Sanctimonious Econ Critics

The New Yorker review of Elephant in the Brain raved about Cents and Sensibility, by Gary Morson and Morton Shapiro, a book said to confirm that “intellectual overextension is often found in economics.” Others have similarly raved. But I don’t care much for this book, so let me explain why. (Be warned: this post is LONG.)

In its first sentence, the book declares its aim:

This book creates a dialogue between two fields that rarely have anything to say to each other: economics and the humanities. We mean to show how that dialogue could be conducted and why it has a great deal to contribute. (p.1)

Morson and Shapiro seem to want the sort of “dialogue” where one side talks and the other just listens. All but one chapter elaborates how economists should listen to the humanities, and the one remaining chapter is on how some parts of the humanities should listen to another part, not to economists. There’s only a two page section near the end on “What Humanists Can Learn From Economists,” which even then can’t resist talking more about what economists can learn:

Economists could learn from humanists the complexity of ethical issues, the need for stories, the importance of empathy, and the value of unformalizable good judgement. But humanists could also learn from economists how to think about scarce resources, about the nature of efficiency, and the importance of rational decision making. (p.261)

So what exactly can we economists learn?

Economics can benefit by considering key ways of thinking, cultivated by reading great cultural artifacts. … We have three distinct ways the humanities could help in economic thinking. First, people are cultural from the onset. … Economists … treat culture as an add-on rather than as essential. …

Second, to understand people one must tell stories about them. There is no way to grasp most of what individuals and groups do by deductive logic. … Contingency, idiosyncrasy, and choices – all of which allow for alternatives – play an indispensable role. … Personhood and sociality demand biography and history. Novels are a distinct way of knowing; and the very shape of the stories they tell – what sorts of events are represented as plausible, effective, or important – convey vital, if elusive, information. …

Third, economics inevitably involves ethical questions, not reducible to economics itself, or for that matter to any other social science. Economists often smuggle ethical issues into their models. … There are many ways to make these covert issues overt and argue about them explicitly. … These questions often invite a distinct perspective best learned from the great novel. … Ethical questions are often too complex and too important to be safely handed over to any theory, existing or to come. It requires real, but ultimately unformalizable, sensitivity. … This distinctly literary and novelistic approach to ethics … is not a theory in the sense of a comprehensive system somehow extracted from the great novels that one can learn apart from reading them. … Ethical decisions … require good judgment, which, by definition, cannot be reduced to any theory or set of rules. …

Here then are the three areas where the humanities could supplement economics: with stories, a better understanding of the role of culture, and a healthy respect for ethics in all its complexity. … Economics has a hard time dealing with culture because it cannot be mathematicized. (pp.9-13)

So, they say economists should read more novels, tell more math-less case-specific stories with lots of contingent detail, and make different ethical choices based less on theory and more on unarticulated judgements. And what is the evidence favoring such changes? Spread out across the book, I find nine concrete arguments.

First, what economists say often sounds obvious:

A humanist is also struck by how often she is moved to say in response to some [behavioral economics] discovery, “You mean, you had to prove that?” (p.277)

Yes, much of what we say sounds obvious. Our contribution is less to make those claims and more to doubt other “obvious” claims. Often both a claim and its negation seem “obvious”; we work to figure out which one to drop. Also, beware of hindsight bias.

Second, economists can’t write novels as well as novelists:

We approach literature as a source of wisdom that cannot be obtained, or obtained so well, elsewhere. There is an obvious proof that the great novelist understand people better than any social scientist who has ever lived. If social scientists understood people as well as Tolstoy or George Eliott, they would have been able to describe people as believable as Anna Karenina or Dorothea Brooke. (p.16)

Does the fact that we can’t do auto repair as well as auto mechanics mean we should listen more to them as well? How about that we can’t doing gardening as well as gardeners? Okay, maybe novelists know more about story-like people, but are those real people or dramatic/compelling characters?

