The Economics of Disagreement

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Disagreement is a fundamental part of life. It is essential to the economy. Just as a certain kind of agreement is necessary to life, so is a certain kind of disagreement. It is when our interests coincide that we can agree. It is when our interests and beliefs do not coincide that we disagree. When a company is formed there is an agreement, when something is paid for there is an agreed price. Is disagreement, therefore, an economic negative?

We should not be so simple as to assume that agreement is good and disagreement bad. Although we might say that all wars are about disagreement and peace is about agreement, and we might say that wealth destruction occurs in the context of disagreement while wealth creation occurs on account of agreement, there is more to this story. It is possible to imagine a destructive agreement and a constructive disagreement. A country that agrees to the wrong trade policy, for instance, may give serious strategic advantages to a competitor; domestic industries may go under, manufacturing capacity may decline with implications for military security and domestic employment (e.g., as in the trade relationship between China and the United States). A constructive disagreement may result in a parliamentary debate over a new law from which new understandings and practices emerge.

Peter Barron Stark offers 8 Steps to Constructive Disagreement. According to Stark, “Disagreements are a positive, normal and necessary part of building a great relationship or a team.” People tend to disagree on many points, and we often find this troublesome; but we must not imagine that disagreements are something to be set aside in search of perpetual agreement. Such has often proved a dangerous course to follow. Every investor and business leader would profit by reading Irving L. Janis’s Victims of Groupthink: A Psychological Study of Foreign Policy Decisions and Fiascos. As Janis points out, the desire for agreement and consensus can result in people suppressing important objections and contrary observations that prevent disaster from overtaking those who are swept along with others by the desire to fit in. In seeking agreement, and through the suppression of unpopular views, people can do incredibly stupid things. A CEO or government leader is bound to have blind spots. If there is no way to disagree or challenge his views, then disaster is bound to occur. These are especially shown in the history of powerful or charismatic leaders.

Stark tells us that “Good business decisions are brought about by respecting each other’s opinion, and having the ability to have a constructive dialogue where each team member has the opportunity to learn from each other, rather than purely liking each other.” There is nothing wrong with being liked, yet the desire to be liked can be corrupting. Even the idea that agreement signifies unity, which is considered necessary for the success of an enterprise, nonetheless corrupts that selfsame enterprise. But where unity becomes uniformity of opinion, a kind of intellectual stagnation takes place. For everyone to fall into a uniform pattern of thinking, often that of a leading personality, is not healthy. The advantages of free speech and free thought are lost when we merely adopt the thinking of those around us.

While Stark attempts to say that disagreements are not the same as conflicts, we should nonetheless admit that conflicts produce remarkable results in nature and history. It is through conflict that we learn many important lessons. Every defeat in war occurs because there are weaknesses that should be overcome. The process of creative destruction within capitalism itself, and the so-called dog-eat-dog competition of the market moves progress forward. Without this competition, and without the possibility of defeat, the economy and all human life would stagnate. It was the economist Joseph Schumpeter who employed the term “creative destruction” which he adapted from Karl Marx. In his book, Capitalism, Socialism and Democracy, Schumpeter wrote, “The opening up of new markets … incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. The process of Creative Destruction is the essential fact about capitalism.”

Competition does not merely signify price competition. It signifies quality competition. Once upon a time there was the competition between the horse and the automobile. Both are forms of transportation and each disagrees fundamentally with the other. You cannot drive a horse and buggy on a freeway. Two forms of transportation, yet they are incredibly different – involving a disagreement over method. In this disagreement, one side is a winner and the other is a loser. The horse-drawn vehicle industry goes under, the automobile industry arises. It is a case of Creative Destruction.

The need of the subservient whole to agree with an Adolf Hitler or a Josef Stalin or a popular ruler is always damaging to the whole. The call for racial purity, proletarian revolution or universal material equality signifies a call for eradicating all checks and balances, and all meaningful disagreements. Whatever benefits are imagined from the prescribed uniformity of race or economic result, the damage to society and economy is much greater. It is the division of power within a society, and within an economy, that produces the most positive disagreements and the best results of all. One might call it “gridlock” which allows real freedom to advance in the face of potential totalitarian measures. For imagine if one party or person within society were able to dictate the most “benign” outcomes imaginable. Even with this supposition, a process without any check or disagreement is profoundly corrupt and subject to unlimited degradation in the direction of megalomania. In the end, Hitler concluded, “I shall annihilate everyone who is opposed to me.” And under the socialist system of Russia, Stalin once said, “True conformity is possible only in the cemetery.” Both dictators sought uniformity of opinion and conformity of action. Both destroyed their respective societies in large part.

Today we are seeing a push toward uniformity of opinion and social conformity on every side. For the sake of our economy, and for the sake of our intellectual life, we should overcome the urge to uncritically accept prevailing opinions and authoritative views. We must question others and ourselves. Ask the following questions: Are they mistaken? Am I mistaken? The answer is important, and may only be found (to the benefit of all) through disagreement.

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About JR Nyquist