Showing posts with label Stated vs Revealed Preference. Show all posts
Showing posts with label Stated vs Revealed Preference. Show all posts

Sunday, September 14, 2014

Of Behavioural Red Flags and Unfunded Campaign Promises

One of the key meta-points of the rationality crowd is that one needs to explicitly think about problem-solving, because one's intuitions will frequently be wrong. In general, sophistication about biases is crucially important - awareness of the possibility that one might be wrong, and being able to spot when this might be occurring. If you don't have that, you'll keep making the same mistakes over and over, because you won't consider that you might have screwed up last time. Instead, the world will just seem confusing or unfair, as unexpected (to you) things keep happening over and over.

For me, there are a number of red flags I have that indicate that I might be screwing something up. They're not ironclad indications of mistakes, but they're nearly always cause to consider problems more carefully.

The first red flag is time-inconsistent preferences (see here and here). When you find yourself repeatedly switching back and forth between preferring X and preferring Not X, this is usually a sign that you're screwing something up. If you go back and forth once or twice, maybe you can write that off as learning  due to new information. But if you keep changing your mind over and over, that's harder to explain. At least in my case, it's typically been due to some form of the hot-cold empathy gap - you make different decisions in cold, rational, calculating states versus hot, emotionally charged states, but in both types of state you fail to forecast how your views will predictably change when you revert back to the previous state. I struggle to think of examples of when repeatedly changing your mind back and forth over something is not in fact an indication of faulty reasoning of some form.

The second red flag is wishing for less information. This isn't always irrational - if you've only got one week to live, it might be entirely sensible to prefer to not find out that your husband or wife cheated on you 40 years ago, and just enjoy the last week in peace. (People tempted to make confessions to those on their deathbed might bear in mind that this is probably actually a selfish act, compounding what was likely an earlier selfish act). But for the most part, wishing to not find something out seems suspicious. Burying one's head in the sand is rarely the best strategy for anything, and the desire to do so seems to be connected to a form of cognitive dissonance - the ego wanting to protect the self-image, rather than admit to the possibility of a mistake. Better advice is to embrace Eugene Gendlin
What is true is already so.
Owning up to it doesn't make it worse.
Not being open about it doesn't make it go away.
And because it's true, it is what is there to be interacted with.
Anything untrue isn't there to be lived.
People can stand what is true,
for they are already enduring it.
The third red flag is persistent deviations between stated and revealed preference (see, for instance, here and here). This is what happens when you say you want X and are willing to pay for it at the current price, and X is within your budget set, and you keep not purchasing X. The stated preference for liking X is belied by the revealed preference to not actually buy it. Being in the budget set is key - if one has a stated preference for sleeping with Scarlett Johannson but is not doing so, this is unlikely to be violating any axioms of expected utility theory, whatever else it may reveal.

Conflicts between stated and revealed preference may be resolved in one of two ways. As I've discussed before, for a long time I had a persistent conflict when it came to learning Spanish. I kept saying I wanted to learn it, and would try half-heartedly with teach yourself Spanish MP3s, but would pretty soon drift off and stop doing it.

This inconsistency can be resolved one of two ways. Firstly, the stated preference could be correct, and I have a self-control problem: Spanish would actually be fun to learn, but due to laziness and procrastination I kept putting it off for more instantly gratifying things. Secondly, the revealed preference could be correct: learning Spanish isn't actually fun for me, which is why I don't persist in it, and the stated preference just means that I like the idea of learning Spanish, probably out of misguided romantic notions of what it will comprise.

Having tried and failed at least twice (see: time-inconsistent preferences), I decided that the second one was true - I actually didn't want to learn Spanish. Of course, time-inconsistency being what it is, every few years it seems like a good idea to do it, and I have to remind myself of why I gave up last time.