Third, Morson and Shapiro call economists “hedgehogs”, though their favorite example of a hedgehog is an ecologist:

“The fox knows many things, but the hedgehog knows one big thing.” … Hedgehogs most often go wrong when they apply theories that work in their own field to others quite different. Consider Paul Ehrlich again: his certainty that he has to be right. … Ehrlich was dealing with economic problems but dismissed the insights of economists. … Literature by its very nature is foxy. … In creating a dialogue between economics and the humanities – with literatures seen as the core of the humanities – we are proposing to temper the hedgehogism of traditional economics with the foxiness of the great novelists. … Be a fox, even if economics tends to breed hedgehogs. The empirical evidence suggests that foxes do a better job in predictive accuracy. (pp.57-63)

Yes, novelists declare few explicit theories about the world, but that is also true of auto mechanics, gardeners, etc. People who offer explicit theories sound more like hedgehogs than people who don’t; should all academic theorists thus listen more to all non-academics, as the latter are more foxy? Also, we’ve seen many cases of explicit models beating intuitive estimation.

Fourth, economists are blamed for development failures:

The failure of so many well-intentioned development schemes have demonstrated the destructive effects of hedgehog thinking. The hubristic claim that economists (or experts in some other discipline) have arrived at hard scientific knowledge, capable of successfully guiding development, has led to disaster after disaster. … Time and again, supposed experts, backed by massive force, put into practice development plans that did not take into account the peculiarities of particular belief systems, the importance of local experience with conditions varying in no predictable way, the role of tacit knowledge that no one can specify but that make all the difference, the need to proceed step-by-step to check with tone change has worked before implementing the next. … These are mistakes a fox would be less likely to make. (pp.196-198)

Okay, but this argument would be a lot stronger if literature folks could claim credit for any successful development efforts. And its not clear to me that economists were much more responsible for these failures than were many other kinds of policy experts.

Fifth, Gary Becker seems to have disrespected other disciplines:

Becker expressed scorn for “sociology, psychology, or anthropology”. (p.121)

Okay, bad on Becker. But don’t most groups contain a few extremists?

Sixth, economists are said to use implausibly extreme language:

Rational choice theory predominated among not only the economists but … other social disciplines. At first I found this difficult to believe. … Surely no one could really believe that people always acted in accordance with what they considered to be their best advantage. … Would anyone not already committed to rational choice theory who looked at the Crusades, the religious wars of the seventeenth century, or the endless strife in the Balkans, conclude that people behave rationally? (pp.30-32)

Becker [says] … all human behavior can be viewed as involving participants who maximize their utility from a stable set of preferences and accumulate an optimal amount of information and other inputs in a variety of markets. … In principle, the economic model can explain everything in human behavior. (pp.121-123)

A friendship may last beyond the grave, in the sense that the presence of your friend is felt and cherished, and you hold the same sort of dialogues with her as you did when she was alive but far away. … None of that would be encompassed in the notion that friends provide “friendship services.” Still less does “child services” capture much of what is involved in having a child. … It is hard to imagine capturing any of this [parenting] complexity under the covering term “child services” which might seem to a humanist essentially wrong-headed. And the humanist might further reflect that reduction of all relationships to utility destroys the very foundation of morality, which depends precisely on viewing people not merely in terms of their utility but as ends in themselves. (pp.141-143)

We quoted Becker earlier using preferences and values as synonyms. Humanists would take issue with that. Preferences are what we enjoy; values are something else entirely. What if we enjoy things that hurt other people? (p.153)

Here Morson and Shapiro don’t seem to get that we economists treat the claim that behavior can be predicted as utility maximization plus random error as a useful tautology, said without loss of generality. We also use “services” in such a general sense; we don’t intend this term to exclude the values Morson and Shapiro describe.

Seventh, they say it is never rational to do things in order to make yourself hard to predict:

Edgar Allen Poe … finds the essence of humanness in unpredictability, in the capacity to surprise. … “What a man needs is simply independent choice, whatever that independence may cost and wherever it may lead.” There is no place for surprisingness in the rational choice approach. … The choice being made is to exercise the right to act against our interests since that action “perseveres … our individuality.” (p.151)

But this seems just wrong; game theory often predicts that actors use mixed strategies to make themselves hard to predict. Rational actors can also choose actions to make themselves hard to find, control, or threaten.

Eighth, economic theories can corrupt the youth:

To imagine marriage as no different from any other economic transaction, … social norms may be corrupted … A society where people generally, not just economists, come to accept Becker’s analysis [of marriage] might expect its divorce rate to go up and its social cohesion to decline. (p.136)

But even if it is corrupting to believe economics, that doesn’t make economics wrong.

