DE GUSTIBUS NON EST DISPUTANDUM?
In 1977, in a famous piece titled “De Gustibus Non Est Disputandum” (usually translated as “There Is No Accounting for Tastes”), Gary Becker and George Stigler, Nobel Prize winners and founders of the Chicago school of economics, made an influential case for why economists should avoid getting entangled in trying to understand what lies behind preferences.2
Preferences are part of who we are, Becker and Stigler argued.
If, after we go over all the information we have, two of us still disagree on whether vanilla is better than chocolate or polar bears are worth saving, the presumption ought to be this is something intrinsic to who we each are. Not a whim or a mistake or a response to social pressures, but a considered judgment reflecting what we value. While they recognized that this is surely not always true, they argued that it is still the best place to start when we set out to understand why people do what they do.We have some sympathy for the idea that people’s choices are coherent, in the sense of being thought out rather than a collection of random acts of whimsy. It is both patronizing and wrong-headed, in our view, to assume people must have screwed up just because we might have behaved differently. And yet society routinely overrules people’s choices, especially if they are poor, supposedly for their own good, for instance when we give them food or food stamps rather than cash. We justify this on the grounds we know better what they really need. To partially combat this attitude—only partially, because we don’t deny there are many misjudgments in the world—in our book Poor Economics we took some pain to argue that the choices of the poor often make more sense than we give them credit for.3 For example, we told the story of a man in Morocco. After he made a compelling case that he and his family really did not have enough to eat, he showed us his largish television with a satellite connection.
We might have suspected the television was just an impulse purchase he had subsequently regretted. But that was not at all what he said. “Television is more important than food,” he told us. His insistence made us ask how this could make sense, and once we went down that road it was not that hard to see what was behind this preference. There was not much to do in the village, and given he was not planning to emigrate, it was not clear that better nutrition would buy him much more than a fuller stomach; he was already strong enough to do the little work that was available. What the television delivered was relief from the endemic problem of boredom, in these remote villages where there was often not even a tea stall to relieve the monotony of daily life.The Moroccan did very much insist his preference made sense. Now that he had the television, any more money, he told us several times, would go to buying more food. This is entirely consistent with his view that televisions serve a greater need than food. But it flies in the face of most people’s instincts and many of the standard formulations in economics. Given that he bought a television when there was not enough food in the house, the presumption would be that any extra money in his hands would go even faster down some drain, since he evidently was the sort of person given to irrational impulses. This is at the base of the case against giving money to poor people. And yet, a number of recent studies from across the world, published after we made the case in Poor Economics that he knew what he was doing, have found that when randomly selected very poor people get some extra cash from government programs, they do spend a very large fraction of this extra money on food.4 Maybe after they buy that TV, exactly as the Moroccan man had promised.
So we learned something by being willing to suspend our disbelief and trust that people know what they want. Becker and Stigler however want us to go a step further—to assume preferences are stable, in the sense they are not influenced by whatever is going on around us.
Neither schools, nor the exhortations of parents or preachers, nor the stuff we read on billboards or on our many screens, in this view, change our true preferences. This rules out conforming to social norms and being influenced by one’s peers, like getting a tattoo because everyone else has one, wearing a headscarf because it is expected of one, buying a flashy car because the neighbors have one, and so on.Becker and Stigler were too good as social scientists not to realize this was not always the case. But they believed it was more useful to ponder why a particular seemingly irrational choice might actually make sense, rather than to close our minds to its potential logic and attribute it to some form of collective hysteria. This view was enormously influential; many, perhaps most, economists bought into this agenda of sticking to what have come to be known as standard preferences, meaning preferences that are coherent and stable. For instance, many years ago Abhijit was living in Manhattan and teaching at Princeton, and thus often found himself on a train. He noticed people often formed lines at specific places on the platform to wait for their train, but as often as not, the front of the line would be nowhere near a door to the train. It was a fad.
A natural conclusion might have been that people just went with the flow because they preferred doing the same as everyone else. This would have violated the idea that preferences are stable, because their preference for one place on the platform over another depended on how many people were there. To explain why people join fads without simply assuming they happen to like behaving like everyone else, Abhijit constructed the following argument. Suppose people suspect that others know something (perhaps the train door will open at a particular spot). They would then join the crowd (perhaps at the cost of ignoring their own information that the train is likely to stop somewhere else). But that would make the crowd bigger, and so the next person coming along would see an even bigger crowd and be even more likely to think this conveyed useful information.
They might also join the crowd, for the same reason. In other words, what looks like conformity could be the outcome of rational decision making by many individuals with no interest in conforming, but who believe others might have better information than they. He called it a “simple model of herd behavior.”5The fact that each individual decision is rational does not make the outcome desirable. Herd behavior generates informational cascades: the information on which the first people base their decision will have an outsized influence on what all the others believe. A recent experiment nicely demonstrates the power of random first moves to generate cascades.6 Researchers worked with a website that aggregates advice on restaurants and other services. Users post comments, and other users add an up- or down-vote. In their experiment, the website randomly chose a small fraction of comments and gave them one artificial up-vote as soon as they were posted. They also randomly chose another small batch to get a down-vote. The positive up-vote significantly increased the probability that the next user also gave an up-vote, by 32 percent. After five months, the comments that had received one single artificial up-vote at the beginning were much more likely to get a top grade than those that got a single down-vote. The influence of that original nudge persisted and grew, despite the fact that the posts had been viewed a million times.
Fads, therefore, are not necessarily inconsistent with the paradigm of standard preferences. Even when our preferences do not directly depend on what other people do, the behavior of others can convey a signal that alters our beliefs and our behavior. In the absence of a strong reason to believe otherwise, I might infer from other people’s actions that a tattoo does look good, that drinking banana juice will make me slim, and that this harmless-looking Mexican man is really a rapist at heart.
But how can we explain that people will sometimes do things they know not to be in their immediate self-interest (for example, getting a tattoo they find ugly or lynching a Muslim man at the risk of being arrested) just because their friends do it?