Can progress be attributed to exchange and specialization?

'Somewhere in Africa more than 100,000 years ago, a phenomenon new to the planet was born. A Species began to add to its habits, generation by generation, without (much) changing its genes. What made this possible was exchange, the swapping of things and services between individuals. That gave the Species an external, collective intelligence far greater than anything it could hold in its admittedly capricious brain. Two individuals could each have two tools or two ideas while each knowing how to make only one. ... In this way, exchange encouraged specialization, which further increased the number of different habits the Species could have, while shrinking the number of things that each individual knew how to make. Consumption could grow more diversified, while production grew more specialized' (Matt Ridley, ‘The Rational Optimist’, 2010: 350).

Ridley’s bold claim is that human progress can be explained mainly in terms of exchange and specialization. Eric Jones, a scholar who has written extensively on the history of human progress, considers that Ridley makes the case very well, based ‘on the few knowns of early pre-history’. Jones also considers that Ridley gets the story of the industrial revolution ‘mostly right’ (Review in ‘Policy’, Spring 2010, 26 (3)).

The weight that we can place on exchange and specialization as explanators of human progress depends importantly on the extent to which advance of knowledge and innovation can be attributed to exchange and specialization. It is possible to go some distance in explaining technological progress as a consequence of specialization. As Bill Easterly points out in his NYT review, however, many breakthroughs come from creative outsiders who combine technologies generated by different specialties.

Ridley mentions that government actions of various kinds in different countries have often inhibited innovation, particularly the introduction of new products and new ways of doing things that threaten the survival of established patterns of production. The implication is that freedom is a necessary condition for progress comes through clearly in Ridley’s recent contribution to Cato Unbound:

‘I am saying that there have always been liberals, who want to be free to trade in ideas as well as things, and there have always been predators, who want to extract rents by force if necessary. The grand theme of history is how the crushing dominance of the latter has repeatedly stifled the former. As Joel Mokyr puts it: “Prosperity and success led to the emergence of predators and parasites in various forms and guises who eventually slaughtered the geese that laid the golden eggs”. The wonder of the last 200 years is not the outbreak of liberalism, but the fact that it has so far fought off the rent-seeking predators by the skin of its teeth: the continuing triumph of the Bourgeoisie’ (p. 252).

I can’t help thinking that this sounds more like rational pessimism than rational optimism. According to Ridley, the industrial revolution is largely a story about coal - and progress since then has been possible mainly because of abundant cheap energy from fossil fuels. He notes that his optimism wobbles when he looks at the politics of carbon emissions reduction and the potential this has to load economies with further rules, restrictions, subsidies, distortions and corruption (p. 347).

Cartoon by Nicholson from "The Australian" newspaper: http://www.nicholsoncartoons.com.au/

The optimistic note on which Ridley ends his book comes from his view that innovation is such an evolutionary, bottom-up phenomenon that it will continue as long as exchange and specialization are allowed to thrive somewhere in the world.

In the end, it would seem that the gains from innovation, exchange and specialization all depend on liberty – liberty is the key to human progress.

Once a neurotic always a neurotic?

Martin Seligman’s view that authentic happiness comes from using your character strengths makes sense to me. For example, it seems reasonable to expect that activities that would bring lasting happiness to a person whose strengths are curiosity, love of learning and zest would differ from those that would bring lasting happiness to one whose strengths are kindness, fairness and a forgiving nature, or to one whose strengths are judgement, perseverance and leadership. (In his book ‘Authentic Happiness’, Seligman identifies 24 strengths under the general headings: wisdom and knowledge, courage, humanity and love, justice, temperance and transcendence.)

This idea of playing to signature strengths also appeals to the economist in me because it involves specialization on the basis of comparative advantage. Thinking in those terms, specialization doesn’t necessarily enable a person with little education or poor health to achieve a high real income – merely a higher real income than he or she would be able to obtain by attempting to be a jack of all trades. Similarly, a neurotic person – one who has an enduring tendency to experience negative emotions – may not have a life full of joy even if he or she plays to character strengths and focuses activities that do not necessarily require a sunny disposition.

Seligman recognizes that some people whose inherited characteristics make them low in positive affectivity are less likely to be happy. His recommendation for such people is that they should learn to exercise greater control over their emotions by using techniques such as recognizing and disputing negative thoughts.

Do people who successfully follow such advice become less neurotic? From what I have read, the standard answer given by psychologists is ‘no’. For example, Daniel Nettle tells us:

‘High neuroticism scorers will always be vulnerable to negative thoughts and feelings. That they cannot change. However, there are techniques in which they can train themselves that seem to have quite a marked effect on how they deal with this vulnerability, which can make a great deal of difference to their being in the world' (‘Happiness’, 2005: 113).

