Economic efficiency often undermines sociopolitical autonomy

Against being econ-brained

Many people in my intellectual circles use economic abstractions as one of their main tools for reasoning about the world. However, this often leads them to overlook how interventions which promote economic efficiency undermine people’s ability to maintain sociopolitical autonomy. By “autonomy” I roughly mean a lack of reliance on others—which we might operationalize as the ability to survive and pursue your plans even when others behave adversarially towards you. By “sociopolitical” I mean that I’m thinking not just about individuals, but also groups formed by those individuals: families, communities, nations, cultures, etc.¹

The short-term benefits of economic efficiency tend to be legible and quantifiable. However, economic frameworks struggle to capture the longer-term benefits of sociopolitical autonomy, for a few reasons. Firstly, it’s hard for economic frameworks to describe the relationship between individual interests and the interests of larger-scale entities. Concepts like national identity, national sovereignty or social trust are very hard to cash out in economic terms—yet they’re strongly predictive of a country’s future prosperity. (In technical terms, this seems related to the fact that utility functions are outcome-oriented rather than process-oriented—i.e. they only depend on interactions between players insofar as those interactions affect the game’s outcome).

Secondly, economic frameworks typically assume that people act in their rational interests at each point in time. They therefore rule out adversarial dynamics like credible threats (and following through on commitments more generally). Yet both offensive and defensive commitments are crucial aspects of how groups make decisions (as decision theories like FDT and UDT attempt to capture). For example:

• The legal system’s commitment to punishing criminals (even when the punishment costs society much more than the crime did) is the foundation on which economic property rights are maintained.

• A nation’s commitment to regaining territory lost in wars (even when it can’t be justified by cost-benefit analyses, like Britain’s defense of the Falklands) deters enemies from trying to seize that territory in the first place.

A more general principle here is that, while economists tend to think about what’s rational on the margin, political power depends on what would happen in worst-case scenarios. Marginal thinking is often more useful in the short term, but in the long term control over the worst-case outcomes provides leverage (for you or your adversaries) to shape the whole landscape of marginal effects. For example, if a tyrannical ruler sometimes executes people who seem disloyal, then his subjects might respond by proactively punishing dissidents to prove their own loyalty. Hence relatively infrequent executions can be amplified into a society-wide control apparatus that shapes everyone’s marginal incentives. (On a technical level, this is related to how changes in disagreement points can have big effects on the solutions of bargaining games—though mainstream bargaining theory hasn’t accounted for how this incentivizes threats.)

Thirdly, economics assumes commensurability (e.g. that goods and services can be priced in terms of money). But the mechanisms and institutions which maintain sociopolitical autonomy require a level of reliability which is undermined by commensurability. For example:

• Individuals whose integrity is for sale at the right price can’t be trusted as leaders.

• Legal systems which punish speech based on how much harm they think it does are easily weaponized. (This is more of a utilitarian failing than an economic failing, but utilitarianism also relies heavily on commensurability.)

• Countries which concede some territory to their neighbors undermine their ability to credibly commit to defending the rest of their territory.

(James C. Scott's work on how states use commensurability and standardization to scale their power is very relevant to this.)

These particular examples are sufficiently obvious that few people defend treating them as commensurable. However, in the rest of this post I’ll discuss five cases where I think many people are applying economic frameworks too broadly, and thereby undermining the sociopolitical foundations that economic analysis implicitly relies on. I’ll refer to this as being “econ-brained”. Econ-brain is related to neoliberalism, libertarianism, and effective altruism, though it’s not synonymous with any of them.² It’s often critiqued by both the anti-market left and the nationalist right; I’m more sympathetic to the latter critiques, but will mostly focus on examples that aren’t polarized along standard partisan lines.

I’d eventually like to develop a formal definition of “sociopolitical rationality” that can precisely describe the failures of “economic rationality”. In the meantime, I hope that these examples convey the core intuitions. Of course, it’s hard to summarize any one topic, let alone five of them. So please take each of these five sociopolitical perspectives in the spirit of “ideas you might be missing, that could add up to something big” rather than “a individually knock-down case against econ-brained thinking”. To facilitate that, I recommend that you take a few moments to note down your opinion of the headline topic before reading the corresponding section.

