The Limits of Economics

[From Bruce Gregory (971122.2150 EST)]

_The Armchair Economist: Economics and Everyday Life_ by Steven Landsburg is a
very readable book that succeeds (unintentionally) in making very clear the
limitations of an economic perspective (and the dangers of applying to
individuals principles gleaned from groups). The first section of the book is
entitled "What Life is All About". The first chapter is "The Power of
Incentives: How Seat Belts Kill." It begins with the statement, "Most of
economics can be summarized in four words: 'People respond to incentives.' The
rest is commentary." It would be difficult to think of a more misguided
statement. Yet it is clear that once you accept this assumption, everything
else follows.

Bruce

[From Bruce Abbott (971123.1055)]

Bruce Gregory (971122.2150 EST)

_The Armchair Economist: Economics and Everyday Life_ by Steven Landsburg is a
very readable book that succeeds (unintentionally) in making very clear the
limitations of an economic perspective (and the dangers of applying to
individuals principles gleaned from groups). The first section of the book is
entitled "What Life is All About". The first chapter is "The Power of
Incentives: How Seat Belts Kill." It begins with the statement, "Most of
economics can be summarized in four words: 'People respond to incentives.' The
rest is commentary." It would be difficult to think of a more misguided
statement. Yet it is clear that once you accept this assumption, everything
else follows.

Last year around Christmas a local radio station offered to give away a
brand new Corvette to the last person to remove their hands from said
Corvette. There was room for only about 40 persons around the Corvette
(which was on display in a mall) so the station had to use a lottery system
to pick the 40 contestants from the huge list of those who applied.
Contestants had to keep at least one hand on the Corvette at all times,
except for a 10-minute break period scheduled once every three hours. Two
and a half days later there were still two highly sleep-deprived contestants
standing there; eventually one of them got so tired that she forgot to keep
both hands on the car as she removed a coat she had been wearing. Most
contestants had endured over 36 hours before they simply couldn't take it
anymore and gave up.

Please explain why so many persons volunteered to put themselves through
this hell, if people do not respond to incentives.

Regards,

Bruce

[From Bruce Gregory (971123.1150 EST)]

Bruce Abbott (971123.1055)

Last year around Christmas a local radio station offered to give away a
brand new Corvette to the last person to remove their hands from said
Corvette. There was room for only about 40 persons around the Corvette
(which was on display in a mall) so the station had to use a lottery system
to pick the 40 contestants from the huge list of those who applied.
Contestants had to keep at least one hand on the Corvette at all times,
except for a 10-minute break period scheduled once every three hours. Two
and a half days later there were still two highly sleep-deprived contestants
standing there; eventually one of them got so tired that she forgot to keep
both hands on the car as she removed a coat she had been wearing. Most
contestants had endured over 36 hours before they simply couldn't take it
anymore and gave up.

Please explain why so many persons volunteered to put themselves through
this hell, if people do not respond to incentives.

What interests some of us, is all the people who heard this offer and yet did
_not_ respond to this incentive. This post nicely captures why you have such
difficulty understanding some of us.

Bruce

[From Bruce Abbott (971123.1315 EST)]

Bruce Gregory (971123.1150 EST)]

Bruce Abbott (971123.1055)

Last year around Christmas a local radio station offered to give away a
brand new Corvette to the last person to remove their hands from said
Corvette. There was room for only about 40 persons around the Corvette
(which was on display in a mall) so the station had to use a lottery system
to pick the 40 contestants from the huge list of those who applied.
Contestants had to keep at least one hand on the Corvette at all times,
except for a 10-minute break period scheduled once every three hours. Two
and a half days later there were still two highly sleep-deprived contestants
standing there; eventually one of them got so tired that she forgot to keep
both hands on the car as she removed a coat she had been wearing. Most
contestants had endured over 36 hours before they simply couldn't take it
anymore and gave up.

Please explain why so many persons volunteered to put themselves through
this hell, if people do not respond to incentives.

What interests some of us, is all the people who heard this offer and yet did
_not_ respond to this incentive. This post nicely captures why you have such
difficulty understanding some of us.

