Econs, Mecons & Wecons: We’re All In This Together

The field of behavioral economics has been given relatively scant attention in the vast coverage of the global financial crisis.  There’s a news item here and there, an occasional informative blog thread on some psychological aspects of financial decision-making, but there hasn’t been much about such things as how technology might help an ordinary person make an informed decision when faced with complex mortgage documents, how people make economic choices under conditions of scarcity or poverty, psychological aspects of doing business in the world of Web 2.0, or the origins of behavioral economics.  I’m not a behavioral economist - I’m just a lawyer with a bias that law and policy should be informed by behavioral science research when possible - but I believe the field can help us all step back from the chaos in reflective moments, and begin to set an empirically and theoretically grounded course into uncharted waters.

Starting simply - as I am inclined to do when faced with new complexity - one of the founders of behavioral economics, Richard Thaler, makes a fundamental distinction between Econs and Humans.   Econs are economic agents in standard economic models who always choose rationally, but Humans make choices with bounded rationality, bounded willpower, and bounded selfishness.  Econs, he says, are like Mr. Spock, and Humans are like Homer Simpson.  I have found a slight extension of this distinction to be helpful in navigating the shallows of the sea change in global economics, a distinction between two hypothetical types of human - Mecons and Wecons.  In this heuristic, a Mecon is a human motivated primarily by economic self-interest; a Wecon is a human moved by a consciousness that we are all in this together.  If an Econ is Mr. Spock, then a Mecon is Mr. Scrooge before the spirits visited, and a Wecon is Mr. Scrooge the morning after.

It may be convenient, in these early days of the transformation of global economic consciousness, to place blame and search for saviors.  It would be easy to characterize unregulated free market capitalists who put Alan Greenspan in a “state of shocked disbelief,” or fee-inspired mortgage brokers who put people into homes they couldn’t afford, as pure Mecons, and to characterize proponents of various alternatives to free market capitalism, or the emerging Generation G, as pure Wecons. But no human is pure Mecon or Wecon, just as no human is pure Econ.   Some capitalist entrepreneurs have long considered corporate profits a means to social ends, many investors routinely integrate social and environmental priorities with economic concerns in their investment decisions, many international corporations were implementing policies and practices of corporate social responsibility, protection of economic, social, environmental and cultural rights, long before the current crisis, and most who worked in the financial industry did not cause the meltdown.  Certainly, eligible Mecons should be brought to justice, drunken money changers may need support groups to sober up now that the party’s over, and some may become more contrite, spiritual, and philanthropic.  Most importantly, the millions who lose jobs, homes, and faith in themselves or their society will need help facing the potentially overwhelming circumstances that now challenge humanity.

All that has happened, and all that is yet to come, raise multitudes of empirical questions.   We face more than an economic crisis - we face a psycho-socio-political-economic-ecologic-legal crisis of unprecedented proportions.  Stated more optimistically, we face an unprecedented opportunity to transform humanity’s relationship to itself and the planet in all of these arenas.  Systematic empirical research into the human dimensions of causes and possible solutions to the crisis/transformation will serve us well.  It is no longer a political question whether law and policy should be informed by scientific research.  The White House has re-opened the doors of government to science, the Chief Economic Advisor to the President is a behavioral economist, and “We the People” - we Econs, Mecons and Wecons who are all in this together - deserve no less than economic law and policy informed by behavioral science.