The Economic Costs of Pseudoscience
Brian Gongol


Pseudoscience, mysticism, and claims about the "paranormal" have been around for as long as humans have been able to tell stories to one another. Yet despite centuries of scientific progress (especially since the Renaissance and the Enlightenment), a stunningly large economy exists for unfounded irrationalism. We may not have many alchemists (though some are still around), but newspapers still print horoscopes. True witch hunts may be out, but new age "philosophy" is everywhere.

To many people, it's "nothing but harmless fun" -- whether they say so in their own defense, or simply to sound open-minded. But open-mindedness to pseudoscience has real economic costs.

The Economic Costs of Pseudoscience Are Real

For clarity, we'll define pseudoscience as anything that seeks to describe some result through magic or mysticism that can more easily be explained by rational inquiry and scientific reason. It's a simple application of Occam's Razor: That when two competing theories exist to explain the same result, one should choose the simpler one. To wit:
Psychic readings seek to explain an individual's life through some "medium's" purported special extra-sensory perception of the world.

BUT...

Given no evidence of these unmeasured "sixth senses" and no reliable method of duplicating actual extraordinary "psychic powers" under laboratory conditions, it's much easier to explain "psychic" readings as skilled cold reading of non-verbal cues.
So what do crystal balls and homeopathic remedies have to do with economics? What are the real costs?

Pseudoscientific Cost Analysis
Belief in Predictive Psychic or Extrasensory Powers Wastes Resources on Bad Forecasts If Jane believes that John has a special connection to powers controlling her life, then Jane may be willing to follow John's instructions and will to do things that may in reality be harmful to her. Since there's simply no scientific evidence that any individual has a special capacity to "see the future", then John is really just a charlatan, feeding Jane made-up predictions. The hazard is that Jane spent some combination of money and time to get John's prediction. If she acts on his prediction, she will spend even more. The resources spent on a psychic prediction would be better spent on action (like education or exercise or financial planning) that has a provable capacity to make Jane's life better.
Unscientific Medical Practices Divert Resources Away from Useful Research and Health As human life spans increase dramatically, we're bound to encounter a greater variety of health problems than we did when people even in wealthy countries like the United States usually died in their 40's and 50's. With greater longevity comes greater exposure to unfamiliar ailments. But some people have taken that as license to promote quackish remedies of all sorts. Perhaps the most insidious is the idea that some unexplained, unmeasurable "life energy" -- in reiki, for instance, it's called "chi" -- that can be manipulated by a skilled practitioner.

People are sold on "frequencies" and nerve flow and healing crystals, which would be perfectly fine if there were any evidence whatsoever they even exist. Unfortunately, people -- who are often hurting and seeking relief -- are duped into believing that so-called "Western" medicine doesn't have the right answers. There's a special penchant for traditional Chinese medicine which especially defies explanation, since Chinese life expectancy is nothing special.

Its defenders claim that alternative healing practices are good for easing suffering, but a practice remains "alternative" by definition until there exists some sort of scientific evidence to back it up. In the meantime, resources that would otherwise be used to conduct useful scientific research and development to help the suffering are wasted on unproven and unscientific practices. When people lose the capacity to distinguish between verifiable evidence-based science and nonsense, they can hurt rational public health efforts and not just their own well-being.
Earth-Worship Artificially Discriminates Against Productive Human Work The Earth-worship that is found widely in the pseudosciences tends to treat the planet as something that is best left untouched by humans, as if all our activity is harmful. In reality, all human activity creates waste byproducts -- and thus has an impact on the natural environment -- even if we live in the forests, wearing only loincloths and eating fruits from the trees. Even then, we would still create waste from the food we didn't fully metabolize.

The pseudoscientific view that the earth is best left untouched by human activity is not only unfriendly to humans (since few of us really want to live in mud huts and wearing only animal skins), it ignores the fact that increasingly sophisticated uses of science and technology allow humans to use Earth's resources more efficiently -- making human life easier and happier while creating less waste.
Belief in Astrology or Other Predeterminants of One's Future Diminishes the Incentive to Control One's Own Destiny If we're strictly obedient to a state of nature, then we live under the law of the jungle -- might makes right. There are certainly examples of altruism among animals in nature, but animals lack the capacity to specifically be aware of what the natural state of things will be if left to themselves, and to contrast that result with what is possible with thoughtful action. Thus, a group of dolphins may be smart enough to protect human swimmers from a shark attack (certainly an act of altruism), but humans have the capacity to analyze why shark attacks occur in the first place and to take preventive action on many different levels.

When people believe that their lives are predetermined by some set of supernatural powers -- whether the position of the stars in the sky or the will of certain spirits -- it diminishes the incentive to do things to actively improve that future. If John sincerely believes that his future is fixed by the positions of the stars in the sky, then his future is beyond his control. This runs contrary to the very idea of human awareness of our surroundings. Human activity is distinguished by the capacity to improve on the state of nature.


These examples are not given to incite violence against the pseudoscientists, nor are they a call for government action against them. But they are a call for every individual who really cares about markets and freedom to realize that science and technology are inseparable from markets, and that they are constantly under attack, even in the modern world. Pseudoscience isn't just "fun and games" -- it has real costs, and those costs are borne even by people who know better.