Tipping and Voting

March 28, 2010

Rational people shouldn’t tip. They shouldn’t vote, either. The reasoning is the same in both cases and easy enough to understand: the costs of either activity outweigh the benefits. You’re supposed to tip “for good service,” but at the point of tipping, the service has already been performed. Sure, in some cases you might be worried about future service, for example if you are at a restaurant that you might eat at regularly. But I’d venture to say that in the vast majority of cases where people tip, they do so with no possible expectation of future reward.

The logic against voting is even clearer: no election has ever been decided by a single vote or anything close to it. Bush won Florida in 2000 by 537 votes. That’s not close to 1. Clearly, voting that has any positive cost doesn’t make sense.

So much for rationality. How about the facts? Anyone who has been to restaurants in both Europe and the United States can tell you: tipping works. Service in America, which relies on irrational tipping habits for services already performed, works way better at producing good service than Europe’s “tip included” method.

What the heck is going on? Well, as happens so often in Game Theory problems, we’re confusing what we think people should do with what they actually do do. To put it another way, if you set up a payoff matrix and people don’t seem to choose their highest payoff action, then you probably set up the payoff matrix wrong.

This calls to mind one of my favorite quotes from Eliezer Yudkowsky: “Rationalists should WIN.” Thus it doesn’t make a lot of sense to say that if the American system were more “rational,” people wouldn’t tip. If people started doing that, our system would be more like the European system, and that would make it worse.

My argument is unlikely to surprise you unless you’ve listened to as many arguments as I have from economists about why people shouldn’t vote. The point is that if your notion of rationality demands that everyone be worse off, then you should probably rethink your notion of rationality.

Based on my understanding of the “individual mandate” portion of the new healthcare bill, the penalty for not buying insurance will be less than the cost of insurance. Guaranteed coverage for “pre-existing conditions” means that you don’t have to buy insurance until you get sick. What should a rational person do when faced with this situation?

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3 Responses to “Tipping and Voting”

  1. Rrrobert! Says:

    I’m not sure what you’re aiming at here – I think you might be praising a system that can credibly assume that most people will buy health insurance even though it’s not straightforwardly rational. But I’m skeptical that you would do such a thing.

    I’m also not sure of your claim that the penalty will cost less than health care. In my experience claims that seem to go against basic common sense are often true with a “but”; i.e., some crucial context is being left out. For starters, the bill gives credits toward insurance for the poorest people who are most likely to value cash over health security.

    My guess is that by the time you get to the point where buying insurance would be more expensive than paying the penalty, you’re well into people who are, as a general rule, willing to pay for the value added by the less salient benefits of insurance – smoothing of the costs of regular care, easier planning, and not having to shop for insurance when you do eventually get sick. That threshold is no doubt lowered by a generalized sense of fair play, as I think you might be pointing out.

    If I remember, I’ll ask one of our health gurus and see what they say.


  2. Yeah, sorry, I was too cryptic in this post, which is something which I hate it when writers do that.

    I needed to be especially clear because I was saying something that you wouldn’t expect me to say. But anyway you figured it out and your first paragraph is right, odd as it may seem. Although, “praising” is perhaps taking it a bit too far. I’m only suggesting that it’s hard to predict what people will do if you don’t fully understand their payoffs.

    With tipping, we might think “Well, nobody would pay a tip if it doesn’t benefit them,” but clearly there are a lot of people who say, “This waiter did a really good job, and it’s worth $5 to me to reward that.” Who knows why they act that way, but they do.

    Lately I’ve been thinking about the importance of “irrational” emotions in bringing about good outcomes in the kinds of Game Theory situations that people are routinely faced with, so I guess this kind of analysis is an extension of that.

    Perhaps a pithy way to summarize my thinking on this issue is to say that if people were really as bad as Thomas Hobbes thought we were, not even the Leviathan could save us.

  3. Rrrobert! Says:

    I’ve occasionally thought that political organizing is essentially an evolutionary mechanism to subvert the logic of the prisoners’ dilemma.


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