How do you square this:
“…Nick Schulz and I tried to point out how much you miss when you ignore the intangibles in economics.”with this:
“If you define self-interest broadly enough, then the statement “people pursue their self-interest” becomes irrefutable. And if you cannot refute it, then it is just an empty tautology.”
In other words, I am claiming that intangible factors matter (I think primarily of institutions, social norms, and innovations). But when someone wants to include intangible factors in self-interest (think of ideology or a desire to help others) then I think it degrades the notion of self-interest into an empty tautology.
Someone who broadens the definition of self-interest to include intangible interests is making a concession to reality. But in order to make useful statements about the world, you have to get specific about how intangible interests enter. For example, you could, as commenter Handle sagely suggests, talk about the desire for raising status within one’s reference group as a motivating factor, and this could help to make useful predictions about behavior.
But the statement that “people act in their self-interest,” without being more specific, does not help make any predictions. And when I see the words “self-interest,” I think that the logical way to make it meaningful is to associate it with economic gain.
I think the important distinction in social science is not so much self-interest but different (conflicting) interests. If every individual shared the same common interest (tried to promote the same end), economics would be very different.
In social science, useful assertions have a predictive value that is significantly greater than random noise, and significantly less than perfect.
As you approach perfectly reliable predictions, (i.e. as falsifications approach zero), an assertion is more and more likely to be treated as tautological. In the best case, this is because it’s value is already completely encoded in existing, near-universally accepted language, in the worst case this is because the definitions are made up in such a way as to ensure the assertion remains true.
As prediction value drifts away from perfect, the assertion starts to be more useful, because it’s predictions are more controversial or unexpected, and so having them borne out more often than expected is useful (adds knowledge or convinces people). As the prediction value falls towards the threshold of random noise, however, the assertion loses value because it’s no longer convincing.
“All theories are metaphors, and all metaphors are lies.”
Deirdre McCloskey
That makes sense in a bourgeois society.
In a warrior society perhaps not so much. As soon as I reached the end of your post I thought of missionaries to the Indians (perhaps Iroquois) seeking to recognize the leaders by their tendency to dress in rags (having given away their best clothes).
As soon as you introduce those variables it’s hard to know where to stop.
I should know Deirdre McCloskey’s system better off the top of my head. Methinks she discusses Aristocratic virtues, Christian virtues, and Bourgeois virtues.
In the USA the Christian and Bourgeois virtues can start to mesh, because one can exercise economic prudence in the service of Christian charity. In that sense the problem isn’t as large as one might think. We can maximize our income or wealth through prudence, and then give things away later.
But that makes it false, and false statements about the world are not useful. They are in fact anti-useful: they muddle our thinking.
Yes I know the expression “all models are false, some models are useful”. It is itself false. A model can be incomplete without being false.
I find the hair-splitting distinction between ‘false’ and ‘incomplee’ [therefore likely to produce incorrect results in certain domains], while insisting there is simultaneaously a big difference in conceptual utility, to be anti-useful.
I’m going to stick up for the “tautological” view of self interest. A tautology is a statement that is true by definition. Saying that people act in their own self interest, and that includes non-financial interests (saying non-economic is wrong, economics covers all human decision making), is not a tautology. It is a definition. A desperately needed definition, because the one economists having been using is so woefully inadequate it has led them to all manner of absurd conclusions. Conclusions they continue to believe despite being able to look out a window and directly observe that they are false.
All deliberate human action is rational and self interested. Any action you freely choose to undertake MUST be in your ex ante self interest, or you would not choose it. This is simply taking revealed preference seriously. So what does that leave? Non-deliberate action! Actions taken due to instinct, to fight-or-flight responses. Actions into which you were coerced. This is the distinction that matters, not the one between actions that earn me money and actions that earn me status.
Yes, these “tautological” definitions help refine our thought and constrain away incoherent avenues of thought. They set up logical relationships that do not themselves predict but rather enable us to make better and sharper falsifiable statements which do have predictive value.
I’m inclined toward Noah’s view.
If a decision is not in the actor’s obvious financial interest, we can take an interest in asking, “were there interests beyond financial were at play in making this decision, or was the actor mistaken, overcome by a compulsion, or coerced?”
We can even try to help. If there are widely held non-financial interests (otherwise known as “consumer needs”) we can try to satisfy them. If actors are commonly mistaken (influenced by misleading advertising, for example) we can attempt to address the information problem. If actors have compulsions, there may be therapies they can turn to. And, if actors are being coerced, it is a matter for law enforcement.
If we assume that only financial interests should be considered, then we are left to conclude that people routinely do not act in their own self interest – which is difficult to do much with.
Any action you freely choose to undertake MUST be in your ex ante self interest, or you would not choose it.
Try telling that to someone on a diet!
Of course, you can say that the person didn’t actually freely choose to have that piece of pizza as she’s thinking to herself, “I really shouldn’t do this” but then you’ve simply created a new question, “What looks like free choice but really isn’t?” Since most things that people do are not accompanied by deep thought and adding up of costs and benefits, a sufficiently smart person can argue that nothing is freely chosen (and perhaps that smart people should thus decide for the benighted many–I don’t think Ludwig would approve).
I agree with your overall point – however it isn’t useful in convincing the unconvinced. Specifically in terms of public choice theory I think it creates too simple a method to ‘disprove’ by cherry picking scores of specific examples where politician X voted on something that is clearly against his (narrowly defined) economic self-interest. (say a top .1%er voting to raise the top marginal tax rate). It also is far too easy to water down public choice to an ‘all politicians are corrupt’ strawman which is used to justify anti Citizen’s United type efforts.
I understand that you can’t leave self-interest as a completely open-ended concept. But restricting it to purely monetary definitions is counter-productive. At least if you are trying to use economic theory to persuade antagonists.
I know many people who spend hundreds of hours producing and performing plays and musicals in community theatre companies. Most of them make no money at all. Most of them do it because they love to do it, and their actions indicate that doing something they love to do with zero financial gain, and likely with a considerable financial loss, is in their self interest. Similar things can be said of artists in a variety of forms: community choruses and orchestras, church choirs and worship bands, dancers, and other performing artists. It isn’t that they are willing to accept low pay, they are willing to work hundreds of hours per year with no pay, and often with considerable out-of-pocket expense. I do not think this can be made “meaningful” by associating it with economic gain, because it is in fact, an economic loss for those involved.
“And when I see the words ‘self-interest,’ I think that the logical way to make it meaningful is to associate it with economic gain.”
Didn’t you admit, just before writing this, that Handle had demonstrated that social status, at least, is a form of “self-interest” not reducible to economic gain that allows for meaningful predictions?
I don’t think the political activity of George Soros can be explained by the desire for economic gain.