Is Economics the Problem?

By James Kwak

For a class, I recently read “The Psychological Consequences of Money,” a 2006 article in Science by Kathleen Vohs, Nicole Mead, and Miranda Goode. It describes nine experiments testing how reminding people of money leads them to behave differently — in ways that we should not be proud of. You may have heard of these experiments.

In Experiment 5, participants first played Monopoly, after which the game was cleared except for a large or a small amount of play money; then they were asked to imagine a future with abundant finances or with strained finances (there was also a control group); then someone walked into the room and dropped a box full of pencils. People who saw more money and imagined having a lot of money picked up fewer pencils. In Experiment 7, participants saw a screensaver with currency symbols floating underwater or fish swimming underwater; then they were asked to move two chairs together for a conversation with another person. People who saw the currency symbols placed the chairs further apart than people who saw fish.

The conclusion is that simply thinking about money — even unconsciously — makes people more self-sufficient, more socially insensitive, and less cooperative.

Now, this caught my attention because (a) I often think about money, and large sums of money (it’s kind of unavoidable when you write about the financial crisis or the national debt) and (b) I tend toward being self-sufficient and not especially given to cooperation. I’m the kind of person who, in school, prefers to do assignments by myself, not so I can stand out, but simply because I find it more efficient to avoid interaction costs. I try to overcome this by being generally helpful to others, but if there’s something I have to do, I often prefer to do it alone.

It also struck a chord with something I’ve written about before: my suspicion that studying a little bit of economics makes you more self-interested and less interested in fairness. Robert Frank, Thomas Gilovich, and Dennis Regan wrote two papers on this back in the 1990s that most of the professional economists out there already know. In one of their experiments, they asked undergraduates at the beginning and end of the semester several questions such as whether or not they would return $100 lost by a stranger at the end of the semester. They found that the proportion of students who gave more dishonest answers at the end of the semester than at the beginning was highest for students who took introductory micro from the mainstream economist, lower for students who took introductory micro from the developmental economist, and lowest for students who took introductory astronomy.

If there’s an effect here, I don’t think the mechanism is that economics makes you a bad person. Instead, it changes your expectations about what the rest of the world is like. If you are an altruistic person and someone teaches you that (a) most people are self-interested and (b) the world would be better if everyone behaved in a self-interested way, that is likely to make you behave in a less altruistic way.

But back to the original study: Money in general and large amounts of money in particular have become more accepted parts of general American culture than they were when I was a child. It seems quite plausible that this is also changing the way that Americans behave and making the ideology of individual autonomy even stronger than it already was. Which I don’t think is such a good thing.

97 responses to “Is Economics the Problem?

  1. Herbert Wetherby

    I would assume that when it comes to large amounts of money, that eventually the piper gets paid or we find out that the amounts were not so large afterall, and what ever happened to that bubble I saw quite a while back?

  2. Another factor is the 30yr national mantra of “Free Markets” which was touted as a way to improve the standard of living for all. It devolved into the utter worship of money. We have a new American religion where we worship the “Money God” and his invisible hand that balances the “Free Markets”. Listen to the market / news reporters. They continue to perpetrate the same over and over.

    In reality we have created a system of predatory capitalism. Only the elites allowed to take it all.

  3. Psychology studies like these remind me of William James’ observation, most people think they are thinking when really they are just re-arranging their prejudices….or having them rearranged by the tester.

    The moral of the story, few people, then and now, think actively- a proposition that will be dismissed out of hand by most…..q.e.d.

  4. I am waiting on the research that links this behavioral economics perspective with authoritarian personality research.

    To me, this juncture is where the rubber meets the road in regard to classic rent-seeking behavior. Only a narrow selfish perspective steeped in disregard for others allows for rent-seeking. I have a hunch that those whose personalities are prone to authoritarian behavior (follower or leader) are predominantly the ones who engage in rent-seeking.

    Once this aspect of behavioral economics is fully elucidated, then we may develop psychological tools to curb irresponsible predatory behavior.

    For now I would be happy to witness the cessation of sanitizing expressions such as “in the interests of the shareholders”. This often gives cover to irresponsible behavior on the part of so-called capitalists.

  5. One of the thing that has definitely happened is that “money” has been assigned a unit of comparison for all things in life, so previously society/community used to respect certain profession/work were respected even though they would not command huge money like academics, doctors so we all know Darwin, Newton, Galileo, Kant but in current times if we were to consider media coverage then it is all about Buffet, Gates, Paulson. It is if you make billions then you are more important than a doctor who saves a human life!
    All this is in no small measure contributed by USA which particularly wanted to highlight the economic aspect against Communist/ other countries but now that same thinking is going to split its own people.

  6. James,

    THis is very useful. No one is a (perfect) “homo economicus”. We all have our flaws and temporary lapses. In fact, conventional ethics teaches people to be moderately altruistic. It is not well known what has caused this convention, but ignoring it does not generally lead to a happy, undisturbed life.

    One of the useful things economics can contribute you a well informed life is on the one hand, that homo economicus does not exist, but is only a prop for theoretical development, but that the altruism that conventional ethics teaches is not very useful as a guide to -not only prosperity (maybe it is for those who know how to harvest other people’s generosity)- but also not to high levels of societal welfare.

  7. James,
    When it comes to rather working assignments alone, I was the same way when I was in school. I found that too much time was wasted in groups.
    I also tend to agree with your conclusion regarding the original study.

  8. “If you are an altruistic person and someone teaches you that (a) most people are self-interested and (b) the world would be better if everyone behaved in a self-interested way, that is likely to make you behave in a less altruistic way.”

    That is no different from concluding that studying economics makes you a bad person.

  9. Scientists working with monkeys set up two cages side by side, so that when monkey A solved a simple number problem a treat was delivered into a tray in its cage, but whenever it succeeded, monkey B, who was doing nothing but observing, would receive a double treat in its own tray. Monkey A was enraged at this, and began deliberately failing to answer the problem correctly. Then the scientists showed both monkeys how they could exchange tokens for treats, and began rewarding correct answers with tokens rather than treats. Remarkably, with the distancing abstraction provided by token-exchange rather than actual treats, monkey A was able to tolerate monkey B receiving a double reward for doing nothing, and began answering the problems correctly. In that sense, money may enable us to work together. How that fits into your interesting subject, James, I do not know.

