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why you can’t buy a place in line

The Guardian recently profiled the thriving career of Dan Ariely, author of Predictably Irrational: The Hidden Forces that Shape our Decisions and a million or so journal articles. The article is cleverly written, partly because it has so much interesting material to draw on (do read it if you haven’t heard much about Ariely’s research). In the middle of the article is this fun anecdote, which illustrates why orthodox economics so desperately needed the behavioralists.

Do mainstream economists really approach shopping and life with such clear and cold eyes? Listen to the story of Oz Brownlee, late professor at the University of Minnesota. One Friday, he and a colleague stopped to buy some steaks. Finding a long queue, they offered cash to the person in front to swap places. The shopper was dumbstruck – which the academics took as a bargaining ploy, so they raised the price. As news spread down the line, other customers turned hostile. The Minnesota department of economics alumni newsletter goes on: “Attempts to explain that they were … trying to ascertain whether there was a mutually beneficial trade of time for money that might improve their welfare and that of the next person in line without disadvantaging others met with little success.” The economists left without any steak.

Brownlee’s mistake was to put into practice something that worked only in theory. That, Ariely and other critics say, is the point: conventional economics tries to make the man fit the model, rather than the other way around.

Maybe I’m correct in thinking that orthodox economics is less a theory about human behavior than it is a theory about market design (focusing on a very special kind of market).

Written by brayden king

May 27, 2008 at 6:30 pm

11 Responses

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  1. It sounds like there weren’t any other economists (or, folks trained in econ) in front of them.

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    tf

    May 27, 2008 at 6:50 pm

  2. It’s the usual deeper sociological point – “staying in line” is not an economic point, it’s moral. We accept in most daily situations that “first come first serve” is more legitimate than “he who has the most $$” gets in line. And unless it’s a lot of $$$, most people will stick by the rule. Interestingly, I did once see people buy their way through a line, but it was at a D&D convention, so the people in line weren’t well socialized to start with.

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    fabiorojas

    May 27, 2008 at 7:45 pm

  3. “Maybe I’m correct in thinking that orthodox economics is less a theory about human behavior than it is a theory about market design (focusing on a very special kind of market).”
    It seems like orthodox economics ought to be a theory less about human behavior and more about market design… but disaggregating the two is rather difficult, no? In order to construct an efficient market for something you have to understand how people will behave in a given market context, and also the meaning of that thing to the relevant people.
    Also, I love Fabio’s example… as someone who has waited in those convention lines, I understand the appeal. But it does lead me to wonder, how is learning role-playing games similar or different from learning conventional economics in terms of behavioral changes? There is some evidence that learning economics makes people act more like economic actors ‘ought’. I wonder if the D&D style thinking, with its similar focus on quantifying risks and payoffs (“experience points” or “gold” instead of “utility” maybe?) leads one to similar kinds of changes? Of course, the endogeneity problems are equally strong if not more so…

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    Dan Hirschman

    May 27, 2008 at 8:16 pm

  4. This post needs some clarification. Did they offer the very first person in the line a sum of money to in essence skip the whole line? Or did they start at the back of the line and start to buy their way forwards. I have been thinking the dynamics of a line while working at my Starbucks job.

    Essentially, each customer has a property right to his or her place in line. It becomes more valuable the closer he or she gets to the register. So by trying to go to the first person of the line you are depriving each person behind in line of that value. I think that should be extremely obvious and if the economist failed to see that negotiating first with the first person in line was a mistake then they weren’t very good economists.

    It might be argued that the person in the front of the line might accept payment and then pay each person behind the price to grin and bare it. But in some sense that is not how good transactions are made. Certainly, some of the people behind value the actual negotiation of their own price.

    That said I am not confident that you could buy your way through a line. The public nature of each subsequent bargaining would quickly raise the price making each additional spot more expensive than the last. Additionally, the line owner (shop owner) might have an interest in keeping the line free of such bargaining, since instead of setting a price for service they force customers to spend time to queue (probably to eliminate the social friction that bidding for service would bring and keep the explicit price of the good lower).

