[Paleopsych] TCS: Why People Hate Economics

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Fri Dec 9 21:34:48 UTC 2005

Why People Hate Economics

[This is good, the idea those who reason from consequences of a proposal and 
those who reason from the supposed motives of the proponents. But Mr. 
Mencken said one thing the author did much better:

["The whole aim of practical politics is to keep the populace alarmed (and 
hence clamorous to be led to safety) by menacing it with an endless series 
of hobgoblins, all of them imaginary" (_In Defence of Women_).]

    By Arnold Kling  Published   11/21/2005

    "the separateness of these two mechanisms, one for understanding the
    physical world and one for understanding the social world, gives rise
    to a duality of experience. We experience the world of material things
    as separate from the world of goals and desires.

    ...We have what the anthropologist Pascal Boyer has called a
    hypertrophy of social cognition. We see purpose, intention, design,
    even when it is not there."
    -- Paul Bloom, writing in The Atlantic

    Paul Bloom's essay "Is God an Accident?" in the latest issue of The
    Atlantic, suggests that humans' belief in God, Intelligent Design, and
    the afterlife is an artifact of brain structure. In this essay, I am
    going to suggest that the same artifact that explains why people are
    instinctively anti-Darwin explains why they are instinctively

    Bloom says that we use one brain mechanism to analyze the physical
    world, as when we line up a shot on the billiard table. We use another
    brain mechanism to interact socially, as when we try to get a date for
    the prom.

    The analytical brain uses the principles of science. It learns to make
    predictions of the form, "When an object is dropped, it will fall
    toward the earth."

    The social brain uses empathy. It learns to guess others' intentions
    and motives in order to predict their reactions and behavior.

    The difference between analytical and social reasoning strikes me as
    similar to the difference that I once drew between Type C and Type M
    arguments. I wrote, "Type C arguments are about the consequences of
    policies. Type M arguments are about the alleged motives of
    individuals who advocate policies."

    Type C arguments about policy come from the analytical brain and
    reflect impersonal analysis. Type M arguments come from the social
    brain. In my view, they inject emotion, demagoguery, and confusion
    into discussions of economic policy.

    As a shortcut, I will refer to the analytical, scientific mental
    process as the type C brain, and the emotional, empathic mental
    process as the type M brain. What I take from Bloom's essay is the
    suggestion that our type M brain seeks a motive and intention behind
    the events that take place in our lives. This type M brain leads to
    irrational religious beliefs and superstitions, as when we attribute
    emotions and intentions to inanimate objects.

    We need our type M brains, but in moderation. Without a type M brain,
    one is socially underdeveloped. In extreme cases, someone with a weak
    type M brain will be described by Asperger's Syndrome or autism. On
    the other hand, as Bloom suggests, there are many cases in which we
    over-use our type M brains. For example, social psychologists have
    long noted the fundamental attribution error, in which we see people's
    actions as derived from their motives or dispositions when in fact the
    actions result from context.

    Economics is an attempt to use a type C brain to understand market
    processes in impersonal terms. We do not assess one person's motives
    as better than another's. We assume that everyone is out for their own
    gain, and we try to predict what will happen when people trade on that

    Perhaps one of the reasons that economics is taught using math is that
    mathematics engages the Type C brain. By getting students to look at
    equations represented in graphs, the instructor steers them away from
    thinking in terms of motives. The down side of this is that when they
    go back to looking at the real world, many people who have taken
    economics courses simply revert to using their type M brains.

    Explaining Higher Gas Prices

    For example, consider the run-up in gasoline prices that occurred
    after Hurricane Katrina. Looking for the cause of higher gas prices,
    the type M brain asks, "Who?" The type C brain asks "What?"

    Some Senators, appealing to the type M brains among their
    constituents, hauled oil company executives into a hearing to ask them
    to explain why they raised prices so high. One might just as well
    imagine hauling people before a Senate hearing and holding them
    personally responsible for gravity or inertia.

