How the Talmud Anticipated Behavioral Economics

Feb. 18 2019

In talmudic tort law, remuneration for damages must in many cases be paid in high-quality land. (As in most premodern economies, payment made in kind was more common than payment in cash.) A court thus places a price on the damages and then the responsible party must transfer to the plaintiff an area of his best land of equivalent value—rather than a larger area of lower-quality land. From the standpoint of classical economics, such a requirement is nonsensical, as Shlomo Zuckier writes:

[S]ince both fields are worth the same amount of money, what is the special preference for having [the tortfeasor] pay with the smaller, higher-quality field rather than the larger, lower-quality field? The standard answer given for this question is [that this] is preferable [from the paint of view of the plaintiff]. . . . In other words, a smaller, high-quality field costing $100 is more valuable than a larger, lower quality field of the same cost. . . .

A basic problem is posed to this approach from the perspective of economics [and] the concept of efficient markets. If a $100 high-quality field is worth more than a $100 low-quality field, why do they remain at the same price? Shouldn’t the high-quality field’s greater value be reflected by a correction in the markets such that it is now worth more than $100? . . .

It may be possible to resolve [this and similar] problems on the basis of a revolution in the study of economics that took place over the past half-century. Amos Tversky and Daniel Kahneman, two Israeli psychologists and scions of rabbinic dynasties, earned the Nobel Prize in economics in 2002 (received by Kahneman; Tversky was deceased by that point) on the basis of their research in the 1970s on behavioral economics. . . .

Kahneman and Tversky, approaching the field of economics from their backgrounds in psychology, took a new perspective on these issues. They pointed to all sorts of irrationalities that are built into the human psyche and raised the question of their significance for economics. For example, people are loss-averse, which means that people value not losing $5 more than they value earning $5, despite the fact that from an economic perspective these things are equivalent. [Furthermore, behavioral research suggests that] loss aversion is much stronger regarding their higher-quality assets than it is regarding their lower-quality assets. Therefore, although giving up either part of a field is of equal cost to the damager’s wallet, the cost to his psyche will be greater in the first case.

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More about: Economics, Halakhah, Psychology, Religion & Holidays, Talmud

 

Despite What the UN Says, the Violence at the Gaza Border Is Military, Not Civilian, in Nature

March 22 2019

On Monday, a UN Human Rights Council commission of inquiry issued its final report on last spring’s disturbances at the Gaza border. Geoffrey Corn and Peter Margulies explain why the report is fatally flawed:

The commission framed the events [in Gaza] as a series of demonstrations that were “civilian in nature.” Israel and its Supreme Court, [which has investigated some of the killings that occurred], framed the same events quite differently: as a new evolution in Israel’s ongoing armed conflict with the terrorist organization Hamas. Consistency and common sense suggest that the Israeli High Court of Justice’s framing is a more rational explanation of what occurred at the Israel-Gaza border in spring 2018.

Kites, [for instance], played a telltale role [in the violence]. When most people think of kites, they think of a child’s plaything or a hobbyist’s harmless passion. In the Gaza confrontation, kites [became] a new and effective, albeit low-tech, tactic for attacking Israel. As the report conceded, senior Gaza leaders, including from Hamas, “encouraged” the unleashing of waves of incendiary kites that during and since the spring 2018 confrontations have burned thousands of acres of arable land within Israel. The resulting destruction included fires that damaged the Kerem Shalom border crossing, which conveys goods and gasoline from Israel to Gaza. . . .

Moreover, the incendiary-kite offensive was an effective diversion from the efforts encouraged and coordinated by Hamas last spring to pierce the border with Israel and attack both IDF personnel and the civilian residents of the beleaguered Israeli towns a short distance from the border fence. . . .

The commission also failed to acknowledge that Hamas sought to use civilians as an operational cover to move members of its armed wing into position along the fence. For IDF commanders, this increased the importance of preventing a breach [in the fence]. Large crowds directly along the fence would simplify breakthrough attempts by intermingled Hamas and other belligerent operatives. The crowds themselves also could attempt to pour through any breach. Unfortunately, the commission seems to have completely omitted any credible assessment of the potential casualties on all sides that would have resulted from IDF action to seal a breach once it was achieved. . . .

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More about: Gaza Strip, Hamas, Israel & Zionism, Israeli Security, Laws of war, UNHRC, United Nations