Tuesday, September 28, 2010

Blame my ex for the Adultery...

Public Choice:

It solves the age old question of why different people live in different ways. Why is the murder rate in Colombia higher than in Costa Rica? Why were you more likely to die a violent death in 13th century England than in 20th century England. Why do South Koreans have more money than North Koreans? Why won't those damn kids stay off my lawn.

Basically it boils down to three things, it's either that the people are different, the institutions are different, or the place is different. (I'm having a hard time nailing down what that last one means. The landscape? The realm of possibilities?) The speaker used the example of craving beer. Why do some people have beer while other people don't have it? (I think this is a bad example, but it's his so I'll use it.) Well, it's either that some people want beer and other people don't, or there are some institutions that are pro-beer (Germany anyone?) and others that aren't, (You don't see many Yemeni Lagers or Iranian Pale Ales on the market.) or it could be that some places have grain, water, yeast, and hops, and others don't. It might even be a combination of all three.

The primary focus of the speaker was on institutions: government specifically. He started with a list of things that governments do that a vast majority of economists agree are 'bad'. He then asked the questions: Why does the government continue to do these things? Why don't they listen to the economists? This point of the show seemed to be a little circular. Things are they way they are (different in different places) because of the institutions, and the institutions are the way they are because of the institutions? Meh - whatever.

People respond to incentives, unless they don't. Personal preferences determine how people act, unless they are overridden by the institutions. My ex wife didn't cheat on me because she is a morally bad (bad bad bad) individual, she soiled the nuptial sheets because she is surrounded by institutions that incentivize acting like a strumpet. The good news is that I'm not bitter, not because that's my personal preference, but because I'm surrounded by institutions that encourage low self-esteem, apathy, passive aggression, and not throwing a woman down a flight of stairs.

It sounds like I'm joking, and I probably am, but think about how things would have been different if I were able to avail myself of some good old Wahhabi institutions. The community would have introduced my ex to some high velocity geology.

The take home message for me was as follows: Not only are people "rationally ignorant", but they are most likely "rationally irrational" as well. Not only does the combination of personal preference, institutional climate and physical environment, not incentivize the act of information collection, those things also remove the incentives for me to rationally think about the things about which I'm rationally ignorant. Say that last sentence out loud.

At our meeting this week, ask me about rational dishonesty. I might tell you some lies about it.