See my conversation with Dan Ariely, about behavioral economics, the limits of free markets, the desire to become Homer Simpson, and the joys of family arguments. The conversation takes place on his very entertaining website: Predictably Irrational.
Freakonomics' Ian Ayres weighs in on Free Market Madness
Economist and lawyer Ian Ayres, or should I say, lawyer and economist Ian Ayres, hmm, . . . weighs in on Free Market Madness on his Freakonomics blog. Nice to see the words “hilarious” in a review, and not followed by a phrase like ” . . . in his ignorance.” Check out his post HERE.
Scientocracy: Policy making that reflects human nature
The key to good policymaking is to understand human nature.
Want to increase how much money people save? You better know what they will do if you change the tax code. Want to reduce the threat of terrorism? All the security in the world won’t suffice if you don’t, at the same time, find ways to confront the behavioral forces that lead people to commit acts of terror. Want to make health care affordable to all? Policy won’t achieve this goal unless policymakers understand the ways doctors and patients make decisions about what healthcare services to use.
In my new blog — Scientocracy — I plan to explore important policy debates through the lens of human behavior. I intend to not only show why psychological science is relevant to a whole range of policy debates, but to also imagine what policies might look like if they were better aligned with human nature.
Who am I to write such a blog?
I am a physician at the University of Michigan, with undergraduate training in philosophy, and without a single psychology course to my credit. Not promising, I know. But actually, after sitting in on a behavioral economics class at Carnegie Mellon University 15 years ago, I have spent the majority of my professional career studying how people make health care decisions — how patients choose between, say, chemotherapy and radiation; how surgeons decide whether a patient is a good candidate for liver transplants; and how policymakers decide whether a new drug brings enough health benefits to justify its staggering price.
Through my research, I have learned a lot about the irrational and unconscious forces that drive people’s decisions. And I have seen what can happen when leaders implement policies that ignore these forces.
The one constant in my professional career, besides practicing medicine, has been my focus on decision-making and policy. For example, my first book, Pricing Life, was published as part of a series on bioethics, but the book deals as much with moral psychology as it does with philosophy.
And my newly released book, Free-Market Madness: Why Human Nature Is at Odds with Economics — and Why It Matters, is a critique of libertarian extremists who believe that most of society’s problems (obesity, crime, drug use…) can be solved by deregulation. I show why such free-market evangelism is at odds with human nature, and why psychologically informed policies — ones that recognize both the rational and irrational side of human nature — would rein in the excesses of free markets to account for human imperfection.
When I talk about Scientocracy, then, I’m not talking about a world ruled by behavioral scientists, or any other kind of scientists. Instead, I am imagining a government of the people, but informed by scientists. A world where people don’t argue endlessly about whether educational vouchers will improve schools, whether gun control will reduce crime, or whether health savings accounts can lower health care expenditures,… but one instead where science has a chance to show us whether vouchers, gun control laws, and health savings accounts work and, if so, under what conditions.
As a new President assumes leadership in the United States, I hope to add to the chorus of voices calling for government policies that are informed by a solid scientific understanding of human nature, in all its wonderful messiness.
To learn more about me or my new book, Free Market Madness, check out my website: https://www.peterubel.com/ .
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Nuance Nation
On the Freakonomics blog recently, Ian Ayres reviewed my new book Free Market Madness, and singled out a story I tell there. Ian has written many books himself, so it isn’t surprising which story, of the many stories in my book, he discussed.
He picked out a section near the end of the book, where I describe my efforts to interest a leading editor in my book idea. After asking to know the bottom-line, take-home message of my book, the editor asked me whether I was “aiming for a nuanced argument?” I responded yes, and then explained how I hoped to write a nuanced book that could nevertheless be marketed with a crisp sound bite. I lost his interest at the word “yes.”
Anyone trying to write a political book the last few years knows about this other “n” word: Nuance.
Publishers don’t want nuance, they want controversy. They don’t want authors to grapple with difficult choices, but prefer people like Ann Coulter who can sell books by making outrageous claims.
Perhaps with Obama in the White House, we can hope for a new era of nuance. Certainly, my new book is very much in the spirit of Obama’s way of thinking.
