*An Economic Tour of the Weird: WTF?!*

by on October 20, 2017 at 12:17 am in Books, Economics, History, Law, Religion | Permalink

That is the new Peter Leeson book, and it is just out.  Here is the Amazon summary:

This rollicking tour through a museum of the world’s weirdest practices is guaranteed to make you say, “WTF?!” Did you know that “preowned” wives were sold at auction in nineteenth-century England? That today, in Liberia, accused criminals sometimes drink poison to determine their fate? How about the fact that, for 250 years, Italy criminally prosecuted cockroaches and crickets? Do you wonder why? Then this tour is just for you!

Here are the book’s rather spectacular blurbs.  Here is a short Peter piece on medieval ordeals.  Here is a Reddit thread on whether medieval ordeals actually were an effective test of guilt.  And he has this piece on superstition and Friday the 13th in Newsweek.  I would like to see a media outlet excerpt his piece on the rationality of gypsy culture.

I would say that Peter has written a very effective book within the Beckerian tradition, namely trying to explain economic phenomena in terms of a neoclassical rational actor model.  Nonetheless I am much less of a Beckerian than Peter is, at least for the socially-oriented issues he is considering.  Here is a simple typology of approaches:

1. Beckerians and the rational actor model.  I slot Peter in here, along with many Chicago School economists, Marvin Harris, and much of public choice economics.  An explanation shows how a social outcome stems from the interaction of means-end maximizing individuals, translated into some aggregate result.

2. Behavioral economics.  By now this is old news, but these researchers find what I consider to be relatively small deviations from the rational actor model.  This is usually done by measurement, rather than through more complete models.

3. Cultural economics, anthropologists, and many sociologists.  Peer effects are paramount, and Frenchmen see the world differently than do Americans, not to mention Bantus or Pygmies.  This is due to a social contagion of perception that does not boil down to rationality in the sense that economists understand it (you can build a model in which social mimicry at young ages is rational, but that model won’t generate much insight into the particular phenomena we are trying to explain, nor does that model pick up the mimicry mechanism very well).  Historical study plus thick description plus economic rationality at various margins (but margins only) plus some statistics is the way to go.  Mostly we’re trying to understand how and why other groups of people see the world in fundamentally different terms.

The economists who can best grasp other points of view thus are the masters of explaining macro-phenomena (by which I mean something quite distinct from traditional macroeconomics).

I am much closer to #3 than are most economists.  Furthermore, I view economists as patting themselves excessively on the back for #2, when #3 is far more important.  Peter has written a very good book mostly in the tradition of #1, though due to his Austrian background with periodic forays into #3.  I once wrote to Peter: “Gypsy culture rational?  How about Episcopalian investment bankers in Connecticut being rational?”  Probably neither are.

1 A clockwork orange October 20, 2017 at 12:33 am

note to self: pee cry

2 CMc October 20, 2017 at 1:31 am

“The economists who can best grasp other points of view thus are the masters of explaining macro-phenomena (by which I mean something quite distinct from traditional macroeconomics).”

This translates to all social science. I view Steven Pinker as fitting into 3, to large degree.

I think evolutionary psychology, broadly defined, can and will make headway into explanation of economic behaviour, augmenting/bridging the rational actor and behavioral models, fleshed out by some of the methods employed by #3.

3 drive-by commenter October 20, 2017 at 2:14 am

yes, Tyler, as opposed to the hernia you give yourself patting yourself on the back here.

4 Steve Sailer October 20, 2017 at 2:38 am

How are gypsies doing in Darwinian terms? Seems like they are pretty numerous in the 21st Century. Maybe not as fast growing as the Amish, but doing okay.

5 KM32 October 20, 2017 at 7:16 am

In a collapse, the Amish will have just bred themselves to be someone’s slaves/heavily taxes serfs. The Gypsies are in a much better position to slip away ahead of the chaos to somewhere not quite so badly hit.

6 Ray Lopez October 20, 2017 at 2:55 am

Damning by faint praise? Seems like TC is dissin’ Leesen for being too much #1 and not enough #3.

Bonus trivia: in the Philippines, they believe fruit bats are evil spirits, and even local municipal authorities who should know better believe that a fruit bat, called an “aswan” is a flying evil spirit. Some of that #3 that TC speaks about. But even in California and now pretty much the rest of the USA, you can rescind a sale of a house if the seller did not disclose that a murder occurred in the house, as it give ‘bad karma’. How is that different from fear of fruit bats in the Philippines? It’s not. Or the municipalities in Australia (twice now in the last month) re-burying whale carcasses in an expensive dig since the populace irrationally thinks it will attract sharks at the beach. Same.

