The Funny Thing About Economics

The Dismal Science

Economics has been dubbed “the dismal science”, and perhaps for good reason. This derogatory moniker was assigned to this "science" due to its historical association with pessimistic views and gloomy predictions of human behavior and societal outcomes. It is a field that is rarely a source of delight or amusement to the well-adjusted individual. But here is what is funny about economics. 

A Tale of Two Sciences

Economics masquerades as something it is not. It has sold itself as an ‘unchangeable law of nature’, like physics. But despite its dazzling graphs and persuasive equations, it’s actually a social science. And what is interesting about social science is that it is profoundly different from physical science. 

Physical science is our way of understanding the physical world. It emphasizes quantitative methods, experiments, and empirical data in efforts to understand immutable laws of nature. Physical science operates independently of our understanding of it. So if, for example, we develop an incorrect theory surrounding the mechanics of the solar system, it has exactly zero effect on how the solar system will work. It will continue to work exactly as it was designed, no matter how accurate or ill-informed our theories may be. Our understanding of physical science, or lack thereof, does not alter the laws governing it. 

Social science, on the other hand, is a way of understanding ourselves. This has an enormous influence on what we think, what we aspire to, and how we act. So social science is very much shaped by our understanding of it, and this ultimately shapes the institutions we create. So if our understanding of social science is wrong, we run the risk of creating institutions that reinforce bad scientific theory, which can (and has) created disastrous consequences. We create ways of living that are consistent with these false ideas, which reinforce the false ideas, causing them to appear true. And false ideas about human beings don’t just go away if people believe they are true. And that can keep societies trapped in antiquated beliefs that far outlive their usefulness.

An Antiquated Economics

Neoliberal economics emerged in the mid-20th century and gained prominence in the 1970s and 1980s. It is fundamentally rooted in The Profit Motive. And the Profit Motive is driven by extrinsic motivations such as rewards and punishments, carrots and sticks, paychecks and pinkslips. Its metrics are measured in units money, power, status, and fame. It is derived from a ruthless focus on self-interest. And it's emphasis is on traditional notions of "success." 

Neoliberal economics also gives us the homo-economicus: the economic man. This theoretical behavioral model portrays humans as perfectly selfish, perfectly rational, and relentlessly self-maximizing. And this fundamental assumption of human behavior has profoundly warped our worldview and the institutions we've created to support it. Because a deeper analysis of these two assumptions leaves them both wanting. 

Humans can certainly be selfish. But to suggest that humans are exclusively selfish and self-maximizing is to present an augmented focus on our most primitive nature, with little to no acknowledgement of our higher nature. It is rooted in fear-based models driven by scarcity and desperate attempts to grasp for status, safety, and security. From a neurobiological perspective, this model is strictly a reflection of our lizard brain (the amygdala), the most primitive part of our neurobiology designed for fight or flight. It however ignores the very presence and prominence of our neocortex, the most evolved part of the human brain, capable of empathy, connection, creativity, community, and problem solving, which are distinctly human features. So to say that humans are inherently and exclusively selfish is to, in itself, ignore or dismiss the very essence of our humanity.

Humans can also certainly be rational. And while we possess an impressive ability to rationalize our decisions and behaviors, these rationalizations can be rooted in a more irrational and complex web of emotional needs and human desires, deeming humans “predictably irrational." So centuries of empirical evidence, alongside our intuitive understanding, indicate that humans are neither robotically rational nor empirically self-seeking. 

The neoliberal claim is that selfishness is the cause of our prosperity. And under this economic logic, greed is good, inequality is efficient, and the sole purpose of the corporation is to enrich the rich and exploit the poor, because to do otherwise would be to slow economic growth and slow the economy overall.

Here's the problem with neoliberal economics. The fundamental assumptions that underpin this economic theory are not only contrary to our deepest intuition, but they are morally corrosive and scientifically wrong. Because millions of selfish acts do not magically transubstantiate into prosperity and common good. And to describe a person as "perfectly rational and relentlessly selfish" conjures up unsettling images of a psychopath, not a good citizen. 

