Seligman's Diagnosis: Monopoly Protection

From a good post by Michael Strong:

Martin Seligman, author of Learned Optimism, is the national leader of the positive psychology movement. I recently ran across Martin Seligman's “Presidential Column,” when, in his capacity as president of the American Psychological Association, he describes a decision by the American Psychiatric Association as “shameful.” The context was the psychiatrists' decision not to participate in a joint academic journal designed to facilitate communication and share research findings between the psychological community and the psychiatric community. Seligman's account of the demise of this journal is telling:

“We published our first article and commentary in September 1997. You can read it on the web at

The dream has ended. In December 1997 the American Psychiatric Association’s Board of Trustees, acting in a closed-door meeting, withdrew from the collaboration (see article on page 42). They cited the need for a “broad review of the costs and benefits of electronic publishing projects.” This, of course, was not the whole story.

In August I began getting messages from their leadership that their board, led by the California trustees, might end their participation. In September, they put their cooperation on hold, citing the “state of the relationship between the two associations.” I was informed that APA’s policy of seeking prescription privileges for psychologists was the central problem. What publishing this scholarly journal had to do with that issue was not clear, but we crafted a disclaimer that reading Treatment did not qualify one to prescribe. It was clear, however, that their final decision to end the collaboration was political. Many of their trustees were worried that any collaboration with APA would legitimize the efforts of psychologists to obtain prescription privileges.”

Both the psychiatric and psychological guilds would be outraged by my notion that we need to legalize markets in happiness and well-being, especially once they realized that that would involve the elimination of occupational licensure. Guilds exist to protect legal prerogatives.

Amazing! I like Michael's phrase “legalize markets in happiness and well-being.” And guilds disgust me.

29 Replies to “Seligman's Diagnosis: Monopoly Protection”

  1. Transaction costs matter, which is why we should all go an read Yoram Barzel.
    My nomination for the most disastrously misleading metaphor in the entire history of economic thought would be John Locke saying that a hunter in a state of nature “mixes his labour” with what he catches. No he doesn’t he takes control of it. Locke’s metaphor encouraged economists to see exchange as the end point of a process of production (which it may or may not be) rather than a purposive act, which it always is. Lock’s mistaken metaphor led to all sorts of bad places, not merely the most famous analytical dead end.

  2. Excellent point. Transaction costs affect everything. That’s why so many tax rules, and so many regulations, are much more troublesome than their authors realize. These things aren’t self-enforcing. They require lawyers, accountants and so on to comply with the regulations or to follow tax provisions, not to mention the time involved on the part of those regulated and taxed. These are real and often expensive transaction costs, and they don’t show up in the regulating agency’s budget.

  3. Your critique of Buiter’s hypothesized baseline is a little too structuralist for my taste. The noble savages were humans just like us. They had the same intelligence and basic goals, even if they lacked particular customs and institutions. Even more so than for us in the civilized world, any interaction with other parties, including trade, involved a great deal of risk. The tribe down the river might want to sell us some flea-ridden hides, or maybe they just want to see the stuff we have and steal it from us while killing four adults and kidnapping a couple of preteens. Maybe you call that a “transaction cost”, but my tribe sees it as more of an existential threat. We’ll just shiver through this winter using the hides we have, thanks. Our baseline is to throw rocks at anyone outside the tribe.
    Even this sort of prehistoric scenario planning is unnecessary, though. If we really want to do science (that’s gonna be a stretch for most economists, but let ’em try), then we’re talking about models and hypotheses, not “the truth”. It may be easier to work with a baseline of zero than a baseline of epsilon. If the resulting theory allows us to make falsifiable predictions of future observations, then we have something we can use. If not, back to the drawing board. As my own little structuralist interlude above was meant to demonstrate, the less our economic theories depend on fevered aetiological imaginings of the state of nature, the better.

  4. I’d quibble with “[M]ost of the New Classical and New Keynesian macroeconomics assumes away the problem of contract enforcement. ”
    My Macro 301 course the problem of price stickiness–necessary to much of the Keynesian machinery–was explained as an artifact of contracts and transaction costs. It costs time & money to find cheaper, to relabel goods. Administrating auction markets costs even more.
    But after that it all becomes much more reasonable. Real human beings aren’t very good at rationality. Begin there. And construct a theory of markets based on assumptions of error, bias, mistakes and subsequent correction.

  5. Raivo Pommer
    ING-DiBa krise
    Vor einer Falle beim Vergleich von Kreditangeboten warnt die ING-DiBa: Unter Umständen droht eine Herabstufung der Bonität durch die Schufa, die Schutzgemeinschaft für allgemeine Kreditsicherung. Das kann zur Folge haben, dass ein Kreditantrag abgelehnt wird oder der Kredit nur zu einem höheren Zinssatz zu erhalten ist.
    Keine Gefahr besteht nach den Angaben der Experten, wenn eine Bank Einheitskonditionen für alle Kreditnehmer ausweist und beim Angebotsvergleich keine persönlichen Daten angegeben werden müssen. Aufpassen sollten Verbraucher bei der Jagd nach Kreditschnäppchen hingegen bei Banken, die den Zins von der Bonität des Kunden abhängig machen.
    Erkennen lassen sich solche Angebote daran, dass kein fester Zinssatz ausgewiesen wird, sondern mit Begriffen wie beispielsweise “Ratenkredite ab 6,9 Prozent” geworben wird. Um ein konkretes Angebot zu erhalten, müssen Verbraucher bei solchen Geldinstituten ihre Adressdaten sowie weitere Angaben zur Einkommens- und Vermögenslage hinterlassen. Um den bonitätsabhängigen Zins zu ermitteln, fragt dann die Bank auf Basis dieser Daten bei der Schufa an

  6. For all the economist bashing, we do need models that simplify reality to understand the world. In order to tease out the factors that are important in certain situations, neo-classical and Keynesian economists do ignore transaction costs and a whole lot of other things. In some situations, certainly, it is ok to ignore transaction costs. In other situations, transaction costs are a major issue. Some Economists have spent careers studying transaction costs. The very fact we are talking about “transaction costs” is due to Coase, for instance.
    People often cite behavioral economics as the future of the general field. Without downplaying the interesting results of behavioral economics, in order to make sense of empirical results we still need theories which will simplify reality in many, many ways. How else will we understand in which situations the results are applicable, or even what the results are.
    The best way to look at economics is as a “soft science” like biology. There is never going to be a law or model which completely describes human behavior the way a physicist describes thermodynamics. The world is just too complex. We can, however, use simplified models to gain insight about how the world works in certain situations.

  7. What Ross is really doing is trying to level the playing field between adherents of Catholicism and everyone else, by forcing everyone to assume the same child-bearing cost as Catholics have, thus nullifying the advantage.That is what some people are thinking but i am thinking vice versa.

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