Key Chapters From The Book “the Hunt For The Simpleton. The Economics Of Manipulation And Deception”

The publishing house “Mann, Ivanov and Ferber” a book “Hunt for the simpleton. The Economics of manipulation and deception”. The authors – two Nobel prize winner in Economics George Akerlof and Robert Shiller explain what behavioral Economics is and how it allows you to manipulate human weaknesses.

Each of us is feeling — usually when I think of a former friend — now, looking back from the height of experience the next few years, we can finally articulate what in his time was only dimly guessed. This feeling was visited by one of us (George) at the end of October 2004. By a strange coincidence, George was in the state of Iowa as an assistant and later a Trustee candidate to the Senate from Iowa Democratic party Art small Jr.

About it it asked the son of the candidate Art small the third, who graduated from the College of George Berkeley. George promised to come to Iowa for a week and help in the election campaign. Career Art small, Jr. was full of unexpected twists and turns.

He taught English, was a pharmacist assistant to the Congressman, representative in the legislature, and then the Senator from Iowa (including the Chairman of the appropriations Committee in the U.S. Congress), lawyer and publisher. In Iowa he was respected for honesty and candor. It left its imprint on his campaign, including its slogan.

“Think big (big), vote for small (small)” and design posters and stickers in a modest black-and-white style. Art has not received any financial injections from the political action Committee or from large businesses, so that at least one of the weeks of the campaign in an election Fund were only $103. He decided to join the fight for the Senate seat in the last minute when it became clear that none of the Democrats will not dare to resist who was at that time the post Republican Chuck Grassley.

During the week spent by George in Iowa, he learned that Art had personal reasons to take up this challenge. Represent the Democrats during the hopeless election campaign is very hard work, but Art besides had to take care of the wheelchair-bound wife. This was revealed when Art invited George to his home, inviting to dinner the omelette which they had to prepare themselves.

The main issue of the campaign was the role played Grassley Chairman Senate Finance Committee as the inspirer of the policy of George Bushs tax cuts in 2001 and 2003. The congressional budget office has estimated that this will increase the Federal budget deficit by about $1.7 trillion.

If the money was able to save for a rainy day (coming just a few years, in 2008), they would help to prevent a repeat of the great depression in the United States. According to our calculations, they would be sufficient to reduce unemployment from 9 to 7% for four years, from 2009 to 2012. Whatever the merits and disadvantages of small and Grassley, the counter Art was stunning.

Iowa exports bacon; Grassley brought him home from Washington. Subsidies for ethanol production is just one of his signature arguments. But not only the personal merits of the Grassley before the state decided the outcome of the election campaign in this season.

He managed to accumulate on her $7.6 million. Quite a few minutes to watch TV stations KCCI, Channel 8, Des Moines, to understand where the money went. Grassley appeared in television commercials, driving a garden tractor, to which the ingenious way was attached to the tug two petrol lawn mowers.

He cut round and round, gradually decreasing their radius. For a tractor on the gorgeous lawn lay strips of cut grass. “Grassley!” — grassina, says speaker. Catch. “Of course, I love to work in the U.S. Senate, but sometimes you just need to escape from it all.

Therefore, the voice sounds slowly and sincerely, I like to mow the lawn on the weekend.”. Art fought until the very end. The result of the election. Grassley And 70.2%, Small — 27,9%.

In the Bible there is the story of how David defeated Goliath. However, in reality the giants win more often than lose. Campaign against Grassley small and the role in it of money — it elections to the U.S. Congress in miniature. Summary statistics clearly show that this campaign is typical in all respects, with the exception that the acute shortage of funds Art.

During the 2008 elections to the Chamber of representatives of the U.S. Congress, the average total election expenses of all candidates was greater than $2 million for the County, despite the fact that in force at the time of the election, the candidates have spent on these purposes in two times more than those who challenged them.

Translated into human language this means that a member of the house of representatives should earn about $1800 for each day of stay in office (including Saturdays, Sundays and holidays). Elections in districts where the incumbent representative at the time was not cost their members more than twice as much — $4.7 million. Elections to the Senate are even more expensive.

In 2008, their price was about $13 million for the County. The average Senator who wanted to be re-elected to his post, and posted over $8 million — as in the case of Grassley, far surpassed the competitors on the amount of funds spent. Back to the election campaign Grassley, since we took her as an example. If you would show the people of Iowa, the man on the mower, they will be inclined to vote for him.

