Why Economists Are So Often Accused of Being Indifferent to Social Problems

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

~Henry Hazlitt, Economics in One Lesson

As someone who has written articles and papers on police and prosecutorial matters (yes, economists analyze those things, too) for two decades, I am not surprised to see the kinds of police killings that provoke people to anger, frustration, and helplessness.

When economists look at what only can be called bad things that happen time and again, we ask why that is so. More specifically, we want to know about the structures of incentives that encourage things to occur time and again, even when there is general agreement that things need to change. Our analyses and our recommendations (when we make them) often are seen either as insensitive or outright offensive to people who don’t know or understand the language of economics and economists.

For example, many economists have been much more critical of the lockdown response to COVID-19, so we are accused by others of wanting people to die. People accuse of us being “unscientific” or insensitive to the needs of others during a pandemic. It seems that it is impossible to cross the divide between economists and their critics.

So, what do economists believe regarding something like dealing with COVID-19? Is our criticism of the lockdowns due to right-wing ideology (as some of my colleagues would claim), lack of compassion for the sick, or something else?

First, and most important, economists hold that we live in a world of scarcity and that our options always are going to be limited. We also will operate in logical fashion, working off sets of assumptions. So, let me demonstrate how the analysis might work.

Economists Must Consider Scarcity

Let us first assume that the national lockdown strategy (one size fits all) was the most effective in preventing more COVID-19 deaths. Now, there was no basis in fact for the original prediction of 2.2 million American deaths, and we know in hindsight that the model that came from Imperial College of London was terribly flawed and vastly overestimated the “if we do nothing” results. We cannot know if our assumption is correct given that we didn’t try anything else, so we would have to deal with a counterfactual, which speaks for itself.

The question, then, would be how long we could be locked down before becoming overwhelmed with the unemployment and the lack of production of essential goods. In other words, How long before the negative results of the lockdown become so dire that we cannot continue on this path? To put it bluntly, if we stay locked down too long, people will die from the consequences; lots of people. Think of all of the people with medical conditions that could not see doctors and receive treatment because most of the medical resources were being directed toward dealing with treatment and prevention of COVID-19. (See? There we go again with the law of scarcity.)

Do we know where the crossover point might be? Well, no. The worlds of medicine and public policy will depend upon models that are imperfect, that are likely to be ideologically biased (especially the more apocalyptic ones), and that do not “predict” the past very accurately, let alone the future. (When I was doing graduate work, one of my professors once told me regarding the use of econometric models: “Econometrics: Predicting the past with ever increasing reliability.”)

However, we can make general observations, and we also can look at the occupational (and racial) makeup of those who are directing the lockdown policies and those who are most negatively affected by them. Phil Magness notes that when we consider policy decisions these occupational differences are not trivial:

Many in elite academia and journalism have the luxury of a paycheck for the time being, as well as the ability to do their work from home with only modest disruption. Vast numbers of newly unemployed Americans do not.

At the same time, most academic efforts to cast the lockdown debate along racial lines miss or omit another dimension that belies their critical theory-infused attacks on any attempt to reopen the economy. The very same lockdowns, social distancing mandates, and shelter-in-place orders that these writers defend are also backed by heavy-handed enforcement by the state. And in many cases, that enforcement falls disproportionately on racial minorities, the poor, and people with fewer means to defend themselves.

Magness was writing in response to those who claimed that people who protested the lockdown did so either out of selfishness or racism or both. (That the lockdowns have disproportionately harmed racial minorities seems to have escaped the notice of many academic and media elites. One doubts that this omission is accidental.)

Looking at the Long-Term

There is another aspect to how economists see things differently than academic, media, or political elites. One feature of economic analysis is that economists look both at short-term and long-term results. We don’t stop with what the situation will be next month, but also look to next year and well beyond that. Political elites have to be concerned with the results of an upcoming election, and all of us who have been associated with journalism and the news cycle know that the only thing that matters in news is what is happening right now.

For example, one can argue both economically and medically that if people are permitted to mingle again and return to their jobs, although in the short run we may see a spike in COVID-19 infections and even a spike in death rates, over the longer term, it would result in fewer deaths. To a certain extent, this is an empirical assessment that we cannot confirm until we actually engage in the activity and permit certain policies. The economists’ logic goes as follows: we know that in the short term there may be more infections and premature deaths, but over time such a policy would result in fewer infections and deaths in the longer future. People will die either way, but permitting an open society would reduce the death rate overall.

The critics, however, tend to look only at the short term. Headlines tell us that infections have spiked in places like North Carolina (which is more open than the Northeastern states), so there is a push to reimpose the lockdown strategies. States that were less restrictive, such as Florida and South Dakota, tended to receive very negative press despite the fact that their fatality rates were much lower than states such as New York, which has very strict policies. (This brings up the famous “chicken or egg” question regarding the relationship between lockdown policies and infection and death rates, but that is for another time.)

