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LanguageIsCool @lemmy.world

What's an example of economic irrationality you've observed in the world?

A friend from Argentina once told me Argentina keeps its best wines for themselves and exports the mediocre stuff, even at the sake of profits.

Similarly, a friend from Turkey once said he couldn’t find good Turkish olives outside of Turkey because “Turks are terrible businessmen and keep the best olives to themselves.”

These are anecdotal and might be untrue but I liked the idea.

At an individual level, it’s irrational to cooperate in a prisoner’s dilemma yet experiments show people cooperate.

Contributing to open source projects may fall into this category.

Have you observed any obvious behavior that goes counter to profit maximization? Any cool examples?

40 comments

  • I'm sure you could write an entire collection of books on the irrationality of Brexit.

    As James O'Brien graciously puts it: "We are the first country in history to have placed economic sanctions upon itself"

  • Others in the thread have already hinted at this fact: logic and optimization are lasers that can be pointed at anything. Point it towards money and of course it’s irrational to forfeit profits for good wine. Point it towards the good wine and of course it’s irrational to forfeit evenings drinking good wine with friends.

    Put another way, one man’s trash is another man’s treasure.

    Of course, this doesn’t mean most people don’t share some common values. Most people want both wine and profits!

    Not only is logic and optimization a laser, but optimization can happen at many levels.

    There are many experiments where the most egg-laying hens are selected and bred, but often these hens are aggressive and kill each other. However, when whole groups of hens (e.g. a group of 5 hens) are chosen, some of the hens do not lay eggs but are peace-makers and create the perfect environment for egg-laying eggs to lay many eggs.

    In this example, optimization happened at the group-level and not at the individual level.

    Similarly, rich people who leave high-tax societies end up in a ‘Lamborghini in a road made of mud’ situation. However, if rich people contribute to the societies that made them rich in the first place, everyone benefits. There are lower anxiety, depression, and suicide rates for everyone (including the rich) in more egalitarian societies. Here you can see the laser and the levels: the laser is either pointed at the luxury car or the quality of life, while the level is either the individual or whole society.

    Group-level selection seems irrational for those who think that being an egotist is the only way.

    Of course, life is not just about lasers and levels. It’s about values. Rationality is a tool. It can help us live valued lives or trip us up. If you want good wine, good cheese, money to buy something else, good friends, and a good society, that’s what matters.

    • Nah that's a cop out. There are legit irrationalities that do not fall into this and i say that as a contemporary utilitarian.

      Someone mentioned gambling in the comments and thats exactly one of such examples - the invisible gains here are almost impossible to justify rationally as in the entertainment provided by gambling can be replicated without the dangers of it very easily. As in mathematically speaking playing fair return games will yield the same or higher satisfaction than low yield games meaning low yields games are objectively irrational.

      • You may not realize it, but you're pointing your laser towards having money and winning at games. These are sensible enough values, since a lack of money can make life difficult and losing at games can be frustrating. In this regard, you are much like other people who share those values.

        You claim that "low yields games are objectively irrational", a statement that only ever makes sense if you take for granted what objectivity is. From this perspective, it's easy to argue that the Holocaust was a loss of rationality, a mass hysteria, but this ignores the thorough tracking, meticulous record-keeping, massive logistics planning, and investigation that it involved. Once again, rationality is a tool, it's a laser that can be pointed anywhere, including bigotry and inhumane values.

        There is a difference between science and values, between actions and values, between tools and values. The fact that most humans agree on values doesn't mean they are 'objectively true'. These humans are like fish in water, fish who don't realize they're in water. They have been socialized into the values of this culture and are absolutely certain they are right and others are wrong. Their gods are the only true gods (which is exactly what their neighbors, who hold other gods dear, believe). These humans don't realize it, but they too are pointing their lasers toward their beliefs, their gods, and everything they hold dear.

        Maybe it helps to look at this inside the brain. Decades of research has shown we build our concepts through relational frames, or conceptual Lego bricks. These tiny bricks relate concepts, such as "low yields games are worse than high yields games", and they combine to create cognitive palaces. Rationality is a set of relational frames, a ladder of sorts that can be taken anywhere in the palace to help us solve problems and embody our values. Once again, to use the tool we need values; we point the laser; we take the ladder somewhere.

        In our mental palaces, we like to keep things organized. We like coherence. But not all order is the same. There is something called literal coherence, which leads us to use deduction, logic, and probabilistic thought —rationality— so that we are right. "Aktchually" guys are literally coherent. Many OCD patients are literally coherent (it doesn't mean they're not suffering). They always carry their rationality ladder with them, even if it has a high price.

        And then there's something else, called functional coherence, where we care less about being right and more about what works, what's helpful, what gets us closer to a valued life and what doesn't. With functional coherence, we accept that we can't clean the whole palace. It's okay if there's leaves on the paths next to the gardens. It's okay if the books aren't in alphabetical order. We know we can use the ladder when we need it, but we sometimes decide to be nimble and run to greet our loved ones, or decide to look in the mirror and be compassionate with whom we see, or really savor the banquet we're about to eat. This doesn't mean the ladder can't help us put up the mirror or fetch the ingredients for our meal. It just means that we don't get stuck with the ladder.

        I'm using metaphorical language because it's a fast way to convey information in limited time, but if you're interested in how rationality is built through cognitive bricks, how we can sometimes get stuck in the webs of thought that we build, and how we can use our cognition to live a valued life, you can check out Relational Frame Theory.

  • Germany does the same with wine to the point where Brits go to Germany and wonder why they're sending us all the shit stuff

  • My father once told me of an old IBM machine, I think it was the System 3 model 15D or one of its contemporaries, or maybe the original System 38. It had some amount of memory, like 32k of memory (I'm going to get these numbers wrong), and to upgrade it you could spend many thousands of dollars to have IBM come install a control board to upgrade it to 64k. The memory was already physically in the box; they manufactured and delivered it to the customer, and sold the memory control board as an exorbitant cost option, when it was the RAM (it might have even been core storage) that was the expensive part to make.

    To a lesser degree, I've been hearing about cars that install cost options on all models, but they don't hook them up on the lower tiers. Like apparently all Lotus Exiges have power mirrors, they've all got motors in them, but they don't give you the switch unless you pay for it. You can go to a Ford dealership, buy the right switch and just pop it in and it'll work. I suppose it can make some sense to reduce part counts, but it's getting to the point where it's "we installed the option in the car, it's hooked up, it's perfectly functional, we've already put in the expense, and we'll allow the software to turn it on if you pay for it.

  • Actively ruining the ecosystem and the climate, two things we probably cannot survive as a species without them working smoothly, so we can all buy new phones and clothes and help less than a handful of us to become even richer than they already are.

    Imho, that's an impressive demonstration of our stupidity and one of the most impressive species-level suicide I can think of. Even dinosaurs were not that stupid and they needed a meteor to hit the planet for them to be wiped out from its surface. Something we humans are working real hard to manage doing all by ourselves.

    To our credit, I should say those few already very rich people will indeed be reaching unheard-of levels of richness. And while helping them do so we will get our new shiny phones and new fashionable clothing. Yeah, I suppose.

40 comments