Illiberal Economics: The Use and Abuse of Rationality
I recently argued economics was a liberal discipline because of the rationality postulate. Finding rational explanations for human behavior, no matter how bizarre, is an important commitment of a liberal worldview. A liberal mind is one that is willing to understand, and even sympathize, with practices and cultures radically different from one’s own. The liberality of rationality lies in its charity. It keeps the social scientist humble, and the people under investigation human. This “charitable projection” is a necessary, though not sufficient, component of liberal studies.
Committing to rationality places a great burden on the social scientist. But it is a joy to carry. Because rationality means taking agents’ plans, expectations, and beliefs seriously, it requires us to get inside their heads. Not only works of history, but philosophy and theology, are relevant to understand the minds of others. We need to reconstruct the world as the agents themselves saw it. For example, if trial by battle and monastic malediction seem irrational to us, perhaps it is because we are unwilling to take seriously a worldview that affirms a personal deity. The rational choice theorist is a true student of society, who necessarily must immerse himself in a wide variety of primary and secondary texts, with both positive and normative content, to make the humanity of others intelligible. Thus in order to wield rational choice effectively, the economist must also study arts and letters. There is no other way to reconstruct the choices of others without either bitterness or partiality.
Why is this point so infrequently appreciated? I previously suggested that economists themselves were to blame. Unfortunately, many economists apply the rationality postulate illiberally. Instead of a tool for understanding human behavior, they use it as a measuring rod for judging human behavior. The problem with using rationality prescriptively, rather than descriptively, is that it becomes all too easy to slip into the role of social critic. Social criticism is fine, and even necessary. But it is not fine when economists claim the mantle of science for their criticism.
It is an unfortunate fact that many economists use rationality as a weapon. This frequently happens when they discuss efficiency. Spend any amount of time perusing the economics literature, and you can find dozens of papers on any topic that purport to find “inefficient” results. Perhaps the most obvious cases are “market failures”. These supposedly occur whenever there is a divergence between what is best for the individual and what is best for the group. Although this definition seems unobjectionable, the inclusion of the term “failure” is no coincidence. It involves the economist rendering judgment based on criteria that may be irrelevant to the agents whose behavior they seek to comprehend. Sometimes, this results in economists claiming certain activities are impossible which, in fact, have many historical examples. Other times, it results in economists arrogating the right to tinker with incentives until people start behaving “correctly.” Each time, the economist has moved into the role of savior, rather than student, of society.
Even more frustratingly, economists genuinely do not understand why anyone would object to their attitude. They see themselves as mediators, merely helping people “get what they want.” But this kind of economics trespasses on the dignity of the science. It reduces economists to policymakers’ adjutants. To be clear: making and analyzing policy is important and legitimate. By no means is it a low or grubby thing. What makes it such is economists trying to pass off as scientific findings their preferences that other people change the way they live, because economists will not make the effort to understand why those ways persist.
There is a word for this attitude in the classical tradition: hubris. Economists these days are full of it. Adam Smith had these “men of system” dead to rights when he wrote in his Theory of Moral Sentiments:
“The man of system…is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.”
Here are Burke’s “sophisters, oeconomists, and calculators”! And well did he prophesy of them. In their quest to become “experts,” they have become tyrants. Even if we ignore the fact that economists-cum-experts so often fail, their fundamental orientation to humanity and society is illiberal. These “blind guides” who “strain out a gnat and swallow a camel” are the heirs of the first-generation utilitarians. Despite their brilliance, they arrogantly believed they could legislate for all humanity, based on their quantitative rankings of pleasure and pain. We call them “benefits” and “costs” now, but aside from that, little has changed.
A recently published book on economics and theology makes this argument in much greater depth. The book is Aquinas and the Market: Toward a Humane Economy, and its author is Mary Hirschfeld, a professor at Villanova. Hirschfeld calls for a reorientation of economics along Thomistic lines, such that economists can no longer delude themselves that they are value-neutral scientists when, in fact, their public pronouncements are replete with moral judgments. I am skeptical about Hirschfeld’s treatment, but I am confident her diagnosis is correct. Hirschfeld persuasively writes that economists “treat efficiency as a desirable property and that much policy analysis depends on a social belief that policies should promote efficiency. This term is employed in a normative fashion, however much economists might like to deny that claim…Although economists see themselves as generating knowledge for its own sake, the prestige of the discipline is tied up with their ability to offer advice to policymakers on how to regulate markets to pursue various goals.” Again: whatever lip service economists pay to comprehension is belied by their efforts at control.
And now for the obligatory of courses. Of course cost-benefit analysis is a useful tool in policy analysis. Of course economists should take part in conversations for how to improve policy, and policy-generating institutions. Of course economists should offer ethical judgments on perceived social shortcomings. None of these things are ruled out by my argument. I am primarily concerned not with the social role of the economist, but the worldview a certain kind of economics inculcates. A mind that uses rationality prescriptively tends to favor social organization along clean, geometric lines. A mind that uses rationality descriptively is much more comfortable with the crooked timber of humanity. To be clear, the geometer has his virtues, and they are many. A liberal mind is no stranger to geometry. But a liberal mind also knows where geometry ends and carpentry begins. Just as important, a liberal mind is sufficiently reflective to know when it is engaged in one versus the other.