Why people hate economics, in one lesson

This is extraordinary. Alex Tabarrok and Tyler Cowen recently released a little promo video, to tout their new “Marginal Revolution University” course on microeconomics (as well as their intro textbook). In it they bend over backwards to make economics seem fun, friendly and non-intimidating. Practically every sentence is accompanied by a cutesy little animation, designed to make the study of economics seem as non-threatening as possible. And yet halfway through the video, they ruin it all, by saying something that is guaranteed to alienate most normal people. See if you can spot the faux pas:

I actually think the whole segment from 1:10 to 2:22 is fairly ill-advised, but there are two points where it’s terrible. (Summary, for those who don’t want to watch: They tell the story of how 19th century British sea captains transporting prisoners to the penal colony in Australia used to mistreat the passengers, resulting in very high mortality rates. Various attempts were made to correct the problem: “the clergy appealed to the captains’ sense of humanity,” “the British parliament passed regulations requiring better treatment of the prisoners,” but “unfortunately, those attempted solutions simply didn’t work.” So finally someone turned to an economist (supposedly), who suggested that the captains be paid, not for the number of prisoners who embark, but rather the number who arrive alive. This worked wonders, and so the triumphant conclusion, that “economy beat sentiment and benevolence” — the final quote from Edwin Chadwick, at 2:21.)

What is wrong with this? What Tabarrok and Cowen are trying to communicate here is the simple idea that “incentives matter.” This is essentially a methodological point about how economics is done, and as such, should be presented in a way that makes it as platitudinous as possible. After all, it is not one of the conclusions of economic analysis that “incentives matter,” but rather one of the foundational postulates. So you don’t want to present it in a way that makes it seem controversial. And of course, there are many ways of doing that, since the problem with the public generally is not that they think incentives don’t matter at all – everyone knows, for example, that people are more likely to work for you if you offer to pay them – it’s just that they underestimate the power of incentives, or they don’t see some of the unexpected ways in which incentives affect social behaviour. So the right way to present it is to say “here’s something that we can all agree upon – but have you thought through the consequences of it? Perhaps not. That’s what economists do.”

But Tabarrok and Cowen are unable to restrain themselves, and so instead of trying to make the action theory seem platitudinous, they present it in a way that makes it seem both morally suspect and politically conservative. Most importantly, they set up a contrast between “economy” and morality, with the latter being dismissed somewhat contemptuously as mere“sentiment” (as though people were being tender-minded fools for thinking that there should be moral rules that prohibit killing people, as opposed to just cash payments for not killing them.) By buying into Chadwick’s contrast between “economy” and “benevolence,” Tabarrok and Cowen are accepting the narrowest reading of the “incentive” concept, that which identifies it, not just with people’s self-interest, but with their pecuniary interests.

Second, there is the (again somewhat contemptuous) reference to the British parliament passing ineffective “regulations.” The fact that Tabarrok and Cowen use this term, which is anachronistic in the context, shows that they can’t resist getting a little dig in against the left, with its tender-hearted conviction that government can be an effective force for good in the world. But this is not the right place to be doing it. Again, it is important to be able to present the foundational ideas of economics in a way that makes them neutral with respect to political ideology. Tabarrok and Cowen though are presenting these ideas in a way that makes them seem inherently anti-government, or right wing. In this respect, they are jumping the gun. Enthusiasm for the market is supposed to be one of the conclusions of economic analysis, not one of its presuppositions. If you present it as one of the basic assumptions, then people who are not already disposed to accept that point of view will simply tune out the whole thing.

To sum up, Tabarrok and Cowen take what should be a platitudinous claim about human motivation and present it in a way that makes it seem both controversial and ideologically suspect. As a result, their offer to “retrain your brain to look at the world in a different way” is one that will strike many people as unwelcome, if not positively nefarious.

