The Axiom of Choice
 

Interesting talk by Barry Schwartz.

I don't want to say much because it would be better to just go into without any preconcpetions, but I think this adresses some very fundamental issues with regards to capitalism.

Re: The Axiom of Choice
 

cliff notes

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Will give perhaps tomorrow, just want to have some people see it first.

edit: Mods have informed me I need more. The talk discusses the notion that more choice --> more freedom --> more welfare.

Re: The Axiom of Choice
 

Cliff Notes (Speaker's ideas and conclusions, not mine):

We live in a world with a lot of choices. There are good and bad consequences to this. The bad consequences are:
1. Choice paralysis: So many choices that you are unable to decide and end up doing nothing. Anectodote: When people must choose between 50 pension plans instead of 5 plans, their participation rate drops even though it is clearly within their interest to participate.
2. Opportunity cost: Even when you are doing something good, you are thinking about what else you could be doing. Anectdote: New York city couple sitting on the beach thinking about how they are missing out on a good parking space in front of their building.
3. Increased expectations --> lower satisfaction. If you get anything less than perfection nowadays, you are pissed. Int he past you had low expectations and were more easily satisified.

Conclusion: Rich people have too many choices and are worse off as a result. Poor people have too few choices. If the rich people shift their choices to the poor people, both parties would be better off.

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I covered this and a similar lecture here.

While what he is saying is very relevent on a psychological level, he completely ignores the economic ramifications of artificially restricted choice. In fact, he opens up the speech by openly ignoring the benefits. "We all know what's good about it, so let's focus on what's bad." This is like lecturing the pros and cons of Wal Mart without talking about the increased convenience and savings to consumers, and just talking about how moms and pops are going out of business. While there are some psychic detriments, the economic benefits provide for so much that we can make them up very easily, and that is how the civilized world progressed. Are we better off living in the dark ages when there were extremely few choices? Pretty hard to obsess over what "could have been" in that case. He is literally advocating shutting down civilization.

While I am very sympathetic to psychological findings, even as they often deviate from the very narrow-minded Austrian assumptions, I think that what Barry Schartz is saying is complete nonsense. If you're miserable because you're not sure whether you made the right purchase or not, you need a more positive outlook on life. I've never felt this way about the car I bought, the apartment I have or the computer I customized. Instead of lowering your expectations (come on, THAT'S the secret to happiness?!?!?!?!), just spend some time appreciating what you have rather than obsessing on what you don't have and this ceases to be a problem. Anyone can do this. We don't need to rewrite the economy because people don't know how to be happy.

Happiness is not an economic issue. It is a personal issue.

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While what he is saying is very relevent on a psychological level, he completely ignores the economic ramifications of artificially restricted choice. In fact, he opens up the speech by openly ignoring the benefits. "We all know what's good about it, so let's focus on what's bad." This is like lecturing the pros and cons of Wal Mart without talking about the increased convenience and savings to consumers, and just talking about how moms and pops are going out of business. While there are some psychic detriments, the economic benefits provide for so much that we can make them up very easily, and that is how the civilized world progressed. Are we better off living in the dark ages when there were extremely few choices? Pretty hard to obsess over what "could have been" in that case. He is literally advocating shutting down civilization.

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I'm not sure what you mean by "economic ramifications" and why they matter. The whole point of studying economics is to try to increase human welfare, and I think he's just pointing out a counterintuitive finding. He quite clearly states that some choice is better than no choice.

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Happiness is not an economic issue. It is a personal issue.

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Happiness is actually quite literally the central economic issue.

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Happiness is actually quite literally the central economic issue.

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This is true, see, for example, "utility." Its what drives all economic exchanges.

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Is the speaker talking about a business opportunity?

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Happiness is actually quite literally the central economic issue.

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This is true, see, for example, "utility." Its what drives all economic exchanges.

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But utility and happiness are not the same thing. Happiness is a cardinal and measurable emotional state of being. Utility, on the other hand, is an ordinal measure of worth that an individual assigns to a good or service. The most preferable choices do not necessarily cause happiness. In fact, they frequently don't.

Economics is about the production, distribution and consumption of scarce resource value. Value is known only through preference; not happiness. Nor is happiness a particularly scarce resource! Read Man's Search for Meaning by Viktor Frankl if you don't believe me. Happiness is cultivated by developing an appreciative, thankful and positive outlook on life, not by owning more goodies. (Yes, people who own more goodies are more likely to be happy, but if you look at the differences in cardinal happiness by economic bracket, the intra-bracket variances of happiness FAR surpass the inter-bracket variances.)

