Sherlock Holmes Was an Economist in Disguise

If you read or watch detective stories, you probably don’t think about them as an expression of economic principles.

But at their heart, that’s exactly what they are. And it’s not just detective stories, but works of fictions of all genres are brimming with economic ideas, from supply and demand to marginal cost.

My fascination with the connection between economics and literature began in 1964 while doing research on Jane Austen’s Persuasion. One scholarly source I read at the time argued that the language of the novel drew from the terminology of economics, shaping the metaphors of the financial/romantic negotiations underlying the story.

Soon after, I read Robert Heinlein’s The Moon Is a Harsh Mistress and learned the expression, “There ain’t no such thing as a free lunch” – referring to opportunity costs, the principle that everything you get costs something. I was hooked.

Economics and literature

Some economic principles were easy to discover in literature. Opportunity cost, for example, is also a crucial idea in Sylvia Plath’s The Bell Jar. The main character descends into depression upon realizing she cannot have everything.

Or, in the great American drama The Piano Lesson, by August Wilson, a brother and sister fight over the disposition of a piano – for her a precious family legacy, for him something to sell to buy the land on which his family was enslaved.

How about scarcity, one of the 51 key economics concepts taught to high school students? The Mad Max movies, with their struggles over fuel and food, come to mind. So does Linda Greenlaw’s The Hungry Ocean, which is practically a course in economics in itself, covering issues such as supply and demand, property rights (and “the tragedy of the commons”), costs of labor and – that all-time favorite – margins: marginal costs of fuel, time, labor, vs the marginal reward of that last fish.

The list goes on, from the risks of lending as told by Shakespeare in The Merchant of Venice, to the rise of the middle class as a background issue in The Canterbury Tales, to virtually everything in Charles Dickens.

Information asymmetry and the detective story

But what of information asymmetry, a concept that posits that some negotiations are unfair because one party has more information than the other? (Think used car salesman.)

Because it’s not a part of classic economics, it wasn’t defined until the 1970s, when it revolutionized the field thanks to the work of George Akerlof, Michael Spence and Joseph Stiglitz, who won the Nobel Prize for their research in 2001.

Since it’s a relatively new concept, no obvious literary example comes to mind.

Except, of course, the detective story.

And the detective story isn’t merely about economics; in some ways it is economics, following many of the same thought structures. It foreshadowed those economists’ work centuries before they won the Nobel.

In almost all detective stories, a crime has been committed, with social order disrupted. The criminal has all the information; the detective and reader have none.

Don’t we think of the economist as a kind a sleuth, unraveling the mysteries of what went wrong with our money, where the jobs disappeared? Economists are still trying to unravel the underlying secrets of the Great Depression.

The process, or plot, of the detective story is for the detective – the reader’s agent – to follow the clues and bring his information set into balance with that of the criminal, who is often in a position of power. The detective employs intellect, sometimes brute force. When he solves the crime, he restores order.

William Breit and Kenneth G Elzinga, who write economic-detective novels under the pen name Marshall Jevons, wrote a parallel analysis that argues that “all good economic analysis is structured like classical detective fiction.”

From Oedipus to True Detective

Sophocles’ Oedipus the King is often thought of as the original detective story. Written in the fifth century BCE, today it seems almost postmodern – the detective and the killer are identical. Like the modern detective, Oedipus tries to uncover the murderer by searching for evidence and questioning witnesses.

We marvel at Sherlock Holmes because in order to set things right, he forces his own mind to become one with the mind of the criminal – a kind of insane symmetry.

The form of the detective story varies. The English drawing room mystery is the simplest. The characters are mostly one-dimensional and disposable. The reader doesn’t care if the corpse belongs to the duchess or the industrialist. The focus is the puzzle. One of the principles is that the reader tries to figure out “whodunit.” To outthink the detective. At the end, everything is made neat.

In a famous variant, the viewer knows from the beginning nearly as much as the murderer, but the detective does not. Maybe you’ve watched Columbo and felt the tension as he closes in on your own secret knowledge of the crime.

The CTV detective series Motive plays off of the Columbo innovation by showing us the killer and the victim before the crime is committed. We know who did it; the police have to discover who; we both have to discover why.

Speaking of cops, the police procedural, such as the Law & Order or CSI franchises, is the most methodical, systematic, even scientific attempt to restore order by gaining knowledge.

Postmodern versions of the detective story include Mark Smith’s The Death of the Detective, in which the detective loses his way, seeming to cause the crimes he is trying to solve. Even more complex is Alain Robbe-Grillet’s The Erasers, which subverts every detective story trope from narrative line, to the motive, to the contrast between killer and detective. Paul Auster’s The New York Trilogy conflates the detective with the writer of the mystery. At the conclusion of the 1975 film Night Moves, Gene Hackman’s detective, destroyed by what he has learned, is left literally circling in a vast ocean.

The most disturbing popular version of the detective story is the noir mystery, associated with hard-boiled detectives like Sam Spade, Philip Marlowe and Lew Archer. In this version, the world wasn’t right before the opening lines, and it is not set completely right at the end. The detective’s – and the reader’s – curiosity is satisfied, but the sleuth’s sense of justice, and the reader’s sense of wrong being set right, is not.

The noir mystery is set in a dark, corrupt world – a kind of broken creation. The detective is tasked to find something or someone, but even the person hiring/assigning him is suspicious and deliberately withholds information. Thus, the detective is searching on multiple levels, trying to work his way out of a labyrinth. When he unravels the mystery, what he finds is more darkness.

If the economist searching for answers attempts to control variables, the detective must attempt do the same, but the contemporary detective has even less control in a universe that is spinning about him.

We can look at HBO’s True Detective by way of this last model. In each season’s narrative, the world is not right from the start. The detectives set out to resolve their cases, but the correct conclusion is subverted by powerful men who influence the detectives’ bosses. The detectives finally find and punish the murderers, but the people who protected them are still in power. The detectives and the viewer have almost complete knowledge of who did what, but that makes no difference. We stew in a rotten world.

The end of detectives?

What might economists make of all the snooping and sleuthing by the fictional detective?

Alex Tabarrok and Tