Revealed Preference

Revealed Preference – Insights from Government, Healthcare, and Sports

I have written in the past about government budgets as seen through the eyes of people who have studied government and political science. The budget serves as a written calculation that enumerates the government’s priorities. In economics terms, we might call this revealed preference, where the government puts a dollar figure down next to the things that candidates and political leaders said was important. The dollar figure they put next to an educational program, a defense program, or towards a new Veteran’s Administration Hospital reveals just how much they actually care about that thing. If we elect a whole set of candidates who promised to improve our local school buildings, but then budget only a tiny new amount of money toward school maintenance while offering a big tax break to financial institutions, their real preferences have been revealed, and they didn’t match what was in their campaign message.

 

I wanted to present a detailed example of government budgeting and revealed preference to set up an observation that comes from Dave Chase in his book The Opioid Crisis Wake-Up Call: Health Care is Stealing the American Dream. Here’s How We Take it Back. Chase was working in the healthcare industry as a revenue cycle consultant, what he describes as someone who helps hospitals with, “generating as a big a bill possible, getting it out as fast as possible, and getting paid as quickly as possible.” After the loss of a close friend, whose encounter with the healthcare system at a young age was incredibly financially costly, Chase saw behind the hospital curtain, and was shaken by the revealed preferences that he uncovered.

 

“Despite breakthrough technologies that could improve patient outcomes, that’s not what hospital wanted to buy. All they wanted were systems tuned to game every reimbursement opportunity the industry had to offer.”

 

I don’t want to say that all hospitals are evil and that hospital management only wants to maximize the money they get out of their patients at every encounter. However, Chase’s quote reveals that the goals of being a financially solvent hospital or healthcare system serving the needs of patients can be displaced by the goal of profit or increased margins. The financial side of a hospital is important – you don’t want your hospital to go under and leave people without medical care – but if the hospital is advertising itself as an organization that puts patient’s first, then its actions should support that messaging. Revealed preference shouldn’t show us that patient care and outcomes fall far behind maximizing profit.

 

Chase was so shaken by the observation in his quote that he left the healthcare field altogether. When revealed preference shows us something hypocritical about the space we are in, whether it is government, healthcare, or even sports, it creates cynicism and drives away the talented innovators who are needed for making the world and field a better place. Chase argues that the revealed preference that he uncovered, increasing hospital margins/profits, was actually damaging to the health and well-being of Americans, and not just in a financial way. If we are in a leadership position, if we are part of the team that makes decisions between the public goal and the internal goal of the organizations we are a part of, we should be asking what our actions and decisions reveal about our preferences. In healthcare, are we really just chasing the dollar, or are we trying to help people live longer and better lives? In government, are we really trying to serve people well, or are we just trying to get really good at following the rules so that we don’t get called in front of a legislative committee? In sports, are we really focused on the game and improving the experiences of athletes and fans, or are we again just maximizing the dollars we get from butts in seats and eyeballs on tvs? The bet I’m willing to make, one that I think Chase would make as well, is that our real preferences will be revealed to the people who interact with our organizations, and in the long-run, if the revealed preference is not what we advertise, people will know, and our organization will lose trust, lose customers, lose talent, and will ultimately fail.

Religion As a Community Social Structure

There are not many things that pull people together quite like religious beliefs. Sports pull us together when our kids are on the same team, when we are all in a stadium, or when two of us are wearing the right hat on an airplane, but those don’t make for strong ties that are lasting and uniting. Religion offers an entire worldview and set of corresponding behaviors that do create lasting ties between people who otherwise wouldn’t have much in common and wouldn’t likely interact for any significant time. Robin Hanson and Kevin Simler look at religion in their book The Elephant in the Brain to understand the ways that religious signaling, behaviors, and beliefs operate in ways that often go unnoticed.

 

They quote a few authors in a short section that stood out to me:
“Religion,” says Jonathan Haidt, “is a team sport.”
“God,” says Emile Durkheim, “Is society writ large.”