    Perhaps for human beings money worked that way long ago but has become a whole other breed of cat. In modern psychology money is said to be strongly associated with excrement in the unconscious mind. That was a widely held notion in the Middle Ages too. Why is/was it despised in that way?

  10. If you weren’t so darn self-interested, you’d link us to less expensive versions of the papers!

  11. Is Economics the Problem? Yes, absolutely. The field has been distorted, contorted, and hijacked by the need to justify the position of the undeserving wealthy. In science, if you started throwing references to “Liberal” physics or “Conservative” chemistry with a straight face, you’d be a nut. But in economics, outrageous political bias seems perfectly acceptable. So in the end, how is economics at all useful, if it can be distorted to justify darn-near anything?

  12. Herbert Wetherby

    So in the end, how is economics at all useful, if it can be distorted to justify darn-near anything?

    In the end it is not useful at all, (but as luck would have it) and almost like in the monopoly game card, bank error in the banks own favor, one mans ending is another mans beginning. Although unbeknowns to the banks, they simply roll over or flip their investments and carry on as if there were no, one mans ending. Because to have it any other way just sour their stomachs as they watch the houseing market take a dive and all that goes with that.

  13. Well, since money is just an idea and is itself used to “justify darn-near anything” why would you expect any different from the field of economics?

  14. For many, economics is a moral philosophy written in numeric terms. Assigning monetary values to intangibles represents a moral choice. The numbers tend to hide the choices that have been made.

  15. Guys: if a society is ruled by fair laws, some will prosper and others won’t. Those prosperous folk aren’t evil. The envious failures who begrudge the prosperous their success are.

  16. For a starving person, a coin means only one thing — much like for the monkeys, it is a token which can be immediately traded for food. In that very immediacy, and urgency, money means something very different to the starving than it does to most of us.

    I think for most of us money goes beyond our monthly housing and car payments, and represents a buffer against many anxieties, and the power to keep ourselves in comfort, and to command deference and services from those whom we could not otherwise command. Because money wards against possible future needs and problems, we can never have enough. And we prefer keeping our money for those things, rather than care for the immediate needs of the suffering.

    What is very sad is that in choosing to take care of number one, we create the very conditions of isolation which reinforce our need to rely on money. In a culture where it would be unthinkable to hoard instead of share, we would be able to depend upon getting help from others when we need it. And that is an economy too, and can have its own incentives, its own efficiencies.

    I think at this time we are caught between those two ideas.

    The wealth of ‘have’ nations and ‘have-not’ nations is inevitably being equalized — that is a part of globalization and the spread of technology — and our great challenge here will be to adjust to living on less without betraying our achievements in sharing and social safety nets, without hardening our hearts. We must either get beyond money-values and undergo this global equalization of wealth with grace, or we will have one long, nasty, dog-eat-dog 21st century.

    Sorry if I wax preachy — the subject is very inspiring.

  17. . . and what planet is that ?

  18. Herbert Wetherby

    Its the one between your ear lobe and your thumb.__ : > )

  19. “Money in general and large amounts of money in particular have become more accepted parts of general American culture than they were when I was a child.”

    Fascination with money may be more accepted today than it was when you were a child, but it has always enjoyed a high level of respect. Visitors to 19th century America from Europe often remarked on and wrote about (not kindly) the conspicuous materialism they witnessed.

    From “Lords of Finance” by Liaquat Ahamed: “Charles Dickens, visiting the United States in 1842 had been struck by the local taste for speculation and the desire ‘to make a fortune out of nothing’….The
    London magazine The Spectator commented [in 1884],’….it makes a nation of the most degenerate gamesters in the world’.”

    Liked your post. Nice to see you thinking about things like this.

  20. my two-bits worth . . I think those experiments work out like that because we have two mentalities. One is a sharing mentality, which we reserve for family and maybe very close friends, and is essentially the same mentality upon which aboriginal societies based their economies. It is ancient and still alive in vestigal form in nuclear families — I call it the ‘aboriginal core.’ The second is of course the money society, the me-first game of economics. The experiments, of course, operate to shift the participants from one mentality to the other. I think we need to learn more about the nature of the “aboriginal core” –

  21. It has also literally become a major religious movement in that time span. It’s called the “Prosperity Gospel” and is really a fascinating bastardization which has a huge following.

  22. I studied Political Economy at graduate and advanced level and I think the body of knowledge called ‘economics’ is useless in terms of an interpretation of the real world – it is amoral.

    The notion that complex events can be reduce to simplistic mathematical notion is laughable and monetarism is even more fanciful. There are fundamental flaws in terms of epistemology as we use simplistic assumptions to explain complex human behaviors.

    Additionally, economics does not exist in splendid isolation from society and the political structures that operate within society. It is therefore, more illuminating to read and understand Political Economy which has its origins in moral philosophy and seeks to explain the interaction of production, buying and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth (and the role of money).

  23. the rookie cynic

    Does this explain why rich people turn into such jerks?

    Sorry, that wasn’t a very academic response, but it seemed to fit the tenor of this article.

  24. Every time you make a choice, it changes who you are.

  25. Every time you make a choice, it makes you who you are because you DID it – the act was YOURS. That’s who you are, your choices.

    The answer is “Yes” to whether “economics is the problem”.

    A kleptocracy certainly is a problem and all we have is a klepto-cratic “economy”.

    Want to get “mystical” – how about this observation from the “beings” who can create an atmosphere on a planet that allows the PERFECT amount of sunlight energy reach the planet to sustain LIFE –

    “No being in all the universe has the rightful liberty to deprive any other being of true liberty, the right to love and be loved, the privilege of worshiping God and of serving his fellows.”

