The philosopher Daniel Dennett passed away recently. While his work was focused on things like consciousness and the philosophy of mind, his ideas can find applications in other areas of life, including economics. There’s one idea in particular he described in his book Intuition Pumps and Other Tools for Thinking I want to highlight here – what Dennett calls a “deepity.”

Dennett describes a “deepity” as a seemingly meaningful comment that is actually marred by ambiguity. There are two different ways to interpret the statement. On one interpretation, it makes a meaningful and substantive claim, but that claim is outright false. On another interpretation, the claim is true, but only trivially true. 

This has some similarities with the “motte-and-bailey” fallacy Scott Alexander has described before:

So the motte-and-bailey doctrine is when you make a bold, controversial statement. Then when somebody challenges you, you retreat to an obvious, uncontroversial statement, and say that was what you meant all along, so you’re clearly right and they’re silly for challenging you. Then when the argument is over you go back to making the bold, controversial statement.

Both ideas are similar in that they refer to claims that oscillate between interpretations, but there are a few differences. In the motte-and-bailey, it’s not necessarily the case that the bold statement is false – it’s just that the bold claim actually being advanced isn’t being defended. Motte-and-bailey is a sneaky argumentative tactic to bypass defending a claim. A deepity, as Dennett described it, is more akin to a trick you can play on yourself. Deepities can trip up our thinking when we unknowingly transfer the truth value of the trivial interpretation over to the substantive interpretation. 

That said, here are two examples of deepities in economics one often finds. The first is the idea that imports reduce GDP, and the second is the idea that price increases are a result of greed. 

For the first example, I’m actually being generous in allowing there’s a sense in which this claim can even be trivially true. It’s only in what Pierre Lemieux has called “a narrow bean-counting sense” – if we look at the accounting identity for GDP, we see that GDP = G + C + I + X – M. That is, GDP is equal to government spending, plus consumption spending, plus investment spending, plus exports, minus imports. While exports are an addition to GDP, imports are subtracted from GDP, therefore doesn’t that just obviously mean imports reduce GDP?

Well, no. While I’ve complained on more than one occasion that many economic misunderstandings come about because economists are just bad at naming concepts (public goods!), in this case I have to acquit the profession of that charge. What GDP conveys is right there in the name – gross domestic product. That is, it’s a measure of things that were – wait for it – produced domestically. Imports, by definition, are things that are not produced domestically. While it’s trivially true that imports are subtracted from the GDP accounting identity, that’s because what GDP measures, by definition, excludes imports. The subtraction occurs to prevent double counting. Recently, I spent $5 on some avocadoes that were imported from Mexico. That $5 would appear in the C portion of the above identity – it was $5 of consumption. But since the avocadoes were not produced domestically, that $5 is subtracted from the GDP calculation as M. That doesn’t mean GDP was “reduced” by $5 in any meaningful sense. It means this $5 in consumption wasn’t part of GDP as defined.

The substantive claim being made by the “imports reduce GDP” crowd is the idea that Americans would have a higher standard of living if we exported more and imported less. But this is outright false. Exports (again, by definition) are things American workers spend time, money, and resources producing and foreigners get the benefit of consuming. Consumption is a benefit, and production is the cost of acquiring that benefit. (Indeed, as Adam Smith wisely said, “consumption is the sole end and purpose of all production.”) Exports are what the citizens of a nation go through the cost of producing but don’t get the benefit of consuming. Because exports are produced domestically (by definition) they are part of GDP, but that’s very different from saying more exports and fewer imports would improve living standards or make citizens wealthier in any meaningful way. Another way to show this is to rearrange the GDP accounting identity. Say you want to live in a society where the citizens benefit from high levels of consumption and investment. You get C + I = GDP – G – X + M. That is, lots of exports and few imports means low levels of consumption and investment, and lots of imports and few exports means high levels of consumption and investment.

The second deepity, that greed explains price increases, can be interpreted in a way that is trivially true. Producers want to make as much money as they can and will therefore prefer to sell at higher prices in order to make more money. But this claim is often trotted out to explain things like price spikes, and in this more substantive context, the claim is clearly false. A desire to make more money rather than less is a constant. Price changes are a variable. Explaining a change in outcome by appealing to factors that have remained the same is an explanatory dead end. As an example, not long ago eggs sharply increased in price in the United States. Does “greed” explain this price increase? Trivially yes, but substantively no. If egg producers used to sell eggs for $3 per dozen and then raise the price to $6 per dozen, how does “greed” explain the change? If greed is the reason to sell at $6 per dozen, then why were they ever selling at $3 per dozen to begin with? Were egg producers altruistically motivated in the previous era, then suddenly all simultaneously got greedier, before all suddenly becoming less greedy again? The economist Justin Wolfers once tweeted out a rather striking graph of egg prices:

The same reasoning that says the massive spike in prices toward the end of the graph is explained by “greed” would, if applied consistently, also imply that the precipitous decline taking place shortly thereafter is explained by a massive decrease in greed. Or, instead of trying to explain changes by appealing to the unchanged, we could try to explain changes by appealing to other factors that also changed. Such as, say, changes in the supply-and-demand situation brought about by the spreading of an avian disease that substantially reduced the egg supply in the short term. 

Those are two common examples of economic deepities. If there are some you can think of, dear reader, do by all means share them in the comments!