. The piece in question made a quantity of assumptions that I normally only associate with activist literature, and not supposedly objective journalism. I don't consider that to be a hallmark of quality news.
Yes, Time Magazine allows editorial writing throughout its content. I won't comment on what I think their biases are, but I'm pretty sure you can detect them on your own.
"we can reasonably presume that the author means 'needlessly inefficient.'"
Well, even that's wrong. If there was no need at all, then it wouldn't be done that way.
I do this stuff for movies I watch all the time: "Well, Morpheus didn't know any better about the humans-as-batteries, and didn't understand how computing power might be a more reasonable use," and "Equilibrium might be set farther in the future than it seems to be, which would explain how things could have gone this far." When you have to fix up what a columnist really meant, I think that's a sign that something is wrong, and I agree with the your parent poster that this columnist either doesn't understand what he's talking about or is writing for effect without regard to accuracy.
> The phrase 'boiling the planet' is clearly a metaphor.
Oh really?
> A more nuanced reading reveals that the author means that we are raising the temperature of the planet to such a high temperature that we are going to cause irreversible change, such as when one boils food and finds that no amount of refrigeration will bring it back to it's former state.
Then the author is babbling. None of the science-based estimates suggest anything like that.
If the author really thinks "sterilizing", "boiling" wasn't a metaphor but scare-mongering.
> More simply, we are doing something analogous to sterilizing the planet, though to a lesser degree, in that many species may ultimately be made extinct.
You must not read much mainstream media. Nearly every piece contains little nuggets like the one(s) you mention. It isn't just Time; they all do it. Not surprisingly, newspapers are struggling with their readers now leaving in droves.
Well, for example, a substantial fraction of our marketed energy use is devoted to heating and cooling (more than 50%); better building designs (like those from the Passivhaus program) essentially eliminate that, at a minimal additional construction cost. A lot of what's left is transportation; a switch from trucks to trains, plus bicycles and local electric public transit for short-distance people-moving, plus better streamlining and saner traffic control, would eliminate the majority of that. Your laptop uses maybe 15 watts; your car is maybe 300 000 watts at full power. It's not a matter of eliminating "modern technology" but rather developing and deploying truly modern technology that focuses on energy efficiency.
The idea is to keep the heat inside, not the air. Passive houses typically come with special ventilation systems that completely exchange the air once every 2-3 hours, while keeping >80% of the energy inside. This kind of design is becoming increasingly popular here in Germany.
Cool. I asked because there have been some problems with energy efficient houses in the Netherlands. People actually got health problems because the ventilation doesn't work well enough. Have there been independent studies of air quality for the houses in Germany?
I don't really know, and I don't speak from first-hand experience. But from what I've heard, the main concern is not air quality, but humidity. When you heat up air, its relative humidity goes down. So especially in winter, the ventilation system can blow very dry air into the building. There are simple technical solutions that artificially "humidify" the air, but it's definitely something to look out for. Low humidity can cause all sorts of health problems.
most of our energy use is unnecessary -- from the article
Saul Griffith via Long Now lays out a nice engineer's estimation of factor 7-9x required drop in personal energy use; mostly through deprival: we become vegetarians, travel little, etc. Let's hope that's unnecessary.
The article really mixes two messages: "behavioral economics works" and "Obama knows what's good for you". The second one is claimed without any evidence, so I chose to ignore it.
I stopped reading Time, Newsweek, USNWR, etc whan I was in High School. Later I read that these magazines were written for 8-9th grade level. That was in the late '70s so I'm sure they are dumbing-down to the 5th grade level by now. Bad strategy. Also, and I'm going out on a limb here, but the internet really changes everything. The reporters have not been objective for decades but they are learning that they cannot get away with slop now that the internet exists. Exciting times!
First off, this isn't Digg or Reddit. Snarky, shallow, one-line summaries are generally not welcome here.
Second, your stupid summary is not supported by the text of the article.
people [sic] are irrational and make stupid decisions.
There is some truth to this if we take the best possible reading. Research continually shows that people do make decisions that are not supported by rational thinking. Bubbles arise in very simple trading games, even when there is an objective maximum to the item traded that falls well below the traded value, for example. There are countless other examples and a rich and growing literature on the subject. Thus, your first statement seems actually to be true, even if it was offered with sarcastic disdain.
The government knows better.
Again, neither your sarcastic disdain nor your parroting of a right-wing canard make this statement any less true as it pertains to this article. Given that the percentage of people making a given choice can be skewed by how the choice is offered, it seems a reasonable course of action to make the offer in such a way as to achieve the desired result. The decreased withholding example from the article is a brilliant case in point. The government really does know better which way to implement a tax cut in order to increase spending.
