Tuesday, August 31, 2010

Assuming People Are Stupid

I often hear conservatives accuse liberals of thinking average people are stupid. I don't think the accusation is very fair, but I will repeat my statement that most progressive analysis and proposals on financial issues start with the idea that people are stupid.

Here's Matt Yglesias on Social Security Private accounts:
This is not an idea I’m enthusiastic about. A large body of research indicates that individuals are not well-equipped to engage in speculative investments, and experience teaches that financial managers are moderately well-equipped to duping people into paying management fees.

Now, one could say that Matt isn't saying he thinks people are stupid. No, he's saying a large body of research indicates that people are in fact stupid, but he's still saying people are stupid. Likewise, a key part of Elizabeth Warren's working assumptions seems to be people are stupid. To be honest, FLG admits there may be some truth to this argument when it comes to financial affairs.

The problem is that a similar sentiment exists in the "people cling to guns and religion" argument as well. I don't want to take that too far. In any case, one ought to be careful when one's primary assumption when governing or regulating appears to be that the average person is stupid.


Anonymous said...

NR used to have a writer eons ago - Dave Schifflet (sp?) married to Lisa. Anyhoo, he wrote this piece that was absolutely hysterical. He was working in some government safety gig that kept and proposed (the propsed bit is key) statistics on how many Americans were likely to die every year on the highway, on a plane, using a microwave, crossing train tracks, pushing a shopping cart in a lightning storm, flossing their teeth during a power outage and just about any other way an American could think of dying. All these numbers were used for developing government safety guidelines. Schifflet wrote at first he began developing a rash just thinking about all these upcoming deaths. Then he started drinking more, thinking about these deaths, trying to cope from the fear of all these ways Americans were going to die. Then the drinking more got the rash more irritated and he was just basically a ball of nerves.

Then he realized that most Americans were too stupid to take their hat off and have it drop to the floor. Not all these Americans were going to die these predicted deaths.

After that great realization he enjoyed going to work again. Then after a while he realized he hated working for the government and quit.

Mrs. P

The Ancient said...

To be honest, FLG admits there may be some truth to this argument when it comes to financial affairs.

Penny stocks?

Day traders?

People who take financial advice from G. Gordon Liddy?

Or Jim Cramer?

Is it so much that liberals think people are stupid (though many do, to be sure) or that liberals believe that all people, smart and stupid alike, need to be protected from predatory individuals and/or institutions?

Mrs. P --

You'd be surprised how much public policy has a death-count background. (Building codes, for example, all assume an "acceptable" death rate due to fires, etc.)

FLG said...

The Ancient:

All of the above and also people who shift their 401ks to the mutual funds that did best last years.

Also, doesn't a predator require a stupid prey? I mean, assuming they follow other laws about transparency and all, which I am generally in favor of.

arethusa said...

If I'm going to be honest, I find it easier to deal with people if I assume beforehand that they are stupid. But this is not related to ideology. It's more like a lifestyle.

The Ancient said...

doesn't a predator require a stupid prey?

Well, it depends on what you mean by "stupid," doesn't it?

If "stupid" is sufficiently inclusive to include naive, neglectful, distracted, foolish, greedy, confused, weak, damaged, etc., well then "stupid" works just fine.

Beyond that, there's the matter of "predator." In the financial world, just what do you think separates predator from prey? (I assume it's something more than net results, or winners and losers.)

[I wrote a long, better response last night, but it was gobbled up somewhere in the posting.]

FLG said...

The Ancient:

I can kind of see it both ways.

But something like this post explains my concerns. Apparently, in the minds of many on the left, free checking is bait and switch and late fees are a predatory practices.

The Ancient said...

I tend to think that the whole business of bank "fees" has gotten way out of hand and needs to be radically simplified. Why? Because it's deliberately complicated. There's an obvious effort at obfuscation, and that's wrong.

I don't mind banks making boatloads of money, and I don't think they should be compelled to carry money-losing accounts. (Well, not many, anyway.) But there has to be some simpler way to keep their basic services profitable. A checking account shouldn't be festooned with a Christmas tree's worth of fees, hidden or not.

P.S. FLG -- There are millions of people, like you and me, who know enough to protect ourselves. But it's a very big country, and many more people lack the education or language skills to understand what's being put in front of them. What do we say to them? (Even someone as profoundly reactionary as myself shrinks from saying tant pis.)

FLG said...

There's a middle ground between saying tant pis and saying that credit card late fees are some sort of sinister plot to dupe consumers.

The Ancient said...


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