Wednesday, August 24, 2011

Brad DeLong Castigates Rampant Social Darwinism

Here is a bit from a post by UC Berkeley economist Brad DeLong in his Grasping Reality with Both Hands blog. He notes the social Darwinism of Tyler Cowen:
Tyler Cowen writes:
More rooftop-ready results on reservation wages: I conclude that some people aren’t very good at looking for jobs and further some people are not very good at accepting job offers…
It seems to me that this is one of the steps in what I have sometimes called the Social-Darwinist Waltz. It goes like this:
  1. People are skilled decision-makers and rational judges of their own interests.

  2. Markets are very good ways of coordinating social activity among skilled decision-makers who are rational judges of their own interest.

  3. Markets are the best way to organize pretty much everything.

  4. When markets go wrong and produce bad outcomes, it is almost always because the government has interfered and has mucked things up with command and bureaucracy.

  5. You say government has not intervened, and yet the market outcome still sucks?

  6. Well, it must be because some people are not skilled decision-makers and are not rational judges of their own interests.

  7. But their lack of skill and foresight is non-adaptive.

  8. Their lack of skill and foresight is blameworthy.

  9. And they should be punished.

  10. And in punishing them, the market outcome is good after all.

  11. It improves the breed.
It is, I think, very important for rational policy to halt the Social-Darwinist Waltz where Tyler is, at step 7, and not go on to step 8.

First, it is not likely that a society in which people were "better" in Tyler's sense at looking for jobs would produce better macroeconomic outcomes. People were much "better" at volunteering to work for lower wages during the Great Depression, and that did not help the situation. What we have now is bad. Active destabilizing deflation is worse. To assume that more individual "rationality" will make for a more "rational" collective outcome is often false--think Prisoner's Dilemma--and in this case is probably false.

Second, a system that for good outcomes requires that people act in ways people do not do is not a good system--and to blame the people rather than the system is to commit a major intellectual error.
I think it is funny that the very people who think markets are rational and efficient are the ones to blame governments and people when things go wrong. But governments are just another expression of collective enterprise, just like markets, and this philosophy of market perfection rests on thinking humans are infinite computers able to calculate returns centuries in advance over a neaer infinity of goods and choices. But then to complain that people are "not adaptive" in their skills and decisions is laughable. It is far more likely that humans make relatively sound decisions about everyday issues than that they make economic decisions about the distant future, e.g. how much to save for a pension when retirement is 40 years away or whether it is better for your "lifetime savings" to take advantage of a tax break offered by government or to forego it. Nutty.

Sadly, it is these ideologues of "rational" and "efficient" who have been driving economics and affecting politics for the last 30 years. What a mess they have gotten everybody into. So much for their "rational" approach to economics.

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