Michael: What if the most dangerous ideas in the world aren't from political manifestos, but from your Econ 101 textbook? Kevin: Huh. That’s a bold start. I thought my Econ 101 textbook was just dangerous to my GPA. Michael: Well, what if the very tools we use to build our economy are also quietly dismantling our morals? That's the explosive argument we're tackling today. Kevin: Okay, I'm intrigued. You’re saying the stuff that’s supposed to make us all richer is actually making us... worse people? Michael: In a nutshell, yes. And it's all laid out in a fascinating, and honestly, quite unsettling book called Licence to be Bad: How Economics Corrupted Us by Jonathan Aldred. Kevin: What's wild is that Aldred isn't some outsider throwing rocks. He's a Cambridge University economist. He's basically critiquing the very foundations of his own field from the inside, which gives his arguments a ton of weight. Michael: Exactly. He argues that for the last 50 years, a handful of powerful economic ideas have given us all a 'licence to be bad.' And to see what he means, we don't need to look at a textbook. We need to look at a car company: Volkswagen.

Kevin: Ah, the infamous emissions scandal. I remember this. They faked their environmental tests, right? Michael: They did more than fake them. For years, Volkswagen, a company built on a reputation of German engineering and reliability, deliberately programmed its diesel cars with a piece of software called a 'defeat device'. Kevin: A defeat device. It sounds like something out of a spy movie. What did it do? Michael: It was deviously clever. The software could detect when the car was being tested in a lab. The moment it sensed a test, it would switch on all the emissions controls, and the car would pass with flying colors, looking like a 'clean diesel' champion. Kevin: And the rest of the time? On the actual road? Michael: The moment the car was driving normally, the software switched the controls off. The cars then spewed nitrogen oxides at up to 40 times the legal limit in the US. This wasn't an accident or a bug. It was a carefully designed, multi-year, international fraud. Kevin: Wow. So this wasn't just one rogue engineer? This was a systemic, calculated decision? Michael: Absolutely. It went deep into the company culture. And the question Aldred’s book forces us to ask is: why? Was it just a few bad apples, or was it the logical conclusion of a certain way of thinking? Kevin: This is a perfect example of Milton Friedman's idea in action, right? The famous quote that 'The Social Responsibility of Business is to Increase Its Profits.' VW took that literally. Michael: You’ve nailed it. That one line, from a 1970 New York Times article, is arguably one of the most influential—and, Aldred would say, corrosive—ideas of the 20th century. Friedman argued, very persuasively, that a CEO's only job is to make as much money as possible for shareholders. Anything else—caring for the community, protecting the environment—is a betrayal of their duty. Kevin: Hold on. So Friedman, this Nobel-winning economist, is basically saying a company has zero responsibility to the environment, or its workers, or the community, as long as it makes money? That sounds... sociopathic. Michael: It sounds extreme, but that idea became economic orthodoxy. It became the gospel of business schools. And Aldred argues it provided the intellectual cover, the licence, for companies like Volkswagen to do what they did. They weren't just being greedy; they were being 'economically rational.' They were fulfilling their social responsibility as defined by a Nobel laureate. Kevin: Okay, but that feels like a bit of a conspiracy theory. Are we really saying a few economists are responsible for a massive corporate scandal decades later? How did that one idea become so powerful? Michael: It wasn't an accident. Aldred traces it back to a group called the Mont Pèlerin Society, founded in 1947 by the economist Friedrich Hayek. They saw the post-war world turning towards government planning and social safety nets, and they were horrified. They believed it was the 'road to serfdom.' Kevin: So they were like the Justice League for free-market capitalism. Michael: Pretty much. And they knew they were playing a long game. Hayek said they weren't concerned with what was 'immediately practical,' but with changing the underlying 'beliefs which must regain ascendance.' They wanted to change the water we all swim in. Kevin: And they succeeded. You see it with Thatcher and Reagan in the 80s. Thatcher famously slammed a copy of Hayek's book on a table and said, "This is what we believe." Michael: Exactly. And the book tells this wonderful, bizarre story about how they funded this ideological war. One of Hayek's disciples, a man named Antony Fisher, wanted to get into politics to fight socialism. Hayek told him not to. He said, 'Don't go into politics. You need to influence the 'second-hand dealers in ideas'—journalists, intellectuals, advisors.' Kevin: So, start a think tank? Michael: Precisely. But Fisher was just a dairy farmer. He had no money. So he goes to America, learns about a new, hyper-efficient, and frankly, pretty grim method of industrial farming: battery-chicken farming. Kevin: Wait, battery chickens? Like, the tiny cages? Michael: The very same. He brought the idea back to the UK, made an absolute fortune, and then used that fortune to found the Institute of Economic Affairs, the think tank that became the intellectual engine of Thatcherism. He literally used the profits from industrialized farming to fund the spread of free-market ideology. Kevin: That is an incredible story. So the ideas that gave Volkswagen the license to pollute were partly funded by... unhappy chickens. Michael: It's a strange world. But it shows how these ideas weren't just academic. They were part of a deliberate, well-funded, and incredibly successful campaign to change how we think about society, business, and our obligations to one another. They made the selfish choice seem like the smart choice.

