Cognitive biases, ideology & control

Yesterday, I spoke at a symposium in honour of Andrew Glyn. This is the gist of what I said.

We economists – especially those of us who are on the left - have got a problem: voters don’t agree with us.

Events a few days ago demonstrated this. But it is in fact a longstanding issue. For years, and around the world, voters have had attitudes opposed to ours. They have been more hostile to immigrants and benefit claimants and more supportive of austerity and inequality than we would like. (This isn’t just an issue for the left: voters also have anti-free market attitudes.)

Why is this? I want to suggest that it is because Marxists were right all along. It’s because capitalism generates an ideology which opposes sensible radical reform. The idea of false consciousness should be taken a lot more seriously.

I came to this view via an apparently circuitous route. In my brief and ignominious career in finance, I learned about behavioural finance. This field, inspire by Daniel Kahneman’s work on cognitive biases, is the idea that people make small but systematic errors of judgment when managing their money.

But this raises a question. If people are subject to cognitive biases when they have big incentives to be right – when they are investing their own money – mightn’t the same be true in politics, where their incentives are less sharp?

Some experimental research suggests the answer is: yes.

Some of these experiments have been done by Kris-Stella Trump at Harvard. She split money between subjects in different ways and then asked them what they thought would have been a fair division. She found that those who got a very unequal split thought that the fair division should also have been unequal. Those who got a more equal division said that a fair division would have been equal.

This suggests that as inequality increases, our perception of what’s fair becomes more unequal. That causes people to accept inequality. This is an example of a wider cognitive bias – the anchoring effect.

We’ve seen this in the real world. Back in 1995, there were protests against the “fat cat” salary received by Cedric Brown at British Gas. By today’s standards, that salary was very low - just over £2m, compared to an average FTSE 100 CEO pay of almost £5m. And yet protests against high pay are no greater now than then. We’ve come to accept greater inequality, just as Dr Trump’s work implies.

I’ll give you some more experiments. These were done (pdf) by Phillip Grossman and Mana Komai at Monash University. They generated increasing inequality between laboratory subjects and then gave people the option of paying to destroy some others’ wealth. They found that many took up the offer. But it wasn’t only the wealth of the rich they destroyed. Almost as often, the poor attacked the poor. 

What’s going on here is a concern for relative status. People try to preserve their self-image by holding others down. This is entirely consistent with attacks upon immigrants and benefit claimants.

Here’s another example: wishful thinking, or the optimism bias. John Steinbeck once said that there’s no socialism in the US because the poor think of themselves as temporarily embarrassed millionaires.

A similar thing happened here in the 2015 election. The Tories said they’d cut welfare benefits. What voters heard was benefit cuts for other people.

Again, we’ve got laboratory evidence for this bias. Experiments by Guy Mayraz have shown that it’s incredibly easy to induce wishful thinking in people.

I could go on. There’s the just world illusion, status quo bias and adaptive preferences. Put all these together and you have what John Jost calls system justification theory (pdf) – a set of ideas that sustains inequality and injustice.

All of this helps explain why there isn’t more hostility to inequality. But it doesn’t explain why anger at elites was channelled towards voting for Brexit rather than into more economically sensible directions.

I suspect three mechanisms helped here. One was wishful thinking.

Another is prospect theory. This tells us that people who feel they’ve lost want to gamble to break even. This is why they back longshots on the last race of the day or why they hold onto badly performing stocks. The thing motivated many Leavers. People who had lost out from globalization, or felt discomfited by immigration, voted Leave because they felt they had little to lose from doing so.

The third mechanism has been discovered recently by David Leiser and Zeev Kril. They show that laypeople’s thinking about economics is dominated by what they call the “good begets good” heuristic. People believe that good things have good effects.

This, I suspect, explains a lot. People think controlling the public finances, or controlling immigration, are good things, so they must have good effects. I shouldn’t need to tell you that it ain’t so. In this context, the slogan “Vote Leave, Take Control” was an act of genius. It appealed to the “good begets good heuristic as well as to the fact that people facing uncertainty and feeling distrustful of elites want more control for themselves. (Perhaps this is fuelled by yet another cognitive bias - overconfidence about the benefits of such control)

I contend, therefore, that Marxian theories of ideology are supported by recent research. People aren’t just misinformed about political issues – there’s lots of surveys telling us that. They are irrational too. They have false consciousness.

Now, this goes against mainstream centrist thinking, which seems to have imported into politics a theory of consumer sovereignty just as behavioural economics is undermining that theory. But it is in fact an old idea. We’ve known since the work of Richard Downs in 1955 that people can be rationally ignorant about politics. We also know they can be rationally inattentive. So why can’t they also be rationally irrational in politics?

All this poses the question: what can be done about this? The answer isn’t to dismiss people as stupid. The point about the cognitive biases programme is that it shows that we are all prone to error. In fact, this is true of those of us who are awake to such biases. Once you start looking for such biases, you see them everywhere – and perhaps exaggerate their significance. That’s an example of the confirmation bias.

