• Rory Sutherland

APPALLING ECONOMICS


Excerpt #1 from an interview with Rory Sutherland, published in Edge.org. Sutherland is Executive Creative Director and Vice-Chairman at OgilvyOne, a subset of 'madmen' Ogilvy & Mather, which in turn is a subset of WPP. OgilvyOne calls itself 'The Customer Agency', part advertising, part direct marketing, part of something else - 'The Thing for Which We Have No Name'.

'The problem—in terms of understanding human behavior, and I go even further, in understanding economics: Why is neoclassical economics so disproportionately influential among the social sciences in influencing policy and bank behavior and, indeed, business?

'I mean, the finance director—the chief financial officer—is now typically the second most powerful person in any organization. He will, unconsciously or not, base quite a lot of his decisions on the unproven assumptions of neoclassical economic theory.

'So why has neoclassical economics, which is a pretty appalling predictive guide to individual human behavior, achieved this influence? One of the reasons is it's mathematically neat so people just fall in love with the elegance of the thing and are happy to ignore the fact that, empirically, it ain't all that.

'Maths may be an obstacle to good thinking because it's actually constraining. We have a perfectly good thing called words and grammar, which can describe very complex concepts. Regret, for example—maybe you can't mathematically express it very easily but it patently affects human behavior.

'The fear of regret is clearly fairly influential in affecting how people behave. I would argue that from my advertising perspective, one of the reasons people pay a premium for brands isn't because they're objectively better, it's because they're less likely to be terrible.'

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