Price and Prejudice

Another Kind of Fundamentalism


If the names Gary Saul Morson and Morton Schapiro ring a bell, it may be because you’ve read their earlier book, Cents and Sensibility — or were charmed by the excerpt published in the Fourth Quarter 2017 issue of the Milken Institute Review. Now they are back with a book on a very different subject, but one that again showcases their synergies as interdisciplinary thinkers and writers. Morson is a Slavic literature professor at Northwestern University, while his coauthor is an economist specializing in higher education and the current president of Northwestern. Minds Wide Shut: How the New Fundamentalisms Divide Us* explores the dogmatism that has infected politics — and is poisoning rational discourse in intellectual pursuits ranging from literature to religion to economics. Here, no surprise, we chose to excerpt the chapter on economics, titled Price and Prejudice. (Fair warning: Morson and Schapiro can rarely resist a pun.)

Peter Passell

Published July 26, 2021


illustrations by selçuk demire

*Princeton University Press (2021). All rights reserved.

The recent anniversary of the fall of the Berlin Wall brought back emotional memories for Europeans of my generation.

So far as we can determine, the phrase “market fundamentalism” entered the public consciousness upon the 1998 publication of George Soros’s book, The Crisis of Global Capitalism: Open Society Endangered. Soros does not explicitly define the term, but his usage suggests that he means it to apply not to a general preference for market solutions, but to a categorical commitment to them deduced from first principles and impervious to counter-evidence. Market fundamentalists, as he describes them, believe their conclusions to be certain, because they are based on a hard science. To make such a claim when it is not warranted is to propound a pseudo-science, which does not mean those making the claim have nothing valuable to say — not all pseudo-sciences resemble astrology — but that, whatever their merits, their claim of scientific status is spurious.

At the heart of Soros’s philosophy is a deeply held belief in human fallibility and occasional irrationality, which make a hard science of human behavior impossible. Consciousness of human fallibility should also make us aware that solutions are not logically necessary, but they may work in particular contexts, and at particular times. That is, Soros thinks economics should be reconceived in terms of practical, not theoretical, reasoning, where solutions may be true, as Aristotle liked to say, “on the whole and for the most part.” Correct solutions on any given occasion cannot be determined by theory alone: “Exactly what is right can be discovered only by a process of trial and error.”

Market fundamentalists, as described by Soros, also tend to see economic models as applicable to other disciplines, which can, by replacing traditional methods, also attain scientific status. They pretend they do not make value judgments, but in fact they smuggle into their analyses a moral theory according to which self-interest is not only a sound description of human behavior, but also a proper moral norm in itself. However, no society can exist for long unless people also share other values that allow for collective purposes and make sense of self-sacrifice.

Market fundamentalism, at the extreme, demands only an individualist morality, whereas, Soros explains, “there are common interests, including the preservation of free markets, that are not served by free markets.” In China, Confucian values, which stress the role of the family, provide another source of value, much as Lee Kuan Yew stressed the need for non-market, non-individualist values as essential to a successful market economy. In this respect, Soros echoes a traditional conservative critique of libertarianism and extreme individualism. While some libertarians see religion as oppressive superstition, many conservatives see religious values as essential for making a market economy work in an ethical way.

It is not necessary to accept Soros’s specific critiques of capitalism, or his proposed solutions, to recognize that what he calls “market fundamentalism” satisfies our criteria for fundamentalist thinking. Market fundamentalism exists, and, even if it is incomparably less dangerous than its polar opposite, the totalitarian philosophies of Marxist-Leninist command economies, it may still mislead. With the supreme confidence of scientists addressing the laity, market fundamentalists contend that markets lead not only to the most efficient allocation of scarce resources but also, quite often, to fairness as well. After all, don’t we often call the price where supply and demand are equal the “fair” market price? Here, as elsewhere, they smuggle in a moral conclusion as an objective description. Laissez- faire becomes “laissez-fair.”

