by Russ Roberts on April 7, 2011

in Complexity & Emergence, Uncategorized

Entering the economics department today I saw the following notice on the front door of the building:


When I first saw it, I noticed that it was referencing a test of the fire alarm system. I presumed that meant there would be some alarms going off and not to worry–it’s just a test. But then I looked more closely. The sign was saying that there would be tests of the fire alarm system and during the three day period of the testing process, there would be no alarms available. So in case there was a fire, be sure to get the heck out of the building. EVACUATE THE AREA! Good idea. In other words, don’t wait for an alarm, there isn’t going to be one.

At first glance, this seems like a remarkably paternalistic and condescending instruction. In the event of fire, flee! Did the designers of the sign think that I would smell smoke or see flames and think, well, I don’t hear an alarm, so there must not be a fire? How stupid do they think I am? But maybe it wasn’t so insulting. Maybe after your sensitivity is deadened by constant coddling, you need signs like this.

I remember being in Chile and having a miserable cold or flu, I went into a drugstore in search of something to make me feel better. As I struggled with trying to read the labels, I realized that Chile’s FDA, if there was one, was probably not like the American FDA. In America, the problem with the stuff you can buy in the drugstore without a prescription is so benign, the problem is whether it will have any impact on you. Anything other than Tums or aspirin requires a prescription. In another country, however, there could be some pretty powerful drugs available over the counter. Having been coddled by the FDA, I was unprepared for the exciting but scary world of potentially real drugs that I could choose freely.

Similarly, I hear people say that were we to privatize social security or better, eliminate it, most people (meaning people other than the person speaking) would not have the financial sophistication to invest their own money. Could be true. For someone with very little discretionary income (a problem partly caused by a payroll tax of over 15% to fund other people’s social security and medicare) why should they develop any financial sophistication. Give them the opportunity to invest their own money and they will have an incentive to get educated.

We have a natural incentive to take care of ourselves. But if someone takes care of us, our impulse toward self-preservation lapses and gets rusty. Pay for my losses and I’ll be less prudent. Cleanse the drugstore of anything remotely likely to have a side effect and I’ll be less prudent. Get rid of the alarm system and maybe I’ll hesitate to run from fire. Well, not really on that last one. But maybe I’ll smell smoke and assume that if the alarm hasn’t gone off, it must be someone misusing the microwave. So maybe it’s not a bad idea to let people know the alarm system is on vacation.

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jcpederson April 8, 2011 at 12:25 am

Perhaps they could provide an illustration of fire, just in case there’s any fuzziness on the concept.

Ed Bosanquet April 8, 2011 at 12:33 am

I prefer the unnecessary sign instead of the entire building being closed. We have a paternal society. That must be accepted. I vote for more signage. What’s the alternative? Closing the building?

Thank you,

tkwelge April 8, 2011 at 1:25 am

sign, sign, everywhere a sign…

ben April 8, 2011 at 12:36 am

A product of the American tort system, no?

Harold Cockerill April 8, 2011 at 4:14 pm

As if this sign could protect the buildings owners from a lawsuit brought by an idiot that didn’t run from a fire because there was no alarm. No one is responsible for what happens to them and signs can’t ward off lawyers. The lawyers would use the sign as an indication the building owners knew there was a dangerous situation and didn’t do enough to protect the tenants.

Also why is the sign only in English?

Mogden April 8, 2011 at 12:36 am

Seems remarkable that safety would be improved through testing if testing requires the system to be disabled for three days.

Ron H April 9, 2011 at 6:07 am

I believe that only the audible alarms are disabled, so that people can continue to work without hearing alarms going off all day as testing of the system is performed.

Ken April 8, 2011 at 12:59 am


” Maybe after your sensitivity is deadened by constant coddling, you need signs like this.”

It’s also a CYA move to prevent lawsuits. I bet there are plenty of people stupid (coddled as you call them) enough to not think anything of flames or smoke without an alarm going off. After they get hurt, due to their own idiocy, they would likely blame the college and not themselves.


