Intro. [Recording date: April 10, 2019.]
Russ Roberts: My guest is Mary Hirschfeld.... Mary and I both have Ph.Ds. in economics, and both have become a little disenchanted with the underlying framework of modern economics. And, I like to frame my disenchantment through the ideas of Adam Smith; and Mary recently through the ideas of Thomas Aquinas--the 13th century philosopher, theologian, and scholastic. Today's conversation is going to be based on Mary's new book, Aquinas and the Market: Toward a Humane Economy.... In the standard economics paradigm, human beings try to maximize their wellbeing--often called 'Utility,' the 'capital U'--subject to the constraints of limited income. What's wrong with that approach?
Mary Hirschfeld: Well, it depends on what you want to do with it. If you mean for it to be a description of how people behave, it's still probably not perfect, but it probably picks up some features of how a lot of people act. But, if you ask the question, 'Should we pursue our happiness by trying to maximize our utility subject to constraint?' there I think the answer has to be No. It's actually an actively bad idea. So, why do I think that? Part of the key problem of pursuing happiness or developing as a wise human being is figuring out which goods are worthy of pursuit. And, it shouldn't take too much reflection to realize that the goods that make up a meaningful human life are the sorts of human goods that aren't necessarily subject to constraint by income or time. So, the pursuit of justice, or of developing close relationships with your family, things like that, for Aquinas a lot of this gets picked up in the term 'virtue'--trying to become an excellent version of a human being. But that has a wide range of these higher goods associated with it. And the key point about these higher goods is that they are not constrained by income. So, yeah--so, when we think in terms of pursuing happiness as maximizing subject to constraint, what we inevitably end up doing is substituting into the, or thinking of the utility function as being primarily premised on these lower goods that do seem to be scarce or subject to constraint. So, material goods. And that seems to shape our whole idea of what happiness is about. And I think that's very misleading.
Russ Roberts: Of course, you could make the opposite argument, that human beings are as they are. They care about stuff. Maybe they should; maybe they shouldn't; but they do care about it. And, I guess one way to frame this challenge to your challenge is to ask: Do people wish they had more stuff? A lot of people act as if they do. They seem to pursue stuff. In many ways, I would argue the utility-maximization framework produces almost nothing of scientific or predictive value other than that people have to make tradeoffs. Right? So, at a given level of income, the essential insight--it's so essential, it's so bland and uninteresting--but it's an insight that I think every human being is aware of: You can't have everything you want. As the Rolling Stones said so well. And so, you have to make tradeoffs. And so that's all that's really there. You could argue that. Do you agree?
Mary Hirschfeld: Um, do I agree? Yes and no. Um, again, I think in terms of key features of human behavior that economics picks up, that would be one of them. And it's true: A lot of people think you can't always get what you want, because you always want a little bit more, and so you have to make these tradeoffs. But, what Aquinas helps you to see is that there's another way of thinking about human happiness that is ultimately more fulfilling and more sustainable. And, that's one where you think--where you just pause. You put the whole project on pause, and you think, 'What do I want my life to look like? What are the goods that I want to have in it?' And, if you do that, you are going to see that the amount of material goods, the amount of stuff you need, is actually finite. So, for me to live out a good life, pursuing the higher goods I try to pursue as a professor of trying to engage with my students, share knowledge, to share my ideas with the public through my writing, to participate in my various communities and all of that--requires a certain standard of living in order to carry that out well. And I actually happen to have that amount of money. So, for me, there really isn't scarcity. I don't need any more stuff. And, I think Aquinas, and Aristotle on whom he draws a lot, would say that, if you don't order your material desires to these higher goods in such a way that you know how much you need, roughly speaking, you will end up treating those lower, material goods as the thing that your life is really about. And, they have good arguments about why that's not a good, not likely to be ultimately fulfilling in the deepest sense possible for humans.
