Economics - General

When the only tool you have is a hammer, everything looks like a nail

Narrow-mindedness is one of the flaws of human cognition.  Often times, perceived conflicts of interests or bias may just be due to narrow-minded thought.

For instance, George Bush decided to invade Iraq.  While I do not want to argue the merits or demerits of the invasion, likely one of the reasons Bush decided to invade the country was because he wanted the U.S. to have a steady supply of oil.  Is oil that important?  From Bush’s point of view, it likely is.  He formed Arbusto Energy, an oil company and much of his family was involved in the oil industry.

What about Henry Paulson?  He decided a Wall Street bailout (e.g., Bear Sterns, AIG) was the best way revive the economy.  Is this because he is corrupt and a Wall Street crony?  Likely no.  However, he did work at Goldman Sachs for many years.  Thus, he likely overestimates the importance of Wall Street in the economy because that is where he built his career.  Paulson has many friends in Wall Street who informed him of their problems.  Paulson, likely has less friends in the trucking industry–who is also suffering from a stagnating economy and high gas prices–so he knows less about the trucking industry’s problems.

How do we solve the health care crisis?  The Healthcare Economist received his training in economics and you may notice that he often uses an economic framework to analyze issues.  Is economics always the right framework?  Likely no.

These three examples are derivatives of the problem of availability bias.  Individuals base their decisions on the information available to them.  However, the information available to any one person does not give the whole picture.  This leads to the quotation in the title of this blog post.  How do we fix the problem of availability bias? gives some instruction:

“You know the joke that economists like to tell each other about the drunk looking for his keys under the streetlight, not because that’s where he lost them, but because that’s where the light is? That’s just the way life is — you use the tools that you’ve got to examine the problems that you’ve got, whether they are big problems or small ones. What really makes economics move forward is when somebody learns how to build a new streetlight, or a portable streetlight, or an infrared streetlight…”

Learn to use your own infrared streetlight.

1 Comment

  1. Sure, that’s true, but I think you miss the more direct implication of your analogy.

    Oil is to Bush, what Wall Street is to Paulson, is what HEALTH CARE (not economics) is to you.

    Sure, you could make a parallel argument looking at the frameworks through which you perceive health care (economics), but this actually doesn’t work well given your analogy.

    Paulson is a libertarian economist. The fact he proposes a bailout is actually surprising given his “availability bias.”

    So staying with the analogy that works, it more likely that your availability bias leads you to overestimate the importance of health care, especially American health care — most likely both as a moral issue and for American competitiveness.

    This professional bias does indeed strike most people. Ask a health worker v. educator v. business trainer v. government advisor from various NGOs working in a developing country what’s most important to that countries development.

    Then you will see bias.

    This “importance bias” tends to sabotage most people, and is a large reason not to trust a specialist when speaking on the macro-level.

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