I review the latest book by George Akerlof and Robert Shiller. I generally admire both authors. Ordinarily, if I do not like a book, then I do not write a long review. However, because both authors are Nobel Laureates, and because the book has received some positive press, I made an exception and let go with both barrels.
The authors do not deny that markets often work. However, if phishing equilibrium is limited to specific types of products, then the authors do not say so, nor do they give any criteria or characteristics to look for in order to predict in which markets phishing equilibria will be most prevalent.
But you have to read to the whole review to get the flavor.
Recall that Alex Tabarrok did not much are for the book, either.
Behavioral economics is a well studied and useful branch to economics. What’s not as well studied is behavioral politics and behavioral voting.
I think it’s the biggest low-hanging fruit for an ambitious researcher right now.
Arnold or anyone else…..I’d be interested to know if there’s a researcher out there right now that’s doing pioneering work in this field to compare how human fallacies transfer to the public sector.
I’d expect the results would be equally grim if not worse, but that might be my priors getting the best of me.
“It is the literary equivalent of a Cinnabon.”
You started writing your review with this sentence in mind, didn’t you? 🙂
I find the whole academic intellectual-political phenomenon of “Behavioral Insights” to be quite worrying. I’ll just use ‘nudge’ as a short-hand. You can tell by the preferences of the high-status individuals who are leveraging their prominence in its favor, and by who is most enthusiastic about these things, that it is going to be abused as a catch-all rationale for all kinds of new and obnoxiously intrusive state interventions to nanny-manage all our lives.
It seems to me there are fundamental political, philosophical, and psychological problems with the whole nudge movement.
Psychological – because, it seems to me, we are still very far from a solid, reliably predictive, and comprehensive model of human choice and behavior. Little insights are one thing, but acting on them without having a model that gives us a gestalt understanding in their role in human behavior and what happens to that unified whole when perturbations are made takes a lot of naive and insouciant hubris.
Political – because we don’t know how to deal with great diversity of preferences and enormous inequality of self-control in an ‘equal protection’ bureaucratic regime in which the state is used to imposing the same rules on everyone and the whole marketplace, instead of focusing only on some especially needy subset. That would be as administratively burdensome as the DMV system for every type of ‘phoolishness’ – a complex of systems which any state is presently disinclined to implement (though that may change). We also don’t have any good way to trade off the interests of those who might ‘need help’ from those whose interests will be harmed by a shift away from the status quo. Maybe in the future everyone will get individually-tailored – and voluntary – nudges from a smartphone, which can maybe lock them out of some transactions, but notice that the nudge literature seems to have no interest in apps or things like that; it’s all about the nanny state.
Philosophical – because there is no broad agreement on the specifics of the teleology: what ‘well-being’ really means and how it related to choice, how to tell which choices are good and which are bad for any individual so that we can agree on what deserves ‘paternalism’ and what doesn’t, and there seem to be plenty on conceptual problems at the very root of trying to distinguish between preferences and pathology. Scott Alexander recently criticized a paper of Bryan Caplan’s for making exactly this kind of error as regards mental illness, and it seems to me that Alexander has the better of the argument by a long way.
As usual, these types of fundamental and irresolvable problems are ironically more of a strength than a liability for the advocates of this cause, because it renders their claims borderline-unfalsifiable and always salvageable no matter what happens or fails to happen in response to any policy intervention.