Yet Another Reason to Hate Economists

It has been argued previously here that John McCain, among others, seems to harbor a pronounced dislike for economists.

Well, you don’t even have to be a politician to hate economists. Via Cory Doctorow at BoingBoing, here’s a fascinating bit from an old paper by Robert Frank, Tom Gilovich (best known for his hot-hand refutation, and this fun book), and Dennis Regan that assesses how economics students perform in cooperation games as compared to other people. It’s not pretty:

A study by Gerald Marwell and Ruth Ames found that students of economics are indeed much more likely to free-ride in experiments that called for private contributions to public goods.

Their basic experiment involved a group of subjects who were given an initial endowment of money, which they were to allocate between two accounts — one “public,” the other “private.” Money deposited in a subject’s private account was returned dollar for dollar to the subject at the end of the experiment. Money deposited in the public account was first pooled, then multiplied by some factor greater than one, and then distributed equally among all subjects.

Under these circumstances, the socially optimal behavior is for each subject to put her entire endowment in the public account. But the individually most advantageous strategy is to put all of it in the private account. The self-interest model predicts that all subjects will follow the latter strategy. Most don’t. Across 11 replications of the experiment, the average contribution to the public account was approximately 49 percent.

It was only in a 12th replication with first-year graduate students in economics as subjects that Marwell and Ames obtained results more nearly consistent with the self-interest model. These subjects contributed an average of only 20 percent of their initial endowments to the public account, a figure significantly less than the corresponding figure for noneconomists.

Among other things, this might explain why:

1. Economists carry a more dyspeptic view of human behavior than nearly anyone else; and

2. Why comments on economics blogs (though not this blog, which is more econ mutt than purebred) tend to be more cutting than average, by a factor of about 8,000.

3. Behavioral lab studies in general should be reviewed skeptically, for the deck can be stacked in oh-so-many ways.

(Hat tip: Therese Odell, and a few others.)


Derick

I think #3 misunderstands the scenario. It is in fact better for you to keep your money private. While it is multiplied by a factor greater than one, it is then distributed, so while the total money going out is higher you individually get less than if you kept it. The most advantageous situation would be for everyone else to go public but for you to go private.

You seem to be referring to the fact that everyone would get more if everyone put in and no one took out. While this is true, that only puts your own putting out as advantageous if it will cause other people to. And seeing as the decision is made independently, there's no room for such an agreement.

So it's not just spite that would make one keep one's money.

Agagooga

Why comments on economics blogs... tend to be more cutting than average, by a factor of about 8,000.

Err, I'd have thought that'd describe Feminist blogs.

And, due to the polarising effects of the political blogosphere, Liberal/Conservative political blogs.

Peter

I kind of don't get it. The least amount of people to play the game apears to be 5.
That means if 1 person pull out you will loose 1/5 of your money. Now if u know the multiplication factor for the investment you can make a pretty clear risk assesment and calculate EV.
I guese you could gain an investment*k by saving your money. But it is unlikly.

Shouldnt economist be MORE likly to take the investment?
The result seems to be skeewed here.
What insentiv do the players have. Get the most money or get more then anyone else?

Also if you can se your co-players and any of them are bigger then you you should probably pool the money.

Shaun C

I think this game should be called the mattress game. The game basically makes you choose between stuffing your money in a mattress, or investing it with an uncertain return.

I think if we looked at economists as a group they would have more money in stocks than under the mattress.

vjkins

does this then show that if you played one-time pd with someone who knew game theory, would you both still end up lose-lose?

Jonathan

Poster #1 here. With admittedly limited literary skills (physicist by trade), my internet commentary always reads harsher than I intend. I suggest neither bias nor impartiality, simply that opening topic references so charged in choice of noun (McCain) and verb (Hate), insert the reader into a very defensive frame of mind. All preconceived notions and political opinions are brought to full bear when confronted with such well trodden ideas. The mind morphs from blank slate to a fortressed and entrenched battlefield. I can only believe it to be an inefficient method of communicating ideas.

Personally, I wish to express that the comment necessitated the article be framed in proper context of potential political positioning and intended effect. Under such conditions I was soon set upon by weariness, leaving with little understanding beyond, " ... something ... something ... John McCain... yea."

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kit ramsey

i don't have anything against them, but if economists were physicists, they couldn't boil water.

Eric Finley

Per the above... "the greatest welfare is generally yielded to society when individuals pursue their own rational self interests."

To paraphrase Rosencrantz and Guildenstern are dead: "Assertion. Point."