Voters impose a history, gleaned from the advertising on their own history. About themselves, their friends, and neighbors. A promotional video with the lawnmower symbolizes that the Grassley — their friend and neighbor.

As they are natives of Iowa, he mows the lawn and even for the sake of this comes from Washington. What he did in the Senate a lot of useful things (e.g., eliminated loopholes in the income tax act, struggling with sexual slavery), deserves attention; in itself is a promotional video says nothing about politics, neither candidate, nor even about his character. On the contrary, if the voters will have any questions after viewing, then most likely, about where the candidate took the money on advertising.

However, if advertising is successful, then that thought they would never come. The consequences of phishing in the policy is akin to the effects of fishing in the economy. Fundamental economic theory States that in the absence of a phishing competition in the economy generates an equilibrium; similarly, the fundamental political science argues that competitive democratic elections provide excellent results.

This conclusion is generally attributed to the American political scientist Anthony Downs. If voters are fully informed and vote according to their preferences, which can be represented on a scale from left to right, the election platform of both candidates will come into balance and will meet the preferences of the “average voter” — because half of the electorate voted for the “left” and the other half for the “right”.

This equilibrium often occurs for the same reason that the queue in the supermarket are aligned along the length. This is because if one of the two candidates do not choose this platform, the second makes it and wins. This equilibrium describes the outcome based on compromise and taking into account the point of view of both sides. This is what we ideally expect from democracy.

Therefore, it would be great if the description of the behavior of the voter and the candidate of the downs were realistic. Unfortunately, the reality often looks a little different, and voters tend to fool debugged in two ways.

First, they never have full information and only for that reason get hooked. Second, they swallow the psychological hook. For example, respond to ads with the candidate, to cut the lawn.

All of these “hooks” shift the political balance and electoral platform in either direction from the preferences of the “average voter”. A winning electoral strategy with voters, which is applied against phishing, consists of three main parts. In terms of the use of such rational strategies can not claim that theorem, the “average voter” adequately describes the results of the election.

Instead we have a deceitful balance in politics. Although some questions are not so difficult to collect a more or less complete information, the General public usually leaves the huge number of Congress discussed issues at the discretion of the congressmen. In such matters knows only a narrow circle of experts, and all the rest actually remain uninformed voters.

Here is an example confirming the fact that even the most undaunted and persistent, the voter will not be able to gather complete information at least on matters of the utmost importance. It is likely that the most important law of our time is resolution of the house of representatives No. 1424, adopted by the 110-th convocation of the Congress (or the Law on emergency economic stabilization 2008) and has granted powers to the Ministry of Finance on the expenditure of $700 billion for the troubled asset.

This prevented the collapse of the US financial system and almost certainly removed the threat (or at least delayed until the present time) the onset of a second great depression. But, no matter how he was important, but possessing insider information, or a clairvoyant could have foreseen how this law is applied within six months after its approval for the sake of a good part of the US financial system, and along with General Motors and Chrysler.

The preamble of the law usually describes the purpose of its adoption. In the preamble to law No. 1424 States that it “..provides authority for the purchase and insurance of certain types of troubled assets”. Hardly, it means allowing for the repurchase of banks and companies. Although we have on hand a copy of the act, we have not found a place in it where this was discussed.

Had to call our friend Philip Swagel, assistant Minister of Finance in 2008 and one of developers of the law. The most dramatic episode of the Program implementation of the troubled asset (TARP) took place on 13 October 2008, when the Minister of Finance Henry Paulson summoned the Director General of the nine largest banks in the country and forced them to sell to the Ministry of Finance of the preferred shares of banks totaling $125 billion. Whether they wanted to or not, did not matter.

Authority for such actions stipulated by the first part of the definition of “troubled assets” in section 3, paragraph 9(A):.commercial or residential mortgage loans, and any securities, bonds or other financial instruments issued before March 14, 2008, inclusive, which are providing such mortgage loans, if the Finance Minister considers that their purchase will help to support financial market stability. As explained Swagel, because the banks themselves owned such assets, their purchase is subject to the law. The authority of the Ministry of Finance to repurchase shares of General Motors and Chrysler looked no less dubious, but they agreed the second part of the definition of distressed assets in section paragraph 9(C):

..any other financial instrument the purchase of which the Minister of Finance deems it necessary to maintain the stability of the financial market. The resolution of the house of representatives No. 1424 determines the assessment of the compliance of certain technical procedures; as a result, it becomes a hopeless task like game style of “Find Wally”. In childrens books, Wally wears a shirt in red and white stripes, blue pants and a wool cap.

