It's money, stupid.

[digitaldiscipline]

Economic Irrationality is, apparently, intrinsic.

Sorry, ikilled007, Mises is tilting at windmills, and not many folks are capable of overcoming millions of years' worth of evolved altruism.

[courtesy of jaylake's daily linkfest]

Comments

[etcet.livejournal.com]

I'm not saying he's wrong, I'm saying that most people won't be able to take his advice.

[etcet.livejournal.com]

The economic calculation problem — the difficulty (or impossibility) of a (usually socialist) government in being able to make economic calculations required to organize a complex economy.

Government is made of people, almost all of whom are incapable of thinking rationally about money.

[serpentstar.livejournal.com]

There's a great deal of research to suggest that even the people the general public expects to be experts on economics, like stockbrokers, are inherently irrational in their approach to investment. Which kinda screws most attempts at prediction...

I don't believe that any of this proves anything about overcoming altruism, though, because I don't believe that it operates on the same level. Humans, generally, are altruistic about a lot of things, but not about money. Money kicks a whole different way of operating into effect, more to do with game theory -- we see money as inherently something that can be gamed, & so we start gaming it. We don't game altruism -- if we see a guy apparently dying in the street, we go over and help him (unless we assume he's a drunken bum, in which case our game theory approach -- "he brought it on himself by not getting a job" -- supercedes our altruism.

[fenixinthedark.livejournal.com]

I not only agree with this assessment, I have experienced it. My ex-credit union manager knew less about regs than I did. Now, I grant you, I have been in the industry for 20 years, but still... he should have the training necessary to have the correct understanding of what regs are, what they mean, and what legal rights a financial institution has regarding 'interpretation'. I was frankly appalled, and moved my accounts the same day.

We expect "expert"... we receive "the guy who was willing to take the salary that was offered".

[razerwolfe.livejournal.com]

I will second fenix on this one. Sadly, as I grow older, I find that many people who claim to know something and be experts are just skimming along and fudging it like the rest of us. Little letters after your name do not at all mean you know what you are doing, just that you passed some test somewhere. I see this alot in the film biz, especially when it comes to my end of things:Rigging. Rigging stuff up to walls, ceilings or whathaveyou and not damaging the item, the surface you are mounting it to or anyone else below, is something that takes experience and knowledge. I've had architect-art directors tell me how to rig something that was simply the wrong-ass way to go about it. After their way fails, everyone knows who the real expert is.

[serpentstar.livejournal.com]

Yeah, I've done enough theatre work to have seen that stuff too. :)

[razerwolfe.livejournal.com]

"Would you rather earn $50,000 a year while other people make $25,000, or would you rather earn $100,000 a year while other people get $250,000? Assume for the moment that prices of goods and services will stay the same.

Surprisingly -- stunningly, in fact -- research shows that the majority of people select the first option; they would rather make twice as much as others even if that meant earning half as much as they could otherwise have. How irrational is that?"

Rather rational when you consider that you would have twice as much buying power in the first instance vs. others, while have markedly less buying power vs others in the second. You would be the one at the top of the heap, while you would be second class in the second instance. It really is not about the amounts, its about power. Buying power is more important than monetary amounts in the given 'test.'

[etcet.livejournal.com]

I think that buying power was attempted to be removed from consideration - "Assume for the moment that prices of goods and services will stay the same."

So, you could buy twice as much as yourself; it's only relative to others that you would not seem as wealthy.

[razerwolfe.livejournal.com]

But it would not 'stay the same' and people are savvy enough to know that. If I'm the only one getting 50k and everyone else is going to get 25k then prices will fall to reflect the worldwide buying power of only 25k, leaving me still having 2x the buying power over everyone else. If I'm making 100k and everyone else is making 250k, then prices will rise to accomodate the new norm and my buying power is even less. People see the intrinsic fault in the question itself versus their real world response and answer correctly to increase their own buying power.

[fenixinthedark.livejournal.com]

I must beg to disagree...

Many times, the economy does not accurately reflect the actual buying power of the public. The housing market being in the mess it is in now is one example. Banks.. well, "banked" on the real estate bubble being permanent (when will they ever learn from history??), and now there are fewer people considered for loans which means that those who wish to sell cannot find a buyer, and many of those who wish to buy cannot purchase because they cannot get the loans they need even when they are capable of paying them back, and have no real problems on their credit history. The market has not adjusted to accomodate the reality of peoples earning power. It, in fact, fucked itself (and all of us) very hard up the ass on that score.

So, given that scenario... which scenario would you choose? I'd choose the one where I earn the greater amount total... not as compared with my peers.

[the_axel]

That assumes that the amount of goods & services available for purchase per capita is static.

But for the requirement "prices of goods and services will stay the same" to be true, there must be more goods & services to be purchased per capita.

Look at it these ways - would you prefer to be earning double the average income in 1850 or 40% of average income today?
Or earn 40% of the average income in the US or double the average income in India?

[razerwolfe.livejournal.com]

Eliminating numbers, it still comes down to this: Do you want to earn 2x more everyone else, or 2.5x less than everyone else.

[etcet.livejournal.com]

True enough; however, if 40% of what everyone else makes is still "plenty, and twice as much as I would get otherwise" . . . . ?

[razerwolfe.livejournal.com]

There's something of the 'being happy with tablescraps' that bothers me about your statement. I will be, by default, at a huge disadvantage in the world versus everyone else (and everyone else does matter since they produce and sell the things I need or want). Mayhap, this is a perceptual difference in how we see human nature.

[etcet.livejournal.com]

I can see what you're saying. I don't know if this is intrinsic in the way the question is phrased, or if it's evidence of the underlying irrationality when it comes to money.

The fact that you and I are having this disagreement leads me to believe that it's the question that needs changing. Savvy responders would, as you pointed out above, recognize that the economy doesn't exist in a vacuum, and market pressures would cause inflation in the wealthier scenario (and I doubt this was taken into consideration when the query was crafted); however, the ignorance of the average person on the subject might make them take the 50/25 for completely different, non-rational reasons as the article contends.

I'm not happy with scraps - I've done that, and it sucks. However, I think that there is a point where having "more" becomes superfluous, though that's not really the thrust of the article's thesis.

[razerwolfe.livejournal.com]

Perhaps the question is a poor one, or perhaps the answer were given but the wrong conclusions were made based on what the questioners wanted to hear and or test for. There is more to getting reward or value from a decision than simple monetary gain. I think that the concepts of status and prestige were not considered in people's responses. You would have more status and prestige in the 50/25 than in the 100/250, and so it also goes in the following 'test' with the prize in the movie line. If the events were isolated, then I'm sure no one would mind getting either the 100 or the 150. But, in the first instance, you are a Winner, while in the second instance you are Second Place. That counts for a lot, and it seems a majority of people (myself included) would not mind winning slightly less and having the prestige of telling others you were a Winner.

[the-siobhan.livejournal.com]

But if the cost of goods and services is the same in both cases than you have more buying power if you have more dollars, no matter what other people have.

Or am I misunderstanding what you mean by buying power?

[etcet.livejournal.com]

That's what I took it to mean, too, but we've got a lot of folks here who are going to drill down to secondary and tertiary effects and not be answering that question in a vacuum, which is probably how the researchers intended.

[the-siobhan.livejournal.com]

People are also very good at thinking up rational reasons after the fact for decisions that are initially based solely on emotional response.