Happiness is also not the most important thing in everyone's life. If it were, all people would always prioritize it over everything else, but they don't. Our human drives lead us in many different directions, and who are we to tell people what the meaning of their lives should be?

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Economics is about the production, distribution and consumption of scarce resource value. Value is known only through preference; not happiness. Nor is happiness a particularly scarce resource!

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POTD/W/M

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this thread isn't making me happy

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The way to maximize freedom is to maximize choice

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Ugh. Clueless. I like lots of choices but choices are hardly tied to freedom. For instance if the government breaks up a large firm under the guise that its a monopoly, then they are both acting to increase choice and negate freedom.

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Paraphrase: Too much choice causes paralysis, unable to choose

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In any case where many consumers face a burdensome process of compiling and understanding information there is a profit signal for an agent to specialize in that information, and provide service to the consumers by closing that information gap.

Any kind of paralysis due to too much choice is either a) the result of government interference (controlling what agents can and cannot do) or the result of agency service not being taken advantage of yet or has been determined by the market to be unprofitable.


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Some choice is better than more, but more choice is not better than some. There is some magical amount, I'm not sure what it is, but I'm confident that we've passed that point where more options improve our welfare

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Some magical amount is what economists call market equilibrium.

He has absolutely no clue, nor can he ever have a clue, as to what number of choices *I* want to have, or what number of choices *someone else* wants to have.

The whole framework of welfare economics thought is seriously [censored]. By violently intervening into a market to restrict choice, you do so at the expense of some people in order to benefit some people. There is no cardinal measurement of value, so there is no way to sum and subtract how much value some gained and some lost, and so there is no way to determine if you've increased overall welfare.

The marginal utility of every dollar spent by every different individual is different, and so using $ as that cardinal measurement of value is just as [censored].

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Income redistribution makes everyone better off

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Jesus [censored] Christ.

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Happiness is not an economic issue. It is a personal issue.

[/ QUOTE ] Happiness is actually quite literally the central economic issue.

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Happiness has nothing to do with economics. Economic exchanges occur based on preferences, which are based on values, which are based on the subjective importance an individual assigns to certain scarce resources.

I do a lot of things, voluntarily, that make me unhappy. I went to blockbuster and paid $4 to rent "The Pianist." I knew what it would do to me. I watched it and almost cried my eyes out. I was completely unhappy when it was over, just like I knew I'd be.

I just went to the gym that I paid $40 this month to. I worked out so hard I almost puked. I knew I would, and I hurt a lot right now.

Economic exchanges are purposeful actions that attempt to achieve certain desired ends, ends which may or may not have anything to do with happiness.

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Economic exchanges are purposeful actions that attempt to achieve certain desired ends, ends which may or may not have anything to do with happiness.

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The point is not that the outcome is your happiness, but rather that you are happy with the outcome (ie, you gain the most utility from a specific outcome).

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Economic exchanges are purposeful actions that attempt to achieve certain desired ends, ends which may or may not have anything to do with happiness.

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The point is not that the outcome is your happiness, but rather that you are happy with the outcome (ie, you gain the most utility from a specific outcome).

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No, its about being satisfied with the outcome (or perhaps more accurately "less unsatisfied", since total satisfaction would yield no further action), but not happy with the outcome.

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Jesus [censored] Christ.

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Why doesn't it?

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Then your definition of happiness isn't the colloquial definition. That's strictly utility.

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Jesus [censored] Christ.

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Why doesn't it?

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If your position is that being taxed is actually good for you, there's really no sense of arguing with you. An argument about diminishing marginal utility or helping the poor is one thing, but calling redistribution pareto-efficient because it helps the rich is beyond ridiculous.

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Happiness has nothing to do with economics.

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lmao. Happiness is probably the fastest growing area in economic research today.

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Jesus [censored] Christ.

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Why doesn't it?

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If your position is that being taxed is actually good for you, there's really no sense of arguing with you. An argument about diminishing marginal utility or helping the poor is one thing, but calling redistribution pareto-efficient because it helps the rich is beyond ridiculous.

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Let's say, hypothetically, you could prove 100% that having less money made you happier. How, exactly, would it be ridiculous?

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Then your definition of happiness isn't the colloquial definition. That's strictly utility.

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The talk adresses both happiness as a general mood as well as the specific utility we get from things we buy, which he believes is diminishing.

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Some magical amount is what economists call market equilibrium.

