Markets in Manipulation

Over at the ever-interesting Marginal Revolution, Tyler Cowen notes the widely-reported story of a woman who put her father’s ghost on eBay. This sparked the realization in me that market behavior can explain children’s bad behavoir. Here’s the woman’s rationale for auctioning the ghost (with metal walker as a bonus): “Mary Anderson said she placed her father’s ‘ghost’ on the online auction site after her son, Collin, said he was afraid the ghost would return someday.”

This is perhaps an Internet equivalent of pretending to sweep out monsters from under a bed. However, the results of the auction are what triggered my thought: “The proceeds from the auction will go to buy Collin a special present, she said.”

So basically the woman is paying the kid to have unreasonable fears rather than educating them out of existence. Furthermore, she’s being clever and pushing the cost of this bit of bribery onto a third party by auctioning off the ghost (and her father’s metal cane in an attempt to avoid eBay’s anti-fraud policies). However, look at the market she’s just created: by rewarding the child’s behavior, she has instilled in him an incentive to invent new and more elaborate fears in an attempt to gain more rewards. In the child’s view, demand for that behavior has just gone up, and, as a rational maximizer, he’ll try to fulfill that demand.

Now, if the woman is a good parent future behavior not associated with something as traumatic as the death of a grandparent will not result in a reward. But such behavior explains how parents who seek to palliate children who demand toys in stores end up with uncontrollable children: by rewarding the behavior, they create a market for it. Eliminate demand, and the supply will eventually go away.

Similarly, government price supports for agricultural products can be seen as bad parenting. So George W. Bush is not just poor at domestic policy planning, he’s also a bad parent…and from the stories about Jenna…