Transcript: John Elster and John Ralston Saul | Apr 15, 2007

[Theme music plays]

The opening sequence rolls. The logo of “Big Ideas” featuring a lit lamp bulb appears against an animated green slate.
Then, Andrew Moodie appears in the studio. The walls are decorated with screens featuring lit lamp bulbs, and two signs read “Big Ideas.”
Andrew is in his early forties, clean-shaven, with short curly black hair. He's wearing a gray shirt over a gray cotton tee.

Andrew says HELLO THIS IS
“BIG IDEAS.”

He coughs and says
AND I'M SORRY AND I'M ANDREW MOODIE.
RATIONAL CHOICE THEORY PURPORTS
THAT IF YOU HAVE ENOUGH
INFORMATION YOU CAN PREDICT
RATIONAL HUMAN BEHAVIOUR.
FOR EXAMPLE LET'S SAY YOU HAVE
OH I DON'T KNOW A TV HOST WHO
HAS A ONE-YEAR CHILD THAT WOKE
UP SCREAMING AT AROUND THREE
A.M. LAST NIGHT.
TODAY WILL HE “A” DO WHAT EVERY
CHILD SPECIALIST ADVISES AND
LEAVE THE CHILD IN THE CRIB
SCREAMING AND KEEPING EVERYBODY
IN THE HOUSE AWAKE FOR HOURS?
OR “B” WILL HE FINALLY PICK UP
THE CHILD, PLACE THE CHILD IN
BED WITH HE AND HIS WIFE AND
GET A GOOD NIGHT'S SLEEP?
WELL IF THE HOST IS A RATIONAL
HUMAN BEING THEN JON ELSTER CAN
CALCULATE THE SOLUTION.
HE IS A SOCIAL AND POLITICAL
THEORIST WHO BELIEVES THAT
RATIONAL CHOICE THEORY CAN
EXPLAIN AND THEREFORE PREDICT
HUMAN BEHAVIOUR AND WHAT HE HAS
TO SAY MIGHT SURPRISE YOU.

A clip plays in which Jon Elster stands behind a wooden podium giving a lecture.
He’s in his seventies, clean-shaven, with short side-parted white hair. He’s wearing a gray suit, striped shirt, and checked gray tie.

Jon says THIS TALK IS
BASED ON A FORTHCOMING BOOK.
THE BOOK IS LARGELY A TOOL
BOOK, A TOOLBOX OF MECHANISMS.
BUT IT ALSO HAS, HAS EXTENSIVE
DISCUSSIONS OF METHODOLOGY
INCLUDING DISCUSSIONS OF
RATIONAL CHOICE THEORY.
I SUGGESTED BY THE TITLE OF MY
BOOK MY CONCLUSIONS ARE
SOMEWHAT AMBIGUOUS.
BEHAVING RATIONALLY IS
SOMETHING WE DO EVERY DAY WHEN
WE CHOOSE THE MORE EFFICIENT
MEANS TO ACHIEVE OUR ENDS.
WE COULDN'T SURVIVE WITHOUT IT.
MOREOVER RATIONALITY IS NOT AN
OCCIDENTAL OR A MODERN VALUE
BUT A TRANSCULTURAL AND A
TRANSHISTORICAL PRINCIPLE.
IT'S BUILT INTO THE VERY IDEA
OF WANTING TO DO SOMETHING.
THAT WE WANT TO DO IT AS
EFFICIENTLY AS POSSIBLE.

A caption appears on screen. It reads "Jon Elster. Professor of Social Sciences, Columbia University. ‘Rational choice theory – Hubris or common sense.’ George Ignatieff Theatre, Toronto. February 16, 2007."

Jon continues AS A NORWEGIAN
PROVERB SAYS DON'T CROSS THE
RIVER WHEN YOU GO TO FETCH
WATER.
VERY OFTEN RATIONAL ACTION IS
SIMPLY PLAIN COMMON SENSE.
BUT AS, AS WE
SHALL SEE HOWEVER COMMON SENSE
AND PROVERBS ALSO ACKNOWLEDGE
DEVIATIONS FROM RATIONALITY.
BECAUSE RATIONALITY'S A NORM WE
WANT TO BE RATIONAL.
WE'RE NOT PROUD OF OUR
OCCASIONAL LAPSES FROM
RATIONALITY BE IT IN THE FORM
OF WEAKNESS OR WILL, SELF-
DECEPTION OR FLAWED REASONING.
WHEN WE BECOME AWARE OF THESE
TENDENCIES WE CAN LEARN NOT TO
TRUST OUR JUDGEMENT OR TO TAKE
PRECAUTIONS AGAINST IMPULSIVE
BEHAVIOUR.
ONE INSIDIOUS FORM OF
IRRATIONALITY HOWEVER IS A
TENDENCY TO RESIST
ACKNOWLEDGING THAT WE ARE
IRRATIONAL.
ONE EXPLANATION ARE THE --
THAT IS THE TENDENCY TO PERSIST
IN A PROJECT EVEN WHEN IT HAS
NEGATIVE EXPECTED VALUE.
MAYBE THAT ADMITTING TO A
MISTAKE WOULD HURT OUR PRIDE OR
PRIDEFULNESS TOO MUCH.
OR WHEN WE GET ANGRY WITH
SOMEBODY WITH, WITHOUT A REASON
WE FIND ONE.
AS ANOTHER PROVERB SAYS WHO HAS
OFFENDED CANNOT FORGIVE.
ANOTHER FORM OF INSIDIOUS
IRRATIONALITY IS WHAT WE MIGHT
CALL HYPER RATIONALITY.
BY WHICH I MEAN THE PROPENSITY
TO, TO SEARCH FOR THE
ABSTRACTLY OPTIMAL DECISION.
THAT IS THE DECISION THAT WOULD
BE OPTIMAL IF WE IGNORED THE
COST OF DECISION MAKING ITSELF.

[Some laughter]

Jon continues I OBSERVE IT
EVERY SUMMER IN THE SOUTH OF
FRANCE.
WHEN TOURISTS CROSS THE BORDER
TO SPAIN TO BUY CHEAP
CIGARETTES AS IF GASOLINE WERE,
GASOLINE WERE FREE AND THERE
TIME QUEUING ON THE HIGHWAY
COST THEM NOTHING.
YOU CAN ALSO OBSERVE IT IN
COMPULSIVE COMPARISON
SHOPPING.
WHEN CONSUMERS IGNORE THE
DIRECT COSTS AND OPPORTUNITY
COSTS BY GOING FROM STORE TO
STORE TO FIND THE LOWEST PRICE
FOR THE ITEM THEY WANT TO BUY.
AND AN ECONOMIST HAS COINED A
PHRASE FOR THIS.
HE REFERS TO THE ACTUAL
INTROGENIC RISKS OF RISK
MANAGEMENT.
NOW THESE INSIDIOUS FORMS OF
IRRATIONALITY ARE AS YOU SAW
LINKED TO THE NORMAL
RATIONALITY ITSELF.
BUT THIS IS NOT A TYPICAL CASE.
LATER IN THIS TALK I SHALL
REFER TO OTHER VARIETIES OF
IRRATIONAL BEHAVIOUR.
BUT FIRST I NEED TO GET THIS
SHOW ON THE ROAD AND I'LL DO SO
BY PUTTING UP A DIAGRAM WHICH I
THINK CAPTURES A VERY COMMONLY
ACCEPTED WAY OF THINKING ABOUT
WHAT IT IS TO ACT RATIONALLY.

He places a paper on a screen projector and it appears on a giant screen. It displays a figure in which the word “desires” is connected by arrows to the words “action,” “beliefs,” and “information.” Beliefs is connected also to information and action.