Thanks to the side interest I have in writing popular economics, I’ve had a lot of conversations with economists who are struggling to understand why it is that they do such a bad job of promoting their discipline. Part of the problem is certainly that so many are unable to present the methodological foundations of the discipline in a way that is morally and politically neutral. Instead, they wind up taking their contempt or condescension towards morality, as well as their enthusiasm for the free market, as though it were, as it were, “baked into the cake.” Unfortunately, if students get fed moral skepticism and right-wing ideology – or if not exactly right-wing ideology, then something that sounds an awful lot like right-wing ideology – on the very first day of class, many will conclude that economics as a whole is unworthy of their attention.

I guess if I were to reach for a slogan, it would be that “morality matters.” Which is not to say that it is the only thing that matters (after all, self-interest also matters). It is just that, in my experience, casually offending people’s moral sensibilities does not actually put them in a mood that is very receptive to argument. Unfortunately, too many economists either never had such sensibilities, or else lost them so long ago that they can no longer remember what it was like to have them. (For example, right after the line that Tabarrok and Cowen quote, Chadwick goes on to say that, even if the payments to the sea captains did not result in the survival of every convict, it nevertheless “secured to every poor man who died at least one sincere mourner.” Now lots of economists might find that kind of ha-ha funny, but it is important to remember that there are many people who find it simply appalling, and that this response should not be dismissed as mere sentimentality.)

This is actually why, in my own attempt to present the basic ideas of economics in an accessible way (in Filthy Lucre), I bent over backwards to avoid using the sort of example that Tabarrok and Cowen pick. I chose rather to use the example of people’s behaviour in traffic to illustrate the key concepts, not just because you can see really clearly how incentives structure behaviour (e.g. people want to get to where they are going as quickly as possible, and so they act quite instrumentally), but also to take an entirely non-pecuniary example, so as not to trigger any of the complex moral attitudes that people have towards money. And needless to say, I didn’t say anything dismissive about morality, or set things up as though there was some sort of a contest going on between “economy” and “benevolence.”

Anyhow, if you want a 3-minute introduction on “how not to introduce students to economics,” I highly recommend this video.


Why people hate economics, in one lesson — 19 Comments

  1. Yes, it is very strange to define incentives so narrowly. The very reason the British government transported these people halfway across the world was to provide aspiring criminals coercive incentives to behave. Indeed, the financial incentives for the captains has the effect of weakening the coercive incentives for the felons back home.

    In any case, the whole story sounds absurd. The British government really couldn’t get 20 people to sail boats and ration food and NOT kill 30 percent of their passengers for some flat fee? Maybe it should have considered leaving them all there.

  2. Great post Joe! You outline the problems quite well.

    I wonder what a similar video would look like if two sociologists produced it. I picture two Marxists, long-bearded, pipe smoking and all, explaining us why sociology is great because understanding the force of socialization processes and the bourgeois ideology — as opposed to, let us say, morality or rational decision-making — will give us new eyes to see the world.

    I think I will re-use that promo video often. It should be very useful to show what naïve economics thinking looks like and, well, what good economics isn’t. ;-)

  3. It’s actually hard to believe that this isn’t a parody. If I wanted to satirize this video, the only thing I could think of changing would be to give one the guys a top hat and a bow tie.

  4. It’s funny and sad at the same time because that’s exactly what my econ 101 prof did… incidentally she also worked for a right-wing think tank so much of the class felt like a church session.

  5. I am no expert on the issue, but I seem to recall Milton Friedman trying to justify child labour in Third World countries:

    “According to Milton Friedman, before the Industrial Revolution virtually all children worked in agriculture.[135] During the Industrial Revolution many of these children moved from farm work to factory work. Over time, as real wages rose, parents became able to afford to send their children to school instead of work and as a result child labour declined, both before and after legislation. Austrian School economist Murray Rothbard said that British and American children of the pre- and post-Industrial Revolution lived and suffered in infinitely worse conditions where jobs were not available for them and went “voluntarily and gladly” to work in factories.”


    That is admittedly an extreme example, but it illustrates the extent to which Joseph’s original point applies. Defending child labour by comparing it to a situation that we look back on as something that is no longer morally acceptable, hardly does much to build support for economics…but it does give ammunition to Marxist and socialist commentators who denounce capitalism and economics as a whole.

