I was chatting with Libby last night about how humans are "lazy". We go to great lengths to develop systems of thought and decision-making that reduce or eliminate the need for reprocessing. Libby suggested that some people were particularly prone to do this. I was suggesting that Libby (and all people) still had more in common with the most dogmatically unthinking, than there are differences. In their influence on our day to day lives, it's our shared assumptions, rather than our unique assumptions that tend to count.
One of the things I think makes humans so successful is their ability to develop crude simplifications that serve to reduce a lot of thinking. It means we spend less of our lives analysing, and we can make decisions more rapidly - both of which are critical in sustaining the sort of existence we lead. In other words, we make rules which minimise transaction costs. One of the transaction costs of making a decision, is the time and energy expended in obtaining better than neutral outcomes from a choice. Our ability to abstract and generalise, rapidly reduces these transactions costs, at the expense of (you'd presume) slightly worse average outcomes. But the point is that transactions costs are significant, the best choice isn't necessarily the one you should try to find and, most importantly, humans are very good at working out where the optimal trade-off is.
Economic theory ignores this almost entirely. It's a subset of the failure of economic theory to remember that its theories are incredibly imprecise. It knows this is true, and acknowledges it, but then often forgets. Elegance of thought tries to spackle over the messiness of reality. Which isn't a new idea, but it's mostly vocalised by people who don't like economics at all. And it's thoroughyl ignored. Most of our government's economic decisions are based on models which proudly ignore any variable too difficult to measure.
There's strong precedent for the idea that value-based decisions are more effective than decisions based on fundamental analysis. Not only do value-based decisions leverage the value of a long-term outlook, but it reduces transaction costs.
I don't really feel like I've explained that very well. The idea I had kind of got lost in the same old complaints about economics.
you mean that life is a many faceted thing, and can’t be neatly sumarised with a triple bottom line?
James / 8:13pm / 20 April 2005
Well yes. But no. That wasn’t actually my point. My main point was that humans are good at skipping over the sort of analysis these models are for, and making good decisions without fully understanding why. And I was suggesting that transaction costs (which are mostly ignored) of economic/social decisions can probably be found by looking at how hard we work to develop helpful abstractions/shortcuts in other areas (i.e., religion, philosophy). But I didn’t explain either of them very well.
Ryan / 8:41pm / 20 April 2005
You should study engineering. A lot of stuff about best affordable quality. Models to simplyfy processes. And all the kind of trade off’s involved. Talking about abstracting problems and all the other clap trap.
David / 9:23pm / 20 April 2005
I’m in the wrong job. I should be at uni
James / 1:22am / 22 April 2005
I’m loving it at the moment. But what makes you say you should go?
Ryan / 2:15am / 22 April 2005