Jon continues AND RATIONAL CHOICE ON THIS
CONCEPTION AND I THINK THIS IS
PRETTY CONTROVERSIAL INVOLVES
THREE OPTIMIZING PROCEDURES.
FIRST THE ACTION MUST BE
OPTIMAL THAT IS THE BEST GIVEN
THE BELIEFS OF THE AGENTS.
THE BELIEFS MUST BE AS WELL
SUPPORTED AS POSSIBLE BY THE
EVIDENCE AND THE EVIDENCE MUST
RESULT FROM AN OPTIMAL
INVESTMENT IN INFORMATION
GATHERING.
SO THEY ARE HERE IN A SENSE OF
CAUSIVE RELATIONS AND
OPTIMALITY RELATIONS.
NOW THE BLOCKED ARROW REFLECTS
A BAN ON WISHFUL THINKING,
WHICH IS INCONSISTENT WITH
RATIONAL CHOICE.
THE PLEASURE PRINCIPLE.
RATIONAL CHOICE IS ABOUT THE
REALITY PRINCIPLE.
BUT NOTE HOWEVER THAT EVEN
THOUGH WE DO NOT WISH, WE DO
NOT WANT THE WISH TO BE THE
FATHER OF THE THOUGHT.
THE WISH CAN SERVE AS A
GRANDFATHER BECAUSE IF YOU LOOK
AT THE DIAGRAM DESIRES EFFECT
THE SEARCH FOR INFORMATION AND
INFORMATION WE GATHER EFFECTS
THE BELIEFS.
THE LOOP REFLECTS THE FACT THAT
OPTIMAL INVESTMENT IN
INFORMATION IS PARTLY
DETERMINED BY WHAT WE FIND WHEN
WE GET IT.
SO SUPPOSE I'M OUT IN THE WOODS
PLUCKING BERRIES.
I KNOW THAT BERRIES TEND TO
COME IN CLUSTERS SO I'M
PREPARED TO SPEND SOME TIME
LOOKING BEFORE I START
PLUCKING.
BUT IF I STRIKE IT LUCKY AND
FIND AN ABUNDANT PATCH RIGHT AT
THE BEGINNING I WOULD BE
FOOLISH TO KEEP ON LOOKING.
THESE BASIC IDEAS CAN BE
SPELLED OUT IN MANY WAYS.
THE IDEA MAXIMIZING EXPECTED
UTILITY GIVES MORE SHAPE TO THE
PRIMITIVE IDEA OF CHOOSING THE
BEST MEANS TO REALIZE OUR DESIRES.
BASIC THEORY TELLS US HOW TO
CONSOLIDATE INFORMATION INTO
BELIEFS AND GAME THEORY TELLS
US HOW TO FORM BELIEFS ABOUT
WHAT OTHER, ABOUT WHAT OTHER
AGENTS ARE LIKELY TO DO.
SO THAT WE CAN CASUALLY
COORDINATE OUR ACTIONS WITH
THIS.
THESE THEORIES HAVE HAD MANY
SUCCESSES, MANY KINDS OF
SUCCESSES, CONCEPTUAL,
PRESCRIPTIVE, PREDICTIVE AND
EXPLANATORY.
AND SINCE TOM FELLING IS HERE
LET ME USE HIS EXAMPLE OF
BURNING ONE'S BRIDGES, WHICH
SEEMS LIKE A SORT OF PUZZLING
BEHAVIOUR.
WHY WOULD ONE THROW AWAY
OPTIONS?
ISN'T IT ALWAYS BETTER TO HAVE
MORE OPTIONS THAN FEWER?
WELL WE KNOW HISTORICALLY AND
ALMOST PROVERBIALLY THAT PEOPLE
SOMETIMES BURN THEIR BRIDGES.
BUT TRADITIONALLY NOBODY
THOUGHT OF SEEING THAT IN THE
LIGHT OF RATIONAL CHOICE UNTIL
TOM CAME ALONG.

A new figure shows numbers connected by arrows, representing different possible choices.

Jon continues SO HERE IN THE DIAGRAM TWO
ARMIES ARE CONFRONTING EACH
OTHER AT THE BORDER OF THEIR
COUNTRIES.
GENERAL ONE CAN EITHER RETREAT
LEAVING THE STATUS QUO 3.3 IN
PLACE OR INVADE.
IF HE INVADES GENERAL TWO CAN
EITHER HIDE WITH OUTCOME 1.1 OR
CAN SEE IT AS A CONTEST TO HIS
AUTHORITY WITH OUTCOME 4.2.
BY STANDARD AGAIN THEORETIC
REASONING THE OUTCOME IS THAT
GENERAL ONE INVADES AND GENERAL
TWO CONCEDES.
BUT WHAT TOM THOUGHT WAS THAT
GENERAL TWO CAN DETER GENERAL
ONE FROM INVADING BY BURNING
HIS BRIDGES SO THAT HE IS
PHYSICALLY UNABLE TO REACH IT.
BUT I HAVE TO ADD THAT THIS
KIND OF REASONING IS NOT
EXACTLY A PIECE OF COMMON
SENSE.
WHAT IT DISPLAYS IS RATHER A
KIND OF EXPOSED OBVIOUSNESS
THAT CHARACTERIZES MUCH OF GOOD
SCIENCE.
BUT AS I SAID IT'S NOT
SOMETHING THAT EVERYBODY WOULD
INTUITIVELY UNDERSTAND AND THAT
IS WHY RATIONAL CHOICE THEORY
GOES BEYOND EVERY DAY
RATIONALITY.
THE THEORY ASSUMES THAT AGENTS
ARE CAPABLE OR MORE OR LESS
COMPLICATED MENTAL OPERATIONS.
AN ASSUMPTION THAT MAY OR MAY
NOT BE TRUE IN ANY GIVEN CASE.
SOMETIMES IN FACT THIS
ASSUMPTION IS DEMONSTRABLY
FALSE AND I'LL HAVE MORE TO SAY
ABOUT THIS TOWARDS THE END WHEN
I GET TO THE HUBRIS PART OF THE
TALK.
FIRST HOWEVER LET ME SEE, SAY A
BIT ABOUT FEYDER'S IRRATIONAL
CHOICE THEORY...
IN THE SENSE THAT THE THEORY
PREDICTS ONE BEHAVIOUR AND WHAT
WE OBSERVE IS SOMETHING ELSE.
I EXPECTED DANNY KAHNEMAN TO BE
IN THE AUDIENCE WHEN I GAVE
THIS TALK SO I WAS, I'M GOING
TO REFER TO HIM.
BUT I'LL BE IT GIVEN IN HIS
ABSENCE BECAUSE DANNY IS ONE OF
THE PEOPLE WHO HAVE DONE THE
MOST TO SHOW THE DISCREPANCY
BETWEEN WHAT THE THEORY
PRESCRIBES AND PREDICTS AND THE
BEHAVIOUR WE ACTUALLY OBSERVE.
PROSPECT THEORY IN PARTICULAR
IS NOW A WELL, ESTABLISHED
RIVAL TO EXPECTED UTILITY THEORY.
JUST TO TAKE ONE EXAMPLE
PROSPECT THEORY SUGGESTS THAT
AN EXPLANATION FOR THE
OTHERWISE PUZZLING FACT THAT A
COMMON PATTERN IN REVENGE IS
OFTEN TWO EYES FOR AN EYE,
INSTEAD OF AN EYE FOR AN EYE.
IT SEEMS THAT ALEX TALIONIS
OWES HIS ORIGIN TO THE NEED TO
CONTROL THE SPONTANEOUS
TENDENCY FOR REVENGE TO EXCEED
THE WRONG THAT IS AVENGED.
AND THIS TENDENCY TWO EYES FOR
AN EYE IS DIRECTLY PREDICTED BY
PROSPECT THEORY.
IN FACT IT WOULD PREDICT TWO
AND A HALF EYES FOR AN EYE.
NOW THERE ARE MANY OTHER WELL-
DOCUMENTED FORMS OF IRRATIONAL
BEHAVIOUR AND LET ME JUST GIVE
A BRIEF LIST.

A list pops up. It reads “Loss aversion, non-probabilistic weighting of outcomes, hyperbolic discounting, heuristics, wishful thinking, inability to project, desire to act for a reason, magical thinking, the categorical imperative, emotions, social norms.”

Jon continues THE TWO FIRST LOSS AVERSION AND
NON-PROBALISTIC WEIGHING OF
OUTCOMES ARE TWO PARTS OF
PROSPECT THEORY.
TOGETHER THEY FORM PROSPECT
THEORY.
HYPERBOLIC DISCOUNTING IS A
PUZZLING, INTRIGUING PHENOMENON
THAT GIVES RISE TO MANY FORMS
OF PRE-COMMITMENT OR SELF-
BINDING.
IT ARISES WHEN AGENTS DISCOUNT
THE FUTURE IN SUCH A WAY THAT
WHEN THE TIME COMES TO CARRY
OUT THEIR PLANS THEIR
PREFERENCES HAVE CHANGED.
THEY NO LONGER WANT TO DO SO.
IT'S CONTRASTED WITH THE
STANDARD ECONOMIST MODEL OF
DISCOUNTING, EXPONENTIAL
DISCOUNTING IN WHICH SUCH
INCONSISTENCIES NEVER ARISE.
HEURISTICS ALSO AN ISSUE THAT
WAS PIONEERED BY DANNY AND BY
AMOS TVERSKY WE USE RULES OF
THUMB THAT OFTEN CAN LEAD US
VERY MUCH ASTRAY.
WISHFUL THINKING I SAID A BIT
ABOUT EARLIER.
I'LL SAY MORE ABOUT IT LATER.
INABILITY TO PROJECT IS A
SOMEWHAT MYSTERIOUS PHRASE.
BUT IT MEANS FOR INSTANCE THAT
PEOPLE ARE INCAPABLE OF
CARRYING OUT THE KIND OF
REASONING THAT LEADS TO THE
EQUILIBRIUM SOLUTION IN THIS
SIMPLE GAME.
REASONING BACKWARDS FROM THE
FUTURE.
IN THIS PARTICULAR GAME WHICH
IS VERY SIMPLE, MOST PEOPLE CAN
PROBABLY DO IT.
IN SLIGHTLY MORE COMPLICATED
GAMES IT TURNS OUT PEOPLE ARE
NOT VERY GOOD AT IMAGINING HOW
THEY AND OTHERS WOULD REACT IN
FUTURE HYPOTHETICAL SITUATIONS.
THEY JUST, IT'S JUST HARD.
NOT TECHNICALLY DIFFICULT BUT
IT DOESN'T COME NATURALLY.
YOU HAVE TO LEARN IT.
DESIRE TO ACT FOR A REASON.
THAT'S SOMETHING AMOS TVERSKY
ALSO BROUGHT ABOUT.
MAYBE THROUGH LIKE A LITTLE BIT
OF HYPER RATIONALITY.
MAGICAL THINKING AND THE
CATEGORICALLY IMPERATIVE ARE
TWO CLOSELY RELATED MODES OF
DECIDING.
BASICALLY YOU TELL YOURSELF FOR
INSTANCE SHOULD I VOTE?
WELL IT DOESN'T REALLY, THERE'S
NO POINT IN VOTING BECAUSE MY
CHANCE OF BEING PIVOTAL IS LESS
THEN THERE IS OF BEING KILLED
IN A CAR ACCIDENT ON THE WAY TO
THE VOTING BOOTH.
SO WHY VOTE?
HOWEVER I'M A PRETTY TYPICAL
MEMBER OF MY REFERENCE GROUP.
SO IF I VOTE I GUESS THEY ARE
LIKELY TO VOTE TOO.
SO LET ME VOTE.
THAT IS CONFUSING CAUSAL AND
DIAGNOSTIC SIGNIFICANCE OF
ACTION.
VERY COMMON.
THEN THERE ARE EMOTIONS AND
SOCIAL NORMS.
SOCIAL NORMS ALSO INVOLVE
EMOTIONS BUT ESSENTIALLY THE
EMOTIONS ARE SHAME AND
CONTEMPT.
BUT THERE ARE MANY OTHER PRE-
SOCIAL EMOTIONS AS IT WERE JUST
SUCH AS ANGER OR FEAR THAT FORM
A SEPARATE CATEGORY.
NOW I SAID A LITTLE BIT ABOUT
MOST OF THESE ALTERNATIVES OF
THESE FORMS OF IRRATIONAL
BEHAVIOUR.
I WANT TO SAY A BIT MORE, MORE
DETAIL MAINLY ABOUT ONE OF THEM
NAMELY THE EMOTIONS.
AND I THINK IT'S USEFUL BECAUSE
IF YOU JUST RECALL FOR A SECOND
THIS SCHEME OF RATIONAL CHOICE
YOU CAN CONTRAST IT WITH THIS
SCHEME IN WHICH EMOTIONS ARE
INVOLVED.