In contrast, in the legislation of various reservations in whose particular interests disguised. Neither the public nor the media cant read and, most importantly, to understand what is written in professional language laws. Our only defense is the desire of Congress to do everything in their power.

But they can understand not all. Moreover, from time to time, they should undergo the process of elections. And for that we need the money with which to pay the “mowing the lawn” on television.

But if the money, as poor Art, no, they can never wait for the day when you are in Congress to protect our interests (or manifest their views). In light of the above it is logical to ask questions. Where congressmen take money for the election campaign and the role of lobbyists in Congress. For starters, take a look at some statistical data about lobbyists, congressmen and electoral funds.

Only in the US, about 12 thousand lobbyists, more than twenty for every Congressman. Stephen Ansolabehere and John de Figueiredo from the Massachusetts Institute of technology, and James Snyder estimated that contributions to campaign funds of congressmen, including funds raised by the candidates, and a substantial amount mobilized by parties and political action Committee, still less than the cost of lobbying through Congress during the entire election cycle.

This volume of funds mobilized through lobbyists, suggests that contributions to campaign funds to make corporations that hire lobbyists, and perhaps directly lobbyists. In fact, for companies, enterprises and other associations account for only about one-eighth of the contributions to the electoral Fund; the lions share of donations, in contrast, comes from individuals.

Themselves lobbyists make only small contributions, executed as a proceeds from the “friends” of the candidate and supporters of his political line. These statistics narrow the scope of the description of the relations between stakeholders and the Congress to analogy with the two-way street. Its not just a case of the “protection for sale” in the form of direct suggestions on pushing amendments to the laws in accordance with the interests of corporations from senators and members of the house of representatives in exchange for contributions to the election Fund, when lobbyists act as brokers.

In this case, congressmen are at risk of becoming victims of deception and fraud on the part of intermediaries, whose incomes are more than eight times the contributions of corporations and unions in election Fund. As a result, we raise two issues. Who are the lobbyists and what services they provide to the congressmen for such an amount.

Useful to find out what the essence of this kind of services. The experience of George Washington, we have seen that a key role of politicians is to give the audience a beautiful story about yourself. Model campaign, which was attended by George, is a man on garden tractor video. She creates a vivid image of the politician, telling a story, and then distribute it.

But it is clear in history, and there is also a hidden. Former Chairman of the Committee on armed services of the house of representatives, and later first Minister of defense under President Clinton Leslie Espin famous expressions. “If you give Congress the opportunity to vote for conflicting decisions on the same issue, he is sure they will”.

The above description of a winning election strategy explains why congressmen — colleagues Espina liked his cynical wisdom. This strategy assumes that before the Congressman is dual purpose — on the one hand, to attract voters, and the other donor.

It is no coincidence and Romney, and Obama caught saying is absolutely unpopular among the majority of the electorate views in private conversations with private “donors”. So, Romney in 2012 said. “47% of voters will vote for the President no matter what because they are dependent on government”25.

Obama, despite his famous temper, four years earlier, in 2008, in an interview with the sponsor said. “In these small towns in Pennsylvania, they [voters] are angry because cling to their guns or religion and have an aversion to people who are not like them.”. The dual task facing policy makers, returns us to the question of why we need lobbyists.

Lobbying is a special operation aimed at helping policy; its meaning is determined by what the lobbyist pays the interested party. Hes always got information on where to find sources of financing, because the willingness of stakeholders to pay the lobbyist shows who is particularly keen to enlist the support of policy with similar views. (The very existence of the lobbyist and its active employment in this field are an indicator of where you should go for the money if necessary — there is no smoke without fire).

In a cruel world where the Congressman needs to get the public to fork out for his campaign, a lobbyist can be a beacon pointing the way to such a coveted gold mine. In addition, a good lobbyist has one more function. It can help the policy to write the history, is able to provide the best compromise between attracting the votes of the public and the pulling of money from interested parties.