    And from the article, “The conclusion is that simply thinking about money — even unconsciously — makes people more self-sufficient, more socially insensitive, and less cooperative.”

    It IS going to be a very nasty 21st century when the only “Meritocracy” in place is among the “kleptos”…who can do it faster…

    Finding the antikythera mechanism is Exhibit A – it was a thousand years LATER that civilized cultures could again produce such “technology”.

    Starve or commit fraud for us “elites”?

    That’s definitely not a “liberty” anyone has EARNED to inflict on a GLOBAL scale as an “economy” and say they are doing “god’s will”.

  26. “In science, if you started throwing references to “Liberal” physics or “Conservative” chemistry with a straight face, you’d be a nut.”

    But it was certainly how the “health care” debate was structured…like I keep saying – the DATA – reams and reams of it generated by banks and for-profit health insurance – has no scientific value.

    I could put together a “swat team”, an army, basically, and go through the 2010 CENSUS DATA in 3 months and provide the scientific data that is in there about the real condition of the human species…

    WHY is the raw data set of the Census NOT AVAILABLE to “we the people”?

  27. Interesting. Yves Smith recently mentioned epigenetics in a similar context. It seems worthy of some research, eventually, on just how much effect our money-mad culture can have on not just social behavior but on the human genome in a specific culture. Apparently behaviors are inculcated into groups of people by outside influences and the influences are in turn absorbed into the genes our parents and grandparents pass down to us.

    Would that there WERE genetic screening for certain occupations…then those predisposed to grasping for power would be banned from Washington and those who would cross any line of decency to make another buck could not work in the financial industry.

    Don’t we wish wisdom were an inherited trait?

  28. “I think we need to learn more about the nature of the “aboriginal core” – ”

    Mondo, mondo…just go talk to your nearest poor person. White, black, native American, undocumented immigrant…doesn’t matter. If you have nothing, and they have something, they will share what they have with you. If you are hurting, they will wrap their arms around you…much more often than not.

    Nevertheless, we (and I specifically and with shame include myself in this) fear the poor. So we try very hard not ever to be near them. In every way, we shrink from them. And in so many ways, it turns out, they are our superiors.

    What does a child really need? Love, nourishment, shelter, the encouragement of curiousity. In our society, we have convinced ourselves (against quite a bit of evidence to the contrary by the way) that it is impossible for a child to have those four simple needs met without a materialistic middle class life style. And so we have made it true.

    Well, we can make it un-true. But that will demand a degree of simple humanity that few of us seem able to muster. Certainly, I find it a challenge.

  29. Carla, Carla, I AM the poor. I was born among people like you describe, middle class people who are afraid of the poor, of other races, of the ‘underpriviledged.’ Intentionally I learned to shed those fears, because I was hungry for what humble people had to teach me. I have lived and worked as one of them, in my house and in theirs, different times, different folks, including some who camped under bridges,for much of my long life. I never cared much about money, just wanted simple physical work and a chance to keep on learning whatever was interesting. I know they thought me a bit eccentric, with my books and projects, but they accepted me as an equal. You are very right in what you say, even if it is somewhat idealized. I think their children are better off a lot of the time, because the parents don’t pressure their kids with expectations. — You are very honest, and I hope you can find a way to experience these things for yourself.

  30. I just want to take the courses B Bernanke took because he is pissing off everybody including the richest, most powerful people and countries. That is the kind of economist I would like to be.

  31. If the power-mad puppets were DNA-screened out of leadership in Washington, how would we protect ourselves from the power-mad puppets leading China? ;>)

  32. Economic history is full of contradictions:

    Ayn Rand received Medicare benefits shortly after surgery for lung cancer in 1974.

    ww.patiastephens.com/2010/12/05/ayn-rand-received-social-security-medicare

  33. Bayard Waterbury

    I am fascinated by these studies, although your explanations for what they prove are certainly debatable. I am far from saying that you are wrong, but, perhaps, just a bit simplistic.

    I can, however speak to these things from a personal perspective. I am not a trained economist, however, the discipline has always held a certain attractiveness for me. My personal perspective comes into play in the following way.

    There was a time, which ended about 15 years ago, when I was a small and somewhat successful small business owner. This wasn’t because I worshipped money, but more because I wanted the “control” and the attention that it seemed to provide for me. I was generous with my employees, and almost always felt a bit of guilt for making more than they did. I had lots of handy rationalizations for continuing to take my profits, but I always felt the need to “give back” by performing lots of community service, and trying to provide assistance, even to my direct competitors. Obviously I have a moral fiber instilled in me by my loving and generous parents. In 1995, I lost my business under some very tragic circumstances, partly due to bad judgment, but much to do with market timing on an expansion. With that loss I also lost my 17 year marriage, and our beautiful home which we had designed and had constructed.

    What I have found since then is that I am just as fulfilled working for others and being paid reasonably, as well as understanding that the trappings of success (the best that money could buy) did not bring me real happiness. Today, I am at least as happy as at any other time in my life. I live hand to mouth, and buy only what I really need. But, I have found serious contentment in that. And, I am still generous, with my time and what meager resources I have.

    Your economic psychologists would have lots of fun with me.

  34. Thank you, mondo, for your sincere and very beautiful response to me. I admit, when I posted my comment, I thought, “Oh, I’m going to catch “H” for this” because I know some of the baseline commenters can really sting, and they may yet shoot down what I said. It’s to be expected and certainly goes with the territory. But thank you, mondo.

    This utter capitulation to materialism that has occurred in our country is a great tragedy. It has stolen our soul. So, what do we have left?

  35. Bayard Waterbury

    By the way, to all of your readers and commenters, I have started my own blog, called Progressive Rationalism which is available here:

    http://bayard-progressiverationalism.blogspot.com/

    Today, HuffPost published an article of mine available here:

    http://www.huffingtonpost.com/bayard-h-waterbury-iii/how-our-leadership-can-so_b_825168.html

  36. Oh, Gee. Seems to me the richest and most powerful people and countries are thrilled with Ben Bernanke.

  37. Most illuminating. I would love to translate the article into German and Spanish.

  38. But in her defense, much as I abhor her, I must say she did at least cavil before accepting the bribe.

  39. Slavoj Žižek

  40. Simplicity has its charms. Living as an artisan in a smallish Central American town as I now do is much more fun and productive than dealing with all those metropolitan rituals and dealing with the orneriness of the Chinese immigrants and the mean-spiritesd blacks and bitchy women of accursed Rockville, MD!