The figure that related desires, beliefs, action and information reappears, now with the word emotion.

Jon continues SO EMOTIONS CAN EFFECT ALL THE
OTHER, ALL THE FOUR COMPONENTS
OF THE RATIONAL CHOICE SCHEME.
SOMEWHAT CONTROVERSIALLY
EMOTIONS CAN EFFECT ACTIONS
DIRECTLY.
AH, AH THE GOOD I WANT TO DO I
DO NOT DO.
BUT THE EVIL I DO NOT WANT IS
WHAT I DO OR WORDS TO THAT
EFFECT.
SO IT'S OFTEN BEEN SAID THAT
UNDER THE INFLUENCE OF PASSION
ONE CAN ACT KNOWINGLY AGAINST
ONE'S BETTER JUDGEMENT.
EMOTIONS ALTHOUGH FORCEFUL
USUALLY HAVE A SHORT HALF-LIFE.
THEY DON'T LAST VERY LONG.
SO IF THE SITUATION CAUSES A
DELAY BETWEEN THE TIME AT WHICH
THE DECISION TO ACT IS MADE AND
THE TIME OF ACTING THE ACTION
MAY NEVER BE UNDERTAKEN.
AN EXAMPLE IS HOW THE INCREASED
EXPRESSIONS OF INTEREST AFTER
SEPTEMBER 11TH 2001 FOR SERVING
IN THE ARMY DID NOT LEAD TO
INCREASED IN ENLISTMENT BECAUSE
THERE WAS A DELAY OF A COUPLE
OF MONTHS GOING THROUGH THE
RECRUITMENT CENTERS.
AND BY THAT TIME THE INITIAL
ENTHUSIASM, ANGER OR WHATEVER
MIGHT HAVE DIED.
ALSO EVEN IF ACTION CAN BE
TAKEN IMMEDIATELY IT MAY
SOMETIMES BE REVERSED LATER
WHEN THE EMOTION ABATES.
THIS AMONG THE 200,000 MEN WHO
DESERTED THE AMERICAN THE UNION
ARMY DURING THE AMERICAN CIVIL
WAR PRESUMABLY OUT OF FEAR TEN
PERCENT RETURNED VOLUNTARILY.
BUT IN SOME
CASES ACTION TAKEN ON THE BASIS
OF EMOTION INDUCED TEMPER
TANTRUMS IS IRREVERSIBLE.
YOU CAN THINK OF THIS AS A
LOBSTER TRAP EFFECT.
SO FOR INSTANCE
WHEN YOUNG MEN AND WOMEN ENLIST
IN A GUERILLA MOVEMENT IN A
MOMENT OF ENTHUSIASM AND LATER
WANT TO LEAVE IT THEY MAY FIND
THAT THIS OPTION IS CLOSED TO THEM.
THERE ARE INNUMERABLE INSTANCES
OF SUCH TEMPORARY PREFERENCE
REVERSALS.
BUT IN FACT I SUSPECT THAT MANY
OF THE PHENOMENA TRADITIONALLY
CLASSIFIED AS WEAKNESS OF WILL
ARE IN FACT INSTANCES OF
EMOTIONALLY INDUCED PREFERENCE
REVERSAL.
ANOTHER EFFECT OF EMOTIONS ON
DESIRES QUITE WELL-DOCUMENTED
IS THAT THEY TEND TO INDUCE A
TEMPORARY INCREASE IN THE RATE
OF TIME DISCOUNTING.
SO THAT PREVIOUSLY LESS
PREFERRED OPTIONS WITH BAD LONG
TERM CONSEQUENCES COME TO BE
SEEN AS PREFERABLE.
AND FINALLY LESS WELL
UNDERSTOOD AND LESS DISCUSSED
MECHANISM BUT WHICH I BELIEVE
TO BE IMPORTANT EMOTIONS MAY
INDUCE A PREFERENCE FOR EARLY
ACTION OVER LATER ACTION TO BE
DISTINGUISHED FROM A PREFERENCE
FOR EARLY REWARD OVER LATER
REWARD.
THE LATTER IS IMPATIENCE.
BUT URGENCY IS TO REPEAT A
PREFERENCE FOR EARLY ACTION
OVER LATER INACTION.
I THINK OFTEN IN EMOTIONAL
SITUATIONS INACTION IS
INTOLERABLE, IS INTOLERABLE.
WE FEEL WE HAVE TO ACT
IMMEDIATELY.
NOW EMOTIONS CAN ALSO EFFECT
BELIEFS DIRECTLY.
BOTH BY THE MECHANISMS,
MECHANISM OF WISHFUL THINKING
THAT I CITED AND BY WHAT YOU
MIGHT CALL THE MECHANISM OF
COUNTER WISHFUL THINKING.
THERE IS IN FACT A PROVERB A
FRENCH PROVERB SAYING THAT WE
BELIEVE EASILY WHAT WE HOPE AND
WHAT WE FEAR.
SO THAT IN A CASE OF WISHFUL
THINKING OR EMOTIONALLY BASED,
THE INFORMATION I MIGHT CITE
AGAIN AN EXAMPLE I MENTIONED AT
THE BEGINNING.
NAMELY THAT EMOTIONAL
PRIDEFULNESS WHICH RESTS ON THE
BELIEF THAT ONE IS A SUPERIOR
KIND OF PERSON WILL RESIST THE
ACKNOWLEDGMENT THAT ONE HAS
MADE A MISTAKE AND PERHAPS
EXPLAIN THE VULNERABILITY TO
DECIDE COST FALLACY.
AND PRIDEFULNESS MAY ALSO
EXPLAIN WHY PEOPLE TEND TO
BLAME THEIR VICTIMS SINCE THEIR
SELF-IMAGE OR SINCE SELF-IMAGE
OF SOME PEOPLE DOESN'T ALLOW
THEM TO ADMIT GUILT THEY FIND A
FAULT IN THE OTHER THAT NOT
ONLY JUSTIFIES WHAT THEY DID TO
HIM BUT MOTIVATES FURTHER
INJURIOUS BEHAVIOUR.
AS IN THE SAME COST FALLACY THE
UNWILLINGNESS TO ADMIT A PAST
MISTAKE TO WORSE CONSEQUENCES
THEN THE MISTAKE ITSELF.
THE CASE OF COUNTER WISHFUL
THINKING WHICH YOU MAY ALSO
CALL THE OTHELLO EFFECT IS
ILLUSTRATED FOR INSTANCE BY
MANY CASES OF RUMOURS WHERE
PEOPLE ARE AMAZINGLY WILLING TO
BELIEVE THE WORST AGAINST THE
EVIDENCE.
FINALLY BY VIRTUE OF THE
URGENCY OF EMOTIONS THEY MAY --
WITH OPTIMAL ACCUSATIONAL
INFORMATION AND THEREFORE ALSO
EFFECT BELIEFS INDIRECTLY.
ANGER AND ALL MAKE US DO THINGS
WE WOULD NOT HAVE HAD DONE HAD
WE HAD A MORE RATIONAL POLICY
OF INFORMATION GATHERING.
A PROVERB HAS IT THAT VENGEANCE
IS A DISH THAT IS BEST SERVED COLD.
ANOTHER SAYS THAT DELAY IN
VENGEANCE GIVES A HEAVIER BLOW.
AND PRESUMABLY BOTH PROVERBS
AROSE IN REACTION TO THE
TENDENCY TO TAKE VENGEANCE IN
HOT BLOOD THUS TESTIFYING TO
THE EXISTENCE OF THAT
PHENOMENON.
IN A CASE OF LOVERS ILLUSTRATED
BY YET ANOTHER PROVERB MARRY AT
HASTE, REPENT IN LEISURE.
OFTEN THE URGENCY USES THE
NEGLECT OF THE TEMPORARY REMOTE
EFFECTS OF THE OPTIONS BY
VIRTUE OF THE FACT THAT THE
DETERMINATION OF LONG TERM
CONSEQUENCES IS ITSELF A TIME
CONSUMING PROCESS.
AND I THINK THE ACTIONS TAKEN
BY THE WESTERN GOVERNMENTS
AFTER SEPTEMBER 11TH 2001
ILLUSTRATE THIS POINT.
IF THE LEGISLATORS HAD TAKEN
THE NORMAL LEGISLATIVE TIME TWO
OR THREE YEARS BEFORE ENACTING
THE LAWS THEY MIGHT HAVE
UNDERSTOOD THAT BY VIRTUE OF
THE INDIRECT EFFECTS OF THE
LAWS THEY MIGHT RISK CREATING
MORE TERRORISTS THEN THE LAWS
WILL ENABLE THEM TO APPREHEND.
SO LET ME NOW MOVE ON TO THE
HUBRIS PART OF THE TALK.
IT IS OBVIOUS TO ANY READER OF
MAINSTREAM JOURNALS IN
ECONOMICS AND POLITICAL SCIENCE
THAT SCHOLARS IN THESE
DISCIPLINES NOW BELIEVE THEY
CAN EXPLAIN VIRTUALLY ANYTHING
BY RATIONAL CHOICE THEORY.
AS LONG AS, AS THERE'S A
REASONABLE OPPORTUNITY FOR
CHOICE THAT IS AS LONG AS
ACTION IS NOT FULLY DETERMINED
BY THE CONSTRAINTS THEY BELIEVE
THAT THE CHOICE WILL BE
EXERCISED RATIONALLY.
IN MY OPINION MANY OF THESE
MODELS ARE DEEPLY UNREALISTIC.
THEY ARE BASED ON ASSUMPTIONS
THAT ARE DEMONSTRABLY FALSE OR
HUGE SIMPLIFICATIONS.
OFTEN IN MY OPINION THERE IS NO
REASON TO HAVE ANY FAITH IN THE
CONCLUSIONS.
NOW BEFORE I PROCEED I SHOULD
SAY THAT IT IS NOT CLEAR THAT
THE MODELS ARE ALWAYS INTENDED
TO BE TRUE.
THAT IS THE COURSE TO THE --
WORK.
RATHER THEY SOMETIMES REPRESENT
A FORM OF SCIENCE FICTION.
AN ANALYSIS OF THE ACTION OR AN
ACTION AN INTERACTION OF
IDEALLY RATIONAL AGENTS WHO
HAVE NEVER EXISTED AND NEVER
WILL.
THE ANALYSIS OF EVER MORE
REFINED FORMS OF STRATEGIC
EQUILIBRIUM FOR INSTANCE IS
HARDLY MOTIVATED BY A DESIRE TO
EXPLAIN OR PREDICT THE
BEHAVIOUR OF ACTUAL
INDIVIDUALS.
RATHER THE MOTIVATION SEEMS TO
BE AN ESTHETIC ONE.
I, I, I DON'T SAY THAT IN A, IN
A NEGATIVE SENSE.
I THINK IT HAS AN ESTHETIC
VALUE.
I THINK ONLY A FEW OF THESE
DEMONSTRATIONS HAVE THAT VALUE
BUT SOME OF THEM DO.
SO FOR INSTANCE TWO OF THE MOST
ACCOMPLISHED EQUILIBRIA
THEORISTS REINHARD SELTEN NOBEL
PRIZE WINNER AND ARIEL, ARIEL,
ARIEL RUBENSTEIN HAVE MADE IT
QUITE CLEAR THAT THEY DO NOT
BELIEVE THEIR MODELS HAVE
ANYTHING TO SAY ABOUT THE REAL
WORLD.
WHEN ADDRESSING THE WORKINGS OF
THE LATTER THE REAL WORLD THEY
USE SOME VARIETY OF HEGEL
ECONOMICS OR BOUNDED
RATIONALITY.
SO I, I HAVE A LIST OF TEN
OBJECTIONS TO THESE PROCEDURES.
THEY ARE DIFFERENT KINDS.

