The Moral Inversion of Economic Thinking

In a delightful, short article on Economics and Morality, Timothy Taylor asks why economics has a reputation for leading to corruption:

Political science, history, psychology, sociology, and literature are often concerned with aggression, obsessiveness, selfishness, and cruelty, not to mention lust, sloth, greed, envy, pride, wrath, and gluttony. But no one seems to fear that students in these other disciplines are on the fast track to becoming sociopaths. Why is economics supposed to be so uniquely corrupting?

Arnold Kling gives one answer:

I think that economics is singled out for opprobrium because of the way that it challenges the intention heuristic. The intention heuristic says that if the intentions of an act are selfless and well-meaning, then the act is good. If the intentions are self-interested, then it is not good.

I would put the point more directly. Economics is detested because it doesn’t just study vice it shows that some vices have good consequences. The moral inversion of economic thinking begins early, in Mandeville’s scandalous and wicked book the Fable of the Bees, which aimed to show how private vices can lead to public benefits. Later, of course, Adam Smith would make a similar point in The Wealth of Nations with his metaphor of the invisible hand and his famous admonition that “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”

The private vice, public virtue theme is not limited to self-interest and microeconomics. Keynes was an admirer of Mandeville as an early discover of the paradox of thrift. Namely, that in some situations the virtuous behavior of saving can lead to public ruin and the vice of consumption can lead to riches. Paul Krugman continues to make this point today with his admonition that economics is not a morality play. Krugman offends traditional morality when he writes:

As I’ve said repeatedly, this is a situation in which virtue becomes vice and prudence is folly; what we need above all is for someone to spend more, even if the spending isn’t particularly wise.

Economists understand composition fallacies: a sum of light feathers is not necessarily light, a sum of bad actions isn’t necessarily bad and a sum of good actions isn’t necessarily good.

It’s no surprise that Hayek was another fan of Mandeville and also an opponent of traditional morality (also here) because Hayek recognized that nominally bad actions and beliefs can lead to good outcomes (“spontaneous order”) and that nominally good actions and beliefs can lead to bad outcomes (“the atavism of social justice”).

Even more recently we see Tim Geithner making the argument against morality:

“…in a panic, to rescue people from the risk of mass unemployment, you’re going to be doing things that look like you’re helping the arsonists…”

Standard morality, as Kling argues, often stops at intentions while economists are interested in consequences. Consequentialist philosophers also look at consequences but economists have the tools to trace interactions as they sort themselves into an equilibrium. Equilibrium outcomes may be very far from intentions. As a result, we find that economists often places themselves and their discipline in opposition to standard morality.


Economists go further: economists celebrate their embrace of counter-intuitive consequences, they emphasize the weirdest and most shocking consequences rather than the most straightforward ones. Keynes emphasized that his solution involved less saving (because saving seems virtuous, and so not saving is surprising) rather than more work, (because work seems virtuous), even though these are identical in the framework.

"I think that economics is singled out for opprobrium": not in my experience. In the college town where I live the common advice is never to let a property to students or teachers of economics, law, or business.

Our selection from engineering, archaeology and the vet school has worked out well.

That's a good point. David, do you think the field *attracts* people who enjoy shock value, or do you think it *converts* people into shock-enjoyers?

Of course in as Keynesian framework, less saving is NOT "identical" to more work (far, far, far from it) so there's always the possibility that the emphasized the things he said because that's what he actually wanted to say (rather than something else wrong and utterly different.)

'Standard morality, as Kling argues, often stops at intentions while economists are interested in consequences.'

Best satire site on the web.

'As a result, we find that economists often places themselves and their discipline in opposition to standard morality.'

As long as the check clears, that is. Those institutes and policy centers don't fund themselves, much less something like MRU.

A cynic thinks he knows the cost of everything.

I sure wish the Koch's didn't desire approving talk of Paul Krugman because I consider him a villain.

Why do you find it satirical? The vast majority of people are (unconsciously) deontologists.

Krugman writes (on his blog today): "Inconsistency in the pursuit of useful guidance is no vice." He makes the comment in the context of Paul Samuelson's approach to microeconomics and macroeconomics that "combines the grand tradition of microeconomics, with its emphasis on how the invisible hand leads to generally desirable outcomes, with Keynesian macroeconomics, which emphasizes the way the economy can develop magneto trouble, requiring policy intervention. . . . It’s a deeply reasonable approach – but it’s also intellectually unstable. For it requires some strategic inconsistency in how you think about the economy. When you’re doing micro, you assume rational individuals and rapidly clearing markets; when you’re doing macro, frictions and ad hoc behavioral assumptions are essential." Since Tabarrok seems to be in an ecumenical mood today I thought I'd add Krugman's contribution to it.