Timothy Pychyl has a relevant post on the ‘Psychology Today’ blog in which he notes that some leaders in the field of positive psychology have outed themselves as neurotics. (When I did an online test I discovered that I also have a tendency to be somewhat neurotic – but that would probably be only too obvious to readers this blog as well as to everyone else who knows me.) Pychyl suggests that while neurotics can learn to act out of character they can’t change their personalities.

Survey data suggests that personality traits for the vast majority of people tend to remain stable after age 30. End of story? Well, not quite. Such studies also indicate that a small proportion of individuals undergo significant changes in personality (see: Terracciano, Costa and Mc Crae, ‘Personality plasticity after age 30’, 2006).

There is some recent evidence of personality change during treatment for depression both using drugs (Paxil) and cognitive behavioural therapy (CBT). The results of one study, led by Tony Tang, suggest that both the drug therapy and CBT outperformed a placebo and had similar effects in changing neuroticism and extraversion scores.

There has also been some research relating to changes in the brain that might be produced by meditation. A study led by Richard Davidson, which examined changes in brain electrical activity following an eight-week training program in mindfulness meditation, found that the program resulted in significantly larger increases in electrical activity in areas of the brain associated with emotional regulation (‘Well-being and affective style’, 2004). A more recent paper by Davidson includes the following remarks:

‘Mindfulness training can be hypothesized to change an individual’s relationship to his or her emotions so that they are not viewed as fundamental constituents of self, but rather as more fleeting phenomena that appear to the self. We would not necessarily expect mindfulness training to alter the neural circuitry of emotional responding in response to a challenge per se, but rather we might expect a change in the connectivity between emotion circuits and those used for the representation of self. We would predict decreased connectivity between emotion processing and self-relevant processing regions’ (‘Commentary: Empirical explorations of mindfulness’, 2010).

I don’t claim to know a great deal about neuroticism or meditation (apart from my own limited experience) but if meditation helps people to be calm and composed, and less likely to panic, or feel threatened, stressed out, frustrated, or bothered in the face of challenges, then I would have thought that would probably be reflected in lower neuroticism according to standard measures used by psychologists.

Finally, as an economist, it seems to me that revealed preferences are worth considering. As I have discussed previously, the self-help industry seems successful according to the usual market tests. When people engage in meditation or other forms of contemplation instead of sleeping longer or indulging in more immediately pleasurable activities, this suggests to me that they may actually obtain some of the benefits that they claim in terms of desired changes in personality traits.

Postscript
There is an update of this post entitled: How much does personality change over time?

Does one form of sensation-seeking substitute for another?

In the last post Ruth, a mental health nurse, discussed how she had been more willing to participate in risky activities such as bungy jumping while she was working in prisons. This led to a discussion of changes in perception of identity that may be associated with drug taking by young people who are seeking to escape from emotional pain. Ruth discussed how mental health patients with a history of drug use could be helped to perceive a wider set of possibilities for their future lives.


This post explores implications of evidence that some adolescents take drugs as a form of sensation seeking. A literature review by Jonathan Roberti notes that sensation seeking individuals tend to engage in behaviours that increase the amount of stimulation they experience. Sensation seeking is more common among young males than other groups. While risk-taking is involved it is not a primary motive – high sensation seekers tend to appraise risky and stressful situations as less threatening than do low sensation seekers.

Sensation-seeking is associated with stimulating occupational choices e.g. a desire for greater novelty and flexibility in work and with choice of risky vocations such as fire fighting. It is also associated with a preference for arousing music e.g. hard rock; travel to less familiar places; participation in relatively risky sports e.g. bungy jumping, white water rafting, surfing, snow boarding, scuba diving and parachute jumping; gambling; crime; impulsive behaviour; and health risk behaviours e.g. unsafe sex, unsafe driving, binge drinking and use of illicit drugs (‘A review of behavioral and biological correlates of sensation seeking’, Journal of Research in Personality, 38, 2004).

Roberti has high hopes that adverse consequences of sensation seeking traits could be reduced by substituting sensations with low health risks for sensations with high health risks:

‘Early identification of risky behaviors, attitudes, and preferences in young adults, such as engaging in promiscuous sexual activities, reckless drinking habits, use of illicit drugs, gambling, and high-risk sports and replacing those with non-risky options is essential in reducing negative health consequences. Recommending appealing, non-risky forms of sensation seeking to individuals that once engaged in risky behaviors is one way of reducing negative health consequences. The effectiveness of using alternative arousal sources that are non-risky but are equally stimulating has yet to be determined and would be a fruitful line of research’ (p 274).