Ninth and finally, Morson and Shapiro’s most oft-mentioned point, what I guess to be their “true objection”, is that economists make incorrect moral choices. They mention this so often that I’ve moved supporting quotes to the end of this post. They object that some economists have at times supported raising the price of Egyptian bread to market-clearing levels, shipping pollution from rich to poor nations, not paying high prices to save the sight of poor Africans, letting individuals sell their kidneys, and deterring both parking violations and murder in the same way. Finally they blame economists for the fact that university administrators make many choices, and say misleading things, to benefit their universities, often at the expense of students, even as they pretend otherwise.

I don’t see why economists should be blamed for selfish university administrators. Few of them have an economics background; in fact, 40% of university presidents have a Ph.D. in education studies. Why not blame that discipline instead? Or the fact that humans are generally selfish?

On the claim that economists make bad moral choices, the general principle seems to be that one should never doubt the usual moral intuitions repeatedly expressed and reaffirmed in our society’s great literature. Philosophers are blamed along with economists for trying to find and apply general moral principles, instead of embracing each case-specific moral intuition and then finding a detailed local story to justify it. If you aren’t clear yet on the right morals, then read more of your society’s moral instruction stories, and you’ll get clear. When novelists and theorists disagree on morals, novelists are right:

Literary schools stress particularity, along with the need for multiple perspectives and the irreducibility of human experience to any single theory. … The best that philosophers can do when paraphrasing great literature is to create some inadequate representation, … much cruder and less nuanced than the original. … People and moral questions are too complex to be captured by any moral theory. (p.14-15)

For Toulmin, the core error of development economics is that economists imagine that the way to understand the world is theoretically, and that policy should simply be theory rigorously applied. But in practical affairs, as Aristotle long ago pointed out, one needs a fundamentally different sort of reasoning inasmuch as actual cases have features no theory can anticipate. One needs judgement, wisdom, and experience. … We can imagine that Toulmin would have had a field day with the Becker model. (p.148)

But there was a way, the one that rationalist philosophy displaced. Instead of reasoning down from general principles, it reasoned up from particular cases. … For Aristotle, … practical affairs cannot be reduced to the application of theory. … When rationalism triumphed in philosophy, casuistry found a new home in a new literary genre, the realist novel. … Whereas the fundamental impulse of the rationalist or scientist is to abstract the essence of a situation and apply general principles to it, the novel tends to make the exact opposite move. Instead of showing the essential simplicity of things it shows their complexity and teaches us to reason appropriately. (pp.219-221)

So in sum, Morson and Shapiro want a “dialogue” where we economists shut up and listen to novelists. Their true objection to economics seems to be that, like philosophers, we claim to offer abstract theories with implications for moral choices, theories that often disagree with the case-specific moral intuitions embraced by their favorite novels. They offer eight other weak objections, but each briefly and with little elaboration. I think it fair to call criticism based primarily on an estimate of one’s own moral superiority “sanctimonious.”

I have argued elsewhere that the fact that different societies have different moral intuitions suggests that we should expect high error rates in case-specific moral intuitions. And thus we should “curve-fit” to infer a simpler “curve” of moral truth that does not pass through or even very near to each case-specific intuition “data point”. The fact that novelists often write touching stories embracing case-specific moral intuitions does not to me seem to be a strong reason not to seek and act on simpler theories that better fit the whole of our moral data.

Finally, here are those promised quotes on the moral errors arising when economic theory conflicts with familiar case-specific intuitions. Interestingly, Morson and Shapiro are rarely willing to disagree directly, but instead “raise questions” about analysis which seems insufficiently “nuanced” if it has not yet come to their correct conclusions:

In Cairo in 1981… subsidizes that had long led to [a low] cost of bread. … [Reducing subsidies] seemed liked a convincing story until someone mentioned the number of people who had died in the riots that had ensured and another talked of the prospects for widespread malnutrition. …How do you property weigh the cost of death? … [What if] we had actually known some of the casualties or their families? (p.24)