  41. Bruce E. Woych

    1. http://en.wikipedia.org/wiki/Homo_economicus

    “Homo economicus, or Economic human, is the concept in some economic theories of humans as rational and narrowly self-interested actors who have the ability to make judgments towards their subjectively defined ends. This theory stands in contrast to the concept of Homo reciprocans, which states that human beings are primarily motivated by the desire to be cooperative, and improve their environment
    Homo economicus bases his choices on a consideration of his own personal “utility function”.
    Consequently, the “homo economicus” assumptions have been criticized not only by economists on the basis of logical arguments, but also on empirical grounds by cross-cultural comparison. Economic anthropologists such as Marshall Sahlins,[8] Karl Polanyi,[9] Marcel Mauss[10] or Maurice Godelier[11] have demonstrated that in traditional societies, choices people make regarding production and exchange of goods follow patterns of reciprocity which differ sharply from what the “homo economicus” model postulates”
    (from: http://en.wikipedia.org/wiki/Homo_economicus)

    Discussion:
    Economics and Ecology are both of the same genesis but it was strikingly distinctive at the origins of its divergence from within it’s root basis not its prefix. The critical distinction between “logos” and “nomos” should not be underestimated. They are phenomenologically distinctive philosophically, despite the fact that cognitively we seek to unify them from such birthing methods from “Oikos” as “household”, but perhaps we should even take heed at the arrogance of considering ecological foundations as a manageable economic household in the first place. From predispositions of chaos and harmony in a cosmic order of consciousness and existence to primal nature in contradistinction to civilization; natural to positive laws, organismic vitalism and emergence through mechanistic-physics and atomistic disintegration…we have captured the world in “nomos” terms and economy measures the pot of gold at the end of that rainbow. The dichotomy between ecology and economics must take a position among the other dichotomies in the history of Western thought and ideas such as brain / mind ; nature / culture ; primitive / civilized ; being / spirit ; and others.

    But what we have missed is that 17th and 18th Century classical “economia” has become a mechanical form of static and dynamic “input-output” while Homo Sapien Sapiens transform their core identity in the measure of themselves via a newly devised self-reflection from a their “homegound” in history…as a self made existence. Positive and progressive laws of order transpose providence and civitas from pastoral nature to industrial conversion in a cosmopolitan reality of transactional cosmology. Homo centric- eccentricity in historicism lends itself willingly to an equasive homo faber;… the maker of tools and beings in history separate from the beast, separate from the “primitive” savage and from debased Nature itself. History becomes the metaphysics of existence and economics is the household and industrial warehouse of its making. A Proud existence; led and limited only by its own self reliance and survival;.and production. Man against men in history becoming a “product” of time and a product of his own making and keeping.
    Mixed with the arrogance of Romanized “will” and metaphysics of superiority and the distortions of superman soon arising with the industrial capacity of clockworks and steam engine and the identity of this independent entity is tantamount to a demigod; if only in his own measure and image making. Writ larger by the accomplishments of collective forces of assemblage and technological (logos…technos… nomos…) transforming and even transgressing toward its transcendent historical apex. A pinnacle of grand design with self determined pastoral domains controlling Nature itself under foot, plow and the forces of physics… quantifying the self serving monetary base of society itself. Mankind not only transcending nature but transforming it at will and to do his bidding at conversion and for every imaginable consumption. Mind over matter and only money matters.

    The drift is that human beings believe without a second thought that the resources are merely the clay of creation itself and that economics and wealth is creation itself. Of course the new financial section, as we now know, are the gods, and production is just another day of creation . People believe, or more correctly, they never doubt that economic man produces at will…produces and transforms according to the demands of a progressive civilization in the transfiguration of time and being into history and all else is essentially recreation and collateral damages. There are no real constraints that are truly impassable. Steady state and sustainability are external terms that spoil the process. Today everything is convertible to some monetary value scale and econometrics has become the conduit to power transfers within the scope of social forces and the market matrix that make things happen. Money is the universal solvent and basically converts the sum total of global forces to a numerical grid. Economics has become the hand maiden to that grid. But the truly ecological science to that economic delusion is that we have been progressively destroying the balances of the natural earth and converting it …or better stated…consuming it….without a memory or conscience about it. Input and output has become monetized ignorance in a process of mass self-stimulation and gratification. And as the process heats up so does our zero sum game and displacement of the waste to the farthest corners of the earth away from the cause. the myth of economics is that it creates wealth. The truth of the matter is that Economics creates a mechanism of displacement in the creation of waste.
    Given that mild caveat, I would recommend the systems of knowledge approach attending to a sustainable ecological concept of deliberation that appears to be initiating some mental imagery back to homo sapien sapien’s ideas…at MIT…check out their site: Perhaps there can be a redeeming aspiration for this beast we call economics!

    http://gssd.mit.edu/GSSD/GSSDen.nsf

    Global System for Sustainable Development – http://gssd.mit.edu/

    http://gssd.mit.edu/GSSD/GSSDen.nsf/structurecontentview/Knowledge%20System?OpenDocument&AutoFramed

  42. Bruce E. Woych

    Carla; check out Gene Sharp (Google)…

    for some reason they won’t let me post the reference for you…

    regards: Bruce

  43. michael johnson

    James,
    Cooperation and autonomy (self-sufficiency) are NOT opposites. Autonomous people cooperate; compliant people obey or follow along.

    Read Elinor Ostrom. She has re-defined the game.

