Big data is all the rage.
We have become increasingly obsessed in economics and in medicine and in public policy with what can be measured. Evidence-based is always better it would seem, than going with our gut or worse, a wild guess that springs from our biases.
This passion for evidence is not new. Carved in stone, on the outside of the social science building where I got my PhD at the University of Chicago is a quote attributed to Lord Kelvin, the physicist who gave us the Kelvin temperature scale and who died in 1907:
“When you cannot measure, your knowledge is meager and unsatisfactory.”
In many ways, it was our motto at Chicago. You could argue that a respect for the importance of data and evidence is the cornerstone, literally and figuratively, of modern science and even modern life.
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.
Using evidence wisely is almost always better than a wild guess. But that “wisely” part is what make it hard. We have to be careful and understand the limits of our tools and our data and our understanding of a complex world.
Adam Smith can help us understand the limits of measurement. He is still probably the most famous economist. Some people know that he wrote the Wealth of Nations. But few know of the first book Smith wrote, The Theory of Moral Sentiments. This was his book on morality and why people behave the way they do when interacting with their circle of friends and acquaintances.
The fundamental question Smith asks in The Theory of Moral Sentiments is why, given that we are self-interested (not selfish, self-interested) do we ever make sacrifices for others? Why do we do acts of kindness and generosity at our own expense?
His answer is that we have a vision of what is honorable and we try to live up to it. That vision comes from an awareness that when I step outside myself, I recognize that I have no claim to be better than anyone else. To act as if I am is selfish and dishonorable.
Smith argues that we want the respect of those around us and we want to earn that respect honestly by how we actually behave rather than how we are perceived. We want our true self to be the source of our reputation. A single sentence sums up Smith’s view of our motivation:
Man naturally desires, not only to be loved, but to be lovely.
By loved, Smith didn’t just mean romantic love or deep friendship. He meant honored, respected, praised, paid attention to. We want to matter in the eyes of others. By lovely, Smith meant worthy of honor, worthy of respect, praiseworthy. We naturally desire to be loved and lovely — we’re hardwired that way. What Smith is saying is that we care deeply about not only being respected and praised — that Smith takes as a given. But we also want to earn that respect and praise honestly, by actually being lovely.
Smith makes a bolder claim that this urge for respect from others is the source of our well-being. He writes:
…the chief part of human happiness arises from the consciousness of being beloved…
So consider the following. If Smith is right and if the the chief part of human happiness arises from the consciousness of being beloved, then what happens to people who are not beloved, not loved, not respected, not honored? What happens to people who no one pays attention to, people who struggle to find respect, honor, love? What happens to people who feel as if they do not matter?
The Tragedy of Mass Shootings
Mass shootings in America are almost always done by a lonely man with a gun.
The policy debate focuses on the gun.
So we debate gun control and the Second Amendment and budgeting money for mental health counseling because obviously people who kill strangers for what seems to be no reason must be mentally ill. We debate whether we should arm teachers, or step up our security at synagogues or concerts or places where crowds gather.
We debate everything except why it has come to pass that it crosses someone’s mind to murder strangers for what seems to be no reason. We take that as a given and try to figure out how to make the task more difficult. How did we come to this point in American life?
We focus on the gun. But we might want to focus on the lonely part.
In an essay on mass shootings, I wrote:
I don’t think it’s a coincidence that almost all mass shootings are committed by men, mostly lonely men, disaffected, alienated from modern life, alienated from the standard of success our culture aspires to, disconnected from those around them. No one pays much attention to them until people are forced to pay attention at the point of gun. No one pays much attention until the headlines scream that these lonely men have finally achieved something people are going to have to notice.
In the past, people who struggled to integrate themselves into the social circles of daily life — the unloved among us — were often bullied or worse, put into insane asylums against their will. We’ve worked at stopping the bullying with some success; we don’t incarcerate people who we think of as crazy. That’s the good news. The not so good news is that we leave them to fend for themselves as best they can. Some of them end up on the streets. All of them are invisible. They make us uncomfortable but we are supposed to be tolerant so mostly we just ignore them.
We try not to think about the fact that despite legislation to restrict gun ownership and despite more security and more schools practicing lockdowns, these tragedies keep happening. We like to think that we just need more of something. If we could only pass tougher gun laws, or train teachers to use guns or something, the problem would be solved.
But none of these policies get at the underlying problem — a loss of connection and an unsatisfied longing to belong that Adam Smith understood. That challenge is not easily quantified so it is unlikely to get anyone’s attention or to be the focus of a research project. We need to pay more attention to the people around us who are unloved and try to connect to them. That requires a change in cultural norms. That change cannot be quantified so it is neglected as a way to improve the situation.
The Impact of the Minimum Wage
In the old days, economists believed that the minimum wage reduced employment among low-skilled workers while increasing the wage of those who kept their jobs. On the positive side — higher wages. On the negative side, fewer jobs. A new set of studies has come out in recent years suggesting that job losses are minimal and maybe zero. So an increase in the minimum wage is all gravy, at least as long as the increase isn’t too big. Other recent studies find that there are job losses and that the pace of job creation for low-skilled workers slows.
