It
goes without saying… (though there's an exception to every rule)
Do
we really need to teach economics, when some elementary revision of good old
proverbs would do the job quite nicely?
From
Neo-classical to Behavioural economics
First, some basic micro-economics. -classical
economic wisdom features in “He who pays the piper calls the tune”, “Fair
exchange is no robbery”, “You pays your money and you takes your choice”, “Beggars
should not be choosers”, “If you pay peanuts, you get monkeys” and “Money makes the world go round.” The law of diminishing marginal utility comes
through simply in sayings like “A change is as good as a rest”, “A little of
what you fancy does you good” and “Enough is as good as a feast”. If that’s not
sufficient, then consider these: “Enough is enough”, “Less is more”,
“Moderation in all things” “Variety is the spice of life”, “You can have too
much of a good thing”.
There is a nod at the main findings from labour
market economics in “Every man has his price”, “Jack of all trades, master of
none”, “Time is money”, whilst the trade off with leisure is summed up in “All
work and no play makes Jack a dull boy” and “Man does not live by bread alone“.
Diminishing marginal productivity also features as “Too many cooks spoil the
broth”.
There are sayings that inform portfolio
management like “Don't put all your eggs in one basket”, and savings, like “A
penny saved is a penny earned”. Of
course, the concept of opportunity cost is also summed up neatly in “There's no
such thing as a free lunch” whilst the importance of letting “bygones be
bygones” is put simply in “It's no use crying over spilt milk”.
The general neo-classical attitude towards
preferences is summed up in “There's no accounting for tastes”. Concerns with
equity are also brushed off quickly in the proverbial world - as they are in
neo-classical economics with “One law for the rich and another for the poor”. Likewise
legal instruments: “The law is an ass”
In what may be the strongest endorsement of
behavioural economics to date, proverbs are particularly rich in describing the
findings from this particular sub-field of economics. Several sayings suggest
that rational economic behaviour may be less commonplace than suggested by neo
classical theory, for instance: “There's nowt so queer as folk”, “A fool and
his money are soon parted” and “A little knowledge is a dangerous thing”.
Salience,
framing, attribute substitution..
There is a wealth of proverbs that warn
against susceptibility to salience effects: “It's the squeaky wheel that gets
the grease”, “Out of sight, out of mind”, “Seeing is believing”, “What the eye
doesn't see, the heart doesn't grieve over”, and “A picture paints a thousand
words”. The tendency for people to substitute attributes is hinted at in “A
drowning man will clutch at a straw”, “There are none so blind as those, that
will not see”, and actually actively encouraged in “Cleanliness is next to
godliness”, “Clothes make the man”, and
“Ask no questions and hear no lies.” We
are warned against framing effects in “All that glisters is not gold”, “Give a
dog a bad name and hang him”, “Never judge a book by its cover”. A clue to
priming effects could have been drawn from “A word to the wise is enough”, and
“There's no smoke without fire”. It is
worth exploring whether and when “Actions speak louder than words” and whether
people really do act on the heuristic that “Barking dogs seldom bite.” Another possible field for a future research
agenda is to what extent “Flattery will get you nowhere”.
Beyond
self interest
The importance of pro-social behaviour also
emerges clearly in folk-wisdom. From warm-glow effects - “Virtue is its own
reward”, “It is better to give than to receive”, to reciprocity - “Do as you would
be done by“, “One hand washes the other” “One good turn deserves another” and
“Love thy neighbour as thyself.” Pro-social preferences are described as “Charity
begins at home”, “Share and share alike” and “ Cold hands warm heart”. The importance
of pro-social behaviour is summed up in “A volunteer is worth twenty pressed
men”.
The reluctance to wield out altruistic
punishment can also be explained by expressions like “People who live in glass
houses shouldn't throw stones”. It seems we also knew the findings of ultimatum
games all along, with sayings like “don’t cut off your nose to spite your face”
and “don’t look a gift horse in the mouth”. Likewise, knew all along that
“Revenge is sweet” and that it is “a dish best served cold”.
Endowment,
loss aversion, status quo and anchoring
Proverbs provide a succinct understanding
of what people experience with endowment effects and loss aversion in sayings
like “Count your blessings”, “Better the Devil you know than the Devil you
don't”, “You can't have your cake and eat it” and “You can't make an omelette
without breaking eggs”. Research
findings are also confirmed in “Easy come, easy go”. This said, it would be
interesting to invite further research as to whether “'tis better to have loved
and lost, than never to have loved at all”. Status quo bias and anchoring effects should
come as no surprise, considering sayings like And “A rolling stone gathers no
moss”, “Don't rock the boat”, “Don't upset the apple-cart” , “Don't change
horses in midstream”, “Better safe than sorry.” At the same time, the
sentiments of the over-confident are summed up in sayings like “All's for the
best in the best of all possible worlds”, “Every cloud has a silver lining”,
“Faint heart never won fair lady”, “Faith will move mountains”, “Fortune
favours the brave”, “He who hesitates is lost”, “Hope springs eternal”, “In for
a penny, in for a pound”, “Lightning never strikes twice in the same place”,
“Nothing venture, nothing gain”, “Third time lucky” etc etc. but even here, proverbs
provide ample warning with “Don't count your chickens before they are hatched”.
In an application to family economics, whilst proverbs recognize that many
believe that “Marriages are made in heaven”, they warn that “Marry in haste,
repent at leisure”.
