Mark D. White
Thanks to Cass Sunstein for spotlighting this on Twitter: the December 2015 issue of Current Opinion in Psychology has a number of short survey articles on the state of moral psychology and behavioral ethics, and seems for the time being to be free to read. The table of contents is here, and the following is from the editors' introduction:
Mark D. White
Matt Adler (Duke University) has a fascinating article in the latest issue of Economics and Philosophy (30/2, July 2014) titled "Extended Preferences and Interpersonal Comparisons: A New Account":
This paper builds upon, but substantially revises, John Harsanyi's concept of ‘extended preferences’. An individual ‘history’ is a possible life that some person (a subject) might lead. Harsanyi supposes that a given spectator, formulating her ethical preferences, can rank histories by empathetic projection: putting herself ‘in the shoes’ of various subjects. Harsanyi then suggests that interpersonal comparisons be derived from the utility function representing spectators’ (supposedly common) ranking of history lotteries. Unfortunately, Harsanyi's proposal has various flaws, including some that have hitherto escaped scholarly attention. In particular, it ignores the limits of personal identity. If the subject has welfare-relevant attributes that the spectator cannot acquire without changing who she is, full empathetic identification of the latter with the former becomes impossible. This paper proposes instead to use sympathy as the attitude on a spectator's part that allows us to make sense of her extended preferences. Sympathy – an attitude of care and concern – is a psychological state quite different from empathy. We should also allow for hetereogeneity in spectators’ extended preferences. Interpersonal comparisons emerge from a plurality of sympathetic spectators, not (as per Harsanyi) from a common empathetic ranking.
Mark D. White
Conference call for contributions
Economics and psychology in historical perspective
(from 18th century to the present)
Paris, December 17th - December 19th 2014
Organized by Mikaël Cozic (UPEC, IUF & IHPST, France) and Jean-Sébastien Lenfant (U. Lille 1, France)
IMPORTANT DATES:
Notification of interest: June 10th 2014
Deadline for abstract: July 10th 2014
Notification of acceptance: August 31th 2014
Full paper: December 1st 2014
SCIENTIFIC COMMITTEE:
Erik Angner (George Mason university, USA), Richard Arena (Université de Nice Sophia-Antipolis), Laurie Bréban (Université Paris 8, France), Luigino Bruni (Università Lumsa a Roma, Italy), Annie L. Cot (Université Paris 1, France), Agnès Festré (Université de Picardie Jules Verne, France), Till Grüne Yanoff (Royal Institute of Technology, KTH, Sweden), Alessandro Innocenti (Università di Siena, Italy), Ivan Moscati (Insubria University, Italy), Annika Wallin (Lunds Universitet, Sweden).
CONFIRMED INVITED SPEAKERS:
Philippe MONGIN (CNRS & HEC Paris, France), Floris HEUKELOM (U. Nijmegen, Netherdlands), Robert SUGDEN (University of East Anglia, United Kingdom).
CALL FOR CONTRIBUTIONS
“Psychology is evidently at the basis of political economy and, in general, of all the social sciences. A day will come when we will be able to deduce the laws of the social science from the principles of psychology” (Pareto, Manual of Political Economy, 1909, II, §1)
Neoclassical economics was built upon a theory of rational behavior that pretended to be independent from psychological foundations. Actually, Pareto, who has been instrumental in laying the foundations of modern utility and rational choice theory, uphold that economics and psychology needed to develop separately and that the hopes for reconciling psychology, economics and sociology in the social sciences “still remain some way off”.
Over thirty years or so, an important part of economics has been oriented towards realizing Pareto’s prophecy that a day would come when economics and psychology would benefit from reconciling each others, opening the way for a better understanding of individual and collective behaviors. This reconciliation comes after a period of time during which economics has developed its tools and principles away from psychology (or so the standard narrative argues), on the mere assumption that rational behavior could be described satisfactorily with a well-behaved utility function. For many economists, the offspring of this collective effort is called “behavioral economics”, and it is sometimes viewed a new paradigm in economics, providing tools and principles that may be applied to different fields of economic inquiry (finance, development economics, game theory, etc.).