  44. Herbert Wetherby

    Its fun to say non-violently rage against the machine but this has 2 problems, first is that it costs money and energy that these people simply do not have. And secondly once they are done with their peaceful protest, the Rockerfellers and Co. simply simle, call for the same thing they did as teens, and walk away complaining that something needs to be done about the budget. In essence nothing has actually changed in the minds of the controlies execpt to find a new way to stall until we financially control the ones who do still have money. Newbys like Barack and Ben, and oldies like Rumsfeld and Cheney all fall into line to maintain the status quo of spending, while delivering the cuts needed to reduce the friction but keep the status quo.

    By law real change takes great amounts of time which is used to delay any resistance to the cause. And these same people have lived under the guise that thier children will never have it as good as they did and currently have today, and have no intention of changing their minds or behaviors ever. So peacefully rage against the machine but relize that there is very little one can do to change it.

  45. Thank you Bayard. I admire your resiliance and capacity to find contentment, and your honest insight as to your motivations (when you were a business owner) is truly exceptional. Some of us deal with psychological pain by taking a hard look at ourselves — that way lies wisdom. And contentment. I think you must be very wise.

  46. James,

    One of the problems with certain interpretations of the study is that is does not take cultural differences into account, which is this context may be an important explanatory factor. Carla’s comment would fit this way of looking at the study’s finding.

    One way of testing the hypothesis that it is economics simpliciter that is responsible for the behavior seen rather than economics cum a particular socio-cultural context would be to carry out the experiment in Japan, which has an educationally more cooperative approach than that found in the US.

  47. In a few hundred years or perhaps far less this will be looked back upon as the age of economics and we will be viewed as insane. No less crazy than Easter Islanders or Mayan’s with the mass blood sacrifice. We have barely begun to see the evil that will be done by the money men. The job of the thoughtful economist now is to document the madness and the atrocities.

  48. and Japan has the most egalitarian distribution of income in the world . .

  49. James, you sound like a true capitalist. Unfortunately, the system sucked you in, the same. You think in old paradigms which are limiting to your human development. Thinking about money makes a man primitive. It doesn’t bring higher aspirations or honorable goals. It’s like a lion thinking about its next pray.

  50. Good point. I remember reading about it, but it did not come to mind when I posted my comment.

  51. Yves Smith book “Econned” analyzes and critics economic theory. A major point is the flawed assumptions upon which “Free Market” theories are based and how those theories affect governmental policies. Interesting stuff, well worth the read.

  52. You have a looong way to go to understand “primitive.” Talk about old paradigms . . And that’s prey not pray.

  53. Bruce E. Woych

    http://www.aeinstein.org/

    compliments : Bruce

  54. Bruce: Thanks! For everyon else, here’s the link to the Times story about Gene Sharp. I have downloaded his book, “From Dictatorship to Democracy” and am reading it now.

    http://www.nytimes.com/2011/02/17/world/middleeast/17sharp.html?_r=1&scp=2&sq=Gene%20Sharp&st=cse

  55. Thank you for the link, tippygolden. It’s priceless.

  56. Economics teaches you that self interest is not just rational, but good for society. Throughout my economics major, this idea was the axiomatic basis for a good deal of our lessons. Four years of sitting through classes like that makes you start to think that a very proscribed definition of ‘rational’ is the basis of morality. When one starts to see the world thorough this lens, I think that it does affect behavior in a negative way. It took me a long time after I graduated to start deconstructing what I had learned, and to reexamine what parts of it were actually ideology that had been presented to me as mathematical inevitability.

  57. Bruce E. Woych

    Congratulations BW from BW: I went to your new site but frankly (I’m no computer wiz…) couldn’t figure out the process of selecting a medium (?) requested to sign on and subscribe. Without signing on I couldn’t add the referecnce to MIT which would be perfect for your “rational progression” program idea. In fact, along with continuous learning systems, your site could become a great location for serious dialogue on the development of a true University without Borders(?).

    In any case, Here’s what i tried to post (which is also below after my discussion/comment for this question)
    I hope you find it a useful reference:

    ttp://gssd.mit.edu/GSSD/GSSDen.nsf

    Global System for Sustainable Development – http://gssd.mit.edu/

    http://gssd.mit.edu/GSSD/GSSDen.nsf/structurecontentview/Knowledge%20System?OpenDocument&AutoFramed

  58. “Natural” forces inherent in the material world will continue to be the constant challenge that organizes whatever intelligence and wisdom a species has acquired through the experience of evolution.

    So there is your mathematical “constant” :-)

    the big “C”.

    The primal organization – what organized the cave dwellers – was the need for a bunch of tool making, “extreme” risk taking, “courageous” warriors drawing out the “play” in the dirt of the cave

    for taking down the predatory beasts who stood between their cave and the water hole.

    Primal organization against the PREDATOR.

    If anyone believes for a second that there aren’t enough “genes” still around to organize a “play” against the PREDATORS, well, we’ll see won’t we?

    As for what “natural” forces are going to do when stressed to the point where the evolutionary “specialists” – the honey bees, for instance – are killed off through the “philosophy” of maximum, rapacious, predatory profit-taking,

    the question that should be asked by INTELLIGENT free-will beings should be – do we really want to find out?

  59. Carla,

    They do not care about YOU and your soul and your desire for steady state self-sufficiency.

    Why do you continue to focus on caring about them? Hours spent in analyzing their beliefs, values, choices…? Who the hell cares? They’re NUTZ.

  60. To be clear – I’m talking about the self-proclaimed “elite” – the Nihilists.

  61. Here’s a free link to the article in question:

    http://www.csom.umn.edu/assets/71704.pdf

  62. Herbert Wetherby

    Annie, you can’t get to heaven alone. No one does it all by themselves, simpathy and understanding are signs of kindness and progress. And yes, many more hours than you can imagine, have been spent analyzing beliefs. Beliefs turn to facts, and are then followed up with action, not understood by the masses or the rich. The consequences of not knowing, or caring about achieveing this lofty goal, can be greater than a lifetime spent trying to make money. Factor in greed and it takes time to balance the scales of justice. So we care, and it shows.

