Comments

1. 

   Anthony St. John

   August 27, 2008 at 19:55

   How I Almost Single-handedly Topsy-turvied the European Banking System and Grew to be the Most Hated Individual at Bahnhofstrasse 45 in Zürich, Switzerland... Jean-Paul Sartre, my “spiritual” father and one of my most appreciated philosophical mentors, once speculated that Life is absurd. The more I advance in age, the more I find myself chuckling at the ridiculousness of human nature and the members of this species which never fail to provide me with oodles to laugh at and even cry for. And my twenty-one years in the north of Northamerica, my one year in the south of Southeast Asia, my eight years in the south of Northamerica, my eight years in the north of Southamerica, and now my twenty-five years in the south of Europe, have altogether given me an astonishing perspective of my favourite object of learning. Remember the early months of 2001 when the DotComBubble was hissing its eventual demise, and thousands upon thousands of pensioners, investors, stockholders, and whomever were being apportioned a trauma that could somehow be contrasted with the heinous aerial attacks that were to come in September? Remember the panicking? Was there some sort of association between these two devastating occurrences? Had the DotComBubble been fed a bunch of funny money/laundered money/dirty money to such an enormous extent that stock exchanges all over the world had no choice but to halt the 1929-like insanity which was threatening the very survival of the Capitalistic System? Were the assaults in New York and Washington some kind of fluke vendetta and not the workings of a well-entrenched “terrorist organization” bent on conquering the world? Very shortly after the horrendous acts of violence perpetrated on 11 September 2001 on one of the most prestigious pillars of the Capitalistic System and the biggest bunker in the world, Bush I, ex-Skull & Boner, ex-Congressman, ex-ambassador to China, ex-CIA director, ex-ambassador to the United Nations, ex-President of the United States, appeared on one of right-wing Italian Silvio Berlusconi’s television news programs (telegiornale), and hugging the diehard demagogue, let us know that SB was Bush I’s friend, quod erat demonstrandum, a chum of the United States of America. SB gloated and bloated. Bush I, the first stupid one and father of the second stupid one, Bush II, strained his smiles. After that, off he went. The next day, the Corriere della Sera reported that the night before Bush I, on a private jet, had flown from Milano to—you guessed it!—Lugano, Switzerland, one of the most-visited pirates’ coves for secret banking in Europe and that pet place of moneyed, naughty Italian business people. Miraculously inspired, I put 2 + 2 together and came up with 4. I did not, as thousands upon thousands of untrustworthy Italian businessmen and businesswomen did, put 2 + 2 together to come up with 7 or 11! The United States’ government realized from the start that it had to trace the sources of this shattering paroxysm in the Capitalistic System, and Swiss bankers were “softened” to be “persuaded” to empty their bags with the goods (secret bank account numbers and figures)—and all of them! Not only would a huge investigation begin to smoke out the executors of the 9-11 tragedy, a more considerable attempt was to be made in order to stall a possible collapse of Milton Friedman’s most prized fantasy. Much was at stake, and we all know that no holds were barred. The United States’ reaction was so vulgar, one had to construe that something more dangerous was going on—even more perilous than the causes and effects of the heartbreaking deaths of three thousand people in The Big Apple. The post-9/11 vocalizations by Bush II were filled with venom and revenge, and partially revealed to the whole world the spiteful instincts of the once somewhat respected nation. Later, actions would speak louder than words. Italy, as usual, laid silent, almost asleep. No one picked up on the connection between the Bush I squeeze on SB and the minutely-printed blurb about the air travelling of Bush I to Schweiz. In fact, at the time I reminded myself that Italians read less newspapers than the citizens of any other country in Europe, and fifty percent of the homes in The Boot, the focolare domestico of Dante Alighieri, possesses not one book! How could Italian businessmen and businesswomen be hip to the extraordinary shakings up in process at the time? Someone had to tell them. Somebody had to reveal to them the sudden enlightenment that had befallen me from out of the blue. I volunteered. I try to be noble. It is not easy. I have performed many acts of nobility in my life, and I am as proud as punch about them. It would not be thorny for me to be dignified at the drop of a hat. I am used to being so. My idea was simply this: To inform the off guard Italian business moguls, sono furbi, of the threat to their patrimonies, and rather than become a “co-conspirator” to their acts of profound stupidity, I would impress them with the fact that in returning their moolah to the Republic of Italy they would enjoy sleepy nights, contribute to the efficacy of their nation’s economic reputation, and help to instil in their fellow countrymen the sense that—as JFK (Ted Sorensen!) would have said—they should ask not what their country could do for them, but what they could do for their country. Wishful thinking. (When I told this story to chief accountant Giuseppe Rovelli, on trial for his alleged participation in Italy’s infamous PARMALAT scandal, his eyes bulged and, before he had changed the subject, GR flashed a very wry smile my way!) One day I feel like Robin Hood! Another day I feel like Zorro! I have never had so much fun! My dear reader, don’t you envy me? As they say in the Suisse Alps, a “snowball effect” ensued and rather than following my advice, the characters who had indicated to me that they had secret accounts in Svizzera and those that I had suspected had, started transferring their goodies not to Italian depositories, but shifted them to other furtive bays located both in Europe and around the world. I was truly disappointed. The billions and billions of these thousands and thousands of unlawful hoarders were to remain ex patria and would never see the light of their just beginnings. What is worse, the connivers passed the word to their compatriots in the four corners of the globe—birds of a feather flock together!—and an enormous “transmission hemorrhage,” a “run” as they used to say, afflicted banks, mostly Swiss, throughout Europe and the world. (Have you ever seen the Alka-Seltzer complexion of Jean-Claude Trichet, president of the European Central Bank?) All of this…Enough! Enough!! Enough!!! Stop! Stop!! Stop!!! Will someone please nominate me for the “£$%&/^ Nobel Prize for Economics and get it over with! Authored by Anthony St. John in Calenzano, Italy The Ides of March MMVIII * * *
2. 

   D Jones

   August 28, 2008 at 15:22

   Ultimately, what's more nannyish: a state that says 'no' to a small set of activities that we define, or a state that tries to subtly micromanage most of our decisions through use of sweets and a swearbox?
3. 

   Daniel Taghioff

   August 29, 2008 at 04:24

   It strikes me that Tim Harfood's defense of "Orthodox Economics" is to claim that it has already changed in response to behavioral economics. He claims areas that are revolutionary that are not changed by behavioral economics, such as studies of complexity, but Pete Lunn claims that these ideas have departed from orthdox analysis in a way that follows movements in the behavioral wing of the discipline. It is hard to assess these claims from outside the discipline, but it is interesting to note what lies at stake in the difference of perspective. The defence of orthdoxy hinges on claiming that emergent effects in the economy have a very tenuous link with how people (but not individuals as Harford disingenousely claims, Lunn cites a lot of collective behavior) actually behave. So really, are emergent effects in the economy a world apart from what people at a smaller scale do, or is it as Lunn claims, that these emergent effects, whilst not easily predicted from smaller-scale interactions, are nonetheless profoundly influenced by their dynamics. I think the latter corresponds much more with findings in the rest of the social sciences, and that there is more evidence for a revolution than not. Perhaps it is a revolution that has been more successful than Lunn claims, bearing in mind we are now in a "Post-Washington Consensus" led by the information economists, whose work clearly shades into behavioral approaches.
4. 

