You should read the article that I linked above if you can; it's got some interesting facts and details in there. The main gist, though, is that people who study economics:
- Are less likely to donate to charity
- Accept greed in others more willingly
- Aren't as fair when dividing money with peers
- Are more selfish in terms of free-riding off of others
Reading through that list of facts, things look pretty bleak for economists. We're all a bunch of self-centered jerks, apparently. :) But seriously, after thinking about this for a few days I've settled on three main points:
1. There's no reason that studying economics should make people greedy.
2. There are several alternative explanations for the above facts that suggest that the above findings are a bit overblown.
3. Even so, I bet it is probably true that studying econ breeds greed to some extent. I think this is likely due to a couple of key misunderstandings about econ in general, and it reflects poor teaching of econ at the introductory level.
If you're interesting in my take on each of these points, keep reading:
1. Should studying economics make you more greedy?
There's a common misconception (held by economists and non-economists alike) that economics teaches that "greed is good." This concept comes from a basic principle of econ taught by Adam Smith himself: "It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest."
But you have to be very careful with this idea. Let me try to state exactly what economics teaches as clearly and cleanly as I can:
In a market where everyone pursues their own self interest, and in which no other frictions are present, assets will be allocated to their most efficient uses.
This is a remarkable statement that demonstrates the amazing power of markets, but if you read it carefully it never says that pursuing self interest is what one should do. It just says that if we assume that people will pursue their own self interest, then assets will be used in the most efficient way possible. Also, the idea of "acting in your own self interest" is actually quite broad and could easily include donating to charity if that makes you happy or better off in some way. In some cases, economists will explicitly include charity or service in their models when they feel that those items are important. For example, if you're modeling retirement savings, the desire to leave an inheritance for your kids is important and must be taken into account. But most academic studies ignore charitable acts and make the simplifying assumption that everyone strictly acts in their own self interest. This is not because this is what economists think everyone should do, nor is it because economists think that everyone does act in this way. It's a simplifying assumption to make the model simpler, and most of the time it's close enough to be quite useful.
One other quick point: Note that the above statement says nothing about fairness or ethics at all. In this hypothetically efficient market that we're thinking about there could very well be people who die of starvation, despite the fact that everything is allocated to its most efficient use. Clearly, no one thinks this is right or is what should happen, but this basic principle doesn't have much to say about fairness. Each economist is going to have a different opinion on what is fair, and in most cases you can't prove that one opinion is better than another when it comes to ethics. Because of this, most of economics steers clear of moral issues and tries to just focus on things that unambiguously make everyone better off.
So far, I've tried to make the case that studying economics shouldn't necessarily make people more greedy. But there is a substantial amount of evidence that suggests that economists are more self-centered than others. Is there any reason to doubt this evidence? I think that there are three things to keep in mind, that should at least temper your nasty thoughts about economists:
- First, pretty much all of the studies that are linked in the article above only show a correlation between studying economics and greed. There is no strong evidence that study economics causes greediness. In reality, there is likely a lot of self-selection going on. Lots of people that study economics are doing so because they are business men and women who are naturally focused on succeeding and turning a profit--a.k.a. somewhat greedier than others. If this is the case, it would make economists more self-centered than others, but it wouldn't be because they studied econ. They were already that way by nature. Of course, that doesn't speak well of those who study econ in general, but it does mean that it's not the study of econ per se that's causing the problem. Also, I have to put in a word of defense for the many MBAs that I know. While most of them are extra competitive, I would also argue that nearly all of them feel that the best way to help the world is by building strong and vibrant companies that produce good jobs and great products. They want to do well themselves and do well for the world. I don't disagree with that notion.
- Second, magnitudes matter. All of those facts say that economists are greedier than others, but how much greedier are they? Are we talking huge amounts here? In most cases, no. For example, in the study that showed that economics professors donate less to charity than other professors, it turns out that econ professors actually donate more than other professors on an absolute basis. The authors of the study scale donations by income, and since econ professor earn more than most other academics, this hurts their donation numbers. But, even scaled by income econ professors donate 91% of what other professors donate. That's still less, but it's not like they are donating zero.
- Third, some of those studies are sort of specially designed to trip up people who have studied economics, particularly someone who's studied game theory. One of the most famous games studied in game theory is called the "ultimatum game." In this game, two players are given a small sum of money. Player 1 gets to propose a way to split the money between the two players. He can choose anything: 50/50, 80/20, 100/0, etc. Player 2 can then either accept the proposal and both players keep the money, or he can reject it, in which case neither player gets anything. This is precisely one of the games in which it is found that economists tend to keep more money for themselves while offering less to the other person. "How rude!" you think. But if you've studied game theory at all, when you're put in this situation you recognize right off the bat that if both players are acting in their own self interest then Player 2 should accept any proposal that gives him anything. Why? Because if he rejects the proposal, he gets nothing! Knowing this, Player 1 should rationally choose to offer Player 2 $0.01, and keep the rest for himself, knowing that Player 2 will accept any offer over $0. So, if you're an economist who has thought through this problem and you're put in this situation, it's natural to gravitate towards offering less, and indeed they do--13% less according to the study. But that's very different from asking whether economists would do the same thing in a real-world situation. This is a carefully controlled game that economists are very familiar with, where their brains will switch to "game theory" mode and will lead them directly to a greedier answer. It doesn't necessarily follow that economists will be that much greedier in real life.
3. So, why might studying economics breed greed?
Although I've argued that studying econ shouldn't make you more greedy, and that the studies showing that economists are greedy are somewhat flawed, it's still my opinion that studying economics probably does indeed make people somewhat greedier. And that's a shame, because it doesn't need to be that way.
Here's the problem: in an introductory econ course, pretty much all that students are able to learn is that when everyone is self-interested markets magically set optimal prices and allocate capital in an optimal way. There's no time in an introductory course to go through all of the potential problems that make that not work out in real life, and it's easy to get mixed up and think that therefore everyone should act purely in their own self-interest. Well-taught introductory econ would very carefully and very forcefully make clear that market imperfections and issues of fairness make it so that greed isn't necessarily good. Unfortunately, introductory econ often isn't well-taught, leading to confusion on that point.
In addition, I think there can be a culture among economists that promotes the idea that if you don't act in your own self interest you are being irrational, and therefore you're an idiot. I don't run into that very often, and almost never among academic economists, but it's out there. I'm all for thinking rationally, but that's not the same as being self interested.
There's also a more benign reason why studying econ might make someone less charitable: skepticism of how effective charities are. When you read papers that show that giving someone $150,000 does not help them avoid bankruptcy in the long run, you start to wonder if charity can really make much difference. That skepticism might very well lead economists to donate less to charity.
The flip side of that, though, is that many, many economists are dedicating their lives to discovering how to help individuals, villages, cities, and countries rise out of poverty. We really want to know how to help the poor and the disadvantaged! In fact, at their core essentially all academic papers in econ are focused on improving economic conditions. In that respect, you could argue that econ is one of the least greedy professions out there. We just haven't found the magic bullet to solve inequality and poverty. Yet... :)
Let me know your thoughts in the comments. Or, you can answer this related question, which came from a great conversation with Shug and Paul: Does education make you more liberal, more conservative, or more moderate?
