2 Jan 2014

The oversimplifying mind

Warning: Long, linked and thoughtful (I hope). We're all eager after the break, yes?

I just got back from three weeks in Ecuador and Colombia. The trip was fun and interesting. It also reminded me of the importance of keeping an open mind when it comes to new situations, people and places.

We all use stereotypes when thinking of people or cultures; we all simplify decisions and rationalize events.[1] These shortcuts can be useful when it comes to everyday situations and interactions, but they can also interfere with our progress by directing us to a path that's easier... and wrong.[2]

I've often ridiculed "planners" who assume that they understand enough about people and behavior to design systems that will be complete, robust and efficient in allocating water. I've tagged these posts "economics versus engineering" to poke fun at engineers (this version is funny), but I was wrong to use that phrase.

Mea culpa.

The truth is that economists are often guilty of oversimplifying (this and this), just as engineers often design robust systems. The real problem arises when individuals mix their biases into their work. I'd say that economists are more likely to make this mistake, as their "models" are rarely stress-tested in the same way as engineered constructs (everything from bridges to artificial knees to software algorithms).[3]

The Colombian bubble butt? ¡Si!
The fact is that we should all be cautious when guessing how people will behave. Oversimplification leads to bad planning, poor execution and gratuitous failure.

That's one reason why I've traveled to over 90 countries, to be surprised, to learn, and to appreciate the variety of human and natural ingenuity.

(This post is not about Ecuador and Colombia, but I was surprised by their urban creativity and sexuality, respectively. A little on the Galapagos, tomorrow.)

Those experiences have honed and strengthened my belief that we must build imperfect understanding into our discussions of "fact" and design of policies. That's why I tend to rely on markets or other disaggregated decision mechanisms for allocating or managing resources (for example).[4]

Many people lack this perspective insight, which is why, for example, both George Bush and Barack Obama -- assuming they have good intentions -- have failed to help the average American. Economists may contribute to this problem by oversimplifying their explanations or policy recommendations, but politicians create greater harm when they mistake their power for judgement and their opinion for consensus.[5]

So, how do we overcome this problem within ourselves and when dealing with others?
  1. Nurture diversity, especially in schooling
  2. Respect our ignorance of reality
  3. Expect surprises with innovation
  4. Devolve power in the context of 1-3
Bottom Line: Every new year gives us an excuse to repent of past sins and choose a new path. In this year, I suggest that you give everybody more credit for knowing something useful while giving nobody the power to decide what is most useful.

  1. I've reviewed several books on this issue, i.e., The Black Swan, The Calculus of Consent, Death and Life of Great American Cities, The (Honest) Truth About Dishonesty, Madmen, Intellectuals and Academic Scribblers, Predictably Irrational, Prophet of Innovation, Two Cheers for Anarchism, and Say Everything. On these topics, I recommend anything by Bill Easterly as well as the paper that explains it all: Hayek's "Use of Knowledge in Society."
  2. I am nearly done with Kahneman's Thinking Fast and Slow, which describes how thoughtfulness (System 2) may be ignored in favor of intuition (System 1).
  3. I've said that economists use math to "prove" their opinions. Read this brilliant 1966 essay [pdf] by Kenneth Boulding ("The knowledge of economics and the economics of knowledge"). Historians are wary of bias, as discussed here.
  4. These themes are central to my new book -- more on that next week.
  5. Ostrom and Ostrom (1971) [pdf] discuss the origin of "public choice" theory, which contradicts the earlier model of the perfect public administrator by integrating bureaucratic self-interest with the complexity of political debates. Read these recent essays on polymaths versus experts, the hubris of financial models and political mangling of markets and how machines may overthrow us while following our instructions.