Thinking Fast and Slow in Antitrust
I still remember that lightbulb moment of watching Daniel Kahneman’s TED talk, The Riddle of Experience vs. Memory, and then reading Thinking Fast and Slow and finally “getting” behavioural economics. It was that rush as dozens of connections go off in your brain at once and a complex knot of problems suddenly reveal themselves to be simple.
The impact of behavioural economics and Kahneman’s work on mainstream economic thinking cannot be overstated (and I still have to read Michael Lewis’ account of it in The Undoing Project: A Friendship That Changed Our Minds), although there is much still to be done to adjust the classic models in light of the way behavioural economists tell us we actually behave, as opposed to how we think we behave.
One of the things that has stayed with me, and most persistently pops up in unexpected intellectual places, is Kahneman’s account of the two sides of our self: the experiencing self and the remembering self, and how important it is to distinguish between the two when we talk about happiness (or, indeed, utility or welfare). The experiencing self lives in the present; it is this self that the doctor approaches when she asks “does it hurt here?”. The remembering self lives in memories, it keeps score and maintains the story of our lives. It is this self that the doctor approaches when she asks “how have you been feeling lately?”.
The remembering self is also the one that is in control of decision-making. The experiencing self actually has no voice because we choose not between different experiences but between different memories of experiences, or between the anticipated memories of the future. Kahneman refers to the “tyranny of the remembering self” as the remembering self drags the experiencing self around through experiences that she does not really need.
Kahneman gives the example of going on vacation because people often choose where to go based on the preferences of the remembering self. He proposes a thought experiment: imagine you know that at the end of the next vacation all your photos will be destroyed and an amnesiac drug will be administered so you won’t remember anything. Would you choose the same vacation? Would you really traipse around the Sistine Chapel or the Taj Mahal if you knew you wouldn’t remember it, despite the hassle and discomfort your experiencing self experiences? For many people the answer would be no. They nevertheless spend a lot of money on such trips for the sake the remembering self, who never gets to be anywhere but always likes to have been everywhere. [The closest I have come to testing this is that I did in fact forget to bring my camera when I visited the Taj Mahal, and my memories are very hazy indeed, but I do remember being moved by the beauty of the architecture — perhaps an experience worth having even if you can’t exactly remember it.]
It turns out that there is very little correlation between how happy someone is about their life and how happy they are in living their life. Happiness for the remembering self comes from goals and money. Happiness for the experiencing self comes from spending time with people you like. Material goods do not impact the happiness of the experiencing self above a certain threshold, whereas for the remembering self the more, the better. The point Kahneman was making, if I should be so bold as to interpret his work, was that in designing any public policy with an impact on happiness (or utility or welfare) we should take care who we are designing for, which version of the self.
When I look at different people’s careers I realise that different people have placed an emphasis on living either for the experiencing self or the remembering self. Those in “high-powered” jobs, with intense hours, sleepless nights, adrenaline-fueled projects, relentless schedules but high pay, perhaps they are living for the remembering self, designing their career around prestige, awards and promotions. Others choose jobs based on an enjoyable commute, time for hobbies and for family, colleagues or clients whose company they enjoy. Of course this is a gross simplification and there may be a spectrum with different levels of emphasis on one self or the other. But looking at my career I realise that I have been struggling with an over-emphasis on the remembering self and a more recent attempt to get into a better balance, to live in the moment with the experiencing self.
What has all this got to do with competition law? I started to wonder whether it wasn’t just my career that was out of balance — perhaps it was also market capitalism. Perhaps that could help explain the obsession in economic thinking with profits, output, GDP, and maximisation — these are things that mean something to the remembering self, but not necessarily to the experiencing self. Even the idea of welfare, which sounds like it is something for the experiencing self, is actually about satisfying preferences (what Kahneman calls “decision utility”) rather than experienced utility. Similarly when we think about consumption, we log it at the moment of purchase not at the point at which the good is actually consumed. When we talk about “consumers” of french fries or music or hair cuts, for example, we think of the moment when they are bought, not the moment at which the the fries are eaten, the song listened to or the hair cut. Owning more than one car, for example, doesn’t really make sense for the experiencing self, who can only drive one car at a time. And we make the assumption that we can add up welfare across many different people and trade-off between different groups of people (consumers vs. workers, consumers vs. producers etc), which makes more sense when thinking about output and profits than sensory experiences and feelings.
The recent season of Chef’s Table features chef Duangporn ‘Bo’ Songvisava and her award-winning restaurant Bo.Lan in Thailand. Bo is on a crusade to save Thai cuisine, and she talks about the existential threat posed to thai cooking by monopolies. Bo describes how small producers of native products are being pushed out by lower cost, more “efficient” giant firms, who can produce at a mass scale. Competition law loves economies of scale, just as the remembering self loves more stuff not less. But she also talks about the fact that in Thai restaurants in Bangkok, all the restaurants are using the same curry paste, made by a single manufacturer. Curry paste is integral to Thai cuisine, and at her restaurant Bo won’t even blitz the paste in a mixer because she believes you get the best flavour from the ingredients from hand-pounding them. A sense of place, a sense of identity, the delight of eating something delicious and nostalgic and comforting — these are things that the experiencing self cares about. Imagining the possibility of one company controlling the flavour of your food, and we can start to think about what the perspective of the experiencing self can bring to antitrust.
This perhaps explains why the consumer welfare standard in antitrust seems to have so little to do with the actual well-being of consumers. It is playing into the realm of the remembering self, for whom maximising abstract quantities of “welfare” actually means something.
How would antitrust be done differently if we shifted the balance somewhere back towards the experiencing self? Well it seems logical that we would want companies worth working for, products worth buying, industries that create healthful environments and nurture the planet on which we all depend. This would mean that price, and the impact it has on output and consumption, would perhaps be less important than looking at the broader impacts of different market practices and structures, which is something that European competition law already does, to some extent, albeit always with one eye on efficiencies.
I believe that life is not just about what you have to show for it at the end, it is about the experience of living it as well. Market capitalism is too far skewed towards outputs and results — profits, innovation, more and more stuff for lower prices. We need to rebalance. So I think if we are going to stick to free market competition in our economies then we need to hold the “winners” of the race to market power to account, because if the only responsibility that comes with that power is to make more money then that is all the whole system will ever do. Changing competition law and the regulation of market power is about changing the incentives throughout the market system towards the sharing of power with stakeholders so we can all experience healthy and fulfilling lives on this planet.
