The Story of a Lucky Economist(allegedwisdom.blogspot.com)
allegedwisdom.blogspot.com
The Story of a Lucky Economist
http://allegedwisdom.blogspot.com/2017/03/the-story-of-lucky-economist.html
58 comments
It's worth remembering the opposite of his example of "C" (the economist who pushed back against the water standards)..
The faceless bureaucrats in these positions have the ability to destroy livelihood, whole towns, and even industries with the stroke of a pen. And they suffer zero consequences as a result.
The faceless bureaucrats in these positions have the ability to destroy livelihood, whole towns, and even industries with the stroke of a pen. And they suffer zero consequences as a result.
The stakes are rather high on both sides of this. The same chemist was responsible for both leaded petrol and CFCs: https://en.wikipedia.org/wiki/Thomas_Midgley_Jr.
Safety regulations can wipe out businesses. Not having (or following!) regulations can wipe out lives on an enourmous scale: https://en.wikipedia.org/wiki/Bhopal_disaster
The point is not to say "regulation good" or "regulation bad", but that these decisions are important and should be taken seriously with submissions from those involved as well as experts. The process has to be sound, and we need to de-partisanise it where possible.
Safety regulations can wipe out businesses. Not having (or following!) regulations can wipe out lives on an enourmous scale: https://en.wikipedia.org/wiki/Bhopal_disaster
The point is not to say "regulation good" or "regulation bad", but that these decisions are important and should be taken seriously with submissions from those involved as well as experts. The process has to be sound, and we need to de-partisanise it where possible.
For all the environmental damage they caused, I'm not convinced that CFCs were a net negative. We have better alternatives now, but the refrigerants R12 replaced at the time were really really nasty; how many lives would you be willing to sacrifice to avoid damaging the ozone layer?
The question is how many lives were lost due to a damaged ozone layer? (increased risks of skin cancer, etc).
The point is that regulation is important. Whether you have good regulation, bad regulation or no regulation it has impact and the discussion is important.
The point is that regulation is important. Whether you have good regulation, bad regulation or no regulation it has impact and the discussion is important.
In many cases (the water standard rule was one of them) the bureaucrats are acting on direct orders from Congress. Congress usually passes those laws demanding regulations to be written as a result of people asking the government to 'do something' about a problem that harmed an identifiable victim. Then the lobbyists get involved. Blaming bureaucrats for those regulations is like blaming coders for what happens after they get told to implement an incoherent design document.
Yeah, to your point:
The EPA was an obstacle for Marc Edwards during the DC water crisis, but then was one of his biggest advocates during Flint.[0]
Examples like this are common enough. So it surprises me that most ideological debates are about whether government is good or harmful. It's both. There are failure modes both with it and without.
Agencies are made up of people, who sometimes do great work and save lives, sometimes learn from past mistakes, and sometimes make new ones that are incredibly costly to society.
I guess "We should study the areas where unintended consequences are most likely to dominate and limit government overreach in those areas, but recognize we still have real problems to solve where it might be the best tool for the job, so avoid throwing the baby out with the bathwater" doesn't make a great bumper sticker.
[0] https://en.wikipedia.org/wiki/Marc_Edwards_(civil_engineerin...
The EPA was an obstacle for Marc Edwards during the DC water crisis, but then was one of his biggest advocates during Flint.[0]
Examples like this are common enough. So it surprises me that most ideological debates are about whether government is good or harmful. It's both. There are failure modes both with it and without.
Agencies are made up of people, who sometimes do great work and save lives, sometimes learn from past mistakes, and sometimes make new ones that are incredibly costly to society.
I guess "We should study the areas where unintended consequences are most likely to dominate and limit government overreach in those areas, but recognize we still have real problems to solve where it might be the best tool for the job, so avoid throwing the baby out with the bathwater" doesn't make a great bumper sticker.
[0] https://en.wikipedia.org/wiki/Marc_Edwards_(civil_engineerin...
Most ideological debates aren't about that. There is no side arguing that government for the sake of government is good.
