Lopsided Brains
In 2013 Adam Grant published an article titled “Does Studying Economics Breed Greed?” While his evidence is compelling and his solution is excellent, his solution is only half a solution, missing a vital component that could benefit all of society. We will begin with his solution, because in identifying the missing half, the whole will be illuminated.
Grant’s solution focused on helping economics students become fully human, instead of “critters with lopsided brains, icy hearts, and shrunken souls.” I am fortunate to teach in precisely that environment. My economics students read, in their other classes, some of the best thoughts ever written by humankind: the literature of Dostoevsky, Solzhenitsyn, O’Connor, Dickens, Austen, and Homer gives my students more wisdom, more opportunity for charitable thinking, and greater expansion of soul than one could get from the best lecture on altruism.
It is vital that we expand our souls, and have hearts warm towards the plight of all of humanity, but Grant focuses on fixing economists, as if knowledge of economics corrupted the soul. He seems to imply that those who are ignorant of economics are better humans. As if ignorance were superior to knowledge. Grant’s article implies, probably not intentionally, that certain kinds of knowledge are better left alone, lest they corrupt us.
But leaving economics alone still leaves us with a lopsided brain, just in the other direction. The other half of the solution is to educate those who are ignorant about economics. The economically illiterate will find, after getting a taste of this corrupting knowledge, that some things that seem patently obvious, such as giving to non-profit charities, are not so black and white.
If you continue reading, you will gain a bit of economic insight, a bit of nuance, that will make you more charitable toward economists who seem to be acting like selfish prigs.
Increasing Poverty for the Sake of Charity
Grant cites that professors of economics give less to charity, and some of them give nothing at all. While on its face this is obvious evidence of hearts full of greed instead of love, that is merely what it looks like surface. The economically illiterate have not considered that non-profit charities are also non-loss charities, meaning they lack the accountability inherent in profit and loss systems (see Basic Economics by Thomas Sowell). This accountability is what makes most of us live within our means instead of spending all of our money on nicer clothes, nicer cars, and nicer houses. We would all like more and nicer things, but we know that misspending our money is not sustainable. Non-profits do not fear loss in the same way, because the money they spend is not their own. That lack of accountability gives them incentives to act more recklessly with scarce resources than for-profit ventures that risk losing their own money.
Even non-economist professors know this. William MacAskill, a professor at Oxford, has established an organization called “Effective Altruism,” in an attempt to identify non-profits that are not wasteful with scarce resources, because so many non-profits are wasteful. And those of us who are charitable do not want our sacrificed money wasted; we want it to help the poor most effectively. We want each dollar we give to count, and so we try to give to organizations that will use our money efficiently.
Efficiency is automatically enforced on the market by loss. For-profit organizations that are wasteful with scarce resources are punished with loss, and they go bankrupt or out of business (unless a “charitable” politician bails them out). The businesses that still exist are those that have been most efficient with scarce resources, or those who have chummy relationships with Congressmen.
While efficiency sounds like a cold business term, what it means is helping the poor and alleviating poverty. The opposite of efficiency is waste, and waste increases poverty. If you regularly cook more food than your family needs, and constantly throw the leftovers away, you have been wasteful. You could have fed more people with those scarce resources, but you used them foolishly and inefficiently. The same is true if you foolishly give your money to a charity that uses your dollars inefficiently.
Why Economists Spurn Charity
If all of us lived isolated from the market, say on family farms where we made everything we consumed, then charity would be vital because all of our work and effort would only enrich and help ourselves, and those outside of our family farm would be excluded. Every bit of food you ate would be a bite of food not given to someone in need. Every piece of clothing you wore would be clothing that did not clothe the needy. But because we operate within a market, and not in isolation, every effort we selfishly make to satisfy our greed also helps the poor and the outcast.
For example, if you buy a hamburger, your money helps people who are probably poorer than you. Your money helps the restaurant employees. Your money helps the factory workers who built the machinery that cooked your burger. Your money helps the construction workers who built the restaurant. Your money helps the farmers who raised the wheat and the cattle and the tomatoes and the onions.
When you spend money on yourself, you get something that you want, and you give someone else something that they want. It is win-win, not zero-sum. Your greedy pursuit to satisfy your wants helps people who are poorer than you. Every act of spending is also an act of charity. And the companies that you spend your money at are efficient with the scarce resources that you put into their trust; otherwise they would not exist (the exception being inefficient businesses that are bailed-out by politicians in the name of charity).
Economists Are Obsessed With Cooperation
When non-economists hear economists praise the market, images come to mind of greedy, faceless, businessmen, polluting the air and the water, chaining children to machinery, and burning down the planet for a profit. To non-economists, “the market” means greed and merciless rapine of humans and the planet. Ignorance of what the market actually is creates that monstrous picture. When economists say market they mean cooperation. Grant’s claim that economics students do not value cooperation is backed up by a recent study on economics students, but only if cooperation is very narrowly defined, because in reality economists are obsessed with cooperation, they never shut up about it.
Adam Smith attributed the great wealth of Great Britain to cooperation. When he made his “Inquiry into the Nature and Causes of the Wealth of Nations” he discovered the cause was cooperation. He used words like division of labor, exchange, and the market, but all of those words are simply precise terms for different manifestations of cooperation. It would not be an exaggeration to claim that a million people cooperated to make the cellphone in your pocket, or that ten thousand people cooperated to make the shirt you are wearing. Those numbers are probably gross underestimations (see I, Pencil by Leonard Read). Nations and people who do not cooperate and exchange are poorer than those who do.
The real mystery is why do all of those millions of people cooperate to feed, clothe, and shelter you? Adam Smith pointed out that we get the majority of our needs met by others, rather than providing them for ourselves. So what motivates humans to cooperate, instead of just taking care of themselves? The answer is found in the missing half of Adam Smith’s quote. Grant started his article by leaving out half of Adam Smith’s quote; the other half is essential, and without it we are left in confusion. A fundamental tenet of economics is to see the whole picture (see Seen and Unseen by Frederich Bastiat). When we leave out pieces, our vision is distorted, and the world appears monstrous, as do the actions of selfish economists. The other half completes the picture, and it centers around the absolute necessity of cooperation:
“In civilized society [a person] stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons. In almost every other race of animals each individual, when it is grown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature. But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.”
As you can see, the missing half is greater, more nuanced, and more lovely than you might have assumed before reading it. We constantly require each others’ help, and we get that help by helping others.
The Whole Picture
Hopefully by now you have realized that we rarely have the whole picture in front of us. It takes time and effort to see beyond the surface. The seemingly selfish behavior of the economically literate can now be seen in context:
- Economists see that efficient for-profits alleviate poverty better than wasteful non-profits.
- Economists see that every act of exchange is an act of charity.
- Economists see that the poor (and economists), are fed, clothed, and sheltered because of cooperation, and that cooperation is fueled by self-love.
We all want people to be good, and we want a world free from poverty. But poverty has been eliminated most efficiently by nations that allowed people to pursue their own selfish, greedy, interests. So while it looks superficially despicable when an economist buys a hamburger instead of donating to charity, his money also helps the poor, and perhaps more efficiently than yours did, though you gave it with the purest of intentions.
