TCS Daily

Economic Idiotarianism

By Arnold Kling - January 30, 2003 12:00 AM

"What bloggers are more than anything, I think, is anti-idiot." - Glenn Reynolds

In response to Reynolds, Charles Johnson coined the term anti-idiotarian, introducing a new political expression into the lexicon. The concept has been spelled out further, most notably by Eric Raymond. Roughly speaking, an idiotarian is someone whose response to September 11 was to issue a moral condemnation of the United States.

But the concept of idiotarianism can usefully be extended to the field of economics. Economic idiotarians are people who implicitly reject market logic and instead see economic arrangements as an either-or choice between idealistic sharing and evil exploitation.

Steven Pinker, a professor of cognitive psychology at MIT, points out that it is natural to resist economic reasoning. One of the chapters of Pinker's recent book, The Blank Slate, is called "Out of Our Depths." In this chapter, Pinker describes certain fields where the knowledge that we have acquired is challenging for cognitive faculties that were designed for prehistoric hunters and gatherers. One of these difficult fields is economics.

Pinker cites the work of anthropologist Alan Fiske, who has found that all interpersonal transactions can be sorted into four relational models.

  • Communal Sharing

  • Authority Ranking

  • Equality Matching

  • Market Pricing

In a Communal Sharing transaction, such as a family dinner, every member of the relationship is entitled to share in what is available.

In an Authority Ranking transaction, such as a decision made in a traditional corporation, there is a linear hierarchy, with people lower in the hierarchy deferring to those who are higher up.

In an Equality Matching transaction, such as taking turns going through a four-way stop, people operate according to an intuitive sense of balance and fairness.

In a Market Pricing transaction, such as buying a used car, people make decisions on the basis of calculating costs and benefits.

Of course, it is the Market Pricing mode of interacting that is studied in economics. However, Market Pricing requires techniques and thought processes that have not always been available to mankind. As Pinker points out,

Market Pricing is absent in hunter-gatherer societies, and we know it played no role in our evolutionary history because it relies on technologies like writing, money, and formal mathematics, which appeared only recently.

Idiotarian Demagoguery

The idiotarian approach to debating economic policy is to frame an issue as a conflict between Authority Ranking (bad) and Communal Sharing (good). For example, an idiotarian treats drug company profits as evil (as if they resulted from Authority Ranking) and insists that the results of drug research belong in the public domain (to facilitate Communal Sharing). However, as John E. Calfee pointed out recently, when this policy is analyzed from the perspective of Market Pricing, we can see that it reduces research and adds to suffering, particularly in the Third World.

There are ways to deal compassionately with the cost of drug research for Third World countries. For example, rich countries could give foreign aid that would enable people in poor countries to purchase drugs at fair market prices. However, for idiotarians, it is necessary to portray the issue as a conflict between drug company villains and poverty-stricken victims.

The archetypical idiotarian demagogue was Karl Marx. Marx did not portray capitalism as an impersonal system of Market Pricing. Instead, he viewed it as a mechanism for Authoritarian Ranking, in which the capitalist class exploits the working class. The alternative, naturally, was Communal Sharing: from each according to his abilities, to each according to his needs.

The Internet has encouraged a great deal of idiotarian demagoguery. Net-heads complain about "Big Media" which supposedly controls "content," keeping it away from the "commons." Once again, transactions that are based on Market Pricing are re-interpreted as Authority Ranking that detracts from Communal Sharing.

In contrast, I believe that the Internet is going to create new Market Pricing institutions and intermediaries in the realms of journalism, music, and other cultural work. Moreover, my guess is that these institutions will not resemble today's publishers, and their revenue models may be nothing that today's industry incumbents would recognize. I believe in the digital revolution, but I distance myself from those who see this revolution as a conflict between Authoritarian Ranking and Communal Sharing.

Sometimes, advocates for Open Source Software speak as if Microsoft inflicts its products on the public using Authoritarian Ranking, when instead software should be available for Communal Sharing. I believe that it is more accurate to view both proprietary and Open Source Software through a Market Pricing framework. This leads one to predict that Open Source developers will lack incentive to make their work accessible and usable for a non-technical audience, which seems to be an issue.

The phrase "tax cuts for the rich" is designed to trigger an idiotarian response. You are supposed to see a conflict between the Communal Sharing of the tax revenue that naturally belongs to all of us and the Authoritarian Ranking of powerful rich people stealing from this communal resource.

A successful idiotarian campaign was the assault on "Big Tobacco." The lawsuits against the tobacco companies were reported as a victory for Communal Sharing and a defeat for Authoritarian Ranking. However, from a Market Pricing perspective, this is not so clear. It may be more accurate to say that smokers are people who made choices rather than victims of tobacco companies; and the winners of the lawsuits were the individual attorneys who collected huge fees, not the community as a whole.

Is Education the Answer?

Pinker writes (p. 235), "The obvious cure for the tragic shortcomings of human intuition in a high-tech world is education... give higher priorities to economics, evolutionary biology, and probability and statistics in any high school or college curriculum."

As someone who teaches high school economics and high school statistics, I naturally welcome this sentiment. However, I am not certain that education alone is the answer. I have to believe that Paul Krugman's education in economics was not lacking; nonetheless, his writing often takes an idiotarian tone.

For example, in his opus on income inequality, Krugman wrote, "if the rich get more, that leaves less for everyone else." This is idiotarian rhetoric, in which Krugman treats inequality as if it were the result of Authoritarian Ranking that allows the rich to steal from the Communal Share that properly belongs to "everyone else." Instead, the Market Pricing model indicates that when someone earns a high income this is because the contributions that the individual makes in the economy have a high market value. Moreover, a high income for one person does not necessarily leave less for everyone else. On the contrary, when markets are functioning properly, high incomes for some will increase the wealth of others. Economic growth is a positive-sum game.

It is not automatically idiotarian to favor progressive taxes or other steps to reduce income inequality. There is nothing wrong with identifying economic problems or advocating changes to the status quo. However, when it comes to economic policy, the public is best served by a debate that is informed by an understanding of Market Pricing, rather than an appeal to idiotarian alternatives.

Ultimately, I hope that Pinker is correct, and that better education in economics will reduce the appeal of economic idiotarianism.

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