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Can Economists and Humanists Ever Be Friends?
One discipline reduces behavior to elegantly simple rules; the other wallows in our full, complex particularity. What can they learn from each other?
Those who seek to reduce behavior to laws would seem hopelessly at odds with those who are fascinated by our full particularity.
Illustration by Tamara Shopsin
What are you doing? I don’t mean what are you doing with your life, or in general, but what are you doing right now? The answer, in one respect, is simple enough: you’re reading this magazine. Obviously. From a certain economic perspective, however, you’re doing something else, something you don’t realize, something with a sneaky motive that you aren’t admitting to yourself: you are signalling. You are sending signals about the kind of person you are, or want to be. What’s that you say—you’re reading this in the bath, or on your phone in bed, or otherwise in private? Well, the same argument applies. You are acquiring the tools for a “fitness display.” This, the economist Robin Hanson and the writer-programmer Kevin Simler argue in their new book, “The Elephant in the Brain: Hidden Motives in Everyday Life” (Oxford), is an advertisement of “health, energy, vigor, coordination, and overall fitness.” Fitness displays “can be used to woo mates, of course, but they also serve other purposes like attracting allies or intimidating rivals.” So there you go: that’s what you’re doing, there in the bath with the magazine. Your rivals are right to feel intimidated.
Wait, though—surely signalling doesn’t account for everything? Hanson, in a recent podcast interview with Tyler Cowen, a colleague at George Mason University, was asked to give a “short, quick and dirty” answer to the question of how much human behavior “ultimately can be traced back to some kind of signalling.” His answer: “In a rich society like ours, well over ninety per cent.” He was then asked to cite a few voluntary human activities that “have the least amount to do with signalling.” The example Hanson came up with was “scratching your butt.”
That made me laugh, and also shake my head. Economists often do. I started reading up on economics twelve years ago. I was in the early stages of writing a novel about contemporary London, and had come to the realization that frequently hits you when you are writing fiction, which is that there is a story behind the apparent story. Partly because I didn’t grow up in London, I felt that I could see just how much it had changed in the past few decades. What had seemed a drab, provincial, gray place in the nineteen-seventies was by the two-thousands unmistakably a world city, a hub of great energy and color and brashness. When I was trying to write my first draft, I realized that I was missing an answer to the question, Why? What were the driving forces behind all the change? The answer turned out to be that after the deregulation of financial services, in October, 1986—known in the City (the financial center) as the Big Bang—London had become a capital of global finance. This was true not in a distant, abstract way but in a manner that literally determined who our neighbors were. In my part of South London, a street that was once economically rather eclectic was becoming increasingly homogeneous, with new arrivals drawn entirely from finance and its ancillary professions. I realized that to understand my city and to write my novel I would have to start trying to understand the world of money.
Books such as “The Elephant in the Brain” show why the experience has been stimulating and fun, and also frustrating and intermittently demoralizing. There is something thrilling about the intellectual audacity of thinking that you can explain ninety per cent of behavior in a society with one mental tool. Many of the details of Hanson and Simler’s thesis are persuasive, and the idea of an “introspective taboo” that prevents us from telling the truth to ourselves about our motives is worth contemplating. (That taboo is the Elephant.) Citing a seven-year study by the rand Corporation in which participants who used more free medical care didn’t become significantly healthier, the writers argue that the purpose of medicine is as often to signal concern as it is to cure disease. They propose that the purpose of religion is as often to enhance feelings of community as it is to enact transcendental beliefs.
Some of their most provocative ideas are in the area of education, which they believe is a form of domestication. “One of the main reasons so few animals can be domesticated is that only rare social species let humans sit in the role of dominant pack animal,” they write. “And we, too, naturally resist submitting to other humans.” They cite a study showing that unschooled workers from less-developed parts of the world aren’t nearly as productive as rich-world workers, even at repetitive manual labor that you might not think demands much education. According to Hanson and Simler, these unschooled workers “won’t show up for work reliably on time, or they have problematic superstitions, or they prefer to get job instructions via indirect hints instead of direct orders, or they won’t accept tasks and roles that conflict with their culturally assigned relative status with co-workers, or they won’t accept being told to do tasks differently than they had done them before.” In the rich world, we have learned to do all those things, and mostly we learned to do them at school, where “an industrial-era school system prepares us for the modern workplace.” Hanson and Simler explain:
Children are expected to sit still for hours upon hours; to control their impulses; to focus on boring, repetitive tasks; to move from place to place when a bell rings; and even to ask for permission before going to the bathroom (think about that for a second). Teachers systematically reward children for being docile. . . . In fact, teachers reward discipline independent of its effect on learning, and in ways that tamp down on student creativity. Children are also trained to accept being measured, graded, and ranked, often in front of others. This enterprise, which typically lasts well over a decade, serves as a systematic exercise in human domestication.