Being in the middle of one such bout of mental backsliding recently, I was pondering why the idea of learning another language kept holding appeal to me, even after thinking about the problem as long as I had. I think it comes from the subtle aspect of what revealed preference is, this time repeated with emphasis on the appropriate section:
when you say you want X and are willing to pay for it at the current price, and X is within your budget set, and you keep not purchasing X
Nearly everything comes down to actual willingness to pay. Sure, it would be great to know Spanish. Does that mean it is great to learn Spanish? Probably not. One thinks only of the final end state of knowledge, not of the process of sitting in the car trying to think of the appropriate Spanish phrase for whatever the nice-sounding American man is saying, and worrying if the mental distraction is increasing one's risk of accidents.

Of course, it's in the nature of human beings to resist acknowledging opportunity cost. There's got to be a way to make it work!

And it occurred to me that straight expressions of a desire to do something have a lot in common with unfunded campaign promises. I'll learn the piano! I'll start a blog! I'll read more Russian literature!

These things all take time. If your life has lots of idle hours in it, such as if you've recently been laid off, then great, you can take up new hobbies with gay abandon.

But if your week is more or less filled with stuff already, saying you want to start some new ongoing task is pointless and unwise unless you're willing to specify what you're going to give up to make it happen. There are only so many hours in the week. If you want to spend four of them learning piano, which current activities that you enjoy are you willing to forego? Two dinners with friends? Spending Saturday morning with your kid? Half a week's worth of watching TV on the couch with your boyfriend? What?

If you don't specify exactly what you're willing to give up, you're in the exact same position as politicians promising grand new spending schemes without specifying how they're going to pay for them. And this goes doubly so for ongoing commitments. Starting to listen to the first teach-yourself-Spanish MP3, without figuring out how you're going to make time for the remaining 89 in the series, is just the same as deciding you want to build a high speed rail from LA to San Francisco, and constructing a 144 mile section between Madera and Bakersfield without figuring out how, or if, you're going to be able to build the whole thing.

And like those politicians you scorn, you'll find yourself tempted to offer the same two siren-song mental justifications that get trotted out for irresponsible programs everywhere.

The first of the sirens is that you'll pay for the program by eliminating waste and duplication elsewhere. Doubt not that your life, much like the wretched DMV, is full of plenty of waste and duplication. But doubt it not as well that this waste and duplication will prove considerably harder to get rid of than you might have bargained for. If your plan for learning Spanish is 'I'll just stop wasting any time on the internet each day'... yeah, you're not going to get very far. Your system 2 desire to learn piano is like Arnie, and your desire to click on that blog is like the California Public Sector Unions - I know who my money's on. The amount of waste you can get rid of is probably not enough to fund very much activity at all. Just like in government.

The second siren is the desire to just run at a budget deficit. The area of deficit that almost always comes up is sleep. I'll just get up and hour earlier and practice the piano! Great - so are you planning to go to bed an hour earlier too? If so, we're back at square one, because something in the night's activities has to be cut. If not, do you really think that your glorious plan to switch from 8 hours a night to 7 hours a night, in perpetuity, is likely to prove feasible (absent long-term chemical assistance) or enjoyable (even with such assistance)? Every time I've tried, the answer has been a resounding 'no'. I say 'every time' advisedly, as this awful proposal manages to seem appealing again and again. You can in fact live on less sleep for extended periods - just ask parents with newborn children. It's also incredibly unpleasant to do so - just ask parents with newborn children. They'll do it because millions of years of evolutionary forces have caused them to feel such overwhelming attachment to their children that the sacrifice is worth it. And you propose to repeat the feat to learn the piano? That may seem like a great idea when you start out for the first night, fresh from a month of good sleeping. It seems like less of a good idea the next morning when your alarm goes off an hour earlier than usual. And I can assure you it almost certainly will not seem like a good idea after a month of being underslept, should you in fact get that far. Iterate forward, and don't start.

The real lesson is to only undertake things that you're actually willing to pay for. If you don't know what you're willing to give up, you don't actually know if you demand something, as opposed to merely want it. Confuse the two at your peril.