   Daniel Taghioff

   August 29, 2008 at 04:34

   Actually the disconnect (between behavior and emergent economic effects - let them eat cake) in Harford's analysis seems linked to how the concept of "information" is based on assumptions that systematically alienate how human knowledge is implicated in social relationships and how it is shaped by human agents. There are no "knowers" or "representers" or "relationships" of a social kind in information-based theories, since the idea of "informtion" was developed to model communication between machines. I wrote a conference paper on this that can be found here: www.media-anthropology.net/taghioff_finding_subject.pdf Perhaps this explains why Harford is comfortable with "information" but not with "behavior" as an explanans for economic dynamics. After all "information" is far more predictable in principle than people are.
5. 

   Derek Tunnicliffe

   September 1, 2008 at 17:28

   Picking up on Pete Lunn's reference to the Sebastian Kube et al paper, which shows a relationship between fairness and performance. Behavioural scientists and pay-and-rewards professionals have long been aware of the necessity for perceived fairness in pay systems, whether performance-related or not. If a pay scheme is perceived to be fair, then it will be accepted and, if performance-related, should (other things being equal) affect performance. To me, this is rational behaviour, Pete. However, as Pete notes, most pay-for-performance schemes work best with simpler tasks, where fairness can more easily be perceived. The greater the complexity (eg in managerial or directorship roles), the more the job-holder relies on other people to act on her/his performance - and, thus, the more difficult it is for the job-holder and her/his peers to adjudge fairness. Again, rational to me. Hence the move to other means of pursuing peformance improvement - not always rational!
6. 

   David Heigham

   September 3, 2008 at 18:12

   It is hard for Tim Harford to write a dull page. Pete Lunn matches him. But they miss the behavioural economics revolution. Pete Lunn does almost touch on it, but is way off when he says: “… the answer is unlikely to come from mathematically convenient assumptions cooked up from the comfort of a senior common room armchair. It will come instead from observing and understanding people’s real economic behaviour, which is why behavioural economics has begun to revolutionise our subject.” In the 18th Century Adam Smith went and looked at how people made pins. The result was the classic account of the advantages of the division of labour. Ever since then, economics has been based upon observing and understanding people’s real economic behaviour. For the last century or so, economics has also emphasised a species of mathematics which can be summarised as finding the simplest model that can explain that behaviour. Simple models require “convenient” assumptions. Behavioural economists behave like other economists in both these ways. Pete Lunn looks, but does not see the real change. The radical novelty in behavioural economics is that its practitioners go out and generate new data to test their propositions. Main stream economists (like most astronomers) have been accustomed to looking to see if their ideas are compatible with existing data. They have rarely set out to generate new information in an attempt to falsify their hypotheses. The behavioural economists not only generate new data; they do it through experiments which can be replicated. Their conclusions tend to be demonstrated to a more credible standard than the mountains of traditional economics papers which induce a model to explain data, but do not generate new information to test that model. Good young economists, whether or not they classify themselves as “behavioural”, are responding to the higher standard by thinking and writing increasingly in terms of testing, verifying or trying to falsify the models that they develop. The original techniques of behavioural economics were mostly taken from psychology; the one subject that may have even more testable but untested theories cluttering its discipline than economics does. However, in economics the techniques are proliferating. ‘Field experiments’ and other less organised trends are spreading amongst economists the realisation that “however beautiful your theory, if it does not agree with experiment it is wrong.” If you have always judged theory in the way most economists have - by its compatibility with the available data, its implications and its elegance - this realisation is deucedly uncomfortable. How do most economists react? How would you feel if, throughout a successful professional career, you had judged work by tough professional standards; and people came along saying you had missed something important? That is how most economists have reacted. First, “Nonsense!” Then, reluctance to think about it. Then, “It is not proper economics”. Then, “Maybe it has some relevance outside the real mainstream.” Economists wrestle very reluctantly with new ways of thinking about their field; just like most professionals and academics. Such reluctance is helped by carelessly identifying the study of people behaving in ways which do not fit the cartoon model of ‘economic man’ with behavioural economics. Economists have been analysing these interesting antics for at least 60 years. The first paper that I am aware of on the implications judging quality by price appeared half a century before behavioural economists found that wine was said to taste better if you thought it was expensive. Identifying behavioural economics with the application of economic analysis to unfamiliar fields is even more careless – Gary Becker got a Nobel prize for that before behavioural economics really got going.. The importance of behavioural economics is not in what it studies, but in how it studies. It is pushing the whole discipline towards what Barbara Bergman calls ‘reality checks’ – going out and checking whether theory matches what is going on. It has been pushing now for a generation. Sometime in the next ten or fifteen years, the economics establishment will comment on the progress being made in empirically verifying our theory. The decade after that should see some radical improvement in the usefulness of economics.
7. 

   It started with Petty

   September 4, 2008 at 17:40

   This debate has raised many interesting questions but the argument appears confused. I’ll start with the opening paragraph. These are indeed exciting times to be an economist. The British housing market has seen purchase prices rise well above inflation for several years. Demand outstripped supply for a variety of reasons and access to relatively cheap and plentiful credit meant asking prices were able to be met. Additionally, the increasing value of houses meant people buying were buoyed by their increasing wealth. Now that the source of credit has been largely withdrawn, house prices have had to fall and there is now a gap between what sellers are asking and what buyers are willing to part with. Sellers are unwilling to take less than they need in order (presumably) to move to another property, and buyers are unwilling to buy a property when they know the value will almost certainly fall (the value of their wealth along with it). Everyone in this market is behaving not only rationally but selfishly also. Resources are not always allocated efficiently and economic theory does not claim they always are. What it states is that all resources are scarce (perhaps the most important point of basic economic theory) and will be allocated to a degree of efficiency depending on the conditions under which a market operates. The housing market in the UK is moving toward a point of greater efficiency (lower prices in this case). Incidentally, this efficiency has nothing to do with equitable distribution – look up Pareto efficiency to understand what is meant by this. “The prices of food and oil are yo-yoing on speculative strings”. Indeed they are. That is because when the price of something in a commodity market is expected to increase tomorrow, traders will buy today. If the price of something is expected decrease tomorrow, traders will sell today. When more of something is being bought than sold, price goes up and vice versa. The forces that drive these markets are based on rational, selfish behaviour. These are “text book” explanations and I would be interested to see what explanation behavioural economics offers for the two above examples. Classical economics has considered how people behave when faced with scarce resources for hundreds of years. I’m very glad that behavioural economics is adding to our enjoyment of studying such a fascinating and wide-ranging subject, but how is it going to deliver “a revolutionary way of understanding the world”? The confusion alluded to in the opening sentence arrives because behavioural economics appears to be intrinsically linked with game theory – a very complex, lengthy and fascinating subject in itself, which challenges, supports but also differentiates from classical economic theory. Anybody claiming a “revolution” should do so only when she or he has studied game theory at length. I have heard nothing thus far which justifies the term.
8. 

