8 – Is economics hard hearted?

I watched a lot of tennis from Wimbledon when it was on a week or two ago. The big story of the tournament was the success of 17-year-old Russian Maria Sharapova who had a stunning victory over Serena Williams in the women’s final. Maria played some supernatural tennis shots, but even more impressive was her coolness and steely determination when things looked bad for her, especially in the semi-final against Lindsay Davenport. Maria had such focus and determination that she appeared hard and almost joyless. Until, that is, she won each match, and then she displayed a fantastic smile and you realised she isn’t hard or joyless at all.

Some people look upon economists as a hard and joyless bunch. “The dismal science” they say. I’m not certain what they mean, but perhaps it relates to the way that economists can often be party poopers, arguing against actions or projects or reforms that others have considered to be a good idea. One of my contributions to this genre has been to criticise the proposal by the Australian Conservation Foundation and the National Farmers Federation for the Australian Government to spend A$65 billion over 10 years on a dramatically expanded environmental program. An easy target, perhaps, but one that got a ridiculous amount of coverage in the media.

One argument against the conception of economists as being hard-hearted is the characters and interests of economists themselves. I admit that I do know one or two who fit the “hard and joyless” description, but I know many more who are passionate about their areas of professional interest and who care deeply about promoting the best interests of the community. Indeed, attempting to promote and protect the best interests of the broad community (especially against the efforts of special interest groups to corner the political market) is something that economists put more effort into than most other disciplines. David Bennett puts it nicely: “The profession of economics is at its best when it is defending the public interest in the widest possible sense.”

One way that economists attempt to protect the public interest is by applying a constraint that the benefits of action (broadly defined) should exceed the costs. Calls for government action put forward by environmental advocates are sometimes couched in terms that imply the action should be pursued at any cost. Economists particularly decry such calls. At any cost is too high.

I made this point in something I wrote two years ago: “A determination to prevent all environmental degradation at any cost only makes sense if one is willing to overlook the potential alternative uses for these enormous sums of money, including improved services for people with mental and physical disabilities, health services, poverty alleviation, education, and so on. Of course the environment can and should hold its own in the allocation of resources, but one cannot sustain an argument that it should take precedence over all other uses of public funds.”

This is not to advocate that a full benefit:cost analysis should be conducted for every possible environmental investment. That would be both problematic and expensive. Rather it should be seen as a need for investment in the environment to be balanced against other possible investments. It is not about economising for economy’s sake. It is a recognition that the “opportunity cost” of public money is important to the community. Funds spent on the environment are not available to be spent on other important public services or amenities.

Furthermore, expenditure of any public funds has the opportunity cost that, as a consequent of their removal from private individuals or businesses through the tax system, the funds will not be spent in the ways that would have been most beneficial to those people, as judged by them.

The positive-net-benefit criterion of economists, which is sometimes interpreted as hard-hearted or even anti-social, is actually a reflection of soft-hearted and pro-social objectives on a broader canvas.

David Pannell, The University of Western Australia

Postscript, 5 August 2004. I heard a lovely comment by Bill Malcolm on this theme a couple of nights ago. It was to the effect that people think economists are dismal because we sometimes say you shouldn’t do worthwhile things. But we’re not. We just say you shouldn’t do stupid things.

Postscript, 23 May 2005. Email from Paul Webster: “The phrase ‘the dismal science’ does get used quite a bit, sometimes improperly. Its origin was Thomas Carlyle who in the 1860s was moaning about the then subject which, following Malthus, said that the future of the human race was geometric population growth limited by linear food supplies. i.e. starvation and pauperism! Not what the Victorians wanted to hear!”

Further reading

Pannell, D.J. (2002). Loving, losing and living with the environment, Connections: Farm, Food and Resource Issues 2: 25-36.

Pannell, D.J. (2003). Heathens in the chapel? Economics and the conservation of native biodiversity, Presented at a workshop of the Cooperative Research Centre for Plant-Based Management of Dryland Salinity, “Biodiversity Values in Agricultural Landscapes”, Rutherglen, Victoria, 14-15 October 2003. Forthcoming in Pacific Conservation Biology.