[tt] Does Studying Economics Inhibit Cooperation?

[Eugen Leitl]

(I'd love to see the numbers for Ayn Rand readers)

http://www.gnu.org/philosophy/economics_frank/frank.html

Does Studying Economics Inhibit Cooperation?

by Robert H. Frank, Thomas Gilovich, and Dennis T. Regan

In an essay written in 1879, Francis Amasa Walker tried to explain “why
economists tend to be in bad odor amongst real people.” Walker, who went on
to become the first president of the American Economic Association, argued
that it was partly because economists disregard “…the customs and beliefs
that tie individuals to their occupations and locations and lead them to act
in ways contrary to the predictions of economic theory.”

More than a century later, the general public continues to regard economists
with suspicion. This attitude stems in part from an apparent misunderstanding
of economists' positions on important public policy issues. For example,
economists commonly advocate auctioning rights to discharge atmospheric
pollutants to the highest bidders, leading critics to bemoan economists'
“shocking disregard for the environment and lack of compassion for the poor.”
What else, the critics ask, could enable them to support a program under
which “the rich can pollute to their heart's content?” On closer examination,
however, the economist's position is less hostile to the interests of the
poor and the environment than it appears. Indeed, as almost every economics
student now knows, the effect of auctioning pollution rights is to
concentrate the burden of pollution reduction in the hands not of the poor
but of those people and firms who can reduce pollution at the lowest cost.
And this is an outcome that is clearly in the interests of all citizens, rich
and poor alike.

Misunderstandings of this sort aside, there remains another important source
of public skepticism toward economics — namely, the perception that economics
encourages people to act selfishly in pursuit of their own material
interests. In this paper, we examine the validity of this perception.
Economists and the Self-Interest Model

If pressed, most economists will concede that people sometimes care about
more than just their own material well being. Many have concerns for the
welfare of other people, for esthetics, for their duties as citizens, and so
on.

Yet few economists include these broader concerns in their models of human
behavior. It may well be that the unpaid volunteer who heads the local United
Way Campaign is driven purely by his concern for the disadvantaged; but
economists feel on much firmer ground if they can identify some more narrowly
self-interested motive for his action. And on inspection, there is at least
some evidence in support of their cynicism. When we examine the membership
rolls of volunteer organizations, we find that insurance brokers, real estate
agents, car dealers, chiropractors, and others with something to sell tend to
be disproportionately represented. Such organizations have less than their
share of truck drivers and postal employees.

The self-interest model has well established explanatory power. Whatever role
love may play in the sustenance of marriage relationships, we know that
divorce rates are higher in states that provide liberal welfare benefits.
When energy prices rise, people are more likely to form car pools and to
insulate their houses. When the opportunity cost of time rises, people have
fewer children. And so on. From the economist's perspective, motives other
than self-interest may matter, but they are peripheral to the main thrust of
human endeavor, and we indulge them at our peril. In Gordon Tullock's words,
“the average human being is about 95 percent selfish in the narrow sense of
the term.”