Behavioural Economics

In addition to his more recognised work on poor laws, Lloyd can be seen to have anticipated some important ideas that have been much more recently articulated in the field of behavioural economics.

Such then is the notion of absolute as distinguished from comparative or exchangeable value... In this sense of value, it may be remarked, that to a poor man, the same things are more valuable than to a rich man. “No one would be absurd enough to maintain, that a guinea has the same value, and therefore would become an equal forfeiture to two persons, the one having a thousand and the other only ten of these” (Lloyd 1834 [1968]: 28—29; source of quote unnamed).

In their work on prospect theory, the behavioural economists Daniel Kahneman and Amos Tversky similarly maintained that the real carriers of value to individuals were relative changes in wealth and welfare, rather than final or absolute states (see Kahneman and Tversky 1982). The same absolute degree of wealth could connote extreme poverty for one person and great wealth for another, depending on the particular context of their lives. For example, the billionaire whose total wealth was suddenly reduced to only $10,000 would feel like they had been greatly impoverished, whereas if a rich benefactor gave a homeless individual with no possessions at all $10,000 as a gift, then that individual would feel almost like a millionaire (see Barnett 2019).

In addition, Lloyd was well aware of some cognitive distortions that affected human perception and human understanding in certain instances. For exam­ple, he wrote that:

The human eye is incapable of taking a clear view of many objects at once. When it is fixed on one object, all other objects are necessarily overlooked. In like manner, the mind can only attend at one time to a definite number of con­siderations: and it follows, that, where the thoughts and feelings are deeply engaged on a present benefit, little power of attention remains to be bestowed upon the future (Lloyd 1833 [2017]: 46).

In the nineteenth century, such illusions of perception and attention were beginning to be documented and studied by some psychologists, although few economists realised their true significance for understanding economic behaviour (see Sully 1887: 86). However, Lloyd did understand their significance, albeit at a more general level, pointing out, for example, that a ‘great source of error in all human enquiries’ was the tendency to generalise prematurely from insufficient facts (Lloyd 1837 [1968]: 18), this being a par­ticular version of what behavioural economists now call anchoring biases. He also understood that the motives for human behaviour were more complex than simply rational self-interest. Many decades before Thorstein Veblen, Lloyd stressed the importance of the ‘spirit of emulation, and the desire of rising in the world’ as a powerful motive of human economic behaviour (Lloyd 1833 [2017]: 58), just as Veblen expressed the belief that the ‘motive that lies at the root of ownership is emulation’ (Veblen 1899 [1925]: 25).

In more general terms and similar to contemporary formulations of the subject of evolutionary psychology (see Barnett 2015, 2018), it is clear that Lloyd believed that the human mind contained some important fixed, inbuilt capacities (or instincts), what he termed ‘dispositions’. He explained on this topic that:

It is convenient, here, to distinguish between the motives and the disposition to prudence. By the motives, I mean circumstances external to the minds of the individuals... By the disposition, I mean something internal to the mind itself, namely, the strength of the reasoning faculty, combined with the degree of self­command possessed by the individual. The disposition, which depends on the reasoning faculty, will vary according as that faculty is improved by educa­tion and experience (Lloyd 1833 [2017]: 40).

In addition, this prudential disposition was seen by Lloyd as part of what he explicitly called ‘human nature’ (ibid.: 52), elsewhere considering a hypo­thetical ‘change in the constitution of human nature’ (Lloyd 1835 [1968]: 117). Human nature was, therefore, for Lloyd, the sum total of all of these inbuilt dispositions and also the various ‘natural passions’, such as those expressed in marriage (Lloyd 1833 [2017]: 32), as evolutionary psychologists currently maintain.

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