    No one sets the price of gasoline. If they could, oil company
    executives would charge $10 a gallon or more. However, because of
    competition, they have to charge an amount that will allow them to
    sell the gasoline that they are able to produce. After Katrina, they
    were able to produce less gasoline, so that at $2 a gallon they would
    have run out. They raised their prices to the point where they could
    not raise them further without losing most of their business to

    If an oil company had decided magnanimously to sell gasoline at low
    prices, it would have run out of gasoline. If enough companies had
    done so, there would have been so little gasoline left that by October
    the public would have been at the mercy of those few suppliers that
    held any inventories. If gasoline had cost $2 a gallon in September,
    the shortage in October might have pushed the price up to $5 a gallon.

    If a monopolist were in charge of the oil industry, he would shut down
    some refineries in order to reduce the availability of gasoline. A
    monopolist would rather produce less gasoline and charge $3 per gallon
    than produce more gasoline but have to charge $2 a gallon to sell it

    Fortunately, the oil industry is not run by a monopolist, and we do
    not have to face $3 a gallon all the time. A competitive firm will not
    shut down its refinery capacity to keep supply off the market, because
    that only benefits its competitors.

    Hurricane Katrina temporarily did for the industry what a monopolist
    would do permanently. The hurricane shut down refinery capacity. As a
    result, oil companies earned high short-term profits. But those high
    profits did not reflect a sudden outbreak of greed among the oil
    company executives. Profits are explained by type C analysis of
    context, not by type M attributions of motive.

    Politics and Government

    Type M thinking views government as a parent. Conservatives want their
    government/parent to police moral behavior. Liberals want their
    government/parent to provide nurturance. Type C thinking instead
    thinks of government as an institutional arrangement. Rather than
    anthropomorphize government as a parent, type C thinking leads me to
    prefer the Separation of Family and State.

    Type M thinking treats political conflicts as battles between good and
    evil. "Our" side is wise and sincerely motivated. The "other" side is
    stupid and evil.

    Many economists revert to type M thinking when they look at politics.
    See my Challenge for Brad DeLong.

    Type C thinking treats political conflict as an inevitable competition
    among various interest groups. Actors in the political sphere respond
    to incentives, just as they do in other spheres.

    Politicians try to exploit the type M brain. Politicians appeal to
    people's fears. Their message is, "You are in danger. Fortunately, I
    care about you, and I will save you."

    The many political crusades against Wal-Mart reflect type M thinking.
    For example, the state of Maryland, where I live, is considering
    legislation forcing Wal-Mart to provide expensive health insurance to
    its employees.

    The type M brain sees Wal-Mart management as Scrooge, and Maryland's
    politicians as the ghosts that are going to get the company to see the
    evil of its ways. However, Basic type C economics says that forcing
    the company to provide more health insurance benefits would lead to
    lower wages for Wal-Mart workers.

    International Trade

    Economists view international trade as equivalent to the discovery of
    a more efficient production process. As Alan Blinder put it recently,
    "It has long been a mystery to economists why so many people view
    creative destruction that stems from technology as okay, while similar
    creative destruction that stems from international trade is something
    to be opposed."

    Hardly anyone feels guilty about using tax preparation software rather
    than paying an accountant to handle their tax returns. Yet many people
    would tell you that there is something wrong with outsourcing tax
    preparation to accountants in India.

    Neither economists nor non-economists tend to think of tax preparation
    software as an alien outsider trying to steal our jobs. However, many
    non-economists' type M brains instinctively think of Indian
    accountants as trying to do us harm. Economists are trained to look at
    international trade through the same type C eyes that we view
    technological innovation, and we are constantly amazed by the general
    public's hostility toward it.

    Paul Bloom offers extensive evidence that the majority of people do
    not accept the type C approach to evolution, death, and other matters.
    If biologists have been unable to get people to change their type M
    minds, then perhaps economists should not feel so bad.

    Arnold Kling is author of Learning Economics.

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