Your perception is incorrect. Now, stop dodging and answer the question,
please.

Regards,

Bruce

PCT is silent about the idea of incentives. If we interviewed the
people who entered the contest versus those who did not enter the
contest we may be able to find out some of the reasons.

Using myself as an n of 1, here are some reasons why I would not enter
the contest:

I already have an adequate car.

I don't have the time it might take.

I don't want to put myself in a situation which may result in
embarassment.

I don't like that particular car.

The prize in the car contest raises the questions: Do I want this? Am I
willing to do what is required to get it? An answer of no to either
question would result in a person not entering the contest. Maybe that
is all an incentive is. Something which raises these questions in a
person. The answer to the questions determines the goal a person
selects to work on.

The Test For the Controlled Variable is useful for helping to find out
what goal a person is working on. It does not tell us why a person
selected a particular goal.

Bruce Gregory wrote:

ยทยทยท

From: David Goldstein
Subject: Re: The Limits of Economics
Date: 11/23/97

[From Bruce Gregory (971123.1150 EST)]

Bruce Abbott (971123.1055)

>Last year around Christmas a local radio station offered to give away a
>brand new Corvette to the last person to remove their hands from said
>Corvette. There was room for only about 40 persons around the Corvette
>(which was on display in a mall) so the station had to use a lottery system
>to pick the 40 contestants from the huge list of those who applied.
>Contestants had to keep at least one hand on the Corvette at all times,
>except for a 10-minute break period scheduled once every three hours. Two
>and a half days later there were still two highly sleep-deprived contestants
>standing there; eventually one of them got so tired that she forgot to keep
>both hands on the car as she removed a coat she had been wearing. Most
>contestants had endured over 36 hours before they simply couldn't take it
>anymore and gave up.
>
>Please explain why so many persons volunteered to put themselves through
>this hell, if people do not respond to incentives.

What interests some of us, is all the people who heard this offer and yet did
_not_ respond to this incentive. This post nicely captures why you have such
difficulty understanding some of us.

Bruce

[From Bruce Gregory (971123.1415 EST)]

Bruce Abbott (971123.1315 EST)

Bruce Gregory (971123.1150 EST)]

Bruce Abbott (971123.1055)

Last year around Christmas a local radio station offered to give away a
brand new Corvette to the last person to remove their hands from said
Corvette. There was room for only about 40 persons around the Corvette
(which was on display in a mall) so the station had to use a lottery system
to pick the 40 contestants from the huge list of those who applied.
Contestants had to keep at least one hand on the Corvette at all times,
except for a 10-minute break period scheduled once every three hours. Two
and a half days later there were still two highly sleep-deprived

contestants

standing there; eventually one of them got so tired that she forgot to keep
both hands on the car as she removed a coat she had been wearing. Most
contestants had endured over 36 hours before they simply couldn't take it
anymore and gave up.

Please explain why so many persons volunteered to put themselves through
this hell, if people do not respond to incentives.

What interests some of us, is all the people who heard this offer and yet

did

_not_ respond to this incentive. This post nicely captures why you have such
difficulty understanding some of us.

Your perception is incorrect. Now, stop dodging and answer the question,
please.

Some people respond to some incentives some of the time. Depends on what their
intentions are, whether something is or is not, at this moment, an incentive,
a counter incentive, or something to be ignored.

Bruce

[From Bruce Gregory (971123.1425)]

Bruce Abbott (971123.1315 EST)

The people sponsering the event were only concern that a number of people
learn about the event and participate in it. They didn't care who responded,
just as an advertiser doesn't care who responds to an ad, only that a certain
number of people do. Why did the first person remove his or her hands from the
car? What happened to the incentive? Ditto for two through thirty-nine. What
about the folks who never showed up even though they would have liked to have
the car? What did this "experiment" tell you?

Bruce

[From Bill Powers (971123.1711 MST)]

Bruce Abbott (971123.1055)--

Last year around Christmas a local radio station offered to give away a
brand new Corvette to the last person to remove their hands from said
Corvette....