In political theory there is a concept (which, as we shall see later, contained in decision of the Supreme court in Citizens United) that such activities as lobbying, includes the “transfer of information”. This may be true, but the lobbyists are spreading information in the context of a sound history with intentional distortion. Advising on its development requires intuitive understanding of politics as a public and private person, and this kind of understanding we have with the best friends and trusted people.

Therefore, it is no coincidence that mobilized lobbyists are former staff members who had to perform these functions, and former congressmen. Among the congressmen who resigned in 2010, at least 50% of senators and 42% of the house members became lobbyists (more prosperous in 1974 this activity chose no more than 3% of the retirees from both houses of Congress; after all, if candidates have not experienced such a need for donations).

If the lobbyist in the role of each policy contributes to the objectives of the latter, this status makes the lobbyist attractive to potential customers. Aspects of the work of Congress that made Espina to utter his famous phrase, dedicated to the history. In accordance with standard procedure, the U.S. Senate allows senators to vote both for and against for any questions regarding financing.

Newly elected Senator Ted Kaufman, who took the place of Joseph Biden after he became Vice-President in 2009, learned that the hard way. Kaufman has deeply shaken the financial fraud that caused the global financial crisis of 2008, so he co-sponsored the bill on its investigation (Fraud Enforcement and Recovery Act (FERA) — the Law on combating fraud).

One of the points of this Law spoke of the allocation to the Ministry of justice $165 million to fight crimes “white collar”. In 2009, the need for these funds has been particularly acute since 11 September 2001, the Ministry of justice liquidated the division of fight against “white collar crime”. The savings were redirected to fight terrorism.

FERA on a wave of enthusiasm passed easily and the Senate and the House of representatives. Kaufman was elated, but soon found that although his colleagues took the decision to allocate $165 million, they are the same after some time approved the inclusion in the annual budget for these purposes only $30 million. The congressmen chose not to risk it, as the further growth of budget expenditures could jeopardize the contributions to campaign funds from bigwigs of wall street.

Joke Espina, and at the same time the optimal strategy of development of the same story for voters and the other for sponsors, literally became a reality. We have described ways of influence on government spending on electoral campaigns and lobbying, forcing him to give the preference “monkeys sitting on my shoulder”. But how significant are these costs.

Can we consider them relatively small in comparison with total budgetary expenditures, amounting to about $4 trillion, and almost a thousand times greater than spending on elections. To do this, analyze the correction factor is the ratio of the increase of election expenses provided by the lobbyists, for they receive the Board.

In addition to loyalty and friendship ties, the ideal lobbyist should have another essential quality — the ability to maintain confidentiality. This means that information on estimates of campaign and expenditures on lobbying in comparison with significant changes in the activities of the government, we will be quite difficult to find. To get it, will have to study relatively rare events — like the volcanologists, who at the first sign of eruption, eager to explore the lava flows, since it is possible to judge that lurks beneath the surface of the Earth.

Persistent desire lobbyist from Washington Jerry Cassidy to write ripping off the cloak of secrecy biography gave us the story of two such cases; lobbying for legislation changes in the taxation of profits received by U.S. corporations abroad, is a third case, finally, disclosure of information about savings and loan crisis of the 1980s can be considered the fourth. In his Message on the situation in the country 1992 George Bush has proposed to repeal the previously adopted decision on allocation of funds for the construction of two new nuclear submarines of the Seawolf class.

Winning this contract contractor General Dynamics responded immediately, taking over $120 thousand a month Jerry Cassidy for organizing campaigns and lobbying to shape public opinion against the proposal. Seawolf was saved, and the cancellation of the subsidies at $2.8 billion suspended. And payments to lobbyists and the spending of additional funds on the information campaign cost relatively cheap on the background of the result.

In 1991-1992, the amount allocated to General Dynamics funds to the campaign of lobbying in Congress has increased only $198 thousand compared with the amount spent for the same purpose in 1989-1990 A study conducted by Rachel Alexander, Stephen Mazza, and Susan Scholz, allows for a deeper analysis of how high may be the income from lobbying.

In the early 2000-ies of the foreign units of transnational corporations, States were allowed not to pay taxes on profits earned abroad, while she remains outside the country; as a result, these balances have accumulated huge, not obligaties tax USA the amount. The country wanted to return the money, and Congress passed the Law on creation of jobs (American Jobs Creation Act — ACA), whereby profits repatriated to the US and not taxable earlier, produced one-time tax deduction of 85% of its amount (section 965), as in force at the time the standard rate of tax on repatriated profits was reduced from 35% to 5.25%.