A gross over simplification of the current party lines would look like this.
Libertarians argue that government is always the problem, and never the solution.
Conservatives argue that markets rarely fail, and the government is so terrible of a solution that most of the time the cure is worst than the disease. But is useful in some limited cases of market failure.
Liberals argue that markets fail pretty often and so we need government a little more often than what conservatives suggest.
Of course this ignores the building of the evangelical and populist branches of the Republican party which don't fall as neatly into the abstraction as the old guard business Republicans.
A gross over simplification of the current party lines would look like this.
Libertarians argue that government is always the problem, and never the solution.
Conservatives argue that markets rarely fail, and the government is so terrible of a solution that most of the time the cure is worst than the disease. But is useful in some limited cases of market failure.
Liberals argue that markets fail pretty often and so we need government a little more often than what conservatives suggest.
Of course this ignores the building of the evangelical and populist branches of the Republican party which don't fall as neatly into the abstraction as the old guard business Republicans.
> Most ideological debates aren't about that. There is no side arguing that government for the sake of government is good.
You can always add more nuance. Ehrenreich had a great piece 20 years ago, "Confessions of a Recovering Statist" with arguments from the left for skepticism of government power. Some people follow that mold and consider themselves liberal-tarians. Some on the right are more hawks, nationalists, or law and order types who prefer strong state institutions.
But speaking in broad swaths, the impression that I get is that most people have a pretty shallow understanding of political theory, and go with the simplest heuristic possible. No fault of their own, it doesn't interest them. They have lawns to mow and bills to pay.
Given that, a better simplification of the current party lines might not drill down into subfactions of parties, but to capture most people, you could get away with something like "I'm on team red" vs. "I'm on team blue."
Short of that, I'm not convinced pro-G / anti-G is that bad of a model for most people though.
You can always add more nuance. Ehrenreich had a great piece 20 years ago, "Confessions of a Recovering Statist" with arguments from the left for skepticism of government power. Some people follow that mold and consider themselves liberal-tarians. Some on the right are more hawks, nationalists, or law and order types who prefer strong state institutions.
But speaking in broad swaths, the impression that I get is that most people have a pretty shallow understanding of political theory, and go with the simplest heuristic possible. No fault of their own, it doesn't interest them. They have lawns to mow and bills to pay.
Given that, a better simplification of the current party lines might not drill down into subfactions of parties, but to capture most people, you could get away with something like "I'm on team red" vs. "I'm on team blue."
Short of that, I'm not convinced pro-G / anti-G is that bad of a model for most people though.
Labeling a team pro-G is similar to labeling pro-lifers anti-choice. Or pro-choice people as pro-abortion. It using one sided proposed narrative to create a caricature of the other.
It's a very common stereotype on the right, that members of left are interested in more government for the sake of government. And labeling a side pro-government perpetuates this misperception.
It's a very common stereotype on the right, that members of left are interested in more government for the sake of government. And labeling a side pro-government perpetuates this misperception.
I'm not on the right criticizing the left though, and it strikes me as melodramatic to say this "perpetuates a misperception."
Let's talk about perceptions and misperceptions.
Most Americans have no idea who is in power, or how their government is structured:
http://www.businessinsider.com/poll-many-americans-dont-know...
Given that, I'll grant that it's probably a mistake to think that people's political ideologies have anything to do with a theory of government at all.
Most people's political ideologies are probably about as refined as a blue/red color preference.
Let's talk about perceptions and misperceptions.
Most Americans have no idea who is in power, or how their government is structured:
http://www.businessinsider.com/poll-many-americans-dont-know...
Given that, I'll grant that it's probably a mistake to think that people's political ideologies have anything to do with a theory of government at all.
Most people's political ideologies are probably about as refined as a blue/red color preference.
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> the 'PhD Economist' credential is a signal that you might be the kind of person who can escape groupthink
I am open to this concept but I don't think I'm being cynical when I say that most people would surely think the opposite when they hear the expression PhD Economist.
