My most recent Forbes piece explains how to use the economic way of thinking to ruin Christmas. In this light, I found Steven Landsburg’s take on Yoram Bauman’s claim in the New York Times that economics increases Grinchiness especially interesting. I haven’t read Bauman’s underlying paper, but in his NYT summary he points out that economics majors are less likely to give money to two activist groups (they were given the option during registration for classes).
Willingness to donate to left-of-center advocacy organizations is hardly a robust test of the treatment effect of economics on public-spiritedness for a couple of reasons. To continue some of Landsburg’s examples, it shouldn’t be surprising that economics education reduces a student’s faith in government action in much the same way that med school would reduce a student’s faith in the power of healing crystals. Yes, there are difficult cases to be made for markets, but jumping from those cases (public goods, externalities, incomplete information, etc.) to “we need government intervention to fix it” is a mistake because it doesn’t carry the economic analysis far enough. Sadly, Bauman’s op-ed contributes to the popular view of economics that comes from Gordon Gekko’s “greed is good” speech in Wall Street. For a useful corrective, here’s Michael Munger in last week’s EconTalk.
I think there’s a subtler point to be made, though, and one I address briefly in my Forbes article. I don’t think we can make a correct inference about the treatment effect of a person’s benevolence by looking at how taking economics classes affects his or her giving to advocacy organizations and charities. Economics might make some people more selfish in the socially questionable sense, but it also makes people wiser about how they use their resources. To use just one example from this semester, my students (presumably) learned that raising money to buy people out of slavery might actually make the problem of slavery worse.
Paradoxically, economics can make people less selfish while giving the appearance of increased selfishness. Particularly as I have read Robin Hanson’s blog, I have come to believe more and more that most “charity” is conspicuous: the primary motive is to signal that we care about poor people, and the secondary consequences are just that: secondary. To paraphrase Thomas Sowell, a lot of charitable endeavors are not about actually helping people so much as they are about showing that we are on the side of the angels. For some people who immerse themselves in the economic way of thinking, the Dismal Science helps them look past their (selfish? greedy?) fixation on others’ approval and shows them that a dollar might alleviate more human suffering if it is put in the bank rather than a donation box. I’ll leave an explanation of this as an exercise for the interested reader.
I plan to write a lot more about this in 2012. For now, here’s a bit of advice on better charity that I wrote a few years ago, largely drawing on arguments made by Tyler Cowen in his excellent Discover Your Inner Economist.
Look for more over the next few weeks and months. Good intentions aren’t the same thing as good results, and I plan to discuss a few ways to strengthen those links.
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6 Responses
Well, there is a war on Christmas (or Xmas as its antagonists prefer) going on. And bad economics is all grist to the mill. Happy Christmas to all.
The Landsburg response does not give economics majors justice. Using Austrian Economic Analysis, ie logic, students probably come to the conclusion that these “Left of Center” programs propose the seen effects of government subsidizing more college and of students getting a tiny amount more grant money but also look further and find the unseen effects of colleges increasing tuition as the level of public and private subsidization increases. So these students probably think these organizations hurt them in the longer run. Which is exactly what has happened to college education prices over the past 60 years.
So what needs to be pointed out is not that these students are greedy but just that they probably becoming rational.
The NYT article on “grinchiness” is laughable. When the students are solicited for donations, it is assumed by the writer that the lefty activist groups who receive the donations are an overall benefit to society. Economics classes, the columnist asserts, teach students to be greedy and selfish because they no longer support the lefty groups financially after taking the classes. Society suffers because the evil doctrine of Adam Smith makes the students believe that “greed is good”. Evidently he believes that the people who run the activist groups are not themselves prone to being greedy and self-interested, because their organizations have been certified as charities by the government. And of course the people in the government who certified the charities must also be selfless and non-greedy.
Assuming that benevolence and selflessness motivates people who work for charities and for government is of course a huge and unwarranted leap of faith. Do they draw salaries? Can their contributions to society actually be measured, or do we have only their word for it that they are on the “plus” side of the register? If their contribution to society can only be measured subjectively, then have the supposed beneficiaries of the charities been surveyed or have they in other ways clearly indicated their assent and gratitude for the charitable work? Is there such a thing as a bad charity? Do economics students have any right to decide which charities to support and which not to support, are are their professors automatically more knowledgeable (and selfless) in having selected these charities for them?
It shouldn’t be surprising that the columnist is apparently a “global warmingist”. That whole ideology can be summarized, “You don’t understand anything about the climate but I do, so you better trust me when I tell you that you had better give me all your money so that I can protect you from rising sea levels.”
The more I think about it, the more obvious it seems that we’re facing a popular mental barrier against sound economics similar to the one agaist free religion that the Enlightenment had to face.
The general public once looked on infidels and heretics with suspicion and outright hatred, and that has by and large disappeared today. Evidence of such is that those very words are now used mostly to denounce those who think on those terms.
On the other hand, “profiteering”, “stinking rich”, “tight-fisted” and other such expressions are still used far and wide. If you treat this mindset as evil, most people don’t see it as only reasonable, but rather as “dogmatism”.
What people want from economists is not sober advice, but rather a way to get rich fast and with little effort. And there are those within the profession – the Keynesians – who are delighted to oblige.
A few points:
1) since it is a natural law that people need to eat to be happy, then it follows that it is naturally just for poor people to take what they need if necessary. No sarcasm intended, but I don’ know if the same applies to america’s poor who are generally quite fat but lack opportunities?
2) That being said, charity is only charity when it is done for its own sake and not for some extrinsic benefit; so that ‘s why people don’t prefer investment to charity.
That the money is badly used is a different problem.
3) Gov. laws definitely do hurt the situation, at least by accident. After all in the past, the unemployed, poor, etc. used to be able to become street vendors or set up cooperatives, or could even sell their labor for a lifetime -i.e. slavery. But since the current gov. has outlawed all of these through vagrancy and other laws, gov. inefficiency has done its fare share of damage (maybe even most of it, since the state is naturally a consumer of savings/income, but idk).
I went to art museums sometimes and I realized, that if the state could lodge pictures in these palaces of bourgeois refinement, then it can certainly construct the same for homeless people; dadaism should not cost this much!
No surprises that the NYT is an interested party to the war on Christmas.
http://www.vdare.com/articles/announcing-vdarecom-s-war-on-christmas-competition-2011-defy-the-deniers