The priorities of the items in the news hint at an important factor in our economic decision-making
In the past week, three themes have been dominating the news headlines in the UK: the football world cup, Brexit and the fate of the 12 boys and their football coach trapped in a cave in Thailand. At first this has little to do with economics.
Well, arguably, Brexit has a lot to do with economics, but I am alluding to the decision-making what to cover and not to cover, how much time or column inches to devote to each item, and what order or page to present them in. And that is very much economics: it is about allocating precious, scarce resource.
Editors have a tough task. With very little time to prepare — especially those responsible for newspapers’ early editions or morning broadcast news — they need to decide what should be most prominent for their readers, listeners and viewers.
Audience figures matter a lot, so they must shape the front page or the news headlines according to the tastes of their target public. If their decisions don’t chime with their audience and it turns away, they will soon be replaced by someone better at the job. So it is reasonable to assume that editors are at least quite competent at anticipating what is important to us here at the other end.
So far so good. But what makes something important to us? You might imagine that the news will reflect events and developments that may affect our wealth and our health — aren’t these top priorities?
Yet strangely, it’s hard to see how these three themes fit that requirement. The football world cup results may have some significance for the vendors of merchandising, but the material impact on the vast majority of the population is very small.
Brexit, in contrast, will most definitely materially affect the wealth and prosperity of many Britons. But that was not what hit the headlines. Even though leaving the EU will hit most people in the wallet, there is little interest in the technical details. No, it was the drama (some might say the pantomime) around the movements in the British government that caught the attention. On 6 July Chequers, the Prime Minister’s country residence, was the stage for the long-anticipated crunch meeting where Theresa May would seek to establish consensus around a comprehensive Brexit plan. That evening, it seemed the entire cabinet had unanimously backed the plan. But barely 48 hours later David Davis, the Secretary of State for Exiting the EU, had resigned. And by Monday afternoon, Foreign Secretary Boris Johnson had also left. Arguably, the resulting changes to the cabinet too may indirectly have material consequences for the electorate (and the expatriates living in the UK but not entitled to vote), but by and large, that was not the focus of the reporting.
Perhaps the strongest indicator of what drives the choice of news items lies in the story about the entrapment of the 12 teenage footballers and their coach in the Great Cave of the Sleeping Lady, and their subsequent rescue. Here, any connection with anyone’s present or future wealth is extremely remote — yet it is a story that has enjoyed, even more than the other two, exceptional global popularity. The idea itself of being trapped underground in pitch darkness for over a week, with water rising, with barely any food or drink, and with no idea whether you will ever be found — it’s pure stuff of nightmares. And this was happening, not to rugged, experienced cavers, but to a bunch of boys. It’s not hard to see how it was the emotional connection that captivated millions of people worldwide.
It’s just a small step from there to the emotions involved in the football world cup. Both my native country and the country where I have been spending the second half of my life reached the semi-finals. Am I a great football fan? Not at all. Is football important to me? Not really. Well, I say that, but it does seem to have been important enough to me to join countless other people who otherwise rarely watch football, and spend about two hours of my life watching a game several times in recent days. Sure, I was selective in my interest — because only two teams really engage my emotions — just like so many other people who root for ‘their’ team. No surprise then that news editors have been allocating a lot of their scarce resource to the adventures of the national team.
And emotions abounded just as much in and around the recent episode of the Brexit soap opera. The cliff-hanger of the Chequers meeting, the delayed resignations, the showmanship of Boris Johnson who invited the press to witness his signing of his is resignation letter, the scheming of outraged Brexiteers weighing up their chances to topple Theresa May, and so on — all the way to Donald Trump’s sizeable contribution just this morning. You didn’t even need to choose a side to be engrossed by the spectacle –it had something of a Shakespearian tragedy. But of course for many people in polarized Britain this was either an opportunity to experience a combination of smugness and schadenfreude, or of affront and despair — adding to the emotional gravity.
News editors give more weight to stories that chime with our emotions. And it is apparent that those are altogether not stories about what makes us materially better off or worse off.
Those preferences for news — so aptly identified by editors — carry over in our wider (economic) decision-making. We most certainly incorporate emotions in the choices we make.
That goes squarely against a certain, narrow interpretation of us people as homo economicus, the rational, utility-maximizing, self-interested character, in which utility only reflects material costs and benefits. Yet it also challenges a widespread perspective in behavioural economics, in which we are all profoundly irrational, riven with biases and prone to fall for fallacies.
But is it truly irrational to prefer a job where you earn $50,000 and your colleagues $25,000 over one where you earn $100,000 and your colleagues $200,000? (That is what about half the participants in a 1997 study by Sara Solnick and David Hemenway chose.) Or is it the blatant unfairness of the second job, compared with the pleasant feeling of superiority of the first that is, apparently, valued at $50,000?
Is it irrational for people to strongly prefer a ‘platinum’ credit card over an ordinary one offering identical benefits? (This is what Leonardo Bursztyn, Bruno Ferman, Stefano Fiorin, Martin Kanz and Gautam Rao found in a 2017 field experiment in Indonesia.) Or does the higher perceived status of the platinum card confer real emotional utility?
When you realize how deeply emotional considerations are involved in the decisions we make, choices that may appear surprising or indeed irrational at first become perfectly understandable. And when you realize that, for different people, different emotions may be at play, that is even more the case. But it would be a mistake to conclude from this that we are not rational, but emotional beings. On the contrary: it is precisely our own, individual emotions that make us rational — at least some of the time.
Originally published at koenfucius.wordpress.com on July 13, 2018.
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