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Have you ever wondered why economists hold seemingly counter-intuitive opinions on issue after issue?
It certainly perturbs friends (and my girlfriend in particular). To the non-economist, those of us trained in the dismal science have a frustrating, sometimes inhuman, ability to detach ourselves from emotive arguments, all the while trying to poke holes in popular ideas.
Where does this desensitisation come from?
The best answer was articulated by Russ Roberts on Twitter last week, and originates from an under-appreciated nineteenth century French economist called Frederic Bastiat.
Using the example of a broken window, Bastiat pointed out that with most actions, there is a first order consequence – something directly observable or “seen”. When a window is smashed, a glazier comes to repair it. We may observe this, and in isolation identify this activity as “good” for the economy.
Yet too often human beings ignore the “unseen” – the opportunities foregone, and the likely long-term consequences of a choice. “If he had not had a window to replace,” Bastiat explained, “he would, perhaps, have replaced his old shoes, or added another book to his library.” To finance the repair of a broken window, the window’s owner cannot use his money in other ways, which he’d no doubt prefer.
This distinction between the “seen” and “unseen” may seem obvious. But example after example, particularly in political discourse, shows how it strains our human instinct to weigh up alternatives or consider unintended effects.
Remember when the coalition government’s policy of “free” school meals for five to seven year-olds was announced in 2013?
Campaign groups rallied to praise the £600m commitment, claiming it would enhance educational attainment, based upon results from narrow pilot schemes. It was only economists who seemed to question whether this spending really obtained the best bang for the buck to increase attainment, or whether the money could be better used in other departments – or even, heaven forfend, be left with taxpayers.
Similar narrow thinking dominates the debate around the Customs Union.
Commentators talk about the potential costs for existing businesses of complying with rules of origin tests and other administrative requirements if we leave.
Yet few ever quantify exactly how significant a problem this is. It seems to be taken as given that any new costs are reason enough to either resist leaving or reach some extensive new customs arrangement. Few weight these costs against the potential upsides stemming from an independent tariff and commercial trade policy.
The great thing about economics is that, once you get it drummed into you that (as the great Thomas Sowell once said) “there are no solutions, only trade-offs”, you view social and political phenomena through this inherently sceptical lens. You do not take it as given that intentions will be achieved. You question and speculate on whether the approach or choice is truly the best use of resources, and what may result from it.
When a politician blithely commits to “making childcare higher quality”, you wonder how much any new regulation of the sector will push up prices, and hence make formal care less affordable.
When the living wage campaign demands that all employers pay £10.20 per hour, you consider whether such a cost increase may erode opportunities for young, unskilled workers looking to get their foot on the jobs ladder.
When Jeremy Corbyn states that the existence of profits in certain industries means lower prices could be delivered under nationalisation, you consider whether public ownership is more likely to become captured by producer interests or suffer from worse profitability.
When governments continually tell us that HS2 will be “good for the economy” because the economic benefits exceed the costs, you consider whether other investments, such as road schemes in areas with bottlenecks, would generate even higher returns.
When someone calls for banning plastic bags for environmental reasons, you think about what the effects of paper bags are for the scale of landfill sites, or the health impact of repeat use of linen bags given hygiene risks.
None of this is to say that economists can always give clear and definitive answers. Value judgements are needed to outline what the aims of an action really are. Practitioners disagree on what weight to assign to differing concerns, conclude differently on whether certain consequences are worth tolerating, and use different techniques to calculate effects.
But the reason why economists will counter and question almost every opinion you have about news is not because we are cold or cruel, but because we are programmed to consider opportunities foregone and potential consequences.
This article was first published in City AM.
TAGS: economic theory, frederic bastiat, opportunity costs, ryan bourne, thomas sowell, trade-offs
Tel Aviv, Israel-based artist Gustavo Viselner specializes in "pixel art." In one of his series, he takes a look at famous TV shows.
