The Fundamental Attribution Error
By Anthony | January 19th, 2006 | 12:28 amIn this past week’s Rhino Times, John Hammer writes an article in which he touches on the new senior drug program:
Some people make bad financial decisions throughout their lives and it appears that if people do that then the government is going to provide for their every need after they retire. Why should people who are working today pay for drugs for retired folks who can’t afford them because during their working years they bought a new car every year, had to have that motor home that they took on a trip once and then it rotted in their driveway, or put what should have been going into a retirement fund into a boat? Some seniors have really high drug bills because they spent money that should have been going into their retirement on cigarettes and now they have a whole host of health problems related to smoking.
I’m sure it’s true that some seniors have made bad financial decisions (maybe that prime real estate in Florida was just a little closer to the swamp than it looked to be on the map). However, is there any reason to think that this is the case the majority of the time? What about those seniors who are in financial trouble due to factors beyond their control – are we justified in ignoring them simply because there are some people who have mismanaged their money?
What’s interesting to me is the assumption that if a senior is having financial difficulty that it must be due to something that he did wrong. I’ve seen this assumption before in similar circumstances, such as in discussions about homelessness or welfare. Many people seem to take the position that if a person is having difficulties, it’s due to laziness, bad planning, or some sort of character flaw. It makes me wonder if there’s some version of the Fundamental Attribution Error at work here:
When something bad happens to me I attribute it to external causes. When something good happens to me, I attribute it to internal causes. The reverse is also true. When something bad happens to somebody else, it is because of internal causes. If something good happens to another person, it is attributed to external causes.
January 19th, 2006 at 8:28 am
The problem is that if the government agrees to pay for drugs or retirement or whatever, folks factor that benefit into their calculations and their behavior changes. For example, let’s say I decide I need $3000 a month to retire on. The first thing I’m going to do is subtract my expected Social Security benefit from the $3000 leaving me responsible for the remaining $2000 or whatever and freeing up all that other money I’d need to save for retirement to spend on cable tv, cell phones, expensive meals, luxury cars, etc.
January 19th, 2006 at 5:05 pm
I’m not sure I buy that. Hammer is talking about a lifetime of financial mismanagement, and I don’t believe that the majority of people under 60 are figuring their expected SS benefits into their current spending habits. Are you? I’m not (maybe I’m mismanaging my funds already!)
Even if you’re correct, for the sake of argument, what’s the solution? Do we get rid of benefits and let all seniors with financial trouble – no matter if its through mismanagement or misfortune – go to the poorhouse or end up on the streets?
January 19th, 2006 at 6:06 pm
I think the government’s role in retirement and health benefits ought to be to help the indigent – like the food stamps program. It ought not be that you reach a certain age and get to cash in a defined benefit. It’s what’s killing these companies like GM. Who’s to say what the landscape is going to be in 50 years and what it’s going to take to uphold government promises.
If you eliminate the government as middle man, folks will have to make their own plans with regards to SS and health benefits. One thing they might do is take all that FICA money they pay and put it away.
With regards to my SS example, it’s fairly common. I see it quite a bit in financial planning calculations. But here’s an example that’s happening right now with the drug benefit. Folks who used to be covered under some other plan are getting rid of those to enroll in the government program. It’s happening at my company on the advice of our insurance guy. It’s cheaper for the employee and the company, but it’s younger taxpayers who are making up the difference. No matter how you configure the program, there will never be a free lunch.
January 19th, 2006 at 8:42 pm
I think I understand where you’re coming from. I just think some provision needs to be made for people who fall on hard times through no fault of their own, and that’s the problem I had with the Rhino piece – it seems to assume that it’s usually solely the fault of the person in question.
I’ll admit that many times there may be an element of personal responsibility involved, but to attribute any misfortune wholly to that is usually going to be a fallacy of single cause – an oversimplification. Most outcomes tend to have multiple interacting causes, so the tendency to reflexively blame the individual seems misguided to me.
I’m not sure what the solution is, but I think some attempt at assistance for those who need it should be part of the answer. Please note though that I wasn’t attempting to defend the drug program that you and the Rhino article mention. I have no problem believing that there are problems with it.