Two stories about capitalism, which explain why economists don’t reach agreement
Why is it that if you know an economist’s political leaning you can guess many of his or her factual beliefs? Would raising the minimum wage would help or hurt the poor overall? Is austerity or stimulus is the more reliable route to economic recovery? Is rising income inequality a drag on growth? Is Piketty’s data sound? These are factual questions, not value judgments, so why don’t economists converge? It’s the same for historians. If you know which party they vote for, you can guess their general views on capitalism, and on the recent debates about whether slavery in the American South was crucial for its development (by providing cotton for the mills in Manchester), or irrelevant for the spectacular flowering of capitalism in the 19th century.
The answer, in part, is that there are two basic master narratives about capitalism that have been circulating in the West since the time of Adam Smith. One story is that capitalism (and business more generally) is exploitation, so we need a strong government to keep the greed and amorality of capitalists in check. The other story is that capitalism is liberation. People were mostly serfs and peasants until capitalism came along and freed people to keep the fruits of their own labor, so we need to keep government’s role to a minimum, given how prone it is to capture, corruption, and inefficiency. Let the markets work in peace.
I’ve been seeing these stories all around me since 2011, when I moved to a business school at the same time that the Occupy Wall Street protests broke out. I find it so helpful to know these stories that I turned them into 70 second video montages to share them with others. The two montages are included in a talk I gave in November at the Zurich Minds festival, which you can watch below.
The talk explains the most useful concept I have encountered in recent years – the concept of “wicked problems,” which refers to problems that activate the moral and political identities and desires of the experts, thereby warping their thinking.
Wicked problems (like poverty, education, or racial inequality) activate all the post-hoc reasoning and biased searching for support that I described in chapters 3 and 4 of The Righteous Mind. They are so different from tame problems (like curing cholera), which can be very challenging technically, but they just sit there and let the experts converge upon solutions. My hope is that a better understanding of moral psychology can help people to think clearly about economic debates, which are usually also wicked problems with moral implications.
I have also made the two montages available as separate files, in the hope that teachers and professors will find them useful for showing in classes that discuss morality, history, politics, or economics.
You can also download the two separate stories at: www.ethicalsystems.org/capitalism