How Adam Smith Can Change Your Life

How Adam Smith Can Change Your Life: An Unexpected Guide to Human Nature and Happiness
© 2014 Russ Roberts
269 pages
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An economist and a rabbi walk into a bar and co-author a work on the meaning of life. That's not the opening line to a joke, but a near-description of How Adam Smith Can Change Your Life. This little book gives a modern interpretation of Adam Smith's Theory of Moral Sentiments, girding it with references to Rabbi Hillel. The contents are surprising, if your association of "economist" is with strictly matters financial, like stocks and trade deficits. Ironically, writes Russ Roberts,  the subjects economists are consulted most on, like the future health of the global economy, is what they're worst at doing. The heart of economics as originated by Adam Smith is behavioral, however, judging how people use their scarce resources to make the best life possible for themselves -- both as individuals, and with other people. The same desire for understanding that Smith applied to humans at the level of nations in The Wealth of Nations is applied more intimately to individual persons here. What do we really want?

The answer isn't money, though it can help. The Theory of Moral Sentiments contends that what people want most, what actually makes us happy, is to be loved and lovely.  This isn't about romance or aesthetics; Smith's use of love encompasses respect, admiration and affection. "Lovely", too, also has a deeper meaning: it is to be worthy of respect, admiration, and affection. People not only want to be held high in the esteem of others, but they want to have earned that place. Part of Smith's argument is that each of us has an Impartial Observer in our heads, an ethereally human figure who is constantly watching, judging, and arguing with us.  A conscience, so to speak, a means through which we can evaluate our own actions  or behavior from an outside perspective, to see ourselves as we are being seen.  This conscience is not perfect -- it can be lied to and argued with through justifications of our behavior -- but unless its voice is smothered and distorted by our own willful actions, it is invaluable. We can strengthen the observer by reflecting on the behavior of others -- when we see them acting irrationally, we can turn our analysis on ourselves, to see  that behavior which we dislike present in our own actions.  We can use this impartial observer to help not fool ourselves, to help us become lovelier -- and so, loved. The impartial observer rings a bell for me in part because of past readings into primate social behavior, particularly the fact that chimpanzees and such will often act in private in ways that strongly imply they are imagining what the consequences of their being caught in unsocial behavior would be.  I suspect that this observer  is some kind of internal-audit tool of our socially-oriented brains, useful for anticipating how our behavior will be interpreted by others.

Students of schools of Greek philosophy like Stoicism -- which regarded moral excellence or virtue as its own reward -- will recognize the 'virtue' of Smith's loveliness straightaway.  Epicureans, who regarded simple pleasures as the key to the good life, will also find an ally in Smith, when he asks: "What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience?".  Smith regarded the chase for fame, power, and gadgets and goods as self-defeating. These itches are insatiable, leading us to constant torment as we try to reach greater and greater levels. Even those who reach the top must find it a hollow victory, judging by the inner lives and outer behavior of celebrities, politicians, and such.  If we understand our core desires, however -- this yearning to be loved and lovely -- we can be conscious of when we are attempting to fill the real need with ersatz praise,  in admiration for our things rather than ourselves.

Those who have an interest in human flourishing will definitely find this little book worth their attention.

Podcast of the Week: EconTalk discusses "Dreamland"

On Monday, Russ Roberts of EconTalk sat down to talk with Sam Quinones about his book, Dreamland: The True Tale of America's Opium Epidemic.  That book has been on my radar for a couple of years (and was how I discovered that book on Area 51 mythology, also titled Dreamland), so I was excited to give a listen.  Quinone opens with two subjects: first, the history of one Mexican town which became the headquarters of a new wave of heroin addiction in southern California, then spread easterly towards the Mississippi. They made heroin cheaper and safer to purchase, and according to the author shunned violence to prevent undue police attention. The second subject concerns the rise of painkiller addiction in the United States, owing to a change in healthcare culture that convinced itself powerful opioids could be made safe for consumption.  The two meet together in Appalachia and other areas of the central US as people addicted to painkillers begin using cheaper and readily-available heroin to feed the beast inside him.

