The Science Of Decision Making

Basketball fans are in their glory as their heroes take to the court. The season is underway and the stars are making news. They make sinking three pointers look easy, almost effortless.

None of those stars are mechanical engineers. They know enough about the laws of nature, however, to find the basket from twenty five feet out. They instantly processes all of the information necessary to release the ball at the exact moment, at the exact angle and with the exact velocity to find the net. The laws of physics can describe what happens in detail, but that knowledge doesn’t make it happen. Only their experience and decisions from moment to moment make it happen.

In the same way, the laws of economics describe what happens in daily life, but when you go to the market, you don’t need to be an economist to successfully provide for your family. Like our basketball players, you instantly process all of the personal preference and market information needed to make decisions.

Mechanical engineers use their knowledge of cause and effect to understand a certain result, the trajectory of a basketball, for instance. If the same conditions, inputs and processes are used, the result will be consistent and predictable. A basketball, backboards and hardwood floors have strictly identifiable characteristics. They will always react the same way to applied conditions.

Social engineers, on the other hand, try to use the laws of economics to bring about what they think is good. To a certain extent, that is possible, because we can anticipate the general reaction of the markets to external forces. There are multiple problems with this engineering approach, however. Real people have their own goals, ambitions and preferences. They have their own ideas of what is good. They don’t always do what is expected. There will be unanticipated disasters, hurricanes, droughts, business failures and government interventions that can dramatically change people’s perceptions, expectations and needs.

Physical scientists work with known quantities and constants. They can control the inputs and precisely describe the reaction of materials. In the social sciences, however, there are far too many variables and unknowns to arrive at any precise cause-effect relationships. Scientists can’t possibly know and measure all of the far reaching effects of actions on each member of society.

Even if they were able to perfectly direct the society to bring about the desired good results, who’s conception of good should be used? With 300 million people in this country, there is a wide divergence of opinion of what is good and appropriate. The more effective the social engineers are at imposing their own view of what is good, the more offensive and abusive they are to those that oppose them. People have a right to act in their own interest as long as they don’t infringe on the rights of others.

While the primary effects of market manipulation are somewhat predictable, secondary effects are usually hidden, but often just as or more significant than the primary. In the social realm, conditions and preferences can vary minute by minute. Humans are acting beings. They are not controllable, and react in different ways at different times.

In any event, the process of manipulation is necessarily political, and expediency is the rule, rather than what is good or right. The changes are guided by the selfish interests of politically powerful groups, and not by the general good, whether or not that good was known or even knowable. They will emphasize the here and now benefits to themselves or their group and ignore the negative consequences to other groups, or longer term effects. The use of political force to bring about good also assumes selfless leaders that act only in the public interest, an obviously unrealistic expectation to even passive observers of reality.

Many people claim to know what is good for the population, the citizens, the people, but the welfare of a population is maximized only when free people make free decisions without coercion from anyone. Economic freedom correlates with improvement in all measures of well-being. It is a rational consequence of the most fundamental elements of human action.

Scientists are trained to understand cause and effect, to explain what is. They can help individual baseball players or market participants achieve their goals, and players should use whatever knowledge will help them in their achievement. Scientists are, however, no more qualified than any other person to dictate to everyone what those goals should be. Decisions and opinions are not the realm of science but, rather, the realm of human choice. Humanity is always better off when basketball decisions are left to basketball players and market decisions to the market players, that is, you and me.

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