 

Simler and Hanson go on to explain what this community and larger social aspect of religion means given that we tend to think of religion more as a private belief system:

 

“In this view, religion isn’t a matter of private beliefs, but rather of shared beliefs and, more importantly, communal practices. These interlocking pieces work together, creating strong social incentives for individuals to act (selfishly in ways that benefit the entire religious community. And the net result is a highly cohesive and cooperative social group. A religion, therefore, isn’t just a set of propositional beliefs about God and the afterlife; it’s an entire social system.”

 

Religions typically encourage pro-social behaviors that get people thinking more about a cohesive group than about selfish motives. By pursuing these prosocial behaviors, people can gain more status and prestige in society. For selfish reasons then (at least to some extent), people pursue the religious dictates of their society in their own personal lives. As they do this, positive externalities may arise and may create a society that is more cohesive and supportive all around. This might not always happen, but having a shared system of understanding the world, our places in the world, and the stories about who we are and why we exist help to create the social fabric and social capital to further encourage cooperation and social cohesion. In a weird way, our selfish motives encourage religion, even if we don’t acknowledge it and assume that religion is entirely about personal beliefs.

What’s Happening in Our Brains Behind the Conscious Self

Toward  the end of the introductory chapter of their book The Elephant in the Brain, Kevin Simler and Robin Hanson explain what they observed with the human mind and what they will be exploring in the coming chapters. They write, “What will emerge from this investigation is a portrait of the human species as strategically self-deceived, not only as individuals but also as a society. Our brains are experts at flirting, negotiation social status, and playing politics, while “we” – the self-conscious parts of the brain – manage to keep our thoughts pure and chaste. “We” don’t always know what our brains are up to, but we often pretend to know, and therein lies the trouble.”

 

The last few days I have written about a few instances where we deceive ourselves and hide our true motives from ourselves. We do this so that in our political and social world we can appear to have high-minded motives and reasons for doing the things we do. Simler and Hanson show that this does not just happen on an individual level, but happens at group and society levels as well. We all contribute to the failure to acknowledge what it is that drives our decisions and why we do what we do.

 

This process takes place behind the conscious self that experiences the world. In the past, I have borrowed from Ezra Klein who has used a metaphor on his podcast about a press secretary. The press secretary for a large company doesn’t sit in on every strategic decision meeting, isn’t a part of every meeting to decide what the future of the company will be, and isn’t part of the team that makes decisions about whether the company will donate money, will begin to hire more minorities, or will launch a new product. But the press secretary does have to explain to the general public why the company is making these decisions, and has to do it in a way that makes the company look as high-minded as possible. The company is supporting the local 5K for autism because they care about the children in the community. The company has decided to hire more minorities because they know the power of having a diverse workforce and believe in equality. The company was forced to close the factory because of unfair trade practices in other countries.

 

On an individual level, our conscious self is acting like the press secretary I described, and this spreads throughout the levels of society. As individuals we say and think one thing while doing another, and so do our political bodies, our family units, our businesses, and the community groups we belong to. There are often hidden motives that we signal to that likely account for a large portion of why we do what we do. This creates awkward situations, especially for those who don’t navigate these unspoken social situations well, and potentially puts us in places where our policy doesn’t align with the things we say we want. We should not hate humans for having these qualities, but we should try to recognize them, especially in our own lives, and control these situations and try to actually live in the way we tell people we live.

Press Secretaries

I have written in the past about the idea and model that our brains act as press secretaries, taking the information that comes into the mind and presenting it in a way that makes everything happening in the mind look as good as it possibly can. This idea comes back in Robin Hanson and Kevin Simler’s book The Elephant in the Brain where the authors expand on the idea. They write,

 

“Above all, it’s the job of our brain’s Press Secretary to avoid acknowledging our darker motives – to tiptoe around the elephant in the brain. Just as a president’s press secretary should never acknowledge that the president is pursuing a policy in order to get reelected or to appease his financial backers, our brain’s Press Secretary will be reluctant to admit that we’re doing things for purely personal gain, especially when that gain may come at the expense of others. To the extent that we have such motives, the Press Secretary would be wise to remain strategically ignorant of them.”

