In Nudge: Improving Decisions About Health, Wealth, and Happiness, Richard Thaler and Cass Sunstein make the distinction between “Econs,” those perfectly rational, perfectly self-interested mythical economic beings, and “Humans,” those, well…humans. Humans have capacity for altruism and are swayed by pesky things like choice framing, the potential for immediate gratification, and so on. Here are some more examples, in pictorial form:
There are two misconceptions here, and I think that one is more obvious than the other. The first one has to do with the last panel- Dear Zach Weiner: economists are (for the most part) not investment bankers, nor are we CEOs, etc. etc. In fact, economists get criticized for models that look at overall economic welfare and ignore the distribution of wealth, so it’s more than a little unfair to portray us in this way. Clearly we would only want the jobs/artifacts trade if our valuation of the artifacts was greater than the money lost by the laid-off people. Duh.
The second, less obvious, misconception is that “humans” wouldn’t pull the stunt in the second panel. In general, you’d be surprised at how good people are at figuring out how to “game the system.” As a counterpoint, I provide the following setup: A few weeks ago, I discovered that there are coupons available online for the parking garage by my office. The coupon is kind of awesome, since it reduces the cost of parking from $20 to only $8. However, there are two conditions on the coupon- first, that I have to print and sign one of the coupons each time I use it, and second, that I pay for the parking with a credit card. Why might this be the case? Apparently the garage had problems with parking attendants having people pay full price, ringing in the sale at the discounted price, and pocketing the difference. If people are willing and able to implement the parking garage scheme, then the extension cord doesn’t seem at all out of the realm of possibility.