Five case studies

1. Prediction markets

[Pause here if you want to consider your stance towards them before reading.]

Prediction markets have highly desirable properties from an economic perspective. They are incentive-compatible ways of surfacing hidden information. They’re extremely hard to manipulate, at least in theory—if anyone suspects manipulation is happening, they can profit by betting in the opposite direction. And so they’ve been supported by various economists (most notably Hanson) as well as the rationalist and effective altruist communities.

Why oppose prediction markets? One standard response is that prediction markets could be used as assassination markets. That is, any market which would be affected by the death of a major figure could allow someone to profit off assassinating them. However, this feels like an edge case—assassinations are rare, and financially-motivated assassinations even rarer.

A more central objection, based on the same principle, is that it’s easy for prediction markets to become corruption markets. One type of corruption is simply profiting by betting on private information, which we’ve already started to see with the rise of polymarket (see here, here, here). We can debate the extent to which institutions should be able to keep information private—but by default they won’t have a choice. Unlike stock markets, prediction markets can be set up in large numbers on arbitrary questions, with anonymized crypto-based payouts, potentially making insider trading much harder to monitor.

Moreover, as prediction markets become better-capitalized I expect we’ll start to see cases where decisions are made in order to influence prediction markets. We’ve only seen unimportant examples of this so far, but as prediction markets grow the incentives to do so will increase. Furthermore, prediction markets could be used as a mechanism to anonymously bribe decision-makers. As a toy example, people who wanted to incentivize policy X could create and subsidize a market like “conditional on policy X being announced, which day will it happen?” The decision-maker could then profit by announcing policy X on a day of their choosing, and betting accordingly. Unlike regular bribes, this doesn’t require any direct interaction or agreement which could serve as smoking-gun evidence of corruption (though it does leave a public record of the anonymized transactions).

In short, prediction markets harm institutions’ ability to maintain autonomy in the face of external pressures, by commodifying the process of turning institutional influence into money (and vice versa). Nor is this a coincidence. Instead, prediction markets create “efficiency” precisely by incentivizing individuals to be more engaged with markets, at the expense of legal and moral obligations to the institutions they work within.

2. Land value taxes

[Pause here if you want to consider your stance towards them before reading.]

Land value taxes are well-known to be highly economically efficient. In general, taxes disincentivize the production of whatever is being taxed. However, in most places it’s not possible to produce more land. And the vast majority of the value of land is driven by factors that the land owners themselves don’t control (such as proximity to a city). So land taxes are considered far less distortionary than taxes on income or consumption—hence the recurring popularity of Georgism amongst political commentators, who sometimes suggest that they should replace income taxes altogether.

The term “non-distortionary” can be misleading, though. If land value taxes replaced income taxes, they’d significantly affect who’s able to afford which property—just in ways that economists think increase efficiency. Consider someone who’d like to use their property in a way that isn’t very financially rewarding—for example, as a community hub. Once they own their property, they might need relatively little income to be viable (and therefore pay little in income taxes). However, if a land value tax is implemented, they’d need to pay the same amount of tax as a commercial business using that same property would, which might force them to move or shut down.

Defenders of land value taxes argue that this is efficient from an economic perspective: it reallocates property from economically unproductive to economically productive uses. Another way of putting this, however, is that land value taxes would make it harder for land-owners to remain autonomous. Instead of freely choosing how to use their own properties, they’d face strong pressures to use it in ways that the market finds valuable. To contrast this with income taxes, consider some group that doesn’t use money to organize itself internally. If you draw a boundary around that group, then income tax only takes some percentage of money that flows in across that boundary, and so the group can reduce their tax burden by becoming more self-sufficient. Conversely, a land value tax creates a net outflow of money from the group that isn’t determined by how much money is flowing in, forcing them to maintain a significant income stream to survive.

