Against Analogies

Bryan Caplan offers a typical libertarian thought experiment in defense of the position that redistribution is bad. As with with many libertarian thought experiments, this one is on an island:

Suppose there are ten people on a desert island.  One, named Able Abel, is extremely able.  With a hard day’s work, Able can produce enough to feed all ten people on the island.  Eight islanders are marginally able.  With a hard day’s work, each can produce enough to feed one person.  The last person, Hapless Harry, is extremely unable.  Harry can’t produce any food at all.

He then goes on to the obvious conclusion that forcing Abel to work is not fair just because the others can’t fend for themselves.

Here’s the problem: what does this have to do with income distribution in a modern capitalist economy? The answer is as follows: nothing. Absolutely nothing. In this island there is no state; people do not cooperate (actually they appear not to have any relationship whatsoever); there is no injustice; there is not even trade. So the thought experiment is worthless.

But the fact is that analogies are generally pretty awful, for the simple reason that they aren’t, by definition, the same as whatever they are purported to represent. They are often said to illuminate a few important aspects of a situation, but this is an illusion. I will demonstrate it by offering two oft-used and reasonable sounding analogies for the economy, one suggesting that monetary policy is impotent at the zero bound, one suggesting that it isn’t:

(1) You can’t push on a string.

(2) Money is like a hot potato that people pass around until the supply matches the demand.

All these analogies help us do is come to the conclusions that we already had in mind. When building analogies people sift through various images until they find one that satisfies the story they wanted to tell. There are an infinite number of feasible sounding metaphors that can go either way: maybe the economy is like a car, and fiscal stimulus is a push from a few friendly passers by; maybe it’s a dog race and the fed sets the speed of the rabbit; maybe it’s a babysitting coop. Or maybe it’s none of those things.

This has important implications for economics. In her 1986 book ‘The Rhetoric of Economics‘, Deirdre Mckloskey argues, among other things, that economic models are basically just metaphors. This is true. As economists like to point out, they seem to care little about whether a model adequately represents the structural mechanics of a system and instead they (supposedly) look at its conclusions. In other words, we don’t have a model of the economy – we’ve got a metaphor for what the economy could look like if it were something different. This is not useful.

P.S. The blogging hiatus didn’t last

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  1. #1 by Dave Marsay on May 2, 2012 - 6:34 pm

    This seems to me a very good analogy to the way that some people think, and real economies do tend to reflect how people think.

    Taking it further, if Abel Abel never helps the others then sooner or later he’ll be left on his own. Also, while Abel Abel might be self-sufficient, he might still prefer some tasks to others, and so be prepared to trade. And, unless he is invulnerable to sickness and accidents, not to mention old-age, he might think some sort of social compact a good idea.

    I do not find this analogy all that bad, just the conclusions drawn from it. ;-)

    • #2 by gappy (@gappy3000) on May 3, 2012 - 5:37 pm

      I completely agree. The rebuttal that “[i]n this island there is no state; people do not cooperate (actually they appear not to have any relationship whatsoever); there is no injustice; there is not even trade” focuses on straw men. The essential features of the issue of social justice are there: a set of individuals; a set of initial endowments; and a set of outcomes that are in this case easy to fathom. The question is rather whether this analogy has been explored fully, and how the analysis may depend on implicit assumptions.

      • #3 by Unlearningecon on May 3, 2012 - 8:19 pm

        The analogy has no relevance to a modern capitalist economy yet Caplan attempts to draw conclusions for a modern capitalist economy from it.

  2. #4 by isomorphismes on May 3, 2012 - 9:11 am

    Analogies are tools of communication, not of proof.

    • #5 by isomorphismes on May 3, 2012 - 9:13 am

      rephrease; “Analogy is a means of communication, not of proof.”

  3. #6 by isomorphismes on May 3, 2012 - 9:16 am

    Gold bugs say that a gold standard is like the ground to an electrical circuit. It’s a nice way to talk about “eliminating noise” just like “pushing on a string” is a good way to talk about asymmetrical phase change. But, the question remains if a gold standard actually is like an electrical circuit, and if it does really eliminate noise.

    • #7 by Unlearningecon on May 3, 2012 - 8:20 pm

      The best way to get a conclusion is to explore the mechanics of the actual system. Once you have done this I could agree that an analogy might help you get the point across to others, but it should never be part of the argument.

      • #8 by isomorphismes on May 12, 2012 - 4:57 pm

        Nope, only part of the explanation. Alfred Marshall said something like “Work out your theories with equations to make sure you’re correct, then explain it without any equations.” (or in an appendix)

  4. #9 by Dave Marsay on May 4, 2012 - 2:45 pm

    I regard economies as being affected by how people think, including how they think about economies, so in this sense economies are reflexive. But the relationship doesn’t seem to be like mirroring: perhaps more like sunlight reflecting from the sea. Perhaps I should have chosen a different word?

