...nobody can be a great economist who is only an economist – and I am even tempted to add that the economist who is only an economist is likely to become a nuisance if not a positive danger.
– FA Hayek

The first question... is this question of how far life is rational, how far its problems reduce to the form of using given means to achieve given ends. Now this... is not very far; the scientific view of life is a limited and partial view; life is at bottom an exploration in the field of values, an attempt to discover values, rather than on the basis of knowledge of them to produce and enjoy them to the greatest possible extent. We strive to "know ourselves," to find out our real wants, more than to get what we want. This fact sets a first and most sweeping limitation to the conception of economics as a science.
– Frank Knight

Despite appearances, there is humanity in economics. Here I try to take maxims from theorems and wisdom from narrowness: together they make for a broad, honest, and inspiring worldview, nowhere near as sterile as what the field is thought to instil (as sterile as what it instils in the average student).

It’s not that economics constitutes a complete worldview. But the sterility and absurdity we see in it is the result of overreach and parochialism in a few proponents, and not anything about the subject matter or even the method.

1. It is hard to change people.

People change all the time, but trying to direct that change is notoriously technical and intensive work. This is why some people say, mistakenly, that incentives are the core of economics: they’re just the easiest way to get folk to shift. (As always, McCloskey gives a poetic rereading of an apparently boring thing: “All that moves us without violence, then, is persuasion, the realm of rhetoric.”)

Take the environmental policy brouhaha - even when reasonable doubt is ruled out, when the hypothesis has attained consensus in the educated world - we keep dumping. Appeals to reason have convinced very few of us to make significant changes. Hence, most of the large structural proposals involve increasing emission costs one way or other, and then letting people reallocate around that. Whether this is because we’re hardwired for myopic behaviour by biology or psychology or culture is besides the point.

Note that this maxim does not preclude the attempt to engineer society (i.e. progressive politics). But along with #2, 3 & 7, it reminds us of the trial and error it takes.

Giant thesis: Non-political factors are more powerful than political factors in the determination of the state of the world. (But economics is only one of the non-political factors.)

Many economists give in to “It is hard to change people”. The remainder of us risk making what Adrian Leftwich calls the “technicist fallacy”: the dubious assumption that all governance problems have a policy solution.

2. It always depends.

Economies are ‘complex’ in a hard sense: economic analysis takes place under gross uncertainty and necessarily limited experimentation. So unconditional answers are dishonest; it always depends. (This is not a weakness: Physical law also depends.)

Now, the third thing you learn in basic economics is the phrase In ceteris paribus, the assumption that only what you’re looking at varies, or matters – i.e. “it doesn’t depend!”. But that means they admit there’s a problem: it’s at least explicit ignoring.

We rarely have enough scepticism. And economics is among the more sceptical disciplines: sceptical about social reality, cheap talk, professed preferences, about actual adherence to ideologies when they cost us things. Outward scepticism, anyway: as usual it’s not evenly applied - you’re much more likely to see radical scepticism about moral or collective action than scepticism about market allocations or the policy relevance of basic linear models.

3. Things fall apart; sometimes they fall into place.

The ghost of Kant gums up arguments on political economy: many of us have the vague intuition that the amoral intentions of markets trump any accidental good that comes of them. You hear things like “capitalists don’t care about social outcomes – all social outcomes determined by capitalists will be to their advantage”. Well, yes, if they’re doing their job and are lucky, it will. Less unreasonable is whether it is only to their advantage. This mindset holds exploitation to be any case in which people are used as a means.

(Stronger definition: “the act of using labour without offering adequate compensation”. Broader definition: “any relationship of unequal benefit”.)

Under these definitions, every employer is an exploiter, since they wouldn’t employ you if they couldn’t milk more value out.

The only thing worse than being exploited by capitalism is not being exploited by capitalism.
– Joan Robinson

But this can’t be inherently or even generally wrong: there can be capability and existential relief in job creation, regardless of what the employer intended. Sure, let us refuse to use people - except that my participation in this economy and that history made that move for me. My conception of what is moral has to be larger (sadly aposteriori as well as tritely virtuous).

Consider this (if it makes you angry then the ghost of Kant is in you): “the dastardly and amoral oil cartel OPEC have done more to slow global warming than all activist efforts combined.” (The argument is that by distorting the oil price upwards for forty years, they made people economise, and so incentivised the development of cleaner energy. Shoddy discussion here.) Entirely accidentally - a thing fallen in place.

(2+3). Protection is sometimes unsafe.

