Nick Hanauer — How To Destroy Neoliberalism: Kill ‘Homo Economicus’

I believe that these corrosive moral claims derive from a fundamentally flawed agreement of how marketplace capitalism works, grounded inward the dubious supposition that human beings are “homo economicus”: perfectly selfish, perfectly rational, as well as relentlessly self-maximizing. It is this behavioral model upon which all the other models of orthodox economic science are built. And it is nonsense.

The concluding xl years of enquiry across multiple scientific disciplines has proven, amongst certainty, that adult man economicus does non exist. Outside of economical models, this is precisely non how existent humans behave. Rather, Homo sapiens receive got evolved to endure other-regarding, reciprocal, heuristic, as well as intuitive moral creatures. We tin endure selfish, yes—even cruel. But it is our highly evolved prosocial nature—our innate facility for cooperation, non competition—that has enabled our species to dominate the planet, as well as to build such an extraordinary—and extraordinarily complex—quality of life. Pro-sociality is our economical super power.

Economists are non incorrect when they attribute the textile advances of modernity to marketplace capitalism’s genius for self-organizing an increasingly complex as well as intricate sectionalisation of knowledge, knowhow, as well as labor. But it’s of import to recognize that the sectionalisation of task was non invented inward the pivot factories of Adam Smith’s eighteenth century Scotland; at some level, it has been a defining characteristic of all human societies since at to the lowest degree the cognitive revolution. Even our to the lowest degree complex societies, small-scale bands of hunter-gatherers, are characterized past times a sectionalisation of labor—hunting as well as gathering—if largely along sex lines. The sectionalisation of task is a trait that is universal to our prosocial species.

Viewed through this prosocial lens, nosotros tin meet that the highly specialized sectionalisation of task that characterizes our modern economic scheme was non made possible past times marketplace capitalism. Rather, marketplace capitalism was made possible past times our fundamentally prosocial facility for cooperation, which is all the sectionalisation of task truly is.…

The next observation is critical.

This dispute over behavioral models has profound non-academic consequences. Many economists, spell acknowledging its flaws, yet defend homo-economicus equally a useful fiction—a tool for modeling as well as agreement the economical world. But it is much to a greater extent than than precisely an economical model. It is also a story nosotros tell ourselves virtually ourselves that gives both permission as well as encouragement to some of the worst excesses of modern capitalism, as well as of contemporary moral as well as social life...

While models purport to endure descriptive, they constituent equally metaphors. All models are express inward the involvement of economic scheme as well as tractability. It is precisely non possible to build a consummate description of a organisation that is complicated, allow lonely complex. The role of the model is to isolate of import relationships as well as regularities using the model equally an analogy, whether its structure is conceptual or mathematical. The query is thence how useful is the model inward elucidating relations as well as regularities that are non evident without analysis.

There is nada inherently incorrect amongst exploring a domain using all models that may endure useful inward this regard. Those that are truly useful volition endure used as well as eventually the others volition endure discarded or supplanted.

The economical model based on adult man economicus equally outlived its usefulness for several reasons. The start is a descriptive issue. The instant is a normative one.

The start is that the ambit of such models is besides express to supply much useful information. The assumes humans inward the "state of nature" next evolutionary principles based on survival of the fittest" through contest inward a symmetrical environment. Thus, the appeal to "spontaneous natural order" on the atmospheric condition that "imperfections," such equally prosocial policy, are minimized.

This nation of affairs doesn't apply to modern societies as well as their embedded economic science that are highly influenced past times civilization as well as institutions. This agency that inward econometrics, of import data volition endure seat aside for modeling convenient, e.g., inward the involvement of mathematical tractability. The final result is that model equilibria may non reverberate observed events accurately. This is accounted for using ceteris paribus although atmospheric condition are truly changing, positing constants when atmospheric condition telephone telephone for variables, as well as an indefinite "long run."

The instant is to a greater extent than serious because it is normative. Conclusions that purport to endure positive are used normatively as well as prescriptively. This is peculiarly the illustration when models exercise technical price convey from ordinary language. Even if the price are defined operationally, the ordinary linguistic communication important comes along, altering non exclusively the denotation but also the connotation. For example, "debt" equally a liability becomes "debt" equally something bad, dangerous, as well as to endure avoided.

None of this is inward way "scientific" regardless the trappings inward the terminology of science.

If nosotros convey that it is true—if nosotros internalize that most people are mostly selfish—and thence nosotros expect some the globe at all of the unambiguous prosperity as well as goodness inward it, thence it follows logically, it must endure true, past times definition, that a billion private acts of selfishness magically transubstantiate into prosperity as well as the mutual good. If it is truthful that humans truly are precisely selfish maximizers, thence selfishness must endure the drive of prosperity. And it must endure truthful that the to a greater extent than selfish nosotros are, the to a greater extent than prosperous nosotros all become. Under this logical construct, the exclusively practiced determination is a draw of piece of work organisation decision—“Greed is good”—and the exclusively role of the firm must endure to maximize shareholder value, humanity endure damned. Welcome to our neoliberal world.

But if, instead, nosotros convey a prosocial behavioral model that correctly describes human beings equally uniquely cooperative as well as intuitively moral creatures, thence logically, the golden dominion of economic science must endure the Golden Rule: Do draw of piece of work organisation amongst others equally you lot would receive got them create draw of piece of work organisation amongst you. This is a story virtually ourselves that grants us permission as well as encouragement to endure our best selves. It is a virtuous story that also has the virtue of existence true....

Unfortunately, Hanauer thence concludes, without justification, that capitalism is the solution rather than the problem. The work is the approach to capitalism.

Capitalism is the greatest problem-solving social applied scientific discipline e'er invented. But knowing that capitalism works is dissimilar than knowing why it works. And opposite to economical orthodoxy, it is reciprocity, non selfishness that guides it—indeed—as if past times an invisible hand. It is social reciprocity that builds the high levels of trust necessary for large networks of people to cooperate at scale. And it is exclusively through these networks of highly-cooperative specialists that the complexity that defines our modern economic scheme tin emerge....

I struggle that this cannot endure truthful as well as it is contradicted past times what he said previously.

It is by as well as large agreed that in that location are iii major factors of economical productions — capital, ground as well as labor. Rent is income generated without productive work. Feudalism is a organisation that favors the ownership of ground as well as extraction of rent through agriculture. Capitalism is a organisation that favors the ownership of industrial as well as finance uppercase as well as extraction of rent through ownership of capital.

What is needed instead of a rejiggering of capitalism is an integrated organisation that balances capital, ground as well as labor, that is, the agency of production amongst people as well as the environment. This is dissimilar from most definitions of socialism as well as mightiness endure termed holism or ecologism, or some such that announce a status of harmony, balance, as well as wellbeing of people as well as the planet.

What is required is a vision of possibilities as well as plans to actualize them. This pattern procedure may endure speeded upwards past times necessity equally climate modify begins to seize amongst teeth downwards harder.

Evonomics
How to Destroy Neoliberalism: Kill ‘Homo Economicus’ — Debunking the failed epitome of traditional economics

Nick Hanauer