Thursday, January 22, 2004

I've been wondering for years what makes otherwise rational people disbelieve or fear economics. Arnold Kling asks the same question in a recent TCS article. To put the question in a simpler form, why do so many people believe that trade with a country such as India will make USA poorer? I can accept that people aren't hard-wired to understand market pricing. Instead, people may be hard-wired to understand sharing, and when a rich person shares with a poor person, the rich person becomes poorer (and the poor person richer). Or perhaps we understand individual trade of concrete objects, being perfectly willing as individuals to trade some of our excess grain for somebody else's excess fabric. It definitely becomes less natural to understand abstract money because that money has developed only recently in evolutionary terms: coins in 600 BC, paper money in 800 AD or so; checking accounts by the Italians around 1500, electronic money only in 1918, anonymous credit in 1937. Institutions to pool money or trade have developed along the same lines, so the concept of a "national trade deficit" (stupid concept, BTW) is a recent one. No wonder we have to think carefully about modern trade issues to understand them.

But I can't believe Kling's second hypothesis, that a fear of math is at fault here. I've known people with a University degree in Math (also Computer "Science", also the hard sciences) to have economo-phobia. Kling's sample must be too small for his hypothesis.

There are other possible models to explain economo-phobia, assuming of course it's a real phenomena (Kling and I could be deluded, after all...).

  • Economics goes against common sense, by which I mean pre-scientific models of trade and money. This is related to Kling's evolutionary psychology theory.

    • Pre-scientific models are replaced by generational churn, more than by rational thought. (For that matter, scientific revolutions also happen only at the pace of a generation). International trade in labour is too new to understand.

    • The data that falsifies common-sense models is too hard to see. We can't directly link a drop in the price of the new pants we buy to a friend losing an IT job and deciding to go back to school.

    • Common-sense models lead to plans like rent control. When these don't work, we're notoriously bad at throwing out models-- in fact we may become emotionally attached to them, rather than go through the unpleasant process of admitting rent control is not really possible.

  • Economics seems to conflict with morality.

    • Economics uses the same words or terms as moralists, only perverting those terms from what a moralist understands. For example, "correct" outcomes and "value". Not to mention, a "good". It's difficult for armchair moralists to accept that terminology.

    • Economists must overcome a certain "gag reflex" when putting a value on certain things, such as a human life.
    • Economists seem to oppose certain moral-seeming actions. Taking the example of rent control again, surely it's a proof of moral upstanding to want poor people to afford decent living quarters. When an economist opposes a plan like rent control, she seems to oppose the whole idea of providing poor people with decent living quarters.

    If common sense and morality are arrayed against economics (even if economics isn't against them), it's not too surprising that we find an understanding and acceptance of economics so rare.

    No comments:

    Blog Archive

    Creative Commons License
    This work is licensed under a Creative Commons Attribution 3.0 Unported License.