Faith in humanity

One of the hardest tasks in economics is to recognize and understand self-interest without condoning selfishness. There is some evidence that Econ 101 might attract and encourage more selfish behavior, a tragic mistake which the great economist Paul Samuelson described as “learning how to spell banana, but not when to stop.” Our task is to make the round trip from individuals’ self-interest to a deeper understanding of the common good, and come out wiser at the end.

At any time but especially now it might be helpful to reflect on how economics can help us be more prosocial, using our capacity for empathy to build a stronger and more effective society. Here’s an example, edited lightly with added emphasis in bold type, from the class discussion board.

After our class sessions on market structure and game theory, a student wrote:

I enjoyed the last lecture, the explanation on the “prisoner’s dilemma”, the strategic interactions that must take place, and how thinking about other’s choices helps guide our own. It’s sad to think about it but, aren’t most of our life engagements “zero-sum” games?

Here’s how I responded:

Thanks for raising the prisoner’s dilemma results in this thread — and especially your last point regarding whether most of our life engagements are zero-sum games.  That’s such an interesting and important question. 

One key insight from economics is that in fact there are many, many positive-sum games in which people naturally choose to cooperate with each other. 

Every time you act politely, stop to let another person pass or whatever you’re engaging in positive-sum interactions.  Those are actually the vast majority of our engagements with other people. 

Then there are negative-sum interactions, where any interaction turns sour so it’s best to walk away.  We don’t observe many of them because people do just avoid those kinds of engagements. 

The punch line is that zero-sum interactions are the focus of attention because they’re on the borderline, and we can influence the social norms that help determine the outcome.

Sometimes we can be architects of our social environment, and choose the payoffs from our interactions in ways that make them more positive-sum. If we do that, collaboration becomes the natural choice for everyone without having to rely on enforcement and threats of punishment if people cheat. 

One way to read the rise of civilization is that we’ve increasingly set things up so that, as soon as people learn how the system works, we realize it’s better to be nice than to be nasty. 

Of course there are limits to the power of incentives, especially because the incentives for being nice almost always come in the future, and understanding them requires some effort of imagination and empathy. 

For that reason, short-sighted and non-empathetic people will see interactions as zero sum conflicts even when there are really big gains from acting cooperatively.  Those people may choose to cheat, missing out on the benefits from cooperation. 

My sense is that, even when the actual payoffs are positive-sum, a lot of social progress relies on increasing levels of education and especially education in the humanities, about empathy and social life, precisely for the purpose of increasing cooperation in interactions that reward it but require high-level understanding to succeed.

That’s some pretty philosophical stuff for a class on food policy, but I think you’ll see how it follows naturally from this approach to economics.

And then, the nicest reply:

Thank you so much!! Faith in humanity restored.