Typical Time Magazine.
At some point in your life you're going to have to start addressing the substance of arguments offered rather than considering the source. Maligning Time serves no purpose relevant to the discussion of whether or not the propositions offered in the article correspond to reality. It serves only to rehearse your own biases.
This is a forum for grown-ups. If you can't comport yourself in a manner appropriate to your peers, please remain silent.
Or, to put it in terms more fitting Digg or Reddit: Lurk Moar!
Good point. I think what he meant to say is that the article made sweeping generalizations about the quality of human decision making, resting on a few superficial stats and questionable assumptions. It also fetishized tricks to change folks' behavior while pretending that Obama's public policy goals are indisputable. Since one man's ideal world is not the same as another man's, and the form one's ideal world takes is generally governed by first principles that can't be proved, and since public policy is the means to transform the world into one's ideal, the notion that the administration's policies can't be criticized is ludicrously silly. Sure, I'm interested in the means, but it's by no means settled what the ends should be. (Nor will it ever be, I should add, as long as people are free to disagree.)
Anyone who has followed Time Magazine at all knows that this is typical of its writing.
> Again, neither your sarcastic disdain nor your parroting of a right-wing canard make this statement any less true as it pertains to this article.
Hmm. Did govt know best during the Bush years?
Do you really want to argue that general skepticism towards govt is wrong? If it isn't, do you really want to argue that it's a "right-wing canard"?
Hint: saying that someone is "right-wing" or taking a right-wing position isn't actually a cogent argument. The folks who care about the lables either already agree or strongly disagree. The undecided don't care about the labels or the tribes. (Clue: "destroy Bush" was only the goal of leftwing fanboys.)
People are irrational and do make stupid decisions, there's a ton of good science saying so, and there are good scientific explanations. We can't run 50mph and we can't not like high-flavor calories. No blame attaches - human nature is what it is. Equally, we are vulnerable to peer group norms and asymmetric treatment of opt-out versus opt-in. Again, science.
Connect those, and you get a way to manipulate humans into doing nonstupid things.
Should you do that? That's a question ethics, and maybe politics.
Can you? That's a question for science, and the answer seems to be yes.
Often when I'm confronted with a policy suggestion I think, "I can't possibly know enough about the ecosystem that policy impacts to say whether the policy would succeed." Not being a domain expert in most issues, I reserve judgement on them. In this case, though, I don't.
As someone who obsesses about product design, usability etc., I just think accounting for real world factors of human behavior is always a good idea. I'm very happy to read this, and if you've ever noticed the difference between two layouts for conversions on your site (or any small detail that makes a huge behavioral difference), you should find this heartening too. Unless, of course, you oppose the goals of the policy or policymaker.
Sort of fitting that a man who taught at the University of Chicago and who has Larry Summers for an advisor would use economics for more than just balancing a national budget.
>"Sort of fitting that a man who taught at the University of Chicago and who has Larry Summers for an advisor would use economics for more than just balancing a national budget."
I agree, people want change but they hardly know what they're in for, especially with universal healthcare "reform"... Some other recent notable changes...
- push to eliminate US nuclear weapons
- encouraging an international currency and removing the US dollar from a position of power
- spending $3.55 trillion for 2010 ($400bn over '09), when we've already committed $12.8 trillion to the recession
- increasing the marginal tax rate to the highest levels since Clinton
- letting North Korea get away with launching missiles over Japan
- taking over private businesses and forcing out their CEOs
I guess you always need a Carter to usher in a Reagan.
...And bring on the drive-by downmods with no responses.
I have seen no evidence of anyone in the administration suggesting any such thing.
> encouraging an international currency and removing the US dollar from a position of power
Ditto.
> spending $3.55 trillion for 2010 ($400bn over '09), when we've already committed $12.8 trillion to the recession
What's the problem with that? Be specific.
> increasing the marginal tax rate to the highest levels since Clinton
'to the highest levels since Clinton' means 'to a higher level than after Bush's tax cuts.' Was the economy, and the federal treasury, in better shape in 2000 (when Clinton left office) or eight years later?
> letting North Korea get away with launching missiles over Japan
Given that this happened two days ago, it's a little early to assess the administration's response.
> > spending $3.55 trillion for 2010 ($400bn over '09), when we've already committed $12.8 trillion to the recession
> What's the problem with that? Be specific.
Uhm... Spending huge amounts of money that the USA doesn't have isn't such a good idea?
> > increasing the marginal tax rate to the highest levels since Clinton
> 'to the highest levels since Clinton' means 'to a higher level than after Bush's tax cuts.' Was the economy, and the federal treasury, in better shape in 2000 (when Clinton left office) or eight years later?
