For better or worse, Econometrics as a study comprises a good deal of Economics and Finance courses, so worry not, this article is indeed of relevance for you to see how vulnerable your worldview might be to the study you are actually doing.
Adam Smith famously wrote in his magnum opus Wealth of Nations, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner but from their regard to their own interest”. Whether we like it or not, this is a fundamental principle of modern Economics, the idea that economic actors care little about one’s happiness or well-being but are primarily concerned with the profit they may turn. As a result, most Economic and Econometric models find their foundation in the assumption that sees humans as a perfectly rational, self-interested, and shrewd kind.
The clearest example of such model would be a famed prisoner’s dilemma that has wide applications throughout Economic science. Two criminals are arrested and kept apart in two cells at the police station: no earlier collusion nor communication is possible between them. At interrogation, the police officer makes an offer to each of them: one can either inform on his partner, in which case he is set free, if the other keeps quiet, or, if the second informs as well, both are locked up. The second option would be staying quiet, in which case he either can get a few years in prison (if the other stays quiet as well) or, in case they inform on each other, gets a longer sentence. So what is the best way to act? According to game theory, always inform on your partner. Why? You can find it out at a Microeconomics class. However, one may wonder if a constant exposure to such ideas would gradually induce one to behave in real life accordingly as well? Would you really get calculating and cold-blooded after three years listening to this? Now, a number of studies is indeed there to suggest that yes, it is a sheer possibility.
A long story short, economic professors in the US are found to give less money to charities compared to professors in other fields (Frank et al, 1993). Next, the students who have taken more than three economic courses are more likely to regard greed as “right” and “moral” (Wang, Malhotra, 2012). In another case, an experiment involving a so-called ultimatum game has been carried out, where students are given 10$ and are asked to divide it with a fellow. If the other agrees, the deal gets through, and if not neither gets anything. The study has found that economic students suggested keeping 13% more money for themselves compared to other students (Carter, Irons, 1991). Lastly, economic students in Germany were more likely to recommend an overpriced plumber when paid to do so (Schulze, Frank, 2000).
The results of the studies above are clear: people studying Econ take greater regard for their personal self-interest compared to other majors. Nonetheless, before rushing to conclusions, can it be that “morally flexible” people are simply more likely to be attracted to Economics as a study in the first place? Now, rather possible. Let us be honest, how many of us have chosen Econometrics or Actuarial Science out of pure financial gains we can get in the future? Quite a few indeed!
Let us also analyse some of the claims above in more detail. First, charities. Perhaps economists are not necessarily less charitable per se, but rather are aware of inefficiencies of charitable work as such. Let’s face it, people are never as careful with other people’s money as careful as they spend their own, to borrow Milton Friedman’s words. Large sums of money donated to charities are often mismanaged or overspent for internal use (i.e. notorious Red Cross scandal in Haiti in 2016). Hence, it is logical to assume that economists, as more likely to be exposed to given information, are purely more knowledgeable and thus more careful entrusting their money to the third parties. Second, greed. What does it actually mean to be greedy? Would you consider greedy to demand a higher wage when you know your boss is underpaying you? How about if a business discovers that it can make more profit and decides to raise prices? Most people would regard second as greed, but from an economic perspective, they are identical! So perhaps “greed” is merely a matter of definition, and the way economists discern it differs from what others see as one.
All in all, does studying Economics make us greedier? Nothing can be firmly said except that people already in the field are statistically more calculating and “fiscally-conscious” compared to others. To my mind, whether it does or not perfectly weighs against the basic lesson Economics teaches: that endowed with free will we are in state to take best possible choices to shape our lives for the better.
Are economists more selfish? (2013). In BBC. Retrieved from: http://www.bbc.com/future/story/20131022-are-economists-more-selfish
Carter, J. (1991). Are economists different? If so, then why? Retrieved from: https://www.jstor.org/stable/1942691?seq=1#page_scan_tab_contents
Clifford, J. (2018). Does economics make you selfish? Retrieved from: https://www.youtube.com/watch?v=WB-win10HeEFrank, B., Schulze, G. (2000). Does economics make citizens corrupt? Retrieved from: https://www.sciencedirect.com/science/article/pii/S0167268100001116
Frank, H. et al. (1993). Does studying economics inhibit cooperation? Retrieved from: https://www.jstor.org/stable/2138205?seq=1#page_scan_tab_contents
More evidence that studying economics makes you selfish. (2018). In Evonomics. Retrieved from: http://evonomics.com/more-evidence-that-learning-economics-makes-you-selfish/
Wang, L., et al. (2012). Economics education and greed. Retrieved from: https://journals.aom.org/doi/abs/10.5465/amle.2009.0185