I am open to this concept but I don't think I'm being cynical when I say that most people would surely think the opposite when they hear the expression PhD Economist.
> most people would surely think
An example of groupthink?
If you haven't studied economics in graduate school, you may not be aware that the field is very different than what is taught in traditional undergraduate economics classes. There are different branches, of course, but the field emphasizes modeling and acceptance of initially-unintuitive results based on careful analysis of system dynamics.
Many people can think through the second-order effects (and beyond) of some policy change. Economists are just one group that has been trained to do so.
An example of groupthink?
If you haven't studied economics in graduate school, you may not be aware that the field is very different than what is taught in traditional undergraduate economics classes. There are different branches, of course, but the field emphasizes modeling and acceptance of initially-unintuitive results based on careful analysis of system dynamics.
Many people can think through the second-order effects (and beyond) of some policy change. Economists are just one group that has been trained to do so.
Economics is a highly politicized "science" however. Desperate for their pet views self-validating their world dominance, endowed chairs, think tanks, consulting, and special access to finance deals fundamentally skew the practice of economics at an academic level, essentially bribing them into line with oligarchical capitalism / "Reaganomics".
Economists routinely are placed in politically powerful positions, invariably due in large part to their professed views on economics being in line with a dominant political (aka rich cabal or pro-industry) view of economics.
If economics was truly up to snuff, it would be at the forefront of guiding policy to resolve the existential threat our global scale environmental disruption poses to us as a species, which is a direct result of the imperfect economic systems of the world.
But the fundamental problems in economics remain:
- if you can't measure it, it doesn't really exist to economics, especially to academics - if it isn't going to run out in three months or kill you in three months, it doesn't matter and is ignored by economic study
Of course those two points are slight exaggerations, but if one views the long course of economic study, they become pretty apparent.
Economists routinely are placed in politically powerful positions, invariably due in large part to their professed views on economics being in line with a dominant political (aka rich cabal or pro-industry) view of economics.
If economics was truly up to snuff, it would be at the forefront of guiding policy to resolve the existential threat our global scale environmental disruption poses to us as a species, which is a direct result of the imperfect economic systems of the world.
But the fundamental problems in economics remain:
- if you can't measure it, it doesn't really exist to economics, especially to academics - if it isn't going to run out in three months or kill you in three months, it doesn't matter and is ignored by economic study
Of course those two points are slight exaggerations, but if one views the long course of economic study, they become pretty apparent.
> If economics was truly up to snuff, it would be at the forefront of guiding policy to resolve the existential threat our global scale environmental disruption poses to us as a species, which is a direct result of the imperfect economic systems of the world.
Economics can predict 'disaster' but does not have anything to say about whether or not disaster should be avoided.
To give an example closer to home, in W. Africa predominant economists believe (but do not publicly say) the AIDs crises is not a general threat to humanity. AIDs rates will increase until a peak point, then society will self-correct whether this is via enforced monogamy rituals, enhanced testing, stigmatisation of carriers, wide-spread STD protection, better medical care for carriers to prevent morality, or other methods is besides the point.
What method you choose to promote is a political question, not an economic one. Just because something increases X in circumstance A, does not bear into question if circumstance A is really something you want even if X is "lower mortality rates".
Economists in international organisations learn this truth, and have to be extremely careful not to substitute their own personal bias, or the preferences of their society for that of their client. For a non-morbid example, working in the US an economists would be tasks to report on how to best expand the existing highway system. Taking a step back, and saying "we should all use bullet trains and live in dense cities", isn't going to be appreciated as the 'American Dream' is predicated on suburban living.
Economics can predict 'disaster' but does not have anything to say about whether or not disaster should be avoided.
To give an example closer to home, in W. Africa predominant economists believe (but do not publicly say) the AIDs crises is not a general threat to humanity. AIDs rates will increase until a peak point, then society will self-correct whether this is via enforced monogamy rituals, enhanced testing, stigmatisation of carriers, wide-spread STD protection, better medical care for carriers to prevent morality, or other methods is besides the point.