Basics of behavioral economics are now part of any curricula in economics. The advent of behavioral economics has often been associated with a story-telling argument about its early development in the 1970s and its establishment, focusing on three main points: 1) the legitimization of experimental methods in economics; 2) the usefulness of concepts and ideas borrowed from psychology to increase the explanatory or predictive power of the theory of rational behavior; 3) the advent of a renewed view of human behavior and hence of new ideas in normative economics.
Actually, Pareto’s opening quotation reminds us also that psychology (in different guises) has been a fundamental issue for economists even since 18th century, if only because economists have usually grounded their own theory of economics on some ideas about human nature, and especially on human desires and beliefs.
In recent years, historians of economic thought and theoreticians have shown an interest in understanding the ins and outs of the behavioral turn in economics, and more broadly, on the introduction of psychological elements in economic explanations. Some have focused on recent history, enhancing the different trends of behavioral economics. Others have dealt with the nascent of behavioral economics and the early collaboration between economists and psychologists in the 1950s. Still some others have tried to understand how the marginalist school of thought had relied on the experimental psychology of its time—namely psychophysics—and how it had progressively been expelled out of the realm of economics, at least temporarily, with Pareto and Fisher. However, those contributions have not been coordinated and we are far from having a comprehensive overview of the complex history of the relationships between economics and psychology.
The aim of this conference is to gather contributions from historians of economics and historians of psychology (including cognitive sciences), and also from historically-oriented researchers and philosophers of these disciplines. The overall ambition is to understand the way economics has dealt with psychological arguments, methods and concepts throughout history and to highlight the main debates between economists and psychologists that have fostered and are still fostering behavioral economics. It is hoped that these will pave the way for an overall vision of the history of the relationships between economics and psychology and of the methodological transformations of economics as a discipline.
The organizers wish to limit the number of contributions so that most of the conference will take place in plenary sessions. Interested contributors are asked to indicate their interest in participating to the conference to A COMPLETER. The deadline for submitting an abstract is July 10th 2014. It is hoped that the contributions to the conference will in turn lead to the publication of a comprehensive reference book with short versions of papers and to thematic issues in journals.
Below is a non-exhaustive list of topics, authors and schools of thought:
If you are interested in participating in this conference, please send a notification of interest mentioning the theme of your contribution by June 10th 2014 and an abstract of approximately 1000 words prepared for blind review by July 10th 2014. Send your abstract by email at [email protected] with the following information:
Name and surname
Affiliation
Title of your contribution
Abstract
Mark D. White
Courtesy of the Mercatus Center at George Mason University, Todd Zywicki and Adam C. Smith have a new paper titled "Behavior, Paternalism, and Policy: Evaluating Consumer Finance Protection," in which they critique the impact of behavioral law-and-economics on the creation and operation of the Consumer Financial Protection Bureau:
This paper examines the relationship between behavioral law and economics (BLE) as a policy
prescription platform and its influence on the regulations emerging from the Consumer Financial Protection Bureau (CFPB). We show how these regulations are inconsistent with the intent and purpose of improving consumer choices. We further demonstrate that the selective modeling of behavioral bias in the BLE framework causes an overestimation of the ability of regulators, who in actuality use inefficient, heavy-handed rules based on little if any real empirical findings of “consumer irrationality.” Accordingly, the broader lesson on the misapplication of behavioral economics goes beyond the ill-considered policies emerging from the CFPB.
Near the end of the introduction (on p. 7), they detail their issues with this approach to consumer protection:
1. Political realities belie the attempts of behavioral theorists to construct policy corrections.
2. Actual political decision-making is susceptible to a number of distorting influences, most importantly bureaucratic overreach, behavioral bias on the part of the policymaker, and lack of appropriate information regarding consumer choices.
3. Bureaucrats do not hold the same preferences about political outcomes as behavioral theorists do. They are affected by self-interest like anyone else, which can cause deviations from prescribed policy measures.
4. Regulations based on behavioral findings tend to lean toward heavier forms of intervention that eliminate viable, alternative forms of exchange, thus impeding innovation and creativity in the marketplace. This in turn limits the overall amount of market activity (in this case consumer credit).
5. Policymakers are unlikely to incorporate evidence-based analysis into their decisionmaking in a manner consistent with the scientific method. Instead, policymakers are susceptible to “confirmation bias” in evaluating evidence.