In the result, 39 companies have joined the lobby in support of this bill, saved about $46 billion in taxes from the amounts they returned to the country. Total expenditure on lobbying for participating in the campaign, corporations made $180 million. The amount of the tax savings from the Amnesty at least 255 times higher than the total amount of the costs of lobbying.

Not less brilliant results lobbying brought the company Ocean Spray in the story of the marking of cranberry juice. Management on sanitary inspection behind quality of foodstuff and medicines (Food and Drug Administration — FDA) during the Reagan administration required to indicate on the label of cranberry juice is that it contains 75% water. Representatives of Ocean Spray turned to Cassidy for advice.

A few members were paid fees in the amount of $2000 and $4000 for speaking out in support of the company and $375 thousand, received from the political action Committee was spent on a lobbying campaign. As a result, the text of the draft law on the allocation of funds without much noise came the cancellation of legislative regulation of information about the composition of fruit juices that companies are required to indicate on the label.

Mission accomplished. A win for Ocean Spray was huge. By 2005, sales of cranberry juice in the U.S. reached $750 million. Compared to this the costs of lobbying seemed absolutely miserable.

In the midst of the savings and loan crisis of the 1980s years were considered a lawsuit against the owner of Lincoln Savings and Loan Charles Keating. In the process, opened up some information on the relationship between spending on lobbying and a loss of taxpayers.

Among the services rendered by Keating in exchange for contributions to the electoral Fund of $1.4 million, was part of an attempt to put pressure on the involved in his case officials made five U.S. senators. The latter was found with these officials, and explicitly asked for assurances that the Federal Board of the Bank housing loan USA will not “prosecute”. This and other similar obstacles that Keating tried to erect in the way of investigation, led to a reduction in the amount of the claim on $1 billion of the initial $2-3 billion, which was required for the closing of its bankruptcy proceedings.

Unlikely to pick a specific situation that allows you to estimate the cost of spending on lobbying, on the one hand, and the received stakeholders of the benefits on the other. But the indirect evidence of the impact of these on politics abound.

For example, it is not by chance, the Committee on financial services of the house of representatives (colloquially known as a “money Committee”) is particularly swollen, its almost 15% of all members of the house. Both parties are strategic reasons send to members who are experiencing insecurity at the thought of the next election. So its not like the disappearance from the budget of $135 million from the amount provided by Law for FERA combat “white collar crime” was misunderstanding.

Similarly, we do not consider a coincidence the fact that the IRS is chronically underfunded, why can not collect hundreds of billions of dollars of taxes and fees (the IRS claims that as of 2006 this amount reached $385 billion). The budgets of the Ministry of justice, Tax administration, Commission for securities markets (Securities and Exchange Commission — SEC) and many other government departments are cut significantly. Unfortunately, the evidence for it is unlikely to be recognized in court, but they confirm that the influence of rich contributors to the authorities distorts the policy that would suit the public, beyond recognition.

Anyway, the relationship between lobbying and election funds, Congress and stakeholders provide fertile ground for hunting simpleton. Phishing is becoming a key factor that makes markets less sensitive to the real needs of people; similarly, it serves as a factor undermining democracy.

Perhaps democracy really the best form of government invented by mankind, but it may not automatically protect us from the tricks of “monkey sitting on my shoulder”. In contrast, we have seen that when the politicians need funds to campaign, they often quickly find them. To this Chapter you could write a lot of supplements, because many of the issues remain unaddressed, but we believe that one of them deserves a special mention.

This Chapter is devoted to the problems of lobbying in the U.S. Congress; but, quite possibly, much more important and urgent problems of lobbying in individual departments, not to mention lobbying in state governments and at the level of local authorities. If the modern economy is to shift the notes, it would have been written in the key of C major. Her songs honor the free market is about the same as the parishioners in the Church at Christmas, together rise and sing “Hallelujah!”. The purpose of this book is to make Economics more understandable for you.

To realize the benefits of the free market does not mean not to notice his shortcomings. We want the music economy was a in a minor. Rather as a Symphony “From the New world” than like “Hallelujah”.

In previous chapters weve cited many examples of how phishing undermines sustainable economic equilibrium, in this Chapter we will analyze its impact on economic growth, as understood by economists.

