Wednesday, December 19, 2012

Economics And Anthropology

John Kay discusses the blinders ideology puts on us all if we are not careful.
For the anthropologists, the custom of standing a round represented ritual gift exchange. They drew an analogy with Native American potlatch festivals, where tribes would gather to eat, sing, dance and confer lavish presents – sometimes treasured or essential possessions – on each other. The economists preferred a more hard-nosed explanation. Buying drinks in rounds rather than individually was a means of reducing transaction costs. The number of dealings between the customers and the bar was reduced, and the need for small change diminished.
I proposed an empirical test between the competing hypotheses. Did you feel successful or unsuccessful if you had bought more drinks than had been bought for you? Unfortunately, the result was inconclusive. The anthropologists believed their generosity enhanced their status. The economists sought to maximise the difference between the number of drinks they had consumed and the number they had bought. They computed appropriate strategies for finite games and even for extended evenings of indeterminate length. The lesson is that if you want a good time at a bar, go with an anthropologist rather than an economist...

A narrow focus is characteristic of scientific method but gets in the way of understanding social phenomena. That was my error when I sought the “true” explanation in the pub. The custom of the round has both economic and social advantages, and it is likely that both help to account for its prevalence and persistence. The earnest missionaries and misanthropic economists who want to shut festivals down because they damage the economy have missed the point that the prospective enjoyment of such events is the reason we engage in economic activity in the first place.

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