Clinton's welfare reform
was the logical conclusion of Ronald Reagan's pernicious use of the
'welfare queen' myth in the 1980s.
(Amy B. Dean, fellow,
Century Foundation)
The most brilliant
propagandist technique will yield no success unless one fundamental
principle is borne in mind—it must confine itself to a few points
and repeat them over and over.
(Joseph Goebbels,
Propaganda Minister, Nazi Germany)
Nature and nurture
“Good wombs have born bad
sons,” as Shakespeare says in The Tempest. The nature versus
nurture debate goes back to at least the time of Plato. But perhaps
over the past fifteen or twenty years we have acquired a remarkable
pool of knowledge regarding human behavior in general, be it the
mapping of the human genome, neuroscience discoveries, behavioral
psychology or even the controversial field of genopolitics. As
individuals we are a complex mixture of genetic and environmental
factors. But who are we in assorted groups or various interests or
particular markets?
Behavioral economics it
seems to me has a great deal to offer, for example, the 2016
presidential election in the United States, which promises to be once
again less than enlightening, informative and honest.
Behavioral economics may
also have a lot to say about how we look at poverty in the U.S. and
throughout the world. Poverty in America has come out of the shadows,
for the moment at least, in part because of the issue of racism, a
central piece in understanding this country.
Where once behavioral
economics was an outlier in the field, it has now become an
influential element in understanding economic decision making. Even
the World Bank in its 2015 annual report devoted most of the document
to behavioral decision making. Ultimately, to be truly successful, it
has to influence policymakers to think in a different way. This,
however, is hardly ever easy; we humans are reluctant to let facts
get in the way of our strongly held beliefs. Call it nature vs
nurture.
My cortisol hormone just
doesn't feel right
Researchers are familiar
with what's called a hormone-receptor complex. There are steroid
hormones, which include cortisol, estrogen and testosterone.
Cortisol, for example, is released under stress, the proverbial
threat, but it can also occur by merely thinking about unpleasant
things. High levels of cortisol over long periods may cause such
illnesses as depression, heart disease and overall suppression of
the immune system.
Stress and prolonged complex
tasks can cause glucose levels in the region of the brain associated
with attention and planning to drop. Physical capabilities can
decrease but mental acuity can be affected as well.
Neurotransmitters, serotonin
and dopamine being two, are related to stress and motivation. Levels
of serotonin in an individual can affect the sense of well being and
confidence. These individual variations might cause different
reactions and possibly have a bearing on how we think about and react
to real world issues, such as violence, gay marriage and poverty.
The point of all this is
that we know a good deal more about genetic and environmental factors
when it comes to human behavior. This connects to behavioral
economists and how they have looked at the field of psychology and
the discoveries in neuroscience and have adapted and applied many of
the ideas to economics. Some have referred to behavioral economics as
the “hybrid offspring” of economics and psychology.
You've been framed
Frank Luntz, a political
operative in the early George W. Bush presidency, told the
administration that it was important to always refer to global
warming as “climate change.” This phrase, it was believed, was
less unsettling and more controllable, thus more easily ignored. The
fossil fuel industry could rest easily.
More than 30 years ago two
psychologists published a paper questioning the standard assumptions
regarding decision making, which ultimately had a significant impact
on traditional economic theory. See Prospect Theory: An Analysis ofDecision Under Risk.
The long standing belief had
been that the “Economic Man” was rational and by in large made
self-interested decisions. Intentionally or otherwise, this idea
benefited the status quo and provided a justification for what has
been thought to be the “inherent” wisdom of what is universally
referred to as the free-market, which is hardly “free” in any
sense of the word.
What was being suggested is
that the reality was actually more about how alternatives were framed
and not about their “relative value.” It became all too often a
zero-sum game. The framing was what strongly influenced the
decisions that people made.
Now, some thirty years
later, the word “framing” is familiar to a great many people, and
certainly it's part of the strategy for both marketeers and political
operatives among others. Of course, who would want to pay a “death”
tax. Outrageous! But what about a small percentage of the rich paying
a very moderate estate tax upon their departure from the living,
considering how they benefited from America's political and economic
system? Andrew Carnegie, one of the founding fathers of the Gilded
Age, did not believe that the children of the rich ought to be handed
a pot of gold. This was the United States and we of course did not
want to create a parasitic aristocracy. You've been framed.
Now, behavioral economists
are looking at how people actually act in making economic decisions,
which could influence the kinds of programs that might be developed,
not only in dealing with poverty but improving upon the choices we
all make—unlike what the traditional economic model claims we have
been doing all along. It has been to a large degree a lovely fairy
tale. Go ahead, treat yourself and pull out that credit card. You
deserve it.
The problem with those
people
It seems that so many of the
tired, moth-eaten cliches have never gone away and have a life of
their own: character flaw, lazy, lack of self-discipline and so forth
have been the constant refrain. In my part of the country you only
have to follow the state legislatures in Missouri and Kansas to know
that obliviousness and general obtuseness have been raised to the
level of sacred text.
It's not that an individual
might be deemed unambitious, but that an entire class of people or
group of individuals have been summarily dismissed as, well,
“flawed.”
What makes behavioral
economics so compelling is the many studies that have been undertaken
and the quantifiable data gathered. It refutes so many of the
standard, mythical economic beliefs beloved by the status quo—most
obviously the comfortable and the privileged.
In the now well studied
Dutch Hunger Winter of 1944, as the allies advanced across Europe,
the Nazis let the people of Holland starve. This affected the fetuses
of pregnant women, especially those fetuses in the 2nd and
3rd trimesters. The fetuses took the cue from their
mother's low nutrient intake, but even when the war ended and there
was plenty of food, in many cases the “thrifty” metabolism
couldn't stop storing calories away. In a number of instances health
problems like diabetes developed later on for these children.
We learned that physical
deterioration was clearly obvious, but we also observed the mental
effects of starvation. Food became the central thought, above
anything else. Fast forward more than 60 years later and behavioral
economists want to know how mental states along with social and
physical environments affect economic activity on a very specific
level … realizing that one size (program) does not fit all.
While behavioral economists,
like any group of people, can have varied points of view, some basic
ideas seem to stand out, oftentimes contrary to the prevailing views.
Sendhil Mullainathan, a behavioral economist at Harvard has said
that, “To put it crudely, poverty—no matter who you are—can
make you dumber.”--anywhere in the world, among any economic class
of people.
The gnawing away of
cognitive competence, counter-productive decisions, the inability to
consider the long-term best interest are all related to what
economists refer to as scarcity. While the standard belief is
generally that those poor people are poor because they make bad
decisions, the behavioral economists believe that people make bad
decisions because they are poor, perhaps obvious to some people, but
observing (in the U.S.) the Congress, many state legislatures and
numerous politicians pontificating on poverty and the poor, you would
be hard pressed to locate cognitive competence among these “decision
makers.”
This is a complex subject,
and while behavioral economics is a central part of economic theory
today, for many, it goes against deeply ingrained beliefs and vested
interests. Framing is going to matter a lot.
For those who want
additional information on the subject the following may be of
interest:
Foundation
History
Other