There’s a rights-based case against infringing on such groups’ autonomy, which I’ll discuss later on. But even in consequentialist terms, society is disproportionately shaped by people and groups that are able to insulate themselves from commercial pressures. This occurs at many different scales: individual homeowners, churches or universities, communities (or communes), all the way up to ethnic groups like the Amish. Such groups are able to experiment with novel ideologies and lifestyles in significant part because they’re less accountable to market forces than corporations. The lessons from those experiments can spread very widely (e.g. the Amish are a common reference point in discussions of fertility declines). By comparison, consider how bad almost all corporations are at cultural leadership—because genuinely novel thinking is often economically illegible, and therefore very difficult to do under financial pressure.

I’ve been discussing land value taxes in a very abstract sense. In reality, there are many complicating factors which might mitigate the effects I described, some of which I discuss in a footnote.³ However, the most important practical consideration may simply be the difficulty of guaranteeing that land value taxes would actually replace other taxes, rather than just adding to them. Over the last century, we’ve seen massive expansions of state power in many domains—amount of regulation and amount of taxation being two crucial ones. For the population as a whole to retain its autonomy, it seems very important to set and defend Schelling fences at which we can coordinate to resist further encroachments—with strong property rights being one of the best such fences. Adding new taxes—and in particular recurring taxes on things which you already own—would make “ownership” a less meaningful concept. It would therefore become more difficult to rally around property rights to fight against expansions of state power (especially ones nominally justified by appeals to economic efficiency).⁴

I suspect that many ordinary people understand the dynamics I’ve explained on an intuitive level—hence why property taxes and poll taxes are so unpopular. However, these intuitions remain illegible from an econ-brained perspective, in part because the sociopolitical principles behind them have never been adequately formalized.

3. Higher education

Higher education is puzzling from an econ-brained perspective, because university students don’t seem to be learning very many job-relevant skills, yet are still paid a significant wage premium over non-graduates. The best economic explanation for why this happens is Caplan’s signaling account; he claims that going to university is a signal of intelligence, conscientiousness and conformity.

However, as I argue in this post, the signaling account doesn’t work, because there are much cheaper ways to signal all of these traits. Instead, I suspect that college is best understood as forming an elite class with its own norms and values (as described by Bourdieu, Lasch, and others).

I’ll note that the formation of such an elite class is actually harmful for most countries. So in this case I’d actually prefer a more economically efficient outcome (like a massive reduction in university prestige and attendance). However, it’s still a good example of the difference between economic and sociopolitical reasoning.

4. Free trade

Mainstream economic thinking is strongly in favor of free trade, for the sake of its economic benefits. However, mainstream economic thinking has also led to a huge amount of American manufacturing capacity being offshored to its geopolitical rivals, to the point where even most US military supply chains are dependent on Chinese production. So economic efficiency here comes at the longer-term cost of national autonomy—both in terms of robustness to disruptions (e.g. from covid) and robustness to conflict with China. While both points have been made in various places over the years, they don’t seem to have been adequately incorporated into economic consensus—e.g. I saw few mainstream economists take them into account when evaluating Trump’s tariffs.

Now, there’s an argument that intertwining the US and Chinese supply chains makes the world safer, by making war between the two superpowers more costly. In other words, perhaps decreasing American and Chinese autonomy is a good thing. However, even though both countries are economically dependent on each other, the US is disproportionately industrially and militarily dependent on China. So from a “hard power” perspective, the US gave up autonomy while China retained (and in fact increased) its autonomy.

Another big tension between economic and sociopolitical views of free trade is that the sociopolitical view accounts for shifts in the internal balance of power within the US. The manufacturing industry is far more widely-distributed across US states than the finance or software industries. So its decline has led to increased concentration of power amongst coastal elites. Again, I’m not claiming that this should be a decisive argument against free trade; however, it’s the kind of consideration that doesn’t arise naturally from an econ-brained perspective. Whereas from a sociopolitical perspective, maintaining autonomous subagents is a crucial component of a nation’s continued health (which is a major reason to defend states’ rights).

5. The future of AGI

Econ-brained thinking has shaped the AGI safety community’s (and thereby the wider world’s) perspective on the future of AGI. Influential figures like Hanson, Christiano, and Shulman often apply economic abstractions to make forecasts. This contrasts with thinkers like Yudkowsky or Vassar who are more dismissive of the relevance of economics for thinking about AGI (though I wouldn’t summarize them as “sociopolitics-brained”, but rather merely “less econ-brained”).