   David Heigham

   September 4, 2008 at 21:40

   A comment on the comments appears in order Anthony St John. As he reports his own behaviour, economics of any sort is unlikely to be able to analyse it usefully. However, the willingness of many Italian and other rich people to accept high costs in order to conceal their wealth is worth study. Perhaps it is something that behavioural economics experimenters could shed light on. D. Jones I think "Nudge" points to governments using sweets and a swearbox to influence a small but important set of decisions that we define. More effective cigarette type taxes and more effective subsidies to swimming pools and other healthy exercise, for instance. It is mostly about using information from experiments to improve the effectiveness and efficiency of things we already dabble in. David Taghioff "So really, are emergent effects in the economy a world apart from what people at a smaller scale do, or is it as Lunn claims, that these emergent effects, whilst not easily predicted from smaller-scale interactions, are nonetheless profoundly influenced by their dynamics. I think the latter corresponds much more with findings in the rest of the social sciences, and that there is more evidence for a revolution than not." On the nail, except that orthodox economists influenced by game theory are increasingly proud of models which bridge the gap between the individual and the collective. There is a revolution here, but it is not from behavioural economics alone. The way economists use the term "information" is subject to subtle confusion. Classically, we thought of the assumption of "complete information" that was required for fully efficient markets. This notion developed through game theory into hypothetical models where "knowers", "representers" and "relationships" figure and are important. At the same time, economists started incorporating concepts from information theory into some of these (and a good many other ) models. The fact tha the two notions of "information" are not the same is usually skimmed over. Derek Tunnicliffe, Behavioural economics experiments really are making an impact on economists simplistic perceptions of pay and rewards. However, I am happy that actual pay systems are in more perceptive professional hands (at least sometimes). It started with Petty Rational selfish behaviour has a hard time in explaining the 2000s bubble in British house prices when a lot of us remember the 1980s bubble in the same market. It does not even explain the recent peak in oil prices to way above the cost of oil substitutes. One of my disappointments with behavioral economics is that it has done no more than describe this sort of behaviour in individual detail. Showing that individual people behave like the mass does not begin to explain why we behave so daftly. There is confusion with game theory because behavioural economics experiments are often directed at testing whether game theory ideas reflect reality; but the two are different. Game theory coupled with Nash equilibria is the preceding revolution in how economics is done. Like the current one of verfying our theories against reality, that earlier revolution took about 40 years to really change the discipline.
9. 

   Tracy W

   September 5, 2008 at 15:28

   I found Pete Lunn's claims about behavioural economics being ignored by the mainstream surprising. Nearly ten years ago now during my economics degree we studied some of the results of behavioural economics during our microeconomic course - indeed our professor introduced a standard theory of how people make decisions under conditions of uncertainty and then in the very same lecture performed some simple experiments on the class to show that our behaviour departed from those norms. This was a faster piece of empiricial evidence than any of the hard sciences I'd taken at uni, where you had to wait until after lunch for the lab.
10. 

    Bo

    September 5, 2008 at 16:00

    I think Behavioral Economics sounds as if it's being touted as a new thing. The third dimension to Neo-Classical Economics, was put forth many years ago as 'Political Economics'. It seems like the same thing. As consumers social and political trends change so does the whole game, (Theories of Collective Action). Of course it makes sense to re-market the term to make it sound less Marxist, but the concept has been around for a long time.
11. 

    Matthew Durand

    September 5, 2008 at 18:45

    Pete's characterization of the supposedly orthodox interpretation of the 'ultimatum game' is misinformed. The way he describes it, economists will rationalize the results of the model - the minimum offer equlibrium - as acceptable and fitting with their theories. However, if you've taken a course in even intermediate game theory, then you'd know that this is only the result for the unrepeated version of the game, in which players have no expectations about the outcomes of future iterations of the game. When the game is repeated the result is quite different, as the receiving player can punish previous bad offers in later iterations (ie: not cooperating). This gives the choosing player the incentive to make fair offers even from the 'start' of the game. This is the same reasoning which allows for escape from the dominant strategy equilibrium of the prisoner's dilemma game (apologies for the jargon). What I'm saying here is that the game theoretic assumptions are capable of accomodating the behavioral economics result, at least in this case. Pete doesn't even acknowledge this, though he must surely be aware of it - it's discussed in most texts specifically concerned with game theory and also in most micro texts under the heading of 'repeated games'. I believe that my objection is consistent with Tim's point, in that what Pete describes as economists attitudes toward this simple abstract game, their orthodox confidence, is simply not there. The thing is merely a thought experiment and when the assumptions change so do the results - and I'm quite sure the majority of economists are aware of this simple truth. I don't think it's unfair to say that most academic economists are familiar with methodological questions and would not resort to the naive assumptions that Pete ascribes to them.
12. 

    Jon

    September 7, 2008 at 06:28

    What behavioral economics is well-prepared to do is to attempt explanations for why some incentives are ephemeral stimulants and others are long-lasting, why an exchange is fair in one context and not another. Traditional economics has had the enduring (though not necessary) habit of assuming away a great deal of psychology and contextual matter in order to focus on those parts of human character that once struck economists as being the 'more economic'. Economic rationality is a perfectly valid theoretical device, but the boundary between economic man and non-economic man was always arbitrary, and it is important to revise the boundaries now and then -- not to trash theory, but to find its limits and expand its capabilities. The more fundamental issue that went unmentioned in the article is the one about the grounding of economic theory itself. It is classic nature versus nurture stuff. Is economics a conventional field of study, which works from the researcher's axioms and lemmas and expresses itself primarily through mathematics, or is economics a reductionist, natural field of study, grounded in biology and tested through experiment. This is the real heart of the debate.
13. 

    Petteri Laine

    September 7, 2008 at 11:50

    Yo Pete and Tim, Interesting topic - but unfortunatelly colonnial heritage debate. It would be more interesting to read a debate that wouldn't be so F¤)%/:n nitty griddy - you said, I said. Respect yelds results!
14. 

    Stephen Ellis

    September 8, 2008 at 03:44

    Jon is on the right track, but he isn't quite right. Economics has traditionally assumed away "a great deal of psychology and contextual matter." Behavioral economics adds back a good deal of psychology but it still ignores context. (That's part of Tim's complaint in his second letter.) Unfortunately, behavioral economics doesn't (yet) "attempt explanations for why some incentives are ephemeral stimulants and others are long-lasting, why an exchange is fair in one context and not another." For some speculation on this very topic, check out the 2007 paper I have with Grant Hayden in the University of Kansas Law Review ("Law and Economics After Behavioral Economics" [55:3 pp. 629-75])
15. 

