Cents and Sensibility
By David Henderson
Princeton University Press has recently published Cents and Sensibility: What Economics Can Learn from the Humanities. Chapter One is on line here.
The book is by literary critic Gary Saul Morson and economist Morton Schapiro. Their basic message, as the title implies, is that economists can learn from the humanities. I’m open to that message because I already agree with it. The issue will be how they pull it off. Unfortunately, the publisher has made it very clear that I may not quote from it without permission. It’s Saturday night as I write this, and so I think permission will be hard to get.
In one section in Chapter One, I think they do pull it off to some extent. It’s where they lay out how narrow economists can be in seeing The Merchant of Venice as being about government regulation and the legal and social framework for markets. But in the same paragraph, they write that one should “wince” at seeing The Road Not Taken as being about choice and opportunity cost. It’s not? That’s what I got out of it in high school long before I had heard the term “opportunity cost.” It’s clearly about choice. And when you have just two choices, the value of the road not taken is the opportunity cost of the road taken.
In the rest of the book, will the authors explain why The Road Not Taken is not about choice and opportunity cost? I don’t know.
There is one section that I found particularly disturbing. It’s where Schapiro, the economist, criticizes the famous memo written by Lant Pritchett and co-signed by the World Bank’s chief economist Larry Summers in which he argued that it made sense to move toxic waste from rich countries to poor ones. The memo was brief and didn’t lay out the reasoning clearly, but that make sense given that it was being distributed internally among, I presume, mainly economists. The missing reasoning is that there were gains from exchange: the rich countries’ value of getting rid of the waste exceeded the poor countries’ disvalue of living with the waste. Both sides could gain from the transfer of waste. If I were being demagogic, I would respond to Summers’ critics: why do you hate poor people? Preventing that transfer prevents them from making themselves better off.
Now it could be that Schapiro’s criticism is that the poor people in the poor country don’t get to choose and their government chooses for them and imposes it on them. That’s a legitimate criticism. But Schapiro doesn’t make that criticism: at least, he doesn’t make it in Chapter One. Indeed, the criticism that Schapiro does make doesn’t sound like that of an economist. He argues that most policy decisions involve situations where some people lose and some gain. True. But here was a case where, if it were done right, there would have been just winners.
This story by Schapiro makes me concerned that either (a) he doesn’t understand basic economics, or (b) he does understand basic economics but is playing to people who are hostile to, or ignorant of, economics.
There is a third alternative: that he has a good criticism of this memo, one that will show up in later chapters. But it isn’t in this one.