There are numerous stereotypes about economists. Two are common. The first is that all we think about and study is money. The second is that economists are more selfish than the average person.
Both stereotypes are wrong. My wife, who is not herself an economist but has been married to one for almost forty-one years, has a great answer to the first claim. When people find out that I’m an economist and then say, “Oh, he must study money,” she answers, “No, he studies human behavior.”
But I want to focus on the second claim because I think it’s the opposite of the truth. My observation is that the average economist is less selfish than the average person and that there’s a good reason for it: the study of economics causes us to think about consequences beyond the ones that are obvious. Moreover, the scholarly literature that some people think shows that students who learn economics become selfish doesn’t actually show that.
Medicare and Social Security’s “generosity”
In early April, some of my fellow pickleball players and I, in the middle of a sudden rainstorm, retreated to a local coffee shop and while there, got into an interesting conversation. I mention the setting because when we’re at pickleball, even when we’re waiting to play, we’re talking typically about the game or related issues. But at coffee we discussed more personal issues.
The main item that came up was Medicare. All six guys in our group, except me, were on Medicare. (I pay extra to keep the health insurance I had as a federal employee.) Various guys were talking delightedly about this or that benefit they got under Medicare. Benefits included gym memberships and massages. There was one other economist in our group. My earlier discussions with him had gotten a little deeper and I could tell that he was somewhat left-wing. After hearing a number of my pickleball friends wax eloquent about Medicare’s generosity, I turned to my left-wing economist friend and whispered, “The young people in this country are so screwed.”
“Why?” he asked.
I answered, “Because the Medicare well is running dry and they are going to have to pay high taxes for Medicare and Social Security for the rest of their working lives and can’t be sure what they’ll get in return.”
He saw the point immediately and then he said that we should try to keep Social Security viable by gradually raising the age at which people get benefits. I agreed.
Then he said that we should also means-test Social Security benefits. Of course, they’re means-tested now to some extent through the income tax system, which taxes a substantial percentage of Social Security benefits for people whose income is above a fairly modest level, a level that is not indexed for inflation. (This AARP site gives the details.) I said that we could argue about what the income level should be beyond which Social Security benefits are phased out but in principle I agreed with him.
Why is this story relevant? Because it shows two older economists of very different political views who are taking account of the unfairness of Social Security to the young. We care about people other than ourselves.
Special parking stickers
Here’s another story. I rent an office in downtown Monterey on a street where one can park for only two hours without risking a ticket. There’s an office beside mine and I’ve gotten to know, and like, the employees. Sometimes the parking enforcers chalk the tires and sometimes they use cameras. When they chalk the tires and I happen to see them go by, I go into the office and tell the employees when the chalking happened so they can time their move. Recently, I got into a conversation with one of the workers at this office. She was venting about the hassle of leaving the office in the middle of a project and moving her car.
Then she told me her proposal. We should have special parking stickers for people in those offices, she said. Now that might be a good idea. But she didn’t even consider the downsides. If we had such stickers, many of us would leave our cars there all day, and people who wanted to patronize the local coffee shop, the local restaurants, or other businesses would have real trouble finding parking. I didn’t bother pointing this out to her because I didn’t get the sense that she would be open to hearing it. It’s the immediate thought that occurred to me. But she thought only about the effects on her and her office mates.
I admit that this story is less persuasive than the first one because there’s no left-wing economist in the story to agree with me. Nevertheless, it’s indicative. Economists tend to think, at least a little rather than not at all, about the effects of various policies on various people. Simply doing that typically makes us less selfish.
Tradeoffs and consequences
There’s a reason that economists tend to think through consequences of various policies. Much of our training in economics is in thinking about how policies affect various people. It is true, unfortunately, that graduate economics nowadays is less about actual economics, and more about mathematical proofs, than it used to be. Still, the median economist today who got either a master’s degree or a PhD has thought at least a little, and possibly a lot, about consequences.
Even those economists who have never heard of the insightful writing of nineteenth-century French economist Frédéric Bastiat, and, unfortunately, that’s probably a majority, are often unwittingly applying one of his key insights. In his famous 1850 essay “What Is Seen and What Is Not Seen,” Bastiat leads off with this:
In the sphere of economics an action, a habit, an institution, or a law engenders not just one effect but a series of effects. Of these effects only the first is immediate; it is revealed simultaneously with its cause, it is seen. The others merely occur successively, they are not seen; we are lucky if we foresee them.
The entire difference between a bad and a good economist is apparent here. A bad one relies on the visible effect while the good one takes account both of the effect one can see and of those one must foresee. (italics in original)
That’s such a powerful essay, with so many applications that are still relevant today, that I had my students read it at the start of every course I taught at the Naval Postgraduate School.
Again, I emphasize that most economists have never read this essay. More’s the pity, as the British say. Nevertheless, it’s hard to go through any graduate economics program without implicitly applying at least some of Bastiat’s insights.
Yoram Bauman’s claim
Yoram Bauman is a first-rate economic comedian. Yes, you read that right. There actually is someone who manages to make fun of economics and is actually funny. I recommend his most famous five-minute performance. (Another competitor for economic comedian is the late P. J. O’Rourke, but that’s another story.)
A few years ago, Bauman made a claim that taking economics makes one more selfish and he cited some economic literature, written in part by him, to back that claim. His claim led to a fierce discussion among him, University of Rochester economist Steven Landsburg, many of Landsburg’s blog followers, and me.
In a 2011 New York Times article titled “The Dismal Education,” Bauman wrote, “Academic research suggests that there’s a good deal of truth to the stereotype” that economists are “selfish Grinches.” As you can see, that’s the opposite of what I’m claiming. To make his case, Bauman pointed to a study he co-authored with fellow University of Washington economist Elaina Rose. He wrote:
During our study period (1999 to 2002), when students went online to register for classes each quarter, they were asked if they wanted to donate $3 to support WashPIRG, a left-leaning activist group. Students were also asked if they wanted to donate $3 to Affordable Tuition Now (ATN), a group that lobbied for “sensible tuition rates, quality financial aid, and adequate funding.”
They found that a lower percent of economics majors than of other arts and sciences students donated to those two groups.
But wait, said Steven Landsburg, isn’t there an explanation staring us in the face? Here’s Landsburg’s point, in my words. Maybe more economics students than non-economics students actually learn that free markets work well and that government intervention often works out badly. If so, you would expect economics students to refrain from giving to left-wing causes that, in the view of these students, will cause harm. That suggests that they’re the opposite of Grinches: they think about consequences, not just for themselves, but also for others.
What about donating to a cause to reduce tuition (that’s presumably what the euphemism “sensible” indicates) and increase financial aid? Why is it Grinchlike to oppose giving to an organization that wants to increase taxes on others?
In the back and forth with Bauman and others, Landsburg nailed it, writing:
I’ve argued elsewhere that when we teach cost-benefit analysis, what we’re really doing is teaching compassion—that is, we’re teaching our students to stop and consider all the people who are affected by a given action or policy before deciding whether to support it.
I couldn’t have said it better.
