I studied pure economics at the London School Of Economics. At least, thats what I tell people when I am trying to sound clever. Technically its a true statement. What I tend to leave out, is that I pretty much lost interest in the topic after year one, and was mostly coasting in years 2 and 3. I went to the pub a LOT, I drunk a LOT of vodka and whiskey. I played the guitar a lot, I listened to a lot of heavy metal. This was all unexpected, because I was super-good at economics A-level, and was destined to be good at degree level. The problem? I suddenly realised I found economics beyond a certain level boring, and too maths-focused.
Annoyingly, the solution to my interest-failure would soon be at hand, because 2 clever people eventually discovered an entirely new field of economics called behavioral economics, which, to my mind, was 1000% more interesting, and absolutely was the sort of thing I would be interested in, had it been an option. But no, the LSE still taught ‘classical’ economics, which focuses on interest rates. Other things matter, but you would be amazed how much of classical macroeconomics is focused on interest rates. I studied it for 3 years. I still don’t know whether rates should go up or down. This stuff is complex as fuck.
Why are you reading this?
The significant thing here is how those clever people suddenly were motivated to invent behavioral economics. I’ll give you the short version, and tie it in to the title soon. Are you excited?
Classical economics models rational behavior. In classical economics, every ‘agent’ in the system has perfect information and is perfectly rational. All data is available, and all decisions make sense. If offered 2 products, an agent will evaluate all of the properties of each of these products, giving this decision their 100% attention. They then make an absolutely perfect choice, based on the cost/benefit analysis of each choice. There is no regret in classical economics, no buyers remorse.
Classical economists were not idiots. They were extremely clever people, and they knew that is not entirely how people work, and that we all make the odd silly decision, but at the macro level, across large populations, its pretty clear that rationality wins out. The best product, taking into account the best offer in terms of features/price will always win. In the long run, rationality rules.
These economists were at a dinner party (presumably where they would while away an evening arguing about interest rates), and the host was cooking the main course, while the guests enjoyed some small nibbles. The guests were enjoying the nibbles, and suddenly one of them concluded, with the agreement of all present, that they should ‘put these nibbles away so we stop eating them’, presumably because they were concerned they might spoil their appetite for the main course.
So far, so middle class dinner party.
But hold on. One of these clever economists suddenly pointed out that this was irrational. At the moment, everyone present has a choice: Eat a nibble, or wait for the main course. This was a simple choice between instant satisfaction or a potentially better option if they wait. They were all adults, they could all make that decision. But WAIT. Everyone agreed that in fact, they would be better off if this choice was removed. They would actually be better off with LESS choice.
On the surface of it, this is not exactly earth shattering, but actually, its a revelation. In the word of classical economics, more choice is ALWAYS good. The idea that en-masse, intelligent adults with full knowledge of the available choices, would be better off if they removed some choice, is a complete refutation of everything that classical economics tells us about the world. It was the beginning of an entirely new science of behavioral economics, which would make its inventors widely read, respected and famous, and change economics forever. It would lead to studies of the special nature of ‘free’ as a magical price, and a staggering amount of research and publication. Behavioral economics is awesome.
Ok, but so what?
What this massive upheaval of literally hundreds of years of analysis shows us, is that human beings are incredibly irrational. We are extremely good at backwards-justification, where we pretend our choices make sense, but if you actually look at how we make decisions its an absolute car-crash. We are massively irrational, and so far from the happiness-maximizing creatures that classical economists imagined. Even given really, really simple choices such as ‘eat these nibbles now… or more of the main course in 15 minutes’, our brains completely and utterly collapse with the stress. Only PHYSICALLY removing the nibbles from our immediate vicinity enables us to make what we think is the ‘correct’ choice.
Social media is the nibbles.
You probably spotted that early. I’m not Agatha Christie here, but I hope the point rings true. Deep down, we are all aware that the amount of time we spend doom-scrolling on twitter is not maximizing our happiness. We know that having twitter and tiktok on our phones is just leading us to waste endless time getting into arguments, or just mindlessly scrolling for a tiny tiny serotonin hit…
About two years ago I uninstalled twitter from my phone. I also don’t have a facebook or reddit app on there. I’ve never used tiktok or instagram. A few years before that I quit an online community that just sucked me into arguments and flamewars. I was aware for a good time that these things were ‘bad’ for my mental health, but they were the tray of nibbles in front of me, so I kept nibbling.
I still have a twitter account, but the fact that I have to go to a laptop or desktop PC to use it means I’m wasting less time there. This is, for me at least, a good thing. I know a bunch of people who tweet at least 50 times a day, always political, always angry, always distressed. This is *not good*.
The best economists in the world went decades without realizing just how irrational we are, and just how out-of-touch their model of human behavior was. We are THAT delusional about our ability to make choices in our healthy interest. Its incredibly hard to take this lesson to heart and actually do something about it, but once you do it, its pretty amazing.
You should delete all the social media apps from your phone.