Bigger than meets the eye

Bryan Caplan has another great post up on Econlog.  In it he mentions his rule of thumb that “Human heterogeneity is bigger than you think“.

I completely agree, and often when we look at other people, or when economists analyse decision making, we rely on the fact that other people share certain attributes with us – an assumption that can be folly.

Furthermore, I found his description about the debates around imagination in the 19th century to be eye opening.

However, I also believe a second rule of thumb “Human homogeneity is bigger than you think“.

On the face of it this seems to be contradictory – I appear to be saying that people are more different than we give them credit for AND more similar than we are willing to admit.  However, I would state that this is not contradictory at all, and that by accepting both of these rules we reach a fuller understanding of what we do when we go to analyse choice and other individuals.

Fundamentally, we view others as “less” in terms of their thought processes than we view ourselves.

Think about your own thought process.  Think about all the issues, expectations, rules of thumb, social construction, and concerns that drive your decision making on a daily basis – think of the depth of all your experience.

Then consider that the people around you have the same depth of experience and thought – no matter how hard you think about it, it is impossible to really view someone with the same level of detail that you do yourself.  You do not have the information, and you do not have the interest.

In this context, merely focusing on the fact that humans do not understand the heterogeneity of experience between individuals would give you a biased picture of any underlying cognitive biases – in truth, the lesson is that humans (and economists) create a caricature of individuals in order to help them make decisions.  That caricature doesn’t just strip out heterogeneity, it also strips out elements where individuals are similar, and helps to reinforce the importance of issues like signalling for the outcome of individual decision making.