One of the basic underpinnings of our society is the notion that people like money and are good with money. They like making money, they like deciding what to do with their money, the whole business of business is an endless fascination for them. On top of that, we’re good at using our money to get what we want. But that is not true. What if, in reality, we hate making financial and business decisions and would rather have it all taken care of by other people? What if we’re actually not very good at spending our money wisely, if, in reality, our tendency is to be irrational and flippant with our funds? There is reason to believe the latter, what we know about human psychology, neurology, biology, and anthropology with what we think we know about economics. We get it all wrong.
Now, if you have ever met an entrepreneur, a businessman, a financier, (and I have met several) there could be no doubt that such people do love to “truck and barter”. But our economic thinking extrapolates from the behaviour of these people of money and makes a sweeping generalisation across the entirety of the population. I argue that, for many people, the precise opposite is our instinct.
- Making financial decisions is hard–the costs of mistakes can be large, and our rational preferences are often clouded by sentiments and confusion about what we ourselves want.
- Market interactions are socially manipulative–when someone is trying to sell you something, you have reason to be suspicious of the “information” you are receiving. Interacting with people whom you cannot trust is not a pleasant activity.
In sum, we are social creatures rather than economic ones. We like to get along with other people, and the free market economic relationship, which demands suspicion, competition, and other non-cooperative behaviours runs against our evolution. We have a strong survival instinct and are adverse to risk-taking, and we don’t like making trades and buying things when there is a risk that we might not be buying what we think we are buying or that we might be taken advantage of.
Most people have absolutely no desire to do their own taxes, to plan their own retirements, to sit down and compare cell phone services, health insurance policies, or utility companies to each other, to do all of the things that self-interested rational utility-maximisers should not only enjoy, but relish. Nonetheless, we have a society that is structured to serve people who do have that impulse at a cost to the rest of us, because the people with the greatest influence within our social structure are the people who do like this stuff–the rich. After all, how does someone become rich in the first place? By both enjoying playing around with money and being good at it. The portion of the population that meets both criteria is in reality very small. Most people do not want to run their own business or spend their lives mucking about in finance or banking. Even many of the people who do engage in these activities do them because they have to in order to do something else–they do not enjoy economic activity in and of itself.
So why do we have to make all of these choices that we don’t even want in the first place? I suggest this is an example of the “false-consensus effect”. People who enjoy playing around with money believe that most people are similar to them, and, since they are in a position to influence the way society is ordered through lobbying, consequently design society to service that desire. To act against this policy is to permit “government takeovers” that remove our “freedom of choice”. It is not freedom of choice that is lost, it is the slavery of having to make choices when one would just rather not bother with the whole mess.
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