The unpredictability of large-scale human affairs and the occasional emergence of order without giving orders mean even left-wing economists have to worry about our policies. Moral judgments tend to be one-step:

But the world is anything but one-step! The analysis of behaviour in terms of incentives - for all that it often justifies self-congratulatory cynicism - is at least capable of looking ahead, a little way beyond the first domino. Actually moral action demands it.

4. People aren’t stupid

By this I mean the assumption of economic rationality. This “rationality” is quite different from the real thing, note - it corresponds to the will to more stuff and the rarer, derived will to efficiency. The assumption is a ridiculous caricature of human inner life. There’s two ways for theory to succeed: either it’s true, or it’d be good if it was. Since rational choice is neither, it is rejected and despised.

The kicker comes when we consider the alternative assumption: that “people are often irrational”. How do we shape policy around this? What kind of road do we build? How do we design insurance schemes or benefits? It turns out that it is punishingly hard to do without: #4 is the behavioural principle of charity. Rational choice “theory”, reconstructed this way, is not a substantive theory at all, but a dummy methodological principle.

Now, the behavioural economists will inherit the earth soon. But policy prescription won’t easily follow from their discoveries regarding our many perversities - because while there’s ~only one way to be economically rational, there are uncountable ways to be irrational.

How can rational choice accommodate macro events like the 2008 financial disaster? Surely that really was the lord of the flies set loose in stock exchanges? In part, yes. But the good choicist’s answer is to decouple rationality from efficiency; it is in the deluded conflation of the two that the malfeasance lies. If there is no necessary link between the two, crises can be explained in terms of rational but revoltingly inefficient collective action problems, rather than by positing mass hysteria or stupidity and so getting sad.

Never ascribe to malice that which can be explained by stupidity. Never ascribe to stupidity that which can be explained by laziness. Never ascribe to laziness that which can be explained by people knowing their own lives better than you do.
― Robert Heinlein & Buck Shlegeris

The egalitarian conservatism that can be read into “People aren’t stupid” also explains why few economists take false consciousness seriously. The processes that generate our “metapreferences”, like social conditioning, are ignored. The upside of this is that economists are able to respect people’s choices in a flawed world. This is a kind of courtesy: “You’re prudent until proven otherwise”. Unlike Marxism and the new economics of happiness, even the nastiest neoclassical theory does not presume that it knows better than you what is good for you.

Ideology is too powerful and illiberal to ignore; sometimes people really are in the grip of terrible ideas / norms. You just have to recognise that there’s a cost (and a large epistemic risk) involved in calling people, or stupid people, or most people brainwashed.

5. You are the system.

Economists are often accused of believing that everything – health, happiness, life itself – can be measured in money. What we actually believe is even odder. We believe that everything can be measured in anything.
– David Friedman

The commodity view of existence is disturbing. Economists have viewed healthy life as a stock of capital to offer for sale (aka “labour”); babies as the investment capital of the poor; immigrants as human pollution; and any outcome below the utter numerical maximum that you squeeze out as a loss (“opportunity cost”).

There’s obvious reason to think that this framework does harm when it becomes commonsensical. But provided it’s kept contained as one perspective among many, the commodity perspective has some important moral and policy implications:

Every pound you spend is a vote for whatever you’re buying. Every seven pounds you spend is another hour of your life sold.

6. Efficiency is humane.

Somewhere along the way in rejecting Victorian bullshit, an idea arose that being efficient is inimical to humanity. (The human will to piss about, perhaps.) This is agreeably romantic. But, in losing its social prominence, efficiency lost its moral connotation as well. (The word “economy” originally meant good household management, “thrift” comes from the same root as “thrive”.)

This loss of moral charge is a mistake: the economical is ecological! Simple waste and planned obsolescence account for huge amounts of the pollution and price hikes in the world. If you ain’t using it, someone will; if you don’t need it or particularly want it, don’t use it. And more: in high-powered contexts, efficiency saves lives, and the rejection of efficiency in the name of sweet warm human imperfection is, here, inhumane.

7. Sometimes there is no right answer.

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.
– Hayek

A common idea: “capitalism sucks but it probably sucks less than the other current options”.

Since we are talking about the replacement of capitalism on capitalist keyboards paid for with capitalist pounds: capitalism obviously doesn’t totally stifle future systems.

And remember #3: it accidentally clothes and feeds us, it accidentally enables state spending on education and health and law. It was forced to grant us surplus time in which to think, sometimes in which to think about alternatives. For all else that it callously does, do not deny this.

8. Most things fail.

Even before we consider De Beauvoir’s more fatal sense: things don’t work. Worse, most fail silently, creating a false sense of security. Watch its space.

Did you ever think that making a speech on economics is a lot like pissin' down your leg? It seems hot to you, but it never does to anyone else.
– Lyndon B Johnson, supposedly


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