Rob April 8, 2011 at 1:33 am

Agreed…this was a move to protect them from lawsuits…which are seen as an opportunity. C’mon Russ, you can’t be so blind to that incentive.

Krishnan April 8, 2011 at 7:05 am

What about those that cannot hear? Sue the college for not providing enough people who can accompany them. What if some cannot smell but could have heard the sounds? Sue the college for discriminating against those that cannot smell. What if some are stupid and do not know to run to safety if there is a fire? Sue the college for not providing guidance for the stupid – and on and on and on it goes

Yup – as someone noted – this is the state we live in – a system designed by attorneys for attorneys who can take from those that can make (yea, I know – there are better examples than this signage, but it is a “sign” of our times!)

JohnK April 8, 2011 at 7:22 am

“What about those that cannot hear? ”

I wondered why some smoke alarms have strobe lights on them.

Probably the result of a lawsuit.

Krishnan April 8, 2011 at 9:37 am

What is tragic is what we do to AVOID lawsuits – not because it makes sense to do so … And that often results in our doing many things that may not make sense, but are forced to do so because someone may have sued and gotten away with it …

Some of the “WARNINGS” on product labels are like that – “Be careful – this plastic bag if put around someone’s head can kill” OR “This is a car. If you crash into a wall or another car at XX miles an hour you may be killed or kill someone else” OR “This coffee is hot – it can burn if you spill it on bare skin” (I know, I made the thing up about the car – I expect to see warning signs on every side of a car one day – because someone would have sued about the car being a deadly weapon

Chucklehead April 8, 2011 at 1:02 am

So, what was the end result in Chile? Were you able to find something effective and inexpensive than visiting a doctor and getting a prescription?

dan April 8, 2011 at 1:26 am

Indeed, what was the conclusion of your ‘Adventures in Chilean Pharmaceuticals’?

Also, I realize the big and scary world of ‘no safety nets’. But, living in the US is a safety net. The Culture, family, and opportunities abound means that the fall is only slight, should you simply choose to get back up. In the US, There is little to no excuse for being unable to provide for one’s basic sustence, beyond physical and mental incapacity.
It would require more frugalness, as saving and conscientious investments. Would require a bit more humbleness, as more individuals will recognize the wisdom of being kind and helpful during their personal ‘good’ times, so as to receive the same generosity in an individuals ‘bad’ times.

Richard Stands April 8, 2011 at 1:19 am

They should have burnt the edges of the sign to drive the point home.

david April 8, 2011 at 2:50 am

fair enough: the rules of an environment can result in different human behavior due to psychological effects the rules have on people (conscious or subconscious).

- buying cold drugs in Chile vs. the US.
- running a bank in the US (with a history of bailouts) vs. before the Continental Illinois bailout
- government run health care vs. completely private

Russ, i think i’ve seen a trend where you indicate that a system with rules designed to be tolerant of individuals’ poor choices will be a less efficient system than one where individuals must personally choose the best option based on available information.

so, this seems plausible in a lot of the topics you cover: democracy vs. communism; banks with and without bailouts; etc…

Do you know of any counter examples? Concrete large scale economic examples where centralized decisions/regulations/rules is clearly superior to the wisdom of crowds?

also, is efficiency always better? perhaps sacrificing some efficiency in order to reduce the severity of a worst case scenario is better, no? Do you have a unified theory of how society should organize itself — economically or otherwise?

Simon April 8, 2011 at 4:19 am

I do think, that the concept of efficiency can show us the cost of non-efficient behavior in the first place. If you evaluate that information and decide, that even though liberal economics propose that solution as efficient, you rather sacrifice some of this efficiency at that cost, then I think it is probably a rational decision. However, people with this kind of information are usually not willing to sacrifice efficiency for other values, because efficiency is so highly valued in this society. That is why people defending excessive regulations actually claim that these regulations come for free, for otherwise few people would want them.