The reasons for these divergences are many, given that even many economists who are calling for relaxing the lockdowns have been receiving regular paychecks. People drawn to the public health viewpoints (“Let’s crush this virus now; lockdowns are the only way to accomplish that goal”) tend to view the world in much shorter time frames than do economists. Some of that is cultural, and some of the differences are due to incentives.

Second, incentives do matter. Some people have done well in this pandemic and those whose voices have been the loudest for an apocalyptic interpretation of COVID-19 are people whose careers have been enhanced by favorable media coverage of their position. Certainly Dr. Anthony Fauci has benefited enormously from the friendly coverage while physicians and researchers who diverge from “the sky is falling” narratives receive much harsher press.

Likewise, governors and mayors have suddenly found themselves in a situation in which their very words at any time become law without any sort of legislative oversight, something the ancients once called a form of dictatorship. One doubts that these chief executives who have enjoyed carrying out their newly found authority are going to be anxious to give up such perks of office.

Note that I am not arguing one way or another for the proper policies. Instead, I am pointing out how economists will differ with others when examining a situation like the one we currently face.

Incentives, Police, and Racism

What about the police killings and especially those that have a racial angle? Since I have two adopted black sons and my wife, stepchildren, and in-laws are black, I find myself being more introspective about things like police killings of black people such as George Floyd. As an economist, I tend to try to look beyond simple racism, especially since police kill a lot more whites than blacks, but at the same time, racial attitudes are still important.

In other words, perhaps racism can explain some police killings of African Americans, but certainly not all of them. This, again, is not a trivial point, and the reason economists such as myself believe this to be of utmost importance is that we know that unless we can deal with the larger picture, the kinds of reforms people seek to curb such killings will not be possible. As I have said earlier, economists will look at the larger picture and ask why behavior that people say they want to eliminate continues to go on despite protests, new laws, impassioned speeches, and more.

As I did earlier, let me permit the assumption that all cops are racist toward African Americans. (Keep in mind that the other three police officers charged in the Floyd death are racial minorities, but we will keep our hard assumption that all three are racists—even though we have no proof of that.) That being the case, we would want to build incentives into their work that would discourage and punish bad behavior, including racially motivated killings.

However, as we have seen, union rules make it very difficult to fire officers who break the rules, and juries are very reluctant to convict officers when their actions lead to being charged with crimes. The US Supreme Court a few decades ago laid down blanket immunity protections for police, which makes it almost impossible to successfully sue an officer no matter what that officer has done just as long as the action can be interpreted as being within the range of police duties.

Police unions—and most public employee unions—are very powerful for two reasons. On one side, many political conservatives, and thus the Republican Party, will side with the police on an ideological or social basis. They see police as the “Thin Blue Line” that stands between our society and lawless anarchy. On the other side, public employee unions are the backbone of the Democratic Party, providing votes, campaign money, convention delegates, and, at times, shock troops. Both sides have different reasons for supporting such labor unions, but the circumstances make reform very difficult.

On those rare occasions when police transgressions actually result in monetary judgments or settlements to victims, the funding for the payments comes either from general tax revenues, insurance, or a combination of both. The offending officers do not pay themselves nor do police pay directly. In the end, they tend to be indemnified, the costs instead being laid upon taxpayers.

It is not hard to see that we are looking at what economists call perverse incentives or, more technically, “moral hazard,” a condition in which the prevailing incentives encourage the very behavior we wish to eliminate. Furthermore, even if we were to eliminate all racism from the minds and actions of every police officer, the prevailing sets of incentives would still make wrongful and controversial killings more likely. To put it another way, many economists (including me) believe that the existing barriers to punishing wrongdoing, if left in place, would result in more unjustifiable killings by police of African Americans and other racial minorities even if there were no racism among the officers than would happen if all officers were racist but did not have such policies protecting them from consequences of their behavior.

That is why economists are less likely to endorse things like racial sensitivity training as a means to reduce or eliminate these kinds of awful police-citizen encounters than are people in other professions. As I wrote before, incentives matter, and they matter greatly.

Does that mean economists don’t care about issues like racism or that we don’t want to save lives? We are often accused of such things, but I, for one, plead not guilty. Economists are supposed to look at the bigger picture and consider human frailties and the existence of scarcity and the existence of limitations upon what humans can do in a short period of time. When it comes to the issue of harm, we believe that policies that reduce harm are going to be more effective than those that are created with the stated purpose of eliminating harm. That others disagree does not mean that we are wrong.

Author’s note: this article was adapted from a written presentation I prepared for students in a course called Economics for Managers.