“This graduation speech teaches you everything you need to know about economics in 297 words” — no it doesn’t

04/06/2014 | Steve Laniel

Whoever wrote this headline decided to annoy a whole lot of people. Indeed, the whole thing is probably a nice big exercise in trolling. So rather than feed the trolls, I will reply in kind with very little text.

Whenever you read about how individuals behave in an economic sense, you should immediately come back with at least one question: what happens if everyone behaves that way? So for instance, that speech talks all about incentives, which are economists’ favorite things. I have an incentive to go to college, say, because doing so increases my expected lifetime income. But what if everyone goes to college? If everyone’s education increases by the same amount, will everyone’s income go up by the same amount?

Or similarly: we all have an incentive, let’s say, to live in a quiet place on the water. But since we all have that incentive, we all decide to move to a quiet place on the water. Now we all live on the water, crowded in with each other, and it’s no longer quiet or peaceful.

Or we all would like our kids to be able to walk to school safely. But they won’t be able to walk safely unless our neighbors believe that it’s safe. So some of us decide to drive our kids to school. Now there’s no safety in numbers, so our kids aren’t safe. So everyone drives their kids to school. So it’s no longer safe for our kids to walk to school.

Or see Klinenberg: used to be that, during heat waves, thousands of people would leave their homes and go sleep in public parks in Chicago. That little wave of revulsion you just felt explains why no one does that anymore. And since no one does that anymore, people have to sleep indoors during heat waves, because they no longer have safety in numbers outside. But lots of people can’t afford air conditioning; in particular, the most marginalized populations cannot afford air conditioning. So they die alone in their apartments.

The moral here should be entirely obvious: what I do depends upon what you do. It makes very little sense, in a lot of contexts, to talk about what you want — what your “incentives” are — without talking also about what I want, or vice versa.

Shorter version of all of the above: read Tom Slee. Really. Go read him as soon as you can. His book is a necessary corrective to the trite Sargent speeches (and, I’m coming to worry, to the Voxes) of the world.

This article comes from the web page “Steve Reads“. You can find the original article here: “This graduation speech teaches you everything you need to know about economics in 297 words” — no it doesn’t.

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