These fundamentalists suppose they worship at the foot of the founder of modern economics, Adam Smith. Smith’s The Wealth of Nations, which they rarely read and only present as it is typically summarized in basic textbooks, serves as a quasi-sacred text or, at least, as a founding revelation, before which all was darkness. Smith’s notion of the “invisible hand” is a powerful metaphor attesting to the proposition that, in a free market economy, individual self-interest, operating through unseen forces, ends up serving the best interests of society. Rational actors, governed solely by their selfishness, will lead us to optimality, assuming the government is smart enough to refrain from unnecessary interference.

In our earlier book, Cents and Sensibility, we urged economic policymakers to display less hubris and more common sense. If they learned more about real people from the humanities and humanistically oriented social sciences, their strategies to enhance the human condition would prove more realizable. With a little less Cents, and a little more Sensibility, economists could better determine when and where to interfere with the market, thereby maximizing the chance that their policies will have their intended impact. In making recommendations to developing or post-communist economies, they could, by considering local culture and history, offer solutions more likely to succeed in a given context.

But the reverse is also true. Humanists, and those who think the way they do, would do well to become economically literate. It is one thing for faculty members in the humanities to ignore the basic tenets of economics; it is much worse to see citizens, and the politicians they elect, acting as if the ideas of incentives, opportunity costs and objective empirical analyses lacked merit. Their Prejudice against the belief that a Price may matter, makes it much less likely that their lofty aspirations will ever be met and much more likely that their policies will make things still worse.

Economists assess preferences not by what people say, but by what they do. In other words, it is behavior, not pronouncements, that reveals underlying preferences.

Not so long ago it seemed that, with the failure of the Soviet Union, the dangers of a command economy were well understood. Never again, it was assumed, would people fail to grasp that government officials have interests of their own, which they pursue under the guise of helping the public. Their solutions may be worse than the problems they presume to remedy. The socialist formula (in the sense of government control of the means of production and distribution) was supposedly dead forever.

It is therefore dispiriting to see a resurrection, among humanists and others, of these not so dearly departed concepts. “Capitalism,” “neoliberalism,” and other all-purpose pejoratives are, as in the early 20th century, once again the source of all evil. If market fundamentalism is a mistake, so is a failure to understand the benefits of markets.

Faculty-Meeting Extremism

Sometimes the ignorance and naïveté regarding basic economic concepts borders on the quaint. Morson once attended a meeting of humanities department chairs at a prestigious private university. Knowing that the chairs had stressed the importance of improving the pay of nontenure-eligible faculty, the dean asked them how the money available for raises should be divided: what share should go to the nontenure-track faculty, who typically teach large numbers of classes at salaries far below tenure-line faculty, and what share should go to their tenured and tenure-track counterparts? Since the chairs were themselves tenured and elected by other tenured faculty, the question put them in the uncomfortable position of choosing between their professed principles and their self-interest.

Economists assess preferences not by what people say, but by what they do. In other words, it is behavior, not pronouncements, that reveals underlying preferences. That is, they rely on “revealed preferences,” an important concept in the field of economics. So what did these chairs do? Anyone who knows how humanists often argue will not be surprised that, after a long pause, one declared: “We reject the false choice based on the notion that resources are limited.”

Of course, no matter how big the pie, it is always finite, and priorities must be set somehow — if not explicitly, then implicitly by what one actually chooses. But, to these humanists, and those who have imbibed their ethos, scarce resources are merely an illusion. One only receives, never forgoes. Their revealed preference was to preserve at all costs their image as high-minded agents without sacrificing their self-interest, as administrators or as faculty members.

Alas, we believe such ways of thinking are now all too common. Despite efforts to deny it, scarcity exists. A horn of plenty that constantly replenishes itself occurs only in fairy tales. You can’t redistribute what isn’t produced. Consequently, there is an economic imperative to allocate resources as efficiently as possible in order to address a society’s needs.

Efficiency is also a moral imperative. No matter what one’s goals, waste should be avoided. To dismiss economic principles and analyses as some form of “neoliberalism” without bothering to understand their potential power is impossible to defend on ethical grounds. If deploying resources one way would save 1,000 lives and another only 10, 990 lives depend on reaching the right decision. And this is a point that great literature, as well as great economics, has illustrated over and over again.