In this section I’ll prioritize breadth over depth. I’ll give half a dozen examples of econ-brained ideas about how to orient to AGI, and mostly leave the task of generating sociopolitical critiques of them as exercises for the reader:

• The idea of paying AIs to cooperate with us, as discussed here, here, and here.

• The idea of owning galaxies, as discussed here.

• The idea that harms from speeding up AI capabilities progress can be largely offset by benefits from preventing capabilities overhangs (as defended here, here, and here and critiqued here). In addition to Paul’s position, it’s illustrative to contrast two other people’s stances towards this idea:

  • Sam Altman used the idea of compute overhangs as a justification to accelerate progress towards AGI, until it became more useful to start pushing for more GPU production instead.

  • Meanwhile, an example of the polar opposite strategy was Wei Dai declining to invest in Anthropic for moral reasons, thereby losing out on what would by now have been over 400x returns. I respect Wei’s approach very much (despite not knowing whether he should have been more econ-brained in this case).

• The idea that AGI labs are efficient at racing towards AGI, and therefore building new capabilities evals isn’t very helpful for them (as I critique here).

• The idea of tracking progress towards AGI in terms of GDP growth or real interest rates.

• The idea that AGI will come in the form of separate tools or services rather than unified agents, as defended by Hanson and Drexler.

  • Note the parallel between this perspective and the idea that businesses are mainly held together by transaction costs, the latter of which led Krier to the very econ-brained idea that society could be revolutionized by AI-enabled Coasean bargaining at scale.

Some of these ideas have been critiqued by Byrnes, Yudkowsky, and others. In his posts on the Spanish conquistadors as precedents for AGI takeover, Kokotajlo is clearly also looking at the issue through a sociopolitical lens. However, it’s worth noting that econ-brained thinkers have scored some big wins over the last decade—e.g. predicting the diffusion of AI across society, and the unprecedented amount of investment that would be funneled towards the AI industry. And zooming out even further, compute-based forecasts of AGI like Kurzweill’s and Legg’s have been surprisingly prescient. Such forecasts aren’t quite central examples of being econ-brained, but there’s definitely something econ-brained (and something anti-Yudkowskian) about believing so much in straight lines on graphs.

Why is this? The most straightforward possibility is simply that the concept of econ-brain is too lossy an abstraction to reliably evaluate thinkers with. Ideally we’d try to diagnose what led to each of these successes and failures in granular detail. But as a rough heuristic, is being more econ-brained actually a good way to improve your forecasts? Some possible responses:

• Maybe the forecasting successes listed above required the right balance between econ-brained and other kinds of thinking. If you’re too econ-brained, you reject the concept of AGI altogether; if you’re not econ-brained enough, you’re surprised by how continuously progress has advanced over the last decade. Paul and Carl and Ray and Shane might be in the sweet spot re these particular topics. But this isn’t a very satisfying response, because these people are extremely econ-brained by almost everyone’s standards.

• Maybe economic factors are more important in the short term (during which institutions and power structures are roughly stable), whereas sociopolitical dynamics play out over longer time horizons (and will especially kick in once AIs become capable of wielding political power). This makes econ-brained people more like foxes, and sociopolitics-brained people more like hedgehogs. The former tend to make more predictions that are accurate; however, the latter have a better chance of predicting the most important large-scale shifts.⁵

• Maybe there’s a tradeoff between predictive accuracy and the ability to get things done. In general, outside-view bets like “nothing ever happens” tend to outperform your inside view on most topics. Similarly, believing in efficient markets is a good strategy for most investors. But it’s hard to change the world by believing in efficient markets. Relatedly, in the final section of this post I discuss how “leaps of faith” can be extremely valuable for sparking coordinated action.

Conclusion

These five case studies are far from exhaustive. There are plenty of examples that I omitted for brevity (e.g. surge pricing, YIMBYism, earning to give, etc). And there are other cases that I suspect are important examples of this phenomenon, but don’t yet understand well enough to discuss in detail. For example, cryptocurrency is a nominally-economic domain that seems more driven by sociopolitical dynamics than economic fundamentals. And Ben Hoffman’s writing on macroeconomics (in particular his post on the debtor’s revolt) provides a perspective from which 20th-century economic history was driven by sociopolitical conflicts.

