Procrastination, Obedince, and Public Policy: The Irrelevance of Salience

Gary M. Anderson and Walter Block

American Journal of Economics and Sociology, 1995, vol. 54, issue 2, 201-215

Abstract: type="main" xml:lang="en">

Abstract. Modern economics assumes that individuals are rational maximizers, who, in the presence of costly information, sometimes make mistakes. Recently, George Akerlof has challenged this presumption. He proposes that people sometimes fail to maximize their long-run utility, due to the phenomenon of “salience.” This refers to the alleged systematic distortion in individual perception where events closer to a person (in time and in space) seem bigger and more important than they really are. The salience phenomenon is claimed to interfere with the process of rational maximization, rendering some individual choices, in effect, irrational. This paper subjects Akerlof's suggestion to critical scrutiny. It is argued that the examples Akerlof offers of the effect of salience are not the anomalies he claims but instead represent behaviors which can be readily explained within the framework of the standard economic model. All of his major examples are considered in this light and it is suggested that the work of Israel Kirzner holds more promise for improving the analytical power of the standard economic model than does the idea of salience.

Date: 1995
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