Can We Minimize Econogenic Outcomes?

Can We Minimize Econogenic Outcomes?

I am back from the annual ASSA/AEA meetings in Atlanta.  I learned a new term that on checking I find has been around for about five years. It is “econogenic,” coined by George DeMartino, who spoke on this in a session on “Ethics and Economics” held by the Association for Social Economics. It means “harm done by economists,” and it is inspired by “iatrogenic,” referring to harm done by physicians.  His talk focused on this and claims that the medical profession  is 50 years ahead of the economics profession on dealing with harm they do.  For physicians he praised the patients’ rights movement that took off in the 1960s and has gained substantial legal support, with patients now having say on how they are treated by physicians rather than living in a world where the physician was always right.

DeMartino noted policies supported by many economists that can be defended on the grounds that they supposedly lead to gains that outweigh losses with Hicks compensation potentially able to make things right and pay off those who might be hurt.  Lots of economists have supported such policy changes when convinced that such calculations are correct.  The problem is that most of the time, indeed, the vast majority of the time, those compensating payments are not made.  And to make things worse, while those gains may exceed those losses, they often are widely spread across many people, while the costs are intensely concentrated very painfully on a smaller group of people.

His main example is increasing free trade.  Most estimates show gains outweighing losses, but those gains are widely and thinly distributed as lower prices while costs are heavilly borne by much smaller groups of people who end up losing their jobs.  While there have been some half-baked efforts in the US to provide some adjustment assistance, it has always amounted to little.  Other nations have done this far more vigorously, with those Nordics Sweden and Denmark outstanding examples.  Of course it is easier for them as much smaller and more homogeneous economies than that of the US, where growing export industries are often located far away from areas losing jobs due to imports.  These issues are not easily dealt with, but there have been amazingly few efforts to do so in the US.

Another example is “shock therapy” policies in transition and other economies.  Again, after a painful period of adjustment, most of those transition economies have ended up having higher real incomes with more democratic regimes than they had previously.  But despite these improvements in most of these nations there have remained groups of people, usually rural, older, and less well educated, who have remained worse off than they were before, although by how much has varied greatly across these nations.

Anyway, I urge more use of this term and more importantly more efforts by economists to make much more serious efforts to urge that when major policy changes happen that seriously damage identifiable groups of people that genuine efforts be made to make those compensations that can be covered by the gains from the new policies.

Barkley Rosser