Read the full transcript of Adnan Muminovic’s talk titled “What Economics Gets Wrong About Humanity” at TEDxSarajevo 2024 conference.
Listen to the audio version here:
TRANSCRIPT:
The Unique Status of Economics
I don’t know if you ever realized this, but economics is the only social science for which a Nobel Prize is awarded. True, it’s kind of a fake one because Alfred Nobel did not include it in his official will, but these are all technicalities. In the end, it doesn’t really matter because no other social science has even awarded a fake Nobel, which I believe has given economics a special wheel of authority and power.
And what I really mean by that is that when economics gets things wrong, or at least it gets them insufficiently right, this has wide-ranging consequences for society. So today, I wish to talk about one of these shortcomings, the one I believe to be the most serious one.
Of course, before I go ahead, it’s worth mentioning that there’s not one way of economic thinking, right? I mean, today we have many non-mainstream brands of economics. I think you can even make the case that there’s an increasing amount of them. However, there’s still a widely accepted view that dominates our textbooks and the way we teach our students.
Problematic Views in Mainstream Economics
Some of these views are truly problematic. They range from our obsession with GDP as a measure of all things to the endlessly repeated claims that we are fully selfish, fully rational, and that we have unlimited wants, none of which is really true. Just a few years ago, two scientists seriously questioned this idea of whether we have unlimited wants. But this is not why I’m here today, because my problem is much bigger and refers to the obsession of traditional or mainstream economics with measuring things, which in most cases translates into an obsession with prices.
The Price-Value Dilemma
More than 100 years ago, Oscar Wilde observed that “people nowadays know the price of everything and the value of nothing,” and that’s the difference between price and value that I wish to discuss today. Because if you think about it, today we largely live in a world where we have one dominant mode of measuring things, namely the price. And at least to some extent, this is understandable, right? Because if you think about it, we live in a world largely dominated by market economies, and a market economy is a decentralized system which is regulated, controlled, and directed by prices.
Prices tell us a hell of a lot. They tell us what people want, where they want it, how desperately they want it, how available it is, which in turn signals to producers what and where to produce and where to sell it. It’s part of a truly magnificent system that almost works like a charm, so it’s natural that we’re in love with it.
The Mathematization of Economics
However, another related reason why we’re so obsessed with prices comes from a general obsession in economics with measuring things, which is really all part of an, I think, unfortunate trend that started a few decades ago called the mathematization of economics. Now we desperately want to quantify everything, to express it in numbers, which is all meant to make economics more scientific and more rigorous. Don’t get me wrong, I have nothing against that.
But in a world where everyone has an opinion about everything, it’s natural that we crave hard facts, that we crave numbers, until you realize that this has now led to a truly absurd situation where we have started to treat some of the most important things in our lives as worthless simply because they do not have a price or any other way of capturing them. And if you think about it, I mean, just think about stuff like love, compassion, freedom, dignity. Do they have a way of being quantified? Of course they don’t, which doesn’t mean that they’re not important, yet this is precisely how they’re being treated.
The Absurdity of Quantifying Everything
So I wanted to give you an illustration before I go on, just to demonstrate to you how far this obsession is going. In 2008, a paper came out titled “Putting a Price Tag on Friends, Relatives, and Neighbors,” and I think the title alone should make you laugh. I think the title alone is truly fascinating. There is widespread scientific agreement that our social ties, our friendships, and all other relationships make us happy, and you won’t be surprised to hear that. But now we’ve come to a situation where this is not enough anymore.
We want to know just how much, in monetary terms, our social relationships are good for us. And behind me, you see the results. The author calculates something in the range of 85,000 British pounds per year, which is, I mean, ridiculous. And you might laugh at this, but it’s actually becoming extremely, extremely serious and consequential.
The Nature Dilemma
However, nowhere, truly nowhere, is this failure to distinguish between price and value so bad and so devastating as with our relationship with nature. And this is basically what I’m getting at today. Now imagine a green park, a green area, a patch of a forest, anywhere in the world, and the debate whether to turn this green park into a residential commercial building. How is this debate conducted?
