Best Columns: Business

India’s tiny car raises great big questions; How money overcomes rationality

India’s tiny car raises great big questions

Anne Applebaum

The Washington Post

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As a feat of engineering, Tata Motors’ new, $3,000 Nano is a marvel, said Anne Applebaum in The Washington Post. “It fits four people and a duffle bag,” travels at 65 mph, and costs about the same “as the DVD system in your neighbor’s Lexus.” Morally and philosophically, though, it raises a real conundrum: What happens when the “laudable” movement to improve the environment “comes directly into conflict with the equally laudable” movement to improve the lives of the poor? The Nano will no doubt be a tremendous boon to working-class Indians, offering them greater mobility and better job opportunities. At the same time, adding millions of drivers to India’s roads means “an exponential rise in carbon emissions” and other pollutants. Is it worth it? I wouldn’t know how to begin to answer that question, and I doubt many of us could at this point. But if we’re going to have a serious “global conversation about climate change,” we have to begin by acknowledging “the real trade-offs.”

How money overcomes rationality

Michael Shermer

Los Angeles Times

Here’s a quick economics quiz, said Michael Shermer in the Los Angeles Times. As the 100,000th customer of a movie theater, Mr. A wins a prize of $100. Meanwhile, down the block, Ms. B is standing just behind another theater’s one-millionth customer. That lucky patron wins $1,000, while Ms. B collects a consolation prize of $150. Would you rather be Mr. A or Ms. B? Amazingly, most people say they would rather be Mr. A. “In other words, they would rather forgo $50 to alleviate the feeling of regret that comes with not winning the thousand bucks.” Such thought experiments go “a long way toward debunking one of the biggest myths in all of psychology and economics, known as Homo economicus.” This mythical creature is unfailingly rational and always makes choices that maximize his advantage. In fact, human beings are as irrational and emotional in economic matters as they are in most other aspects of their lives. Like our primate cousins, we so dislike the feeling of regret that we’ll pay to avoid it. “That’s weird and irrational, but it’s the way it is”—whether economists like it or not.

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