 

I really like the way that the authors describe the role of the conscious part of our brains as acting as a press secretary. By keeping us consciously unaware of our motivations for action, we can be strategically ignorant of why we do what we do. Strategic ignorance is common when we pretend that the things we do don’t have external consequences for others, when we don’t want to face the reality of science, or when we just want to avoid doing some unappealing task. In most cases we probably recognize that we are not fooling anyone when we claim we don’t know what’s really happening, but at least it gives us a slight cushion to be comfortable while hoping that the negative consequences don’t come back to bite us.

 

Hanson and Simler continue the metaphor, “What’s more – and this is where things might start to gt uncomfortable-there’s a very real sense in which we are the Press Secretaries within our minds. In other words, the parts of the mind that we identify with, the parts we think of as our conscious selves…” It is easy to ignore the parts of ourselves that don’t align with the story we want to tell and present to the world about what great people we are. It turns out it is so easy because we are not consciously aware of those parts of ourselves. We are just the press secretary who is handed the script about all the great things happening within us.  We purposefully avoid those parts of us that look bad, because we don’t want to acknowledge they are there and have to explain ourselves in spite of those negative aspects of who we are. By simply ignoring those parts of us and sticking to the happy script, we can look great and feel great about the wonderful things we do, even if those wonderful things don’t measure up to the sanitized version we present to the world. There is a lot taking place behind the scenes, but lucky for us, we are just the front facing conscious press secretary who doesn’t see any of it.

Undertaking Your Pursuit

I spend a lot of time thinking about what is important in my life, what I want to work toward, and why I want to work toward those things. Its not always an easy and enjoyable task, and I find that if I get away from it for a little while, unimportant things slip back in. In order to stay on top of things and focus on the important, I find that it is helpful to think about the deep why behind my actions, habits, and daily routines. The most important questions I ask myself focus on whether I am doing something because I am trying to make the world a better place, or whether I am doing something out of my own self-interest. I know I will never detach self-interest from what I do, but at least I can try to align my self-interest with things that help improve the world as opposed to things that simply show off how awesome I think I am.

 

“Pursuing what’s meaningful is important, but just as important is understanding why we’re pursuing what we’re pursuing and how we’re undertaking that pursuit. Pay attention to the why behind your actions, and the how and what become a lot easier to define and control.” Colin Wright ends one of the chapters in his book Becoming Who We Need To Be with that quote. It is advice we hear a lot but that I don’t think we always actually follow. Part of the reason we don’t always follow that advice is because it is usually packaged as “follow your passion” or “if you do what you love you will never really work a day in your life.” This line of advice giving isn’t too helpful and puts pressure on us to have the perfect job we love or else we feel that we are doing it all wrong. Better advice for us is to look inside and try to understand our motivations, ask ourselves what it is that drives us toward our goals, ask if that is reasonable and in the best interest of society, and adjust so that we are operating in a way that is designed to make the world a better place instead of only operating in a way to maximize the pleasure we find in the world.

 

I truly believe that better understanding our motivations and being honest with ourselves about the forces that drive us will help us realign our lives in a more positive direction. When we truly examine ourselves we will not want to find that we are working hard, hitting the gym at 5 a.m., and doing everything we do just to show off to others or just to buy new things that will impress others. We will find that we are more fulfilled when we align our days around pursuits and goals focused on building communities, helping other people, creating meaningful relationships, and trying to solve problems for other people. This may not immediately change every aspect of our life, but it will allow us to slowly build habits and ways of thinking that help us make better choices that minimize our selfishness and propel us toward meaningful goals.

Recognition is Empty

At some point in human history, we were living in small tribes of maybe 50 to 250 people and we were evolving ever more complex brains because our small political groups put pressure on our ancestors to be socially skilled in order to pass on their genes. In a small social tribe, actions and motivations mattered. There was a pressure to do good and impressive things and to appear to be doing those things for noble rather than vain reasons, but it was also not enough to just do good, you had to be noticed by your tribe. You had to make sure your status improved, that people saw you doing positive and noteworthy things so that you could progress up the social hierarchy of the tribe and be permitted to pass your genes along. The traits that flowed from these evolutionary social group pressures are still with us, but the need to seen doing physically and socially impressive things in order to pass our genes to the next generation (and potentially even just to survive on a daily basis with the help of some friends/allies) is mostly gone. This leaves us in an awkward place where our brains still want to impress people and climb up a social ladder (remember that our ancestors social ladder was only about 50 to 250 people tall) in a world where we can connect with millions of people and where competition for security, shelter, food, and a partner just isn’t as life threateningly dramatic as it was one hundred thousands years ago.