Having watched one son go all the way through secondary school, and with another who still has three years to go, I found that account painfully close to the reality of what modern schooling is like.
Hanson is a free-range thinker. His previous book, “The Age of Em” (2016), was a startlingly original speculation about a future world dominated by humanoid-robot intelligences. But the deliberately value-free and judgment-free nature of his thinking can cause trouble. After the death of ten people in Toronto, apparently at the hands of a self-described “incel” (or involuntary celibate), he wrote on his blog, “One might plausibly argue that those with much less access to sex suffer to a similar degree as those with low income, and might similarly hope to gain from organizing around this identity, to lobby for redistribution along this axis and to at least implicitly threaten violence if their demands are not met.” This led to an article in Slate which posed the question “Is Robin Hanson America’s Creepiest Economist?,” and to a subsequent Twitter pile-on. “The Elephant in the Brain” is not creepy. But the book has moments of laughable wrongness. We’re told, “In One Thousand and One Nights, for example, Scheherazade uses her artful storytelling to stave off execution and win the affection of the king. Maya Angelou, in contrast, managed not to woo Bill Clinton with her poetry but rather to impress him—so much so that he invited her to perform at his presidential inauguration in 1993.” The idea that Maya Angelou’s career amounts to nothing more than a writer shaking her tail feathers to attract the attention of a dominant male is not just misleading; it’s actively embarrassing.
More generally, Hanson and Simler’s emphasis on signalling and unconscious motives suggests that the most important part of our actions is the motives themselves, rather than the things we achieve, such as writing symphonies, curing diseases, building cathedrals, searching into the deepest mysteries of time and space, and so on. The last sentence of the book makes the point that “we may be competitive social animals, self-interested and self-deceived, but we cooperated our way to the god-damned moon.” With that one observation, acknowledging that the consequences of our actions are more important than our motives, the argument of the book implodes.
The issue here is one of overreach: taking an argument that has worthwhile applications and extending it further than it usefully goes. Our motives are often not what they seem: true. This explains everything: not true. After all, it’s not as if the idea that we send signals about ourselves were news; you could argue that there is an entire social science, sociology, dedicated to the subject. Classic practitioners of that discipline study the signals we send and show how they are interpreted by those around us, as in Erving Goffman’s “The Presentation of Self in Everyday Life,” or how we construct an entire identity, both internally and externally, from the things we choose to be seen liking—the argument of Pierre Bourdieu’s masterpiece “Distinction.” These are rich and complicated texts, which show how rich and complicated human difference can be. The focus on signalling and unconscious motives in “The Elephant in the Brain,” however, goes the other way: it reduces complex, diverse behavior to simple rules.
This intellectual overextension is often found in economics, as Gary Saul Morson and Morton Schapiro explain in their wonderful book “Cents and Sensibility: What Economics Can Learn from the Humanities” (Princeton). Morson and Schapiro—one a literary scholar and the other an economist—draw on the distinction between hedgehogs and foxes made by Isaiah Berlin in a famous essay from the nineteen-fifties, invoking an ancient Greek fragment: “The fox knows many things, but the hedgehog one big thing.” Economists tend to be hedgehogs, forever on the search for a single, unifying explanation of complex phenomena. They love to look at a huge, complicated mass of human behavior and reduce it to an equation: the supply-and-demand curves; the Phillips curve, which links unemployment and inflation; or mb=mc, which links a marginal benefit to a marginal cost—meaning that the fourth slice of pizza is worth less to you than the first. These are powerful tools, which can be taken too far. Morson and Schapiro cite the example of Gary Becker, the Nobel laureate in economics in 1992. Becker is a hero to many in the field, but, for all the originality of his thinking, to outsiders he can stand for intellectual overconfidence. He thought that “the economic approach is a comprehensive one that is applicable to all human behavior.” Not some, not most—all. It was an emphasis he was often to repeat:
All human behavior can be regarded as involving participants who maximize their utility from a stable set of preferences and accumulate an optimal amount of information and other inputs in a variety of markets. If this argument is correct, the economic approach provides a unified framework for understanding behavior that has long been sought by and eluded Bentham, Comte, Mark, and others.
That’s human society and history, solved. Becker analyzed, in his own words, “fertility, education, the uses of time, crime, marriage, social interactions, and other ‘sociological,’ ‘legal,’ and ‘political problems,’ ” before concluding that economics explained everything. In his work on the family, he studied “marital-specific capital”—that’s something you would probably call “children.” The utility of this form of marital-specific capital is to provide “child services.” Children are not “normal goods”—that is to say, demand for them does not rise as income rises. Child services are “the commodity that provides the utility a couple receives from having a child,” in Morson and Schapiro’s paraphrase. “The child is merely an input, and when combined with lots of other factors, such as educational and psychological investments and of course time, a couple produces something that gives it, in the best case, joy.”