Some time ago, I saw a recommendation for "The Browser" here on MR. A few minutes ago, I saw this aphorism on that very web site:

"The purpose of studying economics is to learn how to avoid being deceived by economists"

“The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.” Joan Robinson [Cambridge Economist]

Never heard about the Fable of the bees before, it seems a really interesting piece of old text. Alex, please add these links:

Fable of the Bees 3rd edition (1724)
Fable of the Bees part II (1729)

Maybe someone can help here - is this the work of an economist opposed to standard morality, or is he upholding it? -

"Standard morality often stops at intentions." This would be true if all people were Kant. But they are simply not as old saying ‘road to hell is paved by good intentions’ illustrates. In my experience, morality is very result-oriented – you’ve done a bad thing even if the intentions were right (although I am not an American and when I think about it a lot of the worse Holywood movies suggest otherwise).

Overall, I found the whole argument little bit convoluted – the simple answer is, that economy is popularly perceived as a field of study that prefers efficiency over other goals, such as equality, salvation of one’s soul or obedience of god’s laws. Wealth is perceived as somewhat immoral in both communism and chritianity. So it is the perceived aim of economics, not the process or means, why it has a bad name.

Kling's "Standard morality" is not known to me, but the distinction between intention and action is coomonplace in religion (sin and sinner), law (ranking culpability for acts by men's rea, parenting and so on.

Is that a straw man to make economist man look technocratic and important?

Stupid tablet typing, sorry.

or maybe it's because economics doesn't know how to define efficiency, and has ducked the issue: See interfluidity

or maybe it's because it's actually *political* economics, not just economics

"Standard morality, as Kling argues, often stops at intentions while economists are interested in consequences."

If David Stove were alive today, he would strangle Arnold Kling and he would be justified.

In other words, Stove's intentions were bad but the consequences will be good?

By the way, I'd say contemporary morality often excuses those who did bad because they meant well. Have we not read hundreds of examples of this, just on this blog, with no end in sight?

A tangential topic, the first spanish edition of Mandeville's The Grumbling Hive is from 1957. The first spanish commented edition of The Fable of the Bees is from 1982. If books are a way to distribute ideas and Mandeville influenced Adam Smith, Franklin, Russeau, Voltaire, Kant, Marx and many others.......I wonder why this influential writer is completely ignored in the Spanish and Latin American literature and what are the long term consequences of this ignorance. Max Weber said it was the difference was the catholic church, perhaps it was just the simple language barrier for interesting ideas.

Caveat emptor.

Economics is not the study of coersion, deceit, morals or charity. It's about rational economic decisions.

It is already there. The study of economics doesn't instill dishonesty in economic players. That issue is the concern of Philosophy (making stuff up about stuff) and Theology (making stuff up about God).

Waiting for my turn at the doctor's office, I picked up "Scientific American" magazine wherein some academic (I have no respect) had an over-wordy thingie on ponzi schemes and how much of finance tends toward such dishonesty. I didn't get far before I was called and the "fun" began.

In a perfect world, economics solely studies (millions of) typically informed/motivated players' rational (in their best interests) decsions in matters of allocating relatively limited supply of goods/resources among relatively unlimited demand for such.

The problem is not honesty/dishonesty. It's that academic/politicized economics attempts to create an (one of the numerous models) economy according to scholarly opinions and the political deceit du jour.

In the real world, the check against dishonesty is the concern of either party in a financial transaction.

I would argue that students who study political science are on the fast track to becoming sociopaths.

Oh, I fully believe that Geithner, Bernanke, Paulson and all the rest acted in their own interests. I don't fall for the bullshit that it was all done to save the world. I fully accept that all the Wall Street banks with worthless paper on their books were acting in self interest when they asked that the Treasury and Fed buy it at face value from them.

So now what? Will we still need a world war to get the economy out of the doldrums? At least the Depression generation had the satisfaction while paying with blood of remembering bankers jumping out of windows. Now we have to listen to them preen themselves at how moral and right they are.

Exhibit A: We have a new pope -- one who thinks of himself first and foremost as a champion of the poor -- bashing the global, free-market system that has lifted more than a billion Japanese, Chinese, Koreans, Indians etc out of poverty and into the global middle-class just during his own lifetime. Should economists merely try to deflect and blunt the criticism? Or go on the offensive and call his economic activism what it arguably is -- evil -- a genuine danger to prospects of the world's remaining bottom billion?