  6. This shows the danger of making a career of trolling people with different politics. It becomes second nature.

  7. The other silly thing about that example is that it’s so outdated. Their best example of an incentive is from 150 years ago?

  8. I would like to go a little further and take aim at the individualism implicit in the Tabarrok/Cowen clip as well as in the comment. I’ve read some seventeenth century log books from Dutch captains, who were employed by the VOC (East Indies Company). There clearly was a *culture* of calculating monetary costs and proceedings, for instance when a captain deliberated if he should vist one of the azores for refreshments: he did not do it as the man still seemed relatively healthy (and in the end he had to report to his employers about the costs incurred). This British captain acted comparably – he was an employee (which was, culturally, a well established role in this period), his identity as a capitain was consistent with this culture and he and well aware of the expectations of his employers. He not only reacted to an incentive – he also obeyed his masters as he was supposed to do.

  9. Well, the other thing wrong for people who are serious about facts is that the story is simply wrong. The First Fleet (transporting convicts and setting up the colony) was run by the Royal Navy. The death rate on the voyage was very low. In an effort to cut costs, the Second Fleet was run by private enterprise, and death rates were very high. After that, various mixes were tried, but government provision was always the safest. So the lesson is the opposite of that offered. This is the case with quite a few economics stories from history, and it gives the enterprise an air of being less than scholarly.

  10. It should be obvious that parliament would at first try to fix problems in the cheapest way possible. The whole premise behind the convict system was that the British wanted to engage in empire building on the cheap, as it would have been prohibitively expensive to “incentivize” masses of free citizens to sail to the other side of the world. So when maltreatment of convicts became a political issue, the MPs would naturally try to fix it through legislation alone. Laws are cheap, bounties cost money. And rich MPs have an incentive to keep taxes low.

    I also dislike how they make it seem as if moralists only argued in terms of treating people humanely. Just as we like to bring up multiple arguments to support our pet issues, so they also used imperialist and economic arguments against the maltreatment of convicts. And arguing the problem could be solved without further government outlays would certainly have been appealing to cheapskate MPs.

  11. I though the closing remarks about how you can even use economics to calculate how much education you should get was pretty peculiar. Investments vs. payoff is actually a pretty familiar concept to most people, and since the payoff in the case of higher education is often so uncertain in so many different ways, a precise calculation is unlikely to be of much interest, and the idea that the only reason anyone would go to school is to jack their income later is an awfully narrow-bore view of life–

  12. Many of us Americans know Mr. Cowen best as the gentleman who said: “We need to accept the principle that sometimes poor people will die just because they are poor. Some of you don’t like the sound of that, but we already let the wealthy enjoy all sorts of other goods — most importantly status — which lengthen their lives and which the poor enjoy to a much lesser degree. We shouldn’t screw up our health care institutions by being determined to fight inegalitarian principles for one very select set of factors which determine health care outcomes.”

    Some of us might be skeptical that Mr. Cowen possesses iron laws which lead to the inevitability of such a worldview. It’s like telling students that in order to study evolution, they must also accept Social Darwinism and all of its implications about human society. It’s false, self-serving, and alienating all in one.


  13. This post is perniciously wrong. One of the ways economics avoids self correction is the “It’s just those nasty conservatives” gambit. See, also, Blinder in NYRB.

    But for those of us who actually understood Adam Smith, the obvious problem is that both liberals and conservatives fail to see that economics cannot be separated from moral philosophy. “Who gets how much of what?” is a moral question no matter how you slice it.

    Stop right there! I can hear the “But…” forming in your head. But it’s wrong and economics as a whole will continue to wander in the wilderness until more of you step back and see that.

  14. You write: “Enthusiasm for the market is supposed to be one of the conclusions of economic analysis, … people who are not already disposed to accept that point of view will simply tune out the whole thing.”
    One problem is that unfortunately too many people taking Economics 101 do NOT “tune out the whole thing,” but rather accept it as a fact, proven by economic science.
    When discussing, say health-care or the minimum wage or executive compensation, too many people here in the U.S. will take it as a fact, as they remember from their Econ 101 class, that private market-based solutions are the best, the only possible ones, that a higher minimum wage will benefit no poor people, CEOs deserve their ‘market-based’ compensation, and any consideration of morality will actually lead to bad outcomes. (And that people like me, who didn’t take Econ 101 just don’t know.)

