Tuesday, 4 May 2010

Self-interest as a norm

A common response from those who seem to dislike the idea that people aren't rational, self-interested maximisers is to focus on the way that people learn.

For example, I've seen someone somewhere use this as an argument against the endowment effect. Their argument was that, yes, maybe people do put a higher value on something once they own it, but that may change with experience. So second-hand car salesman won't experience the endowment effect in the same way (if at all?) in respect of a car they've just bought at auction compared to a regular punter. The point seems to be that people learn to value things more rationally the more they trade.

That all sounds ok. But I wonder what is really going on here. Is it that rational self-interested 'core' is exposed through repeated transactions? All that cranky irrational stuff gets worn away with experience. Or could it also be that to some extent we internalise a new norm and act in accordance with it?

Clearly I'm not discounting the idea that people do act in a rational and self-interested way. But to what extent is that actually resulting from an internal drive which might be uncovered through experience, and to what extent is it a norm that people behave in line with?

I reckon there's something worth thinking about here, and having googled 'Self-interest as a norm' I found this paper, which looks like it might be worth a read.

UPDATE: That paper is well worth a read. Lots of interesting stuff and useful refs in there.


CharlieMcMenamin said...

I think you edge ever closer to the idea of what sociologists of economics call 'performativity'.

i tend to look to Will Davis of Potlatch to guide me thorough that stuff e.g. http://potlatch.typepad.com/weblog/2010/01/winding-up-economists-a-research-methodology.html

Hope the move went well.

Tom Powdrill said...

Hi Charlie

Yep, I think you're right. Actually I was thinking of getting this book:


And Will has written a review of it somewhere.

Move went very smoothly, and getting use to having space again!


CharlieMcMenamin said...

McKenzie is always interesting - but you might want to first check out his various articles in the LRB before splashing out quite that much money for a book...This should get you thro' the paywall.Let me know if it doesn't work.


chris p said...

If self-interest is to be denied by replacing private investment by public investment then there is no "self" left in it! At this point "self" re-emerges in a new wave of private investment unless life has changed your own definition of "self". Hence charities are voluntarilly staffed by older and often retired people who consider them-"selfs" to be statiated