On one side, you have people supporting the project that will tell you, “Oh, it will generate so much economic activity,” you know, because there will be construction workers that will be working there and who will be paid. Small businesses will sell ties, others will sell windows, businesses will sell concrete, there will be utility companies selling water and electricity, and it will be so good. And the thing is, these people will be capable, almost to the dollar, to calculate just how economically beneficial the project will be.
Now think about the other side.
Let’s imagine a group of environmentalists, so really just ordinary citizens, that wish to protect their park. What is it that they can offer in terms of counter-arguments? It will go something like this: green areas reduce stress, they regulate the temperature, they contribute to cleaner air, and chirping birds and animals make you happier, which is very nice. Indeed, there is broad scientific agreement that green areas do exactly that, they make us healthier, happier, and more satisfied with our lives. A recent study also showed, for instance, that green areas decrease postpartum depression, which is all great, but now the crucial question is, how exactly does it compare?
On one side, you have a project where all the benefits can be easily calculated, and on the other side, you have, I mean, I don’t know, what’s the economic value of lower depression, increased happiness, and well-being with your life? We don’t really know. And now you might tell me, “You know what, this is really abstract,” but I don’t think it is, it’s very real, it just has the horrible disadvantage that it cannot be quantified, which is why so often the green park and all these things in our lives end up on the losing side.
Possible Solutions
So let me now turn to the question, what is it that we can do about it? I mean, and I would assume that one of your initial reactions is, “Let’s just get better at putting a price on everything,” okay? We understand that maybe it doesn’t work right now, but let’s just invest our time and energy in doing that, and in this case, we will be able to compare apples to apples and oranges to oranges and make an informed decision. That would be one possible solution, and indeed, a few months ago, the IMF, in its flagship Finance and Development magazine, ran a series of articles, and one of them was titled “Renewing Economics.” And in that article, the author made the following pledge and said that we must become absolutely better at our natural capital statistics and putting a cost on our natural services.
But really, just stop for a moment and just think how mind-blowing this is. Even an article titled “Renewing Economics” ends up falling into the same measurement trap over and over again. And you know, another thing I find truly fascinating is that throughout history, if you think about it, we have developed different measurement systems for various phenomena. We have one measurement system to measure sound, to measure distance, to measure weight, to measure temperature, yet we insist on tossing everything else in our lives into one bag and putting a price on that. I mean, just how mind-blowing that is.
The Complexity of Nature
And again, for reasons I already discussed, I think we will never be able to truly achieve this, but let’s say even we manage to overcome this obstacle, it leads you to another problem, namely, if you want to be true and fair to nature, you would have to know what it is that it exactly does for our lives. And so far, we simply do not know. I mean, our ecological system is a complex system full of interdependencies. You know, where things are happening, it’s not only that we have known unknowns, we have many unknown unknowns.
According to some estimates, we are losing one valuable drug each day that could go to healing deadly diseases and improving people’s lives because we are destroying our environment. How do you put a price on that? How do you put a price on things we don’t even know exist?
The Consequences of Pricing Everything
But okay, just to provoke you a little bit more, maybe, just maybe, we really find a way to measure everything. Maybe, over the next few decades, there is an AI that is capable of truly understanding all the miracles that nature does for us, and it’s really capable of putting a price on everything. And now you might think, well, this has resolved your problem, and then you can do a proper cost-benefit analysis. But I’m sad to say that it hasn’t. It has merely changed one problem for another one.
And let me give you two illustrations which show this, because what most people don’t realize often in life is that, and this is one of the main takeaways of today that I would like for you to remember as you leave this room: When you put a price on everything, you change the nature of that very thing, the essence of that very thing, often in ways that you did not expect.
Think about blood donations, which is a serious social problem, right, because there’s never enough of it. So the economic logic would motivate you, just thinking about how to overcome this problem, the reaction would be, let’s put a price on it. Let’s pay people money in return for the donated blood. But now seriously close your eyes and think about giving blood voluntarily or giving blood in return for money. Do you feel the difference? And of course you do, deep down in your gut.