Russ Roberts: Well, Adam Smith would agree. Maybe we'll get into that later. But, I want to rephrase the critique that I started us with. And some of the--you know, my suggestion was that this vision of human activity as maximizing something, is sterile. In the sense that it only teaches us that there are tradeoffs. It leaves out a bunch of stuff. I think that a more serious critique would be that--and Robert Frank and others have made this suggestion--that if you teach people that this is the definition of rationality, they start to think that more stuff will lead you to happiness. Greater happiness. Which, I think, with you, I agree, is a, um, a bad way to look at the world. But I think the deeper point that you are suggesting is that the stuff that isn't in our utility function, as economists--belonging, friendship, love, justice--those things often conflict. They are not just left out. They conflict with the economists'--it's something of a straw man. I wish it were something of a strawman. I don't think it is. But, let's call it the textbook version of homo economicus--the economic human being--as maximizing utility depending on stuff. A lot of times, taking that new job with the higher salary that allows you to have the bigger house, the nicer car, and more stuff, means less time for your family, your community, your pursuit of French, playing the flute, whatever it is that is not commercially oriented. And I think economists, not intending it, but they become blind to those tradeoffs.
Mary Hirschfeld: Very much so. I mean, in principle, they are going to tell you that they can put all those things into a utility function. The: a). there's real questions about whether this works of goods that could be modeled, as though, 'Oh, I want justice on the one hand and more pizza on the other.' But, b). in practice, they don't. And you're right. And the critique by Frank is a concerning one. This gets taught to lots and lots of students, who then think that it's rational to pursue life in terms of maximizing your utility function subject to constraint. Which in turn means that you really want more income to loosen up those constraints. And, people do end up making these decisions that subordinate the real goods that--if you ask them they would say that the real goods that they care about, but they end up subordinating them to the economic concerns. The whole idea that economic concerns are independent, should have independent weight, independent of these higher goods, is itself a symptom of this disorder. The last thing I want to say is--it just broke my heart. I was teaching some of this material in one of my classes, and I had a student who just said, 'You know, my heart's desire would be to be a First Grade Teacher. That's really what I would like to do. But I can't do that because it wouldn't be rational.' And, what she meant was, 'because I wouldn't make enough money.' And, yeah. So, it really is ubiquitous in the culture, and I do think the economic way of thinking just supports that. And, that's part of what I try to talk about in the book.
Russ Roberts: And you are honest about it. I mean, I don't think--neither you nor I are suggesting that people are happy being poor--
Mary Hirschfeld: Oh, no--
Russ Roberts: We're not talking about poverty. We are not talking about a life as an aesthete, of just living as a--in poverty. But I think that example is, as you say, it's poignant in its--I've counseled a number of young people to take jobs that they are uneasy about. Maybe I shouldn't. But I've counseled them to do the thing they love. Often because--you don't need infinite amounts of stuff. And it's great to spend 8 hours a day doing something you love. And that's precious beyond--in so many ways, obviously. And, in particular, teaching. I've told people to go into high school and lower levels of teaching because it makes the heart sing. And that counts.
Russ Roberts: So I think it's a fascinating question. I'll just add, on the last day of class I always tell my students, 'Don't take the job that pays the most money.' Unless--unless, of course, you are lucky and it happens to be the job that you love, also. But there is a tradeoff there. And the fact that people have trouble seeing that tradeoff, to me, is a serious piece of valuable information. So, I want to suggest that behavioral economics, its critique of economics is actually, has its own level of sterility. Which is, 'Oh, people aren't that rational. They don't make calculations. They have biases.' Yeah, but that's just such a small part of the problem. And I think the inability--let me make a speculation and you can respond to it. I think when you talk about stuff all the time--the demand for shirts and beer and whatever it is that you put on your blackboard as a college professor--you end up, you can't help but end up thinking less about these other things. And yes, you'd wave your hands and say, 'Oh, we can put them in the utility function.' 'Oh, of course they matter.' 'Yeah, yeah, yeah.' But I think when you do that all day long, year after year, you start to forget about them. It's like the drunk looking for the keys under the lamppost. And so, I think, the stuff that can't be measured--dignity, respect, agency--all those important human experiences just get forgotten.
