Wantability, Well-Being and Risk

I’ve been mulling a name change for the blog for some time. The name the “The Rational Pessimist” was a riposte to Matt Ridley’s book “The Rational Optimist“. Ridley’s book is a paean to global free markets and human innovation–and in parts is correct. Since the industrial revolution commenced, technology coupled with capitalism has lifted the bulk of the world’s population out of a Hobbesian life that was “nasty, brutish and short”. But where I differ from Ridley is in believing that a 200-year data set of economic growth can fully capture all future risk.

Ridley’s book is Panglossian. He believes that every problem we face–from climate change to resource depletion–is relatively minor, just waiting to be solved by a technological fix. For him, price always trumps scarcity. Whenever something looks like it is running out, the magic of markets will  always lead to new discoveries or acceptable substitutes.

As an economist by training, I accept that the everlasting dance between supply, demand and price is something of beauty. But I also believe that it has its limitations. A backward-looking empirical observation that things haven’t run out is different from a forward-looking theoretical prediction that things won’t ever run out. North Sea oil is running out regardless of price, and a global supply of oil is not qualitatively different from a local one.

Of course, technology may provide a perfect, or dare I say it better, substitute for fossil fuels. But then again it may not. That is uncertainty, and the consequences of that uncertainty is the concept of risk.

Most cornucopians like Ridley don’t accept that out of the set of all possible outcomes there are two tails: a very good one and a very bad one. This blog likes to poke around in the negative end of the tail where bad stuff happens. Why? Because bad stuff would be exceptionally painful for us and our kids. Indeed, those of who live in developed nations have forgotten that in the political and economic arena really bad stuff can happen (unlike our grandparents who knew this fact only too well). I think that is why the Great Recession of 2008/09 came as such a shock to so many.

The problem I have–and one of the reasons for changing the name of the blog–is that the word “pessimism” has such a loaded meaning. It suggests that I can see the negative outcomes alone. My intention is for the blog to be more nuanced than that. When I look, for example, at climate change, I don’t see the globe warming by 4 or 5 degrees Celsius, so committing us to extremely dangerous climate change, as an established fact. What I do see is the possibility of such an outcome occurring. Put another way, I feel less pessimism than fear. And risk captures that fear.

The other preoccupation of this blog beyond risk is well-being. The concepts appear disconnected, but they are not. Risk relates to decision-making under uncertainty. But decision-making over what? In all the aspects of the life we lead, we make decisions to secure desired outcomes. However–and this is critical–those decisions relate to what we want, not necessarily what makes us happy. The Nobel prize-winning economist Daniel Kahneman, together with Richard Thaler, looked at this distinction in a famous 2006 article.

The two economists differentiated between what they called decision utility, or “wantability” and experienced utility, a form of happiness or well-being. The two things are frequently not the same, and we have a growing evidence base to prove it. This adds a whole new dimension to risk since we may not only not get those things to which we aspire, but we may also be aspiring to the entirely wrong set of things even if we get them.

We do, however, have the capability to do better. Richard Dawkins in a foreword to the 30th anniversary edition of his famous book “The Selfish Gene” complained that he had been misconstrued. He stated that humans weren’t inherently selfish just because their genes gave them a predilection to certain actions. Rather, our intelligence has given us the ability to self-reflect and step outside our genes. Similarly, we should not be servants to our unsatiated wants. The reflective life is one where we try to understand the reasons behind the things we do.

Nonetheless, the challenge is tough. The well-being movement has been accused of being paternalistic. Who has the right to usurp our right to choose? But in this war over our decision-making, we should understand the size of the opposing armies. Like so many of the insights from evolutionary psychology, wantabilty is born out of a need to survive on the savannah two million years ago. Our genes would prefer us to be unhappy replicators than happy eunuchs. Of course, pleasure is a great spur to action as sex so evidently shows. But this is a tap that is quickly turned off. We are more successful as a species if we are programmed to be compulsive shoppers than satisfied with a single set of clothes.

And if our natural predispositions were not enough, the $600 billion  advertising industry is there to reinforce the message: you are what you consume and if you don’t consume what purpose do you serve? So should the consumer’s heart ever still, the advertising industry’s defibrillator is quickly applied.

Aggregate such urges and stick a neoliberal justification on top and it is not surprising that we are perfectly capable of trashing the planet through squandering our natural asset inheritance or polluting our own nests. This is the biggest risk of all. The risk that we blindly pursue wants to such an extent that the entire system collapses and we can no longer satisfy needs (physical or psychological). I am not saying this will happen–by temperament I am not actually a pessimist–but I am saying that it could.