Notes from Underground

~ Marco Piovesan ~ 1 Comment

In June 2020 I was preparing the material for my summer school “Economics of Misbehavior” [Link] and I decided to read Dostoevsky’s short novel Notes from Underground [Link]. The principal character is a retired mid-level government bureaucrat living in St. Petersburg that cannot stop humiliating himself and embarrassing others. I love this book and I think it is a masterpiece of the literature and a must-read book for behavioral economists. In the first part of the novel, the underground man says that human beings are inconsistent and unknowable. They have no logic and their actions make little (or no) sense. In short, Notes from Underground describe human perversity and illogicality.

This novel is a nice contrast to “our” Rational Choice Theory that provides precise theoretical models to understand and predict human behavior. We assume that humans are rational beings and capable of conducting ourselves in logical ways. Dostoevsky hates the idea that if we strived to be more rational, we would stop acting in ways that harmed ourselves and society. He wrote that there are millions of instances where people have knowingly gone against choices that would bring them the greatest “utility” and well-being. To understand human (mis)behavior we need to understand that an individual is not a “sort of piano key or a sprig in an organ”. It is something more complex. 

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The Law of the Hammer

~ Marco Piovesan ~ Leave a comment

Abraham Maslow in his book The Psychology of Science (1966) wrote “I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail”.

The law of the hammer is a cognitive bias that involves an over-reliance on a familiar tool. For example, when you learn a new economic concept you may apply it everywhere – which may result in failure to seek out other (potentially more efficient) alternatives.

The concept is attributed both to Maslow and to Abraham Kaplan although the hammer and nail line may not be original to either of them (or more information read here).

Charlie Munger in Poor Charlie’s Almanack (2005) [Link] wrote that one partial cure for the law of the hammer is multidisciplinarity. If a man has a vast set of skills over multiple disciplines, he, by definition, carries multiple tools and, therefore, will limit bad cognitive effects from man-with-a-hammer tendency.  In other words, single disciplines are too narrow a perspective regarding many phenomena. The world in which we live in exhibits a level of complexity that makes it impossible to understand the important phenomena that are affecting humans today from the perspective of any single incomplete system of thought.

In short, the mere knowledge from only one domain, is not enough. To be wise, you must develop a true curiosity to read different streams of literature and constantly learn new perspectives of the world.

To know more: read the introduction of The Nature and Method of Economic Sciences: Evidence, Causality, and Ends by R. F. Crespo (2020) [Link].

Please note that this page contains affiliate links and any sales made through such links will reward me a small commission – at no extra cost for you. Thanks for your support!