Psychologist Barry Schwartz Wants to See More Friction in the Economy
Psychologist Barry Schwartz Wants to
See More Friction in the Economy
by Maki Somosot '12
In an op-ed in the New York Times, psychologist Barry Schwartz critiques the financial industry's historical pursuit for efficiency in economic transactions, arguing that this has set the very conditions for the recent economic collapse. Schwartz recommends the value of "friction" in order to slow down the drive for efficiency and enable institutions and individuals to make better decisions.
"Like point masses moving in frictionless, Newtonian vacuums, financial transactions are so far removed from the material entities that underlay them that transactions can occur with lightning speed, with nothing to slow them down," says Schwartz.
Option markets, security-bundled mortgages, high credit card interest rates and home-equity lines of credit are examples of the economic obsession for efficiency, according to Schwartz. While these developments have facilitated economic transactions, he concludes that "more efficiency may not be better." On the contrary, it has led to the economic crisis, and more generally has kindled public disgruntlement towards the financial industry and its activities.
Ultimately, Schwartz proposes that "friction" - in the form of certain social norms - will slow down the modern pursuit for efficiency.
"If people thought about their homes less as investments and more as places to live, full of the friction of kids, dogs, friends, neighbors and community organizations attached, there might be less speculation with an eye toward house-flipping. And if companies thought of themselves, at least partly, as caretakers of their communities, they might look differently at streamlining their operations."
In another recent op-ed published in the Chronicle for Higher Education, Schwartz extols the potential psychological benefits of the economic crisis: reduced focus on material success and lowered expectations.
"There has been a research boom in recent years on the determinants of well-being, and it shows that material wealth contributes too little to well-being, once incomes are above subsistence, to justify people's efforts. And it shows us that lowered expectations may enable us to derive satisfaction from life events that would have left us disappointed in the boom years."
People who pursue material success as a goal, according to Schwartz, will also be less happy than those who come into that success accidentally. More often than not, psychological well-being results from what people do, rather than what than they have. Therefore, engaging in meaningful work, as well as fostering a strong sense of social connectivity, are crucial to well-being.
Nonetheless, Schwartz recognizes the practical challenges to maintaining psychological well-being in a sickly economy. "In a difficult job market, people will take any job, whether or not it's a good one," he says. "And today millions have no job. The suffering caused by the lack of work is incalculable." But Schwartz still argues that lowering expectations and settling for good enough will enable us to "derive satisfaction from activities and possessions that would previously have been disappointing."
"We should try to cultivate and strengthen some of the changes in our expectations and aspirations that the downturn has brought, making them habitual enough that they won't disappear when the economy recovers," he concludes.
Schwartz, the Dorwin P. Cartwright Professor of Social Theory and Social Action, teaches about psychology and economics. His research focuses on decision making, the creation of values, morality and self interest, and work satisfaction. Most recently, he is the co-author of Practical Wisdom: The Right Way to Do the Right Thing (Riverhead Books, 2010), with with political scientist Kenneth Sharpe.