Are Homebuyers Rational Decision-Makers?

According to rational choice theorists, how do individuals make decisions?  Put simply, they act so as to maximize their expected utility, given their a priori preferences and some general idea of the nature of the world (by this, they mean that individuals have some idea of the probability of certain actions leading to specific outcomes).  While rational choice theory was first developed in academic disciplines such as economics, political scientists have adopted the technique and it’s use has proliferated in that discipline.  One of the criticisms of using rational choice theory to explain political phenomena is that often individuals have difficulty ordering preferences adequately.  This is because there is no single “currency” of utility in political science.  The same, however, can not be said for economics as it is much easier to order preferences when there are dollar values attached.  But what happens when time, leisure, etc., have to be taken into account.  Well, it turns out that individuals make many “mistakes” that diverge from that expected of instrumentally rational decision-makers.

Jonah Lehrer informs his readers of a fascinating series of studies done by Ap Dijksterhuis, a psychologist at Radboud University in the Netherlands.  One of these studies looks at decisions related to real estate purchases.  The studies:

look at how people shop for “complex products,” like cars, apartments, homes, etc. and how they often fall victim to what he calls a “weighting mistake”. Consider two housing options: a three bedroom apartment that is located in the middle of a city, with a ten minute commute time, or a five bedroom McMansion in the suburbs, with a forty-five minute commute. “People will think about this trade-off for a long time,” Dijksterhuis writes. “And most them will eventually choose the large house. After all, a third bathroom or extra bedroom is very important for when grandma and grandpa come over for Christmas, whereas driving two hours each day is really not that bad.” What’s interesting is that the more time people spend deliberating, the more important that extra space becomes. They’ll imagine all sorts of scenarios (a big birthday party, Thanksgiving dinner, another child) that will turn the suburban house into an absolute necessity. The lengthy commute, meanwhile, will seem less and less significant, at least when compared to the allure of an extra bathroom.

But, as Dijksterhuis points out, that reasoning process is exactly backwards: “The additional bathroom is a completely superfluous asset for at least 362 or 363 days each year, whereas a long commute does become a burden after a while.” For instance, a recent study found that, when a person travels more than one hour in each direction, they have to make forty per cent more money in order to be as “satisfied with life” as someone with a short commute. Another study, led by Daniel Kahneman and the economist Alan Krueger, surveyed nine hundred working women in Texas and found that commuting was, by far, the least pleasurable part of their day. And yet, despite these gloomy statistics, nearly 20 percent of American workers commute more than forty-five minutes each way. (More than 3.5 million Americans spend more than three hours each day traveling to and from work: they’re currently the fastest growing category of commuter. For more on commuter culture, check out this awesome New Yorker article.) According to Dijksterhuis, these people are making themselves miserable because they failed to properly “weigh” the relevant variables when they were choosing where to live. Because these deliberative homeowners tended to fixate on details like square footage or the number of bathrooms, they assumed that a bigger house in the suburbs would make them happy, even if it meant spending an extra hour in the car everyday. But they were wrong.:

Dependency Theory and Import Substitution Industrialization (ISI)

PBS broadcast a tremendously informative series called Commanding Heights, which took a look at the the battle over the world’s political economy during the 20th century.  Below you’ll find a portion of the episode on Latin America, which has been uploaded to You Tube.  The clip below explains the concept of dependency theory–the theoretical impetus behind the establishment of the political economic institution of import-substitution-industrialization (ISI).  Unfortunately, ISI did not work very well in practice, and Moises Naim–the editor of Foreign Policy Magazine, explains why in the clip below.

P.S. “The Chicago Boys” were not Michael, Scotty, and Phil. 🙂

What are the Fundamental Tenets of Confucianism…Culture as Destiny?

Over the past few weeks, we have addressed the debate regarding the relative explanatory power of cultural versus institutional and rational choice approaches to the analysis of political phenomena.  In the book excerpt, “A Brief History of Human Liberty,” Newsweek editor Fareed Zakaria analyzes the cultural argument regarding economic growth and democracy. He quotes the former Singaporean Prime Minister Lee Kuan Yew:

“…if you want to see how culture works, compare the performance of German workers and Zambian workers anywhere in the world.  You will quickly come to the conclusion that there is something very different in the two cultures that explains the results.”

Zakaria has some sympathy for this argument, but then argues that it is strange that Lee Kuan Yew is such a strong proponent of cultural arguments* given that while Singapore is culturally very similar to its neighbor, Malaysia, Singapore has been much more effective in its economic policies than has its neighbor.  In fact, I would add that a strong argument against cultural explanations of democracy and economic development are the differences between East Germany and West Germany (in the post-WWII-era until unification) and the present difference between North and South Korea.

