Hard Head, Soft Hearts: Tough-minded Economics for a Just Society

"I really like this book, in no small part for its title, but also because I think its conclusions resonate with truths of today. First of all, as background, Alan Blinder is a well-known left-wing—in US terms, liberal—intellectual and economist, who has served in many Democratic administrations. He notes that if one has a soft heart for the under-privileged, one also has to have a hard head in discussing policies. We cannot just say, ‘We need a bigger government that does more things and just give money to people; that will solve all the problems.’ What is a hard head together with that soft heart? In the last few weeks, we’ve had to support businesses and households in the face of the initial economic impact of the coronavirus. A lot of people would have suffered enormously without that. The unemployment rate has shot up, there’s greater poverty, children in abusive families are being locked down at home, people are unable to work and make a living, firms are failing through no fault of their own. It’s important to have a soft heart. Support Five Books Five Books interviews are expensive to produce. If you're enjoying this interview, please support us by donating a small amount . But a soft heart that is properly connected to a head says: ‘Let’s provide a lot of support, but let’s remember this is not just about giving more cash quicker to more people, like the heart says, because there are trade-offs now and there will be more trade-offs soon.’ We need to have a hard head to choose the best way to help people, to decide the best way to use the scarce resources of the government, and to understand the pitfalls and the virtues of different options. That is what it is to have a hard head. Blinder wrote his book in the context of different policy debates that were going on in the 1980s, but the general approach of combining the soft heart with a hard head is ever present. Moreover, the lessons he draws are also relevant today. In the last chapter he talks about the roots of bad economic policy, and asks why it is that sometimes the heart beats the head and we end up with bad policy. He has three answers. One, that reality is complex, it can’t be encompassed by a T-shirt slogan. Two, that ideology often overrules pragmatism. And, three, that the presence of special-interest lobbying subordinates the common good. “As an economist, I feel I should offer a warning that we are advocating revolutions in response to a temporary shock” And, if I think about the difficulties we’re likely to face with hard head/soft heart issues right now, those three lessons still have a lot to teach us. First, it’s much easier to have a slogan that says, ‘Let’s give money to lots of people right now,’ than to think about the complex reality of how to get money to people, how best to use that money and who to help when incentive problems are raised. When it comes to the second lesson, which is ideological forces versus pragmatism, I’m always struck by how people who have been defending ‘X’ for 20 years see that this crisis provides an extremely strong argument for ‘X’ to be done right now, even if for 20 years they’ve been unable to convince others of ‘X’s merits. The role of ideology is quite striking. And, third, special interest groups. Look at the extent to which, very quickly, we see special interest groups saying, ‘My business should be bailed out, not some other one.’ It’s hard to protect the merits of free trade that we spoke about earlier on, if you’ve got these special interests trying to take over the government. So, I think all three of Blinder’s lessons are very visible now and that’s why I thought this was a way to conclude my five books with those three lessons and the more general motto: to have a hard head in spite of a soft heart. I don’t want to say they worry me because that makes it sound like I’m against these changes. I’m just pointing out that they’re clearly driven by an ideological desire to change our society. Some of them I may actually be in favour of, while others I may find less appealing. It’s more that, as an economist, I feel I should offer a warning that we are advocating revolutions in response to a temporary shock. Those revolutions could be policy proposals to give an enormous role to the government from now on—buying goods from everyone, deciding who gets what. They could be proposals for dramatic changes in the tax system, taking more from some than from others because we like redistribution. Or they could be proposals that use a very heavy hand to promote more climate-responsible or green industries, as opposed to others, when the economy reopens. They could be proposals to protect airlines because they’re public infrastructure, so their shareholders are bailed out. There are proposals for closing borders now, using the fact that the virus has spread internationally to bring protectionism back, disguised as a way to keep us healthy. It’s not about highlighting any one in particular, my point is that all these proposals share this characteristic of being ideologically driven."