When I consider this from an economics perspective, it is not entirely clear whether, or to what extent, sensation seekers would view such activities as substitutes. It would be nice to think that an afternoon engaging in an extreme sport would satisfy a sensation seeker’s desire for thrills until the following week - and that the culture associated with all extreme sports would tend to encourage healthy living. It might be possible, however, for a sensation seeker to spend an afternoon engaging in an extreme sport, followed by an evening of illicit drug use and gambling, and then to end the day participating in a sex orgy (although I can’t verify this from personal experience). More research may be required. (Perhaps I should clarify that I am suggesting surveys of the lifestyles of people who engage in various extreme sports.)

Jonathan Roberti draws attention to research suggesting that sensation seekers prefer certain types of friends and tend to surround themselves with others who have similar sensation seeking characteristics. I expect that the behaviour of sensation seekers in this respect would be strongly influenced by their own sense of identity.

How can parents ensure that children with sensation seeking tendencies develop a sense of identity consistent with adopting healthy lifestyles? My previous consideration of this question suggests that the main environmental shaper of personality is a child’s peer group. Parents may not be able to choose their children’s friends for them, but parents do make decisions about where they live and what schools their children attend.

Postscript:
There seems to be increasing evidence linking cannabis use among young people to mental illness. Some recent research is reported here. That suggests that it is stupid for young people to use cannabis. However, that does not provide sufficient reason for cannabis use to be illegal.

How can we explain the attitudes of young drug users towards the risks involved?

This post is the sixth in a series of discussions with Ruth, a mental health nurse who has worked with drug users in prisons and hospitals. There is a brief summary of earlier post in the series, on my other blog.


Ruth began the discussion by considering whether her own history might help us understand why kids engage in risky behaviour:

When I worked in the prison system, I participated in activities such as bungy jumping and solo trekking through the Himalayas and so on. These are risky activities. They differ from drug taking because they are socially acceptable. But they are similar because they involve a risk of being injured or killed. I saw myself as capable in extreme situations. It felt good!

My attitude toward risk-taking has changed since I stopped working in the prisons. I now experience greater fear of heights and tend to allow that fear to dictate my actions. For example, I was walking down some steps – the open variety – descending about 100 metres underground last year. I was terrified, simply of the height, as I looked down to see where to put my foot next. Vertigo had got me – and not for the first time in my life. Yet, only a few years prior, I had bungy jumped off the side of a swing bridge over a river.

The only difference I can point to is that I am now engaged in less risky activities on a daily basis. I experienced great fear on both occasions, but it seems to me that I was accustomed to taking risks back then. Now I am out of practice, so to speak.

This makes me wonder if young drug users see drug-taking as a measured risk - just as the risk of trekking solo through the Himalayas or bungy jumping or so many other things I did, mirrored the risks I took working in the prison. A lot of drug users may consider that the risks involved are not out of the ordinary, relative to the risks that are part of their daily lives. This might explain why so many argue that drug use is quite safe.

I expect that many could relate some of what Ruth has been saying to their own experience. I know that when I took on new roles at work that required me to get out of my comfort zone, this also affected other aspects of my life. If we think in terms of identity economics, a change of role may be associated with a change of perceived identity, which in turn has implications for the satisfaction we obtain from different kinds of behaviour and the choices we make.

Tammy Anderson, a sociologist, has developed a cultural-identity theory of drug abuse which suggests that drug abuse is the outcome of an identity change process. The process may involve a range of factors relating to personal circumstances, identification with sub-cultures and economic opportunity. For example, at a personal level some kids may feel out of place and different from others, or a loss of control in defining their own identity because of unrealistic parental expectations. This may lead them to identify with alternative social groups i.e. a drug sub-culture. In turn, this provides a new identity, with acceptance by a peer group and associated economic opportunities to fund drug use. (‘A cultural identity theory of drug abuse’, here)

In my view, while such a cultural-identity perspective makes sense, it would be desirable for it to be embedded into an identity economics framework in order to recognize the role of individual choice in these personal changes.

Ruth comments:

My experiences mostly centre around drug takers after their habit has become a noticeable problem. Although I know less about the introductory phase of drug taking or experimentation, I have worked with many teens (mostly girls but some boys too) who have lived through sequential painful experiences and have given up on the idea of living free of ongoing emotional pain. Young people in these situations may welcome any mind numbing activity just to escape the hurtful lives they live. This is not about immaturity or lack of worldliness or some other non-reality oriented scenario. I'm referring to situations where there are real reasons for the emotional pain they feel. Many are still too young to leave home and are therefore doomed to continue living in circumstances that are painful to them until they come of age.