Ike April 8, 2011 at 7:25 am

David, you raise a valid question, but I would quibble with the use of the phrase “the Wisdom of Crowds.”

What Don and Russ earnestly back is the notion of complex emergent behavior, and its power to drive the most efficient solution for individuals en masse. That there is no one sufficiently informed or enlightened to be able to predict where a price price point ought to fall in order to trigger supply, need, or innovation.

The Wisdom of Crowds refers to those classes of problems where individual errors tend to cancel each other. For example, if I were to ask 300 people to guess my weight, the averaging of the answer would be very nearly right. Likewise, if I asked them how many jelly-beans in the midway jar, even though there might be a much larger standard deviation in the answers, the average of the guesses would be fairly close.

When you migrate to those things that are outside the realm of the average person’s experience, the Wisdom of Crowds will fail. Questions like “What is the National Debt?” for instance. Or “What is the atomic weight of Selenium?”

The other difference is that as an individual, I am an economic entity acting upon feedbacks from millions of other people. It’s not like I am placing my guess about the price of a loaf of bread into the box to be tallied later. There will be local variations on prices, and they will all be correct, because incorrect prices spur behavior that change the signals yet again. This is Wisdom of Crowds no more than “millions of atoms colliding and building a static charge to form a bolt of lightning” is the Wisdom of Clouds.

vikingvista April 8, 2011 at 4:21 am

Which department or agency is responsible for making sure you choose to stop and read the sign?

geoih April 8, 2011 at 7:53 am

“How stupid do they think I am?”

Is this really a question from a person who works in an academic institution? Are you telling me that your professorial peers don’t need to be told things like this so the university has some sort of liability protection? It has been my experience that the higher the academic degree, the higher the sense of privilege and attitudes like “that doesn’t apply to me”.

On my campus, it is a constant struggle to get professors and doctors to evacuate buildings, even when there is an actual emergency. They are far more likely to close a door and ignore the alarms. This of course means that somebody has to go into the building and chase these self-important prima donnas out of the building.

We may have a natural inclination to take care of ourselves, but there is also a natural inclination to force the costs of mistakes about taking care of ourselves on to other people. Tell me how you think a court or jury would decide a case where no warning signs were posted and then some building occupant got injured during an emergency? Would the building owner be held liable for the ignorant actions of the person who didn’t have common sense enough to leave a smokey building simply because there were no alarms?

There is a logical market reason for a building owner to post signs like this. It might be because the market is distorted by government intervention, but it is still a market driven reason.

John V April 8, 2011 at 8:09 am

Agreed. The incentive structure that prompted the posting of the sign has been established and conditioned over years coddling and the emboldening of the blame game through the pushing off of liability onto anyone but ourselves. BUT, it’s still the result of coddling.

I think Russ acknowledged this is the final paragraph. But the fact that law has evolved this way says a lot about this concept. The proverbial burglar suing the homeowner is an embarrassment for ever being true.

John V April 8, 2011 at 8:02 am

I find this concept somewhat applicable to many traffic lights…especially in smaller towns and non-ultra urban areas.

How often have you sat at a light with nobody going through the green side of the light? You’d think that, besides at lights at major intersections with heavy traffic, we’d be able to manage with stop signs and flashing red/yellow lights. But in response, you’ll hear about fears of cars ramming into each other.

Then again, I find the visual of the unneeded traffic light vs. something less intrusive like a stop sign to be helpful in understanding the idea of how government can be the cause of a problem while attempting to eliminate one that isn’t really there.

JohnK April 8, 2011 at 8:59 am

In my area they’ve started putting in roundabouts.

It takes a while for people to learn to navigate them, and there’s always the occasional jerk in a big truck who intentionally ignores the yield signs, but overall I find them preferable to sitting at a red light without any traffic.

