It’s the essay “Capitalism and the Jewish Intellectuals,” by Jeffrey and Shterna Friedman. It’s in the same issue of Critical Review as my essay “Macroeconometrics: The Science of Hubris.” I recommend subscribing to Critical Review, even though the publisher maintains one of the most user-hostile web sites I have ever encountered.

If asked to explain economics standing on one foot, many of us would say “Incentives matter.” F&F say that is a bad move.

They take as their starting point Jerry Muller’s book, Capitalism and the Jews. I can sketch their essay as a Q&A. The answers are F&F’s, in my words.

Q: Why are so many Jews hostile to capitalism when, as Milton Friedman argued, it is the one system that breaks down discrimination against Jews and allows them to thrive?

A: Because many Jews, particularly the ones we hear from, are intellectuals, and intellectuals are hostile to capitalism.

Q: Why are so many intellectuals hostile to capitalism?

A: Because many intellectuals do not have first-hand knowledge of economics. They have heard that “incentives matter,” and this confirms their impression that capitalism is based on greed. Even intellectuals with training in economics take away from “incentives matter” the message that “we” (meaning intellectuals making policy) should manage, or at least tweak, everyone else’s incentives.

Q: How would you break down that hostility to capitalism?

A: By de-emphasizing “Incentives matter” and instead emphasizing that “unintended consequences matter.” That is the message of Adam Smith. It is the message of Hayek. Once we embed people in complex economic and political systems, selfish intentions can turn out well (because of competition), and good intentions can turn out badly (because of imperfect knowledge).

There are too many excellent passages in the F&F essay to quote here. But I cannot resist quoting this, from late in the essay:

if we tried to understand Hayek by reading Marcuse, we would get nowhere…if we try to understand Marcuse and his fellow left-wing intellectuals without reading them, we also get nowhere…Free-market economists tend to be as uneducated in the views of anticapitalists as anticapitalists are in the views of free-market economists. The mutual misunderstanding can be reduced only through sympathetic attempts to understand “the other.” This requires gaining distance from one’s own assumptions, theories, and intellectual tradition.

Of course, the law of asymmetric insight says that we think we know the other side’s point of view (even better than the other side knows its own!). So we easily rationalize not having to read the other side’s position sympathetically.

But my main take-away from F&F is that when we emphasize “incentives matter,” people on the left hear that as confirmation of their arguments for the need to regulate and control capitalism. Hence, we ought to change our message.