Economics: The Psychologically Naïve Science

Originally published on The Huffington Post, August 9, 2012

I admire Paul Krugman. I really do.

Having won the Nobel Prize in Economics, Krugman is not only a great economist, but he is a wonderful and witty writer. His many columns in The New York Times and books (for his latest, see End This Depression Now) are a testimony to his ability to explain arcane topics in terms that the layperson can understand. To accept his ideas is another matter.

For instance, why do Republicans violently oppose any form of a government stimulus even though that’s precisely what The Great Depression supposedly taught us in order to get the national economy working again? Yes to be sure, any stimulus big enough to do the job will in the short run add substantially to the deficit (even this is debatable), but in Krugman’s pithy words, “The time to save water is not when your house is on fire.” The time to pay down debt is when the economy is doing well, not when it’s strapped.

Again, why the nasty and fierce opposition to such ideas? That they are somewhat counterintuitive is only part of the answer. The deeper answer lies outside of economics.
If the government can successfully attack the recession — what Krugman rightly calls a “minor depression” — then when the recession is over, government will be empowered to attack a host of never-ending societal problems. According to Republicans, this not only breeds greater dependency on government, but it eventually unleashes greater restrictions on business and hence on our “freedoms.” Worst of all, it would cause billionaires to pay more in income tax for the “greater good of society.” And this in turn means giving support to those who are viewed as “freeloaders and undeserving.”

Consider another. Why do those at the very bottom rungs of society often oppose, again in the most violent terms, government health care? Because, if one accepts such aid, then one finally has to admit that one is indeed at the very bottom. And that is far too painful to do.

Irrational? Perhaps.

Notice that we have been steadily moving from the land of so-called “rational economics” into the lands of politics, psychology, and sociology.

Now Krugman is very good in acknowledging that the acceptance of his and the ideas of other leading economists is more often than not a matter of politics than it is of economics. Still, unfortunately like the great body of economists, Krugman is not good in acknowledging that, no matter what the field of human endeavor, all of our ideas rest on a foundation of deep psychological and sociological assumptions and predispositions.

This is precisely why I not only view economics as the “dismal science,” but as one of the many “psychologically naïve sciences.” This is also why in my many previous op-eds I have stressed in particular the role of psychoanalysis in helping us to understand political behavior. Yes, to its credit, economics has finally developed “behavioral economics.” But, one, it took far too long to do it, and two, the type of psychology that behavioral economics sweeps in is still not deep enough to account for the seemingly irrational complexities of human behavior.

I don’t know how to get the very poor and the very rich to change their attitudes and behavior. But, one thing I do know: If we Liberals and Progressives want all of us to change, then we’ll have to learn to tell more compelling stories that appeal to our hearts and emotions, not just our brains.

Originally published on The Huffington Post, August 9, 2012

About imitroff

Dr. Ian Mitroff is Professor Emeritus at the Marshall School of Business and the Annenberg School for Communication at the University of Southern California in Los Angeles. He is the president and founder of Mitroff Crisis Management, a private consulting firm based in Oakland, California, that specializes in the treatment of human-caused crises. He is a Senior Investigator with the Center for Catastrophic Risk Management at the University of California, Berkeley.
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