    Petteri Laine

    September 8, 2008 at 11:37

    Here's is some elaboration to my previous critique: http://apps.facebook.com/crazyfunpix/?previous_view=FB_PROFILE&media_token=WPr7ywBGBISTDxu5nUOwrc8aoPlc3tUf3dIaBeCO3PpEq3Hk2esf0Y0T92c17AtShL8w8J9XDjz2vCH58Fz2X1j38mGtT7hS-LQMmo8GFhKKTZjAFdekShttemXFo-cYPbJmf806DWK0Co2kdy3-9A&override_domain=1&detail=1&view=601208893 In general, I think your argumentation is swell!
16. 

    zorcas worble

    September 8, 2008 at 23:07

    The to-do over behavioural economics suggests that bloggers are unaware that 100 years or so ago, there was no plain 'economics," instead, "political economy." Then, for murky reasons, PE was divided into Political Science and Economics, depriving the reading and thinking public of the insights to be had when humans and their organizations were integrated into the financial equation. Bernard Mandeville and Herbert Spencer, to mention but two,integrated the analysis of men and money very well, though with a strength of intellect and breadth of experience not so commonplace these days among narrow specialists.
17. 

    jonknee

    September 9, 2008 at 03:49

    I don't know what all the fuse is about. I refer you guys to "Human Action: A Treatise on Economics" by Von Mises. The Austrain school of economics taught that human behavior is the basis of economic study and not mathematics. There's nothing new here.
18. 

    Daniel Taghioff

    September 14, 2008 at 05:28

    @David Heigham "The way economists use the term “information” is subject to subtle confusion. Classically, we thought of the assumption of “complete information” that was required for fully efficient markets. This notion developed through game theory into hypothetical models where “knowers”, “representers” and “relationships” figure and are important. At the same time, economists started incorporating concepts from information theory into some of these (and a good many other ) models. The fact tha the two notions of “information” are not the same is usually skimmed over." That is a very interesting point for me, thank you. Do you have any references to papers that explore this elission, or that disentangle the different senses of how "information" is used by economists?
19. 

    MaxDrei

    September 14, 2008 at 12:32

    For this non-economist, an enjoyable piece in this month's magazine, but I surmise that it would have been less enjoyable for Edward O. Wilson, the author of the influential "Consilience". Seems to me that both Lunn and Harford were bent on pushing their respective books and, but for that, could have agreed, each that the other's view is more or less right. Next, I want to write something on the piece "Harvard Loses its Lustre". Where do I go for that, please?
20. 

    Anthony St. John

    September 16, 2008 at 17:11

    16 September 2008 The Logical Consequence of the 2008 Summer Olympics in Beijing, China No one can deny that the 2008 Summer Olympics symbolized a crucial dividing point for the world at large—more so than the South Ossetia tragedy—and was the priming set off to sanction the political, economic and social revolution that will horror-strike the worn-out status quo of Judeo-Christian “Democratic” Capitalism with us for more than some centuries. This diffusion will be accomplished “without firing a shot” as the Chinese forward motion brings to reality, drop by drop, with abundant doses of Capitalism’s very own medicine, the nightmare of John Kenneth Galbraith: the success of Capitalism is its demise! We must all bow to the ingenuity of the Chinese people and their unwearied and clever leaders. I cite one, Sun Tzu: “Therefore, the skilful leader subdues the enemy’s troops without any fighting; he captures their cities without laying siege to them; he overthrows their kingdom without lengthily operations in the field.” In other words, as empire-watcher Rudyard Kipling was once keen to make note of, centuries-old governmental conglomerates do not go out with a big bang, they depart with a whimper. The Chinese are well aware that the West is not consuming to possess; it is possessed to consume! And the Chinese ersatz Capitalism is at the ready to furnish all the junk that is demanded of them. When Hong Kong law-making officials visited the Chinese mainland to gripe about the pollution drifting from southern China to the ex-British possession, Chinese bureaucrats told them flat out: “Stop ordering all this useless crap!” With true Milton Friedmanish panache, post-Olympic fervour was heralded with a 10% upsurge in wholesale prices for the People’s Republic of China’s items for consumption. One world, one dream! Everyone is doing it, n’est pas? “If you give them enough rope, they will hang themselves,” speculated Karl Marx. And that is exactly what they are doing! Western political and economic hegemony is on the wane. The principal purveyors of political, economic, cultural and social policy extending heavy-handed rule over foreign countries—Canada, France, Germany, Italy, Japan, Spain, The Netherlands, The DisUnited Kingdom, and their kingpin, The DisUnited States of America—now find themselves challenged as never before notwithstanding their often turbulent histories. Having lost any perception of authority and/or authenticity, these Concocters of Consent, their consent!, these Rulers of the Truth, their truth!, these Proponents of Judeo-Christian “Democratic” Capitalism, their capitalism!, now have their backs against the wall. Vicious societal agitation against them, duplicitous oligarchic socialists (olisocists), is rampant throughout the world. Uncertainty is a certainty. Foreboding is the order of the day. It is as if a grand conflict, a universal war (World War III/Universe War I) is looming in the inner selves of people—still again! Is an Armageddon between The Haves and The Have-Nots in the offing? A super clash, to outdo all the others, set on its deleterious course centuries ago? Who is going to redeem Western Culture? Who is going to pull The Old World out of its nosedive? Who is going to call the tune for The New Europe? Who is going to skipper us through our Sea of Hypocrisy? John Sidney McCain III? Barack Obama? A paedophilic Pope? For every action there is a reaction. Have you thought about the atrocities committed against indigenous Canadian children? Hundreds of thousands of aborigines have! Have you thought about the criminal colonization of vast parts of Africa by the French? Hundreds of millions of Africans have! Have you thought about the millions massacred in the Soviet Union by the Germans and Italians? Millions of Soviet families have! Have you thought about the disgusting occupation of Libya by the Italians? Colonel Gheddafi has! Have you thought about the rape of Nanjing by the Japanese? The Chinese have! Have you thought about the millions of Hispanic natives slaughtered by the Spanish? The Venezuelans and the Colombians have! Have you thought about the Indonesian killings perpetrated by the Dutch? The Indonesians have! Have you thought about the worldwide imperialistic control actuated by the British? At least the Indians have! Have you thought about the bombings, which have exterminated millions all over the world, by the Northamericans? The Europeans, the Southamericans, the Asians, those in the Middle East have! Oh, my dear, wretched Western Civilization, how could you have been so haywire for so many centuries? There is not a crevice in any part of this world into which the blood spilt from your self-righteous violence has not seeped. On each and every one of the continents millions upon innumerable millions close their hearts to your debaucheries, and they crawl into themselves in disgust and foreboding endeavouring to find, in desperation, a reason to believe that this Life has a semblance of Beauty and Promise and Goodwill that has never been allocated to them suffering, starving, solicitous, saddled, sagging, sapped, scared, schizoid, shackled, shamed, shattered, skewered, slighted, soused, sordid, spooked, squashed, stigmatised, strapped, submerged, subordinated, supplanted, systematized…. Will you please tell me who do you think you are hoodwinking rummaging around so? The whole of humanity? A very big part of it? The largest part of it you can get your mitts on? Oh, despicable, pitiable Western Empire, Land of the Setting Sun, Caldron simmering in hungering desperation to regain the smacks of the Past, You seek to lunge ahead on the energy of Your logic and hopes not yet lionized. You call upon Your histories to lend strength to Your fantasies. You coil up hard on Your proud self wrinkled and weather-beaten. You struggle to nurture new flowers on the dry rot of Your haunted memories. Your youth, sniffed upon by strapped canine squads, rape-hate in Your stadiums striped with electronic rejoinders to press softly-pliant, gaily-tinged plastic buttons. Your elderly curl their ways to bankrupt health ministries where physicians fool with forms and fill in football pools. Your neighbours to the East—brazen, sordid—yank towards You roughly extracting for exacting theirs craved for. You, Western Civilization, sit pickled—soused in the juices of Your scummy heretofore. Your dabblers in politics set flags unfurled and their powers shame—shame!—this Our world. Oh! Miserable Western Civilization, Your Past just does not want to pass, does it? Authored by Anthony St. John Casella Postale 38 50041 CALENZANO FI Italia 11 September 2008 * * *
21. 