Peer
effects
As for the struggle with identification to
find peer effects - surely the sheer
amount of proverbs are enough to suggest that these really exists? “A person is
known by the company he keeps”, “There's safety in numbers”, “When in Rome, do
as the Romans do”, “If you can't beat em, join em”, “If you lie down with dogs,
you will get up with fleas”, and “Imitation is the sincerest form of flattery”,
although it could be a case of “Birds of a feather flock together” and “Great
minds think alike”. An interesting research agenda would be whether peer
effects are stronger in positive domains as suggested in: “Laugh and the world
laughs with you, weep and you weep alone”
Time
discounting, will-power
Everything in the proverbial world seems to
confirm research on the human tendency for present focus, with may proverbs actively
encouraging people to think of the future “An apple a day keeps the doctor
away”, “A journey of a thousand miles begins with a single step”, “As you make
your bed, so you must lie upon it”, “As you sow so shall you reap”, “An ounce of prevention is worth a pound of
cure”, “A stitch in time saves nine”, “Everyone wants to go to heaven but
nobody wants to die” ”Make hay while the sun shines”, “Never put off until tomorrow what you can do
today”, “Procrastination is the thief of time“. Patience too is actively
encouraged in sayings like “All good things come to he who waits”, “Patience is
a virtue”. On the other hand, some proverbs do seem to advocate present focus,
“There's no time like the present”, “Carpe diem”, “Eat, drink and be merry, for
tomorrow we die”, “Live for today for tomorrow never comes”, and “Shrouds have
no pockets”. Recognizing the dilemma that presents itself proverbs offer other
wisdom such as: “It's never too late”, “Time flies”, “Time is a great healer” and
“Time will tell” and quite simply, “A watched pot never boils”.
The struggle with will-power receives a lot
of attention in sayings like “Do as I say, not as I do”, “Failing to plan is
planning to fail”, “If you can't be good, be careful”, “No pain, no gain”, “The
road to hell is paved with good intentions” and “There's many a slip 'twixt cup
and lip” “Where there's a will there's a way”, and “ If at first you don't
succeed try, try and try again” and “Rome wasn't built in a day”.
Recall,
mental categories, emotion
The tricks our mind plays with recalling
past events is evident in sayings like “All's well that ends well”, “distance
lends enchantment to the view”, and
“Absence makes the heart grow fonder”,
though why proverbs suggest that “Hindsight is always twenty-twenty” is
not yet clear (though it certainly is an assumption made in most studies). The
joys of savouring are also explored in “It's better to travel hopefully than to
arrive”.
That people have issues with mental
categories seems evident in sayings like “A place for everything and everything
in its place”, “Penny wise and pound foolish”, and “Take care of the pence and
the pounds will take care of themselves.”
Visceral effects are captured in sayings like “The way to a man's heart
is through his stomach”, “Love is blind”, “Love will find a way”.
Happiness
Even happiness research found what proverbs
had told us all along, that “Money isn't everything”, and “The best things in
life are free”. We knew all along about relative effects as “comparisons are
odious”, “Ignorance is bliss” and “The grass is always greener on the other
side of the fence”. The financial crises
itself was forecast in “He that goes a-borrowing, goes a-sorrowing” and “Give
credit where credit is due”.
System
1 and System 2
The notion of System 1 and System 2
thinking is captured so elegantly in “One half of the world does not know how
the other half lives”, “There are two sides to every question”, “Every stick has
two ends”, System 1 operates on sayings like “First come, first served”, “First
impressions are the most lasting”; System 2 employs other sayings like “Doubt
is the beginning not the end of wisdom”, “Fools rush in where angels fear to
tread” “It's no use locking the stable door after the horse has bolted”, “Look
before you leap”, The effect of distraction is also summed up in “When the
cat's away the mice will play”. What remains to be researched is whether “No
man can serve two masters”, or “Two heads are better than one”.
Demographics
and Intervention
Some proverbs also reveal correlation between
demographics and behavioural findings, such as: “Boys will be boys”, “A good man is hard to
find”, “Behind every great man there's a great woman”, “The female of the
species is more deadly than the male”,
“The husband is always the last to know”, “There's no fool like an old
fool” and “You can't teach an old dog new tricks”, seem to substantiate much of
what peer-reviewed research has found to date. The nature vs nurture debate
remains unresolved in proverbs as it does in the research. Is it “Like father,
like son”, “The hand that rocks the cradle rules the world” or “is Life is what you make it?” Proverbs
suggest that “The good die young”. To date, this runs counter to most findings
in behavioural economics.
The ethical debate on choice architecture
is informed by “Give a man enough rope and he will hang himself”, “A man who is his own lawyer has a fool for
his client” and “The price of liberty is eternal vigilance” Yet proverbs cast a
pessimistic view on the possibility of de-biasing behaviour: “It is easy to be
wise after the event”, “You can lead a horse to water, but you can't make it
drink”, and “A leopard cannot change its spots.” A glimmer of hope may yet
exist, as suggested by “You are never too old to learn.” At least “fore-warned
is for-armed.” Ultimately “What can't be
cured must be endured”.
An
agenda for future research
Proverbs also provide us with a research
agenda for behavioural economics. Do we use other – as yet under-researched - heuristics
that lead us astray like “If you want a thing done well, do it yourself”, “That
which does not kill us makes us stronger”; “All you need is love”; “A new broom
sweeps clean”; Is “All publicity is good publicity” or do we believe that
“Still waters run deep”? Do we have different rules of what is “fair in love
and war”? Do we behave as though “Blood is thicker than water”? Do we have a
tendency to “Throw the baby out with the bath water”? Does “Early to bed and
early to rise” really make a man “healthy, wealthy and wise”? Under what
conditions is “Hard work never did anyone any harm” true? Does “Life begin at
forty”? Is “Necessity is the mother of
invention?”, in risky decisions, are we “Once bitten, twice shy”?
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