Is modern economics built on a lie?
In his guest blog for CUSP, Paul Bain describes new evidence that questions whether people have insatiable economic wants, and how economists’ reactions to this evidence illustrates the deeply ideological basis of modern economics.
Guest blog by Paul Bain
Open almost any current introductory economics textbook and you will learn that everyone has insatiable economic wants—these wants are practically unlimited and always exceed what we have. This forms a basis of the foundational economic principle of scarcity—a principle described in economics texts as “the mother of economics” (Jeffrey Perloff), and “the fundamental economic problem” (Jeffrey Sloman and colleagues). As stated by 2024 Economics Nobel Laureate Daron Acemoglu and colleagues: “Scarcity exists because people have unlimited wants in a world of limited resources”; similar examples from other major economics textbooks can be found in our preprint article.
But is this claim about insatiability true? No matter how much we have economically, does everyone always want more?
Despite strong statements that economic wants are insatiable, the same texts are embarrassingly silent when it comes to evidence. They either say nothing at all about evidence, or use anecdotes that assume the conclusion, e.g., after someone purchases a car, they will obviously soon want a better car. This seems a very weak scientific basis for a foundational principle of a major social science.
What is the evidence for insatiability?
As we struggled to find evidence, we conducted a large cross-cultural study to identify the extent of people’s economic wants. We asked almost 8000 people in 33 countries to imagine their absolutely ideal life, and then how much money they would need to achieve this ideal life (setting aside practical constraints in obtaining that money), selecting from amounts from US$10000 to $100 billion (making them the richest person in the world at that time). Less than 25% chose $100 billion, and most thought they could achieve their absolutely ideal lives with $10 million or less. While some people seemed to have unlimited wants, it was far from universal or even typical.
When this article in Nature Sustainability was published, economists that responded showed less interest in the findings and more in telling us we missed evidence showing human wants are insatiable. They pointed to papers by the economist Richard Easterlin and colleagues, which used data from a large US study run over 16 years (1975-1991). This study did indeed directly address the question of whether wants are insatiable, as people were asked about what they wanted and what they had from a small list of 10 desirable economic goods (e.g., a vacation home, nice clothes, a second car, travel).
Easterlin’s work claimed to show that as people’s incomes increased (allowing them to satisfy more economic wants), on average they wanted about two more consumer goods in the list than they currently had. In his book An Economist’s Lessons on Happiness, Easterlin concluded “… incomes (what people have) and income reference levels (what people want) increase by the same amount, and the gap of unfulfilled wants remains the same.” That is, people’s wants are insatiable. End of story.
How strong is the evidence?
When we looked more closely at these findings, they were, well, strange. Analyses used highly selective subsets of the data (such as people in a specific age range in a particular year) without a clear reason. Some studies used proxies such as education to indicate people’s income, even though participants reported their actual income. Some findings were not statistically significant but were interpreted as if they were. Overall, the results were much less straightforward than their conclusions suggested.
So we went back to the same dataset and the list of 10 goods that Easterlin used, but included all participants this time, and used income information directly rather than proxies. The findings were very different. Unfulfilled wants were lower for those with higher incomes, and a substantial proportion reported no unfulfilled wants, contrary to insatiability being universal.
In these re-analyses, we first used the same list of 10 consumer goods as Easterlin did, so that results were easily comparable. Only, it inherited an issue we already found with the original research—these are just 10 items. We addressed this by examining the responses to broader questions in the survey about general desires for wealth—something Easterlin didn’t report but seems very relevant as greater wealth means being able to satisfy more economic wants.
Specifically, people were asked whether they wanted a lot of money, or whether they wanted a job that pays much more than average. Responses showed that only about 50% of people wanted either of those things. We also uncovered an interesting historical dimension: the proportion of people wanting wealth increased from the 1970s to the 1990s, coinciding with the rise of neoliberal economic policies—today known as “Reaganism”. That is, people’s desire for wealth were higher when they were provided fewer public services and had to rely more on themselves economically.
In sum, even the best evidence identified by mainstream economists for want insatiability does not stack up. And our own large survey from 2022 shows that economic wants are not universally insatiable.
How have economists responded to our Easterlin-Revisited study?
It may not be surprising that there has been resistance to publishing this research re-examining and extending Easterlin’s analyses, and especially the main conclusion that challenges the insatiability of people’s wants. The reasons given, though, provide some insight into the ideology of modern economics.
The main argument against publishing this research has been that insatiability is a foundational principle in economics, and as such requires very strong evidence to disprove it. This would be a reasonable request if there was strong evidence to support insatiability in the first place, but so far editors and reviewers have consistently failed to address our request to identify such supporting evidence. This indicates that the assumption of universal insatiability is ideological, not scientific.