    Barley

    September 16, 2008 at 23:04

    An interesting debate, and made more sharp, and vital, by the events of the last few days. The demise of Lehmans and potentially other financial firms is a death foretold by Robert Shiller (of Irrational Exuberance fame). Being outside the discipline, but having read Thaler for many years - I declare my hand. But here is Shiller's cross-over comments which he deems crucial in the current financial distress (from The Subprime Solution, Shiller, p119): "There has been an important revolution [in economics] with the development, in the past few decades, of the field of behavioral economics, including behavioral finance. This discipline incorporates insights gained in other social sciences. For that reason, many financial theorists of the old school have resisted the revolution, for they fear that it renders their mathematical models useless. On the contrary - it opens up their models to far richer and more successful applications. Denying the importance of psychology and other social sciences for financial theory would be analogous to physicists denying the importance of friction in the application of Newtonian mechanics. If one is permitted to apply Newtonian mechanics only in realms where friction can be completely disregarded, then one is confining its application largely to astronomy. Once we add a theory of friction, Newtonian mechanics can begin to be applied to earthly problems as well, and it becomes an essential tool for engineers who are desiging devices to improve our daily lives. We have a comparable opportunity today with the advent of behavioural economics..." It is a strong argument to stop resistance to the monopoly of the Econs over the Humans, to use Thaler's distinction. I like Tim Harford's and Stephen Levitt's work - it is refreshing and clear-eyed. But they have to widen their vista surely and take on Thaler et als insights into the dumb short-cuts we all make on complicated issues. And, actually, how different is the rational choice theory on teenage sex etc espoused by Harford, Levitt and so on from the heuristics proposed by Thaler, Sunstein et al? Sept 08
22. 