7 Nigel October 20, 2017 at 5:39 am

“How is that different from fear of fruit bats in the Philippines?…”

It’s different in that an entirely rational purchaser of the putative house would probably still suffer loss of resale value, given the existence of not entirely rational purchasers.

8 JFA October 20, 2017 at 6:36 am

I don’t think he’s “dissin'” Leeson here. TC is just calling a spade a spade. Leeson would probably take it as a compliment.

9 JWatts October 20, 2017 at 10:50 am

” But even in California and now pretty much the rest of the USA, you can rescind a sale of a house if the seller did not disclose that a murder occurred in the house, as it give ‘bad karma’.”

It’s not necessarily about bad karma, it’s about a bad reputation. Plenty of people don’t want to arrive home everyday and get reminded that a murder occurred at their home. They don’t want to live in the house on the street that the neighbors talk about being the Murder home. A murder will effectively drop the potential value of the house. Anything that will drop the potential value of a house should be disclosed to potential buyers.

10 dearieme October 20, 2017 at 3:03 am

In Britain the gypsies – known variously as Roma, travellers, pikies, tinks, and probably other designations – have been classed as racial or ethnic groups even when they are conspicuously as white as the next man. As you’d expect the point is to claim racial/ethnic privileges. Some have been arrested for keeping slaves so there is obviously some limit to their privileges. Or perhaps slavery is a privileged crime. Who can tell from outside the mad world of the Sociological State?

11 Miguel Madeira October 20, 2017 at 5:42 am

“known variously as Roma, travellers, pikies, tinks, and probably other designations”

“Roma” and “travellers” are not different things (“Roma” being what Portugueses call “ciganos” and “travellers” a specifically British Islands thing)?

“have been classed as racial or ethnic groups even when they are conspicuously as white as the next man”

And? Many ethnic minorities are “as white” as the ethnic majority – some are virtually indistinguishably (like Serbians, Croats and Bosniaks).

12 Brett Dunbar October 20, 2017 at 9:42 am

Irish Travellers are in fact a different ethnic group from the Romany. They have a distinct language, Shelta a Celtic Germanic mixed language which isn’t mutually comprehensible with either English or Irish.and is unrelated to Romany.

https://en.wikipedia.org/wiki/Irish_Travellers

In 2011 an analysis of DNA from 40 Travellers was undertaken at the Royal College of Surgeons in Dublin and the University of Edinburgh. The study provided evidence that Irish Travellers are a distinct Irish ethnic minority, who separated from the settled Irish community at least 1000 years ago; the claim was made that they are as distinct from the settled community as Icelanders are from Norwegians. Irish Travellers “left no written record of their own” and their families do not date back to the same point in time; some families adopted Traveller customs centuries ago, while others did so more recently. It is unclear how many Irish Travellers would be included in this distinct ethnic group at least from a genetic perspective.

Among other speculation on their origins, “two theories are rejected outright”: that they were descended from those Irish who were made homeless by Oliver Cromwell’s military campaign in Ireland in the 1650s, or made homeless in the 1840s famine due to eviction.

13 Hazel Meade October 20, 2017 at 9:33 am

Roma/Gypsies and Irish travellers/tinkers are two ethnically distinct groups.
Roma are darker skinned and originate from India (a very long time ago), while Irish travellers are white.

14 JFA October 20, 2017 at 6:37 am

I would like to see Tyler’s recommendations for best books exhibiting #3.

15 Kevin- October 20, 2017 at 10:33 am

+1

16 Thor October 20, 2017 at 11:56 am

Karl Marx, Vlad Lenin, Pierre Bourdieu, and Michel Foucault, I’m afraid.

17 Pat October 20, 2017 at 6:57 am

“Mostly we’re trying to understand how and why other groups of people see the world in fundamentally different terms”. So mostly we’re not doing economics.

18 Butler T. Reynolds October 20, 2017 at 10:37 am

If economics is mostly equations, then I guess not.

19 Pat October 21, 2017 at 1:47 am

Economics accepts that people have different preferences and doesn’t concern itself with why. It just assumed they act on those in the same rational way.

20 rayward October 20, 2017 at 8:56 am

How is behavior (2) distinguishable from perception (3)? Yesterday I linked to Robert Shiller’s essay on the 30th anniversary of black Monday in which he wrote this: “In 1987, a powerful feedback loop from human to human — not computer to computer — set the market spinning. . . . We will have panics but not an exact repeat of Oct. 19, 1987. In one way, the situation has probably gotten worse: Technology has made viral rumor transmission much easier.” https://www.nytimes.com/2017/10/19/business/stock-market-crash-1987.html Perception (that the sky is falling) combined with behavior (the herd instinct) led otherwise rational investors to jump off the cliff. Sure, the Dow soon recovered from black Monday and in the long run (the 30 years since black Monday) investors who didn’t panic and follow the herd have been greatly rewarded for their rationality; but in the long run we are all dead.