The infamous World Bank / Lawrence Summers memo. … arguing that there were a number of reasons why the Bank should encourage greater migration of dirty industries to the developing world, … [including] relocating toxic waste to areas with already high morbidity and mortality and with low wages implies a minimal economic cost. A second reason was … the richer the nation, the greater its appreciation of clean air and water and improved levels of health. … “A concrete example of the unbelievable alienation, reductions thinking, social ruthlessness and the arrogant ignorance of many conventional ‘economists’ concerning the nature of the world we live in.” In my mind that says it all. … What about the moral issues at stake? … Someone gains, someone else loses. (p.26)

What is the economic value of millions of Africans keeping their sight? If you count it in economic terms – chanciness in earnings discounted back to the present the answer is alas, not all that much in areas with high unemployment and low educational attainment. … “Using income figures to judge the value of a life saved inherently biases a project evaluation against the poor.” … Is there a lesson here? … Should economists step back and think more broadly about the greater good differently conceived? Perhaps. Or at least we argue so in the chapter that follows. (p.29)

Becker observes … a person commits an offense if the expected utility to him exceeds the utility he could get by using his time and other resources at other activities. … Isn’t there a qualitative difference – not just one of degree – between a parking violation and murder? … There is something fundamentally wrong-headed with taking, as a model crime, one that has no moral value. (p.146)

Becker and Julio Elias argue that the long waiting list for new kidneys implies a large number of needless deaths. Their answer: a market for organs. … The issue is not nearly so simple as Becker, or the economic model taken alone, would allow. … We have a natural reluctance to bless a situation in which poor people are likely to the sellers and rich people the buyers. … A humanist might consider … a quite different argument based on … bribery or corruption. … Selling the use of our bodies, whether for surrogate parenting, prostitution, or some other purpose, may entail “self-degradation,” … may cheapen a society’s sense of what it is to be a human being. … Couldn’t our repugnance testify to a moral sensibility – at times appropriate – that we have even if we cannot articulate it? … We are repelled by the treatment of the body as a collection of spare parts. (pp.158-159)

Have implored colleges and universities to “act more like businesses,” presumably in an attempt to become more “efficient.” But “efficient at what?” is a question they do not ask, as if it were unproblematic. (p.66)

Our focus here is on the allocation of price discounts. … Here is where economics might easily collide with ethics. Why not use … the knowledge of how much aid it would take to get a student to enroll, and then offer the smallest price discount required. … But … this reasoning raises several moral questions. If the aid is called “merit”, shouldn’t it go to the most meritorious of applicants rather than to those who are less accomplished but otherwise unlikely to accept and admission offer? … And doesn’t transparency – or its lack – matter? … It is one thing to do something openly and another to do the same thing while letting people think one is doing something else. … In everyday life, that is called hypocrisy, and given university pretensions to speak as a moral conscience, suggests numerous pious hypocrites in literature. (p.73)

One reply would be that engaging in this sort of misleading behavior allows the school to spend more money on worthy purposes. Might this justify the school’s actions? … The ethical questions here do not have obvious answers, and that is our point. What from an economics standpoint does not raise difficult questions, from an ethical perspective, more natural to the humanist, certainly does. … We have to believe more stories would help. If enrollment management gurus actually spoke with some of those talented, earnest students who were desperate to attend the institution, would they be as likely to explain that interest? (p.75-76)

There is a related application of this type of analysis that is also morally fraught. Many schools work very hard to minimize their admit rates … acting on the premise that, to the outside world, increased selectivity equates with higher quality. … To minimize a school’s admit rates, focus on those students with high predicted yields and, for those with low probabilities either reject them or place them on the wait list. … In many disciplines it would be natural to interview the students in question in order to help inform the basic model. But in economics that is rarely done. (p.78-80)

Both full-time and part-time contingent faculty members outperform tenure line professors in the first-term classroom. … The strong and significant effect of contingent faculty on our measure of learning held for all subjects, regardless of grading standards or the qualifications of the students. … So what do you do with the results of this study? … How about teaching contingent faculty better? … Where on a college website does it mention the percentage of undergraduate courses that are taught why nontenured line faculty, … often the almost invisible providers of some of the best teaching around. (p.85)

Some schools count those who only submitted part one applications among their total number of applications. (p.88)

If everyone else exaggerates their numbers but you do not, are you being honest? After all, the main point of these data is comparative. But this reasoning can itself be a dishonest conscience saver. Anyone who knows the great realist novels – Tolstoy’s Anna Karenina, Dicken’s Great Expectations … becomes suspicious of any justification of lying. (p.98)