Justin P April 8, 2011 at 10:53 pm
Eric April 8, 2011 at 8:09 am

Pharmacists are very highly trained, both here in the US as well as in other countries. Outside the US, you can get very good health care from a pharmacist because of this. [The litigious nature of our society, combined with the coddling of the FDA, makes getting similar assistance less likely here.] Today, here in the US, how often do people go to the doctor, tell him their symptoms, opine that they might have a cold, only to hear the doctor confirm their opinion and offer drugs that are readily available over the counter at the local pharmacy (or even gas station shoppette). During my infrequent foreign travels, I’ve had several opportunities to use the free advice of the local pharmacist. Some countries even designate “duty pharmacies” in local areas that will be open 24 hours should someone need help that doesn’t warrant going to a doctor.

Now there’s a concept… seeking medical help that doesn’t warrant going to a doctor… and getting it!

Methinks1776 April 8, 2011 at 8:42 am

How much sophistication is needed to call up Vanguard and invest in an index fund? Even with the ups and downs of the equity market, you’d still earn a higher return than SS.

JohnK April 8, 2011 at 9:08 am

But, but, but those companies are motivated by profits! They’re going to make money off of your investment! That’s theft!

It would be so much better to put the money in the hands of a lawyer turned politician who knows absolutely nothing about finances. They will give you a much better return because they won’t take a profit.

vikingvista April 8, 2011 at 2:52 pm

The market makes it ridiculously easy. Open a Scottrade retirement account, pick an age-appropriate lifecycle ETF, and once a year for $7 make an online contribution. For greater diversification, use multiple discount brokers, and lifecycle ETFs from multiple firms.

SS is a relic as well as a scam. There is no point to it except as a source of ill-gotten loot.

Methinks1776 April 8, 2011 at 8:49 am

Not only does indexing have the benefit of not requiring any investment sophistication at all, but your retirement nest egg will be invested in an actual asset instead of a lie!

vikingvista April 8, 2011 at 2:53 pm

Hear hear.

Russ S. April 8, 2011 at 12:14 pm

I used to work in a factory in Singapore, and there was frequent testing of fire alarms. I asked one day about this because it seemed excessive. The answer made it clear. If the government comes to inspect and they don’t work, the employee designated in charge of the system is responsible and goes to jail.

Matt April 8, 2011 at 5:09 pm

It’s most disappointing that you’re making fun of the person who made that sign. Sorry they don’t have an intellect to match yours. It’s one thing to make fun of people who willfully put themselves in the spotlight, or those who should know better. Here was just a guy making a sign somebody told him put up. Well fought.

brotio April 8, 2011 at 5:45 pm

From Prof Roberts’ post: Did the designers of the sign think that I would smell smoke or see flames and think, well, I don’t hear an alarm, so there must not be a fire?

The post is aimed at the individual (or committee) that decided the sign was necessary.

Duncan Peacock April 10, 2011 at 1:25 pm

This reminds me of comedian Mitch Hedberg’s bit.

“A man came up to me at a club and said I would have to move because i was blocking the fire exit. As if there was a fire, I wasn’t gonna run. If your flamable and have legs, you are never blocking a fire exit.

Herman April 10, 2011 at 2:48 pm

What you think of as an excessive safety net in the US actually encourages specialization and efficiency.

Assured that only safe, easy to use drugs are available OTC, I do not have to invest my time in gaining a specialized understanding of drug applications. If I did not have that assurance, I would have to spend my time to learn enough about drugs that I did not accidentally poison myself. That has nothing to do with being smart or stupid. That is simply lost time that I could have spent on gainful work.

The same principle is (trying) to be applied to investable security regulations, mortgages, etc. The purpose is to make these investment vehicles available to the general public, without imposing the impractical requirement that the general population invest a lot of its time to understand them. If you think these instruments are fundamentally too complex for the general population, and they cannot be de-risked through regulation, then they should have remained outside of public availability and not marketed as if they were.

Naturally, Wall Street prefers that the general public can put its money into their products. But they, and you, can’t have it both ways. Any industry that wants to sell its wares to the general US population is forbidden by policy from burdening the public with an undue need for specialization in those products.

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