The young people I've had most regular contact with have long dispensed with the idea that they can change themselves, or their life circumstances. They have usually had limited exposure to the idea that they can consciously create a life for themselves and much less exposure to ideas about how they might do such a thing. In their own eyes their identity is defined and absolutely limited to what they are now and has been determined indisputably and irrevocably by the circumstances of their birth and upbringing.

From the therapy side, I see these self-perceptions as an excuse to avoid dealing with what the individuals see as an unchangeable future. As these limiting perceptions change then they see that they have greater potential to change their lives than they realized. It would be helpful if the community as a whole could adopt a similar approach to these people.

I found that talking to these patients about travel adventures like trekking the Himalayas and Swiss Alps and so on can make a difference to their long term projections for their own lives. The potential to have that kind of adventure can be enough for them to think it is worth getting through their ordeal. They often turn off drugs as a direct result - not always, but often. What is happens is that their confidence builds in a natural way. I could point out how 'ordinary' I was, much like themselves, and how I went about achieving my goals – the usual methods of planning, practicing and reading relevant material and talking to others who had done similar things. This led the patients to see a whole new set of possibilities - which in turn opened options and gave them confidence to act differently, and with choice.

Confidence and choice are at the heart of every behavioural decision. I suspect identity building is limited by an assumption of 'who I am' in the world around me.

The discussion continues here.

Does Australia also have a ruling class?

In his article, ‘America’s ruling class – and the perils of revolution’, Angelo Codevilla suggests that Democrat and Republican office-holders in recent governments in the United States ‘show a similar presumption to dominate and fewer differences in tastes, habits and opinions ... than between both and the rest of the community’. He claims: ‘They think, look, and act like a class’ (‘The American Spectator, July-August 2010).


I think the article provides a good explanation of why Americans who normally support the Republican Party are currently so disenchanted with it. Perhaps Australians should be thinking about possible implications for politics in this country.

Characteristics of this class identified by Codevilla include the following:
• ‘Its first tenet is that “we” are the best and brightest while the rest of Americans are retrograde, racist, and dysfunctional unless properly constrained’.
• Its only standard of truth is consensus among its members. It does not take seriously the views of anyone - irrespective of professional competence, academic achievement, wealth or office held – unless they are members of the class. Like a fraternity, the ruling class requires its members to share the manners and tastes of the class.
• It views the common people’s words as ‘like grunts, mere signs of pain, pleasure and frustration’.
• It stakes its claim to power through intellectual-moral pretence but holds power through patronage – increasing the power of government to increase its own power and reward its supporters.
• It includes among its number people who have been chosen by government to be the true representatives of various sectors of society and who have been empowered to represent those sectors in elaborating laws and administrative rules.
• It seeks to make itself the arbiter of wealth and poverty by making economic rules dependent on the discretion of office holders who are members of the ruling class.
• It redirects the people’s energies away from satisfying their own desires – toward living more densely and closer to work, driving smaller cars, using less energy, improving their diet etc.
• It assumes that what it mandates with regard to education and welfare of children must be correct ipso facto, while what parents do is potentially abusive.
• ‘Its principal article of faith, its claim to the right to decide for others, is precisely that it knows things and operates by standards beyond others’ comprehension’.
• It identifies science and reason with itself and pronounces definitive scientific judgment on whatever it chooses. Aggressive, intolerant secularism is the moral basis of its claim to rule.
• It interferes in the affairs of foreign governments that are not the enemies of America.
• It favours ever higher taxes and expanding government.

Before I go further, I think a confession may be in order. Some of those points describe attitudes I held 40 years ago. I’m not proud of that, but at the time I thought that Commonwealth public servants were the best and the brightest in the land and that they should have more power.

Another point I should make is that it is important to distinguish between opposition to ruling class attitudes and support for populist attitudes. In my view the words of non-experts on complex economic issues do have little more value than a grunt. Whether we are talking about economic policy, brain surgery or plumbing, I think it should be self-evident that the views of experts count for more than those of non-experts. The problem with the ruling class is not its lack of regard for the views of non-experts, but its lack of regard for the views of experts who do not accept that it has a right to interfere in the way citizens live their lives.

Coming to the question I posed at the beginning, it is obvious from what I have already written that I think Australia does have a self-appointed ruling class as described above. This ruling class is identified most closely with the public service and the political left, including the Greens as well as the Labor Party.