 

Pushing back against some of these natural feeling and evolutionary favored behaviors can actually lead to a more fulfilling and meaningful life. This is at the center of the idea in Ryan Holiday’s book, The Ego is the Enemy. Holiday encourages us to avoid acting in the interest of our ego, which is to say he encourages us not to act out of our own self-interest with the intent to be seen and with the intent to deliberately rise up the social hierarchy. We can certainly do that and we will have lots of opportunities in our live to chose that path, but Holiday argues that to live a more fulfilling and complete life today, we should look to do great work as opposed to simply being impressive to other people. Regarding a fulfilling life Holiday writes, “It’s about the doing, not the recognition.”

 

This quote has stayed with me and helped me think about why I do some of the things I do and how I chose to do those things. I could go work out in the gym and make sure I take up as much space as possible and exercise as extravagantly as possible so that everyone sees how physically impressive I am. Or, I could find a spot that doesn’t interfere with other people and doesn’t necessarily put me in the center of attention and I could focus on making sure I really do the exercises that matter to keep me fit, healthy, and injury free. I might get stronger with both strategies, but the first strategy is really about my ego and about being seen, where the second approach is actually about health and physical development. I believe much of life is like this.

 

We can make excuses for doing the flashy things that help us rise through the social ladder and we can lie to ourselves and others about our motives for doing those things (our brains literally evolved in small groups to do this). However, with several billion people on the planet, we hit a point where this strategy is counter productive if we actually want to be fulfilled and content with our lives and actions. We no longer live in the small tribes we evolved for, and we have more options to make an impact for the people in our lives and societies in which we live. We no longer need to set out to make sure we are seen and recognized for doing great work to build allies for survival. We will likely receive all the recognition we need from the people who matter most in our lives if we set out to do good without setting out to build a reputation. Part of us may still want that recognition and be happy when we receive it obliquely (maybe even more happy to receive it this way) which is fine. The point is that we can be more content and fulfilled when we take this oblique path to success and recognition and build habits and work that are about doing and not about being applauded.

Performances on Social Media

Ryan Holiday’s book Ego is the Enemy helped me to better understand and recognize moments when I was allowing my ego to drive my behaviors and decision making. So much of our desires and motivations we hide from ourselves in an attempt to make ourselves feel better about who we are and what we do. We pursue things that give us rewards and social recognition, but we tell ourselves that is not why we are doing such things. One area where this is obvious is in our social media habits.

 

Regarding social media and ego, Holiday writes,
    “Blank spaces, begging to be filled in with thoughts, with photos, with stories. With what we’re going to do, with what things should or could be like, what we hope will happen. Technology, asking you, prodding you, soliciting talk.
    Almost Universally, the kind of performance we give on social media is positive. It’s more “let me tell you how well things are going. Look how great I am.” Its rarely the truth: “I’m scared. I’m struggling. I don’t know.”

 

We tell ourselves that we use social media to keep up with friends and family. To know what loved ones and close acquaintances are up to. And we post to let them know what is going on in our lives and to share fun and interesting details about what we are up to.

 

But what Holiday has recognized and addresses in the passage above (something we all have seen and know in our hearts), is that we are really just posting on social media to look good and to get rewards from people liking our posts and telling us that we are doing something impressive or good. People often refer to Facebook as Bragbook and are good at catching other people behaving in an attention seeking way on social media, but are not always good at recognizing this in themselves. It is helpful to recognize exactly how we are using social media and to try to adjust our behavior in a more honest way. Rather than asking ourselves what will get the most positive social recognition we can at least ask if what we are posting is truly for us and to keep our friends in the loop with something we want people to know about, or if we are simply trying to seek sympathy, congratulations, or to incite envy in other people. Everything we post is a signal of one sort or another, and everything we do on social media is to some degree a performance. We have the choice of making that performance an ego boosting yet hollow ostentatious display, or a more honest and real snapshot of our lives.