Undercover Economist

April 11, 2014 1:17 pm

Economists aren’t all bad

‘Some research on students suggests economics either attracts or creates sociopaths’
Illustration by Ed Nacional of an evil and good economist©Ed Nacional

Justin Welby, the Archbishop of Canterbury, recently bemoaned the way that “we are all reduced to being Homo financiarius or Homo economicus, mere economic units … for whom any gain is someone else’s loss in a zero-sum world.”

The remarks were reported on the 1st of April, but I checked, and the Archbishop seems serious. He set out two ways to see the world: the way a Christian sees it, full of abundance and grace; and the way he claims Milton Friedman saw it, as a zero-sum game.

Whatever the faults one might find in Friedman’s thinking, seeing the world as a zero-sum game was not one of them. So what do we learn from this, other than that the Archbishop of Canterbury was careless in his choice of straw man? The Archbishop does raise a troubling idea. Perhaps studying economics is morally corrosive and may simply make you a meaner, narrower human being.

That might seem to be taking the economics-bashing a bit far but there is a hefty body of evidence to consult here. (Two recent short survey articles, by psychologist Adam Grant and by economist Timothy Taylor, provide a good starting point.) Several studies have compared the attitudes or behaviour of economics students or teachers with those of people learning or teaching other academic disciplines.

Typically, these studies find that economists are less co-operative in classroom games: they contribute less to collective goods and they act selfishly in the famous prisoner’s dilemma (where two people have a strong incentive to betray each other but would collectively be better off if both stayed loyal). In 1993, Robert Frank (an economist) and Thomas Gilovich and Dennis Regan (both psychologists) surveyed academics and found that although almost everyone claimed to give money to charity, almost 10 per cent of economists said they gave nothing.

Frank and his colleagues also gave hypothetical dilemmas to students. Would they correct a billing error in their favour? Would they return a lost but addressed envelope containing cash? (And what did they think other people would do in these situations?) Those studying traditional microeconomics classes were less likely than other students to give the honest response, and slightly less likely to expect honesty from others. Most students said they would return an addressed envelope with cash in it but economics students were more likely to admit to baser motives.

Reading such research suggests economics either attracts or creates sociopaths – and that should give economics instructors pause for thought.

Yet I am not totally persuaded. Economists did actually give more to charity in Frank’s survey. They were richer, and while they gave less as a percentage of their income they did give more in cash terms.

What about those hypothetical questions about envelopes full of cash? Were economics students selfish or merely truthful? Anthony Yezer and Robert Goldfarb (economists) and Paul Poppen (a psychologist) conducted an experiment to find out, surreptitiously dropping addressed envelopes with cash in classrooms to see if economics students really were less likely to return the money. Yezer and colleagues found quite the opposite: the economics students were substantially more likely to return the cash. Not quite so selfish after all.

Most importantly, classroom experiments with collective goods or the prisoner’s dilemma don’t capture much of economic life. The prisoner’s dilemma is a special case, and a counter-intuitive one. It is not surprising that economics students behave differently, nor does it tell us much about how they behave in reality. If there is a single foundational principle in economics it is that when you give people the chance to trade with each other, both of them tend to become better off. Maybe that’s naive but it’s all about “abundance” and is the precise opposite of a zero-sum mentality.

In fact, some of the more persuasive criticisms of economics are that it is too optimistic about abundance and peaceful gains from trade. From this perspective, economists should give more attention to the risks of crime and violence and to the prospect of inviolable environmental limits to economic growth. Perhaps economists don’t realise that some situations really are zero-sum games.

. . .

Economists may appear ethically impoverished on the question of co-operating in the prisoner’s dilemma but they seem to have a far more favourable attitude to immigration from poorer countries. To an economist, foreigners are people too.

This viewpoint infuriates some critics of economics, to the extent that it earned the famous nickname of “the dismal science”. Too few people know the context in which Thomas Carlyle hurled that epithet: it was in a proslavery article, first published in 1849, a few years after slavery had been abolished in the British empire. Carlyle attacked the idea that “black men” might simply be induced to work for pay, according to what he sneeringly termed the “science of supply and demand”. Scorning the liberal views of economists, he believed Africans should be put to work by force.

Economics puts us at risk of some ethical mistakes, but with its respect for individual human agency it also inoculates us against some true atrocities. I’m not ashamed to be a dismal scientist.

Twitter: @TimHarford; Tim Harford’s latest book is “The Undercover Economist Strikes Back”

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