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Rejoinder to comment - response to article by Douglas McCulloch in this issue, p. 239

American Journal of Economics and Sociology, The, April, 1995 by J. Barkley Rossner, Jr.

I do not have any serious disagreement with the thrust of the Comment by Professor McCulloch on my paper, "Belief: Its Role in Economic Thought and Action" (Rosser, 1993). That people's beliefs are profoundly influenced by the incredible complexity of specialized modern life and the inevitable conflicts this entails, I concur with fully. Given this, let me respond to two points and in so doing make some further extensions of my own.

First, it is suggested that in juxtaposing the beliefs and thoughts of professional economists with those of "most people" (364), I have implicitly denigrated the latter relative to the former and believe somehow that the former are "rational" while the latter are not. This was not my point. Rather, the paper argued that for all their sometimes high-powered analyses and approaches, economists remain creatures of belief just as much as "most people."

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Indeed there is evidence that sometimes professional economists can be "too smart for their own good." One such case involves not economists, per se, but professional financial traders in the kinds of speculative bubble situations discussed in my paper. Shiller (1989) presents detailed survey evidence from the 1987 stock market crash suggesting that the attitudes and behavior of institutional investors, the supposedly highly informed professionals, were far more panicky and irrational than those of "ordinary investors." Far more of the professionals in percentage terms reported actual physical symptoms of panic such as elevated pulse rates and sweaty palms than did ordinary investors. Also, far more of the professionals sold stocks on October 19, 1987, behavior that in hindsight was clearly foolish as the market immediately bounced back. In that situation, ignorance was bliss.

Second, it is argued in this Comment that specialization leads "the majority" to live in "different worlds." This argument resonates with deep ongoing disputes about the nature of reality which I shall not attempt to resolve that are raging in physics and philosophy. However, let me note that especially with respect to strongly held beliefs, there are (at least) two competing approaches possible to the apparent holding of mutually incompatible beliefs. One is the multiple worlds view advocated in the Comment. The other involves a single coherent view of the world but with a peculiar form of preferences, in particular non-convex preferences.

The multiple worlds view is implicit in my original paper in the remarks about "framing" and "context" (359). Let me focus the discussion by considering the related behavior of drug addicts and the intensely religious, clearly not "regular folks" but perhaps exemplifying the issue in dramatic form. Both of these groups are noted for sudden total changes in apparent belief and behavior. The drug addict goes cold turkey from constant use to complete abstention. This may be accompanied by their adopting a fervently "anti-drug" position. The intensely religious person may experience a sudden conversion in which they suddenly convert from one religion to another, possibly even one they fervently opposed before as in the famous case of St. Paul. (Nock, 1933).

The "multiple worlds" view would hold that these individuals have jumped suddenly from one world to another. This has been formalized by Elster (1979), Winston (1980), and Schelling (1984) who posit drug addicts as possessing multiple sets of preferences that they switch back and forth between depending on circumstances.

However, there is another possibility. In their study of the "cold turkey" phenomenon among drug addicts, Becker and Murphy (1988) posit the possibility of non-convex preferences implying a violation of the law of diminishing marginal utility. In such a case, one may have a single set of preferences, and in that sense may "live in a single world." But the nature of one's preferences are such that if one starts to move toward one form of behavior one "goes all the way" and cannot stop. One is an obsessive-compulsive type personality; it must be "all or nothing."

Evidence for this view shows up in the dialectical obsession many addicts and converts have with their former behavior or beliefs. The former addict is very likely to become a drug counselor and likely to be much more zealously anti-drug than the "ordinary" counselor. The convert is likely to be the most severe enemy of their former religion, "the god that failed." This intensity of anger and opposition may reflect their very real awareness of their own preferences and how close they are to returning to their previous behavior or view.

Finally we must note that there is no easy way to verify this view rather than that of the "multiple worlds" view. In the end, the choice between the two must be a matter of belief.

References

Becker, Gary S. and Kevin M. Murphy. "A Theory of Rational Addiction" Journal of Political Economy 96 (1988): 675-700.

Elster, Jon. Ulysses and the Sirens: Studies in Rationality and Irrationality. Cambridge, Cambridge, UP, 1979.

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Rejoinder to comment - response to article by Douglas McCulloch in this issue, p. 239

American Journal of Economics and Sociology, The, April, 1995 by J. Barkley Rossner, Jr.

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