    I also think that in something like economies analogies and models are bound to be imperfect, so not only do we need to fully explore them and their assumptions, we also need to continually bear in mind that they are only analogies / models.

    Regards

  5. #10 by Gepap on May 4, 2012 - 3:39 pm

    To me there are several fundamental flaws with the Caplan analogy. The most obvious one, and the discussion Caplan completely ignores in his post is that the real choice for the majority in the moral universe Caplan constructs is Able’s liberty or Harry’s life – after all, the only way for Harry to survive and not die a horrible death by starvation would be for Able to share his surplus, but if he decides not to, Harry must die. It seems to me that Caplan expects us the reader to accept that moraly this is okay because Harry’s death is based on his own faults (not good enough to feed himself) – Able is virtous (has the virtue of ability) while Harry is worthless. Thus Harry’s death is okay.

    Notice that Caplan did not state why Harry is so unable to feed himself – Harry is simply Hapless. Why not call him helpless? after all, in real life the only humans so utterly incapable of feeding themselves out there in nature are infants, the sick, or the disabled. but if Caplan had identified Harry as having no fault for his situation, its becomes very hard to make the audience reach the moral conclusion he wants them to reach. People feel empathy – they would empathize with a helpless Harry and ask why Able would be so callous as to let him die. To prevent this at all we must define Harry as inherently worthless from the start, which is why he is labelled Hapless.

    one could take his very parable of Caplan’s and with just a few tweaks completely undermine the moral conclusions we are supposed to make. What if we add a second set of skills to the parable – those of violence? Able has the greenest thumb out there, which is why he is so darn good at growing food. Harry is hapless when it comes to farming, but boy, he is great at fighting and can easily beat the snot out of anyone else in the island. I think its easy to realize where this heads – Harry will himself enslave Able, in order to feed himself through the surplus production he now beats out of Able. Does that majority of people in the Island have some moral responsibility to save Able from Harry’s tyranny? According to Caplan they had no moral responsibility to save Harry’s life. Are they similarly free from saving’s Able’s liberty?

    Caplan revealed his prejudices very clearly with this parable. He clearly believes that the amount of wealth people have accumulated and their incomes now must be reflective of some greater underlying “worth” – the successful are virtous. The unsuccessful are failures, not just materially but morally. This is why he opposes any redistribution. All the economic talk is merely a rationalization to support his moral judgement.

    • #11 by Unlearningecon on May 4, 2012 - 3:54 pm

      You are obviously right but I think the problem with Caplan’s analogy reflects a deeper problem with analogies in general, which is that you can construct one to support pretty much any argument and people work backwards from their prejudices to do this, making them useless as a meaningful tool for argument.

  6. #12 by The Protectionist on May 4, 2012 - 11:58 pm

    Mr/Ms Unlearning Economics, This is my first time to your site. Very refreshing. I read your “About” page and I can appreciate your disappointment with capitalism, but perhaps now that you’ve cut the intellectual ropes that had you bound, you may want to consider a new proposition. The problem is not capitalism, it’s economic theory which is destroying capitalism that is the problem. Karl Marx said the fastest way to destory capitalism was with free trade. Daniel Webster said the number one reason we have our present day Constitution was to stop the economic chaos unleashed by free trade with Great Britain under the Articles of Confederation. Both men were right.

    Unfortunately, all three political parties subscribe to the neoclassical myth which justifies free trade and its very bitter fruits. If you’re willing to consider the daring attempt of a Christian engineer to overthrow 200 years of economic theory, check out the new blog rescuingeconomics.wordpress.com and his conservative book outlining this amazing theater of the absurd that has become mainstream economic policy in which conservatives who have lost their protectionist heritage have unwittingly adopted Marx’s methods, while the Chinese in contrast have adopted the economic logic of the founding fathers. Who would have thought. Ask yourself this question, why aren’t the Chinese disappointed in capitalism, while we are. The answer is China protects its industries, we don’t. The missing piece of the puzzle is a theory of economics which makes sense of protectionism. The blog takes a first swing at laying the ground work.

    Keep up the good intellectual fight. America’s future depends on it.

    • #13 by Unlearningecon on May 5, 2012 - 7:28 pm

      I have a post called ‘The Irrelevance of Comparative Advantage’ where I explore this. I’m also aware of the American School of economics, which emphasises labour and industry.

      That’s interesting about Marx and the blog. Thanks.

  7. #14 by atm0spheric on May 5, 2012 - 4:00 pm

    Well said.

