Thursday, June 4, 2009

One Slice

. Thursday, June 4, 2009

Let me try to clarify my position by highlighting where it is that we differ. For those growing weary of this thread, I post some music .

You write:
3. ... the way I look at the concept of "bounded rationality" is as a heuristic device to measure people as they actually are rather than as automatons. In other words, nobody is perfectly rational but we all operate as if we think we are. Under that condition, people can seek new knowledge, biased people can seek to become less biased and improve their decision-making abilities over time, and "incomplete information" does not have to be equal to "private information". Remember "rational ignorance"?

If I interpret this paragraph correctly, you believe the information shortcomings that sometimes plague decision making are remediable. In contrast, I believe that they are not remediable. And to be clear, by being remediable I don't mean is it possible for one to imagine ways to make these problems disappear. I mean, do individuals have incentive to behave differently so that the problems cease to prevent good outcomes? My view differs from yours, then because I think the "policy relevance question" focuses not on can people seek more information (of course they can), but on will they seek more information? Here I believe our models tell us they will not.

Take rational ignorance: a situation in which people forgo collecting information that could produce better decisions because the cost of acquiring the info is greater than the expected benefit the info provides. My point isn't that more information isn't available, nor that decisions could not profit from its incorporation. My point is that people have no incentive to acquire it; that's what it means to be rationally ignorant. Remedying this information problem thus requires people with no incentive to collect more information to actually collect more information. I don't know why one would think that they would do so. I believe that what applies in this case applies more generally: if info problems emerge from the incentives that individuals face, then these individuals have no incentive to do the things necessary to remedy the information problem.

This is why I don't know how to understand the claim that IR scholars can help mitigate information problems. If information is important in the ways our theories suggest, then gaining policy relevance by providing information implies that IR scholars somehow can make policy makers do things they have no incentive to do. In other cases (information asymmetries) it requires us to provide information we cannot possibly possess. I agree that if we could in fact do these things that would be neat. But, I don't see how we can do these things.


Kindred Winecoff said...

I'm happy to leave it at that. For the most part I don't disagree with you. I just think you are over-stating the case by a good bit.

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