Friday, December 01, 2006

Why People Find It Hard to Understand Economics.

I finally understand why economics is so hard for many people to grasp.

It's not because of complexity. The rules of supply and demand aren't inherently more difficult to fathom than those that apply to, say, politics, or cooking, or sports.

Yet while most people have no trouble wrapping their brains around these subjects - indeed, millions will be eagerly absorbing their finer points this weekend - (What are you watching: Meet the Press, celebrity chefs or college football?) - few have a similar appetite for economics.

And now I know why, thanks to Alan Fiske.

Fiske, a professor of anthropology at UCLA who previously taught at Penn and Bryn Mawr, has devoted decades of research to disentangling human relationships. He's studied communities all over the world, comparing cultures in West Africa with those in Europe and America.

His conclusion: Just as every human language is composed of the same grammatical elements (subjects, verbs, etc.), all relationships are built from exactly four kinds of interactions.

Fiske labels these communal sharing, equality matching, authority ranking and market pricing. Here's what he means:

Communal sharing is how you treat your immediate family: All for one and one for all. Or as Marx put it: From each according to ability, to each according to need.

Equality matching, by contrast, means we all take turns. From kindergarten to the town meeting, it's all about fair shares, reciprocity, doing your part.

Authority ranking is how tribes function, not to mention armies, corporations and governments. Know your place, obey orders, and hail to the chief.

Market pricing, of course, is the basis of economics. It's what we do whenever we weigh costs and benefits, trade up (or down), save or invest.

Don't get Fiske wrong: He's not saying that each relationship in your life fits into one of these four slots. Rather, these are paradigms - mental models - that we use to help make sense of our interactions.

When there are conflicts, moreover, Fiske maintains it's often because we aren't all using the same model.

For example, you might see housework as a communal-sharing function, while your spouse approaches it as equality-matching. Neither is wrong, yet you still end up angry or guilty when the laundry isn't done.

The same problem can afflict whole societies, as Fiske described to me recently. "The Danes pride themselves on being fair," he said. "They can't understand why they don't get along with their Middle Eastern immigrants."

But Fiske does: "The immigrants expect authority ranking. The Danes expect strict equality matching. Each side sees people constantly violating the models."

To call this a far-reaching theory is probably a gross understatement. The more I think about it, the more it seems to fit and explain.

Does the boss have a leadership problem? Maybe it's because she has a communal-sharing model in her head, while the troops are mainly into authority-ranking. Or vice versa.

But what is particularly interesting is the role of market pricing, which Fiske speculates might have been the last to evolve in our prehistoric ancestors' brains.

It makes sense. For hunter-gatherers in small bands, sharing, matching and ranking were probably as fundamental to survival as eating and breeding. But market pricing involves complex choices based on mathematical ratios.

"It's the difference between addition and subtraction on one hand, multiplication and division on the other," Fiske says.

Commerce and global trade, of course, require a finely honed version of the market-pricing model. But if humans developed this model relatively late, it might well be less than universal, even today.

In other words, to have an intuitive grasp of economics, you might just need to take a step or two up the evolutionary ladder.

0 comments:

Petitions by Change.org|Start a Petition »

  © Blogger templates The Professional Template by Ourblogtemplates.com 2008

Back to TOP