Ben, if you’ve ever got an hour to spare…

Ben, if you’ve ever got an hour to spare, I’d love to hear your thoughts about a recent episode of NOVA called “Mind Over Money.” It’s about the debate among economists and social psychologists: can economic theory rely upon the assumption that people will act out of rational self-interest, or must we recognize that people are emotional and make bad decisions? (I guess it’s basically Smith versus Keynes, though I wouldn’t have understood that before.)

It’s interesting, and I learned a lot, but there were a number of things that bothered me throughout. Although both sides of the debate were presented, to me there seemed to be a clear bias toward the “people are irrational” view — and worse, an unspoken assumption that we must therefore regulate markets to guard against bad decisions. No one they spoke to even suggested the wild notion that perhaps people should be free to make bad decisions.

Also troubling to me was the assumption that the 2008 market collapse was caused entirely by irrational behavior (and, therefore, a failure of regulation). Not one word was spoken about the possibility that government interference with the market might actually have caused the problem.

I was also bothered by an experiment they depicted toward the end of the show, wherein students were asked to trade on a simulated market for assets whose “fundamental” value was programmed to decline predictably. The result was a classic bubble, with prices climbing well above this fundamental value and then collapsing when the assets were declared worthless. But I was waiting for an explanation of what this “fundamental” value was supposed to mean: what is the value of an asset, if not the amount you can get for it on the market?

I guess I have trouble with the idea that market bubbles are inherently irrational. If prices are going to climb for a while and then collapse precipitously, it doesn’t seem to me that it’s necessarily irrational to gamble on the possibility that you can get in and get out before the collapse happens. Sure, someone will lose the game, but does that mean that it’s irrational to play at all?

But my entire education in economics consists pretty much of this 52-minute NOVA. So what do I know?

It’s not on Hulu, unfortunately, and I couldn’t get it to work through PBS’s site either; but you can watch it through WGBH here.