Anton Chekhov never tired of pointing out the self-indulgence of failing to allocate time, money and energy effectively. Waste is one of his great themes. In his plays and stories, intellectuals regularly posture about their compassion while wasting resources needed to help others. In this way, otherwise well-intentioned people cause serious but avoidable damage. They do not properly appreciate that if poverty is bad, then wasting resources capable of alleviating poverty is also bad, no matter how uplifting and morally gratifying a wasteful activity may be.

Wisdom From Chekhov

In Chekhov’s play Uncle Vanya, Doctor Astrov eloquently describes the ongoing destruction of the natural environment. Having traced decades of diminishing forests, wild elk, swans and grouse, Astrov is disturbed not only because he loves nature and believes that people have an obligation to protect it, but also because the destruction has been entirely pointless. At least there might have been “in place of these devastated forests … highways, railroads, if there were factories, mills, schools, and the people had become healthier, richer, more intelligent — but you see, there is nothing of the sort!”

The same is true of human relations. If only we economized on human suffering! If only it were limited to the minimum necessary for the greater good! Indeed, we would be better off if it resulted entirely from self-interest; in that case, there would be a lot less of it than there is. Chekhov’s stories and plays dramatize sheer waste, opportunities for kindness that are simply neglected. In the economy of things or personal relations, waste may be the greatest tragedy and is in itself immoral.

Much waste comes from the refusal to acknowledge the necessity of trade-offs. Those department chairs faced a choice on how to allocate resources. In Chekhov’s final play, The Cherry Orchard, Madame Ranevskaya and her family, who have spent a lifetime wasting resources for no purpose, now must at last choose between having their estate sold at auction to pay the mortgage, or accepting the suggestion of the merchant Lopakhin, who proposes to save the estate by replacing the orchard with summer cottages for tourists. However sad it would be to lose the beautiful orchard, where the family spent so many wonderful hours in childhood, it will be destroyed in any case by anyone who buys the estate.

But the family dreamily refuses to acknowledge that they simply must make a choice. This failure to face a real dilemma, which cannot be dismissed as a “false choice,” creates avoidable waste. Instead of preserving something, they lose everything. Indeed, it has been their failure to recognize that resources are limited that has led to the inability to pay the mortgage in the first place.

It is no less true today that to regard efficiency and maximizing utility as vulgar, or ideologically suspect, entails harm to the very people about whom one professes to care. But try to explain “marginal utility” to most humanists, or, these days, to many politicians and voters. Chekhov’s characters are still everywhere.

The Economics of Hate?

Unfortunately, there is ample evidence that in Western countries people on the political extremes have a common goal: to tear down the status quo, sometimes with little notion of what should come after. Even those closer to the center may act that way unwittingly. As Soros observes, sometimes even moderation can be taken to an extreme.

Extremists tend to have more in common than just the idea that elites are bad. From the radical left to the far right, they often reject the application of basic economics, as if ideas like “scarce resources” and “trade-offs” were some conspiracy of the wealthy to defraud others. The very idea of assessing costs as well as benefits becomes suspect. And this neglect of basic economics comes at a substantial price.

As icebergs melt, wealth inequality rises and personal and governmental debt balloons, wouldn’t it be wise to recommit ourselves to prudence and a concern for Third Quarter 2021 87 truthfulness — to choose reforms that work, over rhetoric that sounds good and policies that feel good? Wouldn’t it be better to act on the basis not of self-righteous indignation but of careful consideration of facts in the light of experience?

Yet such an approach isn’t easy to adopt in what some have described as a “post-truth” era. In an insightful op-ed, University of London political economy professor William Davies spoke of an “oversupply of facts in the 21st century” while trying to understand the surprise (especially among academics!) of the Brexit and Trump votes.

Max Boot, once a conservative, warns the Left not to emulate the Right by trampling facts: “For both the far left and the far right, facts are an irksome ‘detail’ of scant importance. What really matters [to them] is being ‘morally right.’” In practice, that means admitting only evidence — without inquiring too closely as to its soundness — that supports positions one presumes in advance to be correct.