Mary Hirschfeld: Yeah. And, what I'm calling for really is just to completely reverse it. So, when we think about economic life, we should think, first, it of dignity, agency, those kinds of human goods. And then second, how does economic life support, enhance those things. But, yeah. It distorts our thinking, just massively. Like, once I started seeing the world this way, you just start to see it, really, everywhere. Things like, we say with a straight face, that we can't afford to have--every household needs to be a two-income household nowadays in order to make ends meet. We say that with a straight face. We're the richest people who have ever lived. We should have more leisure, not less of it. And we're unable to see these things happening as irrational, which in some sense they clearly are.
Russ Roberts: Right--of course, if two people want to work, it's no problem. But if one of them doesn't want to work--
Mary Hirschfeld: Oh. Sure.
Russ Roberts: for whatever reason--they have--to do childcare, or to volunteer, or to work on a hobby, and take a lower standard of material wellbeing, that's all to the good. And yet, we talk about it as if it's "impossible."
Mary Hirschfeld: Yeah. The irony is, way back in the 1930s, John Maynard Keynes thought we were about to arrive at a place where we had solved the economic problem. And his concern was: What are we going to do with all this abundant leisure? So, whatever this thing is--
Russ Roberts: We showed him.
Mary Hirschfeld: Yeah. Julia Schor has picked it up in The Overworked American and The Overspent American, two different books talking about this phenomenon. Because it does suggest that the culture is getting worse on this dimension, like over the decades; and it comes to seem more and more normal to us. And the real tragedy is we are so very rich, and yet we don't--because the flip side of this is if I keep pursuing more and always feel that I have scarcity in my life, somehow I'm not seeing how much I do have. I'm not actually fully present to or enjoying the material goods that are right here in my living room. And, so, that's also part of, to me, the tragedy. We're missing the higher goods; and I think we're also not fully enjoying the lower goods that we actually have. Because there's something in this maximizing mentality that means you are always looking for the next step. And, so you are missing happiness on multiple levels when you try to pursue your life this way.
Russ Roberts: So, if someone was listening in on this conversation and didn't know anything about you or me, they'd say, 'Oh, well these are obviously two Leftists who hate capitalism. Who think that we need a commercial sector based on people, not profit; and, obviously, greed is a sin and we need to put the commercial world in perspective. And most of that kind of talk comes from either the Left or the Far Left.' And yet, I am not on the Left or Far Left. And I don't think you are, either. How do we understand that? And, how do we reassure our listeners?
Mary Hirschfeld: Yeah, well, I do try to spend time in my book, and I might end up writing a follow-up about it. I love markets. I think private property is an institution that's absolutely fitting to human nature. And I think if you take this lens of thinking about life in terms of these higher goods and then economic life in service of it, you come up with a really compelling case for, like, what does it--'For the good of business.' Like, it's really good for the baker to set up shop: they're exercising their human talents; they're providing bread and other items to the community; they're building relationships. All these things are really, really good. And they are making a living. And, markets coordinate all of this so they end up being interdependent. It opens up a beautiful view of how markets work, in a way that's compelling in its own right. The only switch is to say that the goods that we're pursuing are, you know, are finite--not this infinite desire for more. And I go on to talk about--and this just comes from Aristotle--that once we want an infinite amount of more, you're going to end up corrupting those real goods that markets actually can and should produce. So.
Russ Roberts: Adam Smith says the same thing. Right?
Mary Hirschfeld: Mmmhmmm.