Has he really bashed the free market system, or are people just bundling all his targets for criticism into one basket and calling it the free market system?

Most likely, they're basing their opinions on the pope on the headlines they've read at

I base my opinion on the observation he is kind of a rock star among the people who almost never take a break telling me I'm anti-science.

Well, I'm not able to parse any of this into a pro-market stance:

And I've yet to see any trace of recognition of the vast improvements in the lives of the poor in the west in the last 200 years or in south and east Asia in the just the last 40 -- a phenomenon that has rapidly reduced the global inequality that the pontiff professes to care so much about.

Do you see anything in it that supports socialism, communism, or coercive redistribution of income?

I do wish he would be more careful, everyone wants the Pope on his side (even the people who hate the Pope) and when you write so open-endedly it's super easy for the Left to claim you as a poster child. I also don't think much of what he says is correct, but that's just me. But I have yet to see anything specific that actually calls for policy that opposes the free market system. Maybe I missed it.

Do you see anything in it that supports socialism, communism, or coercive redistribution of income?

No, the rhetoric seems consistently anti-free market, but not explicitly socialist. But it's not all generalities -- this, for example, is pretty specific:

“The libertarianism deregulation of the market is much to the disadvantage of the poor,” Rodriguez continued. “This economy kills. This is what the pope is saying.”

But that's not Francis, that's some cardinal who is interpreting him, so it's a great example of what I mean.

Doesn't make the original statements non-problematic, but I don't buy for a minute that this cardinal has special insight into the true meaning of the statements.

Ever since liberation theology -- well, earlier I'm sure but liberation theology sure made things clear -- there have been very politically liberal/communist elements within the Church. I don't take seriously any interpretive statements made by any cardinal over the age of 60.

"But that’s not Francis, that’s some cardinal who is interpreting him, so it’s a great example of what I mean. Doesn’t make the original statements non-problematic, but I don’t buy for a minute that this cardinal has special insight into the true meaning of the statements."

He's not just 'some cardinal' -- he's one of the Pope's closest advisors (and head of the council of advisors). I'd bet that not only does he have direct insight into the meaning of the papal statements, but was also involved in drafting them.

@Slocum, please forgive me if this is old news for you, but the National Catholic Reporter is notorious for calling itself Catholic while promoting dissent (usually political and liberal).

All I can find on the Cardinal's Vatican work is that he is a member of a committee that is restructuring the organization of Church offices.

Not trying to convince you about the Pope so much as about the media. I'm sure they did it to the Dalai Lama, too!

This is all great and necessary. I'd also like to read, occasionally, less self congratulatory posts about areas where perhaps economic analysis may fall short. Are there areas where economics, as a field, is systematically biased?

For example, are economists, on average, overconfident about their conclusions? Is there perhaps a tendency to extrapolate long term exponential trends into the future, with very little real basis for this extrapolation other than that the trend seemed to hold for a couple hundred years in the past? One frequently reads statements from economists to the effect that "Our descendants a hundred years from now will be so much wealthier and more knowledgeable than we are, that they will be able to easily deal with any problems we leave them, so let's not worry about leaving them problems".

In all fields, simple extrapolation is a tenuous and error prone exercise - it is usually a big "no-no" - especially when the extrapolation involves exponentials. Why should this not be the case for economics?

I would go further - ethics would be greatly improved by the tools of logistical consequentialism developed by economists

Economics is good at pointing out when seemingly immoral personal decisions lead to potential public welfare; or vice versa. But the common extension is thus that morality has no value, and this is a problematic generalization. Further, the economists are often studying only the first approximation for welfare, at best. This also leads to issues, when issuing recommendations to society.

A few observations on these controversies.

First, consequentialism is an inadequate philosophy for anyone. Even with rational expectations, consequences can never be fully known or correctly forecasted. And consequences for big actions can last for centuries. It is not that the idea is wrong, but that it cannot never be implemented. The alternative is virtue ethics.

Second, I have noticed increasing interest in Ayn Rand these days. Prof. Brat, who just defeated Eric Cantor, studies Ayn Rand even though he has a masters degree in theology. And Paul Ryan has a deep interest in Rand. Why the interest? Rand rejected the amoralism of The Fable of the Bees. She believed -- correctly in my view -- that capitalism needs a vigorous defense as an ethical system.

