Can Georgists Use Psychology
to Achieve a Broader Impact?

Edward J. Dodson

[Reprinted from Equal Rights, Summer 2005]

HGFA trustee John Kromkowski recently suggested it might be worthwhile to reprint an interview in the Gallup Management Journal with Professor Daniel Kahneman, Professor of Psychology and Public Affairs at Princeton University and winner of the 2002 Nobel Prize in economics. Professor Kahneman is a vocal critique of economic theory based on "rational-agent" assertions. He essentially discounts the existence of what economists have for much of last century referred to as "economic man."

The insights Professor Kahneman provides do not seem to me to be of much value to those of us who see the need for significant restructuring of socio-political arrangements and institutions. His focus is on improvement of the decision-making process by individuals, whether they are acting as organization leaders or consumers.

Henry George's observation about us is that we seek to satisfy our desires with the least exertion; and, to that end we often attempt to monopolize natural opportunities. Professor Kahneman makes a very different observation:

"What is true about people is that they hate losing. They're much more sensitive to what they might lose than to what they might gain. So we say that people are loss-averse, not risk-averse. …I think that people evaluate gains and losses relative to some reference point and put more weight on the loss, not the gains."

In his autobiographical essay upon acceptance of the Nobel Prize, he expanded on the importance of this insight:

"The concept of loss aversion was, I believe, our most useful contribution to the study of decision making. The asymmetry between gains and losses solves quite a few puzzles, including the widely noted and economically irrational distinction that people draw between opportunity costs and 'real' losses. Loss aversion also helps explain why real-estate markets dry up for long periods when prices are down, and it contributes to the explanation of a widespread bias favoring the status quo in decision making. Finally, the asymmetric consideration of gains and losses extends to the domain of moral intuitions, in which imposing losses and failing to share gains are evaluated quite differently."

His attempt at interdisciplinary collaboration with economists is described as something of a campaign at the fringe. A number of economists, mostly young and unsatisfied with existing theoretical constructs, warmed to his approach and the result of his research and experiments. Along the way he came to a deep appreciation for the need to change the way social scientists have interacted (or failed to do so):

"One line of work that I hope may become influential is the development of a procedure of adversarial collaboration, which I have championed as a substitute for the format of critique-reply-rejoinder in which debates are currently conducted in the social sciences.1 Both as a participant and as a reader I have been appalled by the absurdly adversarial nature of these exchanges, in which hardly anyone ever admits an error or acknowledges learning anything from the other. Adversarial collaboration involves a good-faith effort to conduct debates by carrying out joint research - in some cases there may be a need for an agreed arbiter to lead the project and collect the data. Because there is no expectation of the contestants reaching complete agreement at the end of the exercise, adversarial collaborations will usually lead to an unusual type of joint publication, in which disagreements are laid out as part of a jointly authored paper."

So, what is the message for us? Are there strategies in Professor Kahneman's work that we can utilize to attract people to our small community? Will a better understanding of how people make decisions help us achieve changes in public policy?

I have not made any serious attempt to study Professor Kahneman's research. Perhaps an Equal Rights reader with an interest and some discretionary time available can take on this challenge and report back to the rest of us.