A slide reads “1. Many models impute to agents motivations they demonstrably do not have. The routine assumption of exponential time discounting is one example.”

Jon continues says THE EVIDENCE IS
NOW WELL SOMEWHERE, SOMEWHAT,
SOMEWHERE BETWEEN STRONG AND
OVERWHELMING IN FAVOUR OF
HYPERBOLIC TIME DISCOUNTING.
BUT IT'S MATHEMATICALLY
INCONVENIENT SO IT'S NOT USED.

A new slide reads “2. Some models impute motivations to the agents for which no evidence is offered, such as a particular form of the utility function. One can of course stipulate a function in order to prove possibility theorems (“a rational consumer with decreasing marginal utility might do X), but not to prove anything about the world. In many situations, the assumption that agents are self-interested is also one that has to be shown to be true, not merely assumed.”

Jon continues SUCH AS A
RATIONAL CONSUMER WITH
DECREASING MARGINAL UTILITY
MIGHT DO X, BUT NOT TO PROVE
ANYTHING ABOUT THE WORLD.
AND IN MANY SITUATIONS THE
ASSUMPTION THAT AGENTS ARE
SELF-INTERESTED IS ALSO ONE
THAT HAS TO BE SHOWN TO BE
TRUE, NOT MERELY ASSUMED.
AND MOREOVER MOST MODELS IGNORE
THE ADVANCES IN THE
UNDERSTANDING OF CHOICE
ASSOCIATED WITH PROSPECT
THEORY.
SINCE THAT THEORY IS STATED IN
TERMS OF GAINS OR LOSSES FROM A
GIVEN BASE LINE IT DOESN'T
ANALYZE BEHAVIOUR IN TERMS OF
MAXIMIZING AN OBJECTIVE
FUNCTION OVER DEFINED OVER
OUTCOMES.
THE MAXIMIZATION FORMAT MAYBE
INDISPENSABLE FOR MATHEMATICAL
MANIPULATION BUT IS IRRELEVANT
FOR MUCH ACTUAL BEHAVIOUR.
I'LL RETURN TO THE ATTRACTION
OF OPTIMIZING THEORY TOWARDS
THE END.
FURTHERMORE --

A new slide reads “4. Some models impute cognitive capacities to agents that they may possess but not exercise. They may, for instance, not spontaneously carry out the backward-induction reasoning that is required in many important applications.”

Jon says THEY MAY FOR
INSTANCE NOT SPONTANEOUSLY
CARRY OUT THE BACKWARD-
INDUCTION REASONING THAT IS
REQUIRED IN MANY IMPORTANT
APPLICATIONS SUCH AS IN THE
BURNING THE BRIDGES AGAIN.
IN THAT CASE AS I SAID THEY
PROBABLY CAN CARRY IT OUT.
BUT IF YOU LOOK AT SOME OF THE
MODELS IN WHICH THEY ARE
SUPPOSED TO BE ABLE TO CARRY
OUT BACKWARD-INDUCTION YOU
MIGHT BE MORE SKEPTICAL.
NOW I COME TO WHAT MAYBE THE
MOST IMPORTANT BUT IN A WAY THE
MOST TRIVIAL POINT.
WHICH IS THAT --

A new slide reads “5. Many models impute cognitive capacities to agents that they demonstrably do not possess. The point is so trivial that it is almost embarrassing: how can an economist assume that an agent has the ability to carry out calculations that he or she (the economist) needs many pages of technical appendices to spell out? The temptation is strong to say, ‘Come on! Get real!’”

Jon says HOW CAN AN
ECONOMIST ASSUME THAT AN AGENT
HAS THE ABILITY TO CARRY OUT
AND OFTEN INSTANTANEOUSLY
CALCULATIONS THAT HE OR SHE THE
ECONOMIST NEEDS MANY PAGES OF
HIGHLY TECHNICAL APPENDICES TO
SPELL OUT?

[Audience laughs]

Jon says THE TEMPTATION
IS STRONG TO SAY COME ON.
GET REAL!
IT'S, IT'S VERY EMBARRASSING
FOR, FOR, FOR THEM I THINK OR
FOR ME IF I'M WRONG.

[Audience laughs]

A new slide reads “6. Many models impute intentions on the basis of the objective interest of the agent in a particular situation, without pausing to ask whether other motivations –emotions or social norms- might be in play. If we try to explain behaviour in turbulent or conflictual situations such as revolutions, for instance, imputing a motive of rational long-term self-interest (reduced to present value by exponential discounting) seems almost ludicrously inadequate.”

