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Economics is a Philosophy of Tolerance

Economics is a Philosophy of Tolerance
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The world is full of snobs. There are music snobs who complain that most people prefer Lady Gaga to Stravinsky, film snobs who complain that most people prefer action movies to art films, and food snobs who complain that most people prefer pizza to fine sashimi. Whatever one’s area of interest, it is tempting to pass judgement on others’ preferences.

In learning economics, and in absorbing its lessons, one learns to be less of a snob. Economic analysis always begins by taking people’s preferences as given. The economist sees someone choosing pizza over sashimi and sees only a person acting towards the highest attainment of his ends. The economist trains himself to leave his personal biases and any inclination towards snobbery behind so that he can keep his analysis value free.

Even common terms like “responsible” and “irresponsible” are value-laden. Activities we recognize as responsible, such as saving for retirement, avoiding risks to life and limb, and living a healthy lifestyle are consistent with a specific set of preferences. Someone who values future experience highly against present experience (i.e. someone with a low rate of time preference) will favour all of these behaviours. Activities we recognize as irresponsible, such as profligate spending, risk-taking, and indulging in junk food, alcohol, or illicit drugs are consistent with a different set of preferences. Valuing present experience highly over future experience (i.e. having a high rate of time preference) makes all these activities more appealing. Economics permits us to understand these different preferences but it never permits us to judge one set of preferences to be superior to another.

It would not be uncommon for a successful professional to pass judgement on former peers or family members who chose partying over study and now earn a lower income than the professional. But in making such a judgement, the professional makes the mistake of interpreting others’ actions through the lens of his own preferences. Partying would certainly have been a poor means to achieve the young professional’s ends, but that does not mean that partying was the wrong choice for those who chose it. In fact, as each person is generally the best-informed about his own tastes and interests, we have every reason to believe that someone who chooses to party is acting towards the best satisfaction of his ends.

In training ourselves to observe others’ actions without judgement in our professional lives, we learn to be more tolerant in our personal lives. Russ Roberts demonstrated such tolerance when he said in a July episode of EconTalk, that he likes “giving cash to poor people…particularly if they are going to spend it on drugs and alcohol…Because sometimes when you are desperately miserable, drugs and alcohol might be what you want.” It is safe to presume that Roberts, as a PhD economist, has never been in a situation as desperate as that of the people he gives money to. And yet he demonstrates his respect for their autonomy and their ability to make choices for themselves by not worrying about the content of those choices. What he is conspicuously not doing is projecting his own preferences onto them.

There is a strain of modern economics that seeks to reintroduce judgement of others’ preferences. This strain derives from behavioural economists[1] who purport to show that people do not behave “rationally” (understood in the neoclassical sense) in the pursuit of their ends, but are instead driven by various biases and errors.

Armed with the tools of behavioural economics, our successful professional could claim that his less-responsible friends were in fact the victims of hyperbolic discounting. That is, when they chose partying over study, they were acting on the basis of a rate of time preference that valued present consumption over future consumption to a greater degree in nearer time periods than in further ones. This would allow our professional to say that his friends were not, in fact, acting to achieve their best ends. They were acting consistently with their preference at each moment in time, but they were not acting consistently with their “true” preference, the preferences reflected by the low rate of discounting between future periods and more distant future periods.

Critics of this approach have pointed out the fundamental error in this reasoning: “There is no theoretical basis for choosing which behavior represents the individual’s ‘true’ best interest as he sees it.”[2] How can one claim, if someone else has multiple sets of inconsistent preferences, that one particular set is “true” while another is “false?” It is easy to slip one’s own preferences into such a judgement: The professional sees the preference for studying over partying as the true preference simply because he prefers studying to partying. The health-conscious intellectual sees the preference for salad over potato chips as the true preference, and so advocates that the salad be placed before the potato chips in the buffet to encourage others to eat more salad and fewer chips.

Economists must resist the urge to re-insert our biases into economics. The tolerance that comes with the economic way of thinking is a valuable side-benefit of economics as a discipline. It goes hand-in-hand with a view of the economist as the neutral observer and student of society rather than as a mechanic or doctor to society. It is a major part of what keeps many economists working against those who seek to dominate and control others.

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[1] See, for instance, Thaler, R. H. & Sunstein, C. R. (2008). Nudge: Improving Decisions about Health, Wealth, and Happiness.

[2] Rizzo, M. J. & Whitmann, D. G. (2009). Little Brother is Watching You: New Paternalism on the Slippery Slopes. Arizona Law Review. Vol. 51. p. 685-739.

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Profile photo of Garrett Petersen

Garrett is an economics PhD student at Simon Fraser University. He holds an MA in economics from Queen

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