  63. CORRECTION. It was not Yves Smith but Joyce Appleby who briefly mentioned the emerging field of epigenetics in the context I proposed for consideration. The mention was in Ms. Appleby’s fascinating 2010 book, The Relentless Revolution-A History of Capitalism.

    Her book, along with 13 Bankers and Econned have to be considered a pretty nifty trifecta when it comes to handicapping the current (interactive and competing) dynamics of our cultural and financial problems.

    Standing on the soapbox for a minute longer, I would like to commend the authors of all three books for providing more light than heat, greater clarity rather than tiresome obfuscation and original insights rather than emotional incitements. To them all: Bravo!

    Again, apologies for the mis-attribution but hopefully the (sincere) plug for the books will be enough salve to soothe any and all resulting bruises of any type.

  64. Stating the obvious from basic Aristotelian logic:

    1. There is much more to being a real person then money. (Worse, there is the common presumption of economics that each of us playing for our sole economic gain will lead to better results than pursuing goals collectively.)
    2. Economics claims there isn’t anything more important than the optimal outcome as measured by money.
    3. Ergo: thinking about economics makes you a worse person.

    Perhaps this overstates the case. But it always surprises me how many economists think so simplistically, though, of course, they can always fall back on the magic get-out which is that everything depends on how the economic analysis is defined or constrained.

  65. Interesting observation. I also like how James balances his preference for working alone with “being generally helpful to others.”

  66. Interesting article, but I think the conclusion of the studies may be a misinterpretation: “The conclusion is that simply thinking about money — even unconsciously — makes people more self-sufficient, more socially insensitive, and less cooperative.” I see how the studies could measure behavior, but it didn’t say how it measured sensitivity, or any other feelings that may influence that behavior.

    Given a fascinating and refreshingly respectful debate I’ve just been having with someone who has an opposite economic identity than me (him Libertarian/Conservative, me Progressive), I’m actually seeing how a lot of Americans are currently living in a lot of fear, and stress/distress, and that is breaking down communication, social trust, and cooperative action all around. People on one side (left/right, politically and economically) consistently seem to think the other side is insensitive (and sometimes stark raving mad), based on behavior and policies they advocate for. But there seems to actually be a lot of fear, with both sides actually afraid of the other side trying harm “people like me,” whoever “me” is. Sometimes I think the problem is more hypersensitivity, not insensitivity.

    Also, I would point out both of us in the current debate are hard-working and financially struggling. I do believe there are actual unethical people trying to make sure as few people as possible have as much control of all the resources as possible, including the workers. It’s the workers themselves who I see being sadly turned against _each other_ by this fear, stress, and hypersensitivity.

  67. To clarify my 2nd-to-last sentence, I see the workers being seen by the rich as “resources” for the rich to exploit, along with environmental resources and other things, that are often not treated with respect or seen as having valid needs and rights.

    Also, is there a direct link to the studies that were cited?

  68. I grew up in a hotbed of Reaganites who would simultaneously decry government spending as they took out the federally provided college loans, with its low interest rate. They all HAD the money for college – didn’t need the loan – but they took advantage of the opportunity to put low-interest loan money into investments with much higher yields.

    My father, liberal Democrat that he was, took pride in the fact that he did not need the loan and thus did not take out the loan – and he made fun of the Reaganite neighbors who did. But he also did not reap the benefits of investing low-interest loan money into much higher yield investments.

    It is not “economic history” that is full of contradictions, but rather it is people. People are the ones who need to determine if their actions will reflect their ideology.

  69. “It is not “economic history” that is full of contradictions, but rather it is people. People are the ones who need to determine if their actions will reflect their ideology.”

    Oh, MSM, it is probably both. After all, “economic history” is just a reflection of people — powerful people vs. powerless people.

    But it’s interesting that you seem to indicate that your father actually lost anything by acting in a way that was consistent with his character and values. I would say not.

    On the other hand, the hypocrites who acted contrary to their stated beliefs may have lost a great deal.

    Which would you rather have, MSM, money in the bank, or your soul?

  70. “People are the ones who need to determine if their actions will reflect their ideology.”

    Excuse me, MSM, perhaps we were making the same point. If so, please forgive my too-quick response. — C.

  71. I wonder if a reversed study has been done: does studying compassion, teamwork and altruism make you more likely to have that world-view?

  72. Bruce E. Woych

    This study is a more objectively accurate measure of how money impacts on our daily interactive consciousness
    and behavioristic reactions if not total response and (provoked)evoked potentials. It is much more instructive overall as a substantial evaluation that does not have questionable agenda bias built into its methodology:

    http://pss.sagepub.com/content/20/6/700.full

    The Symbolic Power of Money
    Reminders of Money Alter Social Distress and Physical Pain

    1. Xinyue Zhou1,
    2. Kathleen D. Vohs2 and
    3. Roy F. Baumeister3
    (available without “pay per view” boundaries)

  73. There are far too many people in this country who would condemn my father for not taking advantage of free money. Our financial sector is filled with opportunistic capitalists who know without a shadow of a doubt that enriching their bank account is far more important than living according to a capitalist ideology that rewards accomplishments and holds leaders accountable for the failure of their business.

  74. “Also, I would point out both of us in the current debate are hard-working and financially struggling. I do believe there are actual unethical people trying to make sure as few people as possible have as much control of all the resources as possible, including the workers. It’s the workers themselves who I see being sadly turned against _each other_ by this fear, stress, and hypersensitivity.”

    Symptoms are not the cause.

    Nanosecond speed is what good one-liner quips are born from :-)

    It’s the speed with which we are being robbed.

    So no one has time to contain the damage of the predator, so now every single activity in life is predator-prone.