First, a brief characterization of the modern theory of economic growth, and then see why it also needs to consider scams. In accordance with the fundamental provisions of economic theory, free markets in every moment give us a huge advantage, providing an unlimited number of choices.

Today in the global world economy free markets enable most adults to trade (perhaps indirectly) with each other, which implies a huge number of choices of the counterparty. About 25 000 000 000 000 000 000 (25 quintillion) potential pairs of adult buyers and sellers. There is another, probably more important is the dimension of the free market — new ideas, based on which to create new products and services in the future, even more widening the range of choice.

In a free market of new products and services that can generate higher profits, actively identified and implemented. During the past century, one new idea a month generated more than three trillion of new ideas put forward by adults from all over the world. The implications of this are staggering.

During a persons life in a typical developed country, the output per capita increases six-fold. Our older pensioners were born in the country is much poorer than modern Mexico. This critical role of new ideas as engines of economic growth discussed for decades, but finally it was formulated in 1957 by a simple and ingenious calculation. 32-year-old economist from mit, Robert Solow, to get the answer, used the logic of reasoning of Sherlock Holmes and rule out all other causes.

To the calculations of Solow, economists do not know how to apportion the degree of contribution to economic growth between the two main factors. The growth in labour productivity (growth of output per man-hour) is associated either with the introduction of new inventions (technical changes), or growth of capital (equipment, buildings, structures, etc.).

Making the assumption that the return on capital represents its contribution to output, Solow was able to calculate the portion of the increase in productivity generated by capital gains, and found (for the United States in the period from 1909 to 1949) that it is equal to one-eighth of the total growth in labour productivity. The remaining seven-eighths are dependent on something else; namely, from new ideas. Solow stated that this balance was attributable to “technical change.”.

So small and rather simple calculation has forever changed the views of economists on economic progress. The growth of living standards was no longer associated exclusively with the construction of newer, larger factories and hiring workers in terrible conditions (as in the textile factories of Manchester in the 19th century or Bangladesh these days).

This simple calculation in one line, formed a new understanding of the sources of economic growth, which in the days when it was made, that is in 1950-ies was characterized by expressions like the motto of the company DuPont. “Better things for better living.. With the help of chemistry”.

For generations a symbol of economic growth becomes a Silicon valley — this name became widely known in about two and a half decades after the opening of the Solow. From this point of view capitalism is the free market not just provides us the current abundance of products and services as a result of the exchange of goods between people seeking to use their relative economic advantage and increases the abundance due to the introduction of new ideas.

Without a doubt, the calculations and conclusions of Solow is solid truth. But we still live in an economy in the style of “Hallelujah!” keeping the innocence of their origins as of 1950-ies. Americans and largely the rest of the world gradually learned the more skeptical view of Economics, Solow new ideas, able to ensure continuous progress.

In American history, was always present dark side, especially in relation to native Americans, women, gays, blacks, immigrants from Spanish-speaking countries, Asians. We started this Chapter with the mention of the Symphony “From the New world”. Its author, the composer antonín dvořák borrowed her idea of the Negro spirituals and native American dances, and did it deliberately.

American history in its classical form no longer resembles a continuous crescendo, culminating, as it was in 1959, during the debate Nixon and Khrushchev, the recognition of the superiority of American food to the Soviet. Interestingly, this allows us to make calculations of the Solow elegant, but incorrect conclusion is that progress is achieved mainly at the expense of new ideas, but new ideas will inevitably lead to economic progress.

It is quite a logical conclusion, if we take into account only technological ideas, that is, those that allow us to produce more products with less labor. However, not all ideas, and even our thoughts, are linked with material goods. Many of the ideas — perhaps even fundamental — relate to our neighbors.

Mentally healthy people, very limited ability to discern the thoughts of others; they have a “theory of mind”. This is one of the most attractive features of humanity. It is the basis of mutual sympathy.

However, the “theory of mind” deficiencies. In other words, we are able to figure out how to persuade people to perform tasks that meet our, but not their interests. As a result, many ideas not associated with the world of technology and do not constitute a way to make “good for you and good for me.”. Rather, it is a new ways to use “theory of consciousness”, allowing to answer the question how causing harm to you, to do good for me.