    Anthony St. John

    September 17, 2008 at 21:21

    17 September 2008 Southamerican Generals and Uniforms and Sunglasses and Tailored Italian Suits: Trying to Make Squares out of Circles During the intoxicatedly, capitalistically-maverick democratic years (1974-1982) when some Venezuelans binged on the lucre culled from the exorbitantly high prices of their liquid gold, I curried favor in an affinity with one of Accion Democratica’s most highly-puffed ministers and overseer of Venezuela’s Ministerio del Ambiente y de los Recursos Naturales Renovables. My job for him was to translate, to correct old speeches penned in English, and to help write new ones. Just as two other ministers I knew before him had done, he too slipped me, under the table, freshly-printed bolivares—paper without much value…any longer. Venezuela was in the pink of graft and corruption and Caracas was their capital. A time when all—except Venezuela’s poor—were drunk on spending and buying. All you needed was a telephone, a telex, and a rented room—your mini “office.” People were importing and exporting unrestrainably. Whisky, cars, electronic equipment, clothes—even two snowplows! If you named it, you could buy it. Venezuelans were so rich, they qualified to take out billion dollar loans in the United States and Europe which they still have not been able to pay back. The feverishness was so overstated, my friend Fernando, a government official, came running into my office one morning at the Ministerio de Informacion y Turismo brandishing a copy of El Nacional with the new, higher posting of a barrel of Venezuelan petroleum, and blurted out—his eyes flooded with tears—for all, including me, within ten kilometres, this Spanish squawk: “We’re going to fuck you gringos for good!” Fernando could not forgive and forget—as millions of his compatriots—the decades of exploitation suffered under the thumb of foreign oil companies. His hate was such that when I asked him, to calm him down, how he was going to go about “fucking” the gringos, he retorted: “We don’t know yet, but you can be sure we’ll do it, gringo!” Little did we know, at that time, a Hollywoodish actor was waiting in the wings of the White House soon to play his most important part, soon to bring down the curtain on the Venezuelan bacchanalia of the late 1970s and early 1980s. Our leading man, the minister, came from a very well-to-do Venezuelan family, and was a Central Stupidity Agency’s dream: He had been brainwashed at a United States’ university, wanted all Venezuelans to vote their brains out, and was as Roman Catholic (Opus Dei?) as the United States Navy. Before he set out for Stanford University to study for a Master of Science in hydraulic engineering, he had frequented posh private schools run by the Jesuits in Caracas. (Stendhal: “Herein lies the crowning achievement of a Jesuitical education; the formation of a habit of paying no attention to those things which are clearer than daylight.”) He also had received training at the United States Bureau of Reclamation and the University of Manchester in England. He was part of that Venezuelan upper crust very far removed from the heartbreaking poverty that most Venezuelans were beleaguered with. As we shall see, he had a grandiose blueprint to save his people from their despondency. His curriculum vitae, eight jam-packed pages, includes eight awards and decorations; fifteen professional and teaching experiences; ten ad honorem titles; membership in five professioinal societies; attendance at twelve international meetings; the publication of twenty seven scientific papers; and, three books dealing with water resources in his Venezuela. All his life had to do with hydraulic engineering and all things connected with it. His C.V. defines him so: An in toto hydraulic engineer. How he got to be minister, is anyone’s guess. In the C.V. there is not one reference to his party, Accion Democratica! So far, so good. Taking into account some of the speeches he had me compose for him, we get more than an inkling into his thinking. Our political plumber wants to flood Venezuela with a new social order based on the earnings his country derives from petroleum, iron and diamonds—those riches his ministry “watches over and protects” for the Venezuelan people! He has a mission and he is glowing with determination. He wants to make radical transubstantiations as they say at Mass time. He wants to lead his people to a new way of life. (Presidential timber? You bet!) The minister, the zealot, in one of his speeches not seventeen pages long, guides me to make him gurgle the nomenclature of the Nazi Party: decrees, regulations, measures, frameworks, plans, policies, guidelines, controls, strategies, techniques, schemes, priorities, plans of action, massive approaches, surveillances, applications of sanctions, zonal directorships, training efforts, environmental wardenships, ad nauseam. He wants to regulate all thirteen million of his people who in 1977 have an annual per capita income of $1,346—the highest in Latinamerica! He yearns for a new economic and social order for his poor people “without ignoring our cherished principles of democracy.” Nothing could be sweeter than that to the ears of Langley, Virginia’s government officials—themselves keen on progress and homogenisation, always keeping in mind Jeffersonian “pursuits of happiness,” through the vagrancies of presidings over and systematisations. In effect, the minister’s compulsion is to make of his nation a sort of “universal machine” (Alan Turing, Cambridge fellow) that can perform the function of any other machine provided the right program is fed it. His people are the instruments that will comprise his gigantic social plumbing system. When all is connected correctly, all will flush in harmony. There is never mention of what Venezuelans need most: hospitals, schools, adequate transportation facilities, et cetera. (Ugh! Thank goodness Ronald Reagan came along?) I never spoke to Carlos Andrés Pérez, but I came to within speaking distance of him six or seven times at governmental functions or in Palacio Miraflores which I could access via my M.I.T. ID card. One time our eyes locked and I held myself from blabbing out this to him: “I’m one of those to whom your staff sends your speeches for correction before they are sent to the printer and the telex machines!” C.A.P.’s irksomeness was not hydraulic engineering, but a good dose of personal omnipotence and grandeur probably planted in him during his years of exile and then torture generated on account of his muscle-bound political convictions. He might have survived—carried his charade—even farther had he had the good sense to bring, unassumingly, his cause to the Venezuelan people themselves instead of resorting, self-importantly, to pan-Central and –Southamerican political alliances; instead of referring to the political ideals of such illustrious statesmen as Roosevelt, Churchill and Kennedy who were considered gringos by his people; and, had he stayed far away from the United Nations General Assembly where in a brilliant speech, “A New Economic Order is Essential for World Peace,” delivered 16 November 1976, he zeroed in so well on what was really happening in Western Hemispheric Machiavellianism, you could just sense his demise was in the making. In New York that day, C.A.P. let fly and accused the United Nations of being manipulated or governed by those industrialized nations which retain the power of decision; by saying that international hypocrisy has a name: Aid; by reminding all in the hall that for centuries Venezuela had been enraptured by powerful nations which gave Venezuelans many long words along with many trinkets; and, by prognosticating that the United Nations was doomed to failure if it continued to be used only when the great powers deemed it appropriate. In those days, there were two “loose cannons” on the Northamerican-Southamerican political battlefield: Jimmy Carter (“President Pérez has become one of my personal, best friends.”) and Carlos Andrés Pérez. Jimmy was spineless; C.A.P. was cruel. My lawyer friend Ramon, son of one of C.A.P.’s arch-rivals for the presidency of Venezuela, told me several times: “C.A.P. is a megalomaniac, a thief, and a murderer. He also sniffs cocaine!” Both Carter and Pérez—the latter gave lip service to the former when they dawdled about what to think about the Organization of Petroleum Exporting Countries—would be shot down by that Californian cowboy intent on beating down those high petroleum prices. C.A.P. blew it. He cannot be defended. Yet it must be said that on what was the Venezuelan political scene at the time, no one could have expected him to be “red, white and blue” perfect. C.A.P. wanted to present his cause to the international community. He felt frustrated politically in Venezuela. And with the ideas he had, he knew he was fighting against the oligarchic grain of the Washington-Caracas connection and he could not count on help from his neighbors to the north—especially two-faced peanut farmers. The pressure groups in Venezuela, always conniving with the United States’ Embassy, did all they could to put up with C.A.P. Washington “biggies,” such as Henry Kissinger, David Rockefeller and Arthur Schlesinger, Jr, came to Caracas to give “Invitation Only” conferences and to solidify their economic bases. All hoped secretly that C.A.P. would turn out to be a “Vote and Go to Church” supporter of democracy, and not the leftist kook that he was. What did they care about what was going on in Caracas’s Petare jail? What they did care about loan money—destined for Venezuela’s destitute population—finding its way to Miami banks and luxurious waterfront condominiums? C.A.P. was a rascal, for sure; but, he touched the nerves of those profiting preposterously from Venezuela’s natural resources. It would be my friend’s father, confidente of Maragaret Thatcher, David Rockefeller, the obnoxious Henry Kissinger, Harvard University political science professors, et alia, who—as Ministro de Justicia later on—would level the final, fatal blow against C.A.P., the Venezuelan Fidel Castro. Washington, D.C. 28 June 1977. EXCHANGE OF TOASTS BY PRESIDENTS CARTER AND PEREZ AT THE WHITE HOUSE STATE DINNER… Jimmy, our bon vivant, slimes all over the White House rug. There are (LAUGHTER)’s, (APPLAUSE)’s and (LAUGHTER AND APPLAUSE)’s dotted all over my copy of his toast script. Jimmy is a cocktail party stand-up cornball. (“I thought about the cartoon I saw, I think in the Milwaukee paper, which showed me talking to Jody Powell, my press secretary, Mr President (“Carlos”), I was saying: ‘Jody, I don’t give a damn about Idi Amin; where is Rosalynn?’” (LAUGHTER AND APPLAUSE). Further: “We have a chance to learn about one another…We share a great deal…Venezuela’s representative (sic!) is a man who epitomizes the finest aspects of our country’s hopes and dreams and aspirations and ideals…” Ad nauseam… Then this seemingly impossible pronouncement: “For nineteen years now, there has been an absolute, total and pure democracy in Venezuela.” Quod erat demonstrandum: “Everyone is privileged to vote and is urged to vote. The decisions of the people on election day are binding and without question.” Only a nincompoop or a false friend could be so soulless. The President of the United States of America an idiot? Impossible! A liar? Gulp! Jimmy has categorically passed his adjudication upon the state of affairs in Venezuela. Nothing could be further from his “truth.” Now comes C.A.P.’s turn to clink White House glassware. Only one (APPLAUSE)! No (LAUGHTER)’s; no (LAUGHTER AND APPLAUSE)’s. Listen to C.A.P.: “…the United States can no longer separate the traditional issues of war and peace from the global issues of justice, equality, and human rights…But we also believe that the Latinamerican dictatorships have a reason for their existence because of the economic instability generated by the unjust economic order in the world…You, Mr. President (“Jimmy”), with real vision, have begun to speak another language. Without expressly saying it, you have come to realize that selfishness has presided until now over the tepid conduct of the great nations…The technological civilization which exists today, could well be called, unfortunately, the civilization of waste…Exploitation cannot continue in its present mode giving more and more to the industrialized countries thus maintaining irritating levels of waste and consumption…At this friendly dinner with so many kind people in attendance, I have referred to fundamental aspects that commit nations and governments to the creation of a new world order, just and equitable…We want a democracy which will serve high ethical standards and humanistic principles. With that trust, Mr President, Mrs Carter, I propose a toast to the success of just and noble ideals, to the great nation of the United States, and to democracy in the Western Hemisphere.” Where did C.A.P. get those ideas? From Marx? From Engels? From a freelance cocaine-sniffing White House speechwriter? Did he actually believe that President Carter—up for re-election one day—would pander to the citizens of the United States to suffer higher gasoline prices to oblige Carlos Andrés Pérez’s ideal of a new economic order that should impose a code “that regulates the actions of transnational companies which have weakened and usurped the national sovereignty of the developing countries and have deeply eroded morals by a systematic use of bribery?” Listen to what Jimmy Carter says to C.A.P. after the Venezuelan tough guy has turned the stomachs of all in the White House dining room: “PRESIDENT CARTER: Thank you very much.” My friend Nicola, son of a Tuscan clothes designer, was in Caracas in late 1996 and he told me he never left the Caracas Hilton during his three-day stay for fear of the Caraquenos. In the 29 October 1994 issue of The Economist: “Caracas’s 4m people have generated 200 killings a month this year…Youths killed for designer sports shoes…Around 60% of Caracas’s population lives in the barrios (slums)…Venezuela is sitting on a “social bomb”…Real income has been falling for 17 years…The bloody riots of 1989 claimed 2,000 dead in the crackdown…” When I left Caracas in 1983, about seven bolivares bought a dollar. The Union Bank of Switzerland’s Global Economic Outlook for the third quarter (Q3) 1997 predicts a 1998 dollar at 690 bolivares. The perfect ambience for a military dictatorship—in the most expensive Italian business suits, naturally! * * * Written by: Anthony St. John Casella Postale 38 50041 CALENZANO FI Italia 1 October 1997
23. 