Morson and Schapiro actually think that Becker’s arguments are useful, and explain why rich people tend to have fewer children than poor people do—their time is more expensive, so “child services” cost them more, and therefore they invest more in a smaller number of children to get the same utility for their buck. It’s an interesting idea, but it’s also a colossal shortcut through all kinds of other cultural and psychological and human realities. The story of Abraham and Isaac, of obedience to God in terrible conflict with parental love, is, as Morson and Schapiro argue, difficult to file under the heading of “child services,” and, of course, there is no moral dimension to this economic analysis: utility is a fundamentally amoral concept.
Their example of what that amorality can look like in practice has real bite. In the nineteen-eighties, Schapiro—who today is the president of Northwestern University, as well as a professor of economics—was part of a team that put together publications for the World Bank. One of their books had a chapter on onchocerciasis, also known as river blindness. It is a parasitic disease that has cost millions of people their eyesight, and is endemic in large parts of sub-Saharan Africa. In 1974, seven West African nations got together, contacted donors, and set out to create the Onchocerciasis Control Program, overseen by the World Health Organization. The program was a huge success, in that it prevented hundreds of thousands of people from going blind, but there was a problem: the economists involved couldn’t show that the venture was worth it. A cost-benefit analysis was “inconclusive”: the people who were being helped were so poor that the benefit of saving their eyesight didn’t have much monetary impact. “There are humanitarian benefits associated with reducing the blindness and suffering caused by onchocerciasis,” the World Bank report allowed. But “these benefits are inherently unmeasurable, and we will not account for them here.” In other words, the very thing that made the project so admirable—that it was improving the lives of the poorest people in the world—also made it, from an economic point of view, not really worth doing.
That story has a happy ending: in 1987, the pharmaceutical company Merck, which held the patent for ivermectin, a drug that prevents river blindness, decided to give it away, in perpetuity, to countries that needed it. Yet it’s hard to sidestep Morson and Schapiro’s argument about the limits of a narrowly economic assessment: “A traditional cost-benefit analysis could easily have led to the discontinuation of a project widely viewed as being among the most successful health interventions in African history.”
Economics, Morson and Schapiro say, has three systematic biases: it ignores the role of culture, it ignores the fact that “to understand people one must tell stories about them,” and it constantly touches on ethical questions beyond its ken. Culture, stories, and ethics are things that can’t be reduced to equations, and economics accordingly has difficulty with them. Morson and Schapiro’s solution is to use the study of the humanities, and particularly of realist fiction, to broaden perspectives and to reintroduce to economics those three missing factors. Realist fiction, in their view, is the territory of the fox. It is, they argue, based on casuistry, which gets a bad rap but historically was the idea that the ethics of a situation are based on the specifics of the actual case. The authors’ hero is Tolstoy, who understood in his fiction that abstract principles should not triumph over human realities. It is an old idea in philosophy, clearly spelled out by Aristotle: “About some things it is not possible to make a universal statement which shall be correct.” The way to convey this truth is through the humanities, which, “properly taught”—an important part of their argument, since “Cents and Sensibility” has plenty to say about the defects of the contemporary curriculum—“offer an escape from the prison house of self and the limitations of time and place.”
The idea that there is a gap between the world of economics and the wider world is also a theme in “The Wisdom of Finance: Discovering Humanity in the World of Risk and Return” (Houghton Mifflin Harcourt), by the Harvard Business School professor Mihir Desai. His title is quietly provocative, since wisdom, Morson and Schapiro and many others would argue, is exactly what is missing in the financial realm. Finance has ingenuity, expertise, and dazzling possibilities for earning and losing money, but none of these are quite the same thing as wisdom. “I had long been bothered by the common presumption that markets, and finance in particular, were a crass domain that we had to shelter ourselves from in order to live a good life,” Desai argues. He regrets the chasm between finance and the rest of society, and he sets out to bridge it with a warmhearted and engaging set of stories in which he pairs fundamental principles of finance with parallel examples from the humanities. “Viewing finance through the prism of the humanities will help us to restore humanity to finance,” he writes, making a claim very similar to that made in “Cents and Sensibility.”
The exercise is both entertaining and informative. Desai takes us on a journey through the fundamentals of finance, from asset pricing to risk and risk management, via options, mergers, debt, and bankruptcy. He does this by using examples as diverse as the movie “Working Girl” (which, as all Melanie Griffith fans will remember, “hints at the parallels between the process of merging companies and the process of combining lives in a marriage”), the novels of Jane Austen (risk management), the life stories of Jeff Koons and George Orwell (illustrating different approaches to leverage), and the unconditional love we give our children. That love, Desai argues, demonstrates the concept of “negative beta assets.”