    It’s Nihilism at warp-speed, Scotty…

    Cain and Abel “competition” destroys families fast,

    and now compound it with slavery (slavery depends on the slave not being able to nurture a family of their own, hence no chance to evolve a government that globally acknowledges property rights earned by labor)

    and, of course the Nihilist argues, it’s “all in the mind”, right? So think positive thoughts…

  75. Bruce E. Woych

    1)

    http://en.wikipedia.org/wiki/Complexity_economics

    “Complexity economics is the application of complexity science to the problems of economics. It is one of the four C’s of a new paradigm surfacing in the field of economics. The four C’s are complexity, chaos, catastrophe and cybernetics. This new mode of economic thought rejects traditional assumptions that imply that the economy is a closed system that eventually reaches an equilibrium. Instead, it views economies as open complex adaptive systems with endogenous evolution. Complex systems do not necessarily settle to equilibrium — even ideal deterministic models may exhibit chaos, which is distinct from both random (nondeterministic) and analytic behavior.[1]” http://en.wikipedia.org/wiki/Complexity_economics

    (2)

    http://en.wikipedia.org/wiki/Evolutionary_economics

    Evolutionary economics deals with the study of processes that transform economy…, through the actions of diverse agents from experience and interactions, using evolutionary methodology.

    Mainstream economic reasoning begins with the postulates of scarcity and rational agents (that is, agents modeled as maximizing their individual welfare), with the “rational choice” for any agent being a straightforward exercise in mathematical optimization. There has been renewed interest in treating economic systems as evolutionary systems in the developing field of Complexity economics.

    Evolutionary economics does not take the characteristics of either the objects of choice or of the decision-maker as fixed. Rather its focus is on the non-equilibrium processes that transform the economy from within and their implications. The processes in turn emerge from actions of diverse agents with bounded rationality who may learn from experience and interactions and whose differences contribute to the change. The subject draws on the evolutionary methodology… and the non-equilibrium economics principle of circular and cumulative causation.

    It is naturalistic in purging earlier notions of economic change as teleological or necessarily improving the human condition.[1]

    http://en.wikipedia.org/wiki/Evolutionary_economics

    (3)

    http://en.wikipedia.org/wiki/Institutional_economics

    Institutional economics focuses on learning, bounded rationality, and evolution (rather than assume stable preferences, rationality and equilibrium).

    “Traditional” institutionalism [1] rejects the reduction of institutions to simply tastes, technology, and nature (see naturalistic fallacy). Tastes, along with expectations of the future, habits, and motivations, not only determine the nature of institutions but are limited and shaped by them. If people live and work in institutions on a regular basis, it shapes their world-views. Fundamentally, this traditional institutionalism (and its modern counter-part institutionalist political economy) emphasizes the legal foundations of an economy (see John R. Commons) and the evolutionary, habituated, and volitional processes by which institutions are erected and then changed (see John Dewey, Thorstein Veblen, and Daniel Bromley.

    http://en.wikipedia.org/wiki/Institutional_economics

    (4)

    http://en.wikipedia.org/wiki/Bounded_rationality

    (5) circular and Cumulative causation / causality in dynamic economic transitions; disequilibrium (open & closed systems)
    http://en.wikipedia.org/wiki/Gunnar_Myrdal (start here…)
    and:

    http://search.aol.com/aol/search?invocationType=webmail-hawaii1-standardaol&query=%20%22circular%20and%20cumulative%20causation%22

  76. Bruce E. Woych

    If you placed this same article in a blog (say…seeking Alpha…) on Wall Street you would get aggressive and immediate knee jerk responses that more than likely would support your underlying thesis but especially the presuppositions servicing the study you are utilizing as a guide.

    On the other hand (after several days…) it seems apparent that the thought and discussion of “money” did not evoke the same results in the comment streaming that has followed here. Overall, this speaks well for your following…but I would also say it raises major questions about the pretext of assumptions presented in your over generalized conclusion about money and “narrow-mindedness” (my rephrasing on that term).

    The conditioned reflex of “money” is off-set by the use of a credit card. Perhaps that should have been your main target for the implications it has for an entire economy and the financial sectors and manipulators of the world?

  77. Bruce E. Woych

    http://www.nber.org/digest/aug06/w11892.html

    http://www.nber.org/papers/w11892

    What is Psychology “worth” on the market? Studies made that induce decisions are a dime a dozen.

  78. It takes a lot of stamina to effect positive change, I think. By positive here I don’t mean value-judged change, ie, what I would consider to be the correct direction, but to change from one overall direction to another, with will. The rich can maintain that stamina simply by keeping up the salaries of those who work on it for them. That’s their great advantage. We have to actually possess or demonstrate the stamina ourselves.

  79. It’s Sunday, it’s Church time

    In teevee land, the worshiper gets to interview the object of their worship ala CNN…

    So one such manipulator of the world is a billionaire because he guesses correctly which country will the “bond markets” punish next…

    In all sincere seriousness, what kind of game do the billionaires play?

    Steal one buck out of a billion people’s pocket? All you need is one archetype and the Patriot Act’s financial files on “you the stoopid people”…c’mon, too easy…

    How “frightened” do you think all those women mutilated and killed by tribal “leaders’ were?

    Quite frankly, there are very real LIMITS to how cooperative certain cultures will ever be with each other…too big of a gulf between moonwalkers and Kyber Pass long-haired, stoned Muslim “hippies”…

    But manipulators of the world seem to scour the neighborhoods for threats to their “authority”…I’m intrigued enough by a personal family saga in the “past” (1970s) to investigate who had the power and by what process did they manage to expel the entire group of natural born leaders from the Catholic high school at the end of their Junior Year…too close to taking down drug lords in the ‘hood…?

  80. Bruce E. Woych

    Annie inquires:

    “In all sincere seriousness, what kind of game do the billionaires play?”

    and the universe answered in reply and without concern fof any sense of obligation…

    Well they play “HARDBALL” of course.

    http://en.wikipedia.org/wiki/MENA_region

    http://en.wikipedia.org/wiki/Revolutionary_wave

    http://en.wikipedia.org/wiki/Color_revolutions

    http://en.wikipedia.org/wiki/Jasmine_Revolution

    Tunisia:

    http://en.wikipedia.org/wiki/2010%E2%80%932011_Tunisian_revolution

    http://english.aljazeera.net/indepth/opinion/2011/01/201111985641326468.html (interesting article: American University of Beirut via AlJazeera; Lessons of the Jasmine revolution: …exposed …multiple layers… “January 23, 2011).
    Organized factors that led the initial “spontaneous” uprising…good insight & assessment on social and psychological factors underlying the popular support. Interesting statement about “opportunism” and political power: (among others)-
    “This probably gives a glimpse of hope to all those working in the field of democratisation; to search for the structure of opportunities and to learn how to use regimes’ weaknesses to breed change in the order.”

