Home > Articles

  • Print
  • + Share This
This chapter is from the book

Here We Go Round the Prickly Pear

Those of us who have been raised and educated in liberal political economies have been trained to believe that it is human nature to make formally rational choices and transact with each other on an impersonal basis in political and financial markets. Price sensitivity rather than adaptation guides our choices, and technical efficiency is our primary goal. The costs of transacting are irrelevant. Providing that governments or bandits do not interfere too much, we believe that if we follow these principles, we will achieve socially beneficial equilibrium in any situation. These beliefs allow us to tell a sensible story about complicated questions—and sensible stories help us make difficult choices. (Some of my colleagues like to refer to this compunction as "faith-based" political economy.) Alas. Although these simplifications may work well in some situations, they are failing to provide reliable predications about global security issues: Energy security is just one example. Instead of making sense, we are making nonsense, weak predictions, and poor policies.

Our understanding of how we make choices and change turns out to be as important as the substance of these choices. Vernon Smith, a Nobel Prize-winning pioneer in experimental economics, argues that prevailing assumptions and models are grossly misguided. Since the mid-twentieth century, experimental and behavioral economists have been using laboratory experiments to test the predictions of standard models of human behavior. Although their results tend to confirm the predictions of these models in many (but not all) impersonal exchange situations, such as electronic auctions, they are mixed in predicting outcomes in personal exchange. But many of our most important interactions in the global political economy (and elsewhere for that matter) involve personal exchange. These results suggest that we are systematically misunderstanding a great deal of human interaction.

We simply do not behave the way we think we behave. And we most certainly do not behave the way we think we ought to behave. For example, standard models cannot account for the following behaviors that we routinely observe in both the field and in the laboratory:

  • Choosing a cooperative solution even if there is a risk that the person on the other side of the bargain may take advantage.
  • Cooperating with strangers, and with machines.
  • Failing to cooperate or punishing the person on the other side of a bargain when it hurts us to do so.
  • Exerting effort or making a contribution without any prospect for monetary reward.
  • Achieving worse outcomes when we have complete and common information.
  • Forming different expectations and knowledge, even when we have common information and training.

Similarly, standard models—the ones we continue to use and to teach in school, despite their predictive frailties—cannot explain the dilemma Tom Schelling examines, in which intensely competitive and ideologically opposed countries have had weapons of mass destruction for over 60 years but have yet to unleash them. And they cannot explain why some groups are able to protect their natural resources, avert resource conflicts, and avoid the "tragedy of the commons."14 Nor can they explain why Cuban soldiers protected Chevron's oil operations during the Angolan civil war; why, despite religious convictions to the contrary, some young men and women kill themselves in order to kill others for religious reasons; why on 9/11, an able-bodied man working in one of the twin towers decided to stay with his handicapped co-worker, even though there was no reason to believe that they would survive; or, why many economists—perhaps most—refused to travel after 9/11.

Not only do we not behave the way we think we behave or ought to behave, we apparently do not think the way we think we think. Eliot chides that we are "hollow men ... stuffed men leaning together headpieces filled with straw." But we are far better equipped to understand ourselves and the intentions of others than we were in Eliot's day. Our existing models of human nature, government, and the relationship between them rest on rather thin empirical foundations. This is due in part because until fairly recently, we have had limited tools to investigate human nature. But with advances in the neurosciences and analytical technologies, it may be possible to discover the biological basis of human nature, thinking, and choice.

Wrestling with decades of contradictory research results, it occurred to Vernon Smith and his colleague Kevin McCabe that developments in the neurosciences could be fruitfully applied to developing a better understanding of economic behavior. And so in the late 1990s, with the aid of a creative extension to a research grant from the National Science Foundation, they launched a new program of experimental research that McCabe dubbed "neuroeconomics." Today, this effort has morphed into a challenging interdisciplinary research program that uses experimental and brain-imagining techniques to examine decision making with the aim of building a biological model of economic choice.15

As Smith and McCabe were rethinking their approach to investigating behavior, Douglass North was wrestling with a new theoretical approach to understanding growth and change. Steeped in years of research on how people in the western political economies have organized exchange, North concluded that adaptive change requires that our minds evolve.16 Our ability to form beliefs, develop solutions, and choose among them begins in our minds, which, regardless of how one approaches philosophy of mind, requires at least a nodding acquaintance with the brain. It is human minds working together (or not) that create and enforce the rules that govern exchange, choose among these rules, organize production and exchange, adapt to changing conditions, and suffer or enjoy the consequences.

However, changing our minds and our choices may require changing our brains. Many neuroscientists argue that we cannot change our mental state without changing our brain state. But before we can change our brains, we must first understand them and how they are involved in thinking and choice. Then we must apply this knowledge to developing a better understanding of our own intentions, the intentions of others, and how we govern ourselves and our transactions. Finally, we must translate this knowledge into policy making.

  • + Share This
  • 🔖 Save To Your Account

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information

To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.


Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.


If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information

Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.


This site is not directed to children under the age of 13.


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information

If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information

Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents

California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure

Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact

Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice

We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020