However, I don’t think the conservative side of Australian politics is as closely identified with the ruling class as in the US. When he came to office, John Howard was viewed as an outsider by the ruling class. This antipathy remained until his government was voted out of office, even though his policies were by then virtually indistinguishable from those of the ruling class. Tony Abbott, the current leader of opposition, seems to want to maintain distance himself from the ruling class rather than to disempower it. His recent book, discussed here, is a strange mixture of support for traditional family values, classical liberalism and espousal of ruling class attitudes toward centralization of power in Canberra.

What distribution principle would you choose behind a veil of ignorance?

In his book, ‘A Theory of Justice’, John Rawls considered what principles of justice would be agreed upon by all behind a veil of ignorance in which no one knows their place in society - their wealth, their class position or social status, their intelligence, strength, state of health etc. One of the principles that Rawls argued would be agreed upon is the ‘difference principle’ – that social and economic inequalities should exist only insofar as they benefit the least well off members of society.

I think the veil of ignorance thought experiment is useful to consider public policy issues from a perspective that is broader than my own perceived interests. When I do this thought experiment, however, I don’t endorse the difference principle (sometimes referred to as the maximin principle). The principle I come up with is to maximize the opportunities of any person chosen at random, subject to provision of a safety net to protect the well-being of the least well off members of society. I expect that some critics would say, however, that I get this outcome because I am not doing the thought experiment properly.

A study undertaken by Hörisch Hannah a couple of years ago does not seem to have the same potential for personal bias to influence the results obtained. Hannah implemented the Rawlsian veil of ignorance in a laboratory experiment using variants of the dictator game (see: ‘Is the veil of ignorance only a concept about risk? An experiment’, Munich Discussion Paper No 2007-4). In the first experiment, one player, the dictator, decides how much of the pie will be received by the other player, given an efficiency loss of 50 percent for units that are transferred from the dictator to the receiver. The veil of ignorance is implemented by requiring each player to decide how much to give to the other player before being assigned the role of dictator or receiver (with equal probability). The second experiment is the same as the first except that the role of receiver is not actually assigned to a person so the outcome can be interpreted as a self-interested response to risk.

Only a minority of subjects opted for the maximin principle under either experiment. The vast majority of male participants perceived the veil of ignorance as introducing only risk. Among women participants, however, impartial social preferences were a second significant motivation that induces stronger concern for equality.

Although I think the results of the study are extremely interesting, they can hardly be presumed to reflect universal values. The study is quite small, with only 167 participants (all university students). There may be potential for bias because about two-thirds of respondents have studied some economics. It would be interesting to see results for similar studies, for people of different ages and backgrounds in different countries.

It would also be interesting to know whether there is any link between the values that people display when they play this game and their political views. Are the views of individual voters strongly influenced by principles that they support irrespective of their own perceived interests? If so, then perhaps politicians are whistling the wrong tune (or whistling to the wrong dog) when they are seen all the time to be responding to rent-seeking by narrow interest groups.

Difficult questions Part V: How effective is anti-drugs advertising?

In a recent post I discussed the question of whether identity economics might help to improve understanding of teenage drug use. I have been discussing this question with Ruth, a nurse who has cared for drug users in psych wards. In this post Ruth comments on the effectiveness of anti-drugs advertising.


I kicked off the discussion by suggesting that one possible implication of identity economics is that anti-drugs advertising would not be likely to make much of an impression on kids unless they see the story it is telling as being relevant to people like themselves.

Ruth comments:

Anti drug advertising has failed miserably and may have been counter-productive. I say this because many teens see these ads and it simply reminds them of what they imagine their friends to be doing right now and sets up the desire to be with those friends and partaking in their shared drug taking – a mostly enjoyable activity. It's like advertising positively for things like chocolate or a holiday destination – you see it, you want it.

The words are heard as nagging noises and are ignored. The images incite memories that are attractive.

No-one sees an ugly person suffering on TV and relates the image to themselves – kids see the ugly person as a looser, not like themselves at all. This is particularly so when the ad comes on TV, interrupting unpleasant thoughts or conversations previously going on for the teen.

The Australian anti-drug advertising that Ruth is talking about can easily be found by searching on Google for ‘anti-drugs advertising Australia’. Such a search also provides references to research supporting Ruth’s view that anti-drugs advertising may have been counter-productive.