A second reason for dismissing our recent findings involves a double-standard. Easterlin used 10 consumer goods, which of course is unlikely to include everything people might want. While this wasn’t a barrier for publishing Easterlin’s results, nor is it considered a barrier still to use it as supposed baseline evidence, our analysis of the same goods was argued to be a fundamental flaw because it doesn’t include everything people might want.
As mentioned earlier, our analysis was employed to establish whether Easterlin’s findings stacked up on their own terms, and we showed that they didn’t. It is profoundly problematic for a science to allow highly selective evidence when it supports a dominant belief, but disallow more extensive analysis of the same data that does not support it. Moreover, reviewers routinely ignored or dismissed our additional analyses that shows that many people did not actually desire great wealth (wealth that could be used for any goods)—additional analyses that were intended to address the shortcoming of limited choice that we already identified in Easterlin’s work. Such failure to engage fairly with the evidence further points to defending an ideological position.
Why would economists defend unlimited wants despite a lack of evidence?
Now, what makes us think that the concept of the economically insatiable human might not only be a misconception but a lie? Here, what is claimed behind the scenes of public discourse in journal peer reviews is informative. As a journal chief editor (and Professor of Economics) explained when deciding not to publish our article in their journal: “…the number of economists seriously believing in literal non-satiation is very, very small…”.
If this senior economist is correct that almost no economist endorses insatiability, then not only are textbook authors lying to students, but economists are also being dishonest when they insist on ‘strong evidence’ against something they don’t even believe themselves.
What could be the purpose of such a clinging defence to something unsupported by evidence? Well, it is ideologically and practically useful.
Most economists are committed to economic growth, a necessity within capitalism. Portraying wants as universally insatiable gives a compelling justification in human nature—if everyone always wants more, perpetual economic growth is a natural occurrence and critical to satisfy our always-expanding wants.
It also downplays problems with economic inequality. If we all want more, then billionaires are just more successful versions of what everyone wants to be, so criticism of their wealth is unfounded.
The lie also serves a practical purpose by simplifying economists’ main task to a technical one—how to efficiently satisfy as many wants as possible—while sidestepping moral considerations about whose or which wants are more important.
What happens if we abandon this lie?
What would happen if we don’t accept this belief? It would mean confronting complex social and moral issues, something familiar to “pre-classical” economic thinkers. For example, Aristotle who argued in his Politics that meeting everyone’s basic needs is more important than satisfying those with ambitions for luxury—the latter were considered tyrants who need to be constrained for the good of society. Even the “father” of Western modern economics, Adam Smith, in his book The Theory of Moral Sentiments made the case that human nature moderates desires for excess for most—our natural virtues of prudence and temperance, principles of justice, and sympathy for others. In these accounts, those desiring extreme wealth are problems for society, rather than popular heroes, strengthening the case for constraining the wealth of the super-rich.
It also raises questions about economic growth as always desirable. Economic growth (more specifically useful products and services that contribute to growth) in some areas and for some people improves lives, but a universal imperative for economic growth is a barrier to sustainable lives and a habitable planet because the push to produce more economic goods and services takes more energy and more resources (“green growth” is still some way off being achievable, if at all).
In this context, the lack of evidence for insatiability casts doubt on focusing on continual economic growth as the route to society-wide wellbeing. A prosperous society might be even better achieved through satisfying those with satiablewants (who are able to achieve their ideal lives) rather than those with insatiable wants who will always be dissatisfied no matter how much they have.
In all, these findings showing that even the evidence claimed to proof that everyone has insatiable wants does not actually add up. And economists’ defensive and gatekeeping responses to this evidence that challenges a fundamental economic principle points to how deeply ideological modern economics is; something often obscured just by its highly mathematical and technical emphasis that can make it seem more objective than it actually is.
Economists today should stop spreading lies to novice students and the rest of us, and re-engage with the moral issues acknowledged by earlier economic thinkers. Or for those that truly believe that economic wants are universally insatiable, produce the evidence to show it.
References and further reading
The detailed research study/findings, and references for the authors mentioned above, can be found in:
Bain, P. G., & Bongiorno, R. (2024). Are people’s economic wants insatiable? Examining the psychology of a basic economic belief. Econstor. https://www.econstor.eu/handle/10419/301038
A summary of Easterlin’s research can be found in his book (especially Chapter 3):
Easterlin, R. A. (2021). An Economist’s Lessons on Happiness. Springer. https://doi.org/10.1007/978-3-030-61962-6
A more holistic approach to pursuing human wellbeing and sustainability without relying on economic growth can be found in:
Jackson, T. (2021). Post Growth: Life After Capitalism. Polity Press.
About the Author
Paul Bain is a Reader in Social Psychology at the University of Bath. He has a combined degree in Commerce/Arts and a PhD in Psychology, both from the University of Melbourne, Australia.
Related posts