In other cases, econ-brained thinking is harnessed to defend a position, but isn’t the main force behind that position. For example, the cultural wars that are currently raging over immigration definitely feature clashes between economic and sociopolitical considerations. However, I suspect that the pro-immigration side is not fundamentally motivated by immigration’s purported economic benefits, which are better understood as fig leaves on a deeper-rooted globalist ideology. Similarly, even though much of the explicit debate about Brexit pitted economic against cultural considerations, the sheer vitriol that elites leveled against Brexiteers suggests that they were primarily motivated by sociopolitical considerations of their own.

Ultimately, the greatest prize would be a precise technical theory that fills in what economics is missing. Scott Garrabrant’s distinction between arithmetic and geometric rationality seems like one important step towards this. As he points out, arithmetic rationality (which I suspect is closely related to economic thinking) is oriented towards maximizing efficiency. But if taken too far, it creates internally dysfunctional agents, and so it needs to be governed at the meta-level by geometric rationality (which I suspect is closely related to sociopolitical thinking). A big question is then how to draw boundaries between the two categories in a principled way.

That’s all beyond the scope of this post, though. For now, I merely hope that I’ve conveyed the core idea that there’s something interesting about autonomy and related sociopolitical concepts which is systematically neglected (and undermined) by econ-brained thinking.

1. Corporations are another example of such a group—though a less central one, because they lack many of the traits that hold together most sociopolitical groups (such as membership/citizenship that’s difficult to take away from people).

2. I use “econ-brain” rather than “neoliberalism” to avoid getting caught up in the political connotations, since the neoliberal world order does many things that econ-brained people disagree with. Also, econ-brain applies to some issues that neoliberalism doesn’t have much of a stance on, like prediction markets or AGI. Meanwhile, when I talk about libertarians as econ-brained, I’m primarily referring to the modern economic-focused libertarianism espoused by thinkers like Brian Caplan and Scott Alexander. Conversely, historical libertarian(ish) figures like Hayek and Rand thought much more about sociopolitical concepts such as serfdom vs freedom.

3. Three such considerations:

• Many of the organizations I mentioned above currently have charitable tax exemptions, and so wouldn’t be adversely affected by land value taxes. However, I think of this as only a band-aid solution to the core problem. If standards for charities are too loose, land value tax is no longer effective (because everyone would find some way to own property via a charity). If standards are too strict, then charitable status provides much less autonomy (because charities would still have to stay on the state’s good side to retain their status). Overall, the more a tax relies on getting the exceptions right, the less sound we should consider its principles to be.

• Property taxes are similar to land value taxes in many ways, and are far more common. So I expect that many of the problems that a full-blown land value tax would cause already exist to a lesser extent in jurisdictions with high property taxes. It’d be useful to get empirical data on this. For now, I’m focusing on land value taxes as a cleaner case study of econ-brained thinking.

• My thought experiment of a community avoiding income taxes by becoming more self-sufficient is in tension with the fact that, in the US, income taxes technically also apply to non-monetary transactions. However, I think that the impossibility of actually enforcing this itself helps demonstrate the limitations of economic thinking. Even in principle, how could you put prices on non-monetary exchanges that occur within a family, or a community, or between university students? If you imagine a government actually trying to do this (and punishing people who don’t pay) that would be the clearest example yet of how economic thinking undermines sociopolitical autonomy.

4. A related practical issue which I haven’t seen a good Georgist response to: the case for land value taxes over property taxes relies on incentivizing construction. But if construction is severely restricted by permitting processes (as it is in most Western cities) then a land value tax would unfairly penalize landowners who didn’t already have buildings on their land, without actually leading to much additional housing. To be fair, I expect this is part of why YIMBYism is much more popular today than Georgism.

5. Relatedly: when Paul Christiano and Eliezer Yudkowsky tried to operationalize their disagreement as a bet, Paul claimed that he’d be willing to bet on most things, whereas Eliezer was much more selective. But when they did settle on a single bet, Eliezer ended up winning (though note that the bet they chose was one where Eliezer was closer to the consensus side, suggesting that there might have been adverse selection).