Russ Roberts: Adam Smith says 'Man naturally desires not only to be loved but to be lovely.' And, by, 'loved,' Smith means not just romantic love but paid attention to, respected, admired, praised, etc. Mattering--I say it's all about mattering. It's an ugly word; I need a better way to say it. But, people want to matter. They want to have some reason to be. They want people to understand and see them as a value. It doesn't have to be physically, and making stuff. It could just be socially and supportively as a friend. And, so that's what makes us happy--says Smith. And yet, Smith says, there's two ways to get there. One of them is to be rich, wealthy, and famous. And let's just stick with wealthy. So, wealthy people tend to get a lot of attention paid to them. Not just by advertising, but by the people around them. People look up to wealthy people. People want their opinion. People want to dress the way they dress. And so on. And Smith says: That's a fool's game. Pursuing that is not going to really make you happy. You are better off--echoing Aquinas--Smith says you are better off being virtuous. You are better off being wise. You are better off accumulating wisdom. And being respected and honored and praised for that rather than money, fame, or power. And, I think that's really good advice. I think there's a separate question of whether, how people actually behave. Right? That's--you and I are both, I think, blurring what economists call the 'positive' and 'normative' distinction--the distinction between 'positive,' which is how the world is, and 'normative,' versus how it ought to be or how we'd like it to head. And I think it's an open question whether people really do pursue more and more and more. So, I think, you know, that's, that's--one defense of the economists' world view is, 'Well, you know, sure, stuff doesn't make you happy. But people act like it does. So, that's what we should treat them.'
Mary Hirschfeld: Yeah. Although, I will say: There actually are significant numbers of people who pursue lives where they do pursue the calling that matters to them regardless of status or wealth. So, they are more like Smith people pursuing, you know, the goods of virtue and character and community. And, um, they exist. And the economic framework just can't always handle that very well. And so maybe in the aggregate there's enough that are pursuing more wealth or whatever that their models work out well. But I think I remember a piece by Tyler Cowen where he suggested that there are a lot of people who are income-satisficers. You know--there are people teaching first grade, for example. There are people who go to work as a nurse. And they are not making a lot of money. But they chose that occupation because it was meaningful. So, but, the positive/normative distinction--it is blurry. So, just to repeat something we've already been talking about: When economists model people as pursuing more wealth, and calling that rational, they are also, I think, shaping or at least endorsing these cultural trends that support that path to happiness that probably is not the best one.
Russ Roberts: So, if you said--
Mary Hirschfeld: So--Go ahead.
Russ Roberts: Well, if you said that to me 25 years ago, I would have said, 'That's ridiculous. That's absurd. You are telling me that economists, through their little Econ 101 classes, are shaping our commercial culture?' Doesn't that strike you as a bit absurd?
Mary Hirschfeld: People always do push back on me about this. And I don't mean that economists have single-handedly created this catastrophe. But I do think they amplify it. So, I think part of the reason why economics looks like a sensible approach is because it's picking up on things that are already there. So they are reflecting back what's going on in the culture. But then, they slap on labels like 'this is rational.' They teach their students how to teach this way. Uh, and that just reinforces it. So, if you tune into a podcast like Planet Money, or if you read a book like Freakonomics, they are just, again, amplifying the sort of message. And I do think that--well, it certainly makes it harder to try to persuade people that there's another approach to happiness that's better. But I do think it's shifting the culture. I think it's Michael Sandel who says, 'The word incentivize is metastasize, in the last 2 or 3 decades.' Just, as a measure of the spread of this economic way of thinking. And his book, What Money Can't Buy I think is a lamentation of, as we shift towards this way, this economic way of thinking, we are forgetting a lot of these other modes of thought that used to come more naturally to us.