    If the economy doesn’t fit the economist’s pet model, the economist explains what is wrong with the economy.

  8. #15 by John77 on May 5, 2012 - 4:39 pm

    Define “fair” and the answers to all of Caplan’s questions becomes obvious.
    Interestingly no-one (not even Moira though she notices the question) seriously considers the middle eight providing for Hapless Harry by reducing their consumption by one-eighth, which most people can actually do.
    PS Caplan doesn’t conclude that forcing Abel to work to provide for Harry or to raise the standard of living of the others is unfair – he (correctly) states that it is slavery.
    This is *not* a parallel for higher-rate tax because the higher-rate taxpayer is not forced to work, he can choose to work shorter hours and taxing Abel at 50% of production would not be slavery

    • #16 by Unlearningecon on May 5, 2012 - 7:26 pm

      The answer to Caplan’s question is obvious in his false analogy. But it has no relevance to contemporary discussion.

  9. #17 by Nicolai Hähnle on May 7, 2012 - 7:04 pm

    I find it interesting that none of the other commenters even mention what I think is the real problem with Caplan’s analogy and why it tells us nothing about the contemporary real world: isolated humans do not actually exhibit this kind of disparity in ability to feed themselves.

    This type of analogy is used to justify not taxing somebody who makes 8x more money than others/average/whatever. In fact, the only reason that somebody is able to make so much more money is that society is set up in a way that makes it possible. A star CEO would be incapable of making that much money without the framework provided by society (not to mention that money wouldn’t even exist without society), and so to reason with this type of island analogy is completely fallacious.

    • #18 by Unlearningecon on May 7, 2012 - 7:13 pm

      That is absolutely true – there’s an implicit value judgement in Caplan’s analogy that people who earn more are ‘just better’, but in that situation there wouldn’t be that kind of disparity unless somebody had procured a particularly fruitful piece of land (i.e. were collecting economic rents). Again we are forced to conclude that there is not a single right wing position left unexplained by the just world effect.

      • #19 by John77 on May 12, 2012 - 11:31 pm

        Straw man argument. Caplan doesn’t say that people who earn more are “better”. He challenges the socialist view of compulsion. Secondly he doesn’t posit someone procuring any advantage apart from natural talent – he assumes that someone has a natural advantage (which could be that Abel can climb coconut trees because he is skinny with strong arms because his legs are withered).
        Why don’t you tackle his argument instead of duistorting it?

      • #20 by Unlearningecon on May 12, 2012 - 11:38 pm

        I’m sorry – ‘Able Abel’ and ‘Hapless Harry’? Surely you can see the implications of these names?

        ‘Better’ might be the wrong word but seriously, John, if you have to focus on such a small part of the argument you’ve no hope. I’ve obviously engaged Caplan’s actual argument, it’s the thrust of my post. Please tell me why his analogy is relevant to discussions of the welfare state.

      • #21 by John77 on May 13, 2012 - 12:18 am

        Why should I tell you that his analogy is relevant to the Welfare State? I’ve told you that it isn’t. You have completely failed to tackle his argument and if you cannot see that, then yes, there is no hope for you – it isn’t even economics. Is compulsion right when it amounts to slavery? If so, explain why; to which I can say: you should not need compulsion. You say – ignore it because it isn’t relevant to a modern capitalist economy, without justifying that claim; then we get assertions that you need a modern capitalist economy to create such income differentials which is palpable nonsense (income differentials are smaller in modern capitalist economies).
        Ignoring an argument is not tackling it.

      • #22 by Unlearningecon on May 13, 2012 - 12:27 am

        I say it isn’t relevant to modern society in the post, justifying the claim. You say:

        Why should I tell you that his analogy is relevant to the Welfare State? I’ve told you that it isn’t.

        despite Caplan mentioning the welfare state in his post. So you are in agreement with me, right? Oh, wait…

        You say – ignore it because it isn’t relevant to a modern capitalist economy, without justifying that claim

        your opinion seems to be fairly inconistent – either Caplan’s analogy is relevant to discussions of modern society or it isn’t.

        then we get assertions that you need a modern capitalist economy to create such income differentials which is palpable nonsense (income differentials are smaller in modern capitalist economies).

        Nope, what I said was that government/organisation/society are required to create them, rather than capitalism.

      • #23 by John77 on May 13, 2012 - 12:33 am

        Caplan only says “discussions about the welfare state can’t be far off’.” in his criticisms of “bleeding heart libertarians” not about his scenario

      • #24 by Unlearningecon on May 13, 2012 - 11:23 am

        Caplan only says “discussions about the welfare state can’t be far off’.” in his criticisms of “bleeding heart libertarians” not about his scenario

        No.