Learning From Objective Analyses

The post-truth approach is getting us nowhere. But how to replace it? It is clear that the mere recitation of facts doesn’t work very well. For one thing, with the birth of “alternative” facts, how does one know whom to believe? For another, when “factcheckers” themselves become opinionated voices, the very word “fact” becomes ideologically charged. This perversion of the idea of fact-checking is more distressing than merely misrepresenting facts, for much the same reason it is worse when the police themselves commit crimes. What economists might call a version of Gresham’s Law all too often prevails: as bad money drives out good, so do bad ideas drive out better ones. And sensational pseudo-facts drive out real ones, while tendentious interpretations of statements are said to be the statements actually made.

Moreover, as long-time faculty, we know from sad experience that delivering lessons doesn’t always capture the attention, much less the soul, of the listener. Morson once had the dispiriting experience of telling students they should think, not just take notes to memorize, and then discovering a forgotten notebook where a student had written: “Reminder for exam — don’t forget! You can’t just memorize!”

As for the presentation of objective truths, we believe Neil Postman [an American culture critic], who argued three decades ago — long before the world of Twitter and its ilk — that there are limitations to how modern experts conceive and express ideas. “Many of our psychologists, sociologists, economists and other latter-day cabalists will have numbers to tell them the truth or they will have nothing,” Postman writes, critical of what he saw as a prevailing assumption that numbers alone could capture and articulate reality. Jerry Z. Muller’s delightful study The Tyranny of Metrics makes Postman seem all the more prescient. Muller examines the cultural paradigm “engulfing an ever-widening range of institutions,” which he calls a “metric fixation.” He cites an oft-quoted dictum wrongly attributed to the brilliant physicist Lord Kelvin (“If you cannot measure it, you cannot improve it”) and the more recent adage of management guru Tom Peters (“What gets measured, gets done”). And so more and more things are measured.

One problem with this approach is that what is measurable is often not important, and what is important is often not measurable. Another is that the metric may negatively affect real outcomes.

Governments and insurers sometimes decide to reward or penalize hospitals and doctors based on the percentage of successful outcomes. As a result, surgeons naturally are less likely to take difficult cases, and so people who might have been saved by a risky operation end up dying. And when politicians demand that police reduce felonies by a certain percentage, and reward or punish them accordingly, officers reclassify felonies as misdemeanors, report lesser crimes or simply do not report them at all. The crime rate declines, while crime remains the same (or grows worse).

An understanding of incentives, trade-offs, marginal utility, revealed preferences and other core economic concepts, with the dispassionate analysis of data, could go a long way toward helping the citizens of a democracy make informed choices.

Postman would not have found these results amusing. He dreamed of ways that “cabalists” might find and convey deeper truths, noting that experts in a past era might have described the economy in the form of poems, parables or well-chosen proverbs. He might have been thinking of the witty poem W. H. Auden delivered at the 1946 Harvard commencement, “Under Which Lyre: A Reactionary Tract for the Times,” which concluded with the memorable commandment: “Thou shalt not sit / With statisticians nor commit / A social science.”

Sure, Postman anticipated the scorn this approach would undoubtedly evoke today, much as Auden anticipated similar scorn by subtitling his poem “A Reactionary Tract.” We naturally ask, should Joseph Stiglitz, who in his 2001 Nobel Prize lecture took a highly critical look at unbridled faith in market outcomes, have acted out his talk rather than read it? Should he have replaced the prose with poetry? Of course not, but all the same, Postman concluded, while “the truth in economics is believed to be best discovered and expressed in numbers … There is a certain measure of arbitrariness in the forms that truth-telling may take.”

In that spirit, we choose a hybrid rhetoric: setting aside both figures and rhymes, metrics and meters, we aim to present often ignored economic truths with stories, some taken from our own experience, some drawn from recent events and some borrowed from great literature. These stories illustrate how an understanding of incentives, trade-offs, marginal utility, revealed preferences and other core economic concepts, along with the dispassionate analysis of data, could go a long way toward helping the citizens of a democracy make informed choices. We bear in mind that one alternative to informed choices is uninformed ones; another is the end of democracy itself.