Jon says IF YOU TRY TO
EXPLAIN BEHAVIOUR IN TURBULENT,
TURBULENT OR CONFLICTUAL
SITUATIONS SUCH AS REVOLUTIONS
I'M, I'M NOT INVENTING THIS.
IMPUTING A MOTIVE OF RATIONAL
LONG TERM SELF-INTEREST,
REDUCED TO PRESENT VALUE BY
EXPONENTIAL DISCOUNTING SEEMS
ALMOST LUDICROUSLY INADEQUATE.
OTHER MODELS INCLUDE THE
INTENTIONS ON THE BASIS OF
ACTUAL OUTCOMES THUS NEGLECTING
THE POSSIBILITY BOTH FOR
MISTAKEN CALCULATIONS AND OR
CALCULATED GAMBLES.
ANOTHER I THINK VERY IMPORTANT
FLAW IN THESE MODELS IS THAT
MANY OF THEM TAKE NO ACCOUNT OF
THE FOG OF UNCERTAINTY THAT
SURROUNDS MOST IMPORTANT
DECISIONS ESPECIALLY WHEN THE
RELEVANT CONSEQUENCES ARE IN
THE DISTANT FUTURE.
ATTEMPTS OF ACCOUNT OF THIS
PROBLEMS FOR INSTANCE BY
ASSIGNING SUBJECTIVE
PROBABILITIES TO THE OUTCOMES
ARE OFTEN ARBITRARY AS WHEN
SCHOLARS APPEAL TO THE
PRINCIPLE INSUFFICIENT REASON
TO STATE THAT THE UNIFORM
PROBABILITY DISTRIBUTION.
LET ME JUST INDICATE HOW ABSURD
THAT PRINCIPLE IS.
SUPPOSE I'M PURSUING SOMEBODY
AH MY DOG I LOST MY DOG AND I'M
FOLLOWING A PATH AND IT COMES
TO A TRIFURCATION.
TWO PATHS GOING UPHILL AND ONE
GOING DOWNHILL.
WELL UPHILL AND DOWNHILL ARE
EQUALLY LIKELY SO THE DOWNHILL
PATH HAS A 50 percent CHANCE OF BEING
THE PATH MY DOG TOOK.
BUT THERE ARE THREE PATHS EACH
OF THEM EQUALLY LIKELY.
SO THE DOWNHILL PATH HAS ONE-
THIRD OF A CHANCE OF BEING THE
PATH MY DOG TOOK.
SO IT CAN'T BE BOTH A HALF AND
A THIRD.
IN OTHER WORDS THE WAY WE, WE
INDIVIDUATE STATES OF THE WORLD
IS ESSENTIALLY ARBITRARY AND
THEREFORE IMPUTING
PROBABILITIES OR ASSIGNING
EQUAL PROBABILITIES TO STATES
OF THE WORLD IS ALSO ARBITRARY.
THEN ALTHOUGH RATIONAL CHOICE
THEORY IS OR WAS INITIALLY A
THEORY OF INDIVIDUAL ACTION
MANY THEORIES AND MODELS ALSO
IMPUTE RATIONALITY THROUGH
COLLECTIVE GROUPS SUCH AS
CLASSES OR STATES.
WITH RESPECT TO CLASSES THESE
RUN INTO THE PROBLEM THAT OFTEN
THE BEHAVIOUR THAT IS RATIONAL
FOR THE CLASS AS A WHOLE WILL
NOT BE RATIONAL FOR INDIVIDUAL
MEMBERS OF THE CLASS BECAUSE OF
THE FREE RIDING PROBLEM.
THAT'S WHY YOU CANNOT SAY THAT
A COLLECTIVE, THAT THE WORKING
CLASS IS A COLLECTIVE ACTOR.
YOU KNOW IN ORDER TO EXPLAIN
REVOLUTIONS WHEN IT'S CLEAR
THAT RATIONAL WORKERS WOULD
STAY ON THE SIDELINES AND THAT
THE OTHERS FIGHT SO THAT NOBODY
WOULD FIGHT.
AND IN THE CASE OF STATES MANY,
MANY SCHOLARS ESPECIALLY IN
INTERNATIONAL RELATIONS OF
COURSE DO SEE STATES AS UNITARY
ACTORS ENDOWED WITH ALL THE
USUAL ATTRIBUTES OF INDIVIDUALS
BELIEFS AND PREFERENCES.
AS IF KENNETH ARROW HAD NEVER
PROVED THE IMPOSSIBILITY
THEORUM OF AGGREGATING
INDIVIDUAL PREFERENCES INTO
SOCIAL PREFERENCES.
AND IT'S NOT THAT THEY WRITE IN
THIS WAY BUT THEY DO NOT EVEN
ACKNOWLEDGE THE FACT IN NINE
OUT OF TEN CASES.

A new slide reads “9. Some models assume that deviations from rationality are either (1) temporary or (2) will cancel out in the aggregate. As for (1), temporary deviations can have durable results if the situation has a “lobster-trap” structure. As for (2), behavioral economics has shown that since many deviations are systematic and not random, there is no reason to expect them to disappear in the aggregate. The ‘equity premium puzzle’ is an example.”

Jon says THE SECOND IS
PROBABLY THE FAVOURITE RESPONSE
TO CRITICISM.
AS FOR ONE
TEMPORARY SITUATIONS CAN HAVE
DURABLE EFFECTS IF THE
SITUATION HAS A LOBSTER TRAP
STRUCTURE.
AND AS FOR THE SECOND OBJECTION
BEHAVIOURIAL ECONOMICS HAS
SHOWN I BELIEVE THAT SINCE MANY
DEVIATIONS ARE SYSTEMATIC AND
NOT RANDOM THESE IS NO REASON
TO EXPECT THEM TO DISAPPEAR IN
THE AGGREGATE.
AND I CITED
EQUITY PREMIUM, PREMIUM AS A
PUZZLE WHICH IS THE FOLLOWING
PUZZLE I HAVE TO TRY REMEMBER
FROM MEMORY.
IF IN 1928 YOU INVESTED ONE
STOCK DOLLAR IN, IN STOCKS IN
1998 YOU WOULD HAVE 1,800 dollars.
IF IN 1928 YOU INVESTED ONE
DOLLAR IN BONDS IN 1998 YOU
WOULD HAVE 28 dollars.
HOW COME?
WHY DOESN'T THE VALUE OF STOCKS
RISE TO EQUALIZE THE RATE OF
RETURNS?
WELL THEY HAVE AN THE ECONOMICS
HAVE AN EXPLANATION IN TERMS OF
LOSS AVERSION AND SOME MIGHT,
MIGHT, MIGHT CALL DECISION MYOPIA.
AND FINALLY THIS IS A VERY
COMMON FEATURE WITH
EXPLANATIONS.
THEY LOOK AT A PIECE OF
BEHAVIOUR AND ARGUE THAT IT IS
AN EXPERIMENT IN A GAME AND
CONCLUDE WITH THAT OBSERVATION.
WITHOUT TAKING THE FURTHER STEP
IN SHOWING WHY IN SITUATIONS
WITH MANY EQUILIBRIA, WHICH IS
I GUESS THE RULE NOT THE
EXCEPTION THIS PARTICULAR ONE
WAS REALIZED.
MOREOVER THEY RARELY PAUSE TO
ASK WHETHER THE WORLD MIGHT NOT
CHANGING SO FAST THAT
EQUILIBRIA DID NOT HAVE ENOUGH
TIME TO ESTABLISH THEMSELVES.
NOW THESE ARE VERY INTELLIGENT
AND SMART SCHOLARS.
THEY ARE NOT UNAWARE OF THESE
PROBLEMS ALTHOUGH CLEARLY NOT
AS AWARE OF THEM AS I THINK
THEY SHOULD BE.

[Some laugh]