  81. Monday morning quarterbacking :-)

    “Revolutions” are a way around seeking justice and fairness – the MO of opportunists who have no skill or talents and they have to get by somehow in the world – so scam ‘em on a bigger scale.

    One man – ONE MAN – is a multi-billionaire…makes no scientific sense…he WINS when countries lose.

    How is that not economic nihilism?

  82. Herbert Wetherby

    One man and courage, make a majority. No matter how many billions. And a scientist is nothing but a failed engineer, so yes, one wins and one loses, it’s no big deal.

  83. Carla and James K too, Many good points. I have lived in one of the poorest communities in my state for most of my life. I certainly agree with you about people with the least. For years I was a building contractor and I always enjoyed working for the working poor much more than the wealthy. The WP always appreciated a good days work and craftsmanship while the more money people had the less appreciation they had for anything. Their expectations for the benefits received were higher than their incomes. Same with my more recent profession in real estate. I would much rather have a working class client than a wealthy one because in most cases there was much less risk and much more appreciation.

    But the current situation is dire IMO. There is way to much debt to be serviced on all levels from private to all levels of business and government. The consequences of the next cycle is going to be beyond anything any of us have seen or experienced. The best part of living in a poor rural community is that many people really know how to live and are not selfish. But none of us know how to live with $5 to $7 gas or $4 per pound peaches or $20 per pound beef on $10 per hour wages or less.. I think we may be looking at a total disintegration of society as we know it in the coming years.

  84. And there is no way to have exponential growth in a finite system… There is a limit to the amount of debt any system can carry before the next straw breaks the mule’s back.

    Ever expanding debt is the same as exponential growth. Can not be sustained.

  85. I learned this years ago. If I wanted to give out a bonus to my crew I had to do it immediately after receiving the final check or I always found a reason to keep it. May not be all of human nature but I sure have seen a lot of rationalizations for being selfish.

  86. still stalking me, eh?

    no one is worth billions

    he’s more the grim reaper…another destroyed culture and civilization, another billion for me…ah, sweet revenge…

    you’re doing great, though, no one left who still has an “open mind” towards your view of “reality”

  87. Herbert Wetherby

    If no one is worth is billions, why do we then have billionaires? Your arguement makes NO sense, in those cases we just sell you down the river. Oh, I forgot, you are almost there. No insurance, no stalkin. No lines, no time, are you still staklin?

  88. You say “The conclusion is that simply thinking about money — even unconsciously — makes people more self-sufficient, more socially insensitive, and less cooperative.”

    … but I don’t think people are thinking about money. Rather, I suspect they’re thinking about cost and risk.

    We already know from other psychological studies that people judge risks poorly, particularly when you vary how much they think they’re in control. We also know from other studies that people over-value cost, and under-value opportunity.

    In all those senses, I think your title is far more accurate than this particular line, in that economics focuses on value, risk, and cost. Insofar as a little amount of economic training doesn’t get you past the biases I just mentioned, perhaps these results all side-effects of these biases?

  89. Money is not inherently good or bad, it is our relationship with money that makes the difference. More to the point, it is about the influence that an economic system has upon the way people order (their) life in society.

    Given that the American capitalistic system is grounded in the assumption that people at base are materially self-interested and that the goal is to maximize ones material gain, our system necessarily contextualizes and prefigures human experience in society. Moreover, this erroneous belief (that we are by nature materially driven) is used to justify self-serving behavior.

    With this notion being the defining way toward order in society, there is no pursuit of greater human value or meaning, just more and more material gain for ‘me’.

    It has us ordering life according to the notion that reality is nothing more than the quantifiable, the material and the objective; which is tantamount to claiming the non-existence of the qualitative, the non-material and the subjective.

    With reality limited to the material, all we have is a work-a-day existence where vision is limited to a future of acquiring more. Accordingly, the measure of a full life is framed in terms of quantifiable ends. So the non-material things such as love, joy, compassion and meaning tend to be expunged from life’s experiences.

    For more on this see http://www.forprogressnotgrowth.com/econome/

  90. It’s worth considering what may be the obverse of this effect. Rebecca Solnit’s “A Paradise Made in Hell” is a very nice series of case studies looking at how, in the wake of disasters, natural and human-made, people do not devolve towards brutish, selfish behavior, as the myth would have it, but often instead turn towards altruism and community. Thus the paradise (people enlivened, empowered, inspired by this shift towards mutual feeling and support) built in hell (the disaster itself). Solnit has a short popular piece that touches on this and also community economy research by J. K. Gibson-Graham. http://www.counterpunch.org/solnit12222010.html

  91. Good question that everyone seems to be asking – why do we have billionaires?

    Well the math is the easiest part – the rich get richer, the poor get poorer – gee, wonder how that happens?

    The thing you have to adapt to, Herbie, is that there are WAY more people who do not believe that anyone is worth a couple billion bucks. And anyone who did manage to convince fellow monkeys that he has a couple billion bucks, well, that’s easy science – it’s an illusion cast out by delusion.

    Monkey brains + imagination = belief in your own made up crap

    In cosmic scale time, imaginative monkeys are still trying to deal with having imagination…

    I’m pretty sure now, btw, that you really do have me mistaken for some other internet persona…

    I have insurance. I just never use it because aliens keep abducting me and always fix whatever is ailing me.

    :-))

  92. Money can easily affect anyone, since we need money to buy our necessities and because we are experiencing recession. People also tend to overwork to earn more money. I agree that money can change the way people behave.