When Clinton left office there was a recession (in 2000 and 2001). It was called the dot com bubble.
Oh. Also take into account that the Democrats controlled Congress the past few years. So maybe it is the Democrat's fault for the current mess?
> > letting North Korea get away with launching missiles over Japan
> Given that this happened two days ago, it's a little early to assess the administration's response.
Didn't Obama want to cut ballistic missile defence?
There is a lot of parroting of talking points to unpack here. First, you assume that drawing down our nuclear program is a priori bad. This is clearly not so. Consider that the greatest threat of terrorists gaining access to nuclear weapons comes from so-called looses nukes in ex-Soviet states. If eliminating some of our weapons will induce them to do the same, this would seem to lessen the chance that apocalyptic weapons will fall into the hands of people who would use them. We could eliminate 9000 nukes and still have more than enough to kill all life on the planet several times over. If the Russians and other ex-Soviet states eliminate a commensurate number of weapons, I think that'd be a good trade.
As for $3.55 trillion for 2010 - unfortunately, I think it's probably necessary. Global manufacturing and trade are falling at rates faster than any seen during the Great Depression. Debt levels are higher now than back then. Deleveraging will take quite awhile. And while some have claimed Japan's deficit spending during its lost decade failed, since growth petered out at 1%, Richard Koo of Nomura makes a fairly convincing case that this was actually a success: they averted a full-scale depression, after all. (http://paul.kedrosky.com/archives/2009/04/richard_koo_on.htm...)
Saying that Obama has increased marginal tax rates to the highest level since Clinton is a cheap rhetorical trick. I don't think top rates going from 36% to 39.6% represents the tipping point between capitalism and socialism. And lower top marginal tax rates under Bush certainly didn't create a booming economy. This is the worst economy in 80 years. Also, remember that under Eisenhower, top rates were as high as 90%. However, those top rates only applied to individuals with incomes around $75 million in today's dollars. I think there's a convincing argument to be made for introducing more brackets at the top of the tax bracket - lumping in people making 300k with people raking in several million a year makes little sense. Nate Silver made this case a few weeks ago. (http://www.fivethirtyeight.com/2009/03/missing-1000000-tax-b...)
Forgive me if I'm not scared about Obama firing CEOs of bailed out firms. Like it or not, certain companies are judged to be too economically, socially, and politically important to fail. If we're going to bail out these firms, getting rid of the incompetents who brought them onto the dole seems like the obvious first step. I wish Obama would get rid of Ken Lewis and the other banking geniuses who played such a large role in bringing on this collapse.
Letting North Korea "get away with firing a missile over Japan." This is disingenuous on so many levels. First, it was a dud, not a missile. Second, it's not as if George W. Bush or Clinton was able to deter North Korea either. Kim Jong Il is determined to starve his people to develop weapons. Short of going to war - which would devastate Seoul and kill millions - there are no good options aside from pressing the Chinese to press North Korea more forcefully.
And finally, you are aware that ballistic missile defense does not actually exist, and likely won't exist in the near future, right? It's something Reagan made up and threw untold billions of dollars into to scare the Soviets. What's the point of pouring money into a nonexistent technology - especially when we are going bankrupt? Ballistic missile defense might be a bigger scam than Bernie Madoff.
> Forgive me if I'm not scared about Obama firing CEOs of bailed out firms. ... If we're going to bail out these firms, getting rid of the incompetents who brought them onto the dole seems like the obvious first step.
Getting rid of incompetents sounds like a great idea. Too bad that Obama isn't interested.
We're still waiting for the politcal class to take a hit. (Barney Frank anyone?)
Heck - we're still waiting for Obama to fire advisors who ran Fannie Mae and Freddie Mac into the ground.
> What's the point of pouring money into a nonexistent technology
It's unclear how being able to hit and destroy ballistic missles in certain cases is "nonexistent technology".
> Also, remember that under Eisenhower, top rates were as high as 90%.
Also remember the vast array of shelters and the like that went away with the Reagan tax rate cuts. If you're going to argue that someone isn't telling the whole story, it's poor form to leave out huge details.
Perhaps, kirse, we think that change won't take just 2 months. Maybe we still think that in these next 4 years, a lot of awesome stuff will happen, and that the changes we have seen are all pretty good.
Also perhaps we've studied history and realize that Reagan was a terrible president, lied through his teeth, and hurt the United States in a lot of ways, while Jimmy Carter went on to do a lot of good, and maybe we're offended by your little smirky statement.