What method you choose to promote is a political question, not an economic one. Just because something increases X in circumstance A, does not bear into question if circumstance A is really something you want even if X is "lower mortality rates".
Economists in international organisations learn this truth, and have to be extremely careful not to substitute their own personal bias, or the preferences of their society for that of their client. For a non-morbid example, working in the US an economists would be tasks to report on how to best expand the existing highway system. Taking a step back, and saying "we should all use bullet trains and live in dense cities", isn't going to be appreciated as the 'American Dream' is predicated on suburban living.
I'm normally a fan of generalizations to make conversation flow easier. No need to get stuck in the weeds of all the exceptions. However, you've made some assertions that go a bit too far for my comfort.
It was not and has not been my experience that the majority or even plurality of economists support "Reaganomics" or "oligarchical capitalism". There are some famous and outspoken economists that are often quoted by politicians, but the rank and file are generally ignored.
Of politically powerful people, it seems to me that most are lawyers. The second largest cohort is perhaps businesspeople as a general category. I'm not sure where economists would rank, but they're not common in politics outside of the Federal Reserve.
I'm not sure why an academic discipline being "up to snuff" would make much difference for policy. I've never known politicians (as a whole) to appreciate science, except for military applications. The economists have been saying we should put a tax on carbon for decades. There are entire departments dedicated to "environmental economics", studying how to coordinate fisheries to avoid population collapse, how to manage forests, etc. Their policy recommendations are largely ignored. An economic system is an outcome of a socio-political system, not some exogenous phenomenon.
> if it isn't going to run out in three months or kill you in three months, it doesn't matter and is ignored by economic study
This is false. I'm not sure what else to say. I suppose the recent years of truthiness and fake news have worn away my resistance.
> those two points are slight exaggerations, but ... apparent
More than slight, and not apparent to me.
> if you can't measure it, it doesn't ... exist
Much of econometric literature concerns how to measure things that are difficult to measure. This includes ineffable things like "freedom" or "happiness".
It was not and has not been my experience that the majority or even plurality of economists support "Reaganomics" or "oligarchical capitalism". There are some famous and outspoken economists that are often quoted by politicians, but the rank and file are generally ignored.
Of politically powerful people, it seems to me that most are lawyers. The second largest cohort is perhaps businesspeople as a general category. I'm not sure where economists would rank, but they're not common in politics outside of the Federal Reserve.
I'm not sure why an academic discipline being "up to snuff" would make much difference for policy. I've never known politicians (as a whole) to appreciate science, except for military applications. The economists have been saying we should put a tax on carbon for decades. There are entire departments dedicated to "environmental economics", studying how to coordinate fisheries to avoid population collapse, how to manage forests, etc. Their policy recommendations are largely ignored. An economic system is an outcome of a socio-political system, not some exogenous phenomenon.
> if it isn't going to run out in three months or kill you in three months, it doesn't matter and is ignored by economic study
This is false. I'm not sure what else to say. I suppose the recent years of truthiness and fake news have worn away my resistance.
> those two points are slight exaggerations, but ... apparent
More than slight, and not apparent to me.
> if you can't measure it, it doesn't ... exist
Much of econometric literature concerns how to measure things that are difficult to measure. This includes ineffable things like "freedom" or "happiness".
Excellent comment.
Many people associate 'economist' with politicized talking heads arguing about ideological issues, but that is a tiny fraction of the profession, just like the most politicized tech CEOs are the tiny fraction of the tech community that gets the most outside attention.
Many people associate 'economist' with politicized talking heads arguing about ideological issues, but that is a tiny fraction of the profession, just like the most politicized tech CEOs are the tiny fraction of the tech community that gets the most outside attention.
Good point. I equate economists generally with ideologues on TV but that's probably as well as founded as thinking software developers are out of shape nerds in Hawaii shirts.
An example of groupthink?
Freshwater macro, for one.
Freshwater macro, for one.
Every discipline has its cliques.
