The Not So Dismal Science
Updated: Jun 14, 2022
by Tim Nadreau, Ph.D.
I spent time last week with some colleagues at a philosophy club where we began a conversation about surveys—do all questions asked invariably anchor and bias the participants? I recalled a story my major professor once cautioned me with. He was part of a large research grant, and one of the participants on the grant was a sociologist that was conducting the survey work for the group. She remarked that, in the survey, 90% of respondents said they were concerned about genetic drift of GMO crops. She went on about the statistical significance of her results: t-statistics, p-values, etc. My professor spoke up and said she had anchored the respondents by first describing genetic drift, and then asking if they were concerned about it. Who wouldn’t say they were concerned? 90% actually seems a bit low in that context.
The crop in question was golden rice—a GMO rice variety engineered to produce beta-carotene. Developing nations often see early onset macular degeneration due to a lack of beta-carotene in their diets. Rice, a staple food source, provided an excellent vehicle for combating the issue. Genetic drift, however, meant golden rice might cross pollinate with native rice species, causing a loss of bio-diversity in the crop.
My professor advised the question should have been phrased, “Are you more concerned about genetic drift or early onset macular degeneration?” His point was that there was a tradeoff, and that was not being made clear to the participant. There are risks with golden rice, and there are risks without golden rice. Economics emphasizes that every action has a trade-off. By reading this post, you are giving up the time it takes you to read it, time you could be spending with your kids, reading a different blog, cooking a meal for your spouse, etc. Doing any of those activities would mean giving up other opportunities. It's easy to see why economists are thought to be such wet blankets.
My colleagues said something that pulled me out of my economist worldview momentarily. “I would rather focus on one issue at a time. Let’s focus on genetic drift first. Then we can look at macular degeneration. Don’t confuse the issues,” they said. But this reminded me of my toddler, putting his hands over his eyes and thinking it made him disappear. Ignoring the tradeoff doesn’t make it go away. Even though it might allow your mind to focus on the singular issue, it doesn't allow you to see it fully.
I want to focus my theory section this week on a friend’s dissertation research. It emphasizes the stark reality of tradeoffs, and what happens when we fail to consider them. He noticed that there was a fundamental shift in the way VA hospitals were allowed to treat their patients post 2012. A significant number of veterans that were prescribed opioids were becoming chronic users. In 2013 the Opioid Safety Initiative (OSI) was introduced to mitigate prescription drug addiction. The OSI was effective. Eventually the types, potencies, and availability of narcotics that could be prescribed were limited and restricted. And low and behold, addiction rates would go down! By 2020 VA patients prescribed opioids had fallen by 64% from their peak. The VA found a “solution.” Suicide rates, particularly among rural veterans, spiked…
Economists hate “solutions” because they assume there is no trade off—no opportunity costs—and as a result, in extreme cases people die needlessly. Eventually the new administration relaxes the prescription regulations, and we go back to the higher levels of drug addiction. Economists see this and conclude the following: there is an optimal level of drug addiction, and an optimal level of suicide, and that level is not zero. Zero is a desirable outcome. All economists want zero drug addiction. All economists want zero suicides. But God didn’t give us that world.
The following figures come from the unpublished NBER working paper linked above. I recommend reading the paper. The authors make caveats surrounding the data, provide clarity in describing the results and methodology, while delving beyond the simple point I am trying to propound here. Yet, the point still stands—tradeoffs are real.
So, after all of this, how can I suggest that economists aren’t dismal people in a dismal science? Easy. Once you understand the tradeoffs, you can manage them better. Ignoring tradeoffs results in awful policies and poor life decisions. Ignoring tradeoffs can mean everything from poorly managed household finances (a prevalent one) to a nuclear arms race (less frequent but with larger consequences). Embracing the tradeoffs usually means innovations and finding effective ways to reduce the opportunity costs. It means finding better pain medications for our soldiers, resulting in less addiction AND reduced suicide rates. Embracing the tradeoffs means less misallocation of resources. It means allowing some genetic drift, and keeping kids in the third world from going blind by the age of 30. Embracing tradeoffs means investing some money in solar and wind R&D, but maintaining our energy producing capacity until those systems are efficient enough to be brought online. Embracing the tradeoffs means balance. We have to take our hands off of our eyes and not live in toddler land any more. If we can do that, the result is better and more stable decisions, better and more stable homes, better and more stable communities, cities, and nations. Economics is an optimistic discipline.