Column: This is what happens when you take Ayn Rand seriously
Economy Feb 16, 2016 11:29 AM EDT"Ayn Rand is my hero," yet another student tells me during office hours. "Her writings freed me. They taught me to rely on no one but myself."
As I look at the freshly scrubbed and very young face across my desk, I find myself wondering why Rand's popularity among the young continues to grow. Thirty years after her death, her book sales still number in the hundreds of thousands annually — having tripled since the 2008 economic meltdown. Among her devotees are highly influential celebrities, such as Brad Pitt and Eva Mendes, and politicos, such as current Speaker of the House Paul Ryan and Republican presidential candidate Ted Cruz.
The core of Rand's philosophy — which also constitutes the overarching theme of her novels — is that unfettered self-interest is good and altruism is destructive. This, she believed, is the ultimate expression of human nature, the guiding principle by which one ought to live one's life. In "Capitalism: The Unknown Ideal," Rand put it this way:
Collectivism is the tribal premise of primordial savages who, unable to conceive of individual rights, believed that the tribe is a supreme, omnipotent ruler, that it owns the lives of its members and may sacrifice them whenever it pleases.
By this logic, religious and political controls that hinder individuals from pursuing self-interest should be removed. (It is perhaps worth noting here that the initial sex scene between the protagonists of Rand's book "The Fountainhead" is a rape in which "she fought like an animal.")
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The fly in the ointment of Rand's philosophical "objectivism" is the plain fact that humans have a tendency to cooperate and to look out for each other, as noted by many anthropologists who study hunter-gatherers. These "prosocial tendencies" were problematic for Rand, because such behavior obviously mitigates against "natural" self-interest and therefore should not exist. She resolved this contradiction by claiming that humans are born as tabula rasa, a blank slate, (as many of her time believed) and prosocial tendencies, particularly altruism, are "diseases" imposed on us by society, insidious lies that cause us to betray biological reality. For example, in her journal entry dated May 9, 1934, Rand mused:
For instance, when discussing the social instinct — does it matter whether it had existed in the early savages? Supposing men were born social (and even that is a question) — does it mean that they have to remain so? If man started as a social animal — isn't all progress and civilization directed toward making him an individual? Isn't that the only possible progress? If men are the highest of animals, isn't man the next step?
The hero of her most popular novel, "Atlas Shrugged," personifies this "highest of animals": John Galt is a ruthless captain of industry who struggles against stifling government regulations that stand in the way of commerce and profit. In a revolt, he and other captains of industry each close down production of their factories, bringing the world economy to its knees. "You need us more than we need you" is their message.
To many of Rand's readers, a philosophy of supreme self-reliance devoted to the pursuit of supreme self-interest appears to be an idealized version of core American ideals: freedom from tyranny, hard work and individualism. It promises a better world if people are simply allowed to pursue their own self-interest without regard to the impact of their actions on others. After all, others are simply pursuing their own self-interest as well.
Modern economic theory is based on exactly these principles. A rational agent is defined as an individual who is self-interested. A market is a collection of such rational agents, each of whom is also self-interested. Fairness does not enter into it. In a recent Planet Money episode, David Blanchflower, a Dartmouth professor of economics and former member of the Central Bank of England, laughed out loud when one of the hosts asked, "Is that fair?"
"Economics is not about fairness," he said. "I'm not going there."
Economists alternately find alarming and amusing a large body of results from experimental studies showing that people don't behave according to the tenets of rational choice theory. We are far more cooperative and willing to trust than is predicted by the theory, and we retaliate vehemently when others behave selfishly. In fact, we are willing to pay a penalty for an opportunity to punish people who appear to be breaking implicit rules of fairness in economic transactions.
So what if people behaved according to Rand's philosophy of "objectivism"? What if we indeed allowed ourselves to be blinded to all but our own self-interest?
An example from industry
In 2008, Sears CEO Eddie Lampert decided to restructure the company according to Rand's principles.
Lampert broke the company into more than 30 individual units, each with its own management and each measured separately for profit and loss. The idea was to promote competition among the units, which Lampert assumed would lead to higher profits. Instead, this is what happened, as described by Mina Kimes, a reporter for Bloomberg Business:
An outspoken advocate of free-market economics and fan of the novelist Ayn Rand, he created the model because he expected the invisible hand of the market to drive better results. If the company's leaders were told to act selfishly, he argued, they would run their divisions in a rational manner, boosting overall performance.