TAGS: arts, pics, pixelated, tv shows
Created and Directed by: Charlie Todd
Executive Producers: Alan Aisenberg, Justin Ayers, Juan Cocuy, Andrew Soltys, and Charlie Todd
Co-Producers: Aleks Arcabascio, Isabel Lopez
Associate Producer: Michelle F. Thomas
Production Coordinator: Dave Szarejko
Production Assistants:Alexis Trevizo, Jonathan Portee, Alex Augustyniak, Jamel Francis, Dave Greenberg, Chris Kelly, Adam Manison
Director of Photography: Justin Ayers
Camera Operators: Alex Crowe, Mike Doyle, Chloe Smolkin, Spencer Thielmann
Hidden Camera Technicians: Marius Becker, Ryan Hamelin
1st Camera Assistants: Erin Trout, Katie Voss
2nd Camera Assistants: Goran Mrvic, Kelli Wilcoxen
Still Photography: Arin Sang-urai
Gaffer: Ted Maroney
Key Grip: Cory Beisser
Best Electric: Seth Margolies
Best Grip: Andrew Naugle
G&E Swing: Eric Ambrosino
Production Designer: Anthony Henderson
Art Director: Sydney Bowers
Production Sound Mixer: Alan Kudan
A2: Artur Szerejko
Sound Intern: Lucas Kadar
Editor: Matt Braunsdorf
Assistant Editor: Ryan Connors
Post-Production Sound Mixer: Arjun Sheth
Coloring Facility: Irving Harvey
Music by: Tyler Walker
Trivia Consultants:Ross White and Mackensie Pless
Special Thanks: One Star Bar (Joe DiPietro, Joe Cordi), Tony Hightower
Host: Yoni Lotan
None of Your Quizness: Lou Gonzalez, Chrissie Gruebel, Brian Urreta
For our latest mission, we surprised random trivia teams by turning a regular bar trivia night into a high stakes game show.
This project was a collaboration with the new movie Game Night. Our first task was to find the perfect bar. We needed a space that had a back room where we could build our set, and a basement where we could set up our control room. “one star” bar in Chelsea ended up being perfect.
Installing a truss for our lights in the back room.
Building the set.
The control room in the basement.
For the “returning champions” None of Your Quizness, we cast our improviser friends Lou Gonzalez, Chrissie Gruebel, and Brian Urreta from the great improv team The Mannequin Room. They were secretly given all of the answers in advance, allowing us to make sure the real people we were surprising always won.
All of the teams we surprised were real, existing trivia teams. We worked with TriviaNYC to find the best teams. TriviaNYC actually runs trivia games at “one star” bar already, but we specifically asked them to help us find teams that had never played at “one star.” This way they wouldn’t know the bar had a back room, and they would be less likely to spot our hidden cameras in the front. We invited the teams to come at different times throughout the night, so we could surprise them one by one. They thought they were coming to a normal bar trivia event.
The reactions when the teams walked through the curtain were so much fun. On one side of the curtain was a normal bar, and on the other there was a full game show set with lights, theme music, a cheering studio audience, and an announcer introducing their actual team name and telling them to “come on down.”
Our friend Yoni Lotan played both the bartender and the host of the game show.
Yoni, as “Alex Martindale,” announces that the winner will receive a $1,000 prize.
The trivia consisted of 10 main round questions and then one final question. The final question was “final Jeopardy” style where the teams could wager as many of their points as they liked. (The video cuts this aspect out for simplicity.) We arranged it so the “returning champions” would always wage 100% of their points and get the answer wrong, ensuring that our challengers would always win.
Celebrating a correct answer.
Realizing they won the game!
Our confetti cannon was probably a little too big for the room. It was ridiculously powerful and over-the-top.
Our “stage manager” Dave Szarejko brings out the $1,000 prize. We really did give each team $1,000.
TAGS: missions, featured
In "The House that Spied on Me," Kashmir Hill outfits her home to be as "smart" as possible and writes about the results.
TAGS: encryption, internetofthings, privacy, spyware, surveillance
Wow. Word traveled fast about my knee injury.
As I mentioned on Friday, I’m in a lot of pain. After several days of being unable to walk, though, I am happy to report that I’m slowly on the mend. Thank you to everyone who sent kind messages. It really meant a lot as I was stuck in bed. Thank you even more for your long, thoughtful comments below Friday’s com—
What’s that? As of the... [read more]