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A fascinating video about how irrational we actually are as a species despite all of our material advancements. I would have to agree with what Dan Ariely says in this talk, we need to simplify our cognitive models and constructs so we can actually make rational, informed choices based on them.
How a coffee chain changed how many think about coffee…
The objectivist camp suffers another blow as parodied by this fine article by John Atcheson. Reprinted here for because a good objectivist smackdown is always welcome at DWR. Thanks to Ben Hoffman for bringing this article to my attention.
Atlas Mugged: The Ayn Rand Six Step
Imagine your landlord coming to you one day and saying, “It’s everyone for himself. We’re not going to supply heat or water or electricity any longer, and we’re not going to conduct repairs.”
Of course, you and the rest of the tenants wouldn’t stand for such a thing . You’d kick him out if you could and move out if you couldn’t.
But suppose, over the years, he cuts the part of the portion of your rent that goes to utilities and repair work. Year after year, he’d stop by and announce his cuts with great fanfare, telling you how much money you’ll save.
On each visit, as he handed out the meager savings, he’d rail about how the utilities were incompetent, and filled with lazy workers, and that repair and maintenance work was a rip-off perpetrated by equally lazy laborers.
“We’re gonna show them,” he’d say, “The market will take care of these bozos.”
Meanwhile, year after year, you pay a little less. Things might get a little ragged. The maintenance man might not show up every day; the fire alarms might stop working; the elevators get stuck more, there’s an occasional power outage, water’s a bit murky … but there’s those savings.
Unbeknownst to you, most of the money the landlord saves is going to upgrade the top floor where he and his cronies live, bringing in their own dependable power and clean water. But you don’t investigate much because … there’s those savings.
Every time you passed him in the hall, he’d give you his spiel. “Those repair guys are thieves,” he’d tell you, again and again. “And you might as well burn money as give it to the utilities,” he’d say with a sage nod of his head. “Just wait ‘til those market forces hit, that’ll show them.” But he’d begin to add a new verse to his rant. “And hey. What about those gays in 3G? Or the Mexicans in 2D? Disgrace how they double up like that …”
Then finally, one year, he announces he can no longer afford to supply heat, electricity or water, and he can’t be repairing anything that breaks any longer. “Just not enough money – besides, look what’s happening around here … throwing more money at those lazy good-for-nothings is no solution.”
Now imagine complaining to him about the frozen pipes, or your child’s pneumonia and him responding with: “Hey. It’s all about the market – if you want it, figure out a way to get it – the market will provide if you’re diligent. Look at the top floor. Besides, it’s all the fault of those Mexicans. Or those gays … or …”
Would you believe that crap? Would you put up with it?
Of course you wouldn’t.
Yet that is precisely the game the Republicans have been playing for years. Call it the Ayan Rand six step. Step one: discredit government. Step two, starve it. Step three, when the underfunded government can’t perform, stand back and say “I told you so.” Step four, create the myth of the individual uber-alles – the Marlboro man on steroids; Step five, if anyone gets wise, find a scapegoat and blame it on them – gays, immigrants, government workers; government working gay immigrants. Step six, when things get bad, divide and conquer – “if it wasn’t’ for them…
So now we are waiting for the magic market to deliver us from a crisis caused by the unconstrained market; we are loath to give the government a penny even though no one else is going to do the things it used to do and do well – the things that created the conditions for a broadly shared prosperity and an open, fair, and transparent market. Now, we are on the verge of shivering in the dark, as we point fingers to any of the various scapegoats the Republicans have created.
Now, their plutocratic bosses have free reign, and they’re gutting the building as we fight among ourselves.
The solution to bad government is good government, not no government.
The solution to envy and jealousy at public sector employees’ pension and benefits is not to strip theirs, but to get ours back.
Our strength comes not from how the strongest or luckiest among us exploit the rest, but from how we come together as a country to do that which we must do together. Indeed, we are great in proportion to how we treat the least fortunate among us, not the most.
The reason it feels like the United States is collapsing around our collective ankles is because it is – if we relinquish all responsibility to “the market” it will strip the walls, tear out the pipes and wires and raise the roof, selling our present and future to make a quick buck. That’s what markets are supposed to do.
And if we buy into some uber-individualist fairy tale about survival of the fittest, we’ll all be handing over a bigger share of our rapidly diminishing paychecks to the CEOs and CFOs of Goldman Sachs or Exxon and we’ll be SOL, as our biggest export will continue to be high wage jobs to China, India, Germany and other countries that haven’t bought into the Ayn Rand fantasy – or nightmare.
That’s why we need government. Because our freedom and welfare are indeed in danger – but not from government; rather from those who point fingers at government in hopes that you won’t notice they’re robbing you blind, in the name of a mutant form of free-market economics that’s really only existed on the pages of a second rate polemic masquerading as a novel.
As I am often told by my free market indoctrinated friends the market will solve societies problems, if….(insert the big whingy diatribe about government interfering here) it was just left to its own devices.
A sample of the pap I usually hear, coherently summarized by Mr.Chang and his book I happen to be reading right now.
“We should leave markets alone, because, essentially, market participants know what they are doing – that is, they are rational. Since individuals (and firms as collections of individuals who share the same interests) have their own best interests in mind and since they know their circumstances best, attempts by outsiders, especially the governement, to restrict freedom of their actions can only produce inferior results. It is presumptuous of any government to prevent market agents from doing things they find profitable or force them to to do things they do not want to do, when it possesses inferior information.
What they don’t tell you…
People do not necessarily know what they are doing, because our ability to comprehend even matters that concern us directly is limited – or, in the jargon, we have “bounded rationality”. The world is very complex and our ability to deal with it is severely limited. Therefore, we need to, and usually do, deliberately restrict our freedom of choice in order to reduce the complexity of the problems we face. Often, government regulation works, especially in complex areas like the modern financial market, not becaues the government has superior knowledge but because it restricts choices and thus the complexity of the problems at hand, thereby reducing the possibility that things may go wrong.”
-Excerpt from 23 Things they don’t tell you about Capitalism – Ha – Joon Chang. pp. 168-169
People always seem to forget that the rational self maximizing actors they talk about in economics text books are merely theoretical constructions and do not figure prominently in the real world. We are neither rational nor do we have complete information when it comes to making economic decisions. Therefore, as Mr. Chang implies government regulation can be a good, even helpful thing, when it comes to market conditions.




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