everyone needs to understand that behavioral economics is total crap -- a bunch of "writers" who make a lot of waves and a lot of money by finding elaborate and confusing ways to describe perfectly ordinary shit.
take Predictably Irrational, a book that spends about two hundred and fifty pages exploring the idea that people can be tricked into paying more for something than they should. you can find this book and an example of its thesis for $25.95 in the "No Shit" section of border's.
here's a gem: "Relativity is (relatively) easy to understand. But there's one aspect of relativity that consistently trips us up. It's that we not only tend to compare things with one another but also tend to focus on comparing things that are easily comparable -- and avoid comparing things that cannot be compared easily." did you catch that? we tend to compare things that are easily comparable, and we tend to avoid comparing things that are difficult to compare. this trips us up. the quote is from page 8, because tautology is always where these books start. we compare things that are comparable for the same reason we eat "breakfast" in the morning.
from this foundation (that A is A), such a book will reliably proceed to conduct a long series of bizarre experiments (in this book, many of the experiments are conducted on the author's "students"). one gets the feeling that these are all scribbled in one of those jackson pollick looking composition notebooks, frayed at the edges, cocaine residue covering every inch. anyway, check out this doozy (i'm quoting the whole thing, because nobody's reading this shit anyway, and reading the author's own words is the best way to absorb the creepiness):
Imagine that you're taking part in an experiment to test the efficacy of a new painkiller called Veladone-Rx. (The actual experiment involved about 100 adult Bostonians, but for now, we'll let you take their place.)
You arrive at the MIT Media Lab in the morning. Taya Leary, a young woman wearing a crisp business suit (this is in stark contrast to the usual attire of the students and faculty at MIT), greets you warmly, with a hint of a Russian accent. A photo ID identifies Taya as a representative for Vel Pharmaceuticals. She invites you to spend a moment reading a brochure about Veladone-Rx. Glancing around, you note that the room looks like a medical office: stale copies of Time and Newsweek are scattered around; brochures for Veladone Rx are spread out on the table; and nearby is a cup of pens, with the drug's handsome logo. "Veladone is an exciting new medication in the opioid family," you read. "Clinical studies show that over 92 percent of patients receiving Veladone in double-blind controlled studies reported significant pain relief within only 10 minutes, and that pain relief lasted up to eight hours" And how much does it cost? According to the brochure, $2.50 for a single dose.
Once you finish reading the brochure, Taya calls in Rebecca Waber and leaves the room. Rebecca, wearing the white coat of a lab technician, with a stethoscope hanging from her neck, asks you a set of questions about your medical condition and your family's medical history. She listens to your heart and measures your blood pressure. Then she hooks you up to a complicated-looking machine. The electrodes running from the machine, greased with a green electrode gel, encircle your wrists. This is an electrical shock generator, she explains, and it is how we will test your perception and tolerance of pain.
With her hand on the switch, Rebecca sends a series of electrical shocks through the wires and into the electrodes. The initial shocks are merely annoying. Then they become painful, more painful, and finally so painful that your eyes fly open and your heart begins to race. She records your reactions. Now she starts delivering a new set of electrical shocks. This time she administers a set of charges that fluctuate randomly in intensity: some are very painful and some merely irritating. Following each one, you are asked to record, using the computer in front of you, the amount of pain you felt. You use the mouse to click on the line that ranges from "no pain at all" to "the worst pain imaginable" (this is called a "visual pain analog").
When this part of the torture ends, you look up. Rebecca is standing before you with a Veladone capsule in one hand and a cup of water in the other. "It will take about 15 minutes for the drug to reach its maximal effect," she says. You gulp it down, and then move to a chair in the corner, where you look at the old copies of Time and Newsweek until the pill takes effect.
Fifteen minutes later Rebecca, smearing the electrodes with the same green electrode gel, cheerfully asks, "Ready for the next step?" You say nervously, "As ready as I can be." You're hooked up to the machine again, and the shocks begin. As before, you record the intensity of the pain after each shock. But this time it's different. It must be the Veladone-Rx! The pain doesn't feel nearly as bad. You leave with a pretty high opinion of Veladone. In fact, you hope to see it in the neighborhood drugstore before long.
