Economics in Action

I’m at the Institute for Humane Studies’s Journalism & a Free Society seminar this week at Bryn Mawr college.  So instead of writing about the news, I think I’ll comment on some lectures.

Today we had our first economics lecture by Nikolai Wenzel, an assistant professor of economics at Hillsdale College.  He talked a bit about economics, but most of the class was spent doing “the trade game.”  Professor Wenzel distributed brown bags, containing an item from a dollar store, to everyone at the lecture.  After we peeked into our bags, he had us rate our item from 1-5 (mine was a set of motivational stickers – Good job! #1! etc. – which I gave a 3).  In Round 2, he had us take our items out of the bag, look around at everyone’s else’s stuff, and then rate our items again (I then gave mine a 2, seeing better items ranging from calculators to candy to post-it notes).  In Round 3, we were allowed to engage in trade with the people sitting to our left and right (I declined to trade for an Eeyore figurine, and my other neighbor wasn’t interested in giving up his balloons; my stickers remained at a 2).  In Round 4, we were allowed to trade with anyone in the room, and I traded my stickers for those little umbrellas you put in fruity drinks, rating them a 3.

Throughout, Professor Wenzel calculated the total value of all the goods in the room as rated by their owners.  From Round 1 to Round 4, the value went up by about 50 points.  The conclusions?

- The subjective value of a particular product can differ among people.
– Freer trade (e.g., trading with everyone vs. just neighbors) increases “happiness” or subjective value.
– Trading also provides us with information (e.g., seeing other products out there, or seeing how your product fares in the market, may change its subjective value).
– Trading stimulates communication and friendship.

If we’re ever to convince people of our viewpoints, I think this is a great way to do it.  Another lecturer yesterday, blogger Megan McArdle, spoke about the importance of intellectual honesty – recognizing the downsides to your own argument, rationally engaging with the other side, and fighting confirmation bias (which makes us seek out evidence that supports our hypotheses and ignore evidence that doesn’t).  This is vitally important but difficult for many people, myself included.  And many other people simply refuse to engage with their opponents, viewing them with instinctive hostility rather than, as McArdle suggested, assuming that they may have something interesting to contribute (I’m thinking here of many cable news shows).  So things like “the trade game” – which actually allow us to see the consequences of our principles in action – are extremely valuable.

Plus, I scored a pack of 18 colorful little umbrellas – anyone want to trade?