Unpredictably Rational

For my news writing class, I read a book on behavioral economics titled, Predictably Irrational, by Dan Ariely.  It explained how individuals will often make irrational decisions because of seemingly insignificant factors.  For example, Ariely, argued that people often don't know how to value goods and, consequently, will choose an item whose price is at the midpoint of all the others.  He illustrated how restaurants can persuade diners to spend more by adding a few exceptionally expensive items to the menu not necessarily to sell but, instead, to increase the value of the median priced dish.  

Following the themes presented in his book I created my own predictably irrational experiment. Here it is. 

Students at the Stern School of Business are taught the basics of economics, including monetary policy.  Therefore I chose this group to test my hypothesis of whether people who are generally knowledgeable about a policy proposal (in this case a switch to the gold standard) will alter their opinion if they are told that it is supported by a highly respected individual.

Over two days I questioned 40 Stern students in and around the Kaufman Management Center on the topic of the gold standard.  I chose this theme because it generally maintains little support amongst business people and economists and, consequently, my first round of questioning would provide a baseline with plenty of room for change in opinion.  

As it turned out, that is what happened.  The first day I asked twenty people at random the following question.

“Should the US revert back to the gold standard, that is should every dollar be backed by a specific amount of gold?”

The results were predictable, the gold standard continues to be unpopular with this demographic.  Seventeen people said no – some saying it quite forcefully and urgently – while three others said yes. 

Two days later I returned to Kaufman to ask the same question but add an important preface.  The question went:

“in 2008 the Nobel prize winning economist John Nash stated the financial crisis would not have happened, or would have been less severe, if the US was on the gold standard, that is if every dollar was backed by a specific amount of gold.  Should the US revert back to the gold standard?”

The results?  There was an increase in the numbers of respondents answering, ‘yes’ but only by two, for a total of five yeses, and 15 answering no.  I was surprised, and I don’t believe one could draw anything conclusive from that minor increase.  

From my experience around students of economics, John Nash garners close to rock star status, and while questioning students for this experiment most respondents did demonstrate recognition of who he is.  Additionally, for any respondent who hadn’t heard of John Nash, I predicted that including ‘Noble prize winning economist’ would help to tip the scales more toward the yes column. 

But I underestimated the veracity of this group.  The results show that Stern students were not significantly affected by the inclusion of a popular name in the question.

Another experiment asking the same question of laypersons would be helpful in forming conclusions but, from these preliminary results, it seems that those with background knowledge of a subject are not influenced much by outside opinions, even of those they respect.