The Economics of Life

When you hear the word “economist” you probably don’t think of Socrates, Plato, and Aristotle. That’s a shame, because economics, properly understood, is a philosophical pursuit. It’s an attempt to answer the same big question that occupied the ancient Greeks. Namely, “How should one live?” 

Adam Smith wanted that answer. He wanted it badly enough to spend his entire intellectual life grasping at it. He read philosophy as a student and taught philosophy as a professor because he understood that our economic lives couldn’t be separated from our inner lives or our relationships with others. He wrote his Theory of Moral Sentiments because he believed that humans were rational and the nature of the self was knowable. He wrote The Wealth of Nations because he intuited a connection between individual self-interest and societal prosperity. 

Smith is sometimes called the “father of economics” but he’d probably have trouble landing a tenure-track position at a university these days. He never crunched a dataset or ran a regression. Unlike most people who call themselves economists in the 21st century, Smith was a starry-eyed, chin-stroking dreamer. He spent his time musing on the big question: “How should one live?”

That is to say, Adam Smith was a philosopher. So, for that matter, was Jeremy Bentham, whose notions of utility and rationality still heavily influence the modern approach to economics. Karl Marx got the answer to the big question (and most of the small ones) spectacularly wrong, but it wouldn’t be sufficient to call him an economist. He was a philosopher, and a consequential one at that. 

The fundamental precept of economics is that we live in an environment of scarcity. Because resources are limited, people must make choices about what and how much to consume, produce, trade, and invest. To make our choices intelligently and efficiently we must figure out what it is we want and need, learn to weigh tradeoffs, and make peace with the fact that we can’t have it all. 

Economics—that is to say the study of the problem of choice in an environment of scarcity—is not at root a question of math or money, though it can seem that way when you read the economic news or watch business channels on TV. It’s a question of human behavior. Ultimately, economics wants to know, “How should one live?”

Somewhere along the way the philosophical roots of economics got lost. Like all practitioners of the liberal arts, economists couldn’t help but grow jealous of the respect afforded their peers in the hard sciences. They wanted to be taken seriously, so they put down their Locke and Rousseau and picked up their Thomas Bayes and Ronald Fisher. Empiricism replaced epistemology. A grotesque portmanteau was born to describe this new subfield: econometrics.

Academic economists fell in love with statistical computing and learned to build forecasting models. Isolating and manipulating certain economic variables in their models allowed them to publish equation-rich papers with appropriately hedged predictions about the future. Financial markets would pay for this information. Policymakers would listen to those who could produce it. 

Whatever small amount of pseudo-scientific respectability this shift earned the profession on Wall Street and in Washington came at a high cost: Regular, everyday Americans no longer felt that economics could tell them anything about how to live. They thought all it could tell them was why some people got rich and everyone else stayed poor. And that ain’t what living’s all about for most people. 

Known to many for his EconTalk podcast and a long affiliation with the Cafe Hayek blog, Russ Roberts has always been one of the good guys. A master popularizer, he has a rare talent for taking the jargon out of economics. He’s done as much or more than anyone in the last 30 years to spread the free market gospel in plain English.

Even the most rational-minded economist doesn’t possess such arid habits of mind as to treat every human relationship as if all that mattered was, “What’s in it for me?” 

Roberts may once have subscribed to Benthamite utilitarianism, but if so, it sure seems he’s moved on. In his new book, Wild Problems, he identifies a whole class of sticky human predicaments that are impervious to what he calls “the standard toolkit of the economist.” These are questions without easy answers—high-value chin-scratchers. 

If you’re trying to decide whether to get married or not, a simple comparison of costs and benefits is a wholly inadequate exercise. If you’re thinking of having children, no amount of pre-game accounting will help you appreciate the life-altering experience of becoming a parent. These are the “wild problems” of the title. For the most part, they are philosophical in nature—”How one should live?”—and immune to utilitarian considerations. 

On paper, a lifetime of endless afternoons sipping margaritas by the pool may seem more pleasurable than a lifetime of diaper changes and college tuition payments—but only on paper. Raising children may be messy, expensive, and exhausting, but family life is richer and more satisfying in the long run than a life of frozen cocktails could ever be. The really important stuff can’t be looked at “as a series of decision nodes where you maximize happiness or well-being” writes Roberts. Narrow utilitarianism isn’t the path to human flourishing.

All of that’s certainly true. It’s also—and my respect for Russ Roberts is such that I hesitate to say this—common sense. As I read Wild Problems I couldn’t help but wonder: Who is he talking about? Who are the narrow utilitarians who look at their lives this way? 

The author has his examples. As bachelors, Charles Darwin and Franz Kafka both made lists of what they imagined to be the pros and cons of married life (and stupidly left them behind for the amusement of posterity). Roberts has his fun at the expense of each. But even the most rational-minded economist doesn’t possess such arid habits of mind as to treat every human relationship as if all that mattered was, “What’s in it for me?” 

That’s a sad little caricature of homo economicus, a mythical creature who cares only about maximizing his own utility even in matters of life, death, love, and happiness. He doesn’t really exist outside Ivory Tower thought experiments. 

Wild Problems is a simple book that does a complicated thing. In his folksy and companionable way, Roberts nudges the field of economics back to its reflective, philosophical roots. That’s an overdue victory for starry-eyed dreamers. But while readers will find it hard to argue with Roberts’s thesis that standard economic analysis only goes so far, they may find themselves wondering if that’s all there is to Wild Problems. At times it feels the author has too much of the Chicago Ph.D. in him to grant his readers that which he grants himself: An implicit understanding of—and comfort with—life’s rich and often contradictory pageant. Most of us understand that toting up the costs and benefits of a day at the races or an evening on the lake takes the sugar out of life.

In the end, Roberts’s advice is the same you’d expect from your grandfather. Do hard things. Don’t measure success by how much is in your bank account. Be more intuitive and less transactional in your dealings with other people, especially the ones you care about and who care about you. Take the road less traveled every once in a while.

It’s a good philosophy. That an economist is the last person you’d expect to hear it from doesn’t reflect well on the state of Russ Roberts’s profession.