This is a version of:
Economics of preference change: the case of therapy.
Journal of Economic Psychology 18 453-463
but the journal carries a commentary on this piece by Bjorn
Frank which is not reproduced here.
THE ECONOMICS OF PREFERENCE CHANGE: THE CASE OF THERAPY
I. INTRODUCTION.
The problem with the rational choice model is that it
neglects the dimensions of personality, self identity and within
these the role of the emotions. All of these are stirring up
great ferment within social psychology (see Harre and
Gillett,1994) but economists have been slow to take an interest.
Robert Frank (1993,p.162) suggests a move to a model which "views
preferences not as ends alone but also as the means of achieving
important material objectives". This implies that we should be
interested in how preferences change. Otherwise we fall into the
regress of treating expressed preferences as revealed preferences
about desired preferences. This is the problem with work on meta-
or multiple utility models. This paper discusses these in the
context of studying therapy as a process of preference
change.
II. ECONOMICS AND BEHAVIOURAL CHANGE
It is convenient to divide behavioural change into that
which is desired by an individual and that which society seeks to
impose on an individual. Economists would not make any normative
judgements on the first kind unless it leads to the second kind.
The second kind involves either paternalism or a desire to
correct externalities i.e. it is decided that the state knows
better than the individual what is good for them or the change is
deemed necessary to remove costs imposed on others. The problem
which the individual suffers may be such that they are incapable
of desiring its removal. However, when it is removed they may be
supportive of its having been removed. In such a case the
imposition of therapy is a straightforward case of the state
acting as an agent on behalf of the rational 'self' inside the
troubled individual. Alternately we might simply argue that the
therapy has changed preferences to a liking for the therapy.
Indeed, it might generate therapy addiction. In terms of the
household 'firm' as portrayed by Becker, therapy may be an
abatement technology for externalities akin to technical
improvements reducing pollution in the corporate firm.
Surprisingly the work of Becker and his acolytes has yet to
consider the issue of externalities arising from within the
structure and function of the family unit.
From an economist's perspective,an individual who seeks
modification of their own behaviour is recognizing that they have
been making errors. The psychological literature distinguishes
motivational from cognitive errors. Cognitive error arises
because of the limited information processing capacity of the
human brain. We might be satisficers rather than maximizers
because the latter exceeds our ability in managing our lives. It
is obvious that mainstream economics would readily embrace the
notion of cognitive errors. This is seen in the reaction of
mainstream economics to the work of H.A.Simon which usually
recieves the least hostility of attempts to broaden the base of
the discipline [see, for example Heiner (1983)]. Motivational
errors arise where there are personality embedded attachments to
particular potential outcomes in an uncertain situation.
Motivation based approaches recognize the desire to maintain a
positive self image or identity. Put bluntly, no one likes to
think that they have made stupid decisions or are an inadequate
person. Some beliefs are more supportive of self image than
others (Langer,1975).
Motivational errors can be treated in terms of a loss of
'self control'. Some economists include this in multiple utility
models (Thaler & Shefrin,1981; Schelling,1984; Etzioni,1987).
The traditional model of choice rules out any kind of judgmental
ordering of the arguments of the utility function. If we relax
this requirement then individuals have preferences about
preferences. Models of self-control argue that individuals have
'higher' preferences which lead them to seek additional
constraints, to reign in the drive to satisfy lower order
preferences, which could be viewed as 'utility enhancing
consumption constraints' (Levy,1988). Compulsive consumers have
been known to freeze their credit cards in blocks of ice. In
broad economic terms the reason for foregoing the required
constraints, in the short run, is that these impose costs in the
form of psychic effort (Shefrin & Thaler,1988) . Maintaining
beliefs that conflict with the environment impose costs in the
form of the strain of reconciliation which leads us on to the
subject of cognitive dissonance.