        And once you start questioning the justice of the islanders’ treatment of Able Abel, questions about the justice of the modern welfare state can’t be far behind.

      • #25 by John77 on May 13, 2012 - 12:44 am

        You assume that saying something justifies what you say.
        There is no answer to that.
        Your last comment is nit-pickingly correct – I made an error when tired and apologise.
        However Abraham didn’t need a government, capitalist or otherwise, to generate an income and wealth differential vastly than CAplan’s postulate.

      • #26 by Unlearningecon on May 13, 2012 - 11:24 am

        Honestly I’m not well versed in the bible although I certainly wouldn’t appeal to it as a parable of truth when making an argument.

    • #27 by John77 on May 12, 2012 - 6:33 pm

      “In fact, the only reason that somebody is able to make so much more money is that society is set up in a way that makes it possible.”
      That comment exhibits a horrendous degree of ignorance of history. Looking back incomes 8x the mean or median were proportionately more common in earlier centuries and so was starvation.Hence Leviticus 23 v 22 – the Bible (more specifically elsewhere) states that it is Abel’s responsibility to provide for Harry.

      • #28 by Nicolai Hähnle on May 12, 2012 - 7:08 pm

        John, I think it’s reasonable to assume that society existed at the time the stories in the Bible developed ;-)

        On top of that, it’s easy to have starvation even when the biggest deviation in income is very small if the economy over all is closer to a subsistence level.

      • #29 by John77 on May 12, 2012 - 7:51 pm

        “John, I think it’s reasonable to assume that society existed at the time the stories in the Bible developed”
        It is so reasonable that I expected even you to recognise that fact. All of Leviticus is about rules for ordering a particular society. Lev XXIII 22 is about what should happen after they settle in Canaan. That economy was not too close to subsistence level as they had one day a week when they stopped work in order to worship God, and they were commanded to consume 10% of each harvest in a feast (think about it! is that a near-subsistence level economy?). There were massive wealth discrepancies – not just Pharaoh etc – Abraham took 318 men born in his household when he went to rescue his nephew.
        And cut out the snide: if you don’t like being told you have a personal responsibility for your fellow human beings, say so, but don’t try to call a moral edict “a story”.

      • #30 by Unlearningecon on May 12, 2012 - 10:19 pm

        There is no disagreement here but John is trying his hardest to create one.

        Everybody here thinks that large disparities of wealth and income rarely, if ever take place in an island like Caplan’s, and are usually representative of various injustices, rents and privileges created by law.

        At the very least, society is required to enable income to be amplified to levels where an 8x disparity is possible, even if there is no injustice.

      • #31 by John77 on May 13, 2012 - 12:01 am

        “Everybody” being defined as “those who agree with me”.
        In the absence of society, there is no limit on earning /income differential ratios.
        If you are able to read, you should be able to deduce that I am not in favour of 8:1, let alone 10:1, consumption ratios. If anyone genuinely earns 8 or 10 or 1000 thousand times average income, good luck to them (David Beckham, Maroon 5 etc) and the tax they pay will support social services, but I should like some honesty in the arguments about Caplan’s scenario. Otherwise you imply that his picture (that compelling Abel to work, rather than relying on Abel to work out of a sense of d, is slavery) justifies an anti-tax campaign.

      • #32 by Unlearningecon on May 13, 2012 - 12:29 am

        Caplan explicitly says ‘discussions about the welfare state can’t be far off’.

  10. #33 by Jon Finegold on May 12, 2012 - 1:32 am

    I’m late, but thought you might find this interesting. Here is Peter Klein,

    At least in usual parlance, a metaphor is a figure of speech in which a term and concept is used as a reference to something that it does not literally denote so that a potentially illuminating similarity is revealed. Isn’t Kirzner talking about real-world entrepreneurs? . . . Arguing that a construct is a metaphor drives a wedge between the reality that the construct is supposed to throw light over and the construct itself. In particular , use of metaphorical reasoning is different from using models, constructs, or ideal types meant to capture essential qualities of real phenomena (which a metaphor need not do).

    From here; while Salerno might not say it, Klein’s entrepreneur is not just more “Knightian” and “Misesian,” but also more “Keynesian.”

    Btw, thank you for always being willing to exchange ideas with me.

    • #34 by i (@isomorphisms) on May 12, 2012 - 6:44 am

      It’s appropriate to refer to models/ideal types as metaphors because they are examples of metaphors, not because they comprise metaphors.

    • #35 by Unlearningecon on May 12, 2012 - 10:21 am

      I guess this goes back to my idea that many economic models – based, as some are, on counterfactual prepositions about the nature of an economy – are not really scientific ‘models’, as each difference between a scientific model and the real world is a specific complication.

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