Wednesday, January 1, 2014

Economics Does Not Explain Everything Because "Irrational" Behavior Matters

Economics is a discipline rather rare in the public policy arena, including the communications business, at times.

Though political rationality also is at work when policies are created, political rationality ("what can be done; what is possible") is not always quite so rational in terms of how people, firms and markets will change, once any set of policies are implemented.

In fact, it is impossible to know, with certainty, how behavior will change, in unexpected way, once a set of changes is made. That also applies for incentives people have when creating products and services. 

"People can be really smart or have skills that are directly applicable, but if they don’t really believe in it, then they are not going to really work hard," says Mark Zuckerberg, Facebook CEO.

That intangible--commitment--cannot be modeled mathematically. Sometimes forces that cannot be measured or modeled--love, affection, idealism--indeed can shape behavior. At least sometimes, that means impossible things can, at least for a time, become "possible."

So "irrational" behavior sometimes can confound forecasters and predictions. And by "irrational," one does not have to imply "not rational and therefore destructive." Love is irrational, too. Passion and idealism likewise can sometimes cause behaviors we cannot quite anticipate.

If some firms seem to continually outperform others, at least some of the time that is because those organizations have harnessed "irrational" commitments. No bureaucratic structure can fully compensate for that. 

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