Will behavioural economics save the economy?

Chrystia Freeland at the FT thinks it might, and I agree. It's a rather unsophisticated application of the theory but - like fiscal and monetary tools - if the situation is extreme enough that a simplistic approach will work, take the simplistic approach.

Comments

Post a Comment

Popular posts from this blog

Rigour? In a blog?

Brad DeLong has an impressively clear (although, or perhaps because, a bit technical) piece on risk appetite and fundamental values of assets . I feel I should respond to it, but it's such a tour de force of clear and explicit assumptions, rigorous logic and thunderous conclusions that I feel I barely can. I particularly loved this statement for pure bloody-minded literalism (that's a good thing, by the way): The fundamental values of asset prices are the money-metric values that the costate variables associated with the commodities would have in some reasonable utilitarian central-planning social-welfare-maximization exercise under reasonable utilitarian preferences. However, here is what comes to mind: Given that asset prices rarely approach the values Brad ascribes to them, could this be because there is competition for the limited amount of savings capital available in the world? If I, as a productively investing business, want to get access to some of it, I probably need t
Read more

How does it feel to be part of Europe?

I had this piece drafted before the murder of Jo Cox last week. But I don’t think it changes anything I was going to say. It simply makes it more urgent to say it. May I introduce you to my two lovely young nieces? Natasha is four months old and Rosalind four years. They live in rural Devon, and they’re just starting to discover the world and decide how to feel about it. I want to think a little about what it might feel like to be in their world. The campaign for Britain to remain in the EU has been full of facts and utilitarian arguments. Economic projections, dispelling of myths about regulations, estimates of the economic and tax contributions made by European workers in Britain. All the kinds of things that may convince you if your inclination is to weigh up the numbers and evaluate the facts. But there are plenty of people who don’t want to make a decision based on numbers, and I understand that. Numbers can be manipulated. We don’t all have the time or desire to r
Read more

The amoeba and the squirrel

[ An essay written for the Internet Review , a one-off maybe-to-become-annual publication documenting (and celebrating?) Internet trends ] Every human has two minds: one like an amoeba and one like a squirrel. The amoeba mind is reactive, emotional, intuitive. It decides immediately, without planning or consideration. It is Freud’s “id”, or the System One of behavioral economics: the amoeba is your unconscious. Your squirrel mind plans, trades off immediate pleasures for future gain, is capable of abstract reasoning and cooperation – the superego. Being an amoeba is often more fun – maybe even more authentic – but the squirrel makes things happen in the long run. Society also has amoeba and squirrel modes. The amoeba is the local interaction: follow your senses and do what’s in your direct interest, consequences be damned. Squirrel mode requires bigger institutions, and trust: in other people’s knowledge, a shared logical picture of the world, forgoing today’s profit for society
Read more