Regular EconLog reader Kevin Corcoran sent me an interesting writeup on finding economic ideas in fiction. I edited it slightly. Here it is:
Occasionally, when watching a show or movie, I’ll notice scenes that nicely illustrate ideas in economics. My ability to spot and describe such moments is, no doubt, one of the reasons I’m so popular at parties. [DRH note: ha ha.]
Recently, one came to mind that made me think of Bryan Caplan’s concept of rational irrationality. The show is called House, M.D., and its titular character is Dr. Gregory House, a doctor who is brilliant at diagnosing difficult cases but is also arrogant, anti-social, and addicted to pain pills due to a half-crippled leg. There was an ongoing story for several episodes in the second season where House had been temporarily removed as department head while being investigated for his various antics. One of his subordinates, Dr. Foreman, was put in charge during the investigation period. Dr. Foreman was presented as generally the smartest doctor (other than House) on the team, and the one who was most willing to butt heads with and push back against House.
In the episode A Failure to Communicate, the other doctors noticed that Foreman, even though he was now technically in charge, was suddenly pushing back less against House, and seemed less sure of himself making decisions. That led to this bit of dialogue between him and Dr. Chase:
Foreman: You got a point to make? Or did you just feel like giving a long unnecessary explanation for something medically irrelevant?
Chase: What happened to the Foreman who always has an answer? The guy who practically wears a sign saying, “I’m as good as House, but I’m nicer”.
Foreman: I never said that.
Chase: I guess it’s safe to be confident when House is there to overrule you. Now that it’s all on you…
Foreman: (Pauses, smiles) It’s different. Yeah.
This scene captures the essence of how rational irrationality begins. Foreman, of course, cares about the outcomes – he wants to get the diagnosis right. But he also knows that his voice is less than decisive when it comes to choosing a course of action. And that background knowledge led him, without even realizing before this point, to express his ideas with greater confidence than he could fully justify. Now that his choices are authoritative, he suddenly becomes less sure about how right he is, and more concerned if he’s missed something or might be wrong. As with all good fiction, this is a totally believable bit of writing. Nobody who watches this episode will think “The way Foreman is acting is so unrealistic.” We all can see how that kind of behavior makes sense, and how we’d almost certainly do the same thing if we were in a similar position.
Rational irrationality extends this idea. As voters, people have far less reason to second guess themselves than Foreman ever did. Even before he was temporarily in charge of the team, Foreman’s voice still had some effect and some influence, and that provided him with additional incentives to get things right. But in all but the smallest elections, voters don’t come anywhere close to having that kind of influence on the outcome, and the incentive to exert intellectual discipline to be sure you have things right doesn’t have enough force to overpower ideological commitments, tribal loyalties, partisan expression, and so on. There’s not much point in second-guessing your decisions when nothing will be different because of your making a different decision. As a result, voters’ behavior is almost entirely driven by knee jerk reactions they have no reason to reevaluate.
That’s one of several examples of my finding nuggets of economic thought in fiction.
Kevin and I think it would be fun for EconLog readers to mention instances where they also have seen the ideas of economics in fiction. Have at it.
READER COMMENTS
Jon Murphy
Jul 11 2022 at 8:50am
Two quick comments:
First, Kevin writes:
We see this in the economics of expertise literature, too. There’s a 2011 piece I like to cite by Joseph Radzevick and Don Moore called “Competing to Be Certain (But Wrong).” They find when experts compete against one another and the person(s) they are trying to convince cannot easily parse the information they are providing, the experts can use confidence to signal the quality of their information. Basically “My information is good and you can tell because of how confident I am.” But this can cause experts to express overconfidence, as you show in your case with Foreman.
My grad school roommate, John Schuler, and I have a EconLib piece where we discuss the Coase Theorem at play in an episode of Have Gun – Will Travel.
nobody.really
Jul 11 2022 at 9:53am
To rephrase, many political theories imply that electoral behavior is a kind of investment: People sacrifice (time, money, effort) in the present in the hope of producing some kind of compensating benefit in the future. And for especially consequential electoral behavior, this might represent a fair model of the behavior. This might accurately describe the choice to hire a lobbyist or invest time and money in a campaign in the hope of acquiring a specific political favor. Or it might accurately describe voting on a referendum where the practical consequence of the vote to the voter seems clear (raising my taxes $X to finance schools) or authorizing your union to call a strike when you know the union intends to strike if it gets the authorization from its members.