    Jon

    September 20, 2008 at 05:40

    Stephen Ellis -- Of course you're right. Behavioral economics cannot lay any greater claim to contextual sensitivity than traditional economics, and it probably lacks the means to do so. Zorcas' reminder about the place of political economy in the history of economic (/political) is very appropriate to the debate. Political economy described a world in which individuals making economic decisions based on self-interest interact dynamically in a political environment that demands attention to collective interests and their power. Both traditional and behavioral economics avoid politics and power, which are messy, and focus theory on some description of the individual's most-basic motives for decision [mainstream evolutionary theories describe the environment as a mere situation, or in game-theoretic terms, as that-which-determines-the-payoffs. The idea that the players are aligned in various ways to the structure of the environment, or to contending structures, is hardly evident, except in the rather limited case where the game has a sub-game where the players play to determine which game they play.]. But this only begs for a theory and typology of environmental effects (esp. in the case of behavioral theories, in which the irrationality of the decision-maker demands that the stimulus of their behavior be taken into account). Of course, there are many economists who have tried to answer the question begged, but mathematics have proved to be a powerful distraction, and not only a powerful aid, in the field, permitting the mainstream to make great leaps of explanatory power in some data-rich confines wherein powerful incentives keep people acting "economically", most of the time, while taking great leaps backward in practical wisdom (e.g. Sachs and the former Soviet Union; the mortgage meltdown).
24. 

    NAU

    September 20, 2008 at 14:44

    Some companies like to spell out a word, so you call 'em up and remember their name. But they use too many letters, you k'now, 'cause they can't edit it. "Give us call at 1-800-I-LOVE-BRAND-NEW-CARPET." I like to press all the buttons. Spell that fucker out to the bitter end. And if the operator's still there, God bless her.
25. 