When I looked again at the advertising my first thought was that showing kids the bad things that could happen if they take drugs must have some impact. The message, ‘You don’t know what drugs will do to you’ is the kind of message I would like teenagers to think about. I must admit, however, that I would not be discouraged from drinking alcohol by the message, ‘You don’t know what alcohol will do to you’, accompanied by images of alcoholics. The message would conflict with what I perceive from my own experience to be likely to happen to me if I continue to engage in moderate drinking.

Ruth concludes:

I've never found a drug user – social user or not – who relates to the characters in those ads, nor have I found anyone who sees themselves as a potential for the advertised risk. Even if they are in it over their heads already. Those who cite the ads as incentives for getting off the drugs state things like 'I saw that happen to my friend and I want to get off for his sake' or 'I know they say that could happen to me, but it won't. I'm smarter than that'. I've always found it interesting that drug users (and dealers) use terminology about their intelligence when defending their position.

The discussion continues here.

Difficult questions Part IV: Do people suffering from DIP have identity issues?

In the preceding post I suggested that identity economics may help us to understand teenage drug use. Ruth, a nurse who has worked in psych wards has responded with some encouraging comments about the potential for identity economics to help in exploring the drug-using phenomenon.


Ruth writes:

In my experience there are different aspects involved.

Some use drugs to escape their thoughts. (I suspect this is the largest group.) Those thoughts invariably include memory (what went before) and fantasy (what may come). The nature of those thoughts are hugely varied and may or not be based on shared experiences. They are not the same as delusions. Instead they are the result of a person trying to explain where he fits in his world, within the (limited) knowledge he has accrued in his life thus far. And the results are a distorted view of what's so, of where they fit, of what they mean to others, of how the world around them works, of the possibilities still awaiting them in life. The younger kids are when they start taking drugs, the more limited this knowledge is likely to be. The thoughts these people experience are particularly painful and cannot be mitigated easily through the usual counselling techniques.

A second group identifies their personalities as predominantly risk taking and therefore actually experience the need to arouse angst in those closest to them. This provides the sense of being cared about by those people. The more they upset the people around them the more evidence they have that they are loved - which of course sets up the adrenaline response very frequently (with every associated thought). Adrenaline in itself is a highly addictive drug - one that many very healthy non drug users like me are quite unashamedly addicted to.

Another group simply start experimenting with 'soft drugs' and end up with physical addictions requiring servicing at every opportunity. These people are the easiest to help as they are generally most motivated at the emotional level.

Ruth continues:

I think it's easy to get mistaken between the view looking in and the view looking out. Those close to the problem emotionally don't see through the same lens as those with an objective (professional) filter. The greatest mistake I see day in and day out is people - sufferers, family, researchers, medics, friends, observers - categorising the problem and therefore the sufferer.

The real answer - in my experience - is to take one person at a time and simply listen to them for quite some time before even attempting to think or consider what to do to help. The person themself inevitably can reveal the true cause of the problem and only then can a useful - long term effective - solution be proposed.

Short term solutions that deal with immediate symptoms such as aggression, depression

and side effects of drugs must of course be dealt with. But it is in the listening that the true cause of the problems are found. And listening is such an underrated skill; it hardly features amongst the more 'sophisticated' skills.

True therapeutic listening puts the practitioner in a place of nothingness, conscious only what is occurring in the room in each moment as it transpires. As the person speaks, the truly listening 'other' feels the person's psyche and is able to communicate in such a way that the person actually experiences a healing feeling without any recommendations or solutions or questions being offered. This is the beginning point for the journey to wellbeing for everyone. It is especially important for kids using drugs.

Ruth obviously feels passionately about therapeutic listening. Her views on this seem to me to make a lot a sense (but I can’t claim any expertise in that area). I would like to round off this discussion by pointing to possible implications of Ruth’s observations for use of identity economics to understand teenage drug use. The important point is that the people who end up in hospital as a result of drug taking do seem to have some particular identity characteristics that may help to explain why they got involved with drug taking in the first place. Ruth sees people making mistakes when they look in from the outside and attempt to categorize individuals. This suggests to me that there may be a need for better research instruments that will enable researchers to get a better understanding of individual behaviour by learning how individuals categorize themselves. In other words, if we are to understand the choices that the person makes it might help to know why the person perceives himself or herself as the kind of person who would obtain satisfaction from that kind of behaviour.

To be continued.



Difficult questions Part III: Can identity economics help us to understand teenage drug use?

This post continues the discussion in some previous posts about understanding teenage drug use. In the first post Ruth, a nurse who has worked in psych wards and prisons, illustrated the nature of the problem by telling the sad story of a man who has been suffering from drug induced psychosis (DIP) over a long period following an incident just before his 18th birthday. In the second post we explored whether viewing drug taking as a rational choice helped us to understand the problem. I concluded that it tended to put the problem back into the too hard basket.