All the time, I hear an argument from some that capitalism produces a lot of prosperity, but it is a system based on selfishness and greed. Socialists are regarded as idealists who appeal to our better natures, all warm and fuzzy and cooperative and nurturing. A cynical defense of capitalism is a loser. The reason there are so many socialists despite the manifest failure of actually existing socialist economies is the idealistic appeal of socialism. If there is no idealistic appeal of capitalism, it is doomed.

So please get rid of Mandeville.

I recommend as an alternative the recent writings of McCloskey, Bourgeois Virtues and Bourgeois Dignity. She tells us not to defend vice as a foundation of capitalism. Rather virtues are the foundation of capitalism.

Strawman arguments can be effective, but only if they're a little more subtle. "Traditional morality" is against butchers, brewers, or bakers charging a fair price for their goods and services? I'd sure like to see a link supporting that!

Or, in the argot of this weblog, Prof. Tabarrok has woefully failed his ideological Turing Test.

I mean, "economics is singled out for opprobrium?" "Economics is detested?" Where is this woe-is-me victim mentality coming from?

Heck, I googled "I detest economists." There are eight hits, six unique. "I detest politicians" - 31,000+ hits (won't count through to see how many are unique).

"For even the very wise cannot see all ends." - Gandalf

Straussians ought to address this topic. Economists have no shame, one might say: they follow logic relentlessly and also are willing to shout that the emperor has no clothes. They are the messengers who get shot.

They don't get shot very hard, compared to philosophers, politicians, writers, protestors, journalists and other dissenting souls.

I don't think the corruption charge is aimed at philosophers like Smith and Mandeville, but at actual self-identified economists waving their plastic doctrine that can confidently, pseudo-scientifically support every single political position (e.g., casting blame for 2008, minimum wage, stimulus, immigration, etc.)

YOu know what other professions have significant chunks of people supporting conflicting political positions based on professional doctrines? Lobbyists and politicians, but they aren't clueless and naive. Lawyers admit that serve their clients, but economics claim some objectivity when doing the same.

That's overblown a bit, but more accurate than this post or Kling's.

One can recognize that people acting with the profit motive in their own self interest benefit society and at the same name ask that they do even better. That is all the pope and many other religious leaders ask.

We can still honor and respect the baker who donates some of his loaves to feed people who cannot earn a living; and criticize the one who keeps all for himself.

"Standard morality, as Kling argues, often stops at intentions while economists are interested in consequences."

At several places in the original discussion, the terms "economics" and "economists" are used as if they are synonyms and interchangeable in this context. That's ridiculous. It's like pretending that all priests, rabbis and imams live up to the precepts of their religions. They don't, and neither do economists live up to a generally accepted way of thinking because there isn't even such a thing. At least those clergy have a generally accepted religion that dictates their thinking and conduct, at least in theory. There isn't, never has been and probably never will be an economics bible or code of thinking. The general public's problem is not with abstract "economics", even if such a thing existed; the problem is with the observed behaviors of many prominent economists.

And, somewhere between intentions and consequences there must be the *means*. The general public's observation of *economists* is that they are all to willing to use intellectually dishonest argument---politics, really, disguised as "economics"---in order to (and here Kling is right) achieve those desired consequences. Yes, the intentions and the end results are very closely knitted together. The problem is what lies between.

Add Giambattista Vico (The New Science, 3d ed. [1744], Bergin & Fisch tr.), #1108: ". . . Men mean to gratify their bestial lust and abandon their offspring, and they inaugurate the chastity of marriage from which the families arise. The fathers mean to exercise without restraint their paternal power over their clients, and they subject them to the civil powers from which the cities arise. The reigning orders of nobles mean to abuse their lordly freedom over the plebians, and they are obliged to submit to the laws which establish popular liberty. The free peoples mean to shake off the yoke of their laws, and they become subject to monarchs. The monarchs mean to strengthen their own positions by debasing their subjects with all the vices of dissoluteness, and they dispose them to endure slavery at the hands of stronger nations. The nations mean to dissolve themselves, and their remnants flee for safety to the wilderness, whence, like the phoenix, they rise again."

Also, Axiom VII of the same work (para. 132): "Out of ferocity, avarice, and ambition, the three vices which run throughout the human race, (legislation) creates the military, merchant, and governing classes, and thus the strength, riches, and wisdom of commonwealths. Out of these three great vices, which could certainly destroy all mankind on the face of the earth, it makes civil happiness."