New ideas of this kind appeared in each Chapter of this book. For example, we saw addictive slot machines of Las Vegas; rating agencies, pasting a mark of quality on the “rotten avocado” (substandard securities); the sale of “the men in the Hathaway shirt” and a Senator on a garden tractor; a puppy, with the intent exhibited in the shop window. The list goes on.

Thus, our understanding of economic progress is not as simple as it seems. The indicators of economic growth (such as income per capita) significantly reflect changes in the economy, although not all these changes benefit.

It was just an implicit assumption that reflects the stereotypes of thinking of the time that “balance” in the formula Solow demonstrates the impact of technical progress. Now you can look at the problem of economic growth more closely and from a global perspective. In proof that not all inventions, empowering, choice, benefit, or at least some, along with the benefits and even harm, give three examples.

One of the best inventions connected with electric lighting, is the switch because it allows you to turn on and off the light. Facebook can also be turned off at any time, but, according to the students of Yale University, with whom we talked, the users of this social network do not always have enough internal discipline, even if they know it will make them happier.

All our interviews took place on the same scenario. Respondents were first called to any imaginary reason to use Facebook, saying something like. “I just talk with there friends”. They believed that the get out “information”.

But at a critical moment in the plays of Ibsen, the emotions grew in intensity, revealing the attitude of love and hate Facebook. Its main purpose was not confined to contacts with friends, as was stated originally, rather, the social network seemed to be an instrument to “create an alternate universe”. There our interlocutors perceived “social worth”, which could not obtain elsewhere.

First-year students at Yale University living in conditions of tough competition. So, for example, a member of the admissions Committee at the meeting with first-year students in 2009 said that among applicants for admission to this year there were so many talented applicants, which could form the first two of course, no lowering of requirements. Thus, even at an elite University the intensity of competition does not relieve students from the need for recognition.

Its possible that Facebook as an alternative virtual universe is a variant of the adaptation to the existing reality. It has its own alternative currency “signs of respect” — the “likes” from friends, repost. The same factors underlie the relations of love and hate for Facebook.

They also underlie the desire of our interviewees to get likes. One of them explained. “You cant keep posting pictures of your dog, because its boring.

As a result, you become obsessed with the desire to seem original or funny, either really appealing to friends”. One of our respondents admitted to nostalgia for the good old days — a year or two ago, when the huskies still were not General insanity. He was very sorry about the “rat race”, which has turned this race for huskies.

We also talked about the other side of Facebook that prevailed before the craze of huskies. One of the students of Yale University explained that the frequenters of Facebook publish photos of only the best, surprising scenes from your life.

But this approach only complicates the life of his follower. “Sometimes I.. I hate Facebook.especially in times like now when I sit in snowy new haven, and all of my friends are enjoying the sun in warmer places.. I would like to forget about it, but actually continue to consider photos of gay people on the beaches and imagine yourself in their place”.

Conclusions we conducted interviews at Yale, confirms the results of the survey of students of the Humboldt University devoted to “the emotions of Facebook users”. In response to the question of why others may feel “devastated or disappointed” because of the communication in Facebook, about 60% of the respondents (86%, agreed to answer this question) described social reasons such as “jealousy”, “lack of likes”, “social isolation”, “no one invites to entertainment events”.

The mention of “envy” were found in 30% of cases, and this is clearly contrasted with the fact that when answering the question about their own visit to Facebook only 1% admitted that they experienced this feeling. So, Facebook should be considered good or evil. Clicking “Like”, you are expressing a positive attitude.

Interestingly, none of the respondents did not mention the fact that he gets pleasure, liking friends. But every “like” in Facebook is a courtesy that allows you to feel and to recognize and respect each other. Respondents also noted that the virtual universe of Facebook is close and, as a rule, positive interaction with reality.

Friends in a social network was often their friends in real life. Indeed, the need for friendly relations has played a leading role in their popularity in Facebook. If all your friends are sitting in Facebook, the refusal to attend this social network is like the rejection of going to a party where you will gather all.

Network Facebook is not without its flaws (as it was mentioned by our respondents). There, dominated by negative aspects, there is yet another innovation. Two students from medialaboratorii MIT Robert Morris and Daniel McDuff has developed a device called Pavlov Poke (“Shock Pavlova”), which can be programmed so that the computer keyboard was giving electric shock if you stay in Facebook longer set time.

As another example of innovation (the economist called it a “technical change”) consider a method, implemented by United Airlines to distribute the passengers on the flights. Like the Duchy of 19th century, United Airlines has developed a system of honorary awards and symbols of social status.

