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Friday, January 31, 2003 - 09:13 AM Permanent link for Economic Idiotarianism
Economic Idiotarianism

(via Jane Galt)  A great article by Arnold Kling in TCS on Economic Idiotarianism.  He presents a sound, structural theory on why people get econ so wrong so often:

Pinker cites the work of anthropologist Alan Fiske, who has found that all interpersonal transactions can be sorted into four relational models.

  • Communal Sharing
  • Authority Ranking
  • Equality Matching
  • Market Pricing

In a Communal Sharing transaction, such as a family dinner, every member of the relationship is entitled to share in what is available.

In an Authority Ranking transaction, such as a decision made in a traditional corporation, there is a linear hierarchy, with people lower in the hierarchy deferring to those who are higher up.

In an Equality Matching transaction, such as taking turns going through a four-way stop, people operate according to an intuitive sense of balance and fairness.

In a Market Pricing transaction, such as buying a used car, people make decisions on the basis of calculating costs and benefits.

As Kling & Steven Pinker both argue, Market Pricing-based allocations are intuitively difficult for many to understand because evolutionary psychology equipped the brain with mental models for the first 3 transactions but not the price-based one.

Consequently, if an allocation doesn't map to what a communal or equality based scheme would/should predict, many are inclined to believe that an authority based scheme is lurking the shadows & bares true responsibility for the outcome.

This sheds much light into the mind of the anti-globo protestor.

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