I’ve always thought that behaviour patterns of bureaucrats are fairly easy to predict: it all hinges on risk/reward. A bureaucrat with expectation of retiring at the peak of pension eligibility will have a very high aversion to risk — but not quite what most people refer to as risk. A bureaucrat has a built-in bias to “stay the course”, to avoid “rocking the boat”, and to prevent the kind of change that will introduce exceptions to normal process.
Expecting a bureaucrat to react like an entrepreneur is unrealistic, because the bureaucrat’s risks (loss of promotion opportunities, loss of status, but not usually loss of job) do not scale well against the possible rewards — except in particularly corrupt jurisdictions, bureaucrats do not directly benefit from making risky decisions.
Given that, is it any surprise that bureaucrats, as a whole, are quite unwilling to step outside “normal practice” or to allow variances, exceptions, or (sometimes) even common sense solutions?
I should be careful (except that I’m a blogger, where “careful” really just means “avoiding lawsuits”), because there’s a risk I’m suffering from one of the traits identified in behavioural economics, the illusion of competence in my preceding horseback judgement:
There is a fashionable new science — behavioral economics, they call it — which applies the insights of psychology to how people make economic decisions. It tries to explain, for instance, the herd instinct that led people during the recent bubble to override common sense and believe things about asset values because others did: the “bandwagon effect.” And it labels as “hindsight bias” the all-too-common tendency during the recent bust to imagine that past events were more predictable than they were. Behavioral economics has also brought us notions like “loss aversion”: how we hate giving up a dollar we have far more than forgoing a dollar we have not yet got.
But while there is a lot of interest in the psychology and neuroscience of markets, there is much less in the psychology and neuroscience of government. Slavisa Tasic, of the University of Kiev, wrote a paper recently for the Istituto Bruno Leoni in Italy about this omission. He argues that market participants are not the only ones who make mistakes, yet he notes drily that “in the mainstream economic literature there is a near complete absence of concern that regulatory design might suffer from lack of competence.” Public servants are human, too.
Mr. Tasic identifies five mistakes that government regulators often make: action bias, motivated reasoning, the focusing illusion, the affect heuristic and illusions of competence.
In the last case, psychologists have shown that we systematically overestimate how much we understand about the causes and mechanisms of things we half understand.
