📖 Adam Smith, Loneliness, and the Limits of Mainstream Economics →
This is an essay from EconTalk’s Russ Roberts with some takeaways from Adam Smith’s The Theory of Moral Sentiments. It’s a book on topics like altruism and what drives human morality, and it’s clear that much of what drives us are those unmeasurable things: satisfaction, respect, honor, meaning. When economists try and design policy only taking into account things that can be measured, a massive piece of the problem is missing. Roberts, on the unmeasurable:
But not everything that is important can be quantified. I worry that as economists, we too often are like the drunk at 1 am looking for his keys under the glare of a streetlight. You go over to help and when you fail to find the keys you ask the drunk if he’s sure if he lost them here. Oh no, he responds. I’m not sure where I lost them. But the light’s better here.
Our natural desire to focus where the light is brightest, where the data are available, where things can be quantified, can cause us to miss the most important issues to be taken into account.
On the impacts of minimum wage increases, something for which we have data on both total wages and net job gains and losses, but not so much on other non-quantifiable effects:
By cutting off the bottom rungs of the employment ladder for the least skilled among us, you get rid of the feeling a person has of agency, of pride, of excellence, mastery, and a sense of belonging. You’ve made that person feel unlovely and unloved. It’s the wrong way to help poor people it seems to me. But almost no one talks about these intangible impacts of the minimum wage on the people who struggle the most to become productive workers.
There isn’t a variable for dignity in the data set.