Preferences > Awareness

I recently asked:

The vast majority of economic papers and books that offer explanations for human behaviors don’t bother to distinguish if their explanations are mediated by conscious intentions or not. (In fact, most papers on any topic don’t take a stance on most possible distinctions related to their topic.) …

Yet I’ve had even economics colleagues tell me that I should take more care, when I point out possible signaling explanations, to say if I am claiming that such signaling effects are consciously intended. But why would it be more important to distinguish conscious intentions in this context, compared to the rest of economics and social science?

Bryan Caplan answers:

Standard signaling models assume that people dislike sending the signal. It is this assumption that implies that signaling equilibria are highly inefficient – or even full-blown Prisoners’ Dilemmas. If people enjoyed signaling, in contrast, signaling equilbria could easily be ideal. What superficially appears to be a vast zero-sum game turns out to be fine because the players like playing the game.

So why don’t economists clearly acknowledge the centrality of conscious desire when they apply signaling models to the real world? Because we usually focus on cases where most people plainly don’t enjoy sending the signal. When I wrote The Case Against Education, I definitely double-checked this fact; but I probably wouldn’t have even launched the project if I’d spent a lifetime inside classrooms packed with jubilant learners.

I agree that, when explaining human behavior, it can often be important to be clear about the preferences that one is postulating. The same behavior explained by different preferences can have different implications for if we should encourage or discourage that behavior.

But when explaining behavior, postulated preferences and conscious intent are just separate and independent topics on which one can be clear. There is no obvious or necessary relation between them.

For example, the real reason that people go to school could because they like school, or it could be because they want to show off smarts, conformity, etc. And for either real motive, people could be fully conscious of that motive, or they could be self-deceived and in denial about it. For example, people could think that they enjoy school, but really go to show off, or they could think that they are trying to show off, but really go because they enjoy school.

While I’m pretty sure that Caplan claims that we go to school more to show off, I’m not actually sure if he has taken much of a stand on how conscious we are in choosing to go to school for this purpose. And that’s my point: I can love his new book (buy it) even without knowing this stance. Like most good economists, he doesn’t bother to distinguish how much his explanation of schooling is mediated by conscious intent.

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  • nevertaken

    Is it really possible to be self-deceived about our own subjective preference? If I ‘think’ (i.e. subjectively believe) that I enjoy school, does that not, in and of itself, mean that I *do* enjoy school?

    • No.

      • nevertaken

        Do mean in a time-offsetted way, such as: while I am at school, I don’t enjoy it; but when I am not at school I convince myself that I do enjoy it? I can see that. But if you mean I could be at school, thinking, ‘this is really great, I like this!’, but not actually be enjoying it, then maybe we are using different definitions for ‘enjoy’?

      • But if you mean I could be at school, thinking, ‘this is really great, I like this!’, but not actually be enjoying it, then maybe we are using different definitions for ‘enjoy’?

        Do you recognize that you might be at school and think “this is really great” when in fact you are only enjoying it a little bit? [If you accept this, why deny greater distortions?]

      • nevertaken

        Not really, maybe this is a cognitive experience I’m missing*, but I don’t experience any dichotomy between my subjective belief of my own pleasure and my actual pleasure. At least not during an experience itself: my belief can and does sometimes drift away from the actual experience at times when I’m not having the experience – the wrong belief gets pulled back into line with the reality quite sharply when I have the experience again though.

        * I mean missing in the sense discussed here:

      • Brian Slesinsky

        I think this might be a disagreement about the meaning of the word “preference”.

        Economists sometimes talk about “revealed preferences” – that is, preferences revealed by the choices you make. (In particular, what you buy). If you say you dislike something but buy it anyway, that’s considered your preference.

        By this definition, it seems odd to talk about whether you prefer to send an involuntary signal. If there’s no choice involved, is it really a preference?

        Also, if a preference is by definition revealed by what we do, how do you talk about people who buy something by mistake?

        It seems rather behavioralist.

  • cwcwcwcwcw

    Or you could try to decide what percentage we are conscious of our actions/desires. This highlights my problem with economics. In order to theoretically do it right you have get into psychology, both regular and evolutionary. And that’s just one dimension. You also need some version of fluid dynamics in terms of money/resource flows. And there’s a whole bunch of other dimensions too. IT’s like trying to predict the weather as if the clouds had personality and interacting politics. My question is, what can current economic successfully predict?

