Yves here. Peter Dorman discusses the importance of altruistic action in response to disasters as important for social cohesion. Notice that he takes as a given that neoliberalism creates a low-trust, transactional society, and how those are particularly ill-suited to dealing with disasters or other challenges to the collective good. From a 2013 article in Psychology Today:
Robert Frank, an economist at Cornell, believes that his profession is squashing cooperation and generosity. And he believes he has the evidence to prove it. Consider these data points:
Less charitable giving: In the US, economics professors gave less money to charity than professors in other fields—including history, philosophy, education, psychology, sociology, anthropology, literature, physics, chemistry, and biology. More than twice as many economics professors gave zero dollars to charity than professors from the other fields.
Less concern for fairness: Students were given $10 and had to make a proposal about how to divide the money with a peer. If the peer accepted, they had a deal, but if the peer declined, both sides got nothing. On average, economics students proposed to keep 13% more money for themselves than students from other majors.
In another experiment, students received money, and could either keep it or donate it to the common pool, where it would be multiplied and divided equally between all participants. On average, students contributed 49% of their money, but economics students contributed only 20%. When asked what a “fair” contribution was, the non-economists were clear: 100% of them said “half or more” (a full 25% said “all”). The economists struggled with this question. Over a third of them refused to answer it or gave unintelligible responses. The researchers wrote that the “meaning of ‘fairness’… was somewhat alien for this group.”
Now there may be an element of self-selection, as in those how go into economics are mercenary types to being with. But it’s not hard to find examples of how economist and MBA-type thinking has done societal harm, and to give numerous examples to show that it has become more widely accepted.
By Peter Dorman, an economist and a professor at Evergreen State College whose writing and speaking focuses on carbon policy, child labor and the global financial crisis. Originally published at EconoSpeak
Whenever there’s a natural disaster, a famine or some other such crisis, people zero in on price gouging. Are grain merchants jacking up prices to take advantage of a food shortage? What about airlines raising fares to cash in on desperate attempts to flee an impending hurricane, or stores that double or triple the price on bottled water? And generators that suddenly only the rich can afford?
Most think this type of exploitation is unjust and even wicked, but Econ 101 says the opposite: it’s a rational, socially desirably market response to a change in supply and demand. Higher prices for goods made scarce and valuable by a disaster encourage both more provision and greater care in use, exactly what you would want in such a situation. For details, see the writeup in today’s New York Times.
According to the Times, the main flaw in the free market argument is that it allows the poor to be completely priced out. This is an application of the argument, made by many social theorists, that distinguishes between essential goods, which should be rationed more or less equally among all, and inessentials, which can be left to the market. There’s a lot to be said in its favor, and I won’t dispute it.
But the Times and most commentators miss a second point, which is about the same issue of social utility as the case for markets. Societies depend on a general willingness to share, volunteer and reciprocate, especially in desperate times. When a hurricane or earthquake strikes, or when war or some other spasm of human destructiveness occurs, we depend on friends and strangers to help locate survivors, pick up the rubble, share their homes and meals and generally pitch in. There have been a number of stories, for instance, about ordinary people from other parts of the country who, hearing about Harvey’s devastation of Houston, made their way their to help out however they could. Most of us won’t drop everything and head to Texas, but it’s safe to say that Houston won’t recover, or at least not so much or so quickly, unless hundreds of thousands in Texas and elsewhere lend a hand.
The problem with price gouging is that it undermines the spirit of voluntary provision. Who will make a personal sacrifice to help the community rebuild if those with the most means are using disaster as a golden profit opportunity? Pecuniary incentives crowd out intrinsic ones. This is true at the individual level and also socially. A society in which the market performs rationally but spontaneous cooperation is snuffed out is cold, cruel and ultimately not rational at all.
Disaster relief for sale is not so different from love for sale.