Wednesday, September 24, 2014

When Economists Mistake the Map for the Territory

There is nothing like arguing with an economist with whom you mostly agree to make clear the shortcomings in the field.

In order to engage in economics research, you have to make some simplifying assumptions. That's fine. That's necessary. Economics deals with one of the most complex network processes known to man; there will have to be some simplifying assumptions. But when one mistakes the map for the territory, problems arise.

For example, it is a simplifying assumption that people are fungible -- that is, that people are perfectly flexible and do practically anything. This then leads to the economic logic that whatever you are doing is what you want to do. Now, there is a certain truth to that statement, but it is a truth that too often is used to mask the complexities of any given situation.

Say you have someone who works in a coal mine. He hates working in the coal mine. The economist would say that he prefers the pay plus working in the coal mine over not working in the coal mine and getting less pay. Or that if he really wants to get out of working in coal mines that he ought to get training in something else.

But here's the reality. Let's say we have a 40 year old man who has worked in coal mines since he was 20. Who, realistically, is going to hire him? He is trained on mining equipment. Which means he's specialized. Some of that is transferable, but he's going to have an easier time getting a coal mining job than some other job. More, many people won't want to hire him because they believe that he'll want to go back to the coal mines for the pay. The perception of potential employers matter. It is not up to this man as to whether he works in a coal mine; it is up to him and all potential employers. And if nobody will hire him except coal mines, then he's stuck being a coal miner. Or becoming homeless. Which is a ridiculous "option."

Further, what if the person is uneducated or has a poor education? This also restricts options. The economist will argue the person can go back to school to gain "human capital." But here we run into all sorts of problems. I already noted that the human capital the coal miner accumulated as a coal miner tends to restrict his options to coal mining. But more, the argument that one can gain any human capital one wants completely ignores the realities of learning disabilities, aptitudes, I.Q., interest, etc. You may want to go back to school, but if you have severe dyslexia, that may not be an actual option. Someone who tells you that you ought to learn computer coding when you don't have the aptitude for coding and/or math is wasting your and his time. Some people simply cannot learn certain things. There are wild variations in creativity, aptitude, I.Q., etc. And all of these restrict people's real options.

More, while it may seem logical that more human capital gives you more options, the reality is that it often has the opposite effect. Sure, if I learn carpentry, that means I can do carpentry and work at Kroger's. There are areas in which it is true that knowing more gives you more options. However, there are other areas where more education not only fails to increase your options, but in fact restricts them. For example, if you have an undergraduate degree -- or even a Master's degree -- in English or technical writing, you can get some pretty good, high-paying jobs. Technical writers can make pretty good money. However, I have discovered that if you have a Ph.D., nobody will ever offer you a job as a technical writer, no matter how good a writer you are. Why not? Surely, if you have the writing skills as a B.A. or a M.A., you have them as a Ph.D. In fact, you should be an even better writer. But writing skills are not the only thing taken into consideration when hiring a writer. They also want to know that you will be there long-term; they don't want someone who they think might be too arrogant, what with their Ph.D. and all. Thus, a Ph.D. can actually close off a number of avenues.

When economists talk about people having all of these options and use evidence that because you are doing something that that is what you want to do, they fail to acknowledge the fact that one's options are severely restricted by others' decisions and perceptions. I cannot get a better job if nobody will offer me one from the hundreds of jobs for which I've applied. Just because I settle for something because it's better than losing one's house and car, not paying the bills, and not having enough to eat, that doesn't mean that I'm happy to have the job or with my situation. And one should not have to be happy when institutions exploit situations where people have found themselves boxed in by being over-educated or not having the aptitude (for whatever reason) to do something else. The fact that someone is doing something does not mean they are happy with the situation, or that they are perfectly happy to have the job they have. The options real people have in the real world are often extremely narrow, and too many economists sound like fools when they don't acknowledge that reality.
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