This Gospel of Greed forms the ideological cornerstone of neoliberal economics. And this economic model, in glorifying the qualities of the psychopath, creates cultural institutions and belief systems to perpetuate this mutant caricature of human behavior. It reduces humans to a one-dimensional, profit-seeking creatures -- an outlook that has proven to yield suboptimal results. The exclusive prioritization of the Profit Motive may produce short-term gains, but at a long-term loss. And as a result of this thinking, we've seen rising inequality, political instability, and natural devastation that is a direct result of decades of this bad economic theory. We need a far more modern economics to address the deficiencies of this model, and meet the needs of our time. 

A Modern Economics

Modern economics is quickly emerging as the model for the 21st century. And it is rooted in The Purpose Motive. And the Purpose Motive is driven by intrinsic motivations. It is defined by intangible measures like service, stewardship, learning, growth, contribution. The Purpose Motive doesn’t dismiss the role of profit, but it views profit as a tool, not a goal; a means to an end, and by no means the end in itself. Its emphasis is on more evolved notions of "significance."

Modern economics presents us with the "moral man". It renders the "homoeconomicus" more a creature of myth than of modernity. Because it is impossible to believe that every human act of kindness is purely maximizing one’s own utility. It is insulting to assert that a soldier’s selfless act of throwing himself on a grenade was intended to promote his own narrow self-interest. These claims are not only contrary to any reasonable moral intuition, but they are scientifically untrue. And modern economics is rooted in evolutionary science, and taps into the neurobiology that animates our capacity for empathy, creativity, reciprocity, and collaboration. 

These findings fundamentally challenge the antiquated ideas put forth by neoliberal economists. And it dismantles the mantra that “greed is good”. And the truth is, being a psychopath is bad for business, and it's bad for society. And the latest empirical research, rooted in real science, correctly shows that humans are highly cooperative, reciprocal, and intuitively moral. And from this it follows that virtue is the cause of our prosperity, not vice. So those traits are humanity’s economic superpower. And those superpowers are key to driving an optimal economics.

Opting for an Optimal Economics

Economics is less of a science and more of a choice. And we can choose better. It is less an immutable law of nature and more a malleable set of beliefs. And we can believe better. And at the heart of this modern economics is a call to be our best selves. And unlike old economics, the fundamental assumptions underpinning these theories are both virtuous and have the virtue of being true. 

This new economics isn’t a product of quixotic imagination or fanciful invention. Its theories and models are being developed and refined in modern institutions around the world, building on the newest research in economics, complexity theory, evolutionary science, neurobiology and other cross-sector disciplines. This modern economics does not yet have its own textbook or even a commonly agreed upon name, but it illustrates where lasting prosperity comes from.

Modern capitalism is an evolutionary system where prosperity emerges from a positive feedback loop between innovation and consumer demand. Innovation is the process by which we solve real human problems, and consumer demand is the mechanism by which the market votes on the most useful solutions. And as we solve more problems, we become more prosperous. But as we become more prosperous, our problems and solutions become more complex, and this increasing complexity requires higher levels of social and economic cooperation, in order to produce more highly specialized products that define a modern economy.

Modern economics turns the “conventional wisdom” of neoliberal economics on its head. Because it isn't capital that creates economic growth; it's people. It isn't self-interest that promotes public good; it's mutual interest. It isn't competition that produces our prospertiy, it's cooperation. And it isn't Profit Motive that is the superior driver of success; it's the Purpose Potive. This shift in underlying motives represents a profound shift in their external expressions. It represents a shift from the Consumption Economy to the Contribution Economy; a shift from me to we; and a shift from success to significance. Because we see that an economic theory that is neither just nor inclusive can never sustain the high levels of social cooperation necessary to enable a modern, interconnected, and interdependent society to thrive. 

Because here's the funny thing about economics: we can make it whatever we want it to be.