Wednesday, May 11, 2005

The economist as freak

Recently, Bryan Caplan of Econolog mused about why people tend to dislike and ignore economists. In the end, he argued that dismal scientists should forget about being nice. Instead, they should be blunt, telling people how things really work as explained by the principles of classical economics. Call it the Larry Summers approach.

Mr. Caplan is right about how ecomists are perceived. Nonetheless, he simply misses the point. People mistrust economists because, unlike them, they don't constantly look at the world through the prism of maximization (at least conciously). This post by Caplan nicely illustrates this point:

I wear shorts about 10 months per year, and I live near Washington DC.
Judging from the number of funny looks I get, and the number of times perfect
strangers stare at me and ask "Aren't you cold?," my behavior is puzzling at

The silly explanation is that I'm from California. But that should
make me more sensitive to cold, not less! The real answer, naturally, is that
wearing shorts in the winter is good economics.

The simplest economic comback to the unwanted queries would be "Of course I'm not cold. I do own long pants. By revealed preference, if I were cold I wouldn't be wearing shorts."

But that's not quite right. The truth is, I sometimes am uncomfortably cold as a result of my
attire. So what gives?

The answer is that if I dressed more warmly, I would be more comfortable during the few minutes that I am outside (maybe 30 minutes per day), but less comfortable during the many hours that I am inside. It's cold outside, but warm inside, so I maximize my expected utility over the course of
the day.

Would you like to have a drink or hang out with someone who thinks like this? How about having him for a roommate or a son-in-law? I wouldn't, and I'm an economist