Tuesday, December 24, 2013

Infidelity as a Commitment Mechanism

I've wondered a few times on these pages about the psychology of married people who begin affairs. As I wrote at the time:
As the length of the affair increases, the probability that your wife will eventually find out converges to 1. The chances that you'll slip up somehow, or get inadvertently found out through some voicemail, missed call, something, are too high.
And when that happens, the results are as predictable as they are horrible.
So how does it make sense to start down this path, rather than go for an honorable divorce now?

It’s entirely possible that the whole thing is just overconfidence, and the people involved think they can beat the odds forever. Maybe they’re just that stupid.

But I think I’ve figured out an alternative.

What if the eventual inevitability of getting caught is the feature, not the bug?

Suppose the unfaithful partner wants to be out of the relationship, but suffers from hyperbolic discounting. Even someone who has grown bored with their partner will still find it painful to tell their husband or wife that they want a divorce. You are wrenching the heart of the person you once loved enough to declare a lifelong commitment to. You want to be free of them, but that doesn’t mean you’re not dreading the process of getting from here to there.

So what will you do if you’re a hyperbolic discounter? You’ll procrastinate. You’ll convince yourself that you’ll leave your wife next month, or next year. And somehow next year turns into this year, and it never happens.

In this view, embarking on an affair is a sign of wanting out eventually, but not having the courage to just end it then and there. The affair is thus a commitment to eventually end the marriage at some unknown point when you get discovered. It functions somewhat like the Thaler and Bernartzi ‘Save More Tomorrow’ plan, or the complaint to the police by a domestically abused woman in a  no-drop jurisdiction. It’s the ‘Divorce More Tomorrow’ plan for those without the courage to tell their husband or wife that they want to leave. 

The indefinite timeline for discovery is also a plus – a known date would cause a lot of stress as it approached, and would create the risk of massive preference reversals. The unknown aspect means in addition that the final choice is taken out of the cheater’s hands, which benefits those who want to feel like the divorce was the process of some inevitable deterioration in the relationship, rather than an active choice by them (we grew apart, things didn’t work out, the knife went in).

My guess is that when the cheater is eventually discovered in their lie, once the initial shock is overcome, the next feeling is relief. Relief that things are finally drawing to the conclusion that they’ve long wanted, but haven’t had the courage to actually ask for.

It seems a strange explanation, but I can’t think of a better one.

Monday, February 18, 2013

The Odd Psychology of Strip Clubs

(Previous thoughts on the psychology of strip clubs here, and male self-deception in relationships here and here.)

The standard complaint about strip clubs is that you're paying to not get what you actually want. In other words, you hand over however much cash to get a lap dance, and you don't actually end up sexually satisfied. Having never attempted to negotiate the transaction, I can't vouch for this, but I'm pretty damn sure that short of offering literally thousands of dollars, you won't get laid. I don't even know if that would work, certainly for many strippers in the US who explicitly see their job as distinct from prostitution. The woman won't get you off (except accidentally), and you won't even be able to touch where you want to, except on their rather limited terms.

Every conversation I've had with guys who paid for a lap dance indicated, privately, that there was little risk of matters escalating to, say, the Bill Clinton level or above.

Strangely, this fact has to be elicited from them in hushed terms - they typically don't like admitting straight out that they didn't get any immediate relief for their however-many hundred dollars. Maintaining the mystique serves the interests of both the stripper and the potentially embarrassed client. As I've said before, this isn't an accident - ambiguous expectations are at the heart of the strip club experience.

So if you believe the standard complaint, men like strip clubs but end up frustrated that they don't actually get any action.

Why is this puzzling though?

The puzzle is that if you actually wanted to get some action for sure, you could have just gone to a brothel and gotten laid with probability 1. Or gone to a bar and gotten laid with probability less than 1.

