Thursday, June 3, 2010

Robert Frank on Economics & Framing

In my continuing crusade to identify sounder economic thinking, I want to share an article by Robert Frank in the NYT. In short, humans are not Spock-like reasoning machines, but we're imperfect decision makers who are often swayed by the deceptive and clearly irrelevant. Frank cites the gold standard studies of Kahneman and Tversky to show how random numbers can influence a totally unrelated estimate of the number of African nations in the U.N. But here's Frank's interesting take on their well-known research: "In such cases, Professors Tversky and Kahneman wrote in 1981, 'the adoption of a decision frame is an ethically significant act.'" Frank goes on to discuss how framing affects political decisions, how lies and deceptions can influence a debate. Frank notes—and I agree here—that the legal system provides a relatively poor vehicle for rectifying such deceptions and outright lies. Rather, Frank cites none other than Adam Smith (a great moral philosopher) in support of the use of social sanctions "as an effective alternative to legal and regulatory remedies". He cites Jon Stewart for his use of humor as a sanction, although Frank doubts that many of the targets of his barbs know or care about Stewart's skewers. Frank concludes by writing: "That's why it's important for the circle of critics to widen — and why we need to remember that framing a discussion appropriately is "an ethically significant act". I concur.

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