Economics & Rationality
Hype HERE - Are actors really rational? According to economists of the neoclassical school, yes. But their perceptios of human behavior may be antiquated as the name (classical) implies. People go across town to save $10 on a clock radio but not to save $10 on a large-screen TV. Richard Thaler, our speaker at the Ath tomorrow, highlights this society wide irrationality. I think it has been given for a very long time that people are irrational. But what Thaler highlights is that people are not irrational in an everyday sense; people go to the supermarkets and choose lower priced products; people choose efficient routes on an everyday basis. Classical theory holds that if your irrational, and don't act in your best interest, you will be corrected by the market and learn from your mistakes. Thaler's response is that the most important decisions we make in our lives are without a market check-and-balance since we don't really have the opportunity to repeat the decision and therfore habituate a "rational response." How many times do people get married in life - love is irrational for most and rational for few. According to the "classical" theory, people who irrationally fall in love and get married, and then divorce, are likely to learn from their mistakes and remarry more responsibly and rationally next time guaranteeing a more efficient (or succesful) outcome. How does this theory explain that most of the divorces in our country are concentrated in a group of people who repeatedly get divorced over and over again. Yes you can argue that the more often you get divorced, the more likely you are willing to do it again - there are lower psychological barriers to entry and less information costs in finding a marriage lawyer (since you probably retained one from the previous marriage) and also a greater likelihood you learned from your past marriage and now have a pre-nup therefore lowering the costs for your next divorce. But if you learned from your mistakes, shouldn't you narrow your rational preferences for a partner the second time and guarantee a greater success to marriage? Here is my question to all you wannabe intellectuals: What can make marriage markets more efficient?
posted by Dollars and $ense at 2:19 AM |
2 comments
2 Comments:
The question, "How do marriage markets become more rational?" The Answer: Marriage seems to be all about the people involved. There are many studies that show that your economic status and how well you "work with" a person determines the outcome of your wedding. Because economic structure and income is not something that can be readily changed, this leaves one option. Changing yourself. The marriage did not work because you did not work. After a long relationship, it is easy to be angry and it is easy to say that the other person messed up. If you call a failed marriage "a market inefficiency" then that inefficiency comes from the simple fact that you did not find the right person, or you are not the right person. Fixing this inefficiency lies in knowing yourself and knowing what you work with and what you do not work with. Certain people attract certain types of people. If things don't work out, maybe it's just you (figuratively speaking). The person themselves are the inefficiency. There are a lot of other factors that can actually play into these inefficiencies in a marriage. Economies and the success or failure of a business can come from timing. Timing too applies to people and marriages. There are many of these factors that can influence the success rate of a marriage. On the other hand, maybe marriages are failing because people are looking at it too much from an economic standpoint, rather than looking at it from a spiritual union with the person you love and decided you cannot live life without (nudge-nudge).
October 7, 2004 at 3:02 AM
Thank you for your kind words Steve-K. By them I can understand that I truly cannot live without you - I miss my roomate MAN!!! I agree wholeheartedly that repeat divorces may be attributed to people failing to change themselves. Marriage is a contract, but unfortunatelly one you can renege on. When people sign into a contract, and their incentive to uphold the contract is no longer there (I signed a deal to sell oil at $50 a barrel for the next 5 years and 2 years in the market price is $100), assuming enforceable contracts, people adjust themselves to the commitment they have made (or file for bankruptcy). Assuming bankruptcy isn't a viable option (emotional bankruptcy?), one can ask how can you make marriage contracts more enforceable. In my opinion, if you look to Eastern culture (where divorce rates are much lower), stronger communal and family ties reinforce the contract. So the question is, how can you make marriage contracts more enforceable? Here is an applied solution: In America, the strongest guarantee of finding a long lasting partner is to live in a city (where information and search costs for the perfect mate are lower due to the overwhelming proximity of potential partners) and to move out to the suburbs (or Palestine, TX) once that partner was found, therefore minimizing the opportunistic behavior to cheat because of fewer potential cheating mates. In these suburbs you will also enjoy a closer proximity to your family or other families reinforcing a sound family model and therefore raising the real social costs of outcast and upheaveal that accompanies getting a divorce (which are minimised after getting your first divorce, by the way). Marriage counselors anyone?
October 7, 2004 at 12:29 PM
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