Fairy-Tale Economics: Scarcity, Risk, Choice

Abstract

Economists tell stories about how people behave. setup is always the same: an actor is confronted with a choice and must make a decision. Should he (it's usually a he) take a quick, assured return or wait for a less certain but larger payofff? Should he place his trust in another actor and collaborate for a larger joint profit, or act alone to make sure he is not cheated, so that at any rate he comes away with something? When he's played the same game for a long time, will he keep paying attention as the next decision comes?The game experiments used by economists to predict human behavior generate a certain range of stories as diffferent players try out diffferent strategies in successive iterations of the game. stories also change insofar as economists with diffferent commitments observe the outcomes. In one common story, it pays to seek short-term gain in a context of extreme uncertainty; in alternative versions, staying the course for the long term leads to far greater profit. In a second much-told story, the maximization of self-interest can only be pursued alone. But a diffferent telling discovers that cooperation brings not only greater stability but also bigger long-term benefit for all parties. limited matrix of elements becomes an arena in which fundamental human tendencies play themselves out: rationality, habit, and impulse; self-interest, cooperation, and the sense of fairness; conformity and self-assertion.2 In any encounter of strategies there are winners and losers, better and worse outcomes among the players.How much is changed when we change the idiom? Here is an example of what the comparative tradition of folklore studies calls the Marchen, what we know in English as the fairy tale. A hero saves a snake princess from a fire and is offfered any reward by her father, the King of Snakes: maybe he'd like a nice bag of gold? hero says no, he wants to know the language of animals. snake tries to dissuade him: knowledge is dangerous and can get you into trouble, he says. But the hero is both obstinate and attentive. Later he is walking down the road past a gibbet where two thieves have been hanged; he overhears the crows on the gibbet discussing where the loot has been hidden. cache proves much larger than the bag of gold he was originally offfered (Agonito 54-55). This story was told in the early 1960s by Italian immigrants in Syracuse, New York; we may note that immigrant families in that era had to decide whether to keep their children in school or take them out early to go into assured factory jobs.3Or consider the familiar contrast of kind and unkind behavior in fairy tales. story of the good girl who is rewarded for helping other creatures in need with riches falling from her hair and mouth, while the selfish stepsister receives toads and vipers (ATU 480),4 is perhaps too schematic to be altogether compelling to the listener. But other tales contrast more realistically the diffference of outcomes between the self-absorbed, self-interested actor and the one who listens, shares food, and offfers labor along the road to his or her ordeal, receiving timely instruction and assistance in return. This is an object lesson in social reciprocity among the vulnerable, and also in paying attention to your surroundings. A calculus is usually present, to be sure; many tales from oral tradition point out the riskiness of unthinking adherence to the highest moral standard. Sometimes when you rescue a snake it turns and kills you (ATU 155). Pure kindness toward an actor too weak to reciprocate is a luxury when the situation is desperate, while continued generosity toward someone who proves to play selfishly would be sheer folly (Mathias and Raspa, The Gourd of Blood). Being smart can be more important than being good, and being lucky often trumps either.The traditional fairy tale also explores decision making over the long term. Godfather Death (ATU 332) is a story about success and hubris. …