Panglossian Economics

@UnlearningEcon lamented the deviations-from-Pangloss framing of neoclassical economics. Normal economic theories take perfection (optimality) as a starting point and ask how real-world “market imperfections” differ from the putative abstract-free-market ideal. (That “the free market” is an abstract ideal can be verified by first going to an actual bazaar and then listening to the way pundits use the term “free market” or “private enterprise” as in versus “government”.)

If you’ve spent too much time with your head in a book rather than participating in actual commerce, it can be hard to even conceive of another frame.


Here’s an alternative theory, just as wrong and just as simple & parsimonious as the Panglossian-private-enterprise frame:

  • Every rich person has some business that’s making them rich.
  • No rich person will enter a contractual relationship that makes them poorer.
  • The only way for a poor person to obtain wealth is to perform a service for a rich person.
  • So the service must increase the efficiency of the rich person, add new customers, draw more sales from existing customers, or make the same work get done for lower cost.
  • Therefore, the rich always get richer. The poor may or may not get richer.

Of course, the real world deviates from this theoretical ideal in some respects.

  1. Ego projects. Sometimes a rich person wants to indulge in an ego project–like starting their own fashion label, “investing” in a “startup”, or retiring from business to write a blog or perfect the craft of 17th-century viola restoration.
  2. Bad, lying employees. Hiring managers sometimes make mistakes and hire someone who said they would make the operation more efficient, but actually costs more than they’re worth.
  3. Vacations and big houses. A few large purchases do transfer wealth from rich to poor for consumptive purposes. However, it can be shown that when a continuum of houses and vacations trade in continuous time, the real [def.] economic [def.] returns to hillbillies exchanged for house-building go to booze and marijuana with plim → 1.

/pan-gloss-ee-un/ adj Used to describe someone who is excessively or naively optimistic.

This word is an adjectivisation (if that’s a word!) of Voltaire’s irritatingly upbeat character Pangloss in Candide. Despite all the horrible things that continue to happen to the characters in the book, leading to a sort of one-upmanship (another brilliant word!) contest of bad experiences, Pangloss eagerly insists that everything is great and continues to be wildly optimistic. I quite like this word, since, although Pangloss is quite annoying in his blindness to reality, he does at least have a positive attitude! In my experience, it is far more common to meet people with the opposite condition (i.e. people who see the worst in everything, even when things aren’t that bad). What literary adjective could be used to describe them? Anti-panglossian?

Word of the day

Panglossian [pan-gloss-ee-uhn] adj : characterized by or given to extreme optimisim; especially in the face of unrelieved hardship or adversity. 

“Even though there were bodies were strewn around the store and her arm was bleeding like a bitch, she smiled like the truly panglossian girl she was, shouldered her sword and began to fight the beast once more."
Charging Towards Fascism

“Now, I’m not Panglossian enough to say immigration has no downsides — nothing does, and I’m more than happy to have a proper debate on how we balance the right of free movement against the desire for community cohesion and the extra responsibilities immigration causes local government.

But the debate in Britain moved on, a long time ago. Now it’s not about immigration, but about *immigrants*. And it’s vile.

This country is getting more mean-spirited, more xenophobic, more unpleasant every day. I’m terrified we’re heading into actual evil, actual fascism, and accelerating more in that direction every day.”