And I meant "an example" in the sense that justifying a thought on the basis that "most people think" is an example of groupthink.
And I meant "an example" in the sense that justifying a thought on the basis that "most people think" is an example of groupthink.
If you haven't studied economics in graduate school, you may not be aware of the extent to which freshwater-like fundamentalism is embedded in the core ansätze of the discipline.
Nice word choice. You even got the accent character in there.
I found freshwater thinking to be refreshingly criticized in my department. I suppose we were a little closer to the coast than the lakes.
I found freshwater thinking to be refreshingly criticized in my department. I suppose we were a little closer to the coast than the lakes.
Don't worry, economics has multiple schools of groupthink.
Only one particular form of it is usually welcome at policymaking meetings though.
Indeed; PhD _anything_ is a signal that you _might_ be the kind of person who can escape groupthink. Or being a successful entrepreneur, lawyer, hermit, anything really. That line stood out for me too.
As a 'trained' historian we were always looking down on the economists for their 'groupthink' tendencies. And on most fellow historians, and pretty much everyone in history.
It's a cheap shot, but armies of trained economists failed to spot (or do anything useful about) the credit bubble, the consequences of which we are still failing to deal with.
As a 'trained' historian we were always looking down on the economists for their 'groupthink' tendencies. And on most fellow historians, and pretty much everyone in history.
It's a cheap shot, but armies of trained economists failed to spot (or do anything useful about) the credit bubble, the consequences of which we are still failing to deal with.
The credit bubble was difficult to spot because it (like all bubbles) emerged fairly rapidly, and involved large amounts of lying and corruption.
Banks failed to inform anyone that they had essentially broken their Chinese wall between the investing & lending divisions. They also failed to inform anyone that they were bundling good credit and bad credit structures, then rubber stamping the whole thing as AAA credit.
Would these issues have been found out eventually? Sure, but:
- The US markets are large and filled with sophisticated people who know just how to hide things. Governments/private corps in emerging economies try the same thing, but they're stymied by a lack of no how on how to fudge data
- Even in the case of poor fudging, you can't find all of it instantaneously and can't comment prematurely
Banks failed to inform anyone that they had essentially broken their Chinese wall between the investing & lending divisions. They also failed to inform anyone that they were bundling good credit and bad credit structures, then rubber stamping the whole thing as AAA credit.
Would these issues have been found out eventually? Sure, but:
- The US markets are large and filled with sophisticated people who know just how to hide things. Governments/private corps in emerging economies try the same thing, but they're stymied by a lack of no how on how to fudge data
- Even in the case of poor fudging, you can't find all of it instantaneously and can't comment prematurely
It was obvious to me in about 2002 in the UK when I started to see people being forwarded money I knew they could never pay back, for cars and houses.
you would have spent 6 years believing something was going to happen before anything happened, that's 6 years out of the 8 years in between the two major crashes this millenium.
I didn't say I predicted _when_ it would happen, simply that it was obvious to a casual observer that there was a credit bubble that would inevitably burst when money couldn't be paid back.
well yeah i mean, if you persist in saying things will go up or go down, eventually you'll be right.
Anyone with any nous could see what was going on. If economists helping run the economy can't spot it, what use are they?
> I am open to this concept but I don't think I'm being cynical when I say that most people would surely think the opposite when they hear the expression PhD Economist.
Classic groupthink :)
Classic groupthink :)
This is a good article about the costly unintended consequences of well-meaning regulations. The author seems to think, however, that this can be resolved by hiring more educated economists, but I seriously doubt it.
My takeaway from the article is that the author completely missed the point, which is that centralised bureaucracy and decision making can be very harmful.
Why are we reliant on an economist to pick up on this irrigation issue? You at least need people from industry to be consulted before regulations like this. Lucky that this particular person noticed the problem, but there probably shouldn't be a lawyer, a scientist and an economist making centralised farming regulations.