About the podcast:  EconTalk interviews generally last an hour, but Roberts posts transcripts below his play button  for those who are interested, but would prefer to skim through the discussion.  I stumbled upon EconTalk back in 2011 or so when I was looking for professional podcasts that would let me absorb ways that people like doctors, lawyers, and economists interpreted the world. (I found EconTalk and Lawyer2Lawyer, but nothing for healthcare. Yet.)   The first interview I listened to was an interesting one on the areas in which industry was returning to the United States.  Although in those days I was much more of an interventionist, I found  the reliably free-market Roberts to be so genial, thoughtful, and nice that I kept listening to him. I've been rewarded with some of the most interesting books ever, works like David Owen's The Green Metropolis, Gary Taubes' Why We Get Fat, and a book on digital medicine that I will be reading soon. Despite the name, EconTalk isn't just about economics -- as those book titles, and Dreamland's, indicate.  Roberts' interviews are often conducted with people he disagrees with, as when he invited Thomas Piketty on to talk about Capital.  He's a gentleman and a scholar, well worth listening to -- or reading.

Note: once my own computer is up and running I will edit this post to include some links to books featured on EconTalk that I've read here. In the meantime, just click the "EconTalk" label if you're curiou.

The Choice

The Choice: A Fable of Free Trade and Protectionism
© 2006 Russ Roberts
128 pages

 Imagine that George Bailey in It’s a Wonderful Life had wrestled not with the impulse to throw himself off of a bridge, but with the decision whether or not to endorse a protectionist presidential candidate whose platform promised to bar all imports from American shores – and that he was guided not by Clarence, but by the ghost of a long-dead economist, who showed him two different versions of America: one with free trade, and the other with barriers to imports. This is the premise of The Choice: A Parable of Free Trade and Protectionism, which is like two of Roberts’ other works, a policy argument in the form of a novel.

Like The Price of Everything, it’s short on narrative despite having the most ‘storied’ premise. Instead, the work is a series of debate dialogues about economic issues that join together to constitute one larger argument for tree trade and against protectionism. Some points ring more true than others, for instance Russell’s/Ricardo’s demonstration of how total economic self-sufficiency impoverishes a society. He uses the example of a household that chooses to ‘bar the import of bread’ and begin manufacturing its own bread.  Certainly, this has advantages: homemade bread is of a far superior quality and can be made to suit one’s own tastes. But the time involved in making bread to satisfy constant demand for it will take away from other activities, even if the household chooses to consume less bread.  Other points don’t fly nearly as well, like Roberts maintaining that though American jobs will be through free trade, other opportunities will be created. In the book, an auto plant closes, and the children of that plant’s workers thus look for new opportunities in a pharmaceutical company that opens to sell drugs to Japan. If the plant hadn’t moved to Japan, not only would those children have taken the same job as their parents (bo-ring!), but Japanese people wouldn’t have had money to buy American drugs.  Yes, it sucks to be the parents, but life balances out in the aggregate. I don’t like this argument, and ironically just yesterday I heard Roberts saying he doesn’t like it much either*, as it stinks of utilitarianism.  It’s of poor consolation to the auto workers who lost their livelihood, but – life is change.  Roberts hasn’t quite convinced me, though now I understand more fully the reasoning behind free trade arguments. I balk at embracing the book enthusiastically, however, because Roberts uses such an extreme example to argue with: his choice is between free trade America and an America totally without imports. Pardon may be granted in that it’s difficult to make much of an argument between two more moderate stances, as distinctions are blurred.

Be forewarned: though a work of interest to those thinking on the merits of free trade, or attempting to understand  the economics of such,  this is on the dry side. Lively as Roberts’ writing is, policy debates about systemic interaction can only get so exciting.