I emphasize #2 and #5 and the CFPB itself in The Manipulation of Choice
Mark D. White
Forthcoming from Behavioral and Brain Sciences is the article "Unconscious influences on decision making: A critical review" by psychologists Ben R. Newell (University of New South Wales) and David R. Shanks (University College London):
To what extent do we know our own minds when making decisions? Variants of this question have preoccupied researchers in a wide range of domains, from mainstream experimental psychology (cognition, perception, social behavior) to cognitive neuroscience and behavioral economics. A pervasive view places a heavy explanatory burden on an intelligent cognitive unconscious, with many theories assigning causally effective roles to unconscious influences. This article presents a novel framework for evaluating these claims and reviews evidence from three major bodies of research in which unconscious factors have been studied: multiple-cue judgment, deliberation without attention, and decisions under uncertainty. Studies of priming (subliminal and primes-to-behavior) and the role of awareness in movement and perception (e.g., timing of willed actions, blindsight) are also given brief consideration. The review highlights that inadequate procedures for assessing awareness, failures to consider artifactual explanations of “landmark” results, and a tendency to uncritically accept conclusions that fit with our intuitions have all contributed to unconscious influences being ascribed inflated and erroneous explanatory power in theories of decision making. The review concludes by recommending that future research should focus on tasks in which participants' attention is diverted away from the experimenter's hypothesis, rather than the highly reflective tasks that are currently often employed.
As is the practice at BBS, the target article is followed by a number of short comments by invited scholars, in this case including Roy Baumeister and Ap Dijksterhuis (all in the same PDF file).
It's a shame Daniel Kanheman, Timothy D. Wilson, or Jonathan Haidt didn't contribute commentary, as they have all written in support of a strong role for the unconscious in decision-making. Nonetheless, this promises to be a interesting challenge to the current trend in behavioral science away from conscious rational processes in decision-making (a trend which is troubling to a philosopher/economist concerned with processes of ethical judgment!).
A lot of modern pop psychologists have sold a ton of books about empathy and learning to be an active listener.
FYI, here is what Adam Smith had to say about these attributes in getting along with others:
"But if you have either no fellow-feeling for the misfortunes I have met with, or none that bears any proportion to the grief which distracts me; or if you have either no indignation at the injuries I have suffered, or none that bears any proportion to the resentment which transports me, we can no longer converse upon these subjects. We become intolerable to one another. I can neither support your company, nor you mine. You are confounded at my violence and passion, and I am enraged at your cold insensibility and want of feeling.
Smith identifies that it is part of human nature for people to want to feel that they have been listened to and understood. Learning how to live in the moment as you interact with another is key to active listening and empathy:
"In all such cases, that there may be some correspondence of sentiments between the spectator and the person principally concerned, the spectator [the listener] must, first of all, endeavour, as much as he can, to put himself in the situation of the other, and to bring home to himself every little circumstance of distress which can possibly occur to the sufferer. He must adopt the whole case of his companion with all its minutest incidents; and strive to render as perfect as possible, that imaginary change of situation upon which his sympathy is founded." (Adam Smith, The Theory of Moral Sentiments (1759), opening chapters)
Smith goes on to say that because it is impossible to actually feel with the same intensity what another feels, people moderate the intensity of their feelings so that others can go along with it. Emotional equilibrium is reached by the listener elevating her sympathy and by the speaker lowering her pitch.
Mark D. White
My latest book, The Manipulation of Choice: Ethics and Libertarian Paternalism, was released earlier this month by Palgrave Macmillan in both paperback and hardcover. In the book, written for popular audiences, I discuss the ethical and practical problems with the idea of "nudges" as popularized by Richard Thaler and Cass Sunstein in their book of the same name.
Walter Olson of the CATO Institute writes that "the 'libertarian paternalism' theory promises to use the state to help correct citizens' wrong decisions without asking their consent, yet also without truly entering the realm of coercion. Too good to be true? Indeed it is, as this book helps to show. Mark White gives us the sort of analysis we need to nudge back." Our own Jonathan B. Wight also comments that: "The Manipulation of Choice states that paternalists impose their own values and goals onto hapless consumers and citizens. Hence, public policies designed to correct the imperfections of behavioral irrationality are coercive. This is an important point and one that needs to be debated."
