WaPo has a delightfully meta-subversive headline for an article about the failings of 21st century capitalism: This Kardashian headline shows why two Nobel winners say the economy is broken. Beneath the headline is a photograph of 3 reasonably attractive women and the hit enhancing text “Kourtney, Kim and Khloe — arrive at the Maxim Hot 100 party”.
Jeff Guo’s article proceeds to an interview with Akerloff and Shiller, reasonably well regarded academic economists, about their book Phishing for Phools. Unfortunately Guo does get around to the Kardashians, which blunts the beauty of the introduction. Still, it is a lovely bit of meta; boosting page hits for an article about how easily humans are manipulated in the interests of feeding their wants.
Shockingly, it seems capitalism does not optimize our better selves.
I’ll let that sink in a bit.
Sure, you think it’s obvious that capitalism is a system for finding local minima traps in a 3 dimensional field where demand is gravity and information technology enables complexity enables deception. If pressed to respond further you might say something like “tobacco”.
It’s not obvious to Americans though. Our culture equates wealth with virtue, and the “invisible hand” of capitalism with the “invisible hand” of a Calvinistic God. It’s an authoritian-dominance attractor in culture-space, and we’re not the only people to get stuck in it.
So this is an article worth scanning, if only as a marker for the fading glamor of the 1990s capitalist (emphases mine) …
… Economics predicts that wherever there is a profit, someone will be there to make it. To that, Akerlof and Shiller propose a corollary: Wherever there is an opportunity to profit off people’s weaknesses, someone will exploit it…
… The basic idea of this book is that there is a “phishing” equilibrium, in which if there’s a profit to be made by taking advantage of your weakness, then that will be there.
… The standard view of markets (which is subject to problems of income distribution and externalities) is that markets will deliver the best possible outcome.
… that’s what the standard graduate student is taught. It’s what you’re told to believe, and what I think most economists do believe. As long as the markets are competitive, and there are no problems of income distribution and there are no externalities, it’s going to lead to the best possible world…
… that then has acquired a moral tone, which is that whatever happens in the market is okay. And that translates, in turn, into people arguing and thinking that it’s okay to be selfish. That if I earn this income, then I in some sense deserve it.
So this view that whatever markets do is good becomes this idea that whatever markets do is right…
… Kirman tracing the origins of this idea back to the Enlightenment. He says, “laissez faire made a lot of sense against the background of monarchy and controlling church.” So this idea of freeing the markets really came through at a time when businesses were being particularly oppressed….
… Irving Fisher was a Yale economist who in 1918 wrote a book saying the free market system is maximizing something but it’s not what Jeremy Bentham, the philosopher, called utility. So he named it wantability.
I did a Google N-grams search [how often a word appears in books] for wantability. The term enjoyed some popularity in the 1920s and 1930s, then exponentially decayed. After the Reagan-Thatcher revolution the term was gone….
… the children’s candy bars were put at children’s eye level …You have professionals who are designing everything. They are designing it for wantability.
Reading this a part of me thinks I should get a Nobel just for my blog rants. Economists don’t think market solutions have local minima traps? It’s novel to think markets produce things that are bad for us? Stockholm, it’s not that hard to find my real identity. I would’t mind the money. You can give me another prize for canopy economics and eco-econ.
So this isn’t a book I’m likely to buy. It’s an interesting marker, however, of our changing attitudes towards market capitalism and for the intellectual history of our judgments from Adam Smith to Donald Trump. Twenty years of lousy economic growth (great for elite, awful for non-college) will do that. I’ll be looking for more signs of thoughtfulness …
- IT and productivity - two noteworthy posts from Equitable Growth 2/2015 - good set of links to my older stuff.
- Learning from an Amazon “Newer Galaxy” fraud: I too am prey. 10/2015. Just this morning! I got caught.