*http://www.econtalk.org/archives/2013/07/michael_lind_on.html

The Price of Everything

The Price of Everything
© 2009 Russell D. Roberts
224 pages

The Price of Everything is an economics novel about the virtues of prices and markets, explaining how they work to maximize efficiency and spread goods out among those who need them and are willing to pay. Like The Invisible Heart, it is a policy treatise in novel form. There, an economics professor fell in love with a liberal English professor and slowly worked his dark-side libertarian magic on her. Here, another economics professor, this one the provost of a university, takes a passionate youth leader with a social-justice agenda under her wing.  Roberts is harder on his ideological opponents here than in The Invisible Heart, possibly there because his doppelganger there was trying to seduce his opponent, while his professor is only trying to turn her target into the man who will bring the free market to Cuba.

The kickoff issue in The Price of Everything is a minor earthquake which causes a run on supply stores. Home Depot and like stores quickly sell out, but Big Box, a megacorporation which makes Wal-Mart look like a mom and pop operation, doubles its prices to take advantage of the uptick in demand. This causes outrage among customers, who are catalyzed by the presence of a pregnant woman who is unable to afford her groceries and led by young Ramon Fernandez, who condemns the store in a speech and then takes up an offering to allow the lady to meet her need.  Having discovered a knack for impassioned rabble-rousing, Fernandez decides to hold a rally on his university campus, protesting the fact that a new building is named after the Big Box corporation, who are donors. That attracts the attention of the professor, who chatting with Fernandez under the pretense of grooming him to be a more effective youth leader, engages him in questions and discussion.In reality,  she's ever-so-slightly steering him toward her point of view. Look at it this way, she says:  before the earthquake, both Home Depot and Big Box had the supplies on hand. After the earthquake, Home Depot maintained its price (fair to the consumer) and Big Box doubled its own.  But from whom did the lady find her supplies? Big Box, because it ensured that the only people taking the supplies were those for whom they were most important.  Had Big Box maintained its normal prices, all the supplies might have been bought up by whoever happened by first and decided to grab some extras. Home Depot's approach might be 'nicer', but  who served the lady's needs? (Well, the crowd did, but that's not the point she wanted to make.)

Roberts' arguments make a horrible kind of sense, though it goes against the grain to hear a defense for 'price gouging'.  More palatable is his attempt to convey the 'genius' of prices as regulating agents, ensuring that everyone looking for lead (his example of choice) gets enough, but not too much, the balancing being set by competition between firms trying to acquire supplies. This argument is especially convincing because the counter is so weak: if markets don't set prices, what will? Who can acquire and process all of the information needed to decide whose needs are greater than anyone else's?  (Maybe Google and the NSA, if they joined forces...) And by what standard are they using? Who plans for whom?

The Price of Everything is not quite as potent as The Invisible Heart, but it's still a fun little way to digest economic arguments from an author who is passionate, but not obnoxious; bold, but altogether pleasant.

The Invisible Heart

The Invisible Heart: An Economic Romance
© 2001 Russ Roberts
282 pages

The Invisible Heart is an oddly sweet argument introduction to the thinking behind classically liberal economics, taking the form of a dialogue between one Sam Gordon, an economics professor, and Laura Silver, an idealistic English instructor who has just begun working at the same private school as Sam. The two hit it off immediately, even though Laura thinks economists are soulless cretins obsessed with money at the expense of the noble expressions of the human spirit, like art and safety regulations. Sam is a lonely, embattled man, and he wants desperately to be understood by Laura, who -- despite not sharing Sam's  views -- finds his earnest passion fascinating.  And so as a year transpires, the two chance to meet time and again; first accidentally, and then as their friendship develops, deliberately. Their relationship is fed by argument, for the book is an extensive argument for libertarianism.

Laura is, by virtually everyone's meter, a liberal:  she's very much concerned about the poor and oppressed. She believes firmly in safety regulations, minimum-wage laws, environmental protections -- the state exists to right the wrongs created by capitalism, to curb the abuses of the free market. Sam, in contrast, is a "classical" liberal who believes the freer the market, the freer the people. He takes Adam Smith's notion of an invisible hand at work in the marketplace for granted: let the market work, and things will sort themselves out. Companies that produce bad products will go out of business; businesses that don't pay well enough won't be able to find workers.

