The FT vs. The Economist

Not sure where my weekend columns have disappeared to – they are supposed to appear on this blog. While we wait, here’s my review from yesterday’s FT of Dan Ariely’s excellent “Predictably Irrational”. But wait! Controversy is afoot. The Economist dislikes the book almost as much as I like it:

Mr Ariely’s weakness for soft-headed extrapolation from experimental findings are on full display at the ends of his chapters. For example, in his second chapter, a few clever experiments are deployed to show that it is possible that a trade may not produce a surplus of utility. Without any discussion whatsoever of the real-world frequency of such cases, Mr Ariely proceeds to question the general validity of the law of demand. And then we find this:

If we can’t rely on the market forces of supply and demand to set optimal market prices, and we can’t count on free-market mechanisms to help us maximize our utility, then we may need to look elsewhere… If you accept the premise that market forces and free markets will not always regulate markets for the best, then you may find yourself among those who believe that the government (we hope a reasonable and thoughtful government) must play a larger role in regulating some market activities, even if it limits free enterprise.

I find this flabbergasting. Every indication is given by Mr Ariely that these alleged irrationalities are general tendencies of the species. So they must afflict every voter, every politician, every bureaucrat, every power hungry general. How exactly is “a larger role” for the government supposed to improve on the coordinating function of the price mechanism? We are offered no details about the principles by which the allegedly superior mechanism is supposed to perform. I suppose we just hope, as Mr Ariely does, that “reasonable and thoughtful” people come to power. To my mind, this is just transparent political signaling (“Hey guys, I’m no right-winger!”), not social science.

This is fair criticism given unfair prominence. As I mention in my review, Ariely’s heroic policy conclusions are weak. But they are also a small part of the book. By the time I’d finished reading it, I’d mentally discarded them and simply remembered an excellent account of experimental science in action. No accounting for taste…

The Undercover Economist: a guide

Publishing schedule: Excerpts from "The Undercover Economist" and "Dear Economist", Tim's weekly columns for the FT Magazine, are published on this blog on Saturday mornings.
More about Tim: Tim also writes editorials for the FT, presents Radio 4's More or Less and is the author of "The Undercover Economist" and "The Logic of Life".
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