Monday, July 11, 2011

David Brooks discovers supply and demand, sort of

In some ways, I feel sorry for David Brooks. He has a gimlet eye for observing upper-middle-class people and making fun of them/us, which I suppose is how he first skyrocketed onto the national scene with Bobos in Paradise. Unfortunately, when he tries to write about actual public policy, things just fall apart, and suddenly lots of bloggers jumped on him for being a fake conservative. Take, for example, this:

Princeton students don’t usually face extreme financial scarcity, but they do face time scarcity. In one game, they had to answer questions in a series of timed rounds, but they could borrow time from future rounds. When they were scrambling amid time scarcity, they were quick to borrow time, and they were nearly oblivious to the usurious interest rates the game organizers were charging. These brilliant Princeton kids were rushing to the equivalent of payday lenders, to their own long-term detriment.

Perhaps I am missing something, but is this not just normal supply and demand? The less you have of something, the more valuable it is to you, and the more you are willing to pay for it? Should I be troubled that none of Brooks's advisors or editors seem to have noticed this and made this point to him?

Would that he could just stick to his comparative advantage and keep making fun of latte drinkers.

1 comment:

  1. There's a wrinkle is that it's not just supply and demand. Most examples of supply and demand consider a static model. When introducing saving-lending, then it becomes about multiple periods.

    I think the issue here is that the Princeton students are not rationally maximizing their time consumption over the entire game, but rather maximizing it in the first/early periods. As he said, they're shortsighted. That's the problem.