If you're interested, Palgrave has made the first chapter available for free, and I have written several blog posts recently tied into the book, including one at this blog commenting on Cass Sunstein's recent review of another book on paternalism at The New York Review of Books, and a post at Psychology Today on the nudge concept in general. (See also past posts at this blog on paternalism.)
Mark D. White
A recent issue of Science (October 5, 2012) is a special issue on depression, and senior editor Peter Stern's introduction lays out the reason for it (emphasis mine):
Depression is a devastating disease. It affects not only the directly afflicted but also the people around them, their families, and their closest relations. It indiscriminately hits all strata of society, no matter one’s intellectual background, age group, or economic situation. There are many cases of highly successful and widely admired individuals who have been struggling with depression for years. Unfortunately, for reasons we still do not fully understand, this condition has been on the rise over the past decades. Considering its impact on an individual’s quality of life and subsequently on the economy and society in general, gaining an understanding of what causes depression and trying to develop effective therapies is of utmost importance. Hence, this year’s Neuroscience Special Issue is devoted to different aspects of depression.
I've long wondered why economists don't look more at both the microeconomic and macroeconomic effects of clinical depression. (I'm careful to add the modifier "clinical" because economists do, of course, spend a lot of time thinking about depressions, Great or otherwise.) Behavioral economists identify, quantify, and model the cognitive biases and dysfunctions that affect the choices of the average person, but have not yet (to my knowledge) looked into how depression affects decision-making. As Dr. Stern recognizes, choices affected by depression--given reported high rates of incidence of the disease--have potentially tremendous economic effects, not only on personal well-being but also on market outcomes, aggregate economic performance, and government policy.
There are many theories of depression in psychology, but one that seems extraordinarily well-suited to incorporating the effects of depression into economic models of choice is cognitive psychology, as typified by the work of Aaron Beck. Beck maintains “the individual’s problems are derived largely from certain distortions of reality based on erroneous premises and assumptions” (Cognitive Therapy and the Emotional Disorders, p. 3). Examples of this negative thinking include: dichotomous reasoning (everything is either black or white, failure or success), selective abstraction (focusing on failures and glossing over successes), and overgeneralization (exaggerating the importance and incidence of failures). In economic terms, these have obvious effects on beliefs and preferences, the foundation of decisions in the mainstream model of choice.
Depressives also report a lack of motivation or "paralysis of the will" that makes them less likely to act decisively to further their goals. In the mainstream economic model of choice, this can be be regarded once again as a result of distorted perceived benefits and costs (downplaying the former and emphasizing the latter) which result in a bias toward inaction (or at least decisional inertia).
This is just one possible framework, and there are many others. I believe that behavioral economists could work within such a framework to refine the cognitive and conative effects of depression on decision-making. Behavioral economists have already told us that we're "presumably irrational"--now it's time to turn to the members of society who are "presumably depressed."
Mark D. White
New today from associate editor Brian Fung at The Atlantic is a piece on an experimental nutritional labeling system modeled on traffic lights. In use in the United Kingdom (where it was instituted by the British government's "nudge unit"), the revised nutrition labels would have color-coded icons for fat, calories, and other aspects of food products according to whether the levels are considered healthy or unhealthy. Mr. Fung reports the results of a study from Masschusetts General Hospital that--unsurprisingly--such labels increase the amount of healthy food consumered and lower the amount of unhealthy food consumed.
I discuss labeling systems such as these in my upcoming book, The Manipulation of Choice: Ethics and Libertarian Paternalism, in which I differentiate between the information provided by such label--which allows people to make better decisions according to their own interests--and schemes like the traffic light one which nudge people toward some food and away from others based on bureaucrats' judgment of what is healthy and what is not. (I also discussed nutrition labeling in an earlier blog post.) As Mr. Fung acknowledges, "Bickering over what red, yellow, and green actually mean is likely to be as difficult -- if not more so -- than actually putting the system in place." Some of this bickering may be political, of course, but some will be due to disagreements among health experts over what a proper diet consists of--a debate unlikely to be settled any time soon among the experts, much less by government fiat!