Taken at face value, it indicates some sort of market failure. Surely there should be more demand for clubs that blurred the line between strip club and brothel?

One answer that I can't rule out is that this is a legality issue - strip clubs are mostly legal, brothels are mostly illegal. In the places where prostitution is legal (e.g. parts of Nevada), I don't know that there's substantial business model innovation along the lines I describe. Maybe there is.

It could also be a quality issue - maybe the type of women who are prostitutes are of a fundamentally different group than strippers, and the male preference is distinct. I dunno though - do you really think the average guy at a strip club is that picky with who he sleeps with, provided the girl is willing? It's possible, but it seems unlikely.

On the other hand, we can pretty conclusively say that it's not a cost issue. Courtesy of Steven Levitt and Sudhir Venkatesh, here's some real-world data on how much it costs to get laid in Chicago with a prostitute:

In other words, no matter who you are, the average cost for most things you want is no more than a hundred bucks. If the average lap dance customer is paying less than this, I'll be highly surprised.

So, on face we have a puzzle - many men apparently pay a lot of money for women to take off their clothes and not sleep with them, and then complain about this afterwards. They do this despite passing up the opportunity to pay less money to get laid with certainty.

If the stated preference doesn't seem to make sense, maybe we can get further by hypothesising revealed preference and see where it takes us. The standard price theory assumption here is that the market is satisfying actual customer demand.

In other words, the fact that it's very hard to get laid at the strip club is actually the feature, not the bug. Even if men won't admit it.

The most obvious explanation for this is that men go to strip clubs in groups of friends such as bachelor parties, and in any such group there's going to be a large fraction, if not a substantial majority, for whom their commitments to wives and girlfriends mean that they actually don't want to get laid that night. If this were a possibility, then they might be tempted by hyperbolic discounting to do something they'll regret the next day (or, more likely, 5 seconds after it's done). If you've got commitment problems (in both the relationship sense and the behavioral economics sense), you want to go to the place where it's very difficult to do anything beyond looking at a distance.

Not only that, but the strong prohibition serves a useful signalling mechanism to wives and girlfriends. Consider the problem of the man who actually has no intention of doing anything untoward with random ladies that night, but who may not be able to credibly signal this to his wife. If you go to the strip club, your claim to having not done anything is credible. At a brothel, you're only there if you want to get laid. Even in my hypothetical innovative strip-brothel, the expected level of misbehaviour for an external observer is larger simply because the range of bad actions has expanded. By being easier to explain to significant others (or even just to rationalise to yourself), it means that the whole group is likely to attend, rather than the group splintering off or going for some consensus alternative.

The more interesting possibility, and one that's less discussed, is that even the people getting lap dances themselves would rather be at the strip club than at the brothel. They're not dragged away from the hookers by their more conservative friends. They actually don't want that, at least in revealed preference terms.

The standard model of male desire says that what men want is some combination of a) hot chick and b) orgasm.

Far be it for me to suggest that this model has no explanatory power. It does.

But I submit that this model of the world has difficulty explaining why lots of men go to strip clubs but not many go to brothels.

A more nuanced alternative would say that men definitely want the above things, but what they also want is to be desired by hot women. They want to conquer hot women, and feel them submit to their will. They want to feel the achievement of seduction, of power, of control.

Going to a brothel will satisfy the 'penis in vagina' aspect. But it will quite definitively not satisfy any of the other parts. Quite the contrary, in fact - it will reveal, in painful relief, how far you are from all the other things you desire about the courtship process. It will reveal you as desperate. Not to the rest of the world, who probably won't know. But to yourself, which is much worse.

In his novel, God Knows, Joesph Heller describes the situation of an aging King David. He has his various courtesans, but can no longer get aroused by them. The only woman who still holds his sexual interest is his wife, Bathsheba. But Bathsheba no longer desires him - her only interest is to try to get David to make her own son, Solomon, the next king in place of his elder son, Adonijah, whom he had with another woman.