Russ Roberts: Well, I--I want to--let me, though I mostly agree with you, maybe even more than mostly, entirely agree with you. I don't think--I don't find the Sandel critique as persuasive as perhaps you do. I don't think there's anything wrong with incentivizing people. I don't think there's anything wrong--maybe I just haven't come far enough along with the critique. But, I don't think there's anything wrong with realizing that people respond to incentives, and to structure public policy in certain ways to take advantage of that or to do that with that understanding of that reality: that people respond to incentives. I think--I've always thought that the--the deepest--there are really only 3 principles in economics: People respond to incentives; there are tradeoffs--that's Number 2, opportunity costs, same idea; and Number 3 is when people interact with each other in what we call markets, more generally in emergent orders and in complexity. It's complicated. The things that are going to happen are not as straightforward as you think. And that gives you the unintended consequences. And it gives you the appreciation that many things work better--not everything--many things work better when they are undesigned and unregulated and not created from the top down. And I think the critics of economics on the Left miss that last point. But, to take the Sandel point about incentivizing: I think the deeper point isn't that incentives have problems. I think it's when you use incentives only for the things that matter--that are measurable. Excuse me. And you ignore the things that don't matter. That's a legitimate critique. But, to argue that there are things that you can measure, that incentives matter, that seems pretty--like a good idea to know about that.
Mary Hirschfeld: Yeah. No. And I certainly don't mean to suggest, by any stretch, that policy-makers should ignore incentives and the fact that they shape human behavior. What I'm more worried about--so I think there's an important role for economics to play, precisely because they do understand this. The point I want to make, though, is it's not the whole picture. And you need to remember that it's not the whole picture. And I think Samuel Bowles, and I'm not going to remember the name of his book but it's mostly just one, talks about his. So, incentives shape behavior. But insofar as incentives also suggest that more is better, they also might undermine some of these other norms or other higher goods. And so, a policy-maker needs to be careful about balancing them. And I actually, we said I think[?] we are saying the saying the same thing. It's not that we should ignore incentives or not use them. It's that when we come to think about public policy exclusively in terms of incentives, we risk forming people in a way that thinks more is better and undermining the commitment to higher goods that often generate good behavior on its own. Um, so, from my point of view, a really good economist has to do this careful balancing act between how do we structure policy so that, yes, we use incentives, but we don't thereby also undermine the deeper goods that we are trying to aim at.
Russ Roberts: I want to push back a little further. Against [?] policy. If I can get you to agree. So, more isn't better. But, I would argue more kidneys are better than fewer kidneys for people who have kidney failure. And we don't have very many kidneys donated in the United States, through just the incentive of altruism. And so, there's an argument to be made that we should let people donate their kidneys for money. Now. I think you'd get more kidneys. I could be wrong about that, obviously. But I think you would get more kidneys. You'd get kidneys from different people, once you said it was up for monetary donation rather than just a pure altruism. And, I think, you could argue that that would be a better world than the world we live in, where people are dying or stuck on kidney dialysis machines that are credibly life-diminishing and incredibly expensive; paid for by usually other people. So, I think that's where the rubber hits the road in this kind of argument. Now, would you argue that it's immoral to monetize the donation of a body part?
Mary Hirschfeld: I'm worried about it. So, I'm not prepared to endorse or condemn. But I am worried about it. So, for me, that's an open question. But let's say for the sake of argument that I don't have a problem with monetizing it. There's still a real question about whether paying people--I mean, giving up a kidney seems like a major sacrifice, like, a hard thing to do. And maybe you get more of it if you pay people. But, maybe you get even more of it if you somehow socially acknowledge it as a heroic, noble, lovable sacrifice. And that, to the degree that you monetize it, then it becomes, 'Oh, she just did it for money.' And you may actually have an adverse effect where you get fewer kidneys and not more. And, [?] points to a few studies on smaller issues like the Israeli day care center where, when you bring in incentives you actually get the perverse effect that you get less of what you were trying to get, because you also inadvertently undermine the norms. I don't know if you need me to spell out that particular example. But, there was a day care center; parents were coming late. They were getting irritated so they just decided to start charging the parents for coming late. And it turned out that parents came even later. And what seems to have happened is, once you convert coming late into something you can buy, people just buy more of it. And, you have thereby undermined the norm that says, 'Out of respect for the daycare workers, I should come pick up my kid on time.' So--
Russ Roberts: I'm glad you mention that example. Because it is the single most frequently-mentioned example that I despise. And really dislike. So, let me give you my reaction to that. When I say it's the most common: It gets quoted--so, Sandel quotes it. I think you quote it in your book, right? Did you mention it in the book? I think you did.