Michael: And this way of thinking—this cold, rational, self-interested logic—didn't stay in the corporate world. It started invading our personal lives, our communities, our sense of right and wrong. Which brings us to a fascinating experiment in a daycare center in Haifa, Israel. Kevin: A daycare center? How do you get from corporate fraud to toddlers? Michael: It’s a perfect microcosm of the problem. The daycare had a common issue: parents were often late picking up their kids, which meant the teachers had to stay late, unpaid. It was a classic problem of social courtesy. Kevin: I can see that. It's rude, but what do you do? Michael: Well, a couple of economists had an idea. A very economic idea. They said, 'Let's introduce a fine. If you're more than ten minutes late, you pay a small fee.' The logic is simple: you create a negative incentive, and the undesirable behavior should decrease. Kevin: That makes perfect sense. So, did it work? Michael: It backfired. Spectacularly. The moment the fine was introduced, the number of late-arriving parents doubled. Kevin: What? Why? That makes no sense. Michael: It makes perfect sense once you realize what the fine did. It changed the entire nature of the transaction. Before the fine, picking up your child on time was a moral obligation. It was about respect for the teachers' time. You felt guilty if you were late. Kevin: Right, it's a social norm. You don't want to be 'that parent'. Michael: But the fine removed the moral dimension. It replaced it with a market one. Suddenly, being late wasn't a question of being inconsiderate anymore. It was a service you could purchase. Parents thought, 'For a few shekels, I can buy another 15 minutes. Great deal!' Kevin: Wow, that's brilliant. It's like if you offered to pay your friend five bucks for helping you move. Suddenly it's not a favor, it's a badly paid job. You've ruined the friendship aspect. Michael: You've just explained the concept of 'crowding out,' and you did it better than most economists. The financial incentive 'crowded out' the intrinsic, moral motivation. And here's the kicker: after a few weeks, the daycare realized it was a disaster and they removed the fine. Kevin: And did the parents go back to being on time? Michael: Nope. The lateness stayed at the new, higher level. The moral norm had been broken, and you couldn't just glue it back together. They had taught the parents that the teachers' time had a price, and that lesson stuck. Kevin: That is a chilling story. It shows how easily you can corrupt a good instinct just by trying to be 'efficient'. Michael: And this is the second major theme of Aldred's book: this idea of 'economic imperialism,' pioneered by an economist named Gary Becker. His whole project was to apply economic reasoning to everything—marriage, having kids, crime, discrimination. He saw all of human life as a series of cost-benefit calculations. Kevin: So love is just a long-term investment with emotional dividends? Michael: According to Becker's framework, pretty much. He argued a family operates like a small firm, with specialization of labor—one person works, one raises kids—to maximize the household's 'utility.' He even analyzed crime as a rational choice: if the potential reward outweighs the probability of getting caught times the severity of the punishment, it's logical to commit the crime. Kevin: This feels so relevant to 'hustle culture' and the gig economy. Everything is a transaction. We're all calculating the costs and benefits of our relationships, our time, our loyalty. Becker's world is the world we live in now. Michael: It is. And Aldred shows us the danger. When you put a price on everything, you can lose sight of its value. He talks about studies where paying people to give blood actually decreased donations and increased the likelihood of people lying about their health history. The altruistic desire to help was crowded out by a small cash payment. Kevin: Because it stops being a gift and starts being a commodity. Michael: Exactly. The book is full of these counterintuitive examples. Paying second-graders to read books makes them read more short, easy books to maximize cash, and they stop reading for pleasure. It turns reading from a joy into a job. Kevin: So the very tool we think we're using to encourage good behavior is actually destroying the motivation for it. That's the corruption the title talks about. Michael: That's the corruption. It's subtle, it's pervasive, and it's often done with the best of intentions.

Kevin: So, after all this, are we just doomed to be these rational, selfish actors? Is there a way back from this? It feels like this logic is everywhere. Michael: That's the book's ultimate point, and it's actually a hopeful one. The problem isn't that we're inherently selfish. Humans are capable of incredible altruism, cooperation, and sacrifice. The problem is that for fifty years, a powerful and persuasive economic story has told us that being selfish is smart. Kevin: It’s given us a script to follow. Michael: A very compelling script. It's told us to distrust each other in the Prisoner's Dilemma, even when cooperation would make everyone better off. It's told us that a corporation's only duty is to its shareholders, not its community. And it's told us that a fine can replace a moral obligation at daycare. Kevin: So it’s not our nature that’s corrupted, but the story we tell ourselves about our nature. Michael: Precisely. The 'licence to be bad' isn't a get-out-of-jail-free card. It's a lens that distorts how we see ourselves and each other. It makes us forget that cooperation, trust, and duty aren't irrational costs to be minimized. They are the very things that make societies, and economies, work in the first place. They are a form of wealth we've been carelessly spending down. Kevin: So what's the solution? How do we start to reverse this? Michael: Aldred's hope is that by understanding how these ideas were built, we can start to dismantle them. We can see them not as laws of nature, but as choices. We can choose to design systems that appeal to our better angels, not just our wallets. We can choose to see the world differently. Kevin: It makes you wonder, where in your own life have you accidentally accepted an 'economic' reason to do something that felt morally... off? Like choosing the cheapest option even when you know it was made unethically, or treating a service worker as a function instead of a person. It's a really powerful question to sit with. Michael: It is. And we'd love to hear your thoughts on this. Join the conversation with the Aibrary community online. What's one area where you see this 'economic corruption' playing out today? Kevin: This is Aibrary, signing off.