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Folk-economics: Inherited biases or misapplication of everyday experience?

Published online by Cambridge University Press:  30 August 2018

Don Ross*
Affiliation:
Department of Philosophy, University College Cork, Cork T12 AW89, Ireland. School of Economics, University of Cape Town, Private bag, Rondebosch 7701, South Africa. don.ross931@gmail.comhttp://uct.academia.edu/DonRoss Center for Economic Analysis of Risk, Georgia State University, J. Mack Robinson College of Business, Atlanta, GA 30303.

Abstract

Evidence for an EEA-derived domain-specific inference system must point to an active, latent representational structure. Otherwise we need to hypothesize only passive, virtual belief not over-ridden on the basis of the individual's experience. The folk economic beliefs identified by Boyer & Petersen (B&P), being with one exception about macroeconomics, might be virtual beliefs that people extrapolate across the micro–macro scale shift based on their experiences with markets.

Type
Open Peer Commentary
Copyright
Copyright © Cambridge University Press 2018 

The central idea of evolutionary psychology, that the human mind incorporates a range of relatively encapsulated, domain-specific inference systems that emerged in the Pleistocene environment of evolutionary adaptedness (EEA), is not uncontroversial. But I will here treat it as a maintained hypothesis. Doing this does not shift the burden of argument from its proponents where invocation of any specific inference system in an explanation of a modern behavioral or cognitive phenomenon is concerned. This is because the relevant alternative is not necessarily active inference by a domain-neutral central system, as in the scheme of Fodor (Reference Fodor1983).

Some folk beliefs that are in tension with scientific competitors may not require any active inference if they simply extend most people's everyday experience, in ignorance of facts that emerge only at scientifically organized scales of observation. For example, most people who have not read a relevant article or seen a documentary probably believe that orcas are, like most apex meat eaters, general predators. In fact, each orca population specializes in a culturally specific type of prey. The folk belief is in this instance the product of a “lazy” or passive inference that requires exposure to science, or, much more rarely, special observational experience, to be over-ridden. No one would hypothesize that evolution selected a special inference system about orcas that is responsible for “folk-orca beliefs.”

Most of the folk-economic beliefs (FEBs) on which Boyer & Petersen (B&P) focus lie in domains that are scientifically addressed by macroeconomists. The one clear exception, falling under the purview of microeconomics, is FEB7 (“Labor is the source of value”). This is also the sole FEB among those B&P identify that was once endorsed by leading economists (Adam Smith, Ricardo, Marx). The modern alternative view, that value is determined by the vector of upward-sloping marginal supply and downward-sloping marginal demand, came to be fully understood (including recognition that it does not require a psychological principle of diminishing marginal utility) only over several decades of technical work (Mandler Reference Mandler1999). All of us who have taught introductory microeconomics know by experience that the marginalist theory of economic value is not something that even motivated, intelligent, relatively numerate people with experience in anonymous markets understand easily. Other beliefs that B&P seem to associate with folk microeconomics – understanding, for example, that having three pizzerias in the neighborhood will lead to better and cheaper pizzas than having one pizzeria in the neighborhood – are broadly accurate, unlike the beliefs that constitute folk-macroeconomics.

Might it be that, instead of adverting to hypothesized intuitions inherited from the EEA, folk-macroeconomics simply results from people lacking the perspective that would be necessary for accurately scaling up their own direct experiences of economic transactions, all of which are confined to the micro scale? For example, if people model countries, in their economic aspect, as analogous to businesses, then it may be a natural transfer of the principle that a sustainable business's revenues must exceed its costs that generates the folk-belief that a sustainable country's returns on exports should exceed its payments for imports, and that a negative trade balance should predict some sort of eventual crisis akin to bankruptcy. Similarly, the view that immigrants are an economic burden might transfer the everyday business principle that a company puts itself at risk if it carries an inefficient wage bill. That is, immigrants might be viewed as naturally analogous to employees. Furthermore, people might model the national labor market as analogous to the local ones in which they themselves participate. To the individual applicant for a specific job, the supply of opportunities is effectively finite, and the presence in the pool of a qualified immigrant really does reduce the native applicant's own chance.

B&P themselves appeal to inaccurate scaling up at several points in their account of folk economics. For example, they point out that people generally don't consider the general equilibrium effects of policies that try to regulate prices, including wages and rents. B&P argue that these scaling-up failures are consequences of missing elements in representational templates brought into the modern world from the EEA. It is unclear why we need to hypothesize such a template to account for the data. Do people not generally base their beliefs about large-scale social phenomena on direct, small-scale personal experiences from which they can extrapolate? Put another way, need we appeal to ancestral experience in the EEA if most people's experience in their current environments supports their folk economics just as well?

Most beliefs maintained by most people are arguably “virtual.” That is, behavior conforms to them, and their role as “stand-by” regulators of action can be confirmed by causing people to explicitly produce them in response to directed probes (Pettit Reference Pettit and Mäki2001). The inherited inference systems of evolutionary psychology are novel constructs, it seems, to the extent that they are active latent structures that can be detected even in the absence of such explicit probes. It is not obvious that B&P have demonstrated evidence for such active latent structures with respect to the folk-macroeconomic beliefs that they identify. Their answer to this criticism might advert to a general principle according to which most people never think about social relations without using EEA-based inference systems. But in that case, their hypothesis could be summarized simply as: The general natural social inference system knows nothing of large markets. Might this help explain why the few people who do – scientifically – understand such markets are such successful rent-seekers, and recently so widely resented?

References

Fodor, J. (1983) The modularity of mind. MIT Press.Google Scholar
Mandler, M. (1999) Dilemmas in economic theory. Oxford University Press.Google Scholar
Pettit, P. (2001) The virtual reality of Homo economicus. In: The economic world view, ed. Mäki, U., pp. 7597. Cambridge University Press.Google Scholar