Tips and tricks, or ‘tips and tricks of the iceberg’: Going meta on behavioural economics

Standard economics’ traditional penchant for focusing on problems that are chosen for their formal tractability rather than their resemblance to real world problems squeezed non-monetary incentives and ‘irrational’ motives from economists’ purview. At the same time bureaucracies are very good at doing the same thing – of ignoring the specific nature of the life world of those they serve. (Of course ‘cultural incentives’ and if you like ‘irrational’ motives are at the heart of what makes bureaucracies work at all, but that’s internally. Those very conditions create fertile ground in which the organisation will make presumptions on the rationality of those whom they serve. But I digress.)

There are two potential ‘narratives’ as we say these days about behavioural economics as an antidote to this state of affairs. The first – exemplified, for instance in this blog post from behavioural economics consultancy 42 ideas - is that behavioural economics and the policies that emerge from it provide an example of economics’ taking upon itself the injunction “Physician health thyself”. Thus in the place of homo economicus - a simplified but unrealistic view of human nature – behavioural economics investigates the way this model is wrong and policy inspired by it takes those things into account in proposing new policy.

Thus the nudge unit in the UK (we have a small clone of it in NSW) does AB testing on government correspondence – discovering and exploiting the fact that taxpayers show stronger compliance to an arrears letter from the tax authorities if it contains a sentence like “over 90% of taxpayers pay their taxes on time” and the response is a bit higher still if the sentence makes the comparison more personal still “Over 90.5% of your neighbours in Notting Hill pay their tax on time”. These are ‘nudges’ in the vernacular of this field and so too is attention to trying to set the most benign possible defaults to take into account the power of inertia. The classic example – used around the world in both government and business these days is setting people’s savings plans to save higher proportions of their income (often by diverting any pay rise they have received into savings) unless they make a conscious decision not to go along, in which case it’s as easy as ticking a box on a form and they can (consciously) choose some alternative. This is behavioural economics as a box of tips and tricks to be added on to neoclassical economics. The physician, if he hasn’t healed himself, has introduced some routines that are better suited to the world.

But there’s another way to look at these tips and tricks – to look at them as ‘tips and tricks of the iceberg’. Ultimately people must be encountered as such. The tips and tricks of behavioural economics are no more or less than a summary of rules that have been gleaned that have the generality necessary to find their way relatively straightforwardly into the learned journal literature. But there’s a whole life world out there. That’s what needs to be encountered and that’s what is always in danger of being given insufficient weight. As Hayek put it

Today it is almost heresy to suggest that scientific knowledge is not the sum of all knowledge. But a little reflection will show that there is . . . a body of very important but unorganized knowledge: . . . the knowledge of the particular circumstances of time and place. [In this] respect . . . practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active coöperation.

Hayek only ever paid any attention to one particularisation of this general proposition – he’s thinking of the value the trader adds in a market to the knowhow of the scientist, the accountant, the engineer, the boss. But the observation is a much wider one. Yet the very tyranny of central planning against which he set himself is alive and well inside organisations, not least government organisations and those that deliver their services.


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Hypocrisy and the outbreak of crypto-socialism amongst our corporate overlords: Shock!

Mark zuckerberg tim cookIn an outbreak of cross-pontification Tim Cook thinks that Facebook and Google customers should be pretty suspicious of them because they collect a lot of data. Not to be outdone, Mark Zuckerberg thinks that Apple should cut its prices so it doesn’t make as much money. He doesn’t think that Facebook should cut it’s prices to its users – perhaps by paying them a cut of the revenue they bring in – to bring Facebook’s profit down to the kinds of reasonable levels he feels Apple’s profitability should be.

Still, it’s nice to see St Thomas Aquinas’s theory of the just price if not making a comeback, then at least poking its head over the parapet.

The interregnum at the Australian Public Service Commission

Many years ago now, Steve Sedgwick the Australian Public Service Commission explained to me that it wouldn’t be right to publish the hoard of information the APSC has on APS employees’ attitudes to their workplaces agency by agency because that would undermine the relationship of discretion and cooperation the APSC has with agencies.

Just thinking about that argument it falls apart it seems to me. If the rules are the results are published the APSC publishing the data isn’t a hostile act, it’s just process. Anyway, no progress has been made while this kind of data has been published in other countries routinely and the whole world gets the bug on open data.

