On 10/25/02, William Dickens wrote:
... the "rationality" assumptions built into to any inter-temporal optimizing model are so demanding that "sort of trying to get it right" will get you no where near the predictions of the of the full-rationality-perfect-information model. The deviations are significant both for the individual and for the policy implications. Take saving for retirement. A little irrationality and mandatary saving can cause big increases in welfare. Take college choice. ... people seem to be amazingly uninformed. Anybody who says "oh well, there probably getting it approximately right," is kidding him/herself. ... Nearly everyone should get more schooling than they do. This is only one of many intertemporal decisions that people badly screw up because they aren't good at thinking about the future vs. the present.You are assuming that the only way to make good decisions about retirement or college is via direct calculation of costs and benefits across time. An obvious alternative, however, is to rely on the advice of knowledgeable experts. For example, if people would just listen to one William Dickens, they would know to save more for retirement and get more schooling. So in order for irrationality to produce bad decisions about retirement and school, people must not only be bad at thinking about the future, they must also be bad at thinking about whether to take advice from you and similar advisors.
Now I am willing to believe that many, perhaps most, people are in fact bad, even irrational, at taking advice. But even so, it is hard to see how it would make sense for an accountable democratic government to push or force people to save or go to school more. If people don't think they need more savings or school, it is hard to see how they would want their government to push them into doing so. So if governments are going to help irrational citizens by pushing them toward more savings and schooling, it would have to be because such governments are run by not-especially accountable elites.
Now maybe you accept this, and think yourself part of, or advisor to, an elite empowered to make ordinary people do things that are good for them, whether they like it or not. Maybe you accept that, if asked, ordinary people would not authorize this elite to act this way, and would not accept this elite's advice regarding how they should behave. But here's the crucial question: how sure are you that you and your fellow advisors, and the elites you advise, are substantially less irrational in this process of making ordinary people do things that are good for them? Can't elite advisors be irrational too? For example, might not the self-interest of academics, as sellers of schooling, bias their advice on schooling?
Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu
Asst. Prof. Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030-4444
703-993-2326 FAX: 703-993-2323
