Why Don't Most People Get Economics?

If you are reading this, you have probably been there before: you are scrolling through your Twitter or Facebook feed, listening to a radio debate, or (God forbid) reading the Guardian, and the writer – the culprit – just doesn’t get it. They don’t get economics; they totally misunderstand what motivates human beings to improve their lot by buying and selling – and correcting them calls for a textbook’s worth of diagrams and explanations. But you don’t have a textbook; you have about 140 characters, so you leave them to wallow in their ignorance, spreading their erroneous rhetoric to your fellow citizens.

As someone who argues a lot, your author is fascinated by what makes people believe the things they believe – that is, I am concerned not just with being correct, but with winning. And if you are reading this, you should be too, for it is not the logically enlightened that decide public policy, but the masses. The inconvenient truth is that no matter how right our papers, policies, or podcasts are, our ideas will never be implemented, will remain politically impossible, unless the average voter feels the way we do. And that average voter does not even know what ‘GDP’ is. So, the question is: how do we get most people (who know nothing about economics) to side with us, instead of those lefties on Twitter? To answer that, we must first explain the current situation, or: why don’t most people get economics?

I: Why do people believe the things they believe?

To we children of the Enlightenment, this question seems both silly and patronising. “I believe things because they are correct;” you say; “I was born with, in Locke’s words, a tabula rasa [blank slate], and I wrote on this slate with facts and logic.” This view of education is romantic, but false, and economists have relied on it too often. In his most famous book[1], Henry Hazlitt briefly wonders what the point of economists refining their discipline is, if the public continue to get the most basic basics wrong; his solution was more logic, presented in the rest of his book. But the economic fallacies he unravels are still repeated today by politicians and pundits. Why do logical arguments affect human belief so little? I will now offer a different, darker, more deterministic model of human belief.

“Gradually I came to learn what every great philosophy has been up to now, namely the confession of its author and a form of unintentional and unrecorded memoir… his morality, in particular, bears a decisive and crucial witness to who he is.” – Nietzsche[2]

What Nietzsche gradually learned was that humans believe things because those beliefs sit well with their psychological make-up; logical arguments, for most people, are just post-hoc rationalisations of bedrock psychological characteristics, which manifest themselves in opinions on everyday life. For Nietzsche, Schopenhauer’s asceticism was due to his misery, and Kant held his moral beliefs because he was a “cunning Christian” – in both men, belief preceded and thus drove their logic. For Nietzsche, Locke’s blank slate is ridiculous: we are born pre-programed with unconscious drives, that incline us towards arguments that best support those drives.

Modern psychology is confirming Nietzsche’s view. Studies of the correlation between political beliefs and the Big 5 personality traits (openness, extraversion, agreeableness, neuroticism, and conscientiousness) are startling: if you want a UKIP or Conservative voter, find someone low in openness; if you want a Green voter, find someone more neurotic[3]. Belief is a psychological, not logical, phenomenon. Ben Shapiro persistently reminds us mere mortals that “Facts don’t care about your feelings” – what he misses out is that your feelings care about facts.

II: What causes our economic beliefs?

If our psychology causes our beliefs, it follows that determining what our psychology is regarding economics will tell us why we believe in certain economic ideas. To do that, I want you to imagine walking from Westminster tube station to the IEA offices at 2 Lord North Street – a 620m walk. Let the station represent 315,000 years ago, when modern humans began, and let the IEA’s front door be the present day.

At the station, humans are living in bands (small tribes based on family relations). Their technology is simple: little more than rocks and bigger rocks. Most notably, their economic system is essentially “From each according to his ability, to each according to his need.” Every day, the hunters hunt and the gatherers gather, and the food acquired is divided equally amongst the band’s members. Anthropologists believe that talented hunters were not allowed more food despite contributing more to the band’s food than others; such prowess was not only unrewarded, but frowned upon by the band, a practise still found in some modern-day tribes (such as the Toraja of Indonesia).

Now you begin walking, turning right out of the station, crossing the road, and then walking down the pavement beside the Houses of Parliament. All this time, human technology remains unchanged; past Westminster Abbey, past the Boris bikes opposite the Pankhurst statue; the same rocks and bigger rocks, right up till 50,000 years ago, at the crossing that takes you over to Great Peter Street. It is only here, five sixths of the way through your journey, that humans begin to innovate. Up till this point, there simply was no innovation, no change in capital goods whatsoever.

Now you cross the road and start walking down Great Peter Street – you can see the IEA. You walk past the right turn into Little College Street, 10,000 years ago (the dawn of agriculture), and stop just one step before the IEA’s black front door. It is here, 400 years ago (less than 80cm away from your destination) that economic growth begins.

The economic system of the past differs with modern capitalism in one crucial respect: it was a zero-sum game. Because all resources were pooled and shared out by the band, me taking more mammoth meat necessitates my cousin Bongo taking less; furthermore, there was no growth, so letting Bongo keep more of his catch would not reward everyone else by incentivising him to kill more mammoths.

Human psychology has evolved to deal with a zero-sum game economy: we are programmed to conceive of another’s gain as our loss. Or, in the words of economist Paul Rubin, for most of human history “Each person would live and die in a world of constant technology and income. Thus, there was no incentive to evolve a mechanism for understanding or planning for growth”. This is the psychological frame, the starting point, that most people apply to economics – let us now consider the mistakes it leads to.