Meanwhile I suspect the reports the APSC sends each agency outlining its performance are FOIable. If that’s true it’s all a bit of a house of cards waiting to fall. And all of a sudden five capability reviews appeared on the APSC website one Friday afternoon. The Mandarin covered the contents of the reviews which are quite candid about departmental shortcomings. Only two of the five capability reviews were recent. One was from earlier this year and two were from last year.

No press release, no date on the website. Why? Who knows, but here’s hoping the house of cards continues to collapse.

Speaking of bullshit . . .

A brief note – with a long appendix – about my recent re-reading of Frankfurt’s “On Bullshit” in the writing of a recent post. I remembered the article fondly, but on re-reading it I found it was mostly bullshit – Srsly! It wasn’t the most odious of bullshit – which comes with all sorts of swagger. But it was bullshit nevertheless – not bullshit as swagger but bullshit as vapidity.  The article has a single – very good – idea in it which accounts for its well deserved fame or notoriety which could have received just as good explication by the author in a 700 word op ed – 500 if you were pressed for space. The idea can be summarised very briefly. Firstly we have a great sentence. “Even the most basic and preliminary questions about bullshit remain . . . not only unanswered but unasked.” And then the thesis. Bullshit is deception but the deception is not that of the deliberate untruth of the liar – which requires an interest in truth so as to deceive. Rather the deception is that though the words are delivered with apparent seriousness, they are rather delivered with  complete disregard for the truth. And an environment in which people speak without knowing their subject is the bed in which bullshit grows.

That’s more or less it. Other interesting and important ideas have been set out by others. For instance I had originally remembered that Frankfurter had also drawn attention to the way in which both the bullshitter and bullshitee are complicit in the performance, but that insight appears to have been supplied by a later contributor. Anyway Frankfurter takes 16 pages to set out the simple ideas I’ve summarised above. Now of course it’s often the case that an article expounds a single idea – the assertion of which could be done in a paragraph or two, but in a good article the supporting pages - 15 in this case – help amplify and illustrate the point. I don’t think that’s the case here. Here are two sentences which appear towards end of the essay in sequence:

Convinced that reality has no inherent nature, which he might hope to identify as the truth about things, he devotes himself to being true to his own nature. It is as though he decides that since it makes no sense to try to be true to the facts, he must therefore try instead to be true to himself.

What does the second sentence add to the first? They seem to say not just the same thing, but precisely the same thing – two sentences which could be alternatives, but not complements. I think the whole article is like this. And in this it’s very like so many other academic material. Full of academic filler, or to use Frankfurter’s term, bullshit. (I recently bought a Kindle book called “Infrastructure: The Social Value of Shared Resources” by Brett M. Frischmann. I was anxious to read it because it was right up my alley – conceptualising infrastructure as a commons and drawing parallels between traditional economic infrastructure and non-traditional infrastructure – such as intellectual resources and social capital. It’s got some good stuff in it, but it had the same problem. Endless handling of possible objections often trivial only occasionally somewhat less so.)

If one took objections of that kind seriously one would never get anywhere. As exhibit A I extract below the fold a couple of pages of Frankfurter’s discussion which helps to establish what he thinks bullshit is. The example he provides is probably not a very good example. So he spends two pages going through possible objections to the example – only to conclude that if you ignore those objections it is a good example. Why not pick a better example – or make one up?  I don’t know the answer but I presume it’s because his example has a famous philosopher in it and – after all – he’s writing a philosophy essay isn’t he?

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Complexity, reducibility, integrity and bullshit: the general untheory


Some readers may recall an earlier post which I christened an ‘untheory’ of innovation. It argued that there’s not much use in ‘theories’ of innovation if they’re taken as recipe books for senior managers to ‘drive down’ innovation through organisations. Why? Because if innovation is to thrive, endless decisions must be made to facilitate any number of different innovations and it can’t be known in advance who should be co-ordinating those decisions. An innovation might involve some slight or pronounced change in accounts, marketing, technical specifications, supplier relations, training, industrial relations and on and on. For these decisions to be made well – or as I like to say ‘on the merits‘ – all sorts of pathologies must be overcome:

There are hierarchies, there’s groupthink, there’s second guessing hierarchies, there’s trying to keep people happy and consensus at any cost, there’s ‘not invented here’, there’s ‘not in my backyard’ there’s excessive risk-aversion (though it’s usually aversion to a certain kind of risk, which is the product of another pathology – process hugging) and other manifestations of status quo bias, there’s adulation of those with high status either within a hierarchy or the wealthy and powerful over the less so and on and on.