But what I found most interesting about Mr. Fung's article was the irony in the subheading:
If soda bans take an implicitly cynical view of human nature, food labels that give consumers the impression of freedom might be their opposite.
I don't know what could reflect a more cynical view of human nature then trumpeting proudly the prospect of "giving consumers the impression of freedom." These two approaches to paternalistic regulation are not opposites--the only difference is that one is clumsy and the other is "clever." This attitude continues as the article begins (emphasis mine):
From New York City's point of view, humans are notoriously bad at making good decisions. That's what makes a ban on large sodas necessary: the idea that Americans can't be trusted with their own health. But maybe there's a middle ground between letting people gorge themselves on junk food and making it illegal. The key to making it all work is creating an environment where consumers still believe they're in control.
No, there's no cynical view of human nature on display there.
Finally, as the article ends, Mr. Fung writes:
New York's faith in humanity must be low indeed if it thinks only the most blatant coercion can get people behaving differently. Whether collectively or alone, people are hopelessly incompetent, is the message Bloomberg's soda ban sends. A more accurate way to put it might be that people are incredibly malleable, open to having their decisions swayed in terrible ways by factors that are out of their hands. The difference is slight, but in the small gap between those two statements lies an opportunity to move people in the right direction without taking away their freedom.
As above, I disagree with Mr. Fung: the difference is not slight, it is nonexistent. In my view, all paternalists have little faith in humanity, as shown by their willingness to substitute their own judgment for those of the people they claim to help, based on an overly simplistic view of decision-making and interests. And if you "move people in the right direction" by manipulation rather than by reasoned persuasion--subverting their deliberative processes rather than engaging them--you are taking away their freedom, little by little.
But as long as they're left with the "impression" of their freedom, as long as they "still believe they're in control," I guess that's OK.
Mark D. White
Last month, The Economist published an article (based on research published in Journal of Marketing) on consumers' irrationality when compared discounts and added content:
Consumers often struggle to realise, for example, that a 50% increase in quantity is the same as a 33% discount in price. They overwhelmingly assume the former is better value. In an experiment, the researchers sold 73% more hand lotion when it was offered in a bonus pack than when it carried an equivalent discount (even after all other effects, such as a desire to stockpile, were controlled for).
In a recent issue, the magazine printed a letter by Rory Sutherland of Ogilvy & Mather UK, succinctly and humorously pointing out the problem with attributing irrationality to such consumers:
You mentioned research which revealed that shoppers often prefer “50% extra free” to a notionally more generous 30% reduction in price, and you cited this as evidence of irrationality or poor mathematical ability on the part of consumers. I think you may be wrong and consumers may be right.
There is, as the advertising sage Jeremy Bullmore observed, a significant difference between a bonus and a bribe. A price tells you much more about a product than merely what it costs. A price cut may be sensibly perceived as a mark of mild desperation on the part of the seller and it is not unreasonable to infer from a price cut that a product is an inferior good. Charging the full price but adding something extra does not convey the same desperation. In any case this whole debate is silly.
If people value 50% extra free more highly than 33% off, then that is an end of the matter. Since all value is subjective, what you are doing by offering the former is simply creating more perceived value at a lower cost. Whether or not the resulting behaviour conforms to some autistic neoclassical idea of rationality is irrelevant.
If the sole purpose of life was to be rational, we would have banned golf years ago.
Mr. Sutherland said it better than I ever could--and I've tried, in many places and many contexts, including previous posts (such as here), book chapters, and my forthcoming book, The Manipulation of Choice: Ethics and Libertarian Paternalism. Economists--of both mainstream and behavioral varieties--all too often see irrationalities where none exist because they insist on interpreting choice through the lens of their narrow understand of decision-makers and the overly simplistic choices they assume on consumers' parts.
The factors that consumers take into consideration when make choices are much more complicated than economists recognize--as Mr. Sutherland points out. And while behavioral economists are making headway in identifying some of these factors, they still don't account for qualitative ones like principles and ideals. Nor do they consider the complex and subjective interests of consumers (and all decision-makers), choosing instead to assume simple unitary goals like wealth-maximization. Until they take these common influences on choice into account, they will see irrationalities wherever they look--which reflects more on the shortcoming of their models than on the decision-makers themselves.