Training Economic Man
By Arnold Kling
Kevin McCabe says that experimental economics offers three implications for policymakers trying to foster economic growth through the adoption of markets.
First, safeguards must be put into place to protect impersonal exchange from our innate desire for personal exchange. Second, policy must take into account the heterogeneity of individual cognitive strategies that are observed in economics laboratories. Third, policy must be test-bedded in economic experiments where the status quo is modeled as an ecologically rational response to the economic environment and the proposed policy change occurs in an environment where individuals have access to a full repertoire of personal exchange behaviors.
One challenge, McCabe argues, is to keep people from falling back on personal exchange, which is exclusionary and anti-competitive. I would also say that people’s views on policy often interpret economic actions in personal terms (“tax cuts for the rich”) rather than in impersonal terms (“a reduction in the tax on saving”).
For Discussion. McCabe describes steps that might be taken to make impersonal markets more appealing to individuals. Is this a project to educate people, or could he be accused of trying to manipulate their preferences?