When people do a cost/benefit analysis they are terribly vague on whether they are suposed to add the costs and benefits or whether the costs get subtracted from the benefits.
Revised: I do not think that link provides evidence for the quoted sentence. Nor I do see other evidence that people are that bad at cost-benefit analysis. I agree that the example presented there is interesting and that one should keep in mind that disagreements about values can be hidden, sometimes maliciously.
I’ve got a better link. David Henderson catches a professor of economics getting costs and benefits confused in a published book. Henderson’s review is on on page 54 of Regulation, and my viewer puts it on the ninth page of the pdf that Henderson links to
That is a good example. Talk of creating jobs as a benefit, rather than a cost is quite common. But is it confusion or malice? It is hard for me to imagine that economists would publish such a book without having it pointed out to them. The audience certainly is confused. Henderson says “Almost no one spending his own money makes this mistake” and would not generalize to people’s capacity for abstract thought.
The original question was how much information to extract from the conventional wisdom. I do not take this as a reason to doubt the conventional wisdom about personal decisions. Partly, this is public choice, and partly because people do not address externalities in their personal decisions. Maybe any commonly accepted argument involving economics should be suspect, though the existence of the very well-established applause-line of “creating jobs” suggests that there are limits to how to fool people. But your claim was not that people are bad at physics and economics, but at the abstract thought of decision theory.
Revised: I do not think that link provides evidence for the quoted sentence. Nor I do see other evidence that people are that bad at cost-benefit analysis. I agree that the example presented there is interesting and that one should keep in mind that disagreements about values can be hidden, sometimes maliciously.
I’ve got a better link. David Henderson catches a professor of economics getting costs and benefits confused in a published book. Henderson’s review is on on page 54 of Regulation, and my viewer puts it on the ninth page of the pdf that Henderson links to
That is a good example. Talk of creating jobs as a benefit, rather than a cost is quite common. But is it confusion or malice? It is hard for me to imagine that economists would publish such a book without having it pointed out to them. The audience certainly is confused. Henderson says “Almost no one spending his own money makes this mistake” and would not generalize to people’s capacity for abstract thought.
The original question was how much information to extract from the conventional wisdom. I do not take this as a reason to doubt the conventional wisdom about personal decisions. Partly, this is public choice, and partly because people do not address externalities in their personal decisions. Maybe any commonly accepted argument involving economics should be suspect, though the existence of the very well-established applause-line of “creating jobs” suggests that there are limits to how to fool people. But your claim was not that people are bad at physics and economics, but at the abstract thought of decision theory.