Trying to Explain
The causation at work in an economy is often systemic interaction, rather than the kind of
simple one-way causation involved when one billiard ball hits another billiard ball and knocks it
into a pocket.
Systemic causation involves more complex reciprocal interactions, such as adding
lye to hydrochloric acid and ending up with salty water, because both chemicals are transformed
by their effects on one another, going from being two deadly substances to becoming one
harmless one.
(...)
Because systemic causation involves reciprocal interactions, rather than one way causation,
that in turn reduces the role of individual intentions.
(...)
While causation can sometimes be explained by intentional actions and sometimes by
systemic interactions, too often the results of systemic interactions are falsely explained by
individual intentions.
Just as primitive peoples tended to attribute such things as the swaying of
trees in the wind to some intentional action by an invisible spirit, rather than to such systemic
causes as variations in atmospheric pressure, so there is a tendency toward intentional
explanations of systemic events in the economy, when people are unaware of basic economic
principles.
While rising prices are likely to reflect changes in supply and demand, people
ignorant of economics may attribute the rises to "greed".
(...)
Such an intentional explanation raises more questions than it answers. For example, if greed
is the explanation, why do prices vary so much from one time to another or from one place to
another? Does greed vary that much and in the same pattern?
(...)
People shocked by the high prices charged in stores in low-income neighborhoods have
often been quick to blame greed or exploitation on the part of the people who run such
businesses. Similarly when they notice the much higher interest rates charged by pawnbrokers
and small finance companies which operate in low-income neighborhoods, as compared to the
interest rates charged by banks in middle-class communities. Yet studies show that profit rates
are generally no higher in inner city businesses than elsewhere, and the fact that many businesses
are leaving such neighborhoods-and others, such as supermarket chains, are staying
away-reinforces that conclusion.
The painful fact that poor people end up paying more than affluent people for many goods
and services has a very plain-and systemic-explanation. It often costs more to deliver goods and
services in low-income neighborhoods. Higher insurance costs and higher costs for various
security precautions, due to higher rates of crime and vandalism, are just some of systemic
reasons that get ignored by those seeking an explanation in terms of personal intentions.
(...)
It is also worth noting that most people are not criminals, even in high crime neighborhoods.
The fraction of dishonest people in such neighborhoods are the real source of many of the higher
costs behind the higher prices charged by businesses operating in those neighborhoods. But it is
both intellectually and emotionally easier to blame high prices on those who collect them, rather
than on those who cause them. It is also more politically popular to blame outsiders, especially if
those outsiders are of a different ethnic background.
Systemic causes, such as are often found in economics, provide no such emotional release
for the public or moral melodrama for the media and politicians as such intentional causes as
"greed," "exploitation," "gouging, "discrimination," and the like.
Intentional explanations of
cause and effect may also be more natural, in the sense that less sophisticated individuals and
less sophisticated societies tend to turn first to such explanations. In some cases, it has taken
centuries for intentional explanations embodied in superstitions about nature to give way to
systemic explanations based on science. It is not yet clear whether it will take that long for the
basic principles of economics to replace many people's natural tendency to try to explain
systemic results by someone's intentions.
― Thomas Sowell, Basic Economics: A Citizen's Guide to the Economy
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Dear Kate,
I don't think I will need to write anything more, or can, without risking losing your attention.
It's a long quote today, yes, calling your attention to the simple human question of cause-and-effect, from an economic point of view. It's very basic stuff, as Sowell stated in the title of his book, which I highly recommend.
Last night at the dinner table my son again asked, not looking at me but for that addressing the incompetence of this father's economic policy all the more effectively, why we retired our second car, why we are not bringing it back, why it is that I can't see what he can see plainly: the convenience it would bring to this family (or, more like, before that, to him).
Economic is the topic, then, and politicking is how to get us there to engage each other and negotiate our competing versions of human flourishing. He sees no system at work but a straight line to allocate resources and answer to the scarcity at the end of it, where his desire lies, but I speak from a web of causes-and-effects, myself in the deep of it, my family too, our country of course, and tread more lightly in what I claim to know, let alone having the will to answer to such knowing.
Those who claim to know exactly what is happening and recommend themselves as the exact solution to it, beware of them. Election month this is; be double wary. Most of all, be careful of what we wish for.
Yours, Alex
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