Tuesday, November 27, 2012

Economic heuristics

Kevin Drum wonders why people tend to listen to CEOs when they talk about the economy:

I'm a cynic, so I suppose you should take my views on the business community with a shaker of salt. Nonetheless, here's what I think we should conclude from this: Fortune 500 CEOs should never be taken seriously on macroeconomic issues. Their job is to dole out high-grade BS in public, and politics and macroeconomics are just grist for their mill. Every word out of their mouths is special pleading, and that's how the business press ought to treat it. I really have no idea why anyone ever takes them seriously on this stuff.

When people hear "CEO" the heuristic (mental shortcut that easily allows someone to identify something without too much mental work) they conjure up is someone who is important, has authority and expertise in the area, and thus should be trusted with their opinion. It's more difficult to explain why this heuristic exists.

I think part of it is that it's just simple. After all, that's why it's a heuristic. Everyone knows what a CEO is. Because of that (or maybe this is causing everyone to know it) the media frames and focuses on that one person. It's like the QB in football. The media and fans focus on that one person because they are the said to be the most important person, the CEO of the players. So when we think of a CEO, we think of a leader.

Another part of it is I think there is a status symbol at work in our society regarding the CEO. They are either elites whose family has run businesses for a long time (Rockefellers) or really talented people who worked their way up to lead great companies (Steve Jobs). We are a very individualistic society. We love to frame things in individualistic ways. And CEOs are a great way to do that. So we kind of put CEOs up on a pedestal, glorifying what they do. Given their high status and leadership position it's no wonder people pay attention when CEOs give their opinion, even though they shouldn't.

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