Life presents us with some very large decisions: where to live, whom to marry, whether to have children. Is there any reason to believe that we make these choices wisely?
Don’t come to an economist for the answers. When it comes to choice, classical economics leaps to the punch line and works backwards: if both Betty Sue and Sally Ann are willing to marry you and you chose Betty Sue, the economist can only conclude that you preferred Betty Sue. Whether the marriage made you happy, or you were right to choose her, is none of the economist’s business. Game theory, for instance, may tell you how to get what you choose, but not how to choose.
Economists are not surprised to hear the (perhaps apocryphal) story that circulates about the great game theorist Howard Raiffa, who is said to have been trying to choose between a large increase in salary at Columbia University or a high-status move to Harvard. Sharing the dilemma with a friend, Raiffa was told to deploy the traditional tools of economics. He is said to have retorted: “You don’t understand. This is a serious decision.”
I am not in Howard Raiffa’s league, but I feel his pain when Family Harford wrestles with the big choices in life. The true challenge is that these choices force us to imagine different possible futures – one with Betty Sue and one with Sally Ann; one living in Surrey and one in Scotland.
Full report here Financial Times