21 Pshrnk October 20, 2017 at 9:24 am

Any Pirates?

22 The Other Jim October 20, 2017 at 9:36 am

An “Economic” tour of the weird, huh?

Serious question: Are all economists just people who couldn’t get jobs at Reader’s Digest, or Cracked? So they self-publish stories about things like prosecuting cockroaches, and call it economics?

23 Tim Worstall October 20, 2017 at 9:53 am

Not sure if this comes from earlier Leeson or not. But the sale pf pre-owned wives? A method of divorce in an era when it required at Act of Parliament to gain a divorce. Along with those culres (well, most of them) where the groom abducts the bride. It’s all pre-organised. Who was going to buy the wife was – usually so it is said- known ahead of the auction. A wife was property, property can be sold, obviating the need for the Act which no one outside the aristocracy could possibly afford.

24 DanC October 20, 2017 at 9:53 am

Perhaps Professor Cowen could flesh out these ideas and perceived differences.

More often, if you think a given market is irrational, you are failing to perceive what is really being traded and valued. Different cultures may value things differently, preferences can vary, but that does not mean that they are failing to achieve the greatest utility given their preferences.

Again not all individuals are rational, but the marginal buyer (or market) sets the price. Collectively groups are rational in that they maximize the utility of the group. Rather few specialist can create a market that can exploit various preferences and maximize the utility of the group. People can create these markets across cultures.

Not sure how variance in preferences translates into one group being more rational then another. Variance in preferences can lead to trade that is mutually beneficial. Trade does not require that all cultures share taste or views. The French can enjoy Jerry Lewis movies for reasons that may escape the rest of the world. Does that make the French irrational because their preferences are different? I can go to a butcher who likes to eat haggis, which I hate, and stay find other things to trade.

Preferences that markets reveal do not require uniform views. If the Japanese shun white cars, it doesn’t prevent them from selling white cars in other markets. Cultural norms hardly seem to prevent trade or a rational market. Attempts by a culture to repress various preferences just seems to create a black market.

Prostitution laws vary around the globe but is that a sign of irrational behavior or varying values. One society can view prostitution as an evil that demeans the society. Another as a transaction between private parties without moral implications. Is one of these groups irrational? Or do they maximize utility and create markets that reflect different preferences? Laws that vary too much from the true social values (for at least for a subset of the population) will lead to black markets.

What am I missing?

25 Anonymous October 20, 2017 at 10:28 am

I would seriously recommend this. A quite readable history of thought on the subject.

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street

Link: http://a.co/iLLbLcC

If you would like something a bit more against “utility”

Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions

Link: http://a.co/byXoIQD

26 DanC October 20, 2017 at 10:46 am

Both books seem like the trend toward cocktail party economics. Interesting anomalies that don’t have much predictive power.

27 Anonymous October 20, 2017 at 10:50 am

Having read them both, I found them very grounded.

But if your thing is to avoid challenging ideas, while making uninformed criticism, enjoy that instead.

28 DanC October 20, 2017 at 11:13 am

A quick skim of the Kindle version of the first book looks like a well written, mildly interesting history of rational markets. Not very deep but a quick review. When it gets to the second half it seems unconvincing, at least with a quick skim.

The second book seemed like a waste of time. A prime example of cocktail party economics replacing real analysis.

But if you enjoy that type of thing, enjoy

29 Anonymous October 20, 2017 at 11:19 am

Very interesting. Fox and Ariely are well respected out there in the world.

Would you say that MR is a place where you feel you can shelter from their ideas?

30 Anonymous October 20, 2017 at 11:45 am
31 DanC October 20, 2017 at 12:19 pm

If you know nothing read the first book and you will know a bit more then nothing, but some of what you will learn is false.

If you want some light entertainment, read the second book. You will learn some trivial things and if that amuses you, this is a free country.

Are you trying to prove that some “economics” books have limited value, that the market for “economics” books is irrational? Or do people just have different preferences for entertainment.

If you are investing your money, I would strongly suggest that you ignore both of these books. But this is a free country and someone in the market will make money off your mistakes and the market will remain efficient.

32 Anonymous October 20, 2017 at 12:34 pm

The average person, who isn’t going to read from Mandelbrot to Bernstein to Shiller to Thaler would probably be better off with

Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich

Link: http://a.co/9w3qZEe

And even lighter read, but with the basics of “brains high on money.”

