Constraints a Good Thing?

Aside from the endorsement income aspect covered in several posts in TSE, the Tiger Woods story has generated Internet buzz about a variety of tangent issues ranging from public-private domains, to domestic behavior, sex addiction and beyond. An aspect with particular economic implications revolves around the role of constraints in life. In general, economists take the reducing of various limits (financial, time, …) as welfare enhancing for the individual.

Woods is a case study in a larger topic — how do people behave when the typical constraints of life vanish? A (possibly apocryphal) story exists from an elite Ph.D. program where the professor was covering the technical details of choice theory and a foreign student from a very wealthy background asked, in sincerity, how does this all work when there is no budget constraint? To be honest, we have not studied that or related questions much in economics. There is some work on self-constraining behavior such as weight-reduction plans and groups.

Exposure to constrained choices may result in important learning by heightening awareness of tradeoffs and implications of choice. On the flip side, the lessening of constraints may dull these abilities over time. It’s a twist on Machiavelli’s observation about the tendency of absolute power to corrupt in more expansive ways. Trey Fleisher and I raised questions about the (sometimes) negative behavioral implications of rising affluence for society at large in Spoiled Rotten, making only a brief reference to the unique world of the super-affluent.

Top sports figures, Hollywood celebrities, top-level CEOs, and high level political figures live in worlds without the usual limitations, with differences in the limits among these groups. For many, financial limits all but vanish. In addition, limits on behavior imposed by associates diminishes as those “doing business” of any sort with them become highly deferential.
In the case of Woods, he reached a point where even the usually ever-present scrutiny of the media had become more of a fawning Tiger PR tool.

Individuals living in such worlds not only engage in extreme, self-damaging (financially, physically, ..) behavior at times, but they make choices that seem to reflect a dulled sense of where boundaries are anymore or of the almost certain implications of some actions. There are “discreet indiscretions” and then there are the emperor without any clothes kind of indiscretions screaming for an audience. For example, Mark Sanford’s (South Carolina Governor) thinly veiled foray to Argentina under the cover of an Appalachian hiking trip was about as likely to stay hidden as Tiger’s activities. Tiger wasn’t some anonymous business person on a convention trip. Everyone of his associates knew exactly who he was. In the TMZ world, such secret liaisons are almost certain not to be secret in the long run. So for behavioral explanations, we are either left with Tiger is stupid (which he is not), Tiger really enjoys lots of lost income and turmoil (not highly convincing), Tiger is sex addicted (maybe, but this may be the result, not the cause), or Tiger’s unbounded world encouraged over-indulging and under-assessing.

In the end, I’ll come back to a key econ dictum: there’s an optimal amount of everything — maybe even constraints.

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Author: Brian Goff

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