Bad Economics

June 28, 2011

Via the normally excellent Chris Dillow, I have learned that there is a thing called Experimental Economics. Apparently, some of these experimental economists are studying something called Ego Depletion. This is the idea that we have a limited amount of self control at any given time, and that actions undertaken that require self control deplete that amount.

In the paper I’ve linked, experimental economists have been doing some experimenting. They’ve found that people who’ve been ‘ego depleted’ are more likely to act selfishly. Naturally, this is a great boon for anyone who wants to explain away the behaviour of anyone undertaking tedious work; it’s not their fault they’re alcoholics, as their ego has been depleted. Look at how small it is now.

So how does this experiment work? Well, our economists make a distinction between implicit and explicit motives. Broadly, this distinction is between instinctive, habitual reactions to a situation and rational, reasoned responses. When determining your reaction to a situation you have to spend some of your self-control resource in order to opt for the latter. So people who’ve spent their self-control will be more likely to make instinctive or emotional choices. Our economists test this by giving two groups of people two slightly different tasks. In one group, participants in the experiment have to cross out all the ‘e’s in a document, while the other group had to cross out every ‘e’ except when it was followed by another vowel or had a vowel two letters away in the same word. The second group had to spend more self-control, and so were ego-depleted.

Participants then took part in an ultimatum game. This is a game in which one participant makes an offer of a share of a sum of money to another participant. If the latter accepts the share, both get the money in accordance with that share. If they refuse, neither do. This experiment has been used to demonstrate that people value fairness in the distribution of resources. In this case, our experimental economists predicted that people with diminished self-control would be more likely to make selfish offers as a consequence of that lower self control, while on the flip side they’d be more likely to reject unfair offers as a consequence of their emotional reaction to the unfairness of the situation.

What a massive heap of shit.

This is what happens when you let economists play Dungeons & Dragons for too long. They’ve decided that people have an amount of ‘Ego points’ that they can spend on casting spells – sorry, exercising self-control – before they have to replenish them by resting at an inn or similar. One imagines that they believe the working world goes somewhat like this:

CAPITALIST BOSS casts EGO DEPLETION on HUMBLE PEON

It’s super effective!

I can’t even begin to go into what’s wrong with this experiment, there’s just so much. Firstly, it’s not clear why any task requiring more mental effort somehow counts as ‘depleting ego’. Both tasks are tedious. The one they’ve chosen as ‘depleting ego’ is actually marginally more interesting than the other as it actually requires concentration, rather than mundane ticking of recognised letters. It would, however, mean that people are more likely to be tired afterwards, and have less energy to use to analyse the consequences of their choices when playing the ultimatum game. They’d therefore make less successful choices. This appears to be case from the results as presented. However, there is no way of distinguishing this hypothesis from the one actually put forward by the experimental economists. This, I would aver, is a bit of a Flaw.

You can’t just magic up a pretend psychological model and then use experiments to ‘prove’ it which could prove practically anything. However, this has been the habit of economists for centuries – I’m not surprised Chris likes this paper, as he’s a Marxist, and Marxism is nothing if not a magicked up model of human psychology. It’s also been their habit to ignore bits of evidence which don’t fit with their pet theory, and indeed in the paper the experimenters point to some neurological evidence which appears to contradict their ‘implict-explicit’ model, and then decide that the evidence is equivocal!

It’s always worth bearing in mind that big tranches of economics are based on glib one-size-fits all psychological models like this one. This is why economists keep getting stuff wrong.

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2 Responses to “Bad Economics”

  1. chris said

    Is it really a problem if the mechanism linking work to selfishness is tiredness rather than ego depletion? The point that work leads to more selfishness would still hold.
    Note that the point here isn’t that they made “less successful” choices – proposers actually moved closer to the selfish rational maximizer of elementary economic theory. It’s moot whether this is less successful or not.

    • Adam Bell said

      It’s a problem if the experiment is intended to prove a particular thesis about a particular psychological model. Proposers didn’t move towards a ‘selfish rational maximiser’ – they were more likely to pitch a lower offer to the other party when in a HED state for no apparent rational reason. This resulted in fewer successful deals. This is less successful. So they can’t have been more selfishly rational. They could, however, have been more selfishly irrational.

      You’re in danger of conflating all types of work together with your use of the word ‘tiredness’. This experiment showed that people who undertake more mentally demanding work are more likely to make selfish choices. This implies that decision-makers are always likely to tend towards the selfish, implying further that the sort of workplace-democracy model of socialism you’ve previously advocated would have unstable elements. THat would, of course, be pushing the conclusions of this experiment a little further than it merits.

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