Suppose there is some job loss. In that case is the minimum wage a good thing or a bad thing? A lot of people and some economists would say that it depends on the size of those two effects. If the wage gains are large relative to the job losses, might be worth it. If the job losses are large relative to the wage gains, probably not. We tend to have data on the number of jobs and the wages workers in those jobs earn so almost every study of the minimum wage is about the size of the tradeoff.
But we’re looking where the light is — where we have the data.
Here’s what we often don’t have data on.
If jobs are lost or not created in the first place, which people are harmed? Is it random? Probably not. It’s probably the least skilled of the low-skilled workers affected by the minimum wage.
Is the amount of training on the job reduced because workers are now more expensive?
Does the boss treat the workers the same as in a world without a minimum wage? When jobs are scarcer, workers compete harder to get them and lousy bosses can still find employees.
And most importantly, we don’t have data on how someone who didn’t finish high school feels about himself after he can’t even find a job as a busboy. Or how he feels at night sitting by himself.
And if you push an advocate for a higher minimum wage to consider these effects, they explain that it’s not a problem. We’ll get that person into the safety net — they’ll get disability or at least food stamps. Jobs for low-skilled workers are going to disappear anyway. What’s the big deal, they say, if the minimum wage speeds up automation or the replacement of workers with artificial intelligence or robots? Eventually, they say, we’ll have to create what’s being called a universal basic income a check for everybody to guarantee a minimum standard of living.
As if material well-being from any source was just as good as another.
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.
The Opioid Crisis
Drug overdose deaths were over 70,000 in 2017. About double the number in 2007. About four times the number in 2000. These are sometimes called deaths of despair.
In his superb book, Dreamland, Sam Quinones chronicles how prescription drugs like Oxycontin spread beyond their narrowest use as a painkiller. Then innovative Mexican entrepreneurs found a way to package heroin and distribute it effectively in medium-sized towns to compete with Oxycontin. One marketing strategy was to show up at the prescription mills — places where doctors would write prescriptions in five minutes after a cursory question of whether you were in pain. The heroin dealers would stand outside and give away free samples of heroin.
But who gets excited about free heroin?
People with empty lives. People who don’t feel lovely or loved. People who don’t feel respected. If you’ve lost your job and the respect that comes with it, I assume you’re more likely to turn to drugs. The opioid crisis has hit Ohio and Kentucky and West Virginia hard, places where economic opportunity has dried up as manufacturing and mining jobs have gone overseas or been replaced by automation.
I was talking to a college kid in my neighborhood about a recent accident he had. He was playing basketball and fell and broke bones in his wrist and arm. They gave him Vicodin for the post-surgery pain. What was that like, I asked him. He told me he hated it. He got off it in a day or two. He was worried about addiction and he also said it made him feel numb. Numb? That doesn’t seem very exciting. He said if your life’s lousy, I guess numb might be an improvement.
What should we do about the opioid crisis?
Keep out the drugs? Not working.
Arrest drug dealers? Not working.
Put people in jail who use drugs? Not working.
Instead, we might want to think about what leaves people in the Rust Belt without much opportunity. Why don’t they leave to find work somewhere else? I think there are two reasons — their skills might not be so useful in the cities where people looking for opportunity might go. And those cities are very expensive for someone just starting out. Too many restrictions on land use.
Instead of trying to keep drugs away from people, maybe we ought to think about ways to get people less interested in drugs. We should give them reasons to stay away from drugs. We should create schools that give people the skills to thrive in today’s economy. We should make it easier for people to move to cities.
What Does This Have To Do With Modern Economics?
I think Smith was right — the chief part of our happiness is our relationships with the people around us — our families, friends, and acquaintances. Those relationships are essentially ignored in modern economics. There’s no place for Adam Smith’s ideas of loveliness in economic models. In the world of economics, individuals buy stuff and become happy. Of course, any decent economist understands that our happiness and our material well-being are not the same thing.
Yet economists on the left and the right argue mostly about material well-being and most economists stay there under the streetlight because that’s where the data will always be best. So do non-economists. They use data like a cudgel to bludgeon the opposition, cherry-picking studies and facts to suit their story. The rest of the story, the part that can’t be quantified, is often ignored. By focusing on what can be measured, we are forgetting what brings joy and a sense of flourishing to the human experience. And if we are not careful, we think our models actually capture how people behave and what they care most deeply about.
Adam Smith never married. He had no children. Most of his life he lived with his mother.
But he was loved by not just his mother. He was respected and honored by the greatest minds and some of the most powerful people of the day — David Hume was his best friend. Smith was often alone. But he doesn’t seem to have been very lonely. He certainly was loved and lovely.
He only wrote two books in his lifetime, but oh the impact they’ve had. Together, they teach us something fundamental about what matters in this world. We would be wise to keep his wisdom close at hand when we think about public policy. We would be wise to remember the limits of looking only where the light is.