Irrationality Can Screw Up Your Life

As if we needed more evidence that rationality is a good thing, it now seems like irrationality is not just something that will lead you to have crazy beliefs and not understand how the world works; it can also kill you (among other things).

Scott Beaulier and Bryan Caplan argue in a paper titled Behavioral Economics and Perverse Effects of the Welfare State that the traditional explanation about crime being more attractive to the poor because their legal options to improve their situation are limited is unsatisfactory.

It might seem intuitive that more poor people commit crimes because they are trying to get out of poverty, but evidence shows that most crimes are not very lucrative.

Their theory?

What’s my alternative? Crime is just one of many, many “social pathologies” that are over-represented among the poor: alcoholism, drug abuse, smoking, obesity, illegitimacy, etc. None of these are good escape routes from poverty. So instead of trying to explain why “poverty causes crime” or “poverty causes obesity,” it makes sense to look for common causes of poverty and social pathologies.

Like what? In a paper just accepted by Kyklos, Scott Beaulier and I point to a simple candidate: irrationality. People who have biased beliefs about practical matters, and/or exercise poor impulse control, are likely to screw up their lives across the board. So it’s hardly surprising that poverty and self-destructive behavior go hand in hand. Rather than being a natural response to poverty, a lot of crime can be seen as objectively self-destructive behavior that happens to have an unusually large amount of collateral damage. (link)

This seems consistent with anecdotal evidence that poor but educated people aren’t as likely to suffer from these social pathologies (and by educated I most certainly am not talking only about formal schooling).

It’s not about how much is in your wallet, but how much is in your head. So get smart (you can if you have a growth mindset).

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5 Responses to “Irrationality Can Screw Up Your Life”

  1. Matt Duing Says:

    I think the same principle is at work when people regret winning the lottery. Money is no protection, especially not when acquired through an irrational act.

  2. Steve Olson Says:

    MGR,

    I’ve always wondered about these assessments…

    People say poverty creates crime and go about proving it with statistics.
    Isn’t it possible that crime creates poverty? Don’t statistics prove that as well?

    I’ve also read poverty increases the chance of single motherhood. But doesn’t single motherhood increase the chance of poverty?

    If alleviating poverty cured social problems, then welfare/socialism should end these problems, but socialism appears to deepen the problems. IMHO poverty is a symptom of other problems, not the root cause.

    Has aid to Africa ended famine, war, genocide, and poverty? No, it has increased. If we send more aid and it continues to increase, we conclude the problem is that we haven’t sent enough. Then we send more and get more of what we don’t want, because we are in a deep sense of denial about what causes poverty…
    A lack of economic/personal freedom combined with a lack of self-discipline. The poor don’t need a handout, they need freedom, liberty, and responsibility.

  3. Michael Graham Richard Says:

    Hi Steve,

    I think you might have misread.

    The whole point is that irrationality/”beliefs not in line with reality” increase your chances of suffering from a range of social pathologies, including crime and poverty.

    So the article agrees with you that poverty/crime/self-destructive behavior is a symptom, not a root cause. According to the researchers, that root cause is irrationality (in a statistical sense — this is probably not a predictor on a case by case basis, as with most general theories).

  4. Steve Olson Says:

    MGR,

    No I didn’t misunderstand.

    I was agreeing with a little spin. Just sounding off.

  5. Michael Graham Richard Says:

    Sorry. In that case, I misunderstood :)

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