Please explain why so many persons volunteered to put themselves through
this hell, if people do not respond to incentives.

I would say they volunteered because they thought that the effort in
involved in going through hell was outweighed by the value of the car,
which they clearly wanted to get. I presume that nobody went through this
who didn't want the car.

Of course another way to explain this is to say that the car acted as an
incentive on some people's nervous systems, causing them to respond by
volunteering for the contest. That would seem pretty simple-minded to me,
though. Surely that's not what you're claiming.

Best,

Bill P.

[From Bill Powers (971123.1936 MST)]

David Goldstein
Subject: Re: The Limits of Economics
Date: 11/23/97

PCT is silent about the idea of incentives. If we interviewed the
people who entered the contest versus those who did not enter the
contest we may be able to find out some of the reasons.

Using myself as an n of 1, here are some reasons why I would not enter
the contest:

I already have an adequate car.

I don't have the time it might take.

I don't want to put myself in a situation which may result in
embarassment.

I don't like that particular car.

The prize in the car contest raises the questions: Do I want this? Am I
willing to do what is required to get it? An answer of no to either
question would result in a person not entering the contest. Maybe that
is all an incentive is. Something which raises these questions in a
person. The answer to the questions determines the goal a person
selects to work on.

The Test For the Controlled Variable is useful for helping to find out
what goal a person is working on. It does not tell us why a person
selected a particular goal.

Nicely put, David. What we have to get rid of is the idea that an incentive
is something we do TO a person to MAKE that person behave in a particular
way. An incentive is always set up as a result that can be obtained by
performing a specific behavior. If you'll participate in this silly
contest, you can give yourself a chance of owning this car. Some people
will want the car and some won't. The ones who want it might buy it, except
that the contest would be a cheaper way to get it if they can become a
player. Some would want it ONLY if they didn't have to buy it, so for them
the person who puts on the contest is the real sucker. Heck, fraternity
pledges go through a lot worse than that, for less.

Suppose you somehow trap a lot of people in a closed room with a locked
door and no windows. You can then get these people to leave the room by
offering as an incentive a key to the door. Look, Ma, I made all those
people leave that room! Ignore that man in the corner making a hole in the
wall with that fire axe. Next time I won't leave a fire axe in the room.

If incentives are simply things that will satisfy existing reference
levels, why do those reference levels exist? Hint: HPCT. Is PCT really
silent on the subject of incentives?

Best,

Bill P.

[From Bruce Abbott (971124.1045 EST)]

Me:

Last year around Christmas a local radio station offered to give away a
brand new Corvette to the last person to remove their hands from said
Corvette. There was room for only about 40 persons around the Corvette
(which was on display in a mall) so the station had to use a lottery system
to pick the 40 contestants from the huge list of those who applied.
Contestants had to keep at least one hand on the Corvette at all times,
except for a 10-minute break period scheduled once every three hours. Two
and a half days later there were still two highly sleep-deprived contestants
standing there; eventually one of them got so tired that she forgot to keep
both hands on the car as she removed a coat she had been wearing. Most
contestants had endured over 36 hours before they simply couldn't take it
anymore and gave up.

Bruce Gregory (971122.2150 EST) --

Some people respond to some incentives some of the time. Depends on what their
intentions are, whether something is or is not, at this moment, an incentive,
a counter incentive, or something to be ignored.

You appear to believe I am making the claim that incentives work, on all
individuals, all the time. That is incorrect, and in fact I can't think of
a single experimental psychologist who would, or ever has, made that claim.
Before one can predict whether a given incentive will work for a given
individual, you have to learn quite a bit about how various factors affect
individuals, and what the states of those factors are for this particular
individual. For my part, I see your claim as asserting that incentives
don't work, period. As the mall observation shows, this is clearly incorrect.

In fact, I was hoping you would provide an _explanation_ for the phenomenon
by reference to a scientific theory of behavior called HPCT. But if, to
your mind, the phenomenon doesn't exist, it needs no explanation, does it?
Which of course leaves us completely mystified as to why all those
contestants behaved as they did.

Regards,

Bruce