Economic models of cognitive dissonsance stress the
avoidance of information which contradicts an exogenously given
self identity (Gilad,Kaish & Loeb,1987); in these dissonance may
trigger an information filter which selects in favour of
information that confirms the wished for belief that is otherwise
contradicted by the world. There are individual differences in
tolerance towards cognitive dissonance which may depend on
constraints in the decision -making environment. Hence, we can
expand the model to allow for personality simply by allowing a
new argument in the utility function and seeking to measure it.
The idea of modifying behaviour is the essence of any kind
of therapy. For economists, attempts to change behaviour do not
generally mean preference change. It would usually imply a change
in relative prices or a correction of false information which is,
strictly speaking, still a change in relative (hedonic) prices.
Take, for example, the following quotation on the suggestion of
using cheaper credit to help 'problem' debtors: "In any event, if
easy credit were addictive or the amount of consumer borrowing
excessive,lowering the price of credit through interest rate
ceilings would be a strange solution. It would make more sense to
raise prices through,for example, a special tax, as in the case
of cigarettes." DeMuth(1986,p.205)
In the case of cigarettes, taxes are a straightforward
relative price change whilst health warnings are an attempt to
correct information failure. Economists have produced a vast
array of studies assessing the impact of these two variables on
smoking behaviour. None of the studies make any reference to
therapeutic approaches (see section IV of Jarvik et al.(1977) for
discussion of these) which attempt to shift underlying
preferences. Economists implicitly assume that individuals are
behaviourally stable and will thus respond in a fairly
predictable way to stimuli. It is thus not surprising that de
Muth does not consider the use of therapy as a palliative for the
problem debtor. Clearly there may be cases where therapy is
Pareto superior to price system based approaches to problem
behaviour.
There have been recent moves to treat addiction, which
would traditionally have been regarded as non-rationl problem
behaviour, as a case of rational choice (see e.g. Becker &
Murphy,1988, Becker,1992). Becker defines an addiction as
"simply a strong habit" (Becker,1992,p.329) where a habit is
defined as a dependency of consumption on past levels. This is
"harmful or 'bad' if greater present consumption lowers future
utility " (ibid.p328). An individual with a strong bad
habit/ addiction is thus someone prone to make cognitive errors
who may therefore have an incentive to seek to correct these or
even sign themselves into an institution for a period of
short-run disutility. If the individual has the extreme
rationality of Becker models then they can manage their addiction
without recourse to such corrections. Akerlofian cognitive
dissonance can be deployed to bridge this gap. If we took it to
its logical conclusion then we would end up viewing insanity as
the end product of a rational choice process where the mind has
lapsed permanently into a created world because dealing with the
'real' world would threaten the existence of the body. This would
arise where the cognitive filter breaks down totally and the
individual is no longer able to juggle the multiple states of
mind in which they exist. It is at this point that a cure, such
as formal therapy, may be sought. For cases of incongruity of
behaviour with stated meta preferences then the same argument
applies but the individual merely faces less psychic strain of
reconciling the two states of the world.
III. THERAPY
For the purposes of this paper we may define therapy as
some form of cognitive stimuli designed to change behaviour. The
behaviour may arise from some form of impairment e.g. learning
difficulties or be a manifestation of apparent personality
difficulties (i.e. motivational errors in terms of the
terminology of section II) e.g. addiction to harmful substances
or activities such as self-abusive eating cycles. Obviously the
behaviour may be deemed undesirable by the individual or society
without the one necessarily implying the other. A bulimic may
harm themselves without imposing external costs on others.
Indeed, society does not intervene to prevent bulimics dying
whereas this has not always been true of hunger strikers.
There are various types of specialist therapy such as arts
therapy (Waller & Gilroy,1992). General pyschotherapy is based
on talking to the subject in an organised way with the intention
of precipitating hidden or subconscious aspects of personality
into the conscious mind.
This is the first role of conventional therapy as a:
"constructive link between the unconscious and the conscious ..
a form of communication between the patient and other people"
[Waller and Dalley(1992,p.10)
In the more radical work of Melanie Klein therapy involves
"working through the infantile depressive position ...