Mary Hirschfeld: Yeah, I did. And Bowles does.
Russ Roberts: Bowles does. And Dan Pink does: we talked about it--I think it was Dan--one of the times I've interviewed him. And I just want to say a couple of things about it, and then I'm going to--I'll give you a little bit of agreement, for what it's worth. So, I think, if they had picked a large enough fine, they wouldn't have seen an increase in people being late. They would have seen a reduction. So, I don't think you want to say, one should say as a general principle that substituting money for norms is counterproductive. I think it depends on whether you pick it correctly. I think the fundamental claim of the paper, which is just a hypothesis that when you convert something to money you reduce the impact of the norm, could be true. You know. But, you just need to pick a bigger one. The more fundamental point, which is made by Ariel Rubinstein, the Israeli game theorist--and I think we talked about it in his EconTalk conversation, because I just found his critique so entertaining, is that, he says: The people who did that study, he says two things about it. One, the actual researchers weren't on the ground. They had graduate students or research assistants collect the data. Which is a little bit weird, because you don't know exactly whether it was collected correctly. That's number one. Number two, he said, 'If you think you can make an Israeli pay a fine at 5:07 when they were supposed to show up at 5, and they are charged so many pounds--Israeli currency--for being late--one ninth of an hour,' he said, 'You're crazy. No Israeli would pay that fine. It just ain't happening.' To the daycare center. So, he expressed some cultural skepticism of this fact. Now, having said that--it's just my pet peeve about that study--having said that, I could imagine--I like your first point. I agree with that 100%. Rather than quote, 'Oh, it's easy. We just have to raise the return, in a financial sense,' you do have an alternative, of creating a social reward: honor, dignity, pride. There are other ways to motivate people. And I don't--I think economists do tend to ignore that. So, I'm with you on that.
Mary Hirschfeld: Yeah. And, I will say, neither Bowles nor Sandel lean exclusively on that one example. They pick out other ones. But, I think all you need to see, to see their point, is: Certain goods which clearly would be mutated if you think about them in monetary terms. I mean, there's a reason why we think prostitution is different from marriage. Right?
Russ Roberts: Yep.
Mary Hirschfeld: So--but then the trick would be to go into each particular case and ask, 'How does this balance out?' And sometimes you are absolutely right: Incentives are going to be the easiest, most obvious, intuitive way to handle it. The warning is just not to think exclusively in terms of incentives.
Russ Roberts: No, I think the incentives are crucial. I just think that monetary incentives are not much different from non-monetary incentives. If you have a norm that says the right thing to do is to give up your kidney for a friend--of course, I salute Virginia Postrel, who donated a kidney to Sally Satel. And we've had conversations with both of them, as well as conversations about the market for kidneys. So, we'll put up links to all of those. But I think norms and--well, norms are sort of a kind of incentive. I think it may be important to make a distinction between a monetary incentive that makes you better off, versus, 'doing the right thing,' that makes you better off--what Adam Smith called 'propriety.' And the certain expectation that there's civilized ways of behaving and interacting with others. Maybe there is an important distinction there that I shouldn't inflate[?].
Mary Hirschfeld: Yeah. And I would really like to see Social Science move more in the direction of thinking through how to balance out these things, or what's involved in these norms. Because I do think there's something--like, we all want to be able to look ourselves in the mirror at the end of the day. Those kinds of--if there's a social calling for me to be a certain way, it's going to be easier for me to step in to do that. And, there is in a sense a higher calling to make, to getting more. And that's what worries me about the heavy weight on incentives that currently characterizes our culture.
