The Economists’ Blind Spot

Back in the fourth century BCE, Plato composed the satyrical dialogue Gorgias to highlight the difference between rhetoric (convincing) and knowledge (teaching/learning). Gorgias says that he can convince anyone of anything. Socrates asks whether Gorgias can convince an expert. Of course not. So, Socrates asks, “What you are saying is that rhetoric is the art wherein ignorant people convince equally ignorant people that they are not ignorant?” Yes, Gorgias admits. There is no easy way out of this dilemma. The social conditions of knowledge are such that clear thinking requires security, leisure (freedom from necessity), and education. Absent these, all people are subject to Gorgias’ fine art. The left promotes universal health care, free quality education, and a strong social safety net not because they want to give people a free ride, but because these are the conditions of a well-functioning republic.

Sorry Paul, but the facts mean nothing to individuals for whom these conditions are lacking. But it is also clear that this creates a huge moral hazard even for those who enjoy good health, education, and freedom from necessity, since there are exceptionally high returns that can be realized from the ignorance of others. I count no fewer than five economic Nobel laureates (Mirrlees, Vickrey, Akerlof, Spence, and Stiglitz) who earned their prizes for precisely this insight; and yet economists still feign surprise when confronted by the minimal role facts play shaping public opinion.

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