(with a ) desire to make reparation the destructive infantile
feelings to mother" .. "for true reparation to take place there
must be admission of the original destruction or there will only
be denial"
[ibid,p.12]
An obvious problem with therapy is evaluation. Its
provision could merely result in consumption benefits to the the
practitioner and client in the form of enjoying talking . At
worst it could lead to welfare losses rendering a patient into a
more problematic state by unleashing difficult to control
repressed thoughts. Arts therapists are becomingly increasingly
aware of such critiques. Although they do not do anything like a
cost-benefit analyis, the literature shows attempts to research
whether the practice does any goood. Payne(1993) documents the
volume of evaluation research whilst Rogers(1993) provides a good
example of how this is done in the context of sexually abused
clients. The volumes by Waller & Gilroy(1992) and Payne(1993)
indicate the range of applications of arts therapy.
Therapy has been applied to alcohol abusers,
schizophrenics, the sexually abused, bulimics,anorexics and
compulsive eaters. These activities range along a spectrum from
what would be considered utterly pathological in terms of the
rational choice model to those which Chicagoans (e.g.Becker &
Murphy,1988,Becker,1992) have tried to bring within its pale.
IV. SYNTHESIS
At the most mundane level, therapy could be used to correct
cognitive errors. If we take the case of alcohol, we could have a
non-addict who simply feels that they drink too much through a
tendency to underestimate health risks. Under existing social
structures such an individual is unlikely to be in therapy. If
they sought it they might find a means to revise their
preferences. This can be seen as just a particular process of
reconciling short and long run preferences in a dual preference
model. The same kind of effect is sought by some people using
hypnotism which is,fundamentally, a form of therapy.
It is more likely that therapy will be applied to
motivational errors as these are embodied in personality. The aim
here is to modify goals and make them more explcit. We can use
game theory in the form of a 'patient's dilemma' (see figure 1)
to illustrate the basic choice problem. The numbers shown are
assumed to be discounted utility. One thing that therapy may do
is distribute happiness differently over the life cycle. The
figure shows an old self for which preference remain unchanged
from before a course of therapy and a new self which corresponds
to possession of the ideal set of meta-preferences. I am here
making a step not found in multiple utility models. Multiple
utility models assume that the 'higher' set of preferences is
more desirable than the lower. Therapy might be a means of
attaining the higher set of preferences. However there is no
guarantee that this will be the case. Therapy is geared toward
finding the 'true' person concealed within repression and
neuroses. The subject may not like the true self which emerges
from the therapy process.
I show the new self achieved without therapy as having
lower utility as the transition involves loss of self esteem
through being unable to frame motivational errors in terms of a
reference grid which explicates them. I am assuming that the
individual gets to the new self through some kind of trauma which
has long lasting effects which offset any liberation achieved.
The trauma could be something like a very bad drug trip or
alcohol binge which we would see as an attempt by individual to
administer chemical therapy to themselves.
If therapy fails to achieve the personality transition of
motivational error propensity then I show this as the worst
outcome as there has been failure on both fronts. The status quo
will be 100 utils at old persona, no therapy while the pareto
superior outcome is with therapeutic persona transformation at
200 utils. The dilemma creates a pressure towards maintenance of
the status quo.
Everything so far has been framed in terms of a one period
game. In fact there will be a sequence of games normally referred
to as a 'supergame'. Individuals may be too weak in willpower to
attain 'true' or 'higher' preferences. Take for example a
criminal who wishes to quit the life of crime. A cycle of
getting caught and punished may well be part of the process of
gravitating towards the desired set of preferences.
I will now discuss addiction a little further as this is
the most obvious intersection of Chicagoan economics and
therapies. It is interesting that Becker's discussion of
addiction treats it as differing from habit only in degree rather
than kind. This is an entirely correct and logical deduction if
one holds to mainstream economic theory as the suitable model of
human behaviour. Attempts to widen this model in terms of self
control, dual preferences, Akerlofian cognitive dissonance etc.
do nothing to change the essence of Becker's position as they are
still a form of " only slightly-modified utilitarianism";
(McCain,1990a,p.78). This is why multiple utility is seen as
futile by some microeconomists ([e.g.Levy,1988) as as it merely
introduces complicating detail into the standard model.
