The Economics of Fickleness

Feb. 1 -- — The deadline is tomorrow for a proposal I promised to deliver but now don’t want to write.

I dutifully, if reluctantly, begin to work on the project when a niggling detail about some utterly irrelevant matter comes to mind. It may concern the etymology of a word, or the colleague whose paper bag ripped open at a departmental meeting revealing an embarrassing magazine inside, or why caller ID misidentified a friend’s telephone number. These in turn bring to mind the next in a train of associations and musings.

Such prosaic episodes strongly suggest to me that there will never be a precise science of economics. Shopping and buying, I suspect, sometimes partake of a similar whimsicality.

I was thus fascinated by a new book by Paul Ormerod, a British economic theorist and professor who has worked for The Economist magazine. Entitled Butterfly Economics, the book faults the discipline for not sufficiently taking into account the common-sense fact that people influence each other.

People do not, as orthodox economics maintains, have a set of fixed preferences that they coolly and rationally base their economic decisions on. The assumption that people are sensitive only to price simplifies the mathematical models, but it is not true to our experience of fads, fashions and everyday “monkey-see, monkey-doism.”