Instead, we should think about policies that run with the grain of people’s biases and yet are sensible themselves. One clue here lies in that word “control”. What we saw during the EU referendum is that people want control. We should therefore offer voters just this. And meaningful control, not just immigration controls.

I’ll leave others to think about what such a platform might be: for me, it includes a citizens income and worker democracy among other things. The point, though, is that whilst we hear much about inequalities of income, the left must also think about reducing inequalities of power.

Comments

[Adrian D]

I'm wondering what effect the 'good begets goo' heuristic may have had on the attendance numbers of those at he Remain rally yesterday.

The good of European friendship and integration begetting the good of, er, the looting of Greece.

[Endrew]

Actually it is entirely rational to distrust the long term predictions of economists, for obvious reasons.

[Endrew]

And I'm not really sure how centralizing power into a huge supra-national institution is going to help inequality of power, or wealth.

[Jane]

No. People form opinions for many different reasons, the false consciousness argument is profoundly wrong, because it starts from the presumption that you, who sees this fault in others, must always be right.

There is no good reason, however, to assume that you alone have such clear insight that you can see the truth, and no one else can.

Remember the saying that the really clever human is the one who knows they might be wrong. You have, for reasons of confirmation bias, presumably, completely ignored this possibility.

Best to just accept that sometimes people will have different opinions to you, and will have arrived at them from a different perspective. Their life experiences are different, their priorities different, their information gathering procedures different, their value judgements different. They may, horror of horrors, think other issues like the cultural impact of too much immigration, or concern over the future of the EU, are more important than economic issues!!!! I know it's painful, but it does happen. When an issue is a constitutional one, the impact on the economy may just not be so important. Also economic impact is not experienced in a universal way, there are always winners and losers, and temporary setbacks, that right themselves. Not everyone had a bad experience of the 2008 financial crisis. So perhaps the economic arguments just weren't persuasive enough.

Sorry, but this is just completely the wrong road to go down, it really is it takes you down an anti-democratic cul de sac. Bad, bad, bad.

[chris]

@ Jane - yes, I might well be wrong about many things. But am I and millions of others, many of whom are smarter than me, really wrong about so many things: Brexit, the economics of immigration, freeish markets etc? If we believe not (and obviously we do) we must explain why others believe otherwise. Yes, there are be rational reasons for them to do so, but also perhaps irrational ones. If we reject this, we come close to a wishy-washy relativism.
It wouid be really weird if people are rational in their political views when they aren't about many other things (in much of my personal life, I've been as stupid as hell).
And I don't like your argument that this leads to anti-democracy. For one thing, ideas are right or wrong, regardless of their consequences. And for another even if I'm right, there's still a strong case for democracy eg because it sustains legitimacy and social peace, or Tocqueville's view that it promotes an energetic citizenry.
I actually favour the extension of democracy, into the workplace.
@ Endrew - I thought we'd covered the predictions thing; there's a massive difference between an unconditional forecast (which economists - like everyone else - are bad at) and conditional ones. (I agree with you about EU institutions being flawed, though).

[AndrewD]

Chris, you might find this an interesting read
http://blogs.sciencemag.org/pipeline/archives/2016/06/30/expertology

[chris]

@ AndrewD - thanks. I did like that. I stress that I'm not accusing Leavers of being morons acting in moronland: as I say, everyone is prone to these cognitive biases, even (sometimes) experts.

[Dave Timoney]

@Jane,

The theory of false consciousness holds that everyone is subject to the same forces, though they react in different ways. The idea that lefties are uniquely free of it and can criticise others from a position outside society is a canard used to paint such critics as patronising and elitist.

The presentation of false consciousness as binary - you either suffer from it or you don't - is ideological in that it assumes a worldview that is internally consistent. In fact, most people get by with a mix of ideological fragments, some of which may be contradictory (i.e. cognitive dissonance).

The recognition of false consciousness proceeds from "the saying that the really clever human is the one who knows they might be wrong".

[VinceReeves]

Not sure though that the idea of extrapolating real life interactions from laboratory experiments is not itself an instance of a false consciousness. The Study of Scientific Knowledge (especially the "strong programme") has for some years been delineating how science itself is far from being the objective, disinterested activity it publicly purports to be.

I think Jane has a point in that voters may place various concerns over the purely economic, and though these may sometimes have a status preservation aspect, I suspect often they don't.

Let's take immigration. I might live in a relatively homogeneous "Anglo-Saxon" street in which I know most of my neighbours. As immigrants move in, I will be aware that "white flight" will gradually come into effect, and that many of the people who I know well will move away, making me more socially isolated. I can overcome this perhaps by making friends with some of the immigrants and this may be an enriching experience, but this is by no means guaranteed. If the immigrants are primarily Muslim I know that I can expect that the local pub, once a focal point of community activity, will almost certainly close at some point due to a lack of customers. Essentially, I am experiencing alienating social change which I have no absolute guarantee of mitigating.

I would therefore have a specific motive to oppose immigration even though I might accept that on the macro level immigration is economically beneficial. I would also have absolutely no motivation to explain my reasoning to any academic economists.