Russ Roberts: Yeah; I was just thinking about tipping. Tipping--I think people tip in restaurants because it's the right thing to do. It's a norm that has evolved. And some people don't like that norm--recently have criticized it. But I do think it's different than the economists' way of looking at tipping in the standard model. Which is: 'Well, there's a chance you might be back there again, with that same waiter.' That's clearly technically true; but it's not why people tip!
Mary Hirschfeld: Right. Right. It's a way of saying 'Thank you.' And 'thank you' is not just to try to get you to be nice to be later on. It's to express actual gratitude. So, although, it begs the question why that service seems to call forth a desire to express gratitude. And, there's interesting reflections on why, that it is a norm; and so I have to say, 'Thank you' that way. And I usually mean it. I mean, I usually genuinely feel gratitude.
Russ Roberts: No; I agree. And I've told the story in here before about leaving a large tip at a lodge in a national park, and my housekeeper returning my wife's diamond earring. It wasn't my plan. It wasn't an insurance policy. I just got--it was a lagniappe; it was a bonus; it was gravy. But I like tipping. As you say--I get pleasure from the expression of gratitude. But it is a little bit complicated. I do think it's an interesting question, whether norms and propriety have become less important in American society.
Mary Hirschfeld: I mean, that is a concern Sandel expresses, and I clearly share. Whenever you substitute money, you are saying that the norms aren't what matters. Because, nobody--like I've already said--nobody thinks you rise in character, improving character, by doing whatever it takes to get more money. So, I do think there's a systematic substitution. And I would hope that people would start thinking about that more thoroughly. Because, Sandel, you know, shoots from the hip. And it seemed to me to be more a gateway to a question that should be explored more deeply.
Russ Roberts: At the same time, though, I think, other institutions--and as you concede, it's not just economics and economists--other institutions that used to teach what I would call virtue, such as our public schools, definitely do not do that any more. They teach a different kind of virtue: they teach tolerance and self-esteem, which are the wrong--I think those are not necessarily the right--they both have positive aspects to them. But honesty, courage, duty, honor, etc. have fallen into disfavor, I think, in American society, to some extent.
Mary Hirschfeld: Yeah. No; absolutely. A little self-discipline would go a long way. The [?] what bothers me about the whole self-esteem push--again, it's good to feel good about yourself; and as you already said, that's, we're built to want to feel good about ourselves. But if it's without content, you end up not feeling good about yourself at all. That's--I think that's one way to identify when you've taken a lesser good and put it up too high, is that when you pursue it as an ultimate good you actually lose all the good or all the value that was there in the first place. It corrupts it. And self-esteem is a perfect example of that. I think it's a disaster that we've pushed that so hard in the schools.
Russ Roberts: Let's talk about economic growth. You mentioned Tyler Cowen. Tyler was on here in the past talking about economic growth as a virtue. Do you see it as a virtue, as something public policy should aim for?
Mary Hirschfeld: Definitely not something public policy should aim for. Caveat: When we are talking about already-developed Western economies. So, economic growth is clearly very good for impoverished countries coming out of poverty. The question is whether we should pursue further economic growth in the United States and Europe and Japan and places that have already in some sense arrived. And, I do not, because I think that just feeds into the solution[?] that more is better; and it keeps people scrambling off into this elusive, whatever is the next thing, and not--failing to see the goods that are around them and failing to cultivate these higher goods. So, I worry about that a lot. That said, the ideal economy, in my picture[?]--if I got to my Utopian vision of what the economy should be like where we are pursuing our economic lives in service of these economic goods, I think it would create a healthy, flourishing society. And, healthy, flourishing organisms tend to grow. So I would expect growth as a byproduct of pursuing these goods. And I would welcome that kind of growth. But I think when you pursue it as an end in itself, you end up--devaluing, not valuing enough these higher goods. And you end up with a lot more stuff and lot less genuine human flourishing, genuine human meaning, genuine human purpose.