I think the best way to try to understand complex issues is to begin by asking naive questions that help to define the problem. (The down-side of this approach is that it reveals my ignorance.) What kind of problem is this? Is it primarily genetic/neurological, psychological, sociological or economic?

Some papers suggest that genetics and neurology may be important. DIP is linked to childhood experience of attention deficit/ hyperactivity disorder and a family history of psychiatric illness. Ruth’s response on the basis of her experience in psych wards is that there is no family history of mental illness for the great majority of those with DIP.

I think there are also problems with both psychological and sociological explanations of why some teenagers are take the risks associated with drug use. It is reasonably clear that psychological issues e.g. self esteem are often involved. Yet, some kids who get involved seem to popular among their peers and achieve to a high level academically or on the sporting field.

Similarly, while incidence of drug abuse is higher among some socio-economic groups, some kids don’t adopt the culture of the socio-economic groups to which they belong. In any case, it isn’t very enlightening to answer questions about why individuals behave the way by saying, ‘Well, how would you expect someone with that cultural or environmental background to behave’. If we are attempting to explain individual behaviour we need to recognize that individuals make choices.

That brings us back to economics. The field of economics that seems to me to be most relevant is identity economics, which has recently developed by George Akerlof and Rachel Kranton (who have recently written a book about it). The basic idea is that individuals gain satisfaction when their actions conform to the norms and ideals of their identity as well as from their consumption of goods and services. Identity can be considered as an objective social category (e.g. gender, race, social class, age group) but in this instance I think it makes more sense to view it as a subjective identification with a particular group (e.g. insiders or outsiders; conformists or non-conformists) or with a particular set of attitudes. (I have previously written about identity economics in different contexts, here and here.)

So, if you want to understand why people behave the way the do it may help to know how this behaviour relates to the way they think of themselves. Kids who engage in particularly risky thrill-seeking or escapist behaviour possibly obtain some satisfaction from thinking of themselves as the kinds of people who do that kind of thing.

Ruth has responded with some encouraging comments about the potential for identity economics to help in exploring the drug-using phenomenon. Her response is in the following post.

Is free choice an illusion?

I am sometimes asked questions like: What is so wonderful about the free market? My answer is that the free market is about choice. You choose what you want to buy. The choices you make send signals through the market to huge numbers of people involved in retailing, manufacturing and production of raw materials. A lot of these people live in different parts of the world. They don’t even know each other – they are just responding to market opportunities. It is inspiring to think that this whole system responds to individual choice.

However, some people argue that free choice is just an illusion. These people include some famous economists, such a J K Galbraith, who wrote ‘The Affluent Society’ in the 1950s. He argued that your choices are manipulated by advertisers, who sell you things that you may not really need. Others argue that modern economies are geared to selling things that are bad for us – food full of fat and sugar; fuel guzzling cars; new fashions in clothes that serve no obvious purpose – often funded with credit that consumers have difficulty repaying.

How has the economics profession responded to this challenge? Over most of the last 50 or so years I think it is fair to say that the profession has largely ignored the challenge. That was easy to do because there was never any serious suggestion that advertising should be banned. Advertising of some addictive products that are harmful to health has been restricted and there has been some regulation to shield children from exposure. Everyone agrees, however, that it would be silly to discourage informational advertising about store locations, products sold and prices. As for more subtle forms of advertising, it is difficult to define activities that should be discouraged without infringing the rights of individuals to engage in persuasive communication with each other.

Much of the economic research that has been undertaken on the effects of advertising has suggested that they are small and do not last long. However, such findings raise more questions than they have answered. Why would firms spend large amounts on advertising if it has little effect on sales?

The findings of some recent studies on the evolution of brand preferences are consistent with Israel Kirzner’s view that it is the entrepreneur’s function not only to make the product available, but also to ensure that the consumer’s attention is attracted to the opportunities that the product provides (‘Perception, Opportunity and Profit’, 1983, p 10). These studies have shown that:
• brand loyalty tends to be a very important factor - many people prefer to buy a leading brand product, even though a less expensive product is indistinguishable when packaging is not visible;
• the first brand that becomes established in a market tends to maintain a substantial advantage over those that come later; and
• this advantage is greatest for products that are heavily advertised.
(For example, see “The marmite effect’, ‘The Economist’, Sept. 23 2010 and Bart Bronnenburg, Jean-Pierre Dubé and Matthew Gentzkow, ‘The evolution of brand preferences’, NBER Working Paper 16267.)