  15. Thornton,

    Of course distribution is a moral question. That hardly renders the post perniciously wrong. But even moral philosophers also see distribution as a question of incentives and efficiency; that logic lies at the heart of Rawlsian work.

    Economists who are not ardent libertarians will regularly include distributional concerns in our work, and it is somewhat baked into basic utility theory that social value increases faster as you give more consumption to the poor than to the rich, ceteris paribus.

    Where you could criticize even liberal econs would be for placing too much distributional emphasis on the material inputs of life and not enough on other aspects of human flourishing and dignity. The moral philosopher I know of who most discussed a broader view of human flourishing is Amartya Sen. Sen is famous for despising all economists and in turn being utterly disdained by that discipl–oh, wait, he had a joint appointment with Harvard’s philosophy and econ departments and was awarded the Nobel Prize in Economics.

  16. Two versions of the same question:

    1) As you, know, Joe, the history of economics is filled with examples of the “common sense morality leads to long term collective ruin/apparently immoral things lead to long term collective flourishing” narrative–Mandeville, Smith’s butcher and baker, Malthus, minimum wages hurt workers, etc… How deep do you think the conflict between economic theory and any notion of morality that has ever commanded widespread assent is?

    2) Isn’t this a problem for experts in any field, compounded by the fact that economists get a lot of air time in public policy debates? Don’t most experts have views on their domains which are at odds by the view held by most lay people?

    I know that you have actually done this (I.e. tried to write a pop economics book in a way that wouldn’t offend regular peoples’ notions of morality) so you are probably well sensitized to whether this is a real difficulty or just a rhetorical difficulty for haughty libertarians.

  17. Peter T’s comment reveals a big reason right wingers run to ancient and obscure examples: few in the audience will know the facts to gainsay their just so recounting.

    Krugman’s experience debating Ron Paul being the ultimate case, where the latter goes running to Diocletian for support for his austrian ideas. Let us check the Roman labour bureau statistics website to see if Mr Paul is correct. Oh, they don’t seem to be online anywhere!?

  18. Joseph Heath,

    People hate economics because most of economists are pretty bad economists. For example, they seem completely unaware of what Martin Feldstein (of all people) would make us repeat as a mantra as first year students: “Economics is a positive discipline, not a normative one” From the omission of that small but crucial caveat on most introductory economics courses to the unfortunate reality that people who study economics at the undergraduate level only are only taught about the “power” of the economic framework as an “explanation” of reality, it is hard to expect anything else from most economists.

    But there are some of us economists who were lucky to study under people who taught us about the discipline’s intellectual history. These academics also went beyond merely mentioning that Adam Smith was a moral philosopher (which is usually a statement subliminally intended to endow economics with a prescriptive edge) and went on to teach us about Ricardo, and Marshall, and Walras, and Von Neuman and rather than exalting the whole “incentives” angle would emphasize than it was the consideration of margins, partial equilibrium, and general equilibrium that were economics’ main strentgths as well as aggregating individual behavior.

    So, we are not all brutes although most of us unfortunately are. Books like Sandel’s
    “What Money Can’t Buy” (http://www.amazon.com/What-Money-Cant-Buy-Markets/dp/0374533652) or McKenzie’s “An Engine Not a Camera” should be at the very least suggested reading for ec students. It would be good for the discipline.

    Also, just for full disclosure, I am not an “alternative” economist. I was lucky to get both my undergraduate and graduate degrees from one of the departments considered to be among the top3 in the US and in addition to that, I happen to work in a hedge fund. So if anything, I guess I would like to encourage you to consider economics as a field despite the horrible PR job many of the self-appointed luminaries in the field do.

  19. The “Joseph Heat” beginning shouldn’t have been there… it sounds very aggressive and it was just a mis-pasting!