Why are we reliant on an economist to pick up on this irrigation issue? You at least need people from industry to be consulted before regulations like this. Lucky that this particular person noticed the problem, but there probably shouldn't be a lawyer, a scientist and an economist making centralised farming regulations.
I definitely understand that centralized bureaucracy and decision making can be very harmful. I also know that the lack of centralized bureaucracy and decision making can also be very harmful, for example by killing tens of thousands of people with trans fats (or air pollution, or communicable diseases, etc.) We are playing an unavoidable game for very high stakes, where inaction can be as lethal as action.
The typical cycle is that something obviously bad happens to an identifiable victim that can be traced to lack of regulation, then congress and/or the courts force regulation, and then the regulation causes a lot of invisible harm that may or may not be greater than the harm it prevents. My job is to try to make these inevitable regulations do more good than harm.
There would have been a public notice and comment period before the rule went final. But industry often fails to notice things, and quite often, when industry asks for standards to be lowered, consumer groups reflexively insist that they remain as proposed. The outcome ends up being based mainly on politics, which is why getting the proposal right matters.
The typical cycle is that something obviously bad happens to an identifiable victim that can be traced to lack of regulation, then congress and/or the courts force regulation, and then the regulation causes a lot of invisible harm that may or may not be greater than the harm it prevents. My job is to try to make these inevitable regulations do more good than harm.
There would have been a public notice and comment period before the rule went final. But industry often fails to notice things, and quite often, when industry asks for standards to be lowered, consumer groups reflexively insist that they remain as proposed. The outcome ends up being based mainly on politics, which is why getting the proposal right matters.
>Why are we reliant on an economist to pick up on this irrigation issue? You at least need people from industry to be consulted before regulations like this.
It's naive to think that effective, efficient regulation can happen without consulting the people actually affected. It's also naive to think those people should be the ones making regulations.
Even beyond the inherent problem with industries regulating themselves, they are just not capable of doing so in many cases, especially farming. What does a farmer know about public health, or water-borne pathogens, or heavy metals? Farmers know what makes plants grow or not. They don't know how those plants affect the people that eat them.
Plus, says who that irrigating with drinkable water is even a bad idea? It's the most accessible standard. Drinking water is everywhere. It's literally the most unscientific reasoning possible that manure is dirty, therefor water can be dirty too. Self righteous, pretentious stories like this are everywhere, where the clever, down to earth common guy stumps all the big brains. The fact is that the people who study the effects of an industry are in a far better position to assess regulation.
Yes- a producer will be able to say that a regulation may be burdensome. They will definitely not be the best person to know if it's warranted or not.
It's naive to think that effective, efficient regulation can happen without consulting the people actually affected. It's also naive to think those people should be the ones making regulations.
Even beyond the inherent problem with industries regulating themselves, they are just not capable of doing so in many cases, especially farming. What does a farmer know about public health, or water-borne pathogens, or heavy metals? Farmers know what makes plants grow or not. They don't know how those plants affect the people that eat them.
Plus, says who that irrigating with drinkable water is even a bad idea? It's the most accessible standard. Drinking water is everywhere. It's literally the most unscientific reasoning possible that manure is dirty, therefor water can be dirty too. Self righteous, pretentious stories like this are everywhere, where the clever, down to earth common guy stumps all the big brains. The fact is that the people who study the effects of an industry are in a far better position to assess regulation.
Yes- a producer will be able to say that a regulation may be burdensome. They will definitely not be the best person to know if it's warranted or not.
When irrigation water is put directly on produce that will soon be consumed raw, it will transmit pathogens and should be drinking-water standard. This was not disputed, and was in the final rule.
However, if the water will go through manure before being absorbed by the the plant's roots, it is very wasteful to first purify it to drinking-water standard. Drinking-quality water is not everywhere in the quantities needed for irrigation, it requires expensive filtration and processing. Everyone saw the logic of this when it was pointed out, nobody was 'stumped'.
However, if the water will go through manure before being absorbed by the the plant's roots, it is very wasteful to first purify it to drinking-water standard. Drinking-quality water is not everywhere in the quantities needed for irrigation, it requires expensive filtration and processing. Everyone saw the logic of this when it was pointed out, nobody was 'stumped'.