That’s why I’ve argued that one of the most useful things one might do as far as ‘teaching’ management or innovation is concerned, is to coach managers not with the usual flattering stories of how far sighted heroic managers were, but rather with unflattering stories which highlight the foibles of our understanding – and offer means of overcoming them. What I’m arguing for is a recognition of the irreducibility of the on the ground experience – its lack of susceptibility to systematic, theoretical insight and its management corollary – policies adopted and driven from the top.

There are any number of areas in which we wave away the possibility of such irreducibility and instead embrace an empty and deluded kind of managerialism in which those at the top are forever attending strategy sessions, restructuring, reengineering and all the rest of it. Progress is not made (and as an aside, cannot easily be measured or ranked) because a lot of the progress that is necessary is sui generis and made at the coalface – or at least must involve the giving the coalface and autonomy to solve its problems and push for improvements.

Some other areas where this jumps out at me are: Continue reading

Refugees: a blast from a not so distant past

CANBERRA, Tuesday.

In the House of Representatives this afternoon Mr. Martens (Lab., Qld.), said that the Government’s acquiescence in Britain’s proposal to send alien internees to Australia for safe custody was causing great alarm to many people.
If ships were available, they should not bring a “ready-made fifth column” to Australia, Mr. Martens said, but should be used instead to bring English women and children to the comparative safety of our shores.

The Sydney Morning Herald, Wednesday 7 August 1940, p 13


Sir,—I wish to add my appeal to tho many already made through your columns to fellow-Australians on behalf of refugees from Central Europe.
Those who have had even slight contact with these people i cause that they have been wounded in a way most difficult to heal—in their minds. They have seen and heard sights and sounds almost beyond the imagination of Australians.
I ask my fellow-Australians to remember it is a large part of our British tradition to shelter and care for people who need such protection. Our association with the words “Concentration camp” is with Berrima and little gardens and libraries for the Internees—as in 1914-18. With these people, who came to us before our countries were at war the words have a meaning wholly remote.
The letters published in to-day’s “Sydney Morning Herald” received by his mother from Harald Arnold Minibeck, a young highly-qualified Austrian doctor, with special degrees in relation to skin diseases, who took his life in Sydney on June 28, rather than face the picture in his mind of a concentration camp—should be read by every Australian before voting for wholesale internment of refugees—for his own peace of mind.
Yours faithfully,

Burwood, The Sydney Morning Herald, Friday 9 August 1940, p 4


Shock! Good government improves wellbeing

Actually the magnitude of the effect is a bit of an eye-opener.

Empirical Linkages between Good Government and National Well-being
by John F. Helliwell, Haifang Huang, Shawn Grover, Shun Wang


This paper first reviews existing studies of the links between good
governance and subjective well-being. It then brings together the
largest available sets of national-level measures of the quality of
governance to assess the extent to which they contribute to
explaining the levels and changes in life evaluations in 157
countries over the years 2005-2012, using data from the Gallup World

The results show not just that people are more satisfied with their
lives in countries with better governance quality, but also that
actual changes in governance quality since 2005 have led to large
changes in the quality of life. For example, the ten-most-improved
countries, in terms of delivery quality changes between 2005 and
2012, when compared to the ten countries with most worsened delivery
quality, are estimated to have thereby increased average life
evaluations by as much as would be produced by a 40% increase in per
capita incomes.

The results also confirm earlier findings that the delivery quality
of government services generally dominates democratic quality in
supporting better lives. The situation changes as development
proceeds, with democratic quality having a positive influence among
countries that have already achieved higher quality of service


Funny how, even though you’ve developed the mental skill and discipline to be the World Chess Champion, you can make a simple mistake. But what’s much more intriguing is how, once you’ve actually made the mistake, you immediately know you’ve made it – as Carlsen did when he made this move, and as Anand did the moment he replied to Carlsen’s game losing move, with a game losing failure to notice the mistake, until that is, until immediately after he made his move!