Why Do Bad Economic Ideas Persist?

Well New York, you did it: The world’s financial capital just elected Zohran Mamdani, a Democratic Socialist, as its 111th mayor.

For all of the enthusiasm of his mostly millennial and Gen Z supporters, many other New Yorkers and observers worldwide are horrified at the prospect of the experimental application of far-left economic policies to America’s largest municipality. While in the age of social media Mamdani has left a comprehensive record of various radical (economic and otherwise) sympathies, one needn’t look beyond his own mayoral campaign platform to reveal a dystopian panoply of collectivist economic policies. Rent freezes. Free buses. Government-run grocery stores. Politicians are frequently accused of hiding their true positions under the cover of bland nostrums while campaigning; Mamdani cannot be fairly accused of hiding the ball. The policy extremism is plain to see.

Let’s be honest: These are terrible ideas, and no serious person with even the most basic understanding of economic theory (or who has simply apprehended the real world on a daily basis) believes any of them will work. Flawed economic ideas, of course, have always been with us: Serfdom, slavery, and sharecropping were all fundamentally forms of economic organization rooted in exploitation and impoverishment, and have deservedly been consigned to the ash bin of history.

What sets collectivism apart — whether called Marxism, socialism, communism, or more vaguely as “social justice”, take your pick — is that those on the exploitive side of the ledger in those now-defunct systems were quite clear-eyed that they were not for the benefit of those subjected to them.

Collectivism distinguishes itself from other failed economic ideologies not only by its longevity (despite consistently failing to deliver), but in that it is marketed as an uplifting economic policy for those upon whom it is inflicted — thus explaining its longevity. Yet how can anyone credibly advocate for something proven time and again not to work?

Let us first dispense with two straw men frequently deployed in defense of socialist economics. The first is “It’s never (really) been tried.” Quite the contrary; we have living among us — including in the outer boroughs of New York City — citizens with a living memory of Soviet communism and its myriad failures. The other is “All modern economies are at least partially socialist, in the form of large public sectors.” It is true that modern “mixed” market economies contain both free-market and command elements. Reasonable people can disagree about the appropriate degree of government intervention in a largely free market system; such arguments, however, which have constituted much of the political debate at the federal level in the U.S. since at least the New Deal era, could not be more distant from the policies elaborated on the Democratic Socialists of America’s website — policies which have consistently failed whenever and wherever they are tried.

Some bad ideas do eventually fall from favor — bloodletting and lobotomies, thankfully, have been cashiered as solutions to the maladies they were intended to treat. Why does collectivism seem to have nine lives?

One reason is that the merits of free market capitalism are seen — particularly by many of those over the age of 50 — as self-evident. The success of the U.S. and the “first world” in the postwar era, particularly after the fall of the Berlin Wall, bred triumphalism and academic hubris (remember “The End of History”?). Little attempt was made to forcefully advocate for or promote the moral and material merits of the market economy, as to do so was akin to saying that water is wet.

Also contributing is the Enlightenment notion of “progress” as an unalloyed good. A belief that the human condition can be improved through an unwavering commitment to reason and science can also be maladapted to suggest that all change — or any change — to the existing order constitutes progress. As market economies in the West have been the incumbent economic order for centuries, any market failure associated with capitalism can be misattributed to that system’s underlying flaws, rather than what are more often the culprits: distortions associated with the socialist scaffolding in a mixed economy (readily witnessed in the U.S. housing and health care markets), or unrelated factors (such as the quality of education or natural resource policies). When markets rule, to make “progress” typically equates to more government.

Yet another Enlightenment-era phenomenon embedded within socialism’s enduring popularity is the debate between reason and sentiment, each championed by Voltaire and Rousseau respectively. The protesters who carry signs stating that “Health Care is a Human Right” (and thus should be paid for by others, and administered by the state) give primacy to emotions over reason, just as Rousseau did. The complexity of the modern world can be difficult to ascertain; thus, when presented with any problem requiring a solution, the impulse to hand it to the only standalone entity (the state) with the resources and legitimacy to “fix it,” whatever “it” may be, can be a powerful one.

A factor in socialism’s more recent appeal is how the advance of technology and social media, combined with a decline in the quality of primary education, have resulted in an increasingly ahistorical public. The “urgency of now” which demands immediate state action to any problem is animated by not understanding — or even being passingly familiar with — what happened 15 minutes ago. Empiricism as part of a heuristic approach to public policy cannot work in a democratic polity willfully ignorant of easily observed phenomena.

Lastly, human nature being what it is, one cannot count out simple bad faith on the part of its advocates for collectivism’s persistence. For some on the statist left, the primary objective is not to deliver the stated outcome — say, cheaper groceries — but rather to concentrate resources under the control of those lobbying for a larger public sector role in the economy. Much of current climate policy fits this profile, in that state control has arguably superseded efficacy as a guiding principle.

The irony of our current pass is that we live in a world in which it has never been easier to access information, yet that ease of access has depreciated its value and made it that much easier to ignore — or permit one to fall prey to emotional entreaties or outright misinformation. What we may be about to witness in New York is our largest city, in the wealthiest and most technologically advanced society the world has ever known, democratically and full-throatedly assent to its own immiseration.

Richard J. Shinder is the founder and managing partner of Theatine Partners, a financial consultancy.

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