Humanistic psychologist Eric Fromm treats addiction as
derivative of neurotic cravings:
"To crave that which is harmful is the very essence of mental
sickness. Every neurosis thus confirms the fact that pleasure can
be in contradiction to man's real interest" (Fromm,1949,p.179-80)
This is a difference of kind rather than degree as needs or wants
are viewed as non-homogeneous. Neurotic cravings are seen as
different from 'normal' tastes. Becker ignores the process
leading to cravings treating them as a by-product of a standard
rational choice process. In mainstream economics utility is the
same thing as pleasure and rational individuals are assumed to
maximize utility. It follows that it does not make sense to say
that pleasure is in contradiction to one's real interest as one's
real interest is the pursuit of pleasure.
Some therapists (e.g. Mahony & Waller,1992,pp.173-175)
regard addiction as emanating from a narcissistic disorder.
Narcissistic conflicts arise where an individuual blocks or
internalizes aggressive impulses towards love objects under
pressure from a frustrating environment. Such feeelings are
trapped in the non-verbal stage of development and may require
non-verbal (arts therapeutic) regression to the stage of fixation
in order that they be explored. In terms of multiple preference
models, such individuals in normal cirumstances are not able to
be overtly conscious of the self which is associated with the
ideal set of preferences. Their experience is one of conflict
between actual preferences and the knowledge that they are not in
the preferred state. This cycle of addiction is clearly
different from the Becker model. It would represent a build
up of tension and aggression spilling over into frustration at
the inability to discover meta-preferences.
Therapy and the process of preference change.
It will be evident from the above that if therapy is to be
fitted into economics the appropriate slot is multiple
preference models. These lack any notion of process or adjustment
to equilibrium which renders them capable,as I have pointed out
elsewhere (Cameron & Golby,1991), of being reduced to a
short-run/long-run distinction. Standard microeconomics has a
cognitive void in that decision-making behaviour is analysed
without reference to the thought process behind it.
Our discussion of therapy highlights that decisions may be made
through intuitive, symbolic, visual or other modes of discourse.
Some quotations from the arts therapy literature, in Rust's
work on eating disorders, serve to illustrate this:
"Art therapy provides a different kind of space from verbal
psychotherapy where inner processes are normally articulated in
words. ..this approach assumes that the client can to some extent
bridge the gap between the image inside as felt and conceived and
the image outside given form to, and embodied in the spoken
word."
(Rust,1992,p.161)
"The art object as a metaphor contains an element of
transformation. I am thinking of one woman's image of a tree. The
roots where shown under the earth and among them was painted
'black shit'. She described the tree as portraying herself and
that she felt her early experience to be 'full of shit'. How
could she, she asked, make something of her life when all there
was at the beginning was bad?. The rest of the group puzzled
over this dilemma. Then they struck on the idea that plants
thrive on shit and that it fertilizes them. The tree could
transform the shit and use it in its strong, healthy growth.
Throught this image she began to see that she could use her
experience in different ways. Instead of cutting off from her
anger and sadness about her early experience she could feel it
and use it to help her understand and distinguish her current
needs and behaviour patterns." [Rust(1992,p.167]. The
disinterested economist's riposte would be that we deal with
'normal' people not those in pathological conditions which could
be neglected in the aggregation to a market model. As I have
argued above this ignores the issue of cognition and of process.
The latter is only really glimpsed by Austrian economists and the
former is not dealt with satisfactorily in any economics.
Trying to overcome a blockage of conflict to select a set
of meta preferences will depend on the individual reckoning
that they have a problem. This paper has suggested that
this is done through symbolic non-verbal reasoning. Neo-classical
economists would argue that the choice behaviour of a fringe
group of inadequate homo economica can safely be ignored. I would
like to suggest that more mundane choice behaviour may follow the
same lines. There is no reason to suppose that the process of
framing choices differs for the more 'normal' decision-maker. In
other words we should pay more attention to the case where an
individual maximizes (or some other goal) utility under a state
of uncertainty as to what exactly constitutes her utility.
