It has been stated many times that
economics is about behavior. Demand and supply are mere manifestations.
Economics is concerned with how people take decisions under various
circumstances. There is a positing about rationality in decision making. Economics
assumes agents are rational when they make decisions. Implied is the agents are
well aware of the cost benefit analysis when they exercise those choices. While
the exercise of choices might seem irrational or weird to the observers, yet to
the agents, there exists a certain calculations that would have gone into their
choice. The behavioral economics contests this proposition, yet it is more
about decisions under cognitive constraints or informational constraints. It is
about boundaries to the rationality in terms of decision making. Therefore,
behavioral economics talks about bounded rationality. Yet within these
boundaries, there does exist a cost benefit analysis towards execution of preferences.
Not evaluating every possible choice is not irrationality but execution of
rational decision under certain constraints.
As one studies rationality, it would
be natural to seek decoding the rationality in decisions of the past. It would
beg to be wondered whether certain decisions could have changed the course of
history. In the context it might seem the decisions were perhaps inexplicable
but a deeper examination might actually suggest the decisions to be rational in
the circumstances being faced by the economic agents. The discussion on
rationality comes back to the mind when one listens to a podcast with Peter
Leeson on Freakonomics. The podcast is available here. The discussion with Steven
Levitt covers quite a few aspects but one interesting thing that gets discussed
is examination of historical events that have been considered barbaric in
modern times through the prism of economics. The discussion is naturally about
the medieval and pre-medieval trials which seem to use harsh methods to extract
confessions. Many methods seem to be faith based rather than based on what we
call modern logic or secular and sound principles of legal justice. There
apparently was little focus on burden of proof but rather seeking to place
faith in supposed hand of God in delivering innocence or otherwise.
The medieval trials were notorious for
their cruelty. They had a hot water test and cold water test. The accused were
asked to dip their hand in hot water and pick up some object like a stone or a
ring that would have been thrown into the water before boiling. If the hand of
the accused doesn’t get burnt it would be indicative of a divine intervention
and thus they would be set free. In the cold water test, the accused would be
thrown into the cold water with their hands being tied. If they do not drown,
it was indicative of their innocence. These trials were generally applied only to
Christians and to other religions like Jews or Pagans, there were other
methods. This in itself would indicate there was certain sense of psychology
that was involved in application of the test. To the Christians who were devout
believers, they would seek to undergo the test to prove their innocence. Their belief
would rest on God saving them. This might not have been applicable to the
believers of other religions.
The priest was the one entrusted
with boiling the water. The accused would be in a private session with the
priest for quite a long time till the water was boiled. It might have been
deals being struck in the private, the outcome of which might be the water
might not have been boiled to the extent it would burn hands. Therefore, the
priests who were supposed to be representatives of God had tremendous role to
play. Yet there was game theoretic view that was supposedly at play. It is
about the strategic or at least tactical value of private information. The accused
would know whether he or she had
committed a crime or not. If they knew they had committed a crime, they would
in all probability believe that their hands would be burnt and thus have an
incentive to confess beforehand perhaps in the hope of receiving less
punishment. Secondly even if the accused were to take advantage and get away
with it, the fact, a serial criminal would have to come back numerous occasions
would be sufficient disincentive for them to try their luck. The priests too
would know if someone kept coming back, the probability of them committing a
crime would be higher.
In fact, the data as discussed on
the podcast indicates something towards this. The researchers in the podcast seem
to have dug out some data from Hungary. Of the 300 odd cases, apparently,
around 100 seem to have confessed before going through the trial. Around two
thirds of those who did go through the trial, they came out innocent. It is
apparent, those who were staunch believers and who knew they had committed a
crime would seek to confess rather than go through the trial. To the others, it
might have been there would be a deal between the priest and the accused or
alternatively, the priests would have gauged their innocence through psychology
and prepared the water less hot. This actually demonstrates, the medieval trials
were perhaps not barbaric in practice though they appeared so in theory. There cannot
be a value judgment on the same at this stage but one has to glance through
economics or psychology to unearth the reasons behind these practices.
It appears so that the practices had
a sense of rationality despite the alleged barbarism. It rested on a
fundamental economic foundations of information asymmetry. In the presence of
information asymmetry, there has to be devised a mechanism for self-revealing. It
is about designing a separating equilibrium. It is about criminals revealing
through self-selection. To this extent they had to design the practices that
seem to bring the psychology of the people. In an era of staunch beliefs and
pre-modern science days, it appeared these tricks would work most of the times.
There would higher degree of errors but that would be neutralized by
confessions too. Therefore, when one examines carefully and beneath the radar,
these practices had a sense of rationality to them.
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