I think...

that I have to differ with Dan's widely praised account of recent events around Dan's and my old haunts.

Dan hypothesizes that "the opposition [of about 100 University of Chicago faculty members to the creation of the new Milton Friedman Institute] is grounded less on ideology and more on an effort to ensure these departments get a bigger slice of the pie." Dan and Jonathan Adler both see this as a Friedmanite explanation of the opposition: ordinary institutional material self-interest. Those who aren't gonna get, want.

But the thing is that that's silly.

I know a lot of the people who signed the letter-- some are friends, some are most decidedly not, some I respect, some not, but almost none are silly or prone to silly mistakes about self-interest. And in terms of absolute self-interest, rising university tides lift a lot of boats. The $200 million in donations the University is planning on for the Institute will include a lot of new money the university wouldn't otherwise get, from people who either want to honor Friedman, from people who are excited about the institutional mission of re-bridging the disparate economics programs at Chicago (where Nobel Laureates in Economics teach in three different divisions-- Social Sciences, Business, and Law), or from people who believe in the future importance of Chicago-style economics and want to invest in the intellectual mission. Those donors aren't likely donors to the Anthropology, Political Science, or English departments.

But if the Institute is created, then there's an inflow of money at one point in the university's budget that at least loosens constraints at other points. That's the way these things work. Some part of the economics department's existing expenses get shuffled over to the Institute. If, as seems likely, Econ physically relocates to the MFI, a whole lot of new office space gets created or opened in the middle of campus. A new group of visiting fellowships and positions mean increased possibilities for matched-spouse hiring and visitorships. Wherever you look, you see ancillary material benefits for departments in a university that gets a $200 million infusion, increased national and international prominence, new positions and buildings and so on and so forth. In the language of neoclassical economics, the creation of the MFI is a Pareto improvement from the university's perspective-- some departments gain a lot, some gain a little, but none will materially lose. It seems to me that a self-interest explanation for the opposition fails, unless the signatories really don't understand the positive-sum dynamic at work. That seems unlikely to me.

But, as has been discussed in this space before, liberal arts academics make very poor homo economici. We've survived several rounds of selection out-- if we were sound calculators of financial self-interest, we wouldn't have gotten PhDs in the first place, and once we had them we would have tried for private-sector employment rather than tenure-track placement, and in any event there ought to be a lot more of us getting science, engineering, and economics degrees and a lot fewer in English lit. And then we chose tenure-- which, on any reasonable bargaining model, means we chose to give up expected-value in dollar terms in exchange for stability. Either we're all very silly, or we optimize on other dimensions.

And a dimension on which we're notoriously strong optimizers is amour propre, status, relative advantage. It more or less has to be so, given the institutional structure. (As I said in the post linked-to above: if you're going to offer people lifetime employment and so make them relatively impervious to financial inducements, you'd better select for people who are so prone to status inducements, or so self-motivated as to believe that what they have to say and write is desperately important to be said and written, that they're going to keep working hard. And they do keep working hard-- fantastically hard, in many cases, and for decades after their jobs no longer depend on it.)

Now, if you model academic behavior as rational, mutually-distinterested self-interest, you find that everyone should welcome an inflow of $200 million into another part of their university. You predict that there will be no opposition.

If, however, you model academic behavior as a status game, more concerned with relative position than with absolute position, and you find that your university is going to take the fields that are already very high-status in the world and relatively even higher status within your institution, and symbolically endow them with even greater status by making them more central to the institution's name and identity and campus and budget, then things look very different. The promise of getting the econ department's leftover offices and the spilloff from the interest on the new endowment pale in comparison to what will be lost. You predict that there will, in fact, be opposition.

It has always been a serious obstacle to economic analyses that persons are not mutually disinterested, that they do care about relative and not merely absolute advantage, that they are willing to suffer material loss so that someone else does not make a positional gain. The models rest on the hope that what Hirschman famously described as the contest between the passions and the interests-- the normative project of trying to persuade people to be self-interested, instead of passionately prideful and vengeful and envious-- has been, to a first approximation, won by the interests. The harmony of interests implied by invisible-hand liberalism is a harmony of absolute interests. There can never be a spontaneous harmony of relative interests-- the prideful and the vainglorious are always engaged in zero-sum games at best, as Hobbes and his successors understood well.

It seems to me that Dan and Jonathan Adler are wrong-- that what we have here is not confirmation of the economist's hope, but its opposite. It's not behavior that fits neatly into any of Milton Friedman's schema; it's behavior that undermines them.