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Title: The Price of Fish: A New Approach to Wicked Economics and Better Decisions
Authors: Michael Mainelli and Ian Harris
Publisher: Nicholas Brealey Publishing (£20.00)
After the success of Freakonomics in providing a key to unlocking pretty much everything, it was probably only a matter of time before a rocket scientist came along to provide a higher order solution to one problem that has confounded economists. The problem, alluded to by the title, is overfishing, which has led to the depletion of fish stocks and in some cases their total collapse. This is clearly not a desirable outcome even for those involved in exploiting the resource and points to a variety of regulatory and market failures. The problem has proved quite intractable. The authors’ contention is that a different approach to decision making provides a solution.
The Price of Fish is a good introduction to a wide range of ideas and disciplines loosely grouped around decision theory. Most readers with an interest in one or other of the fields will encounter old friends, for example “expected return” “positional goods” “information theory” or “creative destruction” as well as new (well, at least to me) ones such as Ashby’s Law of Requisite Variety. To the extent that there is a “big idea” it is that particularly intractable problems, “wicked economics”, can be made to yield to a multidisciplinary approach of the type that the authors advocate. “Consilience” is a term the authors use on a number of occasions. Revived by Edward Wilson in his 1998 book Consilience, the unity of knowledge it is conceived as a sort of unifying theory combining the disciplines of the humanities and natural sciences. The authors of The Price of Fish identify four principal strands Choice, Economics, Systems and Evolution each of which has a bearing on complex problems and brings particular disciplines to bear.
The unifying principle of the book is fish. This is either cute or annoying depending on temperament. Bullet points are marked by an amusing little fish icon. Examples of “real commerce” are drawn from fish trading, a holiday is a fishing holiday, the Guild of Fishmongers typifies a particular type of institution, Rod [geddit?] is Everyman – a fisherman naturally. This is clearly not a dry business book - the zany authors are depicted juggling on the dust jacket. Readers will have to decide for themselves how well the book does in the zaniness stakes but it certainly makes a lot of engaging ideas very accessible.
Those of the Women are from Venus, Men are from Mars persuasion will have little difficulty in recognising the difference between Satisficers and Maximisers. “Buying” is what satisficers do. They set out to buy a particular thing, a pair of brown lace up shoes for example, and provided that they find some that are broadly fit for purpose they are happy. “Shopping” is what maximisers do. They set out to investigate a wide range of possible footwear solutions. This distinction is used to good effect in a discussion of the process of public procurement, one that often produces a poor outcome for the winning bidder as well as for the government agency.
One of the pleasures of the book is the authors’ liking for scientific rigour, something often lacking in the social sciences. The description of experiments such as “Ultimatum” leaves one admiring the simple elegance of the design. In this one player “A” is asked to make an offer to share $100 in prize money with another “B”. If the offer is accepted then they share the money as proposed. If the offer is turned down neither get anything. “B” should accept any offer – after all something is better than nothing. This outcome the “Nash equilibrium” is not however what is produced experimentally. “A”s typically make more generous offers and “B”s are inclined to turn down offers which seem niggardly. In fact the normative outcome is more like 80/20. To have doubts about rational expectations is one thing to be able to set empirically derived limits on the concept is another.
A provocative discussion of accounting fiction is another case in point. Everybody knows that the very big numbers in company accounts [let alone the even bigger ones in government accounts] are a fiction of spurious accuracy. As the authors point out, this expensive and important exercise even if it is approached scientifically lacks any of the illuminating terminology which would accompany such an exercise in that arena. Where are the confidence intervals, the range estimates, the description of sampling techniques and the probability distributions?
Alongside a lot of scientific and mathematical common sense, such as the distinction between the mathematical procedure of determining what it is you need to estimate, and the scientific process of estimating it; there are some robust examples of a more common or garden variety. Few can quibble with: “The greater the diversity of opinion the more likely it is to lead to the right answer”.
Nick Carn
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