Instead, the divisions turned against each other — and Sears and Kmart, the overarching brands, suffered. Interviews with more than 40 former executives, many of whom sat at the highest levels of the company, paint a picture of a business that's ravaged by infighting as its divisions battle over fewer resources.
A close-up of the debacle was described by Lynn Stuart Parramore in a Salon article from 2013:
It got crazy. Executives started undermining other units because they knew their bonuses were tied to individual unit performance. They began to focus solely on the economic performance of their unit at the expense of the overall Sears brand. One unit, Kenmore, started selling the products of other companies and placed them more prominently than Sears' own products. Units competed for ad space in Sears' circulars…Units were no longer incentivized to make sacrifices, like offering discounts, to get shoppers into the store.
Sears became a miserable place to work, rife with infighting and screaming matches. Employees, focused solely on making money in their own unit, ceased to have any loyalty to the company or stake in its survival.
We all know the end of the story: Sears share prices fell, and the company appears to be headed toward bankruptcy. The moral of the story, in Parramore's words:
What Lampert failed to see is that humans actually have a natural inclination to work for the mutual benefit of an organization. They like to cooperate and collaborate, and they often work more productively when they have shared goals. Take all of that away and you create a company that will destroy itself.
An example from Honduras
In 2009, Honduras experienced a coup d'état when the Honduran Army ousted President Manuel Zelaya on orders from the Honduran Supreme Court. What followed was succinctly summarized by Honduran attorney Oscar Cruz:
The coup in 2009 unleashed the voracity of the groups with real power in this country. It gave them free reins to take over everything. They started to reform the Constitution and many laws — the ZEDE comes in this context — and they made the Constitution into a tool for them to get rich.
As part of this process, the Honduran government passed a law in 2013 that created autonomous free-trade zones that are governed by corporations instead of the countries in which they exist. So what was the outcome? Writer Edwin Lyngar described vacationing in Honduras in 2015, an experience that turned him from Ayn Rand supporter to Ayn Rand debunker. In his words:
The greatest examples of libertarianism in action are the hundreds of men, women and children standing alongside the roads all over Honduras. The government won't fix the roads, so these desperate entrepreneurs fill in potholes with shovels of dirt or debris. They then stand next to the filled-in pothole soliciting tips from grateful motorists. That is the wet dream of libertarian private sector innovation.
He described the living conditions this way:
On the mainland, there are two kinds of neighborhoods, slums that seem to go on forever and middle-class neighborhoods where every house is its own citadel. In San Pedro Sula, most houses are surrounded by high stone walls topped with either concertina wire or electric fence at the top. As I strolled past these castle-like fortifications, all I could think about was how great this city would be during a zombie apocalypse.
Without collective effort, large infrastructure projects like road construction and repair languish. A resident "pointed out a place for a new airport that could be the biggest in Central America, if only it could get built, but there is no private sector upside."
A trip to a local pizzeria was described this way:
We walked through the gated walls and past a man in casual slacks with a pistol belt slung haphazardly around his waist. Welcome to an Ayn Rand libertarian paradise, where your extra-large pepperoni pizza must also have an armed guard.
This is the inevitable outcome of unbridled self-interest set loose in unregulated markets.
Yet devotees of Ayn Rand still argue that unregulated self-interest is the American way, that government interference stifles individualism and free trade. One wonders whether these same people would champion the idea of removing all umpires and referees from sporting events. What would mixed martial arts or football or rugby be like, one wonders, without those pesky referees constantly getting in the way of competition and self-interest?
READ: Libertarian Charles Murray: The welfare state has denuded our civic culture
Perhaps another way to look at this is to ask why our species of hominid is the only one still in existence on the planet, despite there having been many other hominid species during the course of our own evolution. One explanation is that we were cleverer, more ruthless and more competitive than those who went extinct. But anthropological archaeology tells a different story. Our very survival as a species depended on cooperation, and humans excel at cooperative effort. Rather than keeping knowledge, skills and goods ourselves, early humans exchanged them freely across cultural groups.
When people behave in ways that violate the axioms of rational choice, they are not behaving foolishly. They are giving researchers a glimpse of the prosocial tendencies that made it possible for our species to survive and thrive… then and today.
Editor's note: This post has been updated to correct a previous statement that Sears went bankrupt. It has been updated to reflect that the retailer appears to be heading towards bankruptcy, as the company's earnings and share prices plummet.
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