(Unions will sometimes seek strike authorizations from their members early in a labor dispute. The advantage of this strategy is that it strengthens the union’s bargaining position by making the strike threat more credible–and that it’s easier to get the membership to grant authorization when a strike seems merely theoretical. But unions will sometimes delay seeking strike authorization until later in the dispute as a way to signal to management the remaining resolve of the membership.)
But the Ultimatum Game reveals that people are willing to sacrifice money purely to promote psychological benefit. And we observe that in many elections–elections of political representatives, for example–the psychological benefit of expressing ideological commitments, etc., will exceed any predictable practical consequence to the voter. In these cases, the electoral behavior looks a lot like an act of consumption: The actor derives all the expected benefit in the moment of acting. People will donate to a politician who has no chance of winning just because they like to hear/see the politician perform. In this respect, the donations are like buying a ticket to a play.
Kevin Corcoran
Jul 11 2022 at 10:24am
This is true, and it’s also a key point in Caplan’s argument about how rational irrationality degrades voter behavior. Voting is indeed treated like a consumption good, but it’s a consumption good with a significant externality built into it. When indulging in the “psychological benefit of expressing ideological commitments” crowds out the incentive to get things right, each act of voting is like a tiny bit of epistemic pollution being released into the system – a tiny push to shift away from “do what actually makes things better” to “do whatever flatters my biases.” Or, as Caplan phrased it in his book:
Todd Ramsey
Jul 11 2022 at 10:35am
From American Gangster (2007):
Frank Lucas:
Brand names mean something, Nicky. Consumers rely on them to know what they’re getting. They know the company isn’t going to try to fool them with an inferior product. They buy a Ford, they know they’re gonna get a Ford. Not a f***in’ Datsun. Blue Magic that’s a brand name; Like Pepsi, that’s a brand name. I stand behind it, I guarantee it. They know that even if they don’t know me any more than they know the chairman of General Mills.
From the Grateful Dead song Cumberland Blues (1970) about a coal miner, I think this lyric illustrates the income effect vs. the substitution effect:
“Make good money, five dollars a day…made any more I might move away”
Kevin Corcoran
Jul 11 2022 at 10:48am
One of the reasons I like this example is because it also illustrates the difference between rational ignorance as traditionally described in public choice economics, and rational irrationality as Caplan described it. To be rationally ignorant is simply to not bother putting time and effort into acquiring information from which you don’t expect to benefit. To be rationally irrational is something stronger than this – it leads people to hold greater confidence in their beliefs than their knowledge justifies. I’m rationally ignorant about the history of ancient Rome – but as a result I also hold no strong opinions about it. But rational irrationality leads people away from agnosticism on topics where they aren’t well informed, and instead turns them into cheerleaders for those issues instead. But it’s not a binary switch type system – Foreman’s ideas were always strongly tempered by the importance of getting things right, but he was still weakly under the influence of rational irrationality, so when his choices carried more weight, he became more cautious about getting things right. Rational irrationality operates on a sliding scale, not a binary switch.
Also, one other fictional scene comes to mind for a different economic concept, this one from The Big Bang Theory. In an early episode, Sheldon Cooper was lamenting that his roommate started a relationship with another physicist whom Sheldon personally and professionally despised. Their neighbor, Penny, tries to talk things through with Sheldon, which led to this exchange:
This little quip illustrates the point Coase made against the welfare economics of Pigou. Pigou treated externalities as a one way street. Coase, however, pointed out that externalities are actually of a reciprocal nature.
David Henderson
Jul 11 2022 at 3:43pm
Kevin,
Wow! Subtle example. I’ve seen that episode probably a dozen times and I missed it. Good on ya, mate.
nobody.really
Jul 12 2022 at 12:13am
I’m told that The Wire illustrated economic constraints in the drug and police biz.
Various musicals depict how radical youthful idealism founder on harsh constraints.
In the musical Pippin, the prince kills the king to establish justices. When a peasant complains that he never gets to own the land he works, the new King Pippin decrees that peasants will henceforth own the land they cultivate. The lords inform the king that, without owning the land, they can’t raise money to pay taxes. The soldiers inform the king that without tax revenues, he can’t maintain an army. And when the Huns attack, Pippin has to undue all of his previous actions—even going so far as to undo the murder of his father. “That’s all right, son,” the father says. “Only don’t let it happen again.”