Russ Roberts: So, let me ask you a tougher question. Some people believe that economic growth has not been shared widely over the last 40 years. I disagree. As long-time listeners know, I think a lot of people have gotten more materially improved than the data suggest for a variety of reasons. However, there is a reasonable amount--excuse me--there is a substantial amount of inequality at any point in time. Which, you could debate whether that's good or bad. But, do you think we should devote our policy space to bringing up people at the bottom rather than improving the economy as a whole?
Mary Hirschfeld: Uh--neither. I want to go off the menu on that one.
Russ Roberts: Fair enough.
Mary Hirschfeld: So, if you just look at material goods, and the point that you make, that, you know, a growing economy has clearly raised the material standard of living for the poor, and people who worry about income inequality are missing that fact; and you are exactly right about that. But what I think you might be missing is that the real problem with income inequality is the social meaning it has. And--and that's a different question. Although, once we start worrying about these inequalities that I think are rising in our culture, when we start thinking about them in economic terms it invites the response that you'd want to give, which is if you care about the material wellbeing--if you care about how much money people have, then you have to take into account the fact that the people at the bottom tend to have a little more than they did 50 or a hundred years ago. It seems to be[?] that what both people on both sides of the debate are missing is that what matters is the social meaning of the inequality. And I do think that's been shifting in character over time. So, you can imagine a world where, say, you are at a university and you have a professors and you have secretaries and you have gardeners. And it would be natural for a lot of reasons for the professors to be higher paid because they spent more time doing education--educating themselves. And because maybe the community wants to celebrate the good of the university which is represented by what professors do. So there's lots of good reasons to pay a professor more than a gardener at a university. That said, you can imagine one good kind of university, where the professors go to work, and they admire the gardening that's been done; and they are friendly with them. They have full respect for and value the contributions of everybody, even though they are being paid differently. And so there's a sense of community. Right? So that would be one vision. And then another vision is: Well, my economic wellbeing is a marker. My status if I make more than you, I'm better than you. And I use these invidious distinctions. And I think there's a real argument to be made that we are increasingly using our economic wealth to make these invidious distinctions. Indeed, I at least entertain the hypothesis or possibility that part of the reason why we're so frantically searching after more wealth is because these invidious distinctions have gotten more and more pronounced over the decades. Um, so anyway, I just--I think economic inequality is a topic that really could benefit from rethinking in a way that thought it through in terms of not just the economic characteristics, but of what the whole human picture of economic inequality means.
Russ Roberts: So that's lovely; and I'm sympathetic to it. But how would that change the actual wages? Would you suggest that--well, you conceded that professors should earn more than gardeners, they shouldn't probably earn as much more as they actually do now. Right? In terms of that status and change and comparative respect. But, so, if you shrink that gap, you are going to either have an excess supply of gardeners, or a shortage of professors? Right? The market forces are going to punish you. Do you want to change that?
Mary Hirschfeld: No. Not really. The market forces are going to set things the way they do. Certainly not at the level of professors and gardeners. I'm not--I'm not such a libertarian that I'm unilaterally opposed to, you know, taxing the rich more or whatever, that just might be a social signal that, you know, while we think distinctions are relevant and matter, that there should just be a cap to them. But I am far more interested in this book and in my whole project--is to let other people sort out: How much should we have of the State due to correct these things. So, I really want to shape the culture, such that the people at the top end who are pursuing their wealth, they are not going to be trying to maximize it. Right? So, they will, ideally, they would voluntarily identify a standard of living that marks out whatever they've accomplished. And then the rest would be available--either through higher taxes or through charitable donations, or whatever, to make community needs; to meet the needs of people who have fallen behind. And, we have examples of this. So, Warren Buffett, for example, still lives in Omaha, Nebraska--
Russ Roberts: Yep--
Mary Hirschfeld: in his old neighborhood. It's a nice house. I'm sure his life marks out that he has been successful. But he doesn't need a 65,000 square foot mansion, right, with 20 acres, and fencing--
Russ Roberts: In Seattle, say, hypothetically.
Mary Hirschfeld: Hypothetically. [More to come, 43:30]