Marketing experts have a great deal to say about how brand loyalty is established. Conventional branding models assume that the purpose of advertising is to influence consumer perceptions about the brand (e.g., associations tied to quality, benefits, personality, and aspirational user imagery). In cultural branding, however, advertisers seek to establish a story about the kind of people who buy the product they are selling and how it fits into their lives. The product is simply a conduit through which customers can experience the stories that the brand tells. (see: Douglas Holt, ‘How Brands Become Icons’, chapter 2). Some people identify strongly with the brand’s story, some may see it as saying something relevant to themselves, others see it as irrelevant.

One of the most interesting marketing exercises in Australia is the advertising of Victoria Bitter. For a long time the story was about ‘Vic’ as a reward for a hard days work - the ‘hard-earned thirst’. It was the working man’s beer. Over the last couple of years the advertising has moved up market. Last year, the story suggested that VB was every man’s beer. The most recent advertising seems to be aimed at young men who sees themselves as a ‘authentic Aussie blokes’. (The latest ad is here). If you buy the story, you may buy the product and make a statement about how you see yourself and how you want to be seen by others.

How can an understanding of the role of story-telling in marketing be incorporated into economics? There is a relatively new brand of economics developed by George Akerlof and Rachel Kranton that is helpful. Identity economics recognizes that people gain satisfaction from acting in accordance with their identity – how they perceive themselves – as well from the goods and services they consume. This explains why some people would prefer to buy the branded product they usually buy rather another product that is a lot cheaper and is indistinguishable in all respects when taken out of its packaging. They get satisfaction from being the kinds of people who use that brand. The satisfaction they get from acting in accordance with their identity – the story associated with the brand – may exceed the satisfaction they would get from paying a lower price.

Summing up then, advertising does not make consumer choice an illusion. Advertisers are often trying to sell you a story. If you don’t identify with the story they are telling, you don’t buy their product. It’s your choice.

Note: This post is based on a speech I gave recently at Nowra Toastmasters.

Why don't the anti-Collingwood mob lighten up?

I’m not a football fanatic. I watch a game on TV now and then during the season, but I don’t really get interested until the finals are on.


After watching both the AFL and Rugby League grand finals this weekend I couldn’t help notice that the losers of both contests looked as though they were about to go to the gallows. Perhaps they were worried about how their fans would react. Why don’t they – the players and fans - just lighten up? After all, football is only a game!

There is research suggesting that a lot of fans take losing very seriously. Researchers discovered that fans of a men’s basket ball team were more depressed after a loss than happy after a win. Compared to the winners, those who watched their team lose had darker moods, they were more pessimistic when rating their mental ability; and they predicted that an attractive person would be more likely to reject them.

I can’t help feeling a bit sorry for the St Kilda and Roosters supporters who had high hopes for the victory of their teams. But I admit to some schadenfreude about the other people who wanted Collingwood to lose. This year supporters of Collingwood’s traditional rivals, Carlton and Essendon, seem to have been joined by a motley crew of supporters of other clubs to form an ABC (Anyone But Collingwood) brigade, consisting of people who have nothing in common except their desire for Collingwood to lose the grand final.

One example of the attitude I am writing about will suffice. For reasons best known to herself, Judith Sloan began an otherwise sensible article published on Saturday in ‘The Australian’ about the ABC (Australian Broadcasting Commission) by suggesting that Collingwood supporters have a psychopathology which causes them to be one-eyed, irrational and rabid. Perhaps she thought that all Collingwood supporters had already cancelled their subscriptions to ‘The Australian’ after reading the attempt at humour at Collingwood’s expense in the lead article on page one the previous Saturday.

I find it difficult to understand why Collingwood supporters arouse so much antipathy. It can’t be because we win too often. After all, our last premiership was 20 years ago. Perhaps it has to do with the ability of supporters to remain enthusiastic despite all the defeats of the past couple of decades. But who could resist being enthusiastic about a young team that plays as though they really want possession of the ball and whose hand-passing leaves opponents flat-footed.

Winners are grinners. Photo by Sebastian Costanzo published in ‘The Age’, here.

Some might suggest that the anti-Collingwood mob don’t like us because they think we like being disliked. Ugh! That doesn’t make sense to me. But Collingwood supporters can sometimes appreciate a joke against themselves. This is probably because we get plenty of practice. The best anti-Collingwood joke I heard this week is this one. Question: ‘What do you call a Collingwood supporter in a suit?’ Answer: the defendant.