    Anthony St. John

    September 20, 2008 at 19:55

    20 September 2008 I Know a Man… Perhaps no other country in the world is so cramful with works of art as Italia is. The people of Italia refer to their Past to live in the Present. The nation boasts beauty in design, fashion, and architecture. Its culinary prowess is renown; its machinery goes to all parts of the world; and, its manipulation of matter gives joy to millions who wear its jewelry, drink from its glassworks, or touch its wood and marble creations. When one ties the knot of his silk cravat made in Como, wraps around her wool scarf manufactured in Prato, fastens the laces of his fine leather shoes made in Varese, or strokes her refined linen from Lucca, the MADE IN ITALY label is certain to bring a sense of glee and contentment to both the sexes. Italia is a hands-on economy. Its modus operandi is meat and potatoes capitalism. Invoices are still hand-written. Candles are used to make wax seals for the post office. Remember those rubber stamps? They are now being used. OLIVETTI’s computer division went out of business. Italia is electronic only when it has to be. Italians want to create beautiful articles that fetch beautiful prices. Luxurious items. Not $50 electronic watches, but $50,000 ones that can be sold in one’s lifetime for $100,000. Italian publishers do not print essays for literary criticism or business management journals; they translate into Italian proven, foreign best-sellers—usually from the United States. Italians are conservative and cautious in business. They are out to serve the rich. Italian businessmen do not want a low price for the masses; rather, they want a high price for the elite. Italians are penurious. Even with their language. Italian has remained almost the same for centuries. English has as much as five times the amount of vocabulary entries in dictionaries than Italian does. Is it possible that Italians gesture so much because their language lacks the words needed for the expression of it? Italia is, therefore, anti-scientific; that is to say “not with it.” Italia is low-flamed on a backburner in the very hot kitchen of Progress. It is an ingredient in the zuppa internazionale that provides flavor far more than it replenishes the hungry with vitamins and proteins. Italia is anti-scientific by its very nature. It is a place where works of artistic and historical value—from the Past—are exhibited and sold to the Present. The Future enters little. Italia is where what one has should be preserved as long as possible. Italia is a huge museum which blusters about how it was. It maintains itself showing the Past to the Present, and this effort has until now reaped tremendous economic advantage. Italia is anti-scientific for another reason: its production, 90% stemming from small family businesses, is for the most part quasi-art— craftsmanship. It is not the mass production producer’s breeding ground. Science and technology do not enter persistently into the minds of little Italian family businesses many of which are quick to see their children leave school as soon as possible to come to work alongside mom and dad. University attendance in Italia is the lowest in the European Union. Italians have an infinitely primitive sensitiveness regards design, coordination, and beauty in things they construct and manufacture. They are uncommonly gifted in fabricating objects by hand, and their consummate skill is recognized for its wonderful transformations. But, the Italians are no longer artists and have not been for a very long time; they are astute artistic businessmen and businesswomen. Italia’s capolavoro is no longer creation; it is changing form. (It is the Japanese who are making real the dreams of Leonardo da Vinci!) Work by artisans, skilled laborers who connect the Past with the Present, is good business. GUCCI, PUCCI, PRADA and FERRARI know this very well. The refined technique of linking the before to the now relies little on Science. The Pavarotti’s and Eco’s must record their C.D.’s and publish their books not in Milano, but in New York or London where the Present looks to the Future and the technological means to deal with the Future exist. Italia’s anti-Science stance, indolent in spirit, is carrying Italia further and further away from Progress. Italians are short-sighted when it comes to Science. They are traditionalists stooped in the what was. They are not complicated innovators or masterly creators. They are convinced that their Past cannot be surpassed or even equalled by any other nation. Let us change the word “anti-scientific” to “non-conformist” and look at Italia from another angle not thought of in terms of annual reports, political expediency, scientific discoveries, or accountants’ printouts. Let us observe, candidly, Italia a bit as a brake on what some gauge an outlandish behavior to make everyone correspond to current customs, rules, and styles—at worst, to uphold by authoritarian means the designs of a polity characterized by a monolithic unity. (Italia is up against the giants yet it is doing everything to be squashed!) The best and most skilled members of Multinat Statesmanship are clear about their obsessive drive to bring the world into correspondence—for the good, for the bad. Most of us who are alienated observers on the World Scene, not activists of homogeneity (giant businesses, worldly-thinking political entities, think tanks, Cyclopean financial establishments, et cetera)—more inclined to authentic, “outside the box,” immediate considerations than to chimerical ponderings—are running scared. We are distraught over starvation, overpopulation, destruction of the Earth, social injustice, crime, inflation, deflation, pollution, AIDS, broken marriages, and so on. The majority of us are at the receiving end. We simply want peace, quiet, and security in our political, social, and ordinary lives. And we know very well we do not have what we want. We understand that together we are doing something terribly wrong, yet we want to believe that the fault is not with us but with those establishings we are persuaded to opine have failed us. This fault-finding is a great mistake. It is the hatching grounds of the very heavy-handed appropriateness and supposititious democracy—both false impressions—that at once we admire for their compatibility, then despise for their unfairness. Non-conforming Italia serves, in part, as a symbol of that reaction against the tendency to bring into compliance anomalously. Delightful are the Italians. They stuff themselves with pasta and they sing with joy. They bow with reverence to the Pope’s God and the United States’ Ambassador, yet never go to church or know the name of Washington’s plenipotentiary. Italians are warm, unconstrained “free” agents. Against the Machine, the computer, electronics, rationality, scheduling, punctuality—against the dirty “conformity” word. They change reluctantly and very, very, very slowly. They are always getting in the way of Progress. They are extant with an enthralling appearance—one they can count on to cover up much for them. I know a man in Prato not far from where I live who is himself particularly interested in his “image” and how it is construed by others. And I would like to tell you about him. I became acquainted with this individual a little more than a year ago, and met him for the first time in his office. The more I came to know about him, the more I was struck with astonishment. And even as I begin to tell this story, I am tempted to pinch myself to convince myself that I am not dreaming! This true story is for me a very sad one indeed. The personage under discussion is a business consultant (commercialista), a very successful one at that—if one would judge by appearances only. He is always answering his cellphone. He drives an enormous white automobile equipped with electronic gadgetry. His office—with three secretaries—is outfitted with computers, the Internet, email, fax machines and other office accruements not normally found in Italian small business offices. The room adjacent to his office is crammed with books and economic magazines and journals mostly written in English. There is a book he himself wrote and published personally but which few people have purchased but which he has given hundreds of gifts of. He represents many companies, and he is often so busy in his office, he tells his secretaries to inform certain callers that he is out of town. He is twenty seven years old, uses Valium drops to calm his nerves, and is under doctor’s care for an ulcer. If you look at the left arm of his huge, expensive desk chair, you will see that it is worn through to the “bone” from his nervous hand rubbings. And he has told me, kidding of course, at least three times—Freudian-slipping all the way—the following: “If I don’t go crazy, I’ll go to jail!” (Kidding, of course.) Naturally, he dresses to kill. Elegance is all around him. If you enter his office, you will be immediately impressed with an inordinate amount of framed pieces of paper which—with the exception of one oil painting of his beautiful, childless wife—are dedications to him for some honor or other, for some diploma from one university or other, for some seminar or other he has attended. Although he never went to university in his own country, he has testaments to his scholarly savoir faire from many institutions that seem at first to be reputable and of a high quality. All of these certificates are, as might be expected, framed in very elegant, costly wooden borders which enclose them. You would be fixed deeply. Get ready to pinch yourself… Two of these diplomas are from a school in California where this character studied for less than two months. The diplomas state clearly that the man studied successfully and fulfilled regularly the requirements for not only a Master’s degree in Economics, but even a Doctor of Philosophy degree in Economics. Under these two encased parchments is another boxed declaration—a bit smaller—written on false United States’ Department of State stationery attesting to the facts that the two degrees are in buona fede, and signed not “by…for…” but forged for the United States’ Secretary of State his very self! Get ready to pinch yourself… If we lean towards another wall in the room, two more sheepskins will be seen. These are from a university in Switzerland, and they proclaim that this twenty-sevenish some one has studied for not only the Master of Business Administration, but still—hold on!—another Doctor of Philosophy in Economics! (To date: M.A.. Ph.D., M.B.A., Ph.D.!) Are you counting with me? Get ready to pinch yourself… One of the truths of the matter here is that this somebody, to qualify for his Swiss Ph.D., purchased a photocopied micro-filmed Ph.D. thesis—of a student recently “doctored” at a very famous United States’ business school—from a company in Ann Arbor, Michigan and well-known throughout the degree-getting world, had that thesis translated, and then submitted it in order to receive his Helvetian documents conferring honor and privilege. Get ready to pinch yourself… The most recent foray by this man hungry in his extravagant quest for recognition of his adroitness in business relations, has been the enrollment in an expensive “by post” course, with video cassettes and brilliantly-designed study guides, for yet another M.B.A. (M.A., Ph.D., M.B.A., Ph.D., M.B.A.!!!) granted by an English school which I was informed—by an Oxford professor—is perhaps the most respectable of its kind and which is much-touted throughout Europe. And with all of these pegs, our fox wants to return to a famous business university in his own country to—you guessed it!—TEACH! Get ready to pinch yourself… While he reads some English, especially economic terminology, he cannot—I swear!—communicate in English, and if you call to speak to him in English, one of his secretaries will tell you immediately he is out of town! Call again? Still out of town. Our heavily-degreed perpetual student ever on the march to nail another “HONOR” to his wall to impress his clients, has larceny at heart. If he is to be a purloiner, he is going to be the best of sharks. His determination and verve would move you. If it is everybody’s business to steal, he will do it better. He is an artist. He does what he does because he loves its labor for its own sake. (Cannot we, at least, admire him for this?) And the joy he affords his dear mother and father—as he sits next to them at Mass every Sunday morning in his parish’s almost empty church—cannot be computed in Earthly terms. If you ask him if he thinks what he is doing is “eccentric,” he will respond with a boyish grin—his baby face shining, his blue eyes twinkling: “Everybody’s doing it!” “If you give them (the capitalists) enough rope, they will hang themselves.” Karl Marx * * * Written by: Anthony St. John Casella Postale 38 50041 CALENZANO FI Italia 3 April 1997
26. 

    Kieran

    September 21, 2008 at 00:29

    The notion that humans are driven by rational self-interest need not contradict evidence of the altruisitc behaviour that we certaintly do see in society. There is an analogy in our biology, that of the selfish gene. As Darwin proposed, we are all agents of our genes, programmed from the start to replicate our genes as succesfully as possible through offspring. This does not mean we take to violence and selfishness in achieving this. For the most part we do not murder our neighbours, although they may be more sexually attractive. We do not have have as many children as is possible to have in one lifetime but rather limit this number to a low average. All in all society achieves an altruistic equilibrium in some sense, all this driven by selfish agents. (The Origins of Virtue - Matt Ridley) This notion is well explained by Game Theory, and its prisoner's dilemma, infinitely repeated 'games' and reasons for cooperation. The main point is that selfishness reigns, just as in traditional economic models. Nevertheless, it is in our rational self interest to cooperate with those around us. Any failure in traditional models to display the results of altruism seen in behavioural economics may be remedied by simply accounting for this fact. I don't foresee a revolution in the way we design economic models. Instead I see more inventive models that more comprehensively account for the payoffs that can be achieved through an agent's decision, bearing in mind our neighbours, how they perceive us and their willingness to deal with us again in the future.
27. 

    Wilma Smythe

    August 17, 2009 at 19:21

    Whether it is a promising topic to uncover human irrationality will depend on how well the principles of behavioural economics can be applied to real life issues beyond the laboratory. My take is that organisations need to start preparing to run their own experiments to test some of the principles of behavioural economics in their own specific environments and for real business purposes such as effective marketing and commmunications, financial planning or engineering. Testing these principles can be cost-effective, and unlike expensive research programmes, generate true insight to into human behaviour. For example think about running a marketing campaign that you suspect will succeed because it applies the principle of conformity (e.g: 4 out of 5 dentists recommend Colgate) and then pilot it... Applying these principles is not so new, and truly understanding why people make decisions can only make organisations stay ahead of the game to innovate and generate real business outcomes (e.g. iPhone).