[...]which is that centralised bureaucracy and decision making can be very harmful.
Or very useful --sometimes even demonstrably so (e.g. tragedy of the commons).
Or very useful --sometimes even demonstrably so (e.g. tragedy of the commons).
The central problem with regulators is you need people who know what they're regulating, meaning industry insiders. But then you have conflicts of interest.
Centralized economic planning never works well, anyway, regardless of how many trained economists are at the helm.
Centralized economic planning never works well, anyway, regardless of how many trained economists are at the helm.
There is centralized economic planning in the area of patents, copyright, theft and many other things. Is that also burdensome regulation?
Do you think the patent and copyright system is well run? As for theft, that is the justice system, and is not economic management.
Regulations will always have costly unintended consequences, and this will never be fully resolved. But the damage can be mitigated and things can be made more efficient by having numerate big-picture thinkers involved early in the process. Many economists do manage to make things better.
In theory, people from any discipline can be numerate big-picture thinkers. But in practice, most hard scientists tend to have a very narrow-minded focus on optimizing the the thing they study most, and ignoring everything else. Lawyers are usually pretty good at trying to think about the big picture and all the people affected, but they are rarely sufficiently numerate to properly analyze and compare things.
In theory, people from any discipline can be numerate big-picture thinkers. But in practice, most hard scientists tend to have a very narrow-minded focus on optimizing the the thing they study most, and ignoring everything else. Lawyers are usually pretty good at trying to think about the big picture and all the people affected, but they are rarely sufficiently numerate to properly analyze and compare things.
Can someone go more into what is meant by framing and anchoring?
Is this like 'sandbagging?'
Does one fail on purpose to set a low standard so that they can have an easier time reaching a goal?
Is this like 'sandbagging?'
Does one fail on purpose to set a low standard so that they can have an easier time reaching a goal?
We did an experiment at work.
Half the group was asked if they thought a person was above 165cm tall, which he was.
The other group was asked if they thought the same person was below 190cm, which he also was.
Then after, both groups were asked to guess his height. The second group guessed significantly higher than the first. Since both groups were told a number first, their response got anchored/biased towards that value.
Half the group was asked if they thought a person was above 165cm tall, which he was.
The other group was asked if they thought the same person was below 190cm, which he also was.
Then after, both groups were asked to guess his height. The second group guessed significantly higher than the first. Since both groups were told a number first, their response got anchored/biased towards that value.
If you present people with several options, they'll be biased towards selecting options in the middle of the range. This is particularly relevant to SaaS startups and pricing plans; but in the article the author was using it to steer the decision maker towards the option he had already determined to be optimal.
The optimal cutoff would probably have been $20 million rather than the $10 million that was chosen, but that change would have been too much for a lot of people. If I had only presented options from $1M up to $20M, then the group probably would have chosen $5M no matter how much I argued for $20M. I had to put the $50M number in people's heads so $10M seemed less of a jump.
Ya that's kind of what it seems like you did... throwing a big number out on purpose so that $9M jump would be "rational." The math in my head says you could weight figures on estimated acceptance probability. By throwing out a low probability figure first before a relatively higher probability acceptance figure - versus just presenting them with a reasonably high probability figure - give a better result. It is almost like expected value.
So it's like suggestion; the ability to make people believe?
good post. add some stories about dealing with lobbyists as an economist, and the post will be even more interesting.
In most agencies, economists almost never interact with lobbyists. The lobbyists always aim at senior management, and almost all lobbying takes the form of 'We care about X and we want you to validate that by signalling that you also care about X' or 'We are presenting a credible threat to sue you if you do Y'. This is useful political and tactical information for management, but it does not affect the economic numbers at all. In theory a lobbyist could present useful information about a hard-to-research topic that informs our analysis, but I've never seen that happen.
Even a small impact becomes huge if you scale it up to billions of users.