Economists aren’t that crazy

Dec 12 JDN 2459561

I’ve been seeing this meme go around lately, and I felt a need to respond:

Economics: “Humans only value things monetarily.”

Sociology: “Uh, I don’t…”

Economics: “Humans are always rational and value is calculated by complex internal calculus.”

Sociology: “Uhhh, Psy, can you help?”

Psychology: “That’s not how humans…”


Physics: drops teacup

I have plenty of criticisms to make of neoclassical economics—but this is clearly unfair.

Economists aren’t that crazy.

Above all, economists don’t actually believe in exponential growth forever. I literally have never met one who does. The mainstream, uncontroversial (I daresay milquetoast)neoclassical growth model, the Solow-Swan model, predicts a long-run decline in the rate of economic growth. Indeed, I would not be surprised to find that long-run per-capita GDP growth is asymptotic, meaning that there is some standard of living that we can never expect the world to exceed. It’s simply a question of what that limit is, and it is most likely a good deal better than how we live even in First World countries.

It’s nothing more than a strawman of neoclassical economics to assert otherwise. Yes, economists do believe that current growth can and should continue for some time yet—though even among them it is controversial how long it will continue. But they absolutely do not believe that we can expect 3% annual growth in per-capita GDP for the next 1000 years. And indeed, it is precisely their mathematical sophistication that makes this so: They would be the first to recognize that this implies a 6.8 trillion-fold increase in standard of living, which is obviously ludicrous. A much more plausible figure for that timescale is something like 0.2%, which would be only a 7-fold increase over that same interval. And if you really want to extrapolate to millions of years, the only plausible long-run economic growth rate over that period is basically 0%. Yet billions of lives hinge upon whether it is actually 0.0001%, 0.0002%, or 0.0003%—if indeed human beings don’t go extinct long before then.

What about the other two claims? Well, neoclassical economists do have a habit of assuming greater rationality than human beings actually exhibit, and of trying to value everything in monetary terms. And economists are nothing if not arrogant in their relationship to other fields of social science. So here, at least, there is a kernel of truth.

Yet that makes this at best hyperbole for comedic effect—and at worst highly misleading as to what actual economists believe. You can find a few fringe economists who might seriously assent to the claim “humans are always rational”, and you can easily find plenty of amoral corporate shills who are paid to say such things on TV. (Krugman refers to them as “professionally conservative economists”.)

Moreover, I think the behavioral economics paradigm still hasn’t penetrated fully enough—most economists will give lip service to the idea of irrational behavior without being willing to seriously face up to how frequent it is or what this implies for policy. But no serious mainstream economist actually believes that all human beings are always rational.

And while there is surely a tendency to over-emphasize monetary costs and try to put everything in monetary terms, I don’t think I’ve ever met an economist who genuinely believes that all humans value everything monetarily. At most they might think that everyone should value everything monetarily—and even then the only ones who say things like this are weird fringe figures like that guy who hates Christmas.

Am I reading too much into a joke? Maybe. But given how poorly most people understand economics, this kind of joke can do real damage. It’s already a big problem that (aforementioned) corporate shills can present themselves as economic experts, but if popular culture is accustomed to dismissing the claims of actual economic experts, that makes matters much worse. And rather than the playful ribbing that neoclassical economists well deserve (like Jon Stewart gave them: “People are screwy.” “You’re just now figuring this out?”), this meme mocks economists aggressively enough that it seems to be trying to actively undermine their credibility.

If COVID taught us anything, it should be that expertise matters. Trusting experts more than we did would have saved thousands of lives—and trusting them less would have doomed even more.

So maybe a joke that will make people trust economic experts less isn’t so harmless after all?

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