As that example perhaps shows, there are moments when, describing the links between finance and real life, Desai reveals just how far apart they are. “The story of General Motors and Fisher Body”—the company that made G.M.’s car bodies—“in the 1910s and 1920s is, for economists, Anna Karenina, Middlemarch, and Jane Eyre all rolled in one—the classic story that explains the nature of flirtation, commitment, marriage, and love,” he writes. I am fairly interested in company mergers (spoiler alert: they often go wrong), but I have to admit to finding that claim inadvertently funny. The humanist response to Desai here is to say, You do you, but please put down the nineteenth-century novels and step away. His account of the invention of formalized bankruptcy is fascinating, but then he compares the story of the American Airlines bust, in 2011, to Aeschylus’ great play “Agamemnon.” Because the company’s stock price had already dropped before the bankruptcy was announced, and, as Desai says, “ultimately individuals who bought American shares and bonds at the filing made five to ten times their investment in two years,” we can draw an analogy with Agamemnon’s tragic decision to sacrifice his beloved daughter Iphigenia. To which the humanist response is: Yeah, no.
Desai explores the intellectual crevasse between the money people and the rest of us in his final chapter, called, trenchantly, “Why Everyone Hates Finance.” One explanation is “the asshole theory of finance”: that finance isn’t inherently bad and neither are the people it attracts, but “finance fuels ego and ambition in an unusually powerful way.” The underlying reason is that finance is full of “attribution errors,” in which people view their successes as deserved and their failures as bad luck. Desai notes that in business, law, or pedagogy we can gauge success only after months or years; in finance, you can be graded hour by hour, day by day, and by plainly quantifiable measures. What’s more, he says, “the ‘discipline of the market’ shrouds all of finance in a meritocratic haze.” And so people who succeed in finance “are susceptible to developing massively outsized egos and appetites.”
We can ameliorate the problem “through works—and work—of imagination, just as Wallace Stevens suggested,” Desai writes. “Finding narratives that allow us to stay attached to what is meaningful in finance can insulate us from the feedback loops of attribution error.”
It is possible to agree with the critiques and admire the proposed fixes in “Cents and Sensibility” and “The Wisdom of Finance” without thinking that anything is likely to change. The gap between economics, finance, and the rest of society would be difficult to fix even if everyone wanted to do so, and it isn’t obvious that everyone does. This point was brought home to me a few years ago, by a private-equity professional who came up to me after a talk I’d given on the language of money at a bookstore in Soho. My preoccupation at that point was with obfuscation and obscurity in the jargon of money, and the way they could be used as a tool to keep laypeople at a distance. The private-equity guy was polite about what I’d said, but added that I had left something out: the way professionals use the language of economics as a tool for dissociating—for switching off their feelings. He gave an example: he and some colleagues had been sitting at a meeting analyzing a company’s balance sheet. They were discussing the business’s “churn,” meaning the rate at which it lost customers and had to acquire new ones, and the resulting effect on profitability. He said that in the middle of the discussion he had a sudden moment of clarity, and had to get up and walk out. The business under discussion was a chain of retirement and nursing homes. “Churn” in this context meant the death of itsresidents. They were sitting around the table, talking about death. That, he said, was what the language was for: to let you talk about human realities without feeling their impact—to ignore death.
I thought about that conversation for a long time afterward. My new private-equity friend had clearly been shaken, and yet, on reflection, I wondered what difference his discovery had made. While it might be brutal or insensitive to regard the death of someone’s beloved parent as “churn,” that’s what it is, from a business point of view. The coldness of the language serves a function, and it is a function that society needs, since nursing homes do have to get their funding from somewhere. I was reminded that one of the things I liked about economics, finance, and the language of money was their lack of hypocrisy. Modern life is full of cant, of people saying things they don’t quite believe. The money guys, in private, don’t go in for cant. They’re more like Mafia bosses. I have to admit that part of me resonates to that coldness.
Another part of me, though, is done with it, with the imperialist ambitions of economics and its tendency to explain away differences, to ignore culture, to exalt reductionism. I want to believe Morson and Schapiro and Desai when they posit that the gap between economics and the humanities can be bridged, but my experience in both writing fiction and studying economics leads me to think that they’re wrong. The hedgehog doesn’t want to learn from the fox. The realist novel is a solemn enemy of equations. The project of reducing behavior to laws and the project of attending to human beings in all their complexity and specifics are diametrically opposed. Perhaps I’m only talking about myself, and this is merely an autobiographical reflection, rather than a general truth, but I think that if I committed any further to economics I would have to give up writing fiction. I told an economist I know about this, and he laughed. He said, “Sounds like you’re maximizing your utility.” ♦
Can Economists and Humanists Ever Be Friends? | The New Yorker
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