Note I am not suggesting any of the above is a justification for opposing immigration, just that the reasons for peoples' attitudes are almost certainly myriad, particularistic, difficult to tease out, resistant to universalising theories, and not necessarily replicable in laboratory experiments.

[Magnus]

It seems to me that Robin Hanson raises false consciousness in his blog today too:
https://www.overcomingbias.com/2016/07/see-a-wider-view.html#disqus_thread

[Peter William Risdon]

If you measure results of Marxist, and more generally left wing, economic policies against results you have a lamentable picture. The cognitive bias, surely, lies in trying to justify these despite the results in practice.

[Matt Moore]

' This suggests that as inequality increases, our perception of what’s fair becomes more unequal.'

Why is this a problem? Seriously? Is there some objective correct level of perceived unfairness for a given level of inequality? Surely if everyone agrees that something is fair, then it is?

[aragon]

This annoyed me too.

http://blogs.scientificamerican.com/mind-guest-blog/brexit-and-trump-when-fear-triumphs-over-evidence/

False consciousness is a justification for dismissing peoples views/decisions, when you disagree with them. Cognitive dissonance.

No wonder we hold experts in contempt, they have too narrow a field of vision; and fail to see the wood for the trees.

Yet try and impose their view on the public, by appeals to expertise they do not possess.

People voted from experience of Europe and immigration, and politicians, who refuse to address the issues.

[Nanikore]

I agree totally Chris - this was about control. When I saw this interview, I suspected Remain were in big trouble:

https://www.youtube.com/watch?v=s_2AUN-_zPE

[chris]

@ Aragon, Peter - This isn't a left-right issue. People also have anti-free market attitudes - very many, for example, favour price controls and nationalization. Unless you think the public are right about everything - and I suspect you don't - the question remains: why do people sometimes have wrong ideas? Cognitive biases are one possible answer. This is why Robin Hanson and Bryan Caplan - who deffo aren't Marxists - also worry about public irrationality.
@ Peter - I agree of course that central planning was a terrible failure. Those of us who are market socialists don't need telling this. It is the right - those who want a points-based immigration plan - who favour central planning these days, not me.

[Luis Enrique]

What's the word for something that evolution throws up but isn't actually useful in survival of the fittest, terms? it has slipped my mind.

I wonder if this set of cognitive biases should be understood as something that was useful in an evolutionary sense, or just a bunch of not very helpful stuff (but not too harmful either) that got thrown out by a messy process.

[Dave Timoney]

@Luis, a "sport", perhaps?

[Michael Gatton]

What's the word for something that evolution throws up but isn't actually useful in survival of the fittest, terms? it has slipped my mind.

Maladaptive?

[Kgaard]

Hi ... I think the real challenge with your analysis (Remain, pro-immigration etc.) is that you implicitly assume race is not real; that it's just a matter of skin color and slow/fast twitch muscles and that brains function exactly alike across races. But the data don't corroborate that. I'd propose that you're operating inside an Overton Window that no longer holds credence with the majority of private-sector, tax-paying men of European descent. They've read the data and reject the cultural-Marxist analysis of race. Whether I think they are right or not is beside the point. This, I think, is a big part of what is driving the change in the political climate.

[Chris Herbert]

Luis. Extinct? Something like 96 percent of all species are extinct. About confirmation bias as it pertains to politics and political economy (economics).. My question is that if you held one narrative to be true, then discovered it was false and thus accepted a competing narrative, do you still have confirmation bias? My view is that it is likely you might have some remaining confirmation bias, but it will be less than before. My specific example was that I was a Republican for more than 30 years (believed in neoliberal economics) then realized absolutely none of my predictions or promises became true. That narrative never delivered on its promises. I'm no a social democrat. A progressive. A MMT/Keynesian/FDR type of narrative is what I believe. I studied the facts, real academic studies that are worth of citation.

[Metatone]

Think the word Luis might have been looking for is "vestigial" ?

[furlong]

Luis, are you talking about a "spandrel"?

[Churm Rincewind]

Jane has it right. As she says, people may well think that "other issues like the cultural impact of too much immigration, or concern over the future of the EU, are more important than economic issues" and Chris's answer that "am I and millions of others, many of whom are smarter than me, really wrong about so many things...the economics of immigration..etc?" spectacularly misses the point.

As I understand it, Jane was not saying that anyone has got the economics of immigration wrong. She was saying that there are other considerations involved, such as the cultural impact, which might sway voters' opinions.

This seems to me to be an uncontentious observation.

Over the years I've often taken issue with Chris's refusal to contemplate any aspect of immigration outside the economic. So when he says "we economists – especially those of us who are on the left - have got a problem: voters don’t agree with us" he's wrong.

As Jane points out, voters are in fact bringing other considerations to bear - considerations which Chris seems unable/unwilling even to consider.

No wonder "voters don't agree with us". They're taking a holistic view, which in the end of the day is probably the right one.

[polidorisghost]

"The idea that lefties are uniquely free of it and can criticise others from a position outside society is a canard used to paint such critics as patronising and elitist."

Pretty convincing as canards go.