Yeah, Reagan did some good things. He also created the atmosphere in which presidents are judged more by clever quips than by experience and plans, he turned the US political scene into a scene of nonstop drama, and there was that Contra thingie that he outright lied about.
Carter wasn't good in office, but after leaving he did incredible things. And he always, always, took what he did seriously.
It would be a good thing. Whether or not it's achievable is entirely a different matter but if that genie could be put back in the bottle it'd be a wonderful thing.
I dislike superficial things such as that. The whole smooth talking and celebrity thing is not for me. But in all fairness, the president that is the most like that is Barrack Obama.
One thing that was good about Bush was that he was not very charismatic. This allowed people to judge him by his actions (and no cult of celebrity existed around him).
The cult of personality that you build around a lot of politicians (esp. Obama) will be bad for you in the long run.
> and there was that Contra thingie that he outright lied about
Here is a quote from WP:
> While President Ronald Reagan was a supporter of the Contra cause,[4] there has not been any evidence uncovered showing that he authorized this plan.
I would not be surprised if he did not know what was happening. The CIA did a lot of things that would fall into a “morally grey area” during the cold war. A lot of these things needed to be done.
> Carter wasn't good in office, but after leaving he did incredible things.
Admittedly he did better than Al Gore, but what did he really accomplish? His habitat for Humanity project is for me stupid.
Why would you get foreign volunteers to build a house in a country with high unemployment? The economic effects was not thought through well – it would disadvantage labourers in the country.
The excellent Wikipedia section you linked to makes it crystal clear that the CRA, which passed in 1977, had no causal role in the subprime meltdown that started in 2007. That should be immediately obvious to the most casual observer, since there were 30 years between the events in question, but in case you were doubting, the article draws on a wide variety of sources of evidence.
> The excellent Wikipedia section you linked to makes it crystal clear that the CRA, which passed in 1977, had no causal role in the subprime meltdown
Where?
Here are a few quotes:
> Economist Stan Liebowitz wrote in the New York Post that a strengthening of the CRA in the 1990s encouraged a loosening of lending standards throughout the banking industry. He also charges the Federal Reserve with ignoring the negative impact of the CRA.
> Jeffrey A. Miron, a senior lecturer in economics at Harvard University, in an opinion piece for CNN, calls for “getting rid” of Fannie Mae and Freddie Mac, as well as policies like the Community Reinvestment Act that “pressure banks into subprime lending.”[60]
> asked if the CRA provided the “fuel” for increasing subprime loans, former Fannie Mae CEO Franklin Raines said it might have been a catalyst encouraging bad behavior
> CRA, which passed in 1977, had no causal role in the subprime meltdown that started in 2007.
Uhm... You know that it was "strengthened" (Expanded) by Clinton twice?
You make it sound like man's progression towards interdependence doesn't warrant some degree of socialized changed in areas that are clearly underperforming in the reign of "private enterprise". No one said change was going to be easy... or cheap. We brought this upon ourselves when we realized farming and gathering was easier than hunting and gathering.
Actually farming is harder than hunting: it's just that people/acre is much higher for farmers than hunters, and farmers, being tied to the land, are more easily governed, supporting expansionist governments which drive the hunter-gatherers out. But I agree: that was the turning point.
Yeah - the point isn't so much the ease of farming, rather it's necessity in order to increase the 'people / acre ' and the inherent interdependence of people as a result. we've been moving towards socialism since birth.
what? really? It was higher under Reagan, he did the best he could to lower it, but you can only do so much with both houses full of democrats. I'd love to know why you would think Reagan would want higher taxes, everything I've read would say otherwise.
Reagan lowered taxes, realized he lowered them too far, then raised them to get revenues back up. Ended up at a much smaller cut than he initially got through. Can't find a best link, but google 'Deficit Reduction Act reagan' and you'll get lots of hits.
But that was a different, more responsible era than the last administration.
Just to clarify, Reagan's tax cuts were actually a revenue windfall for the Treasury, as it unlocked a ton of capital gains that investors had been sitting on and resulted in an economic expansion that, aside from a brief recession in 90-91, pushed through the end of Clinton's administration[1].
[1] Not that Bush Sr. and Clinton deserve no credit, of course, Some folks have unfairly vilified Bush Sr., but the fact is, economists agree that the US was emerging from recession before the end of his administration
"Smart" people and the media have been obsessed with "rationality", (pseudo-)math and quantitative research, until it finally emerged in the economistic world view that people are - surprise, surprise - not that rational; something that psychologists have known for ages.
Right now, economics is sort assimilating a lot of psychological insights, which is good for humanity, but it's not economics, the original creativity stems from psychology.