Trust, International Diplomacy, and Economic Prosperity
The people who are currently running the US government have made it abundantly clear that they believe in the might-makes-right model of human interaction. Both internally and externally, the current US regime seems to treat everything as ultimately only a question of how much they can grab, daring anyone -- the courts, Congress, states, cities, universities, law firms, protesters, and anyone and anything else -- to try to do anything about it. Power is about macho posturing and taking advantage of every opening (and creating openings that did not previously exist), along with a huge dose of outright brutality. International law? It is to laugh. The rule of law? Whoever has the levers of power can use the law as they see fit.
As shocking as all of that has been for everyone to witness for the last twelve months, disdain for norms and other social niceties has in fact been the bedrock of the academic canon in economics and other areas of the social sciences for decades. Although mainstream economists generally say that laws are binding (especially property and contract laws), the "squishy" stuff of social cohesion has always been subjected to condescension and derision. People are, after all, modeled as rational actors, and the sincerely held belief among nearly every economist I came across during my graduate study and during the years that I taught economics before moving into law was that things like social norms and trust were a sucker's game.
Why? Substantively, the idea is that profit-maximizing rational actors would never "leave money on the table." That is, if there is a gain to be had by flouting social expectations, someone will surely take advantage of that opportunity, which means that in equilibrium everyone will have competed away any potential gains. All of the money that was on the table will have been pocketed. If anyone hesitates to exploit an opportunity -- that is, chooses not to be a rank opportunist -- they will be flattened.
But the procedural reason for this tunnel-visioned approach to human interactions is, I think, more telling. Things like norms, trust, politeness, deference, and so on are thought to be impossible to measure, which means that such things can -- indeed must -- be ignored. Only chumps believe in restraint.
Not every economist believes all of that, of course, but what I have described here is the overwhelming consensus among economists who have been trained over the last half-century or more. Indeed, some studies showed that economists and economics graduate students were notably antisocial and grasping -- so much so that one study (which I cannot find right now to provide a link) surveyed graduate students to try to figure out whether going into economics turns people into a**holes or whether people who are already a**holes are drawn to studying economics. Nature or nurture, right? If I recall correctly, the data supported nature as the answer. But either way, the people who view themselves as non-suckers who truly understand how the world works generally smirk at any suggestion that norms and so on matter.
That is why I was so pleased -- but surprised -- by this statement in Paul Krugman's substack post yesterday:
American power and influence have always rested, much more than many people realize, on the perception of American trustworthiness. We didn’t always do the right thing, but we honored our agreements and were the least greedy imperial power in history. That’s all over. At Davos, Mark Carney called for giving up hope that the Pax Americana can be restored, and Donald Trump proved him right.
I should clarify that, in a way, it perhaps should not be surprising that Krugman would say something like that. Although he is the most decorated economist of all time and is very much a product of (and contributor to) the barren intellectual world that I described above, he has always been an outlier in being able to think outside of the tiny box that he was trained to stay inside. He is also an outlier in being a skilled communicator, which is another asset that economics graduate programs not only fail to teach but actively devalue.
Yes, I do sometimes point out when Krugman strays from his lane and makes bad arguments (see esp. here). Even so, he is much more often right when he expands his perspective and looks at the world as it is, rather than through rigid economic models. And in any event, he is right to include the clause "much more than many people realize" at the beginning of that block quote above. He is talking not only about his own professional colleagues but about the people who believe in the even more primitive idea that they do not need to pretend to follow any unwritten rules or social expectations.
One of the reasons that the so-called Law & Economics movement caused such an uproar as soon as it emerged in the 1970's was that it all but extolled the idea that people could walk away from actual agreements -- including legally binding contracts -- because breaching such agreements was merely a rational assessment of the costs and benefits of bothering to act like a civilized human being. In the guise of being a descriptive model, it became notably prescriptive.
The blowback against that idea was based not on the aspiration that "people ought to be well mannered" but the idea (which Krugman captured above) that people who race to the bottom end up stuck at the bottom. It is not at all difficult to describe a norms-based approach as something like "greed with enlightened self-interest," but there always seems to be someone who skips over the "enlightened" part. And sometimes they run a government.
Trump in his first term insisted on renegotiating NAFTA, and in his second term he treated his own USMCA as non-binding on his own actions. When European and other countries tried to make "deals" with him, the question was why they would bother, knowing that any new agreements would be tossed aside whenever Trump felt like it. Universities and law firms were similarly engaged in wishful thinking.
But it is now clearer than ever that if a person cannot trust that another person will act with honor and decency, the scope of possible cooperation narrows. It might not be possible to quantify trust or to measure when and how much it has been destroyed, but the consequences are easy to predict. Antisocial behavior and attitudes breed distrust, and distrust impoverishes all of us, both in politics and in economics -- that is, in real life.
Even the people who think that they are above it all, or who think that their power and wealth will protect them from the inevitable harms that follow from the loss of social trust, will learn all too soon that their power and wealth have always depended on social cohesion. That is the true cost of might-makes-right: the abuse of might makes everything feel wrong, and people act accordingly.
- Neil H. Buchanan