Jon says SO THEY HAVE A
NUMBER OF RESPONSES TO THE
OBJECTIONS I'VE BEEN MAKING.
AND UM, ONE IS THAT MY IDEA OF
STANDARD FOR EXPLANATION NAMELY
ESTABLISHING THE BELIEFS AND
PREFERENCES OF THE AGENTS AND
THEN EXPLAIN BEHAVIOUR ON THAT
BASIS IS UNFEASIBLE IN
PRACTICE.
FOR THERE IS WHAT ONE, WHAT
ONE, WHAT ONE MIGHT CALL A
BASIC HERMENEUTIC PROBLEM FOR
ESTABLISHING MENTAL STATES.
ON -- CIRCULARITY WE CANNOT USE
THE BEHAVIOUR ITSELF AS
EVIDENCE FOR THE MENTAL STATES
THAT CAUSE THE BEHAVIOUR.
THEY MUST LOOK AT, LOOK AT
OTHER EVIDENCE SUCH AS
STATEMENTS BY THE AGENT, ABOUT
HIS MOTIVATION, THE CONSISTENCY
OF HIS NON-VERBAL BEHAVIOUR
WITH HIS STATEMENTS.
THE MOTIVES IMPUTED TO HIM BY
OTHERS AND CONSISTENCE OF THEIR
NON-VERBAL BEHAVIOUR WITH THESE
IMPUTATIONS.
YET HOW CAN WE EXCLUDE THE
POSSIBILITY THAT THESE VERBAL
AND NON-VERBAL FORMS OF
BEHAVIOUR WERE PURPOSEFULLY
CHOSEN TO MAKE AN AUDIENCE
BELIEVE, BELIEVE FALSELY THAT A
PARTICULAR MOTIVATION WAS AT WORK.
PROFESSIONS ARE MOTIVATIONS AND
ALLEGATIONS ARE MOTIVATIONS CAN
THEMSELVES BE MOTIVATED.
THIS IS A SERIOUS DIFFICULTY.
BUT IT'S NOT INSURMOUNTABLE.
IN FACT THE HISTORIAN'S CRAFT
IS PRECISELY TO SURMOUNT.
THAT'S WHAT HISTORIANS DO.
THEY TRY AND COLLECT EVIDENCE
FROM ALL SORTS OF SOURCES TO BE
ABLE TO GET BEHIND THE
PROFESSED OBSERVATIONS AND
BELIEFS OF THE AGENTS.
AND EVEN IF IT WERE
INSURMOUNTABLE THAT WOULD NOT
JUSTIFY THE -- IMPUTATION OF
MOTIVATIONS.
ANOTHER COMMON RESPONSE IS TO
PROPOSE THE REPLACEMENT OF
ACTUAL RATIONALITY THAT IS OF
REAL, REAL LIFE PEOPLE WITH AS
IF RATIONALITY.
THIS IS ESPECIALLY ASSOCIATED
WITH THE CHICAGO SCHOOL OF
ECONOMICS, MILTON FRIEDMAN WHO
ARGUED THAT IF THE MODELS ALLOW
US TO PREDICT BEHAVIOUR WE
DON'T NEED ANY FURTHER QUESTION
ABOUT WHETHER THE ASSUMPTIONS
ARE TRUE.
WELL IN MY OPINION THIS
FRIEDMAN TERM I GUESS IT'S
CALLED CAN WORK ONLY IF EITHER
OF TWO CONDITIONS IS SATISFIED.
ON THE ONE HAND ONE MIGHT BE
ABLE TO POINT TO A MECHANISM
THAT IS CAPABLE OF ME MAKING
RATIONALITY.
ME MAKING ALL THE WAY DOWN TO
THE MATHEMATICAL APPENDICES.
THE PROBLEM IS THAT NOBODY HAS
COME UP WITH SUCH A MECHANISM.
THERE ARE TWO CANDIDATES,
REINFORCEMENT AND NATURAL
SELECTION OR SOCIAL SELECTION
IN THIS CASE.
REINFORCEMENT, PSYCHOLOGICAL
REINFORCEMENT HAS BEEN SHOWN TO
PRODUCE BEHAVIOUR THAT
GENERATES SYSTEMATICALLY FROM
RATIONAL CHOICE.
LISA HERSHTON SHOWED THAT IN A
NUMBER OF EXPERIMENTS.
AS FOR NATURAL SELECTION OR
SOCIAL SELECTION THE MECHANISMS
OF SOCIAL SELECTION BE THEY
MARKED COMPETITION OR POLITICAL
COMPETITION ARE SO CRUDE THAT
IT'S, IT'S UNTHINKABLE THAT IT
COULD, THAT IT COULD MIMIC AS I
SAID RATIONALITY ALL THE WAY
DOWN TO THE MATHEMATICAL
APPENDICES.
IT'S IN SOME -- SENSE SOMETIMES
YES.
BUT NOT ALL THAT STUFF.
JUST TO TAKE AN OBVIOUS FACT
ABOUT SOCIAL SELECTION AS A
DISTINCTION FROM NATURAL
SELECTION HUMAN BEINGS CAN ARE
NOT CONSTRAINED TO ADJUST TO
THEIR ENVIRONMENT.
THEY CAN ANTICIPATE IT AND EVEN
SHAPE IT.
SO IT'S A VERY POOR ANALOGY.
BUT EVEN IN THE ABSENCE OF A
RATIONALITY MIMICKING MECHANISM
WE MIGHT ACCEPT THE
INSTRUMENTALIST VIEW IF THE
ASSUMPTION THAT THEY WILL JUST
TO PREDICT BEHAVIOUR WITH VERY
GREAT ACCURACY.
THE LAW OF GRAVITATION NEWTON'S
LAW SEEMED MYSTERIOUS FOR A
LONG TIME AND MANY PEOPLE
REFUSED TO ACCEPT IT BECAUSE IT
SEEMED TO BE BASED ON THE
UNINTELLIGIBLE IDEA OF ACTION
AT A DISTANCE.
YET BECAUSE OF MANY PREDICTIONS
THAT WERE ACCURATE TO MANY
DECIMAL POINTS NEWTON'S THEORY
WAS EVENTUALLY AND
CONTROVERSIALLY ACCEPTED.
THE MYSTERIOUS WORKINGS OF
QUANTUM MECHANICS ARE ALSO
ACCEPTED BUT SOMETIMES WITH
HESITATIONS BECAUSE THERE ARE
NOW MORE PREDICTIONS WITH EVEN
MORE INCREDIBLE ACCURACY.
BY CONTRAST IF -- COULD SUPPORT
HER RATIONAL CHOICE
EXPLANATIONS OF COMPLEX
PHENOMENA TENDS TO BE QUITE
WEAK.
THIS IS OF COURSE A SWEEPING
STATEMENT.
BUT RATHER THEN HAVING TO
EXPLAIN WHAT I MEAN BY WEAK LET
ME SIMPLY POINT TO THE HIGHER
LEVEL OF DISAGREEMENT AMONG
COMPETENT SCHOLARS ABOUT THE
EXPLANATORY FORCE OF COMPETING
HYPOTHESES.
EVEN IN ECONOMICS IN SOME WAYS
THE MOST DEVELOPED AMONG THE
SOCIAL SCIENCES THERE ARE
FUNDAMENTAL PERSISTENT
DISAGREEMENTS AMONG SCHOOLS AND
THEY NEVER OBSERVE THE KIND OF
MANY DECIMAL POINT PRECISION
THAT WOULD PUT CONTROVERSY TO
REST.
SO UNLESS I'M ENTIRELY MISTAKEN
WHICH IS OF COURSE ENTIRELY
POSSIBLE A WHOLE GENERATION OF
ECONOMISTS AND POLITICAL
SCIENTISTS ARE ON THE WRONG
TRACK.

[Some laugh]

Jon says WHY CAN THIS BE SO?
ONE MIGHT REFER TO EMOTIONAL
MECHANISMS SUCH AS PHYSICS ENVY
BUT THERE MAYBE A SIMPLER
EXPLANATION.
RATIONAL CHOICE THEORY IS,
RATIONAL CHOICE THEORY IS AS I
SAID EARLIER ENORMOUSLY
ATTRACTIVE BECAUSE IT HOLDS OUT
THE PROSPECT OF UNIQUE
DETERMINANT PREDICTIONS.
THIS FOLLOWS FROM THE SIMPLE
FACT THAT ANY WELL BEHAVED
OBJECTIVE FUNCTION, DEFINE
WELL, DEFINE WELL BEHAVED
FEASIBLE SET REACHES A UNIQUE
MAXIMUM FOR A VALUE, REACHES A
MAXIMUM FOR A UNIQUE VALUE IN
THAT SET.
IT'S THE DETERMINACY AND THE
UNICITY OF RATIONAL CHOICE
THEORY BASED ON MAXIMIZATION OF
UTILITY OR MAYBE PROFITS THAT
ACCOUNTS FOR A LOT OF THIS
ATTRACTION.
BUT TO USE A VERY LOOSE
METAPHOR CHOSEN ONLY FOR ITS
PEDAGOGICAL VALUE AH, THE
UNDERLYING ASSUMPTION THAT
PHYSICS FOR INSTANCE ALLOWS FOR
UNIQUE PREDICTIONS IS ACTUALLY
FALSE.
ALTHOUGH NEWTON'S LAW WORKED
FINE.
IN SOME CASES WITH THREE BODIES
OR MORE IT DOESN'T WORK.
YOU CANNOT PREDICT THE BODIES
OF A THREE, THE MOVEMENT OF A
THREE BODY PLANETARY, THREE
BODY SYSTEM.
NOW SIMILARLY THIS IS JUST A
METAPHOR WHEN YOU MOVE FROM ONE
PERSON TO MANY PERSONS AS IN
GAME THEORY PREDICTION BECOMES
ALMOST IMPOSSIBLE IN MANY
CASES.
EVEN SUCH SIMPLE CASES AS THE
GAME OF CHICKEN OR THE BATTLE
OF SEXES IN WHICH THERE ARE TWO
EQUILIBRIA AND NO TACIT CUES A
LA SHELLY TO TELL US WHICH TO
COORDINATE ON.
EVEN IF YOU SUPPOSE THAT AGENTS
ARE IN A CO-EMOTIONAL STATE.
AND EVEN LET'S SAY IF THERE ARE
NOT, ASSUMING THAT ARE NOT
EFFECTED BY YOU KNOW KAHNEMAN,
TVERSKY KIND OF BIASES AND, AND
MISTAKES AND FRAMING ERRORS AND
SO ON AND SO FORTH.
EVEN ASSUMING ALL OF THAT THEY
STILL WOULD NOT BE ABLE TO MAKE
A UNIQUELY PREDICTABLE RATIONAL
DECISION BECAUSE OF THE FACT OF
UNCERTAINTY AND THE COMPLEXITY
OF, OF THE CAUSAL STRUCTURE OF
THE SOCIAL, SOCIAL WORLD.
SO VERY OFTEN I THINK WE SHOULD
JUST FALL BACK ON CASE AND SAY
THAT INVESTMENTS FOR INSTANCE
ARE DETERMINED BY THE ANNUAL
SPIRITS OF THE ENTREPRENEURS.

[Audience laughs]

Jon continues WHICH IS NOT
EXACTLY A PREDICTION, AN
EXPLANATION WITH GREAT
PREDICTIVE POWERS.
BUT IT MAY HAVE SOME
DESCRIPTIVE ACCURACY.
THANK YOU.