Economists, policymakers they continue to forecast the future course of the economy. They give us prediction on the effects of possible policy initiatives with scientific certainty despite only a small minority of economists anticipated the financial crisis and the recession.

Apparently, during the Duke Lacrosse Case, professors in the economics department was the most supportive of the lacrosse players. Hundreds of economists signed petitions praising non-Obama-sourced health care plans, and even Mitt Romney for President. I daresay you will find no equivalent actions among any of the other non-hard-scientific academic disciplines. Naturally, with idiosyncratic behaviors such as the ones I listed, economists are going to have a bad reputation amongst the intellectual elitists.

I disagree with your (and Krugman's) interpretation that self-love (of Adam Smith) is "immoral". Or that "vice" is good.

It is absolutely moral to look after one's interests so long as one does it without harming others. Voluntary exchange between two self-interested parties it the acme of morality.

It is also nonsense to suggest that saving is bad or that the Keynesian "fallacy of composition" exists. Invariably, the saver funds the investor who creates wealth.

The apparent counter-intuitiveness of the discipline is NOT justification for "immorality" or vice. It is justification that FREEDOM and PROPERTY RIGHTS work. These are the most moral things in life.

Nature did not make man to be slave of others. Nature made man to achieve his potential, and that could well mean a life of luxury.

I've provided a few counter-intuitive lessons form economics here:

Note that none of these are a justification for immorality.

Indeed, pretending to love others over oneself IS immoral. But when one does so (like a mother 'sacrificing' her comfort for her child's), it is in one's self-interest, and hence rational.

Kindly don't being GENUINELY IMMORAL ideas like those of Keynes and Krugman into the mix along with those of Adam Smith.

Traditional Christian morality since Augustine has understood that one can have benevolence toward all, but only beneficience toward some. There are also distinctions made between commutative and distributive justice. The characterization here is pretty uncharitable

I think it's largely because economists are employed by rich and established people to make prescriptions in line with their profit interests (e.g. the much discussed Koch Brothers).

And they often tend to moralize while doing so (Caplan, Krugman, etc. as prime examples of economists willing to opine, sanctimoniously, on moral issues). As you say, usually in a utilitarian manner and by justifying actions through a consequence that it cannot really tie soundly to actions, and is frankly conjectural ("trickle down" benefits? "complementary jobs"? well, that's the least of it).

Psychologists? Sociologists? They don't really get paid, very much. And they're perfectly willing, at times, to describe how "dark side" thinking and behavior could be beneficial. Really.

Later, of course, Adam Smith would make a similar point in The Wealth of Nations with his metaphor of the invisible hand and his famous admonition that “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”

I wonder, would this sit on Tyler's list of restaurant tips? Would anyone really advocate complete indifference by service and goods providers to the well being of the people they deal with? That it is *really* a redundant factor for them to give a shit? Sincere mutualism, backed by spite, has proved to be a damn good evolutionary strategy so far.

What's up every one, here every one is sharing these experience, so it's good
to read this weblog, and I used to go to see this web site all the time.

At least for macroeconomics, how about, "Pick any economic policy based on your particular ideology; there exist economists who will give you a case for why it's the proper thing to do." For example, consider what comes out of the Council of Economic Advisers depending on whether a Republican or Democrat sits in the Oval Office. This is not a characteristic that inspires trust on the part of the general public.

The article doesn't actually say very much. The author begins be framing the question in dogmatic-sounding religious terms. Then in a roundabout way, claims that seemingly amoral economic decisions have pragmatically moral outcomes. Basically: 'economists are smarter than you and you don't know their motives.' Then there's the insinuation that people with a background in Political science, history, psychology, sociology, and literature could not be acting with the end in mind.

And then there's the selective Adam Smith reference. Adam Smith didn't advocate an ideological, regulation-free economy. but with careful and deliberate laws, prudently chosen to allow everyone access to an industry, as opposed to the arbitrary taxations imposed at the time (e.g. hat tax, window tax, etc.). He also favoured a strong social safety net to ensure that those who the system failed would have access to jobs and be able to contribute to the economy.

Sorry; calling B.S. on this. Look at the end results of political movements supposedly supported at their inceptions by those in the field of economics. Did the Tea Party or the NeoCons really have warm and fuzzy moral end goals in mind? Did they have a pragmatically beneficial effect? Ask an historian, sociologist, or political scientist, I think. And a philosophy major might be able to help Alex Tabarrok with the argument.

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