Efficient outrage

Matt Damon put yet another foot in his already quite full mouth this week. In an interview with ABC, he was invited to discuss the reckoning of sexual harassment and assault in his and other industries. He decided, for some reason, to go to bat for the idea that not enough is being made of what he perceives as a gradation of harm across different manifestations of workplace misogyny. Implicit is an attack on those who would advocate swift and severe punishment for what Damon would have us believe are minor sins.

I want to make the case that textbook economic theory will firmly reject Damon’s line of reasoning. Outrage of the type that Damon describes is more than justified, it is efficient. The market and the law don’t have the tools to reckon with the full, true cost of misogyny. This market failure makes for fertile soil for institutions that force perpetrators and enablers to internalize some of those costs. Outrage-of-the-day culture invites a lot of criticism from those looking to score a cool, contrarian take, but it is smart economics.

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Does positivism indocrinate?

Somewhere in the history of the practice of economics we went positivist. Research and teaching of the subject both became technical and methodological, preoccupied with the “if this, then what?” questions of economic science, and rejected policy debate as unscientific. A semi-famous quotation from Keynes:

“The Theory of Economics … is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps the possessor to draw correct conclusions.”

Weirdly, this sterilization has in fact had the paradoxical effect of reducing the scope of economics that’s presented to students and researched by economists. Ronald Coase puts it like this:

“Mainstream economics, as one sees it in the journals and the textbooks and in the courses taught in economics departments has become more and more abstract over time, and although it purports otherwise, it is in fact little concerned with what happens in the real world…. economists since Adam Smith have devoted themselves to formalizing his doctrine of the invisible hand, the coordination of the economic system by the pricing system.”

I’m not arguing for anarchy in the profession. It just seems strange that we sterilized the science, freed it from value judgments and the real-world status quo, then presented it using nothing but the status quo to illustrate our tools. We worked so hard to show that our method gives you all the levers and buttons you could ever want, then obsessed over one or two of them.

Did the positivist revolution lead to a sterilization of normative economics as well as positive economics? Keynes’ “correct conclusions” are positivist conclusions; there cannot be “correct conclusions” to the actual, real-world questions that the science of economics is supposed to inform.

There’s a crucial difference between carving normative judgment from economic science and ignoring normative judgment altogether. It’s particularly difficult to illustrate in classes the difference between the two sides of our coin when we never hold normative debate. Does that make the positivist content of our classes seem like ideological indoctrination?

If we either presented a full diversity of positive models when we taught our methods, or engaged in actual normative policy debate to illustrate the application of our methods to real, difficult problems, we can preserve the positivist revolution and show the next generation of economists that Keynes was right. Economics can be a method for everyone, not a doctrine of the status quo. Economics can be scientific, but teaching economics like a natural science would certainly not be my first choice.