Indeed, that's what most of our participants found. Almost all of them reported less pain when they experienced the electrical shocks under the influence of Veladone. Very interesting -- considering that Veladone was just a capsule of vitamin C.
the experiment is then repeated, only this time the pill's cost is 10 cents per dose; the placebo effect is halved. the conclusion: "When it comes to medicines, then, we learned that you get what you pay for. Price can change the experience."
so the perceived effect of a placebo is anchored to the price of the drug. this is something that drug dealers, for one, have known for decades: your heroin can be 90 percent baking soda, and as long as you charge heroin prices the addicts still want it. people have been pulling this stunt forever: you have something you don't want; you give it a high price and a flashy pitch; people pay you for it.
the intricate torture scenario is not necessary to prove a banal and widely accepted hypothesis. obviously people are not perfectly rational economic actors. just as obviously, this irrationality can be manipulated. it's called being a con-man. throwing in a "complicated-looking machine" that causes great pain, however, is called being an economist, an academic.
there's a lot of this sort of thing going around these days. from the widely-read Freakenomics series (and blog), to malcolm gladwell's annual inside look into how stuff happens, to Nudge by obama cabinet member cass sunstein. Predictably Irrational is an especially odious example of this trend, as it's sole focus throughout seems to be on how to trick people into giving you their money (holding a man upside down and shaking him apparently being out of style).
but there is a little more depth to this "discipline". it isn't all creepy, sadistic marketing experiments. what behavioral economists like to focus on is social policy, how to shift government policy toward more rational aims. sunstein in particular has recently been demonized by some on the right wing, which is returning to its modern roots of scouring the land, trying to ruin the careers of any "marxists" it can find.
that marx is tied to this fad of fusing state-capitalism and modern behavioral psychology is yet another sign of our resounding national ignorance. the mandate of marxism is global economic justice; the mandate of behavioral economics, by contrast, is efficiency (ever an urgent concern for capital). these guys are about as marxist as ayn rand.
of course, a lot of communists have been super-crazy, plus the berlin wall fell. when in rome, and all that.
so how does this affect the commodity nearest to my heart, music? pitchfork is there to fill the gap. after spending a breezy two paragraphs on how just-plain-creepy behavioral economics is, tom ewing hits us with this: "[I]n a low-trust and low-money environment, behavioral economics is politically irresistible: It's simple, it's barely noticeable, and it's cheap. More, it promises a kind of psychological judo. We could batter ourselves senseless and penniless against people's irrationality and selfishness while trying to change their behavior. Or we could use those very traits to 'nudge' them in a desired direction. No wonder business people, as well as politicians, like it so much-- it seems to offer solutions to all kinds of sticky behavioral problems." how quickly this shit always turns into tiny fascism, obsessed with "solving" all sorts of "sticky behavioral problems". (problems such as, "why don't people give me more money?")
seriously, though, the issue ewing addresses is: is there any way to trick people into paying for music even though they don't like to. he cites the example of mflow, an internet community that has come up with an elaborate system to re-attach a cash transmission to the distribution of music. the method employed by mflow reads like something cribbed from one of those cocaine-smudged composition books i talked about before: "You share 'flows'-- songs or albums-- with [your followers], and they do the same for you. When you see one you like, you can buy it, and 20% of what you pay goes to whoever shared it with you in the first place." kind of clever, no? can such an idea succeed? probably, for a little while. but success in this environment is not only hard to come by, it's usually short-lived. remember, the napster kid once made a lot of money selling his shit to BMG, and now it's swallowed up in rhapsody, which no one on earth uses.
of course, the success or failure of any one venture capitalist start-up isn't really important. at all. to anyone, really. what sucks is that all the ideas thrown out in the article are inexorably tied to "social networking". now i'll admit that people are communicating through their electronic dealies in droves these days. but the notion that, like the steam engine and the automobile, social networks will define human interaction for the foreseeable future? well, sure it's plausible. but it's also depressing as hell.
people who consume creativity primarily through their computers are abstracted from the vast amount of work that goes into the creation of every single piece of art. the audience has always been necessarily removed from the labors of creativity to some degree, but the fact that music now comes wirelessly from the air around us has vastly increased that distance. as long as the works lack context (beyond categorization), consumers by and large will not want to pay for them. mixing in the trivialities of social networking, replete with "friends", "badges", and "groups", doesn't accomplish much besides making the whole thing seem even more repulsive.
remarkably, tom ewing ends up agreeing. "Real life games are attractive to marketers because they impose objectives onto behavior, which makes it easier to change and to predict. But like most social media, they also bring people's networks out into the open and turn them into something you can make money off when you can't make it out out of fans themselves so easily. In this case, I can't help feeling that the social relations we form around music and fandom are better off uncommoditized." so that's his argument against. do you notice something missing here? i sure do. where the hell are the musicians?!
and, to go back to the fake opioid experiment from before, this is the problem with behavioral economics: it encourages you to see things from the perspective of capital ("marketers") and of consumers ("fans themselves"), while completely ignoring the needs of labor. in each of the solutions that tom ewing presents (or those offered up by almost anyone else when they address this issue), the role of the musician is similar to the role of the test subjects in the Veladone-Rx experiment: he goes through excruciating pain repeatedly, but the last time he's tricked into thinking it doesn't hurt.
music is something people make with their hands and listen to with their ears. (we began with tautology and we'll end there, damnit!) the best way to move forward is to throw out the complicated-looking machines and be done with the byzantine petty fascism of behavioral economics.