“I give you the toast of the Royal Economic Society, of economics and economists, who are the trustees not of civilization, but of the possibility of civilization.” John Maynard Keynes, quoted in Dwight E. Robinson, “Economics and ‘The Possibility of Civilization’” Four Judgments, Quarterly Journal of Economics 67(1), Feb 1953, pp. 50-75, p. 50

 

Look around you. No doubt you see people doing things that don’t make much sense when you think about it. Middle-aged people (like me) talk about wanting to be healthy but then (like me) still too often eat like they’re still in High School. People talk about wanting a job and don’t seek one. People litter. People throw things away that could be recycled. There’s homelessness. Jobs are especially scarce for black teenagers. The world, it seems, doesn’t make sense because it’s filled with fools and knaves. If only we could find the right strong man or woman who can make a plan and make it work…

A lot of that, I suspect, is the product of a price structure that rewards what looks like foolishness and knavery. When we get the prices right, however, what looks “foolish” isn’t necessarily foolish, and what looks knavish might be relatively easy to explain.

Consider littering. It drives me crazy: in the 1980s, I imbibed messages telling us not to litter or waste energy or water. The fastest way to annoy me is to leave a room without turning the light off or to leave a faucet running for no discernable purpose. I hate seeing people throw food away, especially when I paid for it. 

Why are people such inconsiderate jerks? More specifically, why don’t they all do what I want them to do when I want them to do it? Don’t they realize that those like me know how they should now live better than they do? 

The fault lies not in our stars and only sort of in ourselves. The fault lies mainly in our incentives.

I won’t get into what prices do, how they work, etc. I’ve covered that in-depth before. Here are just a few examples. Rather, I want to highlight an unintended social spillover from forsaking the price mechanism: the erosion of the social fabric and the dissolution of the bonds that make civilization possible. Look at your Facebook and Twitter feeds for a second. Glance at Nextdoor.com. You’ll see many posts decrying other people’s selfishness or foolishness. We have long lines outside gas stations because people are greedy and only interested in themselves. People “don’t want to work anymore” because they’re lazy. People support this or that foolish thing du jour because they are fools. 

Frequently, however, we would do well to ask about people’s incentives. What incentive do people have not to support the stupid thing? Campaign advertisements are clear examples of what Joseph Schumpeter meant by people moving to a lower level of mental performance when political questions are on the table. I’ve followed Bryan Caplan in building a bit of a bubble that insulates me from political campaigns, but it’s important to consider people’s incentives when asking why they vote the way they do. Since a single vote is supremely unlikely to be decisive, we have very weak incentives to develop epistemically justified true beliefs about what is conducive to the common good.

Instead, we rely on gut reactions and simple heuristics. “Gee, Candidate Betty Blue wants to help the children! I also want to help the children! I’m voting for Betty Blue!” “Candidate Rhonda Red likes guns? I also like guns! I’m voting for Rhonda Red!” Schumpeter notes that people regularly indulge in modes of thinking and heed “arguments” they would rightly dismiss as silly in just about any other context.

Our family spends a lot of time in Birmingham’s Avondale Park. Like any city park, there’s a bit of a litter problem. It needn’t be because people carelessly toss beer cans in the grass when finished. On busy days or weekends (especially during youth baseball season), garbage cans overflow, and anything light enough to be blown away ends up in the grass, the woods, or the pond. First, people face little social sanction for littering in the park. The cops are never around, and few people want to be the self-appointed litter police.

The same thing happens when people feed ducks and geese in the park. There are giant signs bearing pictures of ducks that say “THANK YOU FOR NOT FEEDING US BREAD,” and explaining that it makes the animals sick and contributes to the green scum that makes the park pond smell bad and look worse. Naturally, it’s common to see people feeding the local wildlife bread, crackers, or other not-bird-friendly foods.

Compare this to Disney World or just about any other theme park. It’s likely to be cleaner, and as the park owners have a clear incentive to keep the animals healthy, they likely have dedicated personnel to remind people (always with a smile!) that we’re not to feed the animals. I know I don’t want to be the litter or bread police. Maybe I should just carry around some birdseed or something.

The social fabric frays when we don’t have clear, well-defined incentives and institutions. We turn against one another, seeing our fellows as fools and knaves when all they do is respond predictably to the incentives in place. John Maynard Keynes famously toasted “the economists” as “the trustees not of civilization, but of the possibility of civilization.” Understanding the roles of incentives, institutions, and information is one way we do that.