The Future of Economics is Moving On Without Us

Recently, I finally finished reading a book I started last September. Entitled “Why They Do It: Inside the Mind of the White-Collar Criminal” and written by my brilliant seminar professor, Eugene Soltes, it explores everything from the law-evasions of Enron to the downfall of Bernie Madoff. However, the segment I found most interesting detailed the psychology behind big-money fraudsters, particularly their outdated intuition. Soltes explains that the modern business world presents complexities foreign to the environments in which our ancestors lived, highlighting a time gap between the current world and evolutionary behaviors. In short, the future is moving quickly, and human instinctive reactions are having a hard time keeping up.

What strikes me most about this phenomenon is how it is overlooked when discussing economic policy. In liberal economic theory specifically, there is a tendency to favor what is fair and equal over what is most efficient, with hopes to foster equality in an inherently unequal socio-economic class system. Here, the morals leading one to distinguish what is right from wrong plays a monumental role, dangerously imposing a binary. What is right might not be what is best, and what worked back then might not be what works now.

For example, it might be economically favorable to dissolve the minimum wage—corporations profit more by reducing spending and increasing profits—but whether it would be moral or just for the working class is another question. The choices one believes to be good or bad are built upon instinct, which might just be getting in the way.

The issue is not that emotion is involved at all, but rather that it is approached in an inadequate manner. Despite the United States boasting the world’s wealthiest and most prosperous economy, our history of sudden recession and market collapse coupled with the myriad corrupt behaviors showcased in Eugene’s book suggest our nation has room to do better. Most business decisions are founded upon objective, hard data, but when humans are left to decide upon more subjective economic matters, opinion and morality hold the joystick.

Another example of morality’s perhaps-too-powerful interference can be found in a recent Freakonomics podcast. The piece introduces a sort of death insurance, which allows terminally ill patients to decline further medical treatment and puts the money they would have spent on hospital bills right back in their pockets. This idea is optimal in the sense that the deceased’s family can now afford tuition, housing, travel, and previously unattainable luxuries. However, its cold-blooded, utilitarian morale renders it extremely unfavorable. The podcast concludes that though the majority of economists agreed it would create economic prosperity, its associated ethics and emotion pushed so strongly against it that it could not be put into action.

The very essence of democracy (save for the mismatch between who won the popular vote and who sits in the Oval Office) suggests that if the people don’t want something, it’s not going to happen. But what if our inherent logic, in these cases and others, is not advanced enough for what the business world is producing right now? In which scenarios do our intuitions remain accurate, and in which are they outdated and inadequate factors in decision making? The solution is not to disregard emotion entirely, but instead to reevaluate its role in the modern economy. Technological advancements are exponentially accelerating the speed of knowledge and innovation, and our thinking, foundation, and intuition need to be evolving just as quickly.

More focus must be placed on objectivity, and less on the ways in which instinct might drive us away from it. Of course, unanimous economic decisions are rare or simply absent in issues such as tax policy or bank regulation. However, once we begin to dissect the base upon which our intuition is built and attempt to consider alternate approaches, we might uncover that the best course of action cannot be classified as either right or wrong. Perhaps there exists a third option entirely. Let’s not allow human error to stop us from finding it.

It is clear that the world in which we live bears little resemblance to that of our predecessors centuries or even decades ago. The current era is abundant with movement, perpetually changing, and becoming more advanced and inventive than ever. We cannot hinder our prosperity by neglecting the lack of synchronicity between our evolutionary impulses and the present globalized world. When evaluating economic policy, we must recognize instinctive thought while simultaneously acknowledging it might be flawed. The future of economics is moving on without us and we cannot keep watching as it runs away.

Madeleine L. Lapuerta ’20 lives in Leverett House. Her column appears on alternate Tuesdays.