Arnold Kling  

Is Jeffrey Friedman Ignorant?

Freakonomics: The T.V. ... Malevolent Aspirations...

He would say so. Back in November, He wrote,

The economist’s approach reduces human error to the merely so-called “errors” of people who actually know that they are wrong, but prefer to be wrong—either because (1) they have some sinister interest in supporting what they know is wrong; or (2) because they get some sort of emotional gratification from being wrong...Caplan seems to think that economic arguments are so well known and intuitively plausible that some act of will—or of irrationality—must be responsible for the public’s failure to agree with Caplan and his fellow economists. Wouldn’t it be more plausible to allow that most people have never even heard the economists’ arguments; and that these arguments are, in any event, counterintuitive...

Friedman spells out his views at length in "Taking Ignorance Seriously: Rejoinder to Critics," which appears in the latest (Vol. 18, No. 4) issue of Critical Review.

He writes (p. 495),

In the mainstream model, producers know how to satisfy consumer demand...they need only take advantage of their knowledge by doing what they realize needs to be done. The same, it seems to me, goes for a model in which an unknown profit opportunity becomes known by...highly motivated entrepreneurs...An epistemological question is being answered by "incentives"--as if merely wanting to know leads to knowledge.

Friedman is arguing that the individual entrepreneur is ignorantly groping for success. Only the market process, which sorts out the winners and losers, acquires knowledge.

As he puts it, on p. 496:

incentives and interests aren't the same as, and are insufficient to produce, knowledge...if there is a cognitive difference between capitalism and communism, it should be theoretically isolated from, not conflated with, a difference in incentives.

On p. 510:

People have, in fact, been practicing such political habits as demonizing each other, preaching to the choir, and dogmatically reaffirming their own faiths since the beginnings of modern democracy.

The foregoing is Friedman's picture of the educated elite, which like mine, is much less sanguine than Bryan's. Bryan would argue that relatively speaking, educated people, and economists in particular, have more sensible views on economics. But, as I argued recently, people are not trustworthy. I trust processes, not people.

Back to Friedman, p. 513

a full grasp of every such consideration--omniscience--would lead all open-minded people to the same conclusions. Disagreement, therefore, inherently means that there has been a failure of understanding--no matter how hard the parties have tried to be open minded. Open mindedness is no more reducible to attitude than knowledge is reducible to cost.

Closed minds, like empty ones, are ultimately instances of cognitive, not motivational failure

He is saying that telling people to be open minded is not going to eliminate disagreement. Often, we assume that people disagree with us because of adverse incentives, but this is, in Friedman's term, the "cynic's heuristic" for explaining away someone else's opinion.

Friedman's view of the world is centered around human ignorance:

1. As individuals, we are quite ignorant. Some people know they are ignorant. Others dogmatically deny it. See my essay, Two Strategies for Avoiding Truth.

2. Certain processes, notably the scientific process and the market process, arrive at knowledge in an imperfect, but relatively reliable way, through trial and error.

3. The political process is less reliable at weeding out error.

4. People are mostly blameless for their views. When I accuse someone on the Left of holding beliefs that make them feel good, or when someone on the Left accuses me of holding beliefs in order to protect the privileged, we are mistaking honest cognitive differences for malign motives.

One point about widespread ignorance is that it is difficult to explain why people should not want to let government make decisions for them. Given that we cannot possibly know what is best in many situations, it is reasonable to hand responsibility for decisions to someone else. In health care, for example, Robin Hanson talks about our desire to offload responsibility to the doctor.

From an individual's point of view, it is not obvious that offloading a decision to an elected official is much different than offloading the decision via the market process. Who cares whether your medical procedure has to be approved by an HMO or by a government agency?

I would argue that in the long run the competitive process is likely to lead to the private HMO making better decisions than the government agency. But that is a fairly subtle argument. A lot of people do not get it.

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CATEGORIES: Economic Philosophy

COMMENTS (3 to date)
Plinius writes:

There is something that I don't understand in Caplan's argument. So people indulge in irrationality because it is cheap, and it is cheap because votes are very rarely decisive. But that's not what people believe: people are under the impression that their vote is crucial, in fact they often speak as if their one meager vote has mythical powers, e.g. "I'm going to vote Republican in the Senate, but Democrat in the House so has to have a split congress which ultimately will bring about the right kind of Republicans, etc...."
So if biased beliefs are what matters, and people are under the impression that irrationality is costly, why aren't people more careful in their opinions?

Arnold Kling writes:

Plinius, your point that many people talk about their votes as if they mattered is well taken. I agree with Friedman that people's political viewpoints reflect ignorance, not the lack of incentive to be rational.

Ed Lopez writes:

Health care is perhaps the least market process driven industry in the U.S. I'd say even less than education.

We also "offload responsibility" to financial planners (I'll gladly suffer some agency slack if I get to avoid all that research!), religious (YOU teach my kids the tough stuff), sommelliers & waiters (the best you recommend), etc., etc., etc. Relying on others can also be understood as exchange--the necessary partner of specialization. Call me old fashioned that way. :-)

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