Tuesday, May 5, 2015

Money Wisdom #354

"By formulating claims of behavioral economics in terms of rationality - an enormously wider concept than utility maximization - it somehow shifts the blame to people: it is people who are not rational. (This is the oldest trick in the book of outdated science: if reality does not conform to theory, then reality must be mistaken.) But this is a preposterously ridiculous claim. It boils down to the meaningless statement that the economic subject, this figment of imagination that has informed economic philosophy for more than one hundred years now, is rational, while people are not.

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Our discussion suggests considering the opposite view, namely that it is the object rather than the subject that is irrational. Economic objects confront people with crystallized patterns of irrationality regardless of how rational or irrational these people are.

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A direct demonstration of how an allegedly irrationally behavior is actually inscribed in economic objects is found in Ariely's work. Ariely wonders why ordinary people might steal small items in certain circumstances - a can of Coke from a refrigerator in a common area, office supplies from their work place, and so on - but would not steal an equivalent sum of money. Ariely conducted a series of experiments to verify that this is indeed the case and to explain 'how does this irrational impulse work?'

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The simple explanation is that people are honest, and they would not steal an object of value. Of course, in strict economic terms a $1-pencil is equivalent in its value to a $1-bill. Yet this equivalence is in contrast to the reality of contemporary consumer economy where a $1-pencil is in fact a type of rubbish. The pencil has no economic value whatsoever once it is purchased. It ceases to be an economic thing (i.e. something that can be sold and bought) and enters the untraceable sphere of objects that the consumer economy places at our disposal - some of them more useful, some less, but as a whole comprising a burdening mass we constantly take care of. (Every citizen in a consumer economy gets a sickening feeling from time to time; we simply have far too many things - something we never say of money.) In other words, what Ariely's question fails to notice is Marx's insight about the monetary economy - money is more valuable than any specific thing that money can buy. Ariely's experiments confirm the status of money as an irrational object: a thing that surpasses its equivalents.

Noam Yuran What Money Wants (2014) p.66-67 

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