Monday, February 20, 2012

Fatal Consumption

The phenomenon of human decision-making is truly a complex and beautiful thing. It’s no mystery that people act…it’s the very foundation of Adam Smith’s “invisible hand” theory which functions on the belief that when individuals make a decision, they will do so out of pure self-interest. For, as Smith theorizes in the Wealth of Nations, “It is not for the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from regard of their own interests.” Not surprisingly, Adam Smith observed that need is often supplied by demand, in most cases generating a beneficial outcome for the whole. Yes, people act, but they do so through individual means driven by various factors which insist, as in all areas, that tradeoffs must be made.
 I was rather disconcerted after reading Robert Franks first two chapters because they seemed to lack direction and a sufficient amount of coherence.  Chapter 3, on the other hand, began to make Frank’s points visible in an understandable and meaningful way beyond elk, hockey helmets, sports cars, or overly-priced suits …
Personally, I was interested in Frank’s logic behind human action and his reasoning as to why the “invisible hand” seems overly simplistic. Frank’s main premise within Chapter 3 is an attempt to paint a picture of his views behind human intentions by establishing how the complexity of self-interest has other ramifications when considering the context in which those choices are made. At the end of the day, it really comes down to definitional barriers between relative vs. absolute costs and how they function within the framework of personal desire.
 Frank views “self-interest” in a relative perspective which is impacted through more than just human consumption but through personal measures of worth. Therefore, Frank argues that self-interest as defined by Adam Smith, is not as universal of a concept because it seems to ignore the additional factors which are likely to play a prominent role in influencing the unique decision-making process of an individual.

Likewise, self-interest may be redefined according to each individual’s perspective because not everyone values consumption at an equal rate.  As Frank points out on Page 42, “when relative income is important, the invisible hand breaks down,” because it is based on the idea that humans weigh additional costs and benefits solely on the inherent promise of absolute consumption and nothing else. Obviously, humans value more than the temporary promise of the tangible and react likewise.
Therefore, Frank argues that self-interest is not nearly as one-dimensional as Adam Smith seems to believe, because humans act beyond tangible expenditures. Possibly, this is why Frank has so avidly made his argument based off of Darwinism, which I still find unnecessary accept for its unique biological appeal.

Still, there are obvious risks in attempting to manifest some regulation aimed at creatively confining personal measures of self-interest.  After all, it is one thing to presume how certain individuals act within a particular context and an entirely different matter to assume that there is actually a correct implementation to control those diverse responses effectively, especially when many are apt to disagree. In those cases, everyone is left with the question of who decides.
Even though Frank is beginning to consider human nature as more complex than Adam Smith’s initial argument for the validity of the "invisible hand," I understand where Frank is coming from more so than I have in chapters past. Anyhow, if self interest is going to be so trivial and self inflicted decisions really don’t end up benefiting the group as Frank suggests, there must be some way to alter individual incentives to merge with the collective. The most assured way of making the group work as a whole is to provide them with no other choice but to conform to some set of rules. In this way, those limitations might be viewed as equalizers, preventing the majority from feeling overly pressured to conform to the ideals of the group...that is, if those pressures really are as harmful as Frank seems to think...

Ultimately, human nature is such that it is not easily captured nor defined in any academic sense. After all, between sociology and psychology, I can’t help but wonder how far the economic scope may realistically stretch in theorizing the root causes of human action. Frank is attempting to dig deeper in explaining market imperfections due to the common perspective of the human condition in a way that is insightful yet undoubtedly, difficult to define.
Granted, Frank’s arguments were much more to the point and his examples more effective in this chapter but I can't help but wonder if in assuming that humans act with varied and diverse intentions, his methods still to come may prove fatal, only forcing the majority towards a mandatory, overly generalized, one-dimensional response, hindering the significant complexities of individual self-interest.

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