Narrator: In 2015, the world discovered that Volkswagen, one of the most trusted car brands, had been deliberately cheating on emissions tests for years. Its "clean diesel" cars were spewing pollutants at up to forty times the legal limit. This wasn't the work of a few rogue engineers; it was a systemic, calculated deception. How could a company built on a reputation for reliability and responsibility engage in such a massive fraud? The answer, it turns out, is more complex than simple corporate greed. It lies in a set of ideas that have quietly reshaped our world over the last half-century. In his book, Licence to be Bad, economist Jonathan Aldred argues that certain economic theories have provided a powerful, intellectual justification for such behavior. They have subtly corrupted our understanding of right and wrong, giving individuals and corporations a "licence to be bad" by framing selfish, and even harmful, actions as rational and efficient.

Narrator: The erosion of our moral compass began, in part, in the paranoid environment of the Cold War. At institutions like the RAND Corporation, strategists developed game theory to model nuclear conflict. A central tool was the "Prisoner's Dilemma." In this famous scenario, two partners in crime are arrested and held in separate cells. If both stay silent, they each get a short sentence. If one confesses and betrays the other, the betrayer goes free while the silent one gets a long sentence. If both confess, they both get a medium sentence.

Game theory concludes that the only "rational" choice for each prisoner is to confess. Regardless of what the other does, confessing always yields a better or equal outcome for the individual. The tragic result is that both prisoners confess and receive a worse collective outcome than if they had trusted each other and stayed silent. Aldred argues that this model, which assumes humans are fundamentally selfish and untrustworthy, escaped the lab. It became a dominant way of thinking about human interaction, teaching a generation of policymakers, executives, and citizens that the smart and rational way to behave is to trust no one and always act in your own narrow self-interest. This thinking discourages cooperation and erodes the social trust necessary for a functioning society.

Narrator: Another powerful idea that reshaped our values came from a profound misunderstanding of the work of economist Ronald Coase. In the 1960s, Coase presented his ideas to a group of influential Chicago school economists, including Milton Friedman. The Chicago school misinterpreted his work to mean that as long as people can bargain, the initial distribution of legal rights and property doesn't matter for achieving an efficient outcome. The person who values a resource most will simply pay for it.

This misinterpretation, dubbed the "Coase Theorem," was revolutionary. It suggested that the goal of the law and government shouldn't be fairness or justice, but simply maximizing total wealth. If a factory pollutes a river, harming a downstream farm, the "efficient" solution isn't necessarily to stop the pollution. If the factory's profits are greater than the farm's losses, the factory should be allowed to pollute. This logic, which prioritizes wealth over justice, was used to justify widespread deregulation and privatization, arguing that the market would sort things out efficiently, regardless of the consequences for fairness or the environment. Coase himself spent decades arguing that his point was the exact opposite: that in the real world, bargaining is difficult and costly, so the initial allocation of legal rights is, in fact, critically important. But it was too late; the corrupted version of his idea had already taken hold.

Narrator: The cynical view of human nature was also applied to politics through "Public Choice Theory," pioneered by economist James Buchanan. Describing his work as "politics without the romance," Buchanan argued that everyone in the political sphere—voters, politicians, and bureaucrats—is motivated solely by self-interest. In this view, politicians don't serve the public; they trade promises for votes to stay in power. Bureaucrats don't implement policy; they work to expand their budgets and influence. Voters aren't citizens; they are consumers of government services.

This theory paints a picture of government as inherently bloated, inefficient, and corrupt. It provides a powerful argument for shrinking the state, cutting public services, and trusting the market instead. Aldred shows that this becomes a self-fulfilling prophecy. If you design systems that assume people are selfish, you strip away professional ethics and public service motivation, leaving only self-interest behind. It ignores the possibility that a teacher or a doctor might be motivated by a desire to help others, not just to maximize their salary.

Narrator: Economic logic has also normalized the act of "free-riding"—enjoying a collective benefit without contributing to it. The argument is simple: if a problem is large, like climate change or tax avoidance, one person's individual contribution is negligible. Why bother recycling if your personal impact is a drop in the ocean? Why pay your fair share of taxes if a massive corporation like Facebook can legally avoid paying theirs? This thinking is perfectly captured in Joseph Heller's novel Catch-22, when a character says, "Suppose everyone felt that way," and the protagonist Yossarian replies, "Then I’d certainly be a damned fool to feel any other way, wouldn’t I?"

Aldred uses the example of a BBC reporter who, during the media frenzy over a royal birth, expressed concern about the intense media interest the new prince would face. The hypocrisy is that the BBC was a major contributor to that very frenzy. The implied defense is that if the BBC pulled out, other networks would fill the gap, so their individual participation makes no difference. This logic, Aldred argues, is a corrosive idea that undermines collective action and our sense of shared responsibility.

Narrator: Perhaps the most far-reaching corruption has been "economic imperialism"—the expansion of market logic into every corner of human life. Economist Gary Becker won a Nobel Prize for applying economic analysis to marriage, family, and crime, treating them as markets where people make rational calculations to maximize their welfare. This way of thinking reduces complex human relationships and moral values to mere transactions.

This leads directly to the belief that incentives are the best way to shape behavior. But Aldred shows how this can backfire spectacularly. He points to a famous study of daycare centers in Haifa, Israel, that were struggling with parents arriving late to pick up their children. The centers introduced a fine for late parents, assuming the financial penalty would solve the problem. Instead, lateness increased. The fine had unintentionally replaced a moral obligation—the guilt of inconveniencing a teacher—with a simple market transaction. For a small fee, parents could now buy the right to be late, guilt-free. The incentive had "crowded out" their intrinsic motivation to do the right thing.

Narrator: Finally, Aldred tackles the justification for staggering inequality: the belief that people deserve what they get. We are told that the ultra-wealthy earned their fortunes through talent and hard work. But this narrative conveniently ignores the enormous role of luck. Aldred tells the story of Bill Gates, who became a billionaire after selling an operating system to IBM. But IBM initially approached another programmer, Gary Kildall, who was the industry leader. For reasons still debated, that deal fell through, and the IBM executives, on a tight deadline, went to the relatively unknown Gates instead. A single moment of pure luck changed history.

Furthermore, this narrative ignores how the wealthy use their power to rig the system through "rent-seeking"—manipulating rules to capture more wealth rather than creating it. This includes lobbying for tax loopholes or preventing government from negotiating lower drug prices. The belief that wealth is purely deserved allows us to tolerate a level of inequality that is not only unfair but, as Aldred argues, is also bad for the economy, as it stifles demand and misallocates talent.

Narrator: The single most important takeaway from Licence to be Bad is that the economic ideas we treat as objective science are, in fact, powerful moral stories. They are not neutral descriptions of how the world works; they are prescriptions for how we ought to behave. For fifty years, the dominant story has been one of self-interest, distrust, and efficiency above all else—a story that has corroded our social fabric and given us permission to act in ways we once considered wrong.

The book leaves us with a profound challenge. If our economic problems are rooted in the stories we tell ourselves, then the solution is not just to tweak policies, but to change the narrative. We must ask ourselves: are we merely rational, selfish actors in a grand, competitive game? Or are we cooperative beings capable of trust, fairness, and a sense of responsibility to one another? The choice of which story to believe will ultimately shape the kind of society we build.