Self-Correction in Markets and Politics

We can’t stop our minds from jumping to conclusions.  If we smell smoke, we jump to the conclusion, “Fire.”  If metal glitters, we jump to the conclusion, “Gold.”  If a person smiles at us, we jump to the conclusion, “Friend.” 

The main way humans attain accuracy isn’t by changing our impulsive cognitive natures, but by practicing self-correction.  Even though we intellectually leap before we look, we can still train ourselves to look after we leap, then leap backwards if appropriate.  Perhaps we see smoke because a fire was recently extinguished.  Perhaps the glittering metal is stainless steel.  Perhaps the smiling person just wants to borrow some money.

You might think that self-correction primarily belongs to the cognitive elite.  But it doesn’t.  Eavesdrop at a grocery store, or strike up a conversation with a random person about his cell phone plan.  You’ll witness a barrage of self-correction.  Like:

“This store seems to charge more for milk, but if you bring your bonus card, it’s actually cheaper.”

“These cookies seem like a better deal, but the box is actually a little smaller, so you don’t really save any money.”

“You save a bundle at CostCo, unless you’re buying perishables and have a small family.”

“That cell phone network has better reception around campus, but terrible customer service.”

Even sentences like: “The BMW is a great car, but it’s insanely expensive” exhibit self-correction.  The fine German engineering makes people drool, but they still hasten to admit that fine German engineering doesn’t come cheap.

What prompts even unsophisticated consumers to practice self-correction?  The reason is pretty obvious: In markets, self-correction saves the self-corrector money, quality, time, and/or convenience.   If you don’t self-correct, you get burned.  Badly.  And often.

The opposite holds in politics.  Few voters exhibit even rudimentary self-correction.  Voters rarely say things like:

“The minimum wage hurts low-skilled employment, but the disemployment effect is small relative to the wage gain.”

“Tariffs are a very inefficient form of social insurance, but at least they’re politically feasible.”

“Immigration restrictions are awful for absolutely poor people in the Third World, but I don’t care about them.”

“Giving everyone the ‘best health care in the world’ sounds inspiring, but it would be insanely expensive.”

“Means-tested Social Security and Medicare may be a little unfair, but we’d save a lot of money without noticeably increasing senior poverty.”

“Getting tough on Iran could easily end in disaster, but it’s worth the risk.”

Instead, the typical voter just repeats insipid slogans, bereft of trade-offs, downsides, or reservations. 

The reason, again, is pretty obvious: In politics, self-correction doesn’t save the self-corrector a dime.  Voters who self-correct live under the exactly same policies as voters who don’t self-correct.  The result is a dire shortage of self-correction – and reliably ridiculous policies no matter who wins.

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