An Economist’s Guide To Big Decisions - Russ Roberts

These decisions about whether to marry, who to marry, whether to have children, where to live, career, what kind of a friend to be, these are decisions that capture who we are. They're much more than just the sum of everyday pleasure and pain that accumulate through the course of living. And if I only take that perspective, I'm gonna miss out on the overarching things that I think matter, dignity, self-respect, living the way one should live, aspiring, becoming the person you want to become. I think if you only focus on the narrow pleasures and pains, you'll miss out on, on some of these bigger things. (wind blows)

As an economist, how do they typically assess decision-making in humans? What's the framework that an economist looks at decisions through?

Well, the framework is one that I've often advocated for in my youth when I was less wise, I suppose. But this, it's a pretty, uh, standard framework and it makes a lot of sense. It's that you have a finite amount of money, you have a finite amount of time, and you have infinite wants. You have all the stuff that you enjoy and you'd like more of everything, but you can't have all you want. Can't always get what you want. And that's because you don't have an infinite amount of money. So the goal of life is to get the most out of it. And the way we do that is we, we balance off the pleasure we get from this good versus the pleasure we get from that good, and we pick how much we wanna consume of these goods and services based on our limited resources. And it's a formal maximization problem. It's a calculus problem. The goal is to accumulate as much pleasure as possible. And pleasure doesn't just mean, uh, days at the beach and, and gluttonous meals. It, it includes subtle satisfactions as well in the hands of a skilled economist. Uh, but the goal in life is to, is to be happy, where happiness can have some real texture to it, uh, if we're thoughtful about it.

You said that that was something you used when you were younger. Why has that framework been eroded over time?

Uh, it has trouble dealing with some of the things that I've come to think are quite important. It struggles... And I, I should add as a footnote before I start that there are probably a handful of economists who wouldn't struggle to include these things. I'm talking about the average economist, uh, and the average person who's, who's drunk the economist Kool-Aid and has, uh, used these techniques for, for their, for their own lives. Let's talk about what's missing from that. One of the things that's missing is other people. Now, in my earlier work as a scholarly academic, uh, I tried to build models of charity. And obviously, there are parts of charitable giving where you get pleasure from it and that fits very nicely into the economist toolkit. Uh, it, it implies things like, uh, if you make charity tax-deductible, if it... and it wasn't before, people will give more because you've lowered the price of giving money to someone else. It's a bit sterile, right? It's a bit sterile, but it can be fitted to the framework. But what about my wife? How should I think about my wife's happiness? Is my wife's happiness something that makes me happy? If I am kind to her, is that... do I do that because I enjoy being nice to her because then she'll be nice to me? Is it all about keeping score, which is sort of the economist's framework? And I'd suggest it's not. Um, a life well-lived, a marriage well-executed and, and lived is not about keeping score. Shouldn't be thinking about what's in it for me all the time. The economist model is, what's in it for me? And you can broaden it to say, "Well, one of the things that's in it for me is what's in it for you makes me happy." But again, I think that's kind of a little bit sterile. Doesn't really capture the full way we think about... most of us think about being nice to other people. And how about decisions that my wife and I make together? Um, how do I think about my happiness, her happiness, the morality of it? Do we take turns? (laughs) Um, that's not the right way most people live. Uh, and most importantly, most of the things that really bring deep and abiding satisfaction, as opposed to momentary pleasure, most of the things that bring us deep and abiding satisfaction don't fit so well into the model. Dignity, sense of self, autonomy, mattering, that people think and respect you, th- these are things that you can cram them into the economist toolkit, but not very easily. And one of the reasons is that they overlay the entire experience of life, I argue in the... in my book. They're, they're... they give texture to everyday life in a... Th- that's very different from the texture of, "Well, that was a good ice cream cone. Should I have a second one? Well, they're $5.85 a piece. No, I won't." Well, that's a rational economics decision, but the deep, deeper questions of, you know, moral dilemmas, what should I do with my life? Should I get married? Should I have children? These don't fit into the economist toolkit. It's not all about cost-benefit analysis on a day-to-day basis. And so that's where I've kind of, uh, parted company in some sense. I think most economists would recognize whether... I don't wanna be a... create a straw person that, you know, "Economists would say..." There are some, but economists would say, "Uh, you should maximize your satisfaction from your marriage and that means if you can get away without taking out the garbage or doing the dishes or you can watch the movie you want and for certain..." Eh, there are economists who do that. Most economists know that, that economics has some limitations in what it applies to. Um, and so then the question is, what's left? What, what do we do for rational decisions in these tough areas? So that's, that's kind of the starting point for, for my book.