My young prodigies have all flown the coop…happy to move on with your A’s and B’s, bubbling with the self-satisfaction of having learned all you’re required to know about economics (or just plain happy you didn’t fail). As you enjoy a late New England spring before beginning unpaid internships in exotic locations like Framingham, I couldn’t help but draw you back into the fold for an important twilight lesson in economics 101. Or maybe we should call this economics 102, since you have all successfully completed the first phase of neoclassical indoctrination.
The lesson for today is love, sweet love! So hypnotically appealing, flush with irrational exuberance, love tips the fulcrum of neoclassical behavior to the dark side. As I write this, I’m reminded of the perennial Disney favorite, Bambi. Young Bambi and his pals Flower and Thumper make a pact to stick together, no doubt an old skool version of ‘bros before hos.’ Yet they fall like dominoes, ‘twitterpated’ to the sound of an annoying little songbird and the on screen appearance of a single hotty of their species. They don’t even bother to shop around before ditching their playmates! Now of course in the movie, they all have cute little babies to show for their excellent mate choices. But what’s to say that Miss Bunny doesn’t turn into a certifiable ‘bunny boiler’ in Bambi II (to get that reference, fast forward to Fatal Attraction).
Herein starts our twilight lesson… Economics is all about human behavior. We theorize about what people will do using a set of very important axioms. We need these basic assumptions so that we can tuck your behavior neatly into a little black box and say, ‘I predict you will do this’. We’ve already provided some examples on this blog…What will you do when I tax your Cheetos? or What will you do when I steal your bottled water? or How can we incentivize people towards better manners? The answers to all of these questions hinge on our ability to accurately predict human behavior.
So what makes love so different? Your behavior under the intense weight of twitterpation is 1) irrational, and 2) made with imperfect information. I will hold today’s lesson in market failure to these two neoclassical assumptions, although we could certainly use the love gun to blow holes in many others. Regarding the first, rationality assumes that you are able and willing to make the decision that is in your own best interest. Given that half of all marriages in the US end in divorce, I’m going to go out on a limb and say we aren’t very good at rationally selecting a mate. Part of this problem is certainly due to broken assumption #2. Everyone has an incentive to put their best foot forward to find a mate, and to hide their less desirable qualities. Kind of like a love toupee of sorts, except less obvious. In economics we call this asymmetric information…there’s a divergence between the information you have about someone and what you really need to know before you ‘make that purchase’. If you want to take it to the extreme, the only neoclassical conforming part of love is the breakup, because only then do you have the information you need to make an informed and rational decision.
So the old adage is true…people do crazy things for love. My socialist leaning students (of which there are many!) will be happy to know that your predictably unpredictable behavior flies in the face of neoclassical theory. Maybe your Solidarity Economics or New Economy theories have a better explanation, or maybe not. But coming from someone who has written enough love poems to qualify for a Master of Fine Arts, I will join you in accepting the fact that economic theory has its limitations. Love is blind, so feel free to keep rockin your rose colored glasses.