In a large aircraft Seating arrangement of the passengers depends not only on the class (first class, business class, economy plus and economy class), but also from the special status provided by the different groups of passengers. Global Services, 1K, Premier Platinum, Premier Gold and Premier Silver. Because people by nature are very sensitive to various ratings as to their, and others, the company has thereby invented an excellent bait for simpletons.

It is enough to sit in the back row of the cabin and watch passengers dutifully participate in a mass race with obstacles, which acts, for example, the accumulation of miles and pull out of the pockets of United Airlines Visa card to lock in regaining the status. In our opinion, the boarding something like a scene from the comic book Roses Often. I want to remind you that Roses Often is the cartoonist from the New Yorker magazine, depicting people with funny facial expressions and text callout bubble that reveals their true thoughts.

It would be interesting to see the picture, which shows the boarding, and the bubble written thoughts Global Service passengers and first class about their comrades in flight, making his way to the last rows in the cabin. Conversely, it would be interesting to see in the bubbles the minds of these losers.

Indeed, some of our interview (again with the students of Yale) confirmed our suspicions regarding the content of these dialog bubbles, which remain to be filled. Fully aware in your own mind, one of our respondents expressed them in one word.

“If Im flying business class, I feel the smugness from the opportunity to Board the plane first.”. Of course, the rankings that determine the order of passengers on the plane, is not particularly important, can not be said about the test of learning ability (Scholastic Aptitude Test — SAT) conducted by the educational testing Service (Educational Testing Service — ETS), which fifteen years ago were written by the journalist Nicholas Lemann, in his book about the rating system.

In the 1930-1940-ies has one of the only students in the preparatory school like Exeter or Groton, for example, and a private home on beacon hill (Boston) was sufficient for admission to Harvard. The reformers of that time who created the ETS and introduce the universal SAT, wanted to expand among applicants for the admission base and to attract children with a higher level of intelligence which, from their point of view, can be assessed using this test. Their innovation has taken root; according to Lehmann, these ratings have replaced the parents belonging to “Secular almanac”, but it was not free from internal faults.

The new meritocracy has filled the void, and immediately after that it turned out that the place of future work and wages increasingly depend on University degree. Without it new Abrahama Lincoln, Harry Truman or Sidney Weinberg among us would have little chance. By itself, the SAT plays a vital role as it determines, do boys and girls in the University and, if so, in what.

Currently, the ratings in education became comprehensive. Already at a very young age students begins what Gary and Valerie Ramey called “races youngsters”. But after SAT and high school graduation rankings do not go from our life.

Universities have their own rating; and for students there is also a rating (especially if they are going to continue learning); the journals that publish their works with University professors, also have a rating; in fact, as its rating is, and the professors (depending on where and how often they are printed). These ratings produce a certain effect.

Students have an incentive to study and prepare for testing; teachers have to teach to meet the standards of the test; professors prepare their articles subject to the requirements of high rating journals. However, ratings are associated with much deeper problems. And this brings us back to the cartoons of Roses Frequent, because those who climbed the stairs of the ratings above, look down on those at the bottom.

I think we were able to identify the side effects of this “complacency”. We both (Bob and George) remember that early in United Airlines first landing in the plane, invited families with children. But now, the company introduced a new rule in favor of the participants of loyalty programs; in April 2012, the airline changed the policy in terms of priority boarding, and the old custom is gone.

As in the case of Facebook, we have some mixed feelings about educational rankings. I think we would prefer a society in which the question of the admission of young people into University is decided according to the results of ratings, to a society in which having a University education depends on the availability of the names of the parents in the “Secular almanac”.

But we have some doubts about the approach of the education system, which allocates certified “elite” who consider themselves entitled to neglect those who have the status below. Our ambiguous attitude to this issue reflects a General ambiguity, which is the main theme of this book. Do we like the free market. But..

Bizets Opera “Carmen” written in Seville (Spain) in 1820-ies. The main character Carmen works in a cigarette factory. If Bizet wrote his Opera on eighty years later, Carmen, most likely, would be another job.

In the 1880s, a native of Virginia James Bonsack invented mechanical cigarette machine that has practically eliminated the need for manual labor in the production of cigarettes. In the next Chapter we will talk about the negative impact of this invention on the quality of life and health of people.

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