Cognitive Biases and Workfare

That last post got me thinking about cognitive biases. Being in contact with the unemployed  makes you more miserable than otherwise, but not because it actually increases your chances of unemployment – it isn’t contagious. So people’s change in behaviour or happiness must be a result of new information or old information which they were previously choosing to ignore.

While Chris (and Layard) are correct, workfare or active labour market polices can be good things, the positive effects – lower inflation and higher growth – are diffuse and the negative effects felt by both those in workfare and who meet those in workfare. So it is possible that seeing what unemployment is really like, and the exploitative practices associated with workfare is new information for some people.

Alternatively, people choose to know less about unemployment than they could and unconsciously engage various cognitive biases to effect this. To this extent cognitive biases protect most people from the negative effects of unemployment.

This means that theoretically the left should welcome workfare, for it finally destroys the recent idea, codified by Thomas Friedman, that we need to build our own economy and that we can be in control of Brand Me. Thinking an individual is responsible for their own economy and economic position is fanciful. Just as blaming the unemployed for their plight is a variant of the fundamental attribution error so too is entrepreneurial fetishism. Calculus was invented twice at the same time; someone was going to invent a pretty mp3 player eventually; somebody was going to get social networking right, some ideas are just in the air. That doesn’t mean it doesn’t make sense to handsomely reward entrepreneurs, because it means we get a more pregnant air from which they pluck ideas, but it does mean we shouldn’t attribute too much genius or control to any one person or group.

That is standard fair on the left, waking up the sheeple…

…so it should be some consolation that workfare will work to either let the employed know how horrible being jobless really is, or will breakdown whatever protective cognitive barriers they’ve erected to protect themselves from those grim truths.

Cognitive biases can lead to sloppy policy so inasmuch as they protect individuals by imposing costs on others they are good things to eliminate but it has to be remembered that they do something useful by protecting people from unpleasant truths. So finding policies that break through them will not be unambiguously good but I hope they will eventually be good.


My solution to all my problems: PRetirement

So, this got me thinking of an old favourite idea of mine.

I’m going to have to wait until I’m 25 to graduate from this Masters course, then I’ll probably be 28 or so by the time I’ve paid off my immediate, could-bankrupt-me, debt, by which point I should be comfortably, competitively placed in a career. When am I going to explore the world, start a business or do some volunteering?

When I’m old? Pffft, won’t be nearly as fun!

So what I propose is that we get rid or Retirement and from the ages of 18 to 30 we pay people the median wage to do with as they please. Travel the world, start a business, study non-stop, run for office, sleep all day, whatever. Then you hit 30 and work until you die, apart from holidays of course. We’d call it pretirement, geddit?

There are obvious logistical problems.

One would be a sharp spike in suicides around 30, another would be people finding they are utterly unable to adapt to working life (but if we can create nice little workers in school then we can do it to 30 year olds), there would also be more violence as young men are wont to fight, but aside from that it’d be brilliant.

Who’d sign up?