[Audience applauding]

The clip ends and Andrew reappears in the studio with a caption that reads “Andrew Moodie.”

He says ONE MIGHT
HAVE EXPECTED A MORE
SUBSTANTIVE DISCUSSION OF THE
WAY THAT RELIGION CAN EFFECT
RATIONAL CHOICE.
SURELY IT'S A
TOPIC THAT COMES UP
OCCASIONALLY GIVEN THE COURSE
OF CONTEMPORARY WORLD EVENTS.
HOWEVER THE REAL VALUE OF
RATIONAL CHOICE THEORY CAN BEST
BE SUMMED UP IN A QUOTE FROM
ELSTER HIMSELF.
RATIONAL CHOICE THEORY IS FAR
MORE THAN A TECHNICAL TOOL FOR
EXPLAINING BEHAVIOUR.
IT IS ALSO AND VERY IMPORTANTLY
A WAY OF COMING TO GRIPS WITH
OURSELVES, NOT ONLY WHAT WE
SHOULD DO BUT WHAT WE SHOULD BE.
NOW FOR AN INTERESTING
DISCUSSION ON WHAT WE CANADIANS
SHOULD DO OR BE WE HAVE JOHN
RALSTON SAUL.
HE'S WHAT ONE USED TO CALL A
MAN OF LETTERS.
A POLITICAL THEORIST, NOVELIST
AND ESSAYIST HE IS ALSO THE
HUSBAND OF OUR FORMER GOVERNOR
GENERAL ADRIENNE CLARKSON.
FOR A NUMBER OF YEARS HE'S MADE
IT HIS BUSINESS TO QUESTION THE
VALIDITY AND VIABILITY OF
GLOBALIZATION AND HE IS HERE TO
DO JUST THAT IN A Q and A SESSION
FOLLOWING A LECTURE WHICH HE
GAVE MOST RECENTLY.

A new clip plays in which John Ralston Saul gives a lecture. He’s in his seventies, clean-shaven, with receding blond hair. He’s wearing a black suit, pink shirt and blue tie.

He says YOU KNOW
PEOPLE FELT THAT IF THE WALLS
CAME DOWN BETWEEN COUNTRIES
THROUGH GLOBALIZATION THROUGH
ECONOMICS THAT IT WOULD ALLOW
US TO BE FRIENDLIER WITH EACH
OTHER.
BUT WHAT WE DISCOVERED IS THAT
THAT'S NOT ACTUALLY HOW YOU
BUILD RELATIONSHIPS BETWEEN
COUNTRIES.

A caption appears on screen. It reads "John Ralston Saul. Author, The Collapse of Globalism and the Reinvention of the World. University of Toronto Mississauga. March 7, 2007."

John says AND IN
FACT THE BIG PROBLEM FOR THE G8
FOR EXAMPLE HAS BEEN THAT IT
WAS STRUCTURED, THE FIRST TIME
IN THE HISTORY OF THE WORLD
THAT THE LEADERSHIP GROUP WOULD
BE STRUCTURED AROUND ECONOMIC
THEORY.
AND EVERY
TIME THE G8 MEETS, G6, 7, 8
MEETS THEY FOUND THAT THE
CRISES THEY HAVE TO DEAL WITH
HAVE NOTHING TO DO WITH
ECONOMICS OR MOST OF THEM.
SO THEY'RE TRYING DESPERATELY
TO DEAL WITH THESE CRISES
THROUGH ECONOMICS OR SIMPLY
SAYING WELL ACTUALLY WE'RE
GONNA TAKE TIME OUT FROM WHAT
WE'RE SUPPOSED TO BE DOING TO
DO SOMETHING ELSE.
AND SO IN A WAY THE, THE SENSE
OF REALITY IN THE DISCUSSION
BETWEEN THEM HAS BEEN VERY
DIFFICULT TO MAINTAIN, TO BUILD
SOME KIND OF FUNCTIONAL
FRIENDSHIP.
EUROPE WHAT'S FASCINATING ABOUT
EUROPE IS THAT YOU KNOW RIGHT
AFTER THE SECOND WORLD WAR THEY
STARTED PUTTING IT TOGETHER AND
THEY PUT IT TOGETHER ON A KIND
OF POLITICAL, ADMINISTRATIVE
AND ECONOMIC BASIS CAUSE THEY
COULDN'T DEAL WITH THE YOU KNOW
THE DIFFERENCE BETWEEN A
COMMUNIST AND THE RIGHT AND THE
HATREDS OF VARIOUS COUNTRIES
FOR EACH OTHER.
SO THEY THOUGHT LET'S JUST DO A
KIND OF UTILITARIAN APPROACH.
AND BECAUSE THE POLITICS AND
THE ADMINISTRATION WERE SO
IMPORTANT THEY WERE ABLE TO
MAKE THE ECONOMICS WORK AS
WELL.
AND YOU GO BACK AND READ
THERE'S SOME REALLY INTERESTING
STUFF WRITTEN IN THE 50S AND SO ON.
AND EUROPE REALLY IS AN
INCREDIBLE SUCCESS STORY.
BUT SUDDENLY WHEN YOU GET INTO
THE 80S IT STARTS TO GET INTO
TROUBLE AND IT'S GOT INTO
BIGGER AND BIGGER TROUBLE.
AND WHY IS THAT?
THAT'S BECAUSE THEY NEVER
THOUGHT ABOUT HOW TO GET
CITIZENS TO LIVE TOGETHER.
I MEAN THERE'S VIRTUALLY ONE
INTERESTING PROGRAM IN EUROPE
THAT PUT CITIZENS TOGETHER
WHICH IS THE ERASMUS PROGRAM
AND THE STUDENT EXCHANGES.
BUT THAT'S AN ELITE PROGRAM,
ITS UNIVERSITY LEVEL.
THEIR DOUGH PROGRAMS THAT TAKE
THOUSANDS OF SCHOOLKIDS FROM
ONE COUNTRY AND PUT THEM IN
OTHER COUNTRIES THEY DON'T
EXIST THOSE PROGRAMS.
SO HERE THEY ARE THEY'RE
SUPPOSED TO BE GIVING UP IF YOU
LIKE THE POWER OF THE NATION
STATE TO LIVE TOGETHER.
BUT NOBODY ACTUALLY THOUGHT
THAT IT MIGHT BE NICE TO
ORGANIZE FOR THEM TO SPEND SOME
TIME TOGETHER.
YOU KNOW APART FROM GOING ON
HOLIDAY, WHICH IS NOT ACTUALLY,
BEING ON THE SAME BEACH
TOGETHER IS NOT ACTUALLY HOW
YOU BUILD INTERNATIONAL
RELATIONSHIPS.

A black slate reads “A Canadian perspective.”

