Self-interest fundamentalism was the economic religion of the 20th Century. We are now in the midst of an economic reformation on par with the Enlightenment as we enter the new millennium.
Have you noticed that a lot of people seem to think that appeals to self-interest lead to a moral and just society?
No, I'm not merely talking about economists. Self-interest evangelicals have been spreading the good news for decades in public policy programs, political science departments, and financial institutions too. Converts can be found in environmental organizations that tell us we'll save on our energy bills if only we change those light bulbs. And blind zealots run polling companies that deploy the doctrine of self-oriented rationalism when they tell us that the preferences of individuals exist in a meaningful way to be measured - with nary an inkling that the way polls are conducted might influence how people respond.
Is self-interest fundamentalism dying? Cracks are certainly spreading through its foundations, as I'll discuss in a moment. The more important questions we need to grapple with are whether it should die away and, if so, with what should we replace it? Consider your answers to these questions. I'll share some of mine below.
Yes, rationalist fundamentalism still has a stranglehold on society. It's meteoric rise to dominance goes all the way back to the nuclear arms race that poured truckloads of cash from public coffers into defense contractor piggy banks through the "game" of mutually assured destruction during the Cold War. We saw it clearly during the Vietnam War when "body counts' laid the foundation for an entire generation of video game players to score points by killing more enemies - never mind that we were slaughtering innumerable civilians.
And, of course, it was only a matter of time before schools fell under the knife of test-based bookkeeping to "hold students accountable" to rationalist ideals of performance measurement - at the expense of actual learning. A web of trans-national organizations have come into existence - the World Trade Organization, International Monetary Fund, and World Bank being the best known - that push the ideology of self-interest into the center stage of world affairs.
Theory of Self-Interest: A Creation Story
How could an impoverished model of human-as-self-focused-calculating-machine have ever come into being? A common myth is that self-interest theories rose out of behavioral studies conducted by psychologists. A nice bedtime story perhaps, but it isn't true. Would you believe me if I told you the behavioral model underlying the global economy came, not from the human sciences, but from mathematics?
Back in the 1940's and 50's, a research center was created to explore fundamental issues of concern to the Air Force. This Research ANd Development institute was aptly named the RAND Corporation. Within the high security walls of this military think tank, mathematicians developed abstract principles for nuclear strategy during the Cold War. In the midst of this particular, historically contingent environment - and motivated by concerns of defense contractors in the air combat arena - the notion of self-interested rational action was born. Proof positive that the most bizarre stories are found in the non-fiction section of your local library.
(If you'd like to read the full story, check out S.M. Amadae's Rationalizing Capitalist Democracy: The Cold War Origins of Rational Choice Liberalism.)
So the birth place of modern market fundamentalism, in the guise of "rational choice theory", was the military think tank that gave us the disastrous arms race. Untested and theoretical, it quickly spread throughout the highest levels of government during the tenure of Robert McNamara at the Department of Defense, then whipped through the economics departments of many prominent universities, spurred the creation of public policy analysis as a "scientific" field, and undergirded today's global institutions of economic governance.
But things are starting to change.
Looking Forward: 21st Century Institutions
The first experimental studies of rational choice theory by behavioral scientists, principally Daniel Kahneman and Amos Tversky, showed that a foundational premise of the theory was wrong. (As a technical side point, they showed that preferences can be reversed by merely framing a question differently.) The "prospect theory" that arose through these experiments became the bedrock of a new field - behavioral economics - that has grown in prominence since its birth in the 1970's.
Throughout the subsequent decades, researchers found more damning evidence against self-interest. Paul Slovic and his collaborators at Decision Research have systematically explored how risk perception influences our decisions in many ways that fly in the face of rational choice theory. Human beings depend on emotional cues to make decisions. And many of these cues are associative rather than based on inferences - thus they do not fit the paradigm of rationality presumed by rational choice theory. In fact, human beings cannot manage risk - especially in the highly complex social situations we often find ourselves in - when regions of our brains that process emotional information are damaged. Antonio Damasio sealed this argument in his 1994 book, Descartes' Error: Emotion, Reason and the Human Brain.
A new view of human reason is on the rise in academia. Unlike its predecessor, the new paradigm is profoundly based in the workings of our bodies. This "embodiment" view incorporates insights from computer science, linguistics, neuroscience, philosophy, psychology, and robotics. Its adherents include people like Gilles Fauconnier, Raymond Gibbs, Mark Johnson, George Lakoff, Eleanor Rosch, Mark Turner, and Drew Westen.