In Free Market Madness, I try to do three things:
(1) Entertain readers with surprising examples of the often hidden forces that influence the way we humans think, decide and behave. I show the peculiar mix of rational and irrational that make up human nature, the often surprising combination of conscious and unconscious decisions that determine our life trajectories. Did you know, for example, that people named Paul are more likely to migrate to St. Paul, Minnesota than are people named Joe, unconsciously influenced by what social psychologists call implicit egotism?
(2) Give readers a brief and colorful history of the link between economists’ beliefs in human rationality and libertarians’ faith in free markets to promote people’s best interests. Readers of my book will see that I am a huge fan of capitalism and liberty. But I also recognize that completely unfettered markets can harm not only those people who make unwise decisions, but have spillover effects on everyone else; that consumers’ choices aren’t as “free” as we think, because we humans can be manipulated by those who understand our weaknesses.
(3) Defend the idea of nuance. We have to find a balance between liberty and well-being, when the two collide. Freedom is a good, on its own, but freedom to take out mortgages we cannot afford, after being persuaded to do so by people who can make money off our decisions, can lead to widespread economic disaster.
Government regulations always have costs. But there are costs, too, in standing by on the sidelines and leaving everything up to the market. My hope is to get people arguing less about the extremes– capitalism versus socialism; freedom versus government control– and more about the large, gray zone in the middle, a zone where I expect we will often find the best policies.
In his inaugural address, President Obama had this to say:
“Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched, but this crisis has reminded us that without a watchful eye, the market can spin out of control.”
Hallelujah.
Fittingly, my book came out on the day of Obama’s inauguration. But now I’m wondering whether Obama, with all his newfound power, got hold of an advanced copy. Because his version of nuance, as expressed so eloquently in his inaugural address, is exactly the tone I tried to set in Free Market Madness.
Let the era of nuance begin!
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Republican Death Wish
“With luck, Ted Kennedy will be dead soon.”
She uttered these words two minutes after expressing hope that the nation would rally behind Obama. A lifelong Republican, she had voted for McCain. I expect she harbored concerned about Obama’s terrorist pals and his anti-American pastor. But with Obama now newly elected as president, she was already beginning to forget what she used to find so terrifying about him. As an American, and as someone who worried about the stiff challenges facing our country, she had no choice but to wish him well. To hope for Obama to fail would, after all, be to hope for America to fail.
But Ted Kennedy — that was a whole other matter. Out of nowhere, in what had otherwise been a pleasant conversation, she brought up his name. “Did you know,” she asked, “that he never graduated from law school?” I didn’t actually. “Did you know how wild he was when he first became a senator?” she asked. I had heard a bit about that, but wasn’t that, like, 40 years ago? “I hope he dies soon. I really do,” she said.
I was dumbfounded. Home for the holidays, I had known that I would be surrounded by ardent Republicans from both sides of the family. My children, you see, have four Republican grandparents and a slew of Republican aunts and uncles. Politically speaking, I think of myself as a flaming moderate, but both sides of my family think of me as a pinko — for not supporting our initial invasion of Iraq; for questioning the wonders of the free market (horror of horrors: I even have a book out now called Free Market Madness!)
But while I expected to hear people complain about how liberals are ruining America, I did not expect to hear anyone call for the death of an ailing senator. This sentiment was so raw, so primal, it flabbergasted me. What had Ted Kennedy done lately to deserve such vitriol? Had his passionate pursuit of universal health care earned him such enmity?
No. None of the complaints she uttered concerned any recent aspect of Kennedy’s life. (I’m leaving her identity unnamed, but I want to clarify that the person I’m writing about was neither an aunt nor grandmother of my children.) In her 70s, she was clearly stuck in the 60s.
I’ve drawn a lesson from this conversation, about the challenges Obama will face trying to bring our country together. The 60’s may have happened forty years ago, but the cultural battles begun back then have not completely run their course. Many elderly conservatives still hate democrats with great passion. And though they find it hard to direct that hatred toward Obama, they have plenty of other people to direct their hatred towards.
And direct this hatred they will! Psychologists have long known that when people’s world views are threatened, they grasp for ways to affirm their beliefs. A recent study published in the prestigious journal Psychological Science reveals the strange depths to which we humans will plunge to affirm our beliefs.