Likewise, in Unrinetown the daughter kills off her father, the tyrant who controled all water use (including use of bathrooms), and urges people to discard all constraints and embrace freedom. Following the rapid depletion of water resources, the masses die of dehydration. The musical ends with “All hail Malthus, and good night!”
Both The Pajama Game and Newsies depict labor strikes—each ending in a compromise settlement between labor and management. (Newsies has the same premise as Urinetown, if not the same ending.)
In contrast, Aaron Sorkin’s film The American President (NOT a musical) initially depicts budget constraints in the form of dealmaking: The president’s top priority is passing a crime bill; his lover is lobbying for an environmental bill. As the environmental bill appears about to pass, some opposing congressmen agree to throw their support to the crime bill if he’ll kill the environmental bill. The president takes the deal, and his lover gets fired for failing to pass the environmental bill. Predictably, alas, the film then changes course: The president becomes persuaded that he can achieve all his objectives without compromise simply by “standing firm” and “showing resolve”—and any thought of budget constraints evaporate.
(In April 2013, a columnist criticized President Obama’s unsuccessful legislative efforts by comparing him to the president in the film. At the following White House Correspondents’ Dinner, Obama responded with a series of rhetorical questions, including “Could it be that [that president was just] an actor in an Aaron Sorkin liberal fantasy?”)
That’s off the top of my head….
nobody.really
Jul 12 2022 at 12:41am
Oh, and there’s the punishingly blunt and unsentimental presentation of the economic realities of British society women in the 2019 film Little Women.
Monte
Jul 12 2022 at 2:33am
Some here will remember the movie, Cool Hand Luke, starring Paul Newman and George Kennedy as inmates in a Florida prison camp. Dragline (Kennedy) thoroughly beats Luke (Newman) in a boxing match, but Luke keeps coming back for more until Dragline loses interest and walks away. Later that night, the inmates are playing poker and Luke wins a big pot on a bluff:
Mathematician John von Neumann was one of the first to examine the game of poker through a mathematical lens.2 Von Neumann was interested in poker because he thought that figuring out the game would be a path toward developing a unique form of math. He wanted to form a general theory that could be applied to business strategy, diplomacy, and evolution, among other things. Von Neumann’s work became what is now known as game theory, the study of mathematical models of strategic and rational decision making.
Henri Hein
Jul 12 2022 at 3:55pm
Spoilers ahead:
In the Justified episode Dark as a Dungeon, Boyd is hiding the fugitive Ty Walker in Ava’s house. They make an agreement to rob Ty’s former boss, Avery. Raylan (the US Marshal protagonist) shows up and informs Boyd that Avery has put up a $100,000 reward for Ty’s capture. Boyd then gives up Ty.
What I like about this example is that Boyd is not turning in Ty to collect the reward money. In fact, he collects it later only as an afterthought, after prompting by Raylan. Boyd changes his mind because he realizes that with the reward, everyone around him, which are mostly petty criminals, will want to give up Ty to Avery, instead of working with them on the robbery. It makes their plan unworkable. He now needs to get Ty away from him and giving him up to Raylan is the quickest way to accomplish that. It’s a nice story about incentives.
Incidentally, the whole setup is also an extremely nice play by Raylan, who talked Avery in to offering up the reward in the first place. But that is more drama than economics.
Daniel Kuehn
Jul 13 2022 at 10:50am
You might be interested in my recent paper on James Buchanan and the Grapes of Wrath: https://muse.jhu.edu/article/858221
J Mann
Jul 13 2022 at 11:34am
I’m a big fan of a scene in the middle of The Maltese Falcon. (Well, the whole movie, but this one scene is a nice bit of game theory.)
Sam Spade is trying to figure out why his partner was killed over a statute (the titular Falcon), and meets with Kasper Gutman to try to find out what the Maltese Falcon is. They lay out their dilemma – Spade knows (or claims to know) where the Falcon is, but he doesn’t know what it is or how to profit from it. Gutman knows what it is and how much it’s worth, but doesn’t know where it is.
Gutman explains that Spade can’t profit from the statue without Gutman’s assistance, and offers to cut him in on the profits, then characterizes that as a final offer. Spade explodes, turns over the table, threatens Gutman’s bodyguard’s life, and storms out in a rage. Then, as he walks away from Gutman’s hotel room, he drops the mask and just smirks, knowing that he’s convinced Gutman that he’s irrational enough to walk away from the deal even if it leaves him worse off.
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