Although Sam's view is partially pragmatic --letting things flow naturally is considerably easier than trying to engineer everything --  he's also driven by principle. People shouldn't meddle with the lives of others, and they certainly shouldn't try to justify their interference by using the state to do the meddling. Sure, seatbelts are a great idea -- but making it illegal not to wear a seatbelt is an abominable one.  What right does the government have to tell people how they may or may not use their own property?  Sam also points out that meddling always has unintended consequences: when the Baptist ban drinking on Sundays, the moralists may cheer -- but so do the bootleggers, because now they can charge a premium for hooch that day. By the same token, when the state mandates the use of scrubbers to clean factory emissions,  the manufacturers of those scrubbers give a cheer.* Why not simply fine companies that emit noxious fumes and let that be an incentive for them to find their own best way of eliminating emissions, rather than forcing them to buy a particular product, and thus enrich only a few?  Spread the wealth around -- embrace competition.  Environmental protection, incidentally, is the one area where Gordon isn't so much a free marketeer, but still manifestly libertarian. He believes firmly in personal responsibility, which is why he wears seat belts but hates the idea of making other people wear theirs. But whereas a driver choosing comfort over safety only endangers his own life, a company dumping waste into a river or into the air hurts everyone. They should take care of their own messes -- but care should be taken in making them do it, as with the scrubbers example.

It's hard not to like Sam, even if you disagree with him, as Laura does. He's a nice guy; like Laura, he wants a better world, but unlike he thinks he should be brought about in an organic way -- that it should emerge from the bottom-up, from the marketplace, rather than being forcibly constructed by states, from the top down.  His arguments sometimes seem counter-intuitive;  he defies expectations. Although an economist primarily concerned with self-interest, Sam isn't himself particularly focused on wealth. One of his arguments with Laura is over the question: are teachers underpaid? Sam thinks not. Yes, their salary is considerably less than most others, but they're compensated in different ways. They have the summers off, for instance, the work becomes easier with time, and they have the chronic joy of seeing "lightbulbs come on in students' heads". If they were truly underpaid, the school would be unable to find people to fill the positions. Besides, he says; it's so much easier to be content with what you have.   Epicurean simplicity isn't what I would expect from an advocate of capitalism, the ethos of which seems to be MORE!

Although I, like Laura, don't quite agree with all of Sam's arguments, it's difficult not to find his earnestness compelling. His principles are outstanding, but it's easy to argue for the free market when you are protected from the fray. The Invisible Heart's author, Russ Roberts, is essentially Sam Gordon: a genuinely nice and fantastically interesting fellow who teaches economics, though at the university level. How can a university economist, safely ensconced in an 'ivory tower', feel comfortable telling people struggling to get by on a minimum wage that said minimum is a bad idea, as it prices those willing to work less out of the market?  And it's easy to say that a factory that didn't pay enough won't find workers, but that's preposterous: when unemployment is high and people are desperate for food, they will accept despicable conditions because they have no other options. There isn't competition for employment in a one-factory town.

And yet despite these reservations, The Invisible Heart stirs me. I wish I'd purchased it instead of borrowing it through the interlibrary loan system, because it's one I'm going to want to revisit. If you want your assumptions questioned, if you want your mind to be provoked into thought by someone who disagrees with you but who is so nice about it that you feel more invigorated  by the challenge than insulted, this is a book to read.  Although about economics, the 'dismal science', Invisible Heart is anything but dismal, freely using poetry, literature, and philosophy to explore the meaning of life.


* For a more real-world example:  I couldn't help but think of reading about a politician who advocated mandatory drug testing who turned out to be bankrolled by the manufacturers of the testing supplies. Baptists and bootleggers...

Related:
EconTalk, the author's podcast.