"Everyone Gains": The Pretty Lie of Economics
Home-grown SDB in our sanctuary of candor
In a world of Social Desirability Bias, the economics profession isn’t just a sanctuary. It is by far the biggest such sanctuary. No other discipline explores emotionally-charged topics with so much candor. Our sanctuary was never perfect, and as the profession’s political distribution moves toward the leftist monoculture of the other social sciences, the sanctuary has been getting worse. Still, if you want to honestly analyze the effect of IQ on earnings, the body count of pharmaceutical regulation, the inefficiency of pollution rules, or the wisdom of the Gulf monarchies’ immigration policies, economics remains the place to be.
Yet in the heart of our sanctuary of ugly truths, economists have long cultivated a very special pretty lie. One almost unique to our intellectual world. Namely: Pointing to a change that is good on balance, then absurdly claiming that “everyone gains.” Stock examples:
“Everyone gained from the Industrial Revolution.”
“Everyone gained from the Internet.”
“Everyone would gain from congestion pricing.”
“Everyone gains from free trade.”
Even as hard-headed an economist as Milton Friedman lapsed into this pretty lie back in 1978: “If you have free immigration in the way in which we had it before 1914, everybody benefited.” Seriously, Milton?!
What makes me so sure that “Everyone gains from X” is invariably a blatant falsehood? Because every change causes price movements, which are automatically bad for someone or other.
The Industrial Revolution was great overall, but hurt traditional craftsmen. The Internet is great overall, but hurt travel agents. Congestion pricing is great overall, but bad for cheapskates with high traffic tolerance. Free trade is great overall, but not for workers and investors in industries that can’t survive at world prices.
Many economists who utter the words “Everyone gains” will, if pressed, admit they’re speaking poetically/falsely. Plenty of others, however, will use the following defenses to stand their ground. They’re all nice tries — and they all fail.
Appeal to the short-run versus the long-run. “Everyone gains” means “Every individual is ultimately better off on balance” not “Every individual is instantly better off.” Nice try, but even if every change was a net positive for everyone after twenty years, it still wouldn’t be a net positive for everyone, because not every initial loser lives twenty more years. “Won’t their kids be better-off, though?” Not everyone has kids!
Appeal to ex ante versus ex post. “Everyone gains” means “Every individual’s expected utility rises, even if some people’s experienced utility falls.” Again, nice try. But in the real world, every change has some highly predictable losers in addition to a larger body of random losers.
Appeal to rule changes versus policy changes. Again, no matter how generally beneficial your rule changes will ultimately be, some losers won’t ultimately be alive.
Appeal to compensation. “We’ll be sure to compensate the losers” just defends one pretty lie with another. In the real world, governments rarely even try to compensate losers. Why not? Because it’s too hard to pinpoint the losers and too expensive to make them whole. Even if you had an infallible list of all losers, how would you find out how much compensation was necessary to offset their suffering? By asking them?! And remember: Losers often fail to realize that they’re losers! If New York City ends rent control, all of the people who would have moved to the Big Apple and landed a rent-controlled apartment are, strictly speaking, losers of deregulation. Even if, as a result of the abolition of rent control, the idea of moving to New York City never occurs to them.
Why do so many economists pathetically cling to the lie that “Everyone gains” from anything? Most of the time, they’re just being psychologically normal humans who unthinkingly repeat feel-good slogans. For more thoughtful economists, however, “Everyone gains” is the magic bullet that allows them to simultaneously (a) feel like value-free scientists and (b) give value-laden policy advice.
The harsh reality is that value-free scientists cannot give value-laden policy advice. Even doctors who recommend vital vaccinations are tacitly embracing the value of human life over the value of microbial life. In the words of Nietzsche, “If you gaze for long into an abyss, the abyss gazes also into you.”
After you and the abyss finish this staring match, fortunately, you’re ready to move on. “Everyone gains” is a silly but unnecessary slogan. Economists should drop it in favor of a blunt: “Yes, I have a strong moral presumption in favor of overall human prosperity. Do you seriously disagree?”
This just seems like another pointless overly literalist autistic take. ‘Everyone’ is taken to mean approximate everyone or all defined classes of people along some axis. It’s trivial to point out that nothing benefits everyone. Even a meteor that wipes out all of humanity benefits people who want to die but can’t muster the will to commit suicide.
I don’t know, this take seems like disputing the claim that blue whales are the largest mammals by pointing out that juvenile blue whales are smaller than adults of some mammalian species. You’re just positing a very specific sense of the claim for which the claim is false but that everyone is already aware of. No new information is being generated.
Don't you have to distinguish between free market processes that aggregate the choices of consumers and create incentives for changes that have economic winners and losers and government policies that redistribute resources and/or pick the economic winners? There is a big difference between Schumpeter's creative destruction and government industrial policy.