Economists sometimes use the term “bounded rationality” to explain the impossibility managers have in understanding reality in all its complexity. Basically, bounded rationality says that managers and economic actors are rational, but only up to a point. At that point, people’s natural cognitive limitations kick in, and this affects their decisions.
Now, if this all seems too abstract, I have a useful tool to provide you with an example: Official Gazette Number 40,166, dated May 15th, 2013.
As you may know, the Official Gazette is the government’s official
newspaper newsletter. All acts of government must appear in it. Every law that is passed, every appointment to senior or even mid-level positions, everything – if it’s not in the Gazette, it’s not official, and it didn’t happen. Legal flunkies all over Venezuela are given the thankless task of poring over it every day.
Today’s Official Gazette is a doozy.
In it, we learn the government has set the prices for all types of products. Not only do we learn the new prices for first-rate, second-rate, and third-rate beef (my new favorite insult is “eres un lagarto con hueso que se cree pollo de res”), but also the prices of a whole assortment of other products.
The mind is baffled when you think of the countless hours it took to put this Gazette together. Your tax bolívares are being spent in endless meetings where bureaucrats decided that Pausterized Milk in 1,800 CC containers has to sell for BsF 13.2, but the one in 900 cc containers has to go for BsF 6.6. It doesn’t matter that “real” prices are much higher, we still need to set the official prices. If we don’t, how will buhoneros know which number they have to multiply by 3 to set their own prices?
In some obscure conference room, in one of the many government building populating the Municipio Bolivariano Libertador, several red-shirted, sleep-deprived bureaucrats surely spent countless hours deciding that Gouda cheese had to be sold for precisely BsF 3.42 less than Munster cheese – not 3.40, not 3.43, but 3.42 damn it!
The “bounded rationality” aspect comes in when you think of the alternatives. Our government cannot think of new ways of creating incentives for producers to increase production, of attracting foreign investment, of improving education, solving crime, paving roads, or building new ports.
They are too busy deciding that breaded chicken patties should be BsF 4.78 more expensive than boneless chicken thighs (with or without skin!).
(Brief digression: of course, Hugo Chávez made it a habit to skip the Gazette altogether – this particular act of government never found its way to the Gazette, but you catch my drift)
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