He has absolutely no clue, nor can he ever have a clue, as to what number of choices *I* want to have, or what number of choices *someone else* wants to have.

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How can you just randomly assert this? I'm fairly sure there are studies done that show quite clearly that people are happier when they have less choice, and he references many of them in his talk. So yeah, he knows, generally speaking, that people often prefer having LESS choice.

To say that market equilibrium is infalliable is absurd.

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Jesus [censored] Christ.

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Why doesn't it?

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If your position is that being taxed is actually good for you, there's really no sense of arguing with you. An argument about diminishing marginal utility or helping the poor is one thing, but calling redistribution pareto-efficient because it helps the rich is beyond ridiculous.

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Let's say, hypothetically, you could prove 100% that having less money made you happier. How, exactly, would it be ridiculous?

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If this were actually true, even if it were not provable, there would be no need to use force to redistribute wealth.

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Some magical amount is what economists call market equilibrium.

He has absolutely no clue, nor can he ever have a clue, as to what number of choices *I* want to have, or what number of choices *someone else* wants to have.

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How can you just randomly assert this? I'm fairly sure there are studies done that show quite clearly that people are happier when they have less choice, and he references many of them in his talk. So yeah, he knows, generally speaking, that people often prefer having LESS choice.

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Less than what?

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To say that market equilibrium is infalliable is absurd.

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To think that some individual can outguess the market for all other people is more absurd.

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Happiness has nothing to do with economics.

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lmao. Happiness is probably the fastest growing area in economic research today.

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What do *you* think happiness research has contributed to economics?

And for that matter, econometrics was the fastest growing research field in economics for a while. What do you think econometrics contributed to the economics?

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Then your definition of happiness isn't the colloquial definition. That's strictly utility.

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The talk adresses both happiness as a general mood as well as the specific utility we get from things we buy, which he believes is diminishing.

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Correct, the speaker did not understand the distinction either.

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Some magical amount is what economists call market equilibrium.

He has absolutely no clue, nor can he ever have a clue, as to what number of choices *I* want to have, or what number of choices *someone else* wants to have.

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How can you just randomly assert this? I'm fairly sure there are studies done that show quite clearly that people are happier when they have less choice, and he references many of them in his talk.



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How can I assert that I know what I want better than the speaker? Ummm...lol?

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So yeah, he knows, generally speaking, that people often prefer having LESS choice.

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How much is the *perfect amount of choice* and how does he know we currently have *too much*?

How would one even discover how much is the perfect amount for *everyone*?

What if I like 200 salad dressing choices, but you only want 5 choices? Currently the grocer is most profitable providing 175 choices. Which one of the three of us should be able to violently enforce our preference onto everyone else?

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To say that market equilibrium is infalliable is absurd.

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But a cabal of political elites deciding how much choice should be available for everyone else in the society isn't absurd. Right.

Re: The Axiom of Choice
 

I finally had time to watch this video, and I'm glad I did. Since I read Stumbling on Happiness, I've been thinking about these sorts of issues a lot.

Most of the talk was great, but I think Schwartz drew some conclusions without really thinking them through. His suggested policy at the end was to make ourselves poorer so we'd have fewer options and fewer choice problems. A much better solution is to develop techniques to avoid the perils of choice.

An example. Whenever you fire up your internet browser, you cross a threshold of nearly infinite possibilities. Are you going to read sports commentary on ESPN? Buy groceries? Read 2+2? Watch dog porn? A billion other things? You could do any of them, but very few people are paralyzed by choice, hovering over their keyboards with a look of pained indecision on their faces. Why? Because the internet is the king of organized, guided information. When I open firefox, I'm immediately looking at Yahoo!'s summary of the information I most frequently access. I have tabs open that have my most frequent sites. When I want to do something new I type a search term into my google toolbar, and if I want to wander i use StumbleUpon. All these options do two things: make it easy and choice-painless to search the unknown and give me a nice comfortable "rut" to be content in when it suits my needs. (That is, when I want weather, i click on Yahoo! Weather and don't think at all about using a different service.)

Go to amazon.com and you'll see more of the same. If you have any history at the site, you'll be bombarded with recommendations about things to look at, how other people shop, etc. Let's look at the pension plan example from a different angle. A study of Vanguard mutual funds found that by preselecting 5 of 50 options, you can boost participation by almost 10 percent!

The real point is that most people lack the ability to competently deal with all the options they are presented with. That says nothing about the objective increase in utility we can expect by better matching consumers and products through increased flexibility. What it says is that systems to help people cope are lacking in many areas. Why do you think monster.com and self-help books are so popular? IMO, it's a first step in the direction of giving people solid guidance to narrow down their fields of choice.

