Once upon a time not that long ago, economics was widely imagined as the stuff of cold calculation and Wall Street as an icon of thriving civil society. The latest crop of analysis analogizes its workings with book titles like House of Cards and Animal Spirits. The field of "behavioral economics" has been around for some time, but current economic realities have brought it into the forefront of mainstream thinking.
My guest, Paul Zak, is a leader in one of the offshoots of behavioral economics. Zak became drawn into this orbit early in his career while studying the correlation of "trust" with poverty or wealth in different countries. He is a new brand of analyst — trained in economics, but also in neuro-imaging and mathematics. His research has centered around a powerful hormone that also acts as a neurotransmitter — oxytocin — which has been dubbed "the moral molecule." Through oxytocin, Paul Zak became interested in the morality of economic decision-making — how and where trust comes into that from a neurological perspective. He intensively analyzed the Enron crisis of the early 2000s, finding it a case study for trust gone awry at every level of an enterprise.
This kind of merger of hard science with social science is an exercise, in some sense, in stating the obvious and explaining it biochemically. Yet some of the "obvious facts" Zak takes as scientific starting points are precisely what have been lost in our out-of-control economy of recent years. For example, he reminds us that economics is essentially a social act, that markets are meant at their core to be places of mutually beneficial social transaction.
I've found it edifying to ponder this now — and to note that this fundamental aspect of human economy from time immemorial is no longer intuitive in so many economic transactions of modern Western life. The economic structures and practices to which we've grown accustomed have stretched and stressed human encounter at its core and — from Paul Zak's perspective — they have challenged trust itself. This adds a new dimension to the comfort many of us sense intuitively in rediscovering the farmer's market, for example, or the small mom-and-pop store that has managed to survive in a world of mega-retail. They touch something deep in our humanity, even our physiology, beyond the benefits they contribute to the environment or local economy.
One of Paul Zak's most interesting — and usable — learnings, I think, is his observation that the natural inclination most of us have to trust and be trustworthy can be diminished by circumstances. Stress can measurably reduce our responsiveness to oxytocin, which in the right circumstances innately inclines us to care about the effect of our actions on others.
Again, common sense as much as science has already told us that stress is bad for us. But Zak's science gives me one other way to grasp the human recklessness that marked so many economic relationships, from housing loans to investment portfolios, in recent years. Generosity and empathy suffer — and this is measurable in biochemical, not merely social terms — when we ourselves feel pressured.
We're presenting this program as part of our series, Repossessing Virtue, in which we have asked people around the country and the globe to reflect on the moral and spiritual aspects of the economic downturn, and on how it has affected their lives. One of Zak's most sobering assertions is that many of us will stop asking those urgent questions of meaning and priority that the economic crisis has provoked. As creatures of habit, most of us will return to a kind of habitual complacency as perceived threats to our well-being abate. And so in the end, this conversation with Paul Zak discomfits, even as it offers insight. And it leaves me with many basic questions. Can this kind of science help us improve our choices and actions, or is it only useful for diagnosis after the fact? How is mainstream economics factoring in the variables of human emotion and character, with and beyond the field of neuroeconomics? And isn't there still something a bit callous in referring to a recession as a moment of economic and even moral "cleansing," as Paul Zak does, when so much human damage is being wrought? After this interview, I took some of these lingering questions to my colleague Chris Farrell, APM's resident economics expert whom you hear often on Marketplace. Watch my conversation with Chris for his context on the field of neuroeconomics, and for another perspective on speaking about recession in human terms.