Extremism and Climate Change

Talk with many on the left about reducing carbon emissions, and it soon becomes apparent that they are thinking not practically, but theologically. They regard carbon use as a kind of sin, and so they engage in moral crusades, not well-thought-out policies, against it. Often enough, they resemble those humanities professors allotting salary increases: they reject “false choices” and refuse to think in terms of scarce resources that must be deployed most efficiently to attain the desired end. When they encounter such thinking, they instinctively react to it as morally questionable.

Monks, missionaries and other moralists do not do cost-benefit analyses designed to reduce the most sin with the least effort. They don’t think of trade-offs among the Ten Commandments. Their whole worldview militates against such thinking, which carries a whiff of the neoliberal devil’s sulfur.

We recently discussed climate change with a colleague who quoted statistics proving it to be an “existential problem” that we must solve within a decade or so if humanity’s future on the planet is not to be ruined irretrievably. No expense, he claimed, could be too great, no effort too strenuous, no policy too draconian, when the stakes are so large; all other problems must be set aside until this one is solved.

We naturally assumed, therefore, that our colleague would be a strong proponent of nuclear power, which emits no carbon. But the very suggestion provoked his horror. Don’t you realize, he instructed, that there is a problem with safe disposal of nuclear waste products? Our colleague went on to echo an article in The New Republic criticizing President Obama for not taking more decisive action against nuclear power. The author mocked those who say that “in the fight against climate change, anything is better than dirty coal, right?” and then proceeded to outline several specific problems with nuclear waste disposal.

Problems in waste disposal, perhaps 100,000 years from now, balanced against an existential threat a decade or so away! But that is just the point: the two threats were not “balanced.” One was not weighed against the other, or it would have been apparent which risk to choose over the other. In this kind of thinking, all risks are bad in the way that all sins are bad. One does not eliminate one sin by replacing it with another; one renounces sin altogether.

Thinking Like an Economist

An economist naturally prefers trading carbon credits to banning the use of carbon altogether. If one charges for exceeding a given threshold and then allows a market in “permits to pollute” sold by those who do not reach the threshold, one promotes efficiency and ensures that carbon will be used only where the value it produces is greatest. But if one thinks in terms of sin, one wants instead to mandate the total elimination of all “nonrenewables.” Just set a date when all fossil fuels will be banned and energy will come from the wind and sunlight. And how will it be stored when the source is intermittent and battery technology is still inadequate? Pass a law setting a date for better batteries!

What if a small use of carbon would produce enormous benefit, perhaps saving many lives, or providing the means to pay for more environmental protection? The use could happen under carbon credits but not, of course, under a total ban. We used to see buses with big signs saying that they burned not gasoline but “clean natural gas” — and natural gas does indeed yield more energy per unit of carbon than oil. Has anyone noticed that one seldom sees such buses anymore?

Either they are no longer used, or their signs have been painted over: one does not advertise that one has switched from cigarettes to cigars or from whiskey to beer. But if the goal is to reduce carbon use as much as possible, then surely switching from oil to natural gas, at least until a still better source is sufficiently available, makes eminent sense.

There is an old Latin saying, favored by 19th-century revolutionaries: fiat justitia, pereat mundus. “Let justice be done, though the world perish.” This is not an economist’s way of thinking. It is a rejection of trade-offs: we either get it absolutely right, or not at all. This is what fundamentalist thinking is all about.

One could ask who is really more moral: The one who would preclude life for all future generations, or the one who would allow some evil so that people still unborn might inherit the earth as we have?

In the real world, nothing is ever pure. Things are better or worse. There are no gains without costs. In short, in discussions of climate change and other problems, we confront not just two theories, but two completely different views of the universe and two ways of thinking. Is life truly intolerable if the greater good entails a lesser, but still measurable, evil?

In Dostoevsky’s novel The Brothers Karamazov, Ivan asks his brother Alyosha if, to eliminate the suffering of millions, it was necessary to sacrifice one innocent child, would he do so? Remember that the millions saved from death and torment include millions of children. Alyosha movingly declares that he could never build human happiness on the bones of an innocent child, and that is the answer Ivan desires. For him, the world is morally acceptable only if there is no unjustified suffering at all. Would one appoint Ivan Karamazov as secretary of the interior? As secretary of defense or the treasury?