Being radically pschotherapeutic one could argue that all
choice behaviour reflects underlying dimensions of the person of
the chooser. This is echoed in the recent social psychological
literature which tries to get away from a mechanistic model of
the mind (Harre and Gillett,1994).
Policy.
Therapy is at the end of a spectrum of methods of
attempting to induce behaviour/preference change. At the opposite
end are price type mechanisms which include prison sentences for
abusive behaviours. In terms of standard microeconomics this
spectrum would be seen as ranging from the 'normal' agent at the
latter end of the spectrum to the disturbed. It is a largely
unstated assumption that the normal dominates. One notable
feature of much psychiatric and psychological work is that
finding a normal individual, in the psychiatric sense, is not a
very normal event in the statistical sense. This may seem a
strange statement to an economist, so it might be helpful to
quote Janov (1973, p.145)
" When I talk about a normal human being, I am discussing a
defence-free, tensionless, non-struggling person. My view of
normality has nothing to do with statistical norms,averages,
social adjustment scales, conformity or non-conformity". It
should be obvious that this has great relevance to the scale and
composition of consumption in the economy through such things as
the influence of body self image on food choice and amount and
the use of cars as status objects to compensate for feelings of
inadequacy.
It is possible to imagine a model of society where
everyone is abnormal if one defines normal in such an ontological
way. Assume that individuals are sensitive to experiences and
stimuli which may overcome their ability to choose in their own
best interests. They make cognitive or motivational errors. In a
market society there is a financial incentive for some one
(advertisers, marketeers and their clients) to exploit this.
This leads us back to Eric Fromm(1949,p.179)
"Psychoanalysis confirms the view, held by the opponents of
hedonistic ethics that the subjective experience of satisfaction
is in itself deceptive and not a valid criterion of value."
On a macro scale,such exploitation may be welcomed as an
engine of economic growth (cp. Cameron,1994 pp.214-217) on debt
and economic growth) bringing a national neurosis or pscyhosis.
In other words there may be a cognitive overload which reduces
the inability of individuals to choose according to their own
best interests.
There may be a competitive process inherent in this i.e. the
fittest, who can adapt best to the disruptive flow of stressful
messages, will prosper at the expense of those less able to do so.
In such a neoclassical evolutionary view it is a good thing that
the stresses of modern living reveal somebody to be anorexic,
bulimic or whatever because it reveals their inadequacy with
respect to somebody else for fulfilling a job. In an uncertain
labour market, i.e. where marginal productivities are difficult
to observe, high stress reveals information. Perhaps an analogy
would be helpful. If I was choosing a car out of 10 models and
was able to observe their life preserving qualities in real life
accidents without having to pay anything then I would clearly
benefit (assuming the absence of altruism effects).
This raises a policy issue of the optimal degree of
state intervention in the form of therapy or alternate measures
to reduce the flow of stressful stimuli. Cognitive overload may
be treated as an externality of the search for high rates of
aggregate growth. On the basis of the allocation of time model
substitution effects, of rising wage rates, may lead to
decreasing parental time and personal rearing inputs which lead
to identity/adjustment integration problems. Such problems may
give rise to crime, inadequacy in relationships, failure in work
or other activites which impose costs on third parties.
V. CONCLUSION
I have considered, in the light of recent attempts to
broaden the scope of the microeconomics of choice, the case of
therapy as a means of changing behaviour. To the best of my
knowledge, economists have not yet written about therapy. This
seems a curious omission as it may be Pareto superior to other
means of adjustment. No doubt it comes about from the assumption
of given tastes which is a way of keeping the wolf of social
engineering from the door in favour of price incentives.
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FIGURE 1; THE PATIENT'S DILEMMA
No therapy therapy
Old self 100 20
New self 80 200