    I sincerely think that it might work better if one went to the end of the line of a business school cafeteria.

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    R. Pointer

    May 27, 2008 at 9:30 pm

  5. The other people in the line were basically together a de facto cartel that was able to assert its right to prevent a transaction unless it got a rent. The cartel prevailed. I don’t see why the economists think it’s good economic theory to expect someone to stand by and let other people engage in a transaction for free when they might be able to get something out of it. Also, the people behind the economists certainly benefitted from any role they played in preventing the transaction since apparently they got their stake sooner.

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    jeremy

    May 28, 2008 at 1:29 am

  6. it is good that researchers occasionally break such norms so that we can see what happens.

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    Michael Bishop

    May 28, 2008 at 3:25 am

  7. @Jeremy and R. Pointer – Am I misreading, or were the economists offering to switch places, and thus in now way making the people in the middle worse off? If they were trying to cut, I can understand the arguments, but it’s harder to make when the overall line position of everyone else is unchanged.

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    Dan Hirschman

    May 28, 2008 at 3:36 pm

  8. My understanding is that they were trying to persuade someone to switch places, which would mean that nobody other than the persons involved in the exchange would be affected by the transaction. The fact that people were upset by this is more indicative of the prevalence of the fairness norm than anything else.

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    brayden

    May 28, 2008 at 4:08 pm

  9. A very interesting issue. I agree with Dan and Brayden that the case seems to be one in which the other people on line would be no worse off; so in some rational sense, there should be no reason for them to object. And what’s more, even if one could defend their opposition in rational terms (e.g., as some sort of rent-seeking, as Jeremy suggests), that begs the question about why they should get so worked up over it. As Fabio suggested, the reaction involves some kind of (emotional) appeal to a *moral* boundary. Why people should moralize about corrupting the queue with money is an interesting question.

    I don’t have time to really think this through, but one thought is that the mistake made by the ‘naive economist’ is that the rights held by the queue-holders are fully transferable, just as would be say, an IOU or title to a car. Clearly, there are many rights that are not transferable– e.g., you cannot sell (or barter) your citizenship; you cannot sell your rights as a member of the ASA (!); you cannot trade your rights as a son or daughter, etc. The difference between the two sets of cases—call them alienable and inalienable rights– lies in the fact that the inalienable rights are part of an exchange between the right-holder and specific others, (and whereby those others grant those rights in return for certain obligations). For the right to be transferred, those others must be included in the exchange somehow. (As would be true, say, if there was a lien on your car…)

    In the case of the queue, the mistake seems to lie in not realizing that the rights associated with a place on the queue really are inalienable– they depend on the assent of other members of the queue. All queue members depend on one another to respect one another’s place on line, to coordinate with one another (in this sense, I agree with Jeremy about the queue being a cartel) to block cutters, etc. In fact, given the anonymity of the queue, there are often strong tensions just under the surface: consider your discomfort when someone does not seem to be respecting your place in the queue! (There must be the equivalent of road rage for queues). So the moral revulsion seems to be a response to the threat that their rights as fellow queue-members (to decide who goes where in the queue, and to demand fulfillment of certain obligations in return for those rights) are being violated.

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    Ezra Zuckerman

    May 28, 2008 at 7:42 pm

  10. All of this discussion points to the idea that creating and maintaining queues takes a great deal of tacit coordination among participants. This coordination is mostly taken for granted, unless someone tries to disrupt that coordination, at which point you see the kind of discomfort exhibited in the story.

    I vaguely remember a paper that I once read that talked about how queues were not respected in all cultures/nations. After doing some quick googling, I didn’t find it, but I did find this 1969 AJS paper by Leon Mann that examines the queue as a “social system.” In Mann’s words, “this paper deals with the kinds of formal and informal arrangements made in queues to regulate behavior, to recognize the priority of early-comers, and to inhibit the growth of conflict.” There is an entire section of the paper dedicated to queue jumping.

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    brayden

    May 28, 2008 at 10:53 pm

  11. Thanks for the great cite, Brayden.

    Like

    Ezra Zuckerman

    May 29, 2008 at 12:56 pm


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