[lbo-talk] facts? what facts?

Wojtek Sokolowski sokol at jhu.edu
Thu Oct 16 08:29:12 PDT 2003



> New York Times - October 16, 2003
>
> ECONOMIC SCENE
> Cloudy Thinking on Tax Cuts
> By ALAN B. KRUEGER
>
> In the most extensive analysis yet available, Larry Bartels, a
> political scientist at Princeton University, gives a simple but
> persuasive explanation: "unenlightened self-interest." Middle- and
> lower-income Americans supported tax cuts they suspected went largely
> to the rich because they thought they, too, would benefit, if only by
> a small amount, and because they failed to connect the tax cuts to
> rising inequality, their future tax burden, or the availability of
> government services.

I have another way of saying that - human behavior is motivated by transaction cost minimization rather than utility maximization. In plain English, most people are too lazy to obtain accurate information, because it entails cost. Instead they go for the "fast food for thought" and grab whatever piece of information is spoon-fed to them.

This behavioral model predicts that if, everything else being equal, there is a choice between a (1) quick and easy to implement option that carries a nontrivial risk in a long run, and (2) an option that is more difficult and costly to implement but carries a nontrivial benefit in a long run - most people would choose (1) over (2).

I also think that the cognitive processes behind making such decisions are heavily influenced by one's life experiences and social norms and values. I think that the TV watchers whose attention span does not exceed 5 minutes are more likely to be transaction cost minimizers than a more sophisticated crowd. That may explain the fact quoted in the article that Rs with lower educational attainment are more likely to support tax policies that eventually hurt them than those with higher educational attainment. I also think that the cultural values prevalent in the US (rabid individualism and instant gratification), make the US-ers more likely to be transaction cost minimizers than benefit maximizers.

The conclusions are quite pessimistic - it is impossible to convince those who dined at McDonalds for their entire lives about the health and aesthetic benefits of nutritious high quality diet. Likewise, it is impossible to convince people who have been lazy and ignorant for their entire lives about the benefits of rational public policy. It will not happen here, period. At least not until some vanguard party sizes control and saves people against their own will.

Wojtek



More information about the lbo-talk mailing list