This experiment/game was an example of a situation where this statement is demonstrably false. Yes, it's an artifical setup, for an experiment. But to assert that it is hardly ever the case in the real world... that takes unusual econothodoxical blindness indeed.

James

I echo Adam on his comment concerning the mathematics of the game -?the rational player will defect rather than cooperate, since placing all of one's money in the private pool will yield more.

One doesn't have to be an economist to determine this (although perhaps a course in Game Theory helps).

My guess is economists tend to defect in these sorts of simulations b/c they recognize that the greatest welfare is generally yielded to society when individuals pursue their own rational self interests. IMHO, "social" responsibility is being demagogued far too much these days.

In the end, many of the claims made by the author of this OpEd are dubious at best, particularly the final three points listed in the article. In particular, I echo Jeff in asking, "what does "more cutting" mean? How something judged more so by a factor of 8000?"

sarahCMS

Interesting, another reason not mentioned in this article of why some people hate economists, is probalby because they are fair. Meaning this look for equality not equity. They probably make some decisions which are not considered moral for others. Economics teaches people how rational people look for self-interest, so logically they will save in private. But the truth is that not everyone alwyas acts in self interest, soem people have different goals, priorities, etc. Assuming is a big mistake many economists make.

Punditus Maximus

I guarantee you, if they were playing for "real" money, the numbers would be much more similar for both groups.

Adam

@#3-Noah

You are missing the math behind the game. If everyone but one person puts 100% in the pool, and that one puts 100% in the private, the private person will receive anywhere from 200% to 150% of the others if the multiplying factor is between 1 and 2.

@#8-Gary

Yeah that's kind of his point.

Knut

I've played this game as an undergrad econ student. We played it a few weeks after another game where the overall winner got a pretty cool prize.

So when I played this game I wanted to win. That meant getting more profit than others and the sure way of getting that in an anonymous low amount of rounds game is contributing nothing and taking everything. I "won" by a decent margin. Turned out the only thing I won was the small economic incentive the game arrangers provided to make people play the game properly.

In my opinion there were only two ways to play the game, either you contribute EVERYTHING to the public pot or NOTHING. Anything in between just shows your insecure and dont really understand the game.

So I would like to see data on how people played the game. In my class a lot of people admitted they didn't really understand the game and had to get help or spend alot of time to get past the initial test questions that were supposed to teach you the game. The less people that understand the game the more people youll see go with the in-between sollutions which just show you dont understand the game.

If the game had many rounds, I would have played it different, because I believe people would stop being greedy at some point and realize they could maximize their own profits (and everyones profit) better by signalling a will to share with the others.

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Steve

Economists favor investment and Republicans favor speculation.

When, as with most Republicans, you have children who are "dumb as a sack of hammers" it is essential to have a society based on speculation if they are to have any future. They would be eaten alive it they actually had to make productive investments with their inheritances!

Jeffrey

This reminds me of a study I read about in about 1999 that did a morality comparison between MBA students and criminals. The criminals "won."

Dan

I think you would see a similar distinction in a lot of games. For example the "Guess 2/3 of the average" where a group of people guess a number between 0 and 100 and the person that is closest to 2/3 of the average of all the guesses wins. The Nash equilibrium is 0, so I think economists would guess lower amounts that a random collection of non-economists, especially if they know they are playing other economists. That is just a theory though.

T-Bone

#7, I was gonna say they must be libertarians "proving" the efficiency of the free market. Now if only they could form some sort of organization to fix that free-rider inefficiency... Maybe they could even vote on the individuals to lead the organization. Libertarians for big organization!

BrianCMS

Its great to know that economics makes you a horrible person for the community.

I think game theory and other behavioral games assume people act in their own selfish best interest, but most people won't know exactly what that option may be. Economic students may have been exposed to these situations before, and if they all know the optimal personal behavior, none will fall for the sucker move of getting undercut in the public pool. Ironically, these same students should know the group optimal behavior, but obviously they are too cynic of human behavior to trust each other and benefit mutually.

pelayocms

The economist did not get the results they expected because they expect everyone to act rationally. This is mainly why economist continue to be wrong, which drives politicians to dislike them. Self-interest is a tough topic to predict beacuse everyone thinks differently.
This games have their loophooles, but in the end they clearly represent a real scenario were everybody acts on their own self-interest and this interest vaires from person to person

Al

It is the tip of the iceberg of evidence that economics persuades us out of our good instincts and leads society astray.