33 DanC October 20, 2017 at 4:45 pm

Thank you That was worth a good laugh. I thought your posts were serious, now I know you are just trying to be a funny troll in any case thank you

34 Anonymous October 20, 2017 at 6:56 pm

Every author I have named is widely respected, or has a Nobel.

I would say it was quintessential trolling on your part to say all those guys are nuts.

35 DanC October 20, 2017 at 9:41 pm

Who said they were nuts

If you like cocktail party economics I suppose you could do worse

My quick perusal finds their arguments weak. You might like them. Just proves Barnum rule

36 Anonymous October 20, 2017 at 10:39 am

By the way, I think it is very funny how we are trending toward “all cars are white” here in southern California.

I have a white Subaru Outback, so I fit the profile.

37 dearieme October 20, 2017 at 2:45 pm

I saw a vile green car yesterday. That chap will never have trouble finding it in a car park. On the other hand, he’ll be easily identified if he misbehaves on the road.

38 peri October 20, 2017 at 11:11 am

An appreciative (“its most valuable contribution is in challenging ingrained attitudes”) capsule review in the New Yorker of a new book about cannibalism, recently, tossed off this:

“In China, for thousands of years, children cut off body parts and cooked them in a soup for their parents, as expressions of filial piety.”

Is that weird? Is it even true? [I guess the famous fact-checkers thought so.] Does #1, #2, or #3 explain it best?

It sure does seem like the opposite of my observation of parental behavior, but now that I think about it my field of observation has been rather narrow, perhaps.

39 rayward October 20, 2017 at 12:22 pm

In the aggregate actors are rational in the long run but irrational in the short run. Are the two qualifications (in the aggregate and in the long run) too much for neoclassical economists to accept? Consider a country with a high level of inequality, nothing comparable to social security, and a policy of one child per family. Would rational actors have a high or low savings rate? Or consider a country with a low level of inequality, a modest social security program, and no policy that limits the number of children per family. Would rational actors have a high or low savings rate? Or consider the same country but with a high level of inequality. Would the savings rate go up or down? Now consider economists who identify with the neoclassical school. Do rational neoclassical economists follow the herd or disperse like cats?

40 anon October 20, 2017 at 7:24 pm

“In the aggregate actors are rational in the long run”

If you listen to the Ritholtz interview with Thaler, he doesn’t quite buy that. He says “maybe.”

http://ritholtz.com/2015/08/interview-with-richard-thaler/

41 Alan Crowe October 20, 2017 at 5:53 pm

Your typology is missing the sideways-looking headless chicken. Most people combine a bit of randomness with a bit of looking around. What are their peers doing? Who is getting good results? Who is getting bad results? Then they copy.

You can say that is not rational. And the irrationality shows up in the dynamics. When circumstances change, no-one thinks strategically in order to work out how to respond, they just try stuff, initially at random. But the lucky few get copied, so in time behaviour changes and starts to resemble the rational actor model (except for the delay, and some on-going random splash, as nobody understands why the good decisions are good so cannot leave well alone.)

Case one, the rational actor model, can get you off to a good start at analyzing the world (especially with static, equilibrium analysis, which hides the delay) even if people are not individually rational, but are faking it at the population level with a version of generate and test.

Case three, cultural economics, is skating on thin ice, because it can end up treating culture as exogenous. When, in the fullness of time, reality seeps into peoples behaviour due to preferential copying of the those who got good results, cultural economics get left behind. Where did the behavioural changes come from? Sometimes they were not latent in the culture, but people have started doing it because it works. It looks as though they thought it through, rational actor style, but slowly.

42 Ramagopal October 20, 2017 at 8:20 pm

Tyler, if you really hold that economists should take culture and sociology more seriously, how come the textbooks co-authored by you are very conventional, without any reflection on the cultural/sociological dimensions of economic life?

43 Ramagopal October 20, 2017 at 8:28 pm

That was more or less a request pf mine to Tyler when he invited “requests”: to suggest readings on economics and culture. But mine was the 206th request so I wonder if he will get to see it!

44 Ramagopal October 20, 2017 at 8:33 pm

this comment was in reply to JFA ( No.14)

45 Pava Renat October 22, 2017 at 1:04 am

Are economists rational? Well, there’s an awful lot of group think in economics, especially macro, I believe. But it may be perfectly rational to buy into group think. After all, one does want to belong, does one not? So, of course economists are rational — and I dare you to disprove it!

46 Italian_nitpicker October 22, 2017 at 4:47 am

“For 250 years, Italy criminally prosecuted cockroaches and crickets” Oh really? Italy exists since 156 years.

The guy has done his homework

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