In response, one could ask who is really more moral: The one who would preclude life for all future generations, or the one who would allow some evil so that people still unborn might inherit the earth as we have? Trade-offs of this type are what economics is about, and, by rejecting the economic way of thinking, these problems don’t magically go away.

Sometimes it is hard to believe those humanistically inclined moralists who claim to be concerned with an existential threat to the climate. Consider, as an economist would, their revealed preferences: if one refuses to allow nuclear power and natural gas, even at the risk of life itself, can one really be so concerned about the climate? After all, one is choosing not what will minimize risk to the climate, but something else entirely. Whatever that “something else” might be — the purging of the world’s sinfulness, the triumph of one’s own political group — then, all protestations to the contrary notwithstanding, that “something else” is what one really prefers.

If someone were to say that the most important thing for him was saving money for his daughter’s college education, but then took an expensive vacation, one might conclude that his preference was not so much for his daughter’s education as for feeling good that he valued it highly. The economists’ idea of revealed preferences turns out to contain great wisdom, including about moral questions.

Teutonic Contradiction

Germany has long been a leader in supporting international agreements to reduce carbon emissions. The United States has not. Seriously concerned about climate change, Germany has massively subsidized and mandated the use of renewable energy sources, thus raising the price of energy substantially, a burden that falls particularly hard on the poor. These subsidies could, of course, have been used to promote social welfare elsewhere. Nevertheless, this policy makes good sense, insofar as we face a dire threat from carbon to our lives. And yet Germany’s carbon use has remained stable since 2009, while American use has been reduced substantially. Why is that?

For one thing, Germany also decided simultaneously to phase out nuclear power. If one thinks in terms of revealed preferences, one might ask: Can they really be as concerned about climate change as they say? Interestingly enough, the Finnish Green Party supports nuclear power; in contrast to the Germans, the Finns, if judged by revealed preferences, prefer what they profess to prefer.

One reason the United States has reduced carbon use, despite its withdrawal from climate treaties, is that fracking has dramatically increased the supply of natural gas and so by basic economic principles reduced its price, thus incentivizing its substitution for less carbon- efficient oil and coal. And yet we have heard colleagues and students condemn the United States, not Germany, for its carbon sinfulness. What are they really more concerned with — reducing carbon or making appropriate pledges?

Existential Threat?

If one presses humanistically inclined moralists on this point, one is likely to hear that fracking may undermine the earth and destroy houses built on newly unstable ground. Let us suppose that is true. How does that danger balance against an existential threat to humanity’s future on earth? To equate the danger of collapsing houses with the threat of carbon in the atmosphere is to judge increased carbon to be no more dangerous than some collapsing houses. If one predicted the sea would rise dramatically in a few years, and then bought beachfront property, what would one’s revealed belief be?

Those of us who do take climate change seriously are bound to reflect that one does not have to be inordinately selfish, morally obtuse or stupidly opposed to science in order to wonder whether such Green activists really believe what they say. The Green New Deal proposed, in addition to phasing out combustion engines and retrofitting all buildings, providing an adequate income for the unemployed as well as suitable housing and healthy food for all, while ensuring that eminent domain is not abused. Surely, if the planet is in grave danger, and resources are limited, one ought to postpone supporting such myriad causes, regardless of how desirable they might be.

We may detect among some proponents a refusal, resembling that of those humanities chairs, to acknowledge that resources are limited. Among other proponents, we may discern a lack of real (as opposed to professed) concern about climate change.

Or consider a low-income Appalachian family reading about the enormous amount of energy consumed by the best-selling authors of books about the fragile environment. The members of this family are aware that their betters, who hector them about carbon, use air travel to take vacations and, in total, use dozens of times more carbon than those they fault for moral obtuseness or hostility to science. And what about families that are poor enough that they will be unable to afford the more expensive fuel to keep their houses at a habitable temperature?