In stage one of the study, a research assistant asked participants to fill out a questionnaire. The research assistant was a moderately attractive blonde haired young woman in a scarf. I mention this not because I’m sexist, but because her physical appearance is important for the study. You see, the research assistant headed off to the file cabinet to get a copy of the survey, and in doing so, switched places with another moderately attractive blonde haired young woman wearing an identical sweater and scarf. The two research assistants shared moderate similarities in their appearance, but anybody looking at the two of them at the same time could easily tell them apart.
However, the research participants weren’t looking at the two at the same time and comparing them. They were in a situation where they expected that they were interacting with a single research assistant. And when the second research assistant came back with a copy of the survey, most of them didn’t realize that this was a different person. Instead, something felt wrong about the situation. Their world view had been challenged. They assumed they were doing a simple survey in a comfortable setting, but instead found themselves feeling acutely uncomfortable for reasons they couldn’t quite grasp.
That’s when stage two of the study takes place. In this stage, the participants filled out the survey, which presented them with a hypothetical report about the arrest of a prostitute. Participants were asked to play the role of a judge and determine proper bail for this woman.
The research participants — still feeling all these negative emotions, still knowing that something in their view of the world wasn’t fitting together correctly — slapped a huge bail on the hypothetical prostitute, a dollar amount significantly greater than the value chosen by a control group who had not experienced the surreptitious switching of their research coordinator’s identity.
When people’s world views are threatened, they look for ways to confirm other parts of their world view, often with vigor. When they cannot detest Obama, therefore, they revisit the sins of Ted Kennedy’s youth with righteous vengeance.
Many Republicans are feeling quite threatened right now. The validity of their world view has been questioned, by events and also by the majority of American voters. We can all hope that Obama will be able to unite people across this partisan divide. But we should be prepared for many ardent Republicans to respond to these threats by looking for fresh targets.
There are many reasons we can hope that Ted Kennedy will overcome his brain tumor and live a long time. But now there is a new reason to hope for this — the longer he lives, the more he can soak up Republican ire, and reduce the chance that Republicans will redirect their negative emotions toward our new president.
For more information on my book, Free Market Madness, check out my website at https://www.peterubel.com/.
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Attack of the Killer Oreos?
Not long before the presidential election, the Wall Street Journal editorial page warned its readers about what it called the attack of the killer Oreos. You have to admit it’s a pretty sensational image — of an Oreo silently stalking its prey, leaping upon an unsuspecting consumer. In fact, this is exactly the kind of image Journal editorialists wanted people to think about when voting in November. “One of the things at stake in this election,” the Journal reminded us, “is who will run agencies like the FCC, which have enormous discretionary power.” And an Obama administration, we were warned, will interfere with companies’ abilities to market their products to us, and our children.
If the current economic crisis has taught us anything, it is that unfettered markets are not the godsend that libertarians would have us believe. Our current economic mess is due, in no small part, to deregulation gone wild.
It is no surprise that the Wall Street Journal opposes the idea of regulating advertisement of junk food to kids. So even as companies find more ways to saturate our brains with images of their products — paying TV shows to incorporate their products into plot lines for example — free market evangelists remain unconcerned. As our children become increasingly obese with each passing year, these people can’t understand why some of us would like to protect our children from things like junk food advertising.
Behind the Journal‘s view is a belief that humans are immune to any negative consequences of advertising:
Viewers already understand exactly what’s going on when a TV character flaunts a name brand,” they opined, “and that awareness is the best defense against whatever ‘manipulation’ is going on.”
In making this statement, Journal editorialists are flaunting their ignorance of human nature. As a physician, I have spent my clinical time caring for patients — smokers, overeaters, under-exercisers — who have been harmed by many of the products that these kind of libertarians would want us to free from regulation. As a behavioral scientist, I have studied how easy it can be to unconsciously influence people’s behavior. As the father of 8 and 10 year-old boys, I have yearned for a government that is willing to step in, when necessary, to protect my kids from the harmfulness of our excessive consumerism.
We live in a market-oriented economy. But a sensible society will recognize when the market needs to be reigned in.
Peter Ubel is Professor of Medicine at the University of Michigan and author of Free Market Madness: Why Economics is at Odds with Human Nature–and Why it Matters (Harvard Business Press, January 2009). To learn more, visit https://www.peterubel.com/
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