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Monday, February 15, 2010

Cat + Bag = Out Cat - Bag = Out Bag - Cat = Out

Bryan Caplan lets the cat out of the bag with his post, 'Applied Economics Assumes Selfishness, and Rightly So'. In that post, he writes:

'Yes, I know that textbooks love to claim that economics assumes "optimizing behavior," not "self-interest." But whenever economists do applied work, they quickly slide to self-interest. You know why? Because although people aren't perfectly selfish, they're shockingly close. That's why economics tells us so much about the world.'

And Caplan is absolutely corrrect in the above. The backpedaling economists often engage in when challenged on this, the disclaimer, 'No, no, the martyr fits our models just as well as the hedonist does,' is, as Caplan notes, an abuse of ordinary English.

What Caplan does not see is the larger picture: the ubiquity of such individuals in our midst, whose life is focused on maximizing their own material welfare, is largely itself a product of modern, liberal individualism, and, to a great extent, the product of economics itself. Furthermore, far from being an uncontroversial model of 'rationality', most of the world's population, in most times and places, would have seen such behaviour as an example of a type of lunacy or degeneracy.

10 comments:

  1. No one tell Gene that Mises opposed kidnapping--Gene might then write that this practice gets a bad rap!

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  2. It seems to me that the predictions of economics will work extremely well so long as the parties to market transactions are, in the overwhelming majority of cases, essentially disinterested in each other's welfare.* This is consistent with widespread selfishness, but it doesn't require widespread selfishness. A world of 10 billion people, each of whom was firmly dedicated to the welfare of about 500 individuals, could fit this scenario quite well.

    * – I know Austrians like to claim that economic laws are a priori true, and apply across all places and all time. But they establish this only by means of a gimmick that robs the laws of all of their predictive power. Thus, for instance, the Austrian law of demand—contrary to what its proponents seem to believe—tells us nothing about the responsiveness of the quantity of bread demanded to the price of bread. The trick is simply to redefine the "good" so as to make it a psychological construct—which, alas, divorces it from market outcomes as we ordinarily define them.

    (Of course, my "so long as..." is a term of art for holding other things about human nature constant, while tinkering with the degree of selfishness. And obviously, I'm neglecting information issues.)

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  3. Anonymous11:16 AM

    The Blackadder Says:

    the ubiquity of such individuals in our midst, whose life is focused on maximizing their own material welfare, is largely itself a product of modern, liberal individualism, and, to a great extent, the product of economics itself.

    Were the rural Chinese peasants in the Great Leap Forward liberal individualists?

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  4. "Were the rural Chinese peasants in the Great Leap Forward liberal individualists?"

    No.

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  5. Philip, don't you mean "uninterested"? Yes, I know that these words are falling together, but I hate it.

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  6. May I offer a few words?

    Gene, I would agree that the apparent ubiquity of the purely self-interested man is a relatively modern phenomenon, but I wouldn't confine it to Western economies; wasn't frenetic self-interest also the norm in communist societies in which traditional communities were deliberately broken?

    The rupturing of man and community and the rise of alienation are of course not universal, but seem to me most closely related to industrialization, as brought to us by state grants of limited liability to investors, and more state-intensive fascism and communism.

    I would say further that Caplan's view of human nature is too shallow and fails to accommodate either our tribal behavior or the many commons which compose the matrices in which we live.

    We see our tribal nature manifested clearly in our modes of dispute; fortunately Lin Ostrom and others have been busy at work observing and describing how we work together to resolve shared problems.

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  7. Yes, TT, you are correct -- Weber explicitly noted that once this attitude gets going, its supplies its own momentum and spreads. My favourite sources on this are Charles Taylor, _The Sources of the Self_, and Alasdair MacIntyre, _Whose Justice, WHich Rationality_. Both highly recommended.

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  8. I'm surprised, Callahan (I'm really not) that you don't mention Voegelin to Tokyo Tom instead of going along with his "post hoc". De-divinization, that's the ticket.

    Glad you liked the Simpsons clip so much, btw.

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  9. Voegelin is good on this topic as well, mpolzkill.

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  10. 1.

    http://www.youtube.com/watch?v=AFquzxwYoeE

    2.

    http://www.youtube.com/watch?v=9BF91x8Kp_k

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