III: Zero-sum thinking today

The problem with zero-sum thinking is that capitalism is a positive-sum game; thus, humans are designed to be hostile towards basic economic concepts. If a trade occurs between two people, then assuming both were well-informed, it must have benefited both parties, or at least one party would not have traded – but realising this means overcoming our intuition that if one person gained, the other must have been ripped off. Free market (that is, positive-sum) ideas mean asking a species that has had zero-sum thinking hammered into it for over 300,000 years to change its mind.

Let us now consider two classic economic fallacies: one big on the left, the other with Trump (I recommend you read both aloud in a whiny, self-righteous voice for maximum effect):

“The rich are getting richer at the expense of the poor!”

“Our country’s current account deficit (with China) is yuge – we need to fix this.”

Both fallacies are manifestations of zero-sum thinking. In a truly free market (not crony capitalism), the only way to get rich is to sell others a good/service that provides them with more utility that you charge them – that is, the only way to get rich is to also increase others’ wealth. The Trump fallacy is an international version of this: instead of a zero-sum game between people, he sees a zero-sum game between nations – but US consumers would only be sending money to China if China was sending goods/services worth more than that money (to the consumers) to the US[4].

Zero-sum thinking can explain the prevalence of most economic fallacies. Consider the focus on inequality, instead of absolute poverty: suddenly, it makes sense that some people are angry at the rich for the state of the poor, because to them this is a causal link. They have conceived of the economy as a static pile of resources to distribute, which means that one man’s yacht necessitates another’s lack of running water. Another one to watch out for with all this talk of “automation” is the lump-of-labour fallacy: believing there is a fixed amount of work to be done in the economy, so if machines do more, then unemployment of humans must rise. In fact, automation has always been followed by higher employment in the long term because the economy eventually grows[5], but data will never influence the mind like our psychological drives. I also think of Christianity and Islam’s disdain for charging interest on loans: if a creditor receives more money from the debtor than he paid out, then the debtor simply must have made a loss – never mind that the debtor used the money to increase his utility by more than the value of the loan. Entire schools of economics, in fact, are nothing more than manifestations of zero-sum thinking, disguised as academic rigour: Mercantilism then; Marxism today.

That zero-sum thinking is part of our psychology also explains why left-wing ideas inherently sound better. Think of the incessant clapping of the Question Time audience whenever someone mentions “our NHS” or “the rich paying their fare share”: is the whole room really swayed by such logically deficient talking points? No, what is going on is confirmation bias: the audience is hearing something they already agree with. Consider again that passage from Nietzsche: arguments are superficial, and only justify what we already believe in.

“I don’t believe that a “drive to knowledge” is the father of philosophy, but that knowledge (and misunderstanding) have functioned only as a tool for another drive.”

So, zero-sum thinking pervades public opinion; but unlike the Enlightenment view (which would be that it prevails because it has been better argued), I say that humans are designed thus inclined to think this way. Socialism, protectionism… these are default human beliefs, and we must be educated out of them, either through the classroom or through life experiences that teach a positive-sum view of the economy[6].

IV: What now?

No amount of rigorous arguments, data, or expertise will change how the average person thinks: the zero-sum frame provided by our psychology is a simple but totalising view of economics, and thus nit-picking at the left’s logic on a topic-by-topic basis is like throwing pebbles at a tank. What is needed, instead of detailed expertise, is to focus on the big picture: we must replace the zero-sum frame with a positive-sum frame. The main advantage of this tactic, besides clearing one’s mind of most economic fallacies in one move, is that it is self-sustaining: someone with a positive-sum frame can reach capitalist, free market conclusions by themselves (because they are thinking about economics in the right way), and not require a tailored argument each time a new issue appears in the public discourse.

Changing this frame is a matter of (I believe) linguistics, psychology, and media theory. I lack the space to explain my own ideas on this here, and those ideas are by no means complete, so I welcome any suggestions from my readers on how to do this[7]. I imagine that we will need an updated, carefully constructed language for discussing economics online, in print and on air; one that implies within its words and phrases a positive-sum view of the economy. Early in the 20th century, the left’s philosophers realised that the language we use influences how we think, and quickly got to work changing the language of politics to rig the game in their favour – this, of course, is the origin of “political correctness”, among other things. If we can co-opt this tactic to make economic language reveal, not obfuscate, the truth, then perhaps we can get that Question Time audience clapping for us more often.

But for now, I would like to finish with some small recommendations. First, remember that those who make zero-sum mistakes are not unbelievably stupid, but merely relying on their natural intuitions to think about problems that humans were never designed to deal with. Second, instead of dumping data, big names, and logical arguments on these people, take time to explain the zero-sum error and why positive-sum thinking is superior, and then apply it to the particular issue you are discussing (I have found this tactic to be incredibly fruitful, in both academic and alcoholic settings). Finally, ask yourself whether your opponent’s mistake stems from their frame, or from genuine reasoning: there are many intelligent people out there that oppose unfettered capitalism for various reasons, and I should hate to think this essay was used by “my side” to prematurely write off all their concerns.

[1] Economics in One Lesson (first published 1948)

[2] Beyond Good and Evil (1886)

[3] British Election Study 2015

[4] Ricardo’s theory of comparative advantage attacks the same psychological drive that free trade ideas do, but on the scale of countries, not individuals.

[5] Hazlitt’s aforementioned book sports a chapter that nicely explains why this is so – worth a read.

[6] Opinion surveys show that zero-sum thinking is negatively correlated with development: living in a prosperous society, where working harder yields greater rewards, teaches positive-sum thinking.

[7] At the time of publishing, my email is s.shemirani1@lse.ac.uk – please send all ideas and/or abuse here.