STREET DOGS

Most of us have little or no education in economics, but that doesn’t stop us holding beliefs about everything, from the benefits of international trade, the origins of inequality, to the power of big business, and the consequences of regulation.

“These ‘folk-economic’ beliefs are often vague, incoherent or just plain wrong,” says Pascal Boyer in New Scientist, “but they are not random people everywhere seem to have similar intuitions. It is as if the human mind is designed to misunderstand the mass-market economies we have created. Our intuitions about production and exchange are adaptations to the particular context in which our species developed. In the small communities of our past, everyone could monitor the effort each participant put in and how much they received in return. But that is not the case with complex trade networks and modern technology. This helps explain our negative attitudes towards large retailers. Everyone knows they make big profits ... they also generally sell goods cheaper than their smaller competitors. We can all see that we gain a little, but most people don’t realise that this aggregate consumer benefit can be hundreds or thousands of times larger than the profits made by large retailers. Similarly, we mistakenly believe that big corporations are allpowerful. Because we intuitively think of exchange as taking place between two individuals, with the stronger, more formidable partner able to dictate terms. What we fail to see is the power of consumers as a whole. No matter how big a company, whether it thrives depends on the aggregate of millions of individuals choosing to buy its products. Our intuition tells us that regulation will redress the balance of power between the producer and the consumer. But this kind of thinking again misses the bigger picture. Price regulations disrupt incentives, often with perverse effects.”