None of this, of course, means that those who warn about climate change dangers are wrong. But it does mean that they might stop berating others who take them not at their word, but at their deed. No rational person believes everything he is told, and those of us who are not scientists have to assess beliefs currently held to be respectable. Seeing whether people behave as if they believe what they are saying is one method of assessment we all use, and we would be foolish not to. If doctors widely refused to have their own families vaccinated, would one fault their patients for hesitating?

A majority of the American public now considers climate change to be an important concern, a fact the two of us applaud. A 2020 report from the Pew Research Center shows that, for the first time in that survey’s 20-year history, more than half of respondents said that climate change should be a top priority for the president and Congress, up 14 percentage points over the preceding four years.

But that support differs substantially across the political spectrum, with more than three-quarters of Democrats citing climate change as a top policy priority and fewer than one-quarter of Republicans, with that partisan gap being the largest among the 18 issues Pew surveyed. As observers have noted, with President Trump having said that “we must reject the perennial prophets of doom and their predictions of the apocalypse,” a sentiment reinforced by some in the conservative media, that finding isn’t all that surprising.

However, a growing consensus, especially among Democrats, doesn’t mean agreement on what the government should do. Some liberals scoffed at the Republican climate agenda, which featured a plan to plant one trillion trees by 2050. But is the response from the far left really any more realistic?

The title of a Washington Post editorial put it pointedly: “Bernie Sanders’s Climate Plan Will Take Us Nowhere.” $16 trillion in new spending over the next ten years to eliminate the use of fossil fuels in electricity and transportation by 2030; $2 trillion to build new wind, solar and geothermal electricity-production infrastructure through governmentrun utilities; $2 trillion to buy people electric cars; $607 billion to link US cities through high-speed rail.

But nuclear power? Forget about it. Sanders would halt the building of new plants and deny relicensing to existing ones.

In another piece, Washington Post columnist Fareed Zakaria points out that, between 2005 and 2016, US carbon emissions fell almost 15 percent. How? Zakaria reports that a major reason was fracking, but about onethird of the reduction was shifting from coalfired plants to natural gas. Solar power? That accounted for a mere 3 percent of the overall reduction.

We repeat a difficult truth: if there is a moral imperative to solve a problem, then there is a moral imperative to expend scarce resources most effectively. Discard one’s prejudices and consider prices.

Yet the Sanders plan not only opposes fracking but also proposes to shut down all natural gas power plants. Zakaria concludes that “the Sanders green energy ‘plan’ is based on magical thinking.” Perhaps, but we think it is based on a different kind of thinking — theological reasoning. Pollution is a sin, so eliminate it. Should the world perish with it, so be it.

Having a set of policies endorsed by a broad spectrum of economists might just be compelling for most Americans, but the fundamentalists on both sides of the spectrum would disagree. On the one hand, pollution is evil and needs to be eradicated regardless of the cost. On the other, if you leave markets alone, the invisible hand will ensure that things will work out for the best. When dealing with a problem beset by negative externalities, that, too, may be a form of “magical thinking.”

We repeat a difficult truth: if there is a moral imperative to solve a problem, then there is a moral imperative to expend scarce resources most effectively. Discard one’s prejudices and consider prices.

A Way Forward Based on Facts?

We increasingly face a stark choice: govern by ideology or by sound economic principles. The reality is that we know some programs and policies that work. We also know many others that sound good but don’t work. Those on the political extremes may pretend otherwise, but, in topic after topic, there is a striking bipartisan consensus among the experts. Maybe we simply need to get that story out there. To be sure, it will not persuade fundamentalists, but it might register among those whom fundamentalists have persuaded.

Perhaps, as Postman argued, it is the messenger who fails to present a compelling story. Reciting a list of numbers and findings, even when they are firmly established, doesn’t necessarily convince. You are competing with marches, signs, slogans and fearmongers. In a battle with slogans, even the most carefully crafted arguments often lose. It is hard to win an argument with a bumper sticker!