The 38th parallel may be just a line on a map, and the division of the nation of Korea into two separate states may be a historically contingent act, but it demonstrates the tremendously powerful impact of institutions on a society.  South Korea was able to develop good political and economic institutions, while North Korea has not.  The cultural foundation of each state was similar (although I’m not an expert on Korea, so maybe there was a cultural difference between the “north” and the “south” that can account for the vast differences in the two states today–although I’m highly skeptical) before the division and we know, in a methodological sense, that a constant can not explain an outcome that varies.

Getting back to Zakaria and Lee Yuan Kew, Zakaria writes that

“the key to Singapore’s success…is Lee Kuan Yew, not Confucius.  The point is not that culture is unimportant; on the contrary it matters greatly…But culture can change…A hundred years ago, when East Asia seemed immutably poor, many scholars–most famously Max Weber [we’ve read his Protestant Ethic argument]–argued that Confucian-based cultures discouraged all the attributes necessary for success in capitalism…A decade ago, when East Asia was booming, scholars had turned this explanation on its head, arguing that Confucianism actually emphasized the traits essential for economic dynamism. Today the wheel has turned again and many see in ‘Asian values’ all the ingredients of crony capitalism.”‘

What are these Confucian and ‘Asian values’ about which there has been so much discussion.  Well, needless to say Asia is a vast land mass, with exceedingly high levels of diversity–culturally, linguistically, religiously, racially, etc.  So the concept of ‘Asian values’ may be so amorphous as to  Confucianism, however, is a distinct and compact body of ideas that has a comprehensive philosophical foundation.  What are Confucian values, then and do they help or hinder China’s precarious journey towards democracy and economic development?  Well, here’s an answer from political philosopher Daniel Bell, who insists that ultimately, Confucianism is about three core values.  What are these?  Listen to the first ten minutes of the audio podcast from this episode of “On Point.”  Here’s a link to the URL on which you can find an archived version of the show.

**Here, it should be noted that a reason Lee Kuan Yew is strongly predisposed to arguing on the basis of culture is his contempt for the licentiousness of Western values and his desire to prevent demands for those kinds of freedoms (as long as political liberty) to take root in the strongly authoritarian state of Singapore.  Just read his statements during the infamous Michael Fay incident.

It wasn’t long before Singapore patriarch Lee Kuan Yew weighed in. He reckoned the whole affair revealed America’s moral decay. “The U.S. government, the U.S. Senate and the U.S. media took the opportunity to ridicule us, saying the sentence was too severe,” he said in a television interview. “[The U.S.] does not restrain or punish individuals, forgiving them for whatever they have done. That’s why the whole country is in chaos: drugs, violence, unemployment and homelessness. The American society is the richest and most prosperous in the world but it is hardly safe and peaceful.”

Here’s another story on the incident.

John Cleese on Proportional Representation

There are generally two types of electoral system in use around the world–first-past-the-post (single-member district) and proporational representation (multi-member district).

As John Cleese explains in this public service announcement, the choice of which electoral system to implement in a democracy can have a dramatic impact on party politics and on the political system in general.  The idea behind proportional representation is that the composition of the legislative body is directly representative of the political opinions in the electorate.  So if, for example, 3% of the electorate votes for the Polish Beer-Lovers’ Party (PPPP–Polska Partia Przyjaciół Piwa), as happened in the Polish parliamentary elections of 1991, then that party will have 3% of the representatives in the legislative body (which it did).

In first-past-the-post systems, such as the USA, Canada, and the UK, the electorate is divided up into single-member-districts, from which a single representative is elected to represent that seat in the parliament.  The winner does not have to win a majority of the vote, only a plurality.  Thus, if there are 4 contenders for a particular seat, and three of them each garners 20% of the vote, the fourth candidate, with 40% of the vote, wins the seat, representing that district in parliament.  The rest of the votes (the 60% going to non-winning parties) is “wasted” as it is not used to determine representation in parliament.  These are the basics, but upon these foundations one can build a myriad of different types of systems, such as the “double-vote” system in Germany.

Monty Python’s take on Constitutional Government

I am a huge fan of the British sketch comedy group Monty Python.  For a political science professor, this clip is like politico-comedic gold.  Here is Dennis the peasant’s views on democratic legitimacy, the proper role of popular mandates in the wielding of supreme executive power, and a sarcastic critique of socialist critiques of liberal capitalism (“oh, there you go bringing class into it again!”).  And remember, “you don’t vote for kings.”

Totalitarianism and 1984

This week we are addressing authoritarianism and totalitarianism.  As mentioned in the textbook, totalitarian regimes are extremely odious, but fortunately are also relatively rare.  There are a couple of regimes today than can safely be characterized as totalitarian–North Korea and Burma.

Totalitarian regimes are characterized by the desire on the part of rulers for complete control of all of the state, civil society and economy.  There is much overt violence and other forms of both cooptation and coercive control.  Take a look at these two video clips of the film adaptation of George Orwell’s famous novel, 1984, and see if you can think of how many characteristics of a totalitarian regime you notice.