Tuesday, August 25, 2009

We Are Not Creatures of Logic

In yet another example of the difference between theory and practice, it turns out that there's a reason the average person makes a lousy economist. We're not ruled by logic. Now, at least on my end, this does not sound like something that should have been a shock. I worked in retail, and I know how appealing that price difference can be, even if in the long term it works out to the same cost - or even more. Yet, perhaps also as another example of scientists have too much time on their hands, a new scientific study has confirmed that yes, we are economic idiots.

Now, I'm not turning this into an entry as to why we are, as people, on average, idiots. Because let's face it we are. Myself included. The only thing that keeps us all alive is that for most of us, our idiocy is short-lived and occurs in sporadic bursts, rather than as a full time thing. My concern here, though, is those theorists who somehow expect that we are not idiots, that we are creatures of logic, and that we base our actions on the logical best outcome.

In the case of the radio program I was listening to which inspired this post (the CBC's Quirks and Quarks) the economists in question were somewhat shocked to find that people don't always ask in their own financial self-interest. Case in point was being offered to split $10 1 to 9 with someone. Most people balked, wanting a fairer split. The economists say that people ought to take the $1, because fair or not it's better than nothing (and I agree, but I can use every spare dollar). However, human nature, or at least a sense of fairness that is probably more societal than nature, intercedes.

Likewise I got into a conversation with someone the other day about the failings of Marx. My biggest complaint with Marx's theories was the part in them where the leaders of the revolution, having overthrown the rich and ruling class (using that term I can say but not spell at the moment) and ascended to power themselves, are supposed to then hand it over to the people. It's a nice, logical progression of the revolutionary movement, and makes perfect theoretical sense to Marx. It does not, however, account for human nature in that most people, once they've taken power, aren't going to simply hand it back over.

Human beings are not creatures of logic. Aside from the grand scale of economics and politics, this afflicts/affects us in our everyday life. How many times do we make decisions counter to the choices we know, logically, we ought to make, because other factors intercede? How often have we done so today?

1 comment:

Kmcelhinny said...

Wow... great post. :)

I find that often people do things because they think they deserve them from outside situations, whether that be a stressful work environment "I work hard so I should get what I want..." or something else, just to be spiteful towards another person "Well... Mr. Smith has it, so I should too, only bigger and better"

The thing is, that logic is hard to reason with personal emotions. It's often difficult to separate the two and sometimes instant gratification wins out simply bc a person wants to feel better right NOW... failing to think about the long term effects it will have on their pocketbooks.

Where as if you work slightly harder for something, the gratification that comes with that is so much more prosperous, not only financially, but also more consistently.