Heller describes very aptly the paradoxical situation of the absolute monarch who, due to the difficulty of male desire, cannot have what he really wants
Abishag showed him the door and petted my heaving chest until she felt my exasperation abate. Then she washed and dried herself, perfumed her wrists and armpits, and removed her robe to stand before me a moment in all her wonderful virginal nakedness before raising a leg gracefully to enter my bed on one of her biscuit-brown knees to lie down with me again. Naturally, it did no good. I got no heat then, either. I wanted my wife. I want my wife now. Bathsheba does not believe this and would not let it make a difference if she did.
“I don’t do things like that anymore,” Bathsheba responds firmly each time I ask, and, if out of sorts, adds, “I am sick of love.”
She lost her lust when she found her vocations. Her first was to be a queen. Too bad that we had no queens. The next was to be a queen mother, the first in our history, the widowed mother of a reigning sovereign. I refused to trade and I refused to grovel. I could order her into my bed with a single cursory command, of course, and she certainly would be here. But it would be begging, wouldn't it? I am David the king, and I must try not to beg. But God knows that, by one means or another, I am going to lie with her at least one more time before I give up the ghost and bring my fantastic story to an end.
Worldly absolute power does not, alas, extend to making other people actually want you on the terms that you would like.

Being the absolute monarch of the commercial transaction is no different. Paying is begging through the medium of money. The problem is otherwise the same. 

In Heller's tale, David never does get Bathsheba to sleep with him. All the courtesans of the world, no matter how beautiful, are hollow in the end.
Abishag my angel has risen from her chair and approaches without noise, wearing only a vivid scarf. Her eyes are dark as the tents of Kedar. I want my God back; and they send me a girl.
Or as the band Gomez put it:
The things that are given, not won, are the things that you want.

Tuesday, October 9, 2012

The Cruelty of Small Zoo Cages


If you're at the zoo with educated types, a frequent complaint you'll hear is about the cruelty of keeping these animals in small enclosures. Look at them! They look so miserable and idle. It's like living your whole life in prison, or in a mental institution. Why don't they put them in a proper-sized enclosure?

For starters, these people rarely tend to list the other side of the ledger than comes from this captivity - lots of animals, primates in particular, tend to live considerably longer in captivity than in the wild, for much the same reasons that you and I live longer in modern society than we would in the wilds of Borneo.

Still, let's take the complaint at face value, and ask the question that the bleeding hearts never seem to get around to asking - why don't  they put the animals in larger enclosures?

The simplest answer is cost - double the size of the enclosures and you'll need roughly double the land area to hold the zoo. That means that either the admission cost is going to have to go up, or the zoo will have to be located miles away where land is cheap. Are you willing to pay either of these costs? Probably not.

But I think there's an even more pervasive reason why the enclosures have to be small - humans insist on being able to see the animals close up.

The chimpanzees sure aren't getting any bigger. If you put them in a huge enclosure, then you're more likely to only see them at a distance, or not at all. Not nearly as exciting that way, is it? At a minimum, if you have a really large area, like the wildlife parks or safaris, you need to be able to enter the enclosure to find the animals yourself. It's not hard to see why this model doesn't scale very well if you want to have thousands of people passing through each day, because the potential for accidents becomes enormous. There's a reason they're called "wild animals" - chimpanzees might look cute, but they'll rip your face off.

What people actually want is for the animals to live in a huge natural enclosure, but also to be magically walking by really close at exactly the moment that the person is ready to see them. No such enclosure exists. 

Viewed in this light, all the complaints about small cages are just so many crocodile tears, designed to assuage the guilty feelings that visitors feel knowing that they're benefiting from the animal's captivity.

As always, don't be surprised when the zoos cater to your revealed preference for small cages rather than your stated preference for large cages. They won't even mind if you complain about the small cages as you demand their existence, to make your conscience feel better. Very few businesses ever do.