Arising with this new view is a profound shift in how we understand human thought and behavior. Just as the institutions of yesteryear grew out of the old paradigm, research in the cognitive sciences beckons us to think differently about the institutions of tomorrow.
This is where I do my work.
I've seen how methods like cost-benefit analysis fail utterly when applied to environmental challenges. Future costs are weighed against current gains in a false choice between short-term profit seeking and long-term sustainability. I've also watched as public policies built on outdated performance measures undermine that which they are meant to improve. A key example is the educational paradigm that gave us No Child Left Behind - high-stakes testing - which flies in the face of what our teachers know about real learning. Any effort to treat moral pursuits - like making the world safe for future generations or educating a child - will demand broader measures of success than numbers alone can describe.
In a previous article, I described some things we'll need our institutions to do in the 21st Century:
In a world based on this new perspective, things work very differently:
- Citizens recognize fear-inducing news reports intended to inflate manufactured risks and hide awareness of genuine threats, thereby reducing the effectiveness of these manipulative tactics.
- Journalists understand the consequences of how facts are presented and beliefs are promoted in the structure of news reporting, resulting in coverage that enhances—rather than erodes—the democratic process.
- Policy-makers abandon contrived and faulty presumptions about “economic rational actors” and instead craft solutions to societal challenges that improve the lives of real people through deeper insights into the human condition, culminating in robust policies that stand the test of time.
- Advocates articulate clear and compelling calls to action that resonate deeply with the values of the citizenry, thereby promoting greater civic engagement and community empowerment.
What's more, we'll need to build a new foundation for our economic institutions. A recent example shows that the old approach is inadequate. Amartya Sen and Joseph Stiglitz, two Nobel prize winning economists, led a commission to improve upon the Gross Domestic Product (GDP) when measuring economic well-being. They spent most of the 79 pages of their personal reflections describing a long history of criticisms that show GDP to be grossly inadequate. Yet, very little of substance was offered to take its place.
What does it mean that a group of leading economists don't know how to measure economic progress? In the words of Sen, when talking about the limits of rational choice theory:
It seems easy to accept that rationality involves many features that cannot be summarized in terms of some straightforward formula, such as binary consistency. But this recognition does not immediately lead to alternative characterizations that might be regarded as satisfactory, even though the inadequacies of the traditional assumptions of rational behavior standardly used in economic theory have become hard to deny.
This tells us that many economists recognize the limitations of rational choice, but they don't have ready-made alternatives. Yet the old tools are well-known and ready for use so they pick them up again and again. They are looking for something better, but haven't found it yet.
I'd like to offer that the alternatives are starting to emerge in the unexpected corner of academia where researchers study the human mind. New tools cannot be found so long as the old paradigm of human nature remains. My colleagues and I are in the process of developing these new tools. What does our paradigm look like? Here are the key features:
- Human beings are profoundly social. We are wired for empathy and we learn how to act in the world through interactions with other human beings and the natural world;
- Human reason is embodied. We think and act through the interplay of brain, body, and environment. Emotions are vital to effective decision-making. And our understandings are shaped by the contexts we operate in;
- Human thought is evaluative. We interpret the world through core values, our sense of identity, and conceptual models for how we believe the world works. There's no such thing as "an objective world" when dealing with social and political issues because we a co-creators of the realities we experience.
Each of these features tells us something about how a human-based economy should work. It should recognize the value of community in our dealings with one another. It should be designed around our biological needs for survival in a world where things like potable water and fossil fuels are becoming limited and the planetary climate system has been disrupted in a manner that threatens us all. And it should acknowledge that interpretations of human well-being are perpetually contested by competing perspectives.
Yes, it is time to let self-interest fundamentalism go the way of monarchy and feudalism. It may not go silently into the night, but the end is nigh. Pretty soon we will have laid the foundation for a sustainable future - both ecologically and financially. In order to do so, we'll have to acknowledge how human beings actually are instead of how theorists engaged in military strategy presumed us to be 60 years ago.
This is a huge undertaking. It won't be completed overnight. Nor will it be the sole effort of a few visionary thinkers. But it must start somewhere. My suggestion is that you'll see it starting to take shape at the boundary between cognitive science and the world of expert practitioners at all levels of governance.
Look there and you'll probably find me too.