John continues
IF YOU LOOK AT THE HISTORY OF CANADA
YOU'LL SEE THAT OVER THE YEARS
THAT WE'VE MADE A SERIES OF
IMAGINATIVE LEAPS.
THE INTERESTING THING ABOUT THIS
COUNTRY IS HOW WE HAVE BUILT
THE COUNTRY ON RISK.
SO THAT YOU KNOW THE LA
FONTAINE, BALDWIN GOVERNMENT IN
1848, 1851 PUT THROUGH YOU KNOW
120 ODD BILLS WHICH ARE THE
BASIS OF WHAT WE DO TODAY AND
THEY COULDN'T AFFORD ANY OF IT.
PUBLIC EDUCATION, A POVERTY
STRICKEN MISERABLE COLONY,
PUBLIC EDUCATION FOR GOD'S
SAKE.
PUBLIC UNIVERSITIES FOR GOD'S
SAKE.
PUBLIC ROADS, POST OFFICES,
PROFESSIONAL SOLICITORS WE
COULDN'T AFFORD ANY OF IT.
BUT BY TAKING THIS RISK THEY
ACTUALLY CREATED THE BASIS OF
THE MODERN, SUCCESSFUL MIDDLE-
CLASS COUNTRY.
WE COULDN'T AFFORD THE CPR.
WE COULDN'T AFFORD MEDICARE.
YOU KNOW WE COULDN'T, WE HAVE
NEVER BEEN ABLE TO AFFORD ANY
OF THE REALLY IMPORTANT THINGS
WE'VE DONE.
BUT BY DOING THEM WE KIND OF
IT'S, IT'S AN IMAGINARY, AN
IMAGINATIVE LEAP OUT OF ONE
STATE OF BEING INTO ANOTHER
STATE OF BEING.
AND BY MAKING THAT IMAGINATIVE
LEAP WE SUDDENLY DISCOVER THAT
WE'RE MUCH RICHER AND THE MONEY
APPEARS.
THAT'S ACTUALLY REAL ECONOMICS.
NOW IF YOU BECOME A MEGALOMANIAC
YOU SORT OF THINK THAT THERE IS
NO END TO THE MONEY AND THAT'S
NOT TRUE.
THERE IS AN END TO IT.
BUT THAT, THOSE CAREFULLY
THOUGHT OUT STRATEGIC
INITIATIVES WHICH IS WHY WE'RE
GIVING YOU THOSE EXAMPLES.
STRATEGIC INITIATIVES THAT
CHANGE SOCIETY, THEY TURN OUT
TO BE FINANCEABLE BECAUSE
THEY'RE INTELLIGENT AND THEY'RE
RIGHT FOR THE PUBLIC GOOD.
AND SUDDENLY ONCE YOU'VE DONE
THEM YOU START TO SEE THAT
ECONOMICS MAKES SENSE.
BUT AS SOON AS YOU START TO
THINK IN A KIND OF MICRO
ECONOMIC LINEAR MANNER
EVERYTHING IS TOO EXPENSIVE.
HAVE YOU NOTICED THAT WE'VE
NEVER STOPPED CUTTING AND YET
EVERYTHING SEEMS TO BE MORE,
MORE AND MORE THINGS SEEM TO BE
TOO EXPENSIVE FOR THE PUBLIC
GOOD.
BUT WHAT THAT, WHAT DOES THAT
FOLLOW?
IT SHOULD BE THE OPPOSITE
RIGHT?
WE CUT IN ORDER TO SAVE MONEY.
AND SO ACTUALLY WE SHOULD BE
ABLE TO DO MORE THINGS BUT IN
FACT WE'RE ABLE TO DO LESS
THINGS.
AND THAT'S BECAUSE THAT'S NOT
THE WAY ECONOMICS WORK.
OKAY ECONOMICS IS A
SPECULATIVE, IMAGINATIVE
BUSINESS.
WHEN YOU GET IT WRONG YOU GO
TOO FAR DOWN.
BUT AS LONG AS YOU'RE BEING,
USING ACCURATE IMAGINATION YOU
ACTUALLY LEAP TO MORE AND MORE
INTERESTING POSITIONS WHICH IS
HOW WE BUILT OURSELVES FROM A
POVERTY STRICKEN NATURALLY POOR
MISERABLE LITTLE COLONY IN THE
MIDDLE OF NOWHERE TO BEING ONE
OF THE RICHEST COUNTRIES IN THE
WORLD.
I CAN TELL YOU IT WASN'T THE
BUSINESS SCHOOLS THAT DID IT.
IT WAS A LOT OF SEAT OF THE
PANTS IMAGINATION, RISK AT THE
POLITICAL LEVEL IN THE BUSINESS
COMMUNITY, THINKERS IN THE
UNIVERSITIES.
ECONOMIC THINKERS IN THE
UNIVERSITIES.
YOU KNOW HAROLD INNIS.
SOME OF THE GREATEST ECONOMISTS
IN THE WORLD CAME OUT OF OUR
UNIVERSITIES.
AND IT'S REALLY KIND OF A WELL
HOW COULD WE DO THIS?
WE CAN'T AFFORD IT.
WELL LET'S JUST DO IT
DIFFERENTLY.
LET'S IMAGINE IT.
SO I'LL FINISH WITH A LAST, ONE
LAST STORY.
A FRIEND OF OURS HAS AH, AH
10,000 ACRES IN SASKATCHEWAN,
THE MIDDLE OF SASKATCHEWAN,
VERY GOOD FARMLAND.
THEY'VE GOT TWO AND A HALF
MILLION DOLLARS WORTH OF
EQUIPMENT AND THEY SPEND ABOUT
400,000 dollars A YEAR ON YOU KNOW
PRODUCTS, INSECTICIDES,
HERBICIDES, YOU KNOW FERTILIZER
AND SO ON.
IN A GOOD YEAR THEY CAN JUST
MAKE A PROFIT.
SO WHEN YOU SAY THAT YOU
REALIZE THAT WHAT YOU HAVE HERE
IS AN, AN, AN INDUSTRIAL
STRUCTURE WHICH DOESN'T WORK.
BECAUSE YOU'VE GOT GOOD
FARMLAND.
YOU'VE GOT 10,000 ACRES.
YOU'VE GOT THE BEST EQUIPMENT,
YOU'VE GOT THE BEST STUFF AND
IT DOESN'T WORK AS AN EQUATION.
WHY?
BECAUSE IT'S BASED ON A 19TH
CENTURY THEORY OF SCARCITY AND
WE'RE NOW IN SURPLUS.
THEIR NEXT DOOR NEIGHBOUR HAS
4,000 ACRES AND DECIDED A
COUPLE OF YEARS AGO THAT THEY
WOULD LET 2,000 ACRES LIE
FALLOW AND THE OTHER 2,000 THEY
WOULD DO ORGANICALLY.
I'M NOT MAKING A SPEECH FOR
ORGANIC.
I'M JUST SAYING YOU KNOW 2,000
ANOTHER WAY OF THINKING.
SO HALF, THIS IS NOW ONE-FIFTH
OF THE OTHER HOLDINGS AND ONE-
HALF OF THEIR OWN HOLDINGS.
AS A RESULT OF GOING ORGANIC
THEY WERE ABLE TO SELL THEIR
EXPENSIVE EQUIPMENT AND BUY
SOME REALLY CHEAP EQUIPMENT,
BECAUSE YOU DON'T NEED THE
EXPENSIVE EQUIPMENT TO APPLY
THE COMPLICATED PRODUCTS THAT
COME FROM PEOPLE LIKE MONSANTO
RIGHT?
SO THEY GOT CHEAP EQUIPMENT AND
THEY WERE SPENDING I THINK
200,000 dollars ON STUFF TO DO ON THE LAND.
THEY NO LONGER SPEND A PENNY ON
STUFF BECAUSE THEY PRODUCER
THEIR OWN FERTILIZER YOU KNOW
AND THEY USE METHODS.
THEY'RE NOW MAKING A REALLY
GREAT PROFIT.
NOW AM I SAYING EVERYBODY
SHOULD DO THAT?
NO.
WHAT I'M SAYING IS THAT IF YOU
STAND OUTSIDE OF THE BOX AND
YOU THINK ABOUT IT DIFFERENTLY
YOU MAY FIND THAT ACTUALLY THE
LATE 19TH CENTURY MODEL OF
MAXIMUM PRODUCTION, MAXIMUM
PROFIT CHEAPEST PRICE IS
ACTUALLY A VERY OLD-FASHIONED
MODEL WHICH DOESN'T NECESSARILY
WORK FOR QUALITY CONTROL,
COMPETITION AND, AND THE
ENVIRONMENT.
IT'S ABOUT THINKING ABOUT IT
SOMEWHAT DIFFERENTLY.
AND ONE OF THE FASCINATING
THINGS IS THAT IN ORDER FOR
THAT SORT OF APPROACH TO WORK
YOU HAVE TO HAVE REALLY GOOD
DISTRIBUTION SYSTEMS.
AND CAN WE GET OFF OUR ASSES TO
PUT IN PLACE DISTRIBUTION
SYSTEMS THAT WOULD MOVE THESE
KINDS OF PROJECTS AROUND OUR
COUNTRY?
NO.
WE'D RATHER GET IT FROM
CALIFORNIA.
THAT'S THAT KIND OF LAZINESS,
WHICH WILL BE THE DESTRUCTION
OF THIS COUNTRY IF WE'RE NOT
CAREFUL.
AND THAT LAZINESS IS AT THE
ELITE LEVEL.
NOT THOSE FARMERS WHO ARE
WORKING DAY AND NIGHT TO
PRODUCE THIS STUFF.
IT'S THE ELITE LEVEL THAT
CANNOT GET ITS MIND OUT OF THE
MANAGERIAL THEORIES OF
ABSTRACTION AND DOWN TO THE
REALITY OF HOW THINGS ACTUALLY
WORK.
YOU BUILD, YOU KNOW GEORGE-
ETIENNE CARTIER AND JOHN A.
MACDONALD WOULD HAVE SOLVED THE
PROBLEM IN THREE MINUTES.
THEY WOULD HAVE SAID THIS IS
HOW YOU MOVE STUFF.
WE'RE GONNA MOVE THIS STUFF.
WE'RE GONNA PUT A SYSTEM IN
PLACE.
THE PEOPLE WE HAVE NOW SAY WELL
COULDN'T WE FIND SOME PEOPLE TO
DO A STUDY OF THIS?
THEN WHAT WOULD BE THE THEORY
BEHIND IT?

The clip ends.

Back in the studio, Andrew says WE ARE
CREATING THESE VAST TRADING
ZONES, CREATING ECONOMIC TIES
TO SO MANY DIFFERENT PEOPLE WHO
BARELY KNOW EACH OTHER.
SAUL'S BELIEF THAT YOU CAN MAKE
AN INTUITIVE LEAP.
THAT, THAT YOU CAN DREAM A
SOCIETY INTO BEING CAN GIVE US
HOPE FOR THE FUTURE.
BUT IT'S THE TRICKY TASK OF
CHOOSING WHOSE VISION AND WHOSE
DREAM WE WILL ALL LIVE IN.
AND IF YOU WANT TO BE ON TOP OF
WHAT'S ON “BIG IDEAS” SEND US
AN EMAIL TO bigideas@tvo.org
AND WE'LL
KEEP YOU INFORMED.
“BIG IDEAS” I'M ANDREW MOODIE.

[Theme music plays]

The end credits roll.

bigideas@tvo.org

416-484-2746

Big Ideas. Producer, Wodek Szemberg.

Producers, Lara Hindle, Mike Miner, Gregg Thurlbeck.

Logos: Unifor, Canadian Media Guild.

A production of TVOntario. Copyright 2007, The Ontario Educational Communications Authority.

Watch: John Elster and John Ralston Saul