We believe not just in data, but in stories. They not only are rhetorically more effective; they reveal what generalized theory and data obscure. We favor crafting our own stories, while listening to those of others. Tell us how you are affected by incentives — ones that lead you to relocate to a state or country with lower tax rates, or ones that prompt you to promote the common good. Or how you are moved by the way some arguments based on objective facts are presented, while others leave you listless. And tell us what the conclusions of specialists — and their general models — leave out.

Economists can propose wiser answers to the problems that plague us. Sometimes they fall short, but it would be extremely unwise to ignore them altogether. Even when they do not have all the answers, they can often recognize proposals that run so counter to basic economic principles that they are likely to be counterproductive. But one thing is very clear: economists need to figure out a better way to make their case.

Back to Adam Smith

In looking for an intellectual forefather who can bridge the chasm between market fundamentalists and anti-market fundamentalists, we have a suggestion: Adam Smith.

But isn’t he the person the market fundamentalists adore? Yes, but, as we argued earlier, they rarely read him, relying instead on textbook- like summaries of his points that made it into mainstream economic theory. The fundamentalists’ founding revelation and the lessons drawn from it are two different things.

The way in which economics textbooks typically represent Smith’s great classic The Wealth of Nations bears little resemblance to its overall spirit. Far from thinking that it is desirable or even possible to describe economic activity by formulas or other ahistorical ideas, Smith chooses instead to devote a substantial portion of the book to purely narrative explanations. And, rather than imagine that human behavior can be modeled in terms of rational choices, Smith refers time and again to rationality as exceptional. More often people are guided by what Smith calls mere folly.

Speaking of the pernicious influence of “the constitution of the Church of Rome [in England],” for instance, he observes sardonically that it was in no danger from “any assault of human reason … Had this constitution been attacked by no other enemies but the feeble efforts of human reason, it must have endured forever.” In this case, as in so many others, purely contingent historical factors, which must be narrated to be understood, accomplished what no principle of reason ever could.

Above all, Smith is far from reducing ethical questions to transactions modeled by most of today’s economists. As those who have promoted the importance of asking ethical questions have stressed, Smith was the author not only of The Wealth of Nations (published in 1776), but also of an earlier volume, The Theory of Moral Sentiments (published in 1759). Indeed, moral argument occurs frequently in The Wealth of Nations itself. Not only does Smith reject the idea that all human action is guided by perceived selfinterest — an idea that in his time was represented by Hobbes — he argues quite the opposite, that a concern for others, as well as for ourselves, lies at the core of human nature.

The Theory of Moral Sentiments famously begins: “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it. Of this kind is pity or compassion, the emotion which we feel for the misery of others, when we either see it, or are made to conceive it in a very lively manner.” And Smith makes it clear that our inclination to pity and compassion cannot be reduced to an indirect kind of self-love or self-interest, as a rational-choice theorist might suppose.

Smith evidently regarded the sort of thinking that laid the foundation for modern economic theory as necessary but not sufficient, either to understand how people do behave or to recommend how they should. One needs economics and more. Particularly distasteful to Smith was the mentality of what he called “the man of system” — the intellectual fundamentalist — who “seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces on a chessboard… to insist on establishing, and upon establishing all at once, and in spite of all opposition, everything which that idea may seem to require, must often be the highest degree of arrogance. It is to erect his own judgment into the supreme standard of right and wrong. It is to fancy himself the only wise and worthy man in the commonwealth, and that his fellow- citizens should accommodate themselves to him and not he to them.”

The wise person will accommodate himself to people and society that do not accord with his ideas: “The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamored with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it.” To Smith, it made little difference what the system was, and market fundamentalists, as contemporary “men of system,” demonstrate just the sort of thinking he had in mind. Smith never regarded economic analysis as all we need.

How we agree with that! We need more facts and less rhetoric. We need economics supplemented not just by the humanistic social sciences — history, philosophy, sociology and the like — but by the humanities as well. And we need to have fundamentalists on both sides, market lovers and haters, focus on objective economic data. As the old saying goes, the plural of anecdote is not data. We know many important answers, if only more of us would put aside our wrath and our a priori certainties and just seek them out.

main topic: Economics Profession
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