Friday, July 08, 2011

Behavioralists Think Everyone Else is Biased

Sendhil Mullainathan of Harvard won a MacAurthur genius grant in 2009, which makes him a celebrity among the New Yorker crowd who like to think they are on the cutting edge. He is also the Assistant Director for Research of the Consumer Financial Protection Bureau. He is a 'behavioral economist', a field supposedly generating what David Brooks calls golden age of behavioral research. I read Kahneman, Tversky and Slovic's Judgement under Uncertainty in the 80's (published 1982), which mainly discussed a series of papers published in the 1970s, and found it fascinating, but now it's now 30 year old stuff and pretty boring. There's a couple hundred academically based confirmed biases which are all kinda true, but not very profound. For instance, people tend to eat more in groups than when they eat alone. That's interesting, and has some implications, but they are pretty parochial. I suspect Freud had a similar popularity cycle, publishing around 1899, peaking in the 1950's, and now scientifically irrelevant although always useful for a rhetorical flourish ('penis envy', 'Oedipus complex').

In his Aspen Institute speech, Mullainathan recounts some familiar anecdotes, such as that default choices are very influential, that being distracted makes you less attentive. These are useful to be sure but hardly something to generalize upon. There aren't a lot of insights generated from the default choice bias, other than, for simple things like organ donation and 401ks, make those the default choice. These have been the staple examples since the 1990s, and they remain the primary regulatory examples.

Take something like irradiating eggs, something almost all scientific people agree is good (kills bacteria, no residual radiation). Why not make them the default eggs? They never would argue for that, because it's contrary to the Luddite-leftists who hate technology but love government. In practice behavioral insights are applied mainly to increase the scope and scale of government, which presumably is staffed by unbiased administrators. Consider than Al Gore cozied up to ethanol when he was trying to be President but now agrees it was counterproductive, and like the sugar cane quotas created a permanent policy that cost merely tens of billions in waste. Such are the results of presumably high-minded objectives, all twisted by the absence of competition. Thus, Mullinaith can only go to the 401k and organ donor example, but can't extrapolate to food irradiation or something else as simple (eg, don't encourage low down payment mortgages). Simple rational thinking doesn't generate better policy. He can prove me wrong with actually generating regulations that have positive benefit/cost ratios, but I'm not optimistic.

Sendhil also thinks that a major problem of the poor is that they inadequately sign up for welfare because the forms are so complicated. If you simplify forms you will have more people on welfare and more fraud, which isn't necessarily good for families in the long run. So, Sendhil likes to play to standard liberal pieties about how government can help and inequality is the result of evil and prejudice (he's big on the stereotype bias, another publication bias result gone viral). Yet he forgets the most profound behavioral bias in this literature that is delightfully recursive:
We think we are better than average at not being biased in thinking that we're better than average.

This is true especially for people who have studied this subject at college. Thus, the behavioralists neatly infer from the literature that everyone else is biased. Now, surely these are smart, educated people, and they are less biased on simple scientific questions that your average housewife doesn't know, but there are lots of big issues relating to politics and business strategy that don't have a monotonic relation between learning and the ability to discern the good. Just look at politics or education, areas subject to a lot of study over the past 50 years, which are hardly more efficient than before all this knowledge arrived.


Anonymous said...

One of my favorite examples is the legalization of marijuana. All high IQ people are for it -- yet somehow it never seems to come to pass. Not in any country in the world (in any real sense).

For all the high IQ going into to makes the case for legalization, almost none has wondered why the anti side has a perfect track record. Might it be the legalization side is over-looking something very, very important?

Anonymous said...

uhh... he might want to double check the 401k example.

Anonymous said...

"We think we are better than average at not being biased in thinking that we're better than average."

I find it hard to believe that people who have the insight and introspection to consider this are in fact not better than average.

Perhaps the high personal esteem is justified.

"Average" is a high standard.

Anonymous said...

..Meant to say "Average" is not a high standard.

Anonymous said...

'Still a man hears what he wants to hear and disregards the rest'


-The Boxer, Simon and Garfunkel

Thomas said...

"We think we are better than average at not being biased in thinking that we're better than average. This is especially true for people who have studied this subject at college."

OK, fair enough:
- Most people think they're better than average.
- People who study the subject in college likely uniformly think they're better than average.

However, consider a more layman example of your argument:
- Most people think they're a better than average driver, correct?
- All professional car drivers that have taken professional car driving courses uniformly think they are better than average, correct?

However, in this case, I can't imagine anyone who would even try to deny that all professional car drivers who have taken professional car driving courses are, in fact, better than average drivers!

It is possible that they think it because it's true, unlike the other 99% of us mopes who think it because our psyche is self-preserving or we're arrogant.

Anonymous said...

Behavioral economics is not economics but psychology. It focuses on individuals instead of exchanges and markets.

Economics makes assumptions about actors to make market predictions. BE makes predictions of actor choices just like psychologists.

The question BE must address is how do biases create market conditions. To date I have not seen BE translate into markets.