Maybe you cannot verbalize it, maybe you cannot rationalize it, but it exists. You change the nature of that very thing. And people over the decades have looked at it and have observed what happens when you put a price tag on blood. And you know what happens? First of all, quality goes down, for obvious reasons, because if you’re paying people for blood, they will be motivated to hide any health concerns they might have. But I find it even more fascinating that the number of people donating blood doesn’t go up. It stays the same. In some countries, it even goes down. Why? Because you suck the joy out of it. You change the good feeling that you had that you’re doing something, it no longer exists.
Another famous example, which I like even more, comes from daycare centers all around the world. As you can imagine, and there are many parents here, people are often late to pick up their kids, forcing the poor people working there to stay longer, you know, and waiting for irresponsible parents to come. Again, economic logic would dictate that you put a price on that behavior. And the idea would be, fine parents, penalize them. If they show up late, they have to pay a fine.
You know, this is how you influence that behavior. And brilliant scientists have looked into that. And you know what they found out? After you introduce the fine, the number of parents coming late to pick up their kids did not only decrease, it actually increased. And I know it sounds like I just misspoke, but it’s true. And I know it sounds paradoxical, but possibly the best explanation why this happened is that before you put a price on it, parents felt guilty for picking up their parents late. They felt that they were violating a social norm. However, once you put a price on everything, you know, you change a social norm for a market norm, which very often drives out intrinsic motivations and our moral and civic values.
Which is why I am absolutely against putting a price on pollution and carbon emissions, because we should not destroy the environment because it’s expensive, but simply because it’s bad.
So now allow me to summarize what I have said so far. First, there are things in our lives that cannot be quantified. Second, just because something cannot be quantified doesn’t mean that it’s not important. And third, even if you miraculously manage to put a price on everything, just so that you can compare things, that changes the essence of that very thing, sometimes in a really bad way.
So what now? As I finished an early draft of this text, reading through it, I realized that it comes across as really environmentalist, and believe me, this was not my initial idea. That was not my intention. As I said, I’m here today to talk about the difference between a value and a price. It’s just that it’s here in the way we treat our nature, where the consequences and the failure to distinguish between a price and a value creates the most serious problems.
So is there anything we can do about this? I think you should run away and hide from people that give you simple solutions to really complex social systems. So whatever I say now will not make a huge difference overnight. But there are things that we can do. One is to recognize the distinction between price and value. And second is to learn to value nature.
And one way to value nature is by actually starting to spend more time in it. Because a study from Britain a few decades ago showed that kids there are better at recognizing Pokemon creatures than their own native species. And that simply cannot be the case. Once we start spending time in nature, we will recognize its value, and then we will start to fight for it.
And one way to do this is by shifting the burden of proof. So what if we shifted the burden of proof? Because right now it’s us that have to run around the economists in order to convince them that nature has special value. But for reasons I already discussed, it’s never possible for us to put a dollar amount on our claim, which is why we ultimately lose.
You know what? We have to change roles here, because let the economists do the hard work of convincing us that whatever project they’re envisaging is not detrimental to our environment. For instance, you want to mine in the deep sea, go ahead. But first let’s consider whether you have taken into account all the consequences of your project for the life down there. For the algae, for the planktons, for the food chain, and all the other chain of events. You know, apparently we have better maps of the moon than we have of the deep sea, so good luck proving that. And if you cannot, then you simply don’t get to do it. Full stop.
Now you might jump and say that everything I’ve discussed now is really the problem of neoliberalism. But let me disappoint you and tell you it’s not, because an article ran a few years ago titled “The Most Senseless Environmental Crime of the 20th Century,” and you know where it happened? In the Soviet Union, where they were killing almost 200,000 whales over a stretch of a few years for no obvious reasons. Because there was a five-year plan to hunt whales, to kill them, where no one really understood what the actual demand for them is.
So what I wish to tell you today is that it’s not neoliberalism, it’s socialism, it’s really us. Economics is not an alien science that was dropped to us and given to us where we have no say in that. I mean, it was created by us, and it can be changed by us, and maybe it sounds like a philosophical question, but it really ultimately is an existential one.
And time is running out, because as John Green said in “The Anthropocene Reviews,” “We are a threat to ourselves and other species, but the planet will ultimately survive us.”