We've made some enormous strides in recent years that have brought an incredible degree of well-being to society. It's bizarre to me that we should now conclude, "Oh well, people have problems deciding, let's go back to when everything sucked." Understanding how a car engine works is far beyond my current capabilities. That doesn't mean I want to go back to a horse-and-buggy or that I'm experiencing some "Paradox of Car-Engine-Sophistication." It means that I pay people indirectly to understand car engines for me. The obvious solution, and one that is developing, is for me to pay people to do a lot of the heavy lifting of choosing as well.

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Brilliant.

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Happiness has nothing to do with economics.

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lmao. Happiness is probably the fastest growing area in economic research today.

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What do *you* think happiness research has contributed to economics?

And for that matter, econometrics was the fastest growing research field in economics for a while. What do you think econometrics contributed to the economics?

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I'm no expert in "happiness" economics but I believe its main contributions are providing microeconomic foundations to existing theories and the basis for advice to policymakers.

Econometrics is used in:-
Industrial economics-widely used in competition/anti-trust cases
Government policymaking-making macroeconomic predictions
In finance-trending and modelling stock movements, etc etc

If econometrics isn't any use then why do all these institutions spend so much money hiring econometricians? Even if you believe that this applied work is infact useless then you must concede that econometrics is useful for testing economic theories and hypotheses.

[BTW, I think I know where you are coming from. There is a lot of trash that has been published in econometrics, but there is some good stuff too]-

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An example. Whenever you fire up your internet browser, you cross a threshold of nearly infinite possibilities. Are you going to read sports commentary on ESPN? Buy groceries? Read 2+2? Watch dog porn? A billion other things? You could do any of them, but very few people are paralyzed by choice, hovering over their keyboards with a look of pained indecision on their faces. Why? Because the internet is the king of organized, guided information.

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No!

The internet itself is totaly DISorganized. Decentralized.

Some *individual sites* make it their business to provide organization - whether that organization is of "internal" data (a la Wikipedia) or external (a la google) or some mix of the two (yahoo) is interesting, but not a relevant distinction in the context of this thread. Further, there are tools that help in these orgnaizational tasks that are local (firefox) or remote (gmail). The point, though, is that none of this organization is inherent in the internet - it's all value that participants are adding *to* the Internet.

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The real point is that most people lack the ability to competently deal with all the options they are presented with.

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Yes! Think about how lost you'd be without all that stuff you mentioned. And it all emerged from the market, not from central planning.

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The internet itself is totaly DISorganized. Decentralized.

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The internet strikes me as both organized and decentralized.

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The internet itself is totaly DISorganized. Decentralized.

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The internet strikes me as both organized and decentralized.

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Parts of it are organized - but those parts are basically held by a single participant. Amazon, for example, organizes it's own data. Wikipedia members have organized the data in their domain. On the wider internet as a whole, organization is only an illusion, provided by filters that other parties provide to screen junk out. Even domain names - amazon.com, google.com, mit.edu, etc are really just a mapping of externally-provided organization (but decentralized organization!) onto a less-organized collection of 32-bit numbers that represent each computer's "address".

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The internet itself is totaly DISorganized. Decentralized.

Some *individual sites* make it their business to provide organization - whether that organization is of "internal" data (a la Wikipedia) or external (a la google) or some mix of the two (yahoo) is interesting, but not a relevant distinction in the context of this thread. Further, there are tools that help in these orgnaizational tasks that are local (firefox) or remote (gmail). The point, though, is that none of this organization is inherent in the internet - it's all value that participants are adding *to* the Internet.

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I don't think we disagree. There are two elements to a web surfer's experience: the chaotic, open jungle of information and the organizing machines that chop it up, sort it, and present it to the individual. Without google and other organizing agents, the internet would be much less useful than it is. I don't think it's useful to view the internet as JUST the individual web pages which exist scattered across a billion computers in no discernible order. The indexers and search engines and browsers which add order are just as much a part of what I think of as "the internet."

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The internet itself is totaly DISorganized. Decentralized.

Some *individual sites* make it their business to provide organization - whether that organization is of "internal" data (a la Wikipedia) or external (a la google) or some mix of the two (yahoo) is interesting, but not a relevant distinction in the context of this thread. Further, there are tools that help in these orgnaizational tasks that are local (firefox) or remote (gmail). The point, though, is that none of this organization is inherent in the internet - it's all value that participants are adding *to* the Internet.

