Sunday, November 29, 2009

Economists think long-term

Al Gore, David Blood; Financial Times:

Why do investors and business leaders continue to focus on the short-term and ignore the fact that businesses that think long-term end up more competitive and profitable? Behavioural economists believe they have the answer: our brains are hard-wired to think short-term because evolution has rewarded serial short-term successes such as avoiding predators and other dangers that faced our ancestors. Their survival ensured our existence – but predisposed us to the same kind of short-term thinking. As a result, even though our world is very different from theirs, long-term decision-making remains the exception, not the rule.

Anyone who is interested in discovering why "investors and business leaders" behave a certain way would probably do well to begin their inquiry with a close examination of "investors and business leaders," not  humankind as a whole.  After all, investors and business leaders are distinguishable from other social groups, and can be compared in relation to them.  The fact that liberal economics -- "behavioral" or otherwise -- routinely ignores these distinctions in favor of categorical assumptions about "human nature," suggests an unwillingness to scrutinize particular groups in a socially meaningful way. 

Why are economists inclined to shift the focus from groups they are presumably tasked to understand to open-ended speculation about human evolution?  One might say it is in their "long-term interest" to do so!

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