    As far as kids going to college to show off, as the parent of a timid/ambitious college freshman, I can assure you it’s WAY more complicated than that.

  • Robert Koslover

    I went to school through age 16 because I had no practical better alternatives available. I didn’t drop out of high school, because drop-outs are considered losers and I didn’t want to be considered a loser. (Perhaps that’s a variation of “showing off”?) I discovered late in high school that I actually liked physics, but still didn’t like school. Even so, I went to college because that’s the standard path for those who want to learn more physics or who seek a career in physics. And I went to graduate school to get a more exciting and better-paying physics job than would otherwise be possible. I confess that during ~22 years of formal schooling, “showing off” partly motivated me some of the time, and I occasionally even (sort-of) almost liked school. But I wonder whatever made you list those two as major motivations for actually going to school. Why not, instead, “because I was forced to go” or “to learn something” or “to get a good job” or maybe even “because all my friends were doing it?” Aren’t those rather straightforward (to me, anyway) kinds of motivations far more fundamental? To (mis?)quote Freud: “sometimes a cigar is just a cigar.”

    • Robert Koslover

      I should admit that your “showing conformity” example matches up pretty well with my “because all my friends were doing it” example, and maybe even with my “dropouts are considered losers” comment.

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  • David Condon

    It’s interesting to see that economists are still so heavily influenced by psychoanalysis. Defining conscious vs subconscious is really hard to do, which is why those terms are less popular today than they used to be. They’ve been replaced by other terms, which are more specific, such as activation of working memory. So to use working memory as a substitute; I’m not sure why an economist would need to determine whether working memory is active when the economist is trying to determine the reinforcer responsible for increasing utilization of a particular signal. At the same time, the types of signals being sent out would probably be very different under circumstances in which working memory is utilized than those in which working memory is not utilized.

  • Charlies

    Daniel hausman has written an entire book on this question, which is likely the most nuanced take.

  • Alan Crowe

    The broad category of conscious intent contains different kinds of rationality. Do we postulate that behavior is chess-rational or sideways-looking-rational? I’m sorry that I don’t know the official social-science terms. I’d better explain what I mean.

    Think about an employer introducing an incentive scheme. There are four initial responses, chess-rational – think through one’s options and what bonus they will earn, booklet&training-rational – try to do what the employer said was the right way to respond to the new bonus scheme, conservative – just keep doing what you’ve always done and hope for the best, headless-chicken – something, anything.

    But after a few months the first bonuses are paid and the employees get to discuss and compare. Over time they copy each other. More specifically they decide who is doing well under the bonus scheme, more money, not too much effort, and attempt to do the same themselves. This is sideways-looking-rationality. It is not available initially because it is not forward looking, but it is much easier on the brain than chess-rationality because one isn’t trying to work out hypotheticals. Sideways-looking-rationality is a popular strategy for getting through life. You get off to a slow start but in the end you do as well as a clever person with their chess-rationality, because you end up copying them. (or maybe you end up copying some-one who practices headless-chicken rationality and got really lucky; sideways-looking-rationality can work out well in the end, even if there is no chess-rationality to copy.)

    It is hard to make detailed predictions about how sideways-looking-rationality will work out. It is a social and psychological theory. How honestly will people share their knowledge? How fast will they learn? But maybe that doesn’t matter. Usually it ends up with much the same outcome as chess-rationality, so an economist can hope to get an approximate long term prediction by putting on his chess-player’s hat and just thinking about what is the best way to play the incentive scheme.

    However, this leads to rival economists talking past each other. The first economist assumes that people respond to incentives without bothering about how this happens and how conscious the responses are. The second economist sees the first using the chess-player approximation to get a prediction and pounces on this as the actual mechanism.

    It is usually pretty easy to refute chess-rationality. Look at the dynamics. Chess-rationality predicts that every-one starts gaming the system from day one. That doesn’t happen. Maybe the system falls apart in year three as too many employees learn to game it, but it doesn’t go splut on day one.

    Another way to refute chess-rationality is to investigate the micro-foundations. Talk to the employees. What do they say. Well, Alice copies Betty, Betty copies Carol, Carol copies David, they clearly aren’t playing chess.

    So economist number two thinks he has convincingly refuted economist number one. Economist number one doesn’t understand the criticism because he merely assumed that people respond to incentives, not that they do so consciously.

    The discussion goes downhill from there because the issue is not conscious versus unconscious, but chess-rational versus sideways-looking-rational.

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