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I don't think we disagree.

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No, we don't. It was just pointing out that the organization you see is an emergent trait - it wasn't designed into the internet by a central planner.

There have been attempts to "engineer" this type of organization, AOL being the most famous.

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Some magical amount is what economists call market equilibrium.

He has absolutely no clue, nor can he ever have a clue, as to what number of choices *I* want to have, or what number of choices *someone else* wants to have.

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How can you just randomly assert this? I'm fairly sure there are studies done that show quite clearly that people are happier when they have less choice, and he references many of them in his talk. So yeah, he knows, generally speaking, that people often prefer having LESS choice.

To say that market equilibrium is infalliable is absurd.

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Here's a good video for you to watch.

Cliff notes: when you're stuck with an option, you tend to rate your satisfaction of that object as much higher than an option with which you have a choice.

Gilbert doesn't make a political statement about this like Schwartz does, though. In fact, he says that we all have the ability to synthesize happiness from within, and thus manufacture the very thing that many of us are seeking to gain from commerce.

Given that we can be brought to know this, we can approach this situation from two directions: personal and economic.

Personal method: Take a few minutes each day to appreciate the things you have.

Economic method: Brutalize the markets so that the citizenry have no choice but to accept whatever is provided by a state monopoly.

And that's why happiness should not be a consideration of economics.

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Im not really following your point about capitalism. Capitalism always provides you the choice to limit your choices. There are millions of thing i could choose to do right now but i'm only focused on the limited things around because thats what i choose. The fact that some people make bad choices, and focus on too wide a range of options, is not the fault of anyone but themselves.

blaming "choices" for the acts of people is no different than blaming a gun barrel for the crime of a murderer.

Again, if they ever do feel focusing on too many choices is hurting them there is nothing stopping them from choosing to choose less. Interfering with freedom doesnt follow from my understanding of this guy's conclusions of choices. More choices never hurts. never.

Also, in a general market sense, as choices become difficult for most, there becomes an incentive for information centers and review guides. Look at the information provided by amazon, ebay, wikipedia, cnet, and others for an example of how a free market helps us make choices when choices are difficult.

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I think a lot of you are focusing too much on the political commentary here, it's really IMO a minor part of what he's trying to say and certainly not something that necessarily follows from the first half of his talk.

There's an important difference between saying "I think redistribution of resources is good for society" and "I think a society which believes redistribution of resources is good will be better off". FWIW, I strongly believe the second, the first varies.

There are other points that I think are being misunderstood. I actually agree with Bobo, there's definitely a lot of that going on. What Schwartz was trying to say was that the reverse process is actually in place a lot today, i.e. doctor's asking patients what the patient wants, drug manufacturers advertising directly to patients and so forth.

It's true that the internet is a fantastic tool for spreading information quite rapidly and that hopefully we can use it to have others choose things for us, but I'm not really sure this adresses some of the more general problems re: depression in industrialized countries.

I think a large part of that depression is what Schwartz is talking about but on a lot larger scale... we each have to choose our entire lives. I'm not saying preordained marriage or forced labor is good, but the fact is that having so much to choose from seems to make a good number of people less happy, and at least makes a small number of people far less happy.

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There is of course valtaherra's line of objection, but I find it to be patently absurd. Anyone who believes that any person (even themselves) always knows what is best for themselves is simply deceiving themselves. People ask for advice... this every day activity is precisely a demonstration of this. Drug addicts who can't (although you can argue about "can't" here, simply put "don't") clearly don't act in their own self-interest.

That is to say, we are both aware of the limitations of our knowledge about what is the best course of action (asking advice) and often unable to act even when cognizant of this course of action (i.e. addicts).

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As to hmkpoker, interesting topic. Let's consider something else instead of happiness. Say a bunch of coal companies are doing something bad for the environment. One may say that the research focus of economics is not the environment (perhaps until someone has to pay to clean it up, and which point it can be quantized). Fair enough. This does not mean that economics of coal mining should be considered entirely seperate from the environmental effects, it simply means that something beyond the economics of the situation needs be analyzed.

So, if you want to say that the study of happiness is outside the realm of economics, it doesn't really bother me much. Either economics itself must incorporate these findings or we must turn outside the field. Either way, I think this is a very important issue to be adressed.

You of course would reply that it ought to be adressed, but at a personal level. I agree more or less, although I'd say it's certainly an inter-personal issue in that we need to become aware as a society of this.