larger segments of society are forced because of declining economies to become outsiders, the use of coercion, under our current model, will probably become more widespread.
“There are two core doctrines in economics,” Offer said. “One is individual self-interest. The other is the invisible hand, the idea that the pursuit of individual self-interest aggregates or builds up for the good of society as a whole. This is a logical proposition that has never been proven. If we take the centrality of self-interest in economics, then it is not clear on what basis economics should be promoting the public good. This is not a norm that is part of economics itself; in fact, economics tells us the opposite. Economics tells us that everything anyone says should be motivated by strategic self-interest. And when economists use the word ‘strategic,’ they mean cheating.”
Offer argued that “a silent revolution” took place in economics in the 1970s. That was a time when “economists discovered opportunism—a polite term for cheating,” he said. “Before that, economics had been a just-world defense of the status quo. But when the status quo became the welfare state, suddenly economics became all about cheating. Game theory was about cheating. Public-choice theory was about cheating. Asymmetric information was about cheating. The invisible-hand doctrine tells us there is only one outcome, and that outcome is the best. But once you enter a world of cheating, there is no longer one outcome. It is what economists call ‘multiple equilibria,’ which means there is nota deterministic outcome. The outcome depends on how successful the cheating is. And one of the consequences of this is that economists are not in a strong position to tell society what to do.”
The problem, he said, is that the old norms of economics continue to inform our policies, as if the cheating norm had never been introduced.
“Let’s take the doctrine of optimal taxation,” he said. “If you assume a world of perfect competition, where every person gets their marginal products, then you can deduce a tax distribution where high progressive taxation is inefficient. This doctrine has been one of the drivers to reduce progressive taxation. But looking at the historical record, this has not been accompanied by any great surge in productivity; rather, it has produced a great surge in inequality. So once again, there is a gap between what the model tells us should happen and what actually happens. In this case, the model works, but only in the model—only if all the assumptions are satisfied. Reality is more complicated.”
Offer brought up one of the issues to consider: “When those in authority, whether political, academic, or civic, are expounding their doctrines through Enlightenment idioms … we must ask, is this being done in good faith? And here I think the genuine insight provided by the economics of opportunism is that we cannot assume it is being done in good faith.”
According to Offer, “economics, political science, and even philosophy, ever since rational choice swept through the American social sciences, have embraced the idea that an individual has no responsibility towards anyone except himself or herself. A responsibility to anyone else is optional. The public discourse, for this reason, has become a hall of mirrors.”
Our current economic model, he said, will be of little use to us in an age of ecological deterioration and growing scarcities. Energy shortages, global warming, population increases, and increasing scarceness of water and food will create an urgent need for new models of distribution. Our two options, he said, will be “hanging together or falling apart.” Offer argues that we cannot be certain that growth will continue. If standards of living stagnate or decline, he said, we must consider other models for the economy.
Offer, who studied the rationing systems set up in the countries that took part in World War
“There are two core doctrines in economics,” Offer said. “One is individual self-interest. The other is the invisible hand, the idea that the pursuit of individual self-interest aggregates or builds up for the good of society as a whole. This is a logical proposition that has never been proven. If we take the centrality of self-interest in economics, then it is not clear on what basis economics should be promoting the public good. This is not a norm that is part of economics itself; in fact, economics tells us the opposite. Economics tells us that everything anyone says should be motivated by strategic self-interest. And when economists use the word ‘strategic,’ they mean cheating.”
Offer argued that “a silent revolution” took place in economics in the 1970s. That was a time when “economists discovered opportunism—a polite term for cheating,” he said. “Before that, economics had been a just-world defense of the status quo. But when the status quo became the welfare state, suddenly economics became all about cheating. Game theory was about cheating. Public-choice theory was about cheating. Asymmetric information was about cheating. The invisible-hand doctrine tells us there is only one outcome, and that outcome is the best. But once you enter a world of cheating, there is no longer one outcome. It is what economists call ‘multiple equilibria,’ which means there is nota deterministic outcome. The outcome depends on how successful the cheating is. And one of the consequences of this is that economists are not in a strong position to tell society what to do.”
The problem, he said, is that the old norms of economics continue to inform our policies, as if the cheating norm had never been introduced.
“Let’s take the doctrine of optimal taxation,” he said. “If you assume a world of perfect competition, where every person gets their marginal products, then you can deduce a tax distribution where high progressive taxation is inefficient. This doctrine has been one of the drivers to reduce progressive taxation. But looking at the historical record, this has not been accompanied by any great surge in productivity; rather, it has produced a great surge in inequality. So once again, there is a gap between what the model tells us should happen and what actually happens. In this case, the model works, but only in the model—only if all the assumptions are satisfied. Reality is more complicated.”
Offer brought up one of the issues to consider: “When those in authority, whether political, academic, or civic, are expounding their doctrines through Enlightenment idioms … we must ask, is this being done in good faith? And here I think the genuine insight provided by the economics of opportunism is that we cannot assume it is being done in good faith.”
According to Offer, “economics, political science, and even philosophy, ever since rational choice swept through the American social sciences, have embraced the idea that an individual has no responsibility towards anyone except himself or herself. A responsibility to anyone else is optional. The public discourse, for this reason, has become a hall of mirrors.”
Our current economic model, he said, will be of little use to us in an age of ecological deterioration and growing scarcities. Energy shortages, global warming, population increases, and increasing scarceness of water and food will create an urgent need for new models of distribution. Our two options, he said, will be “hanging together or falling apart.” Offer argues that we cannot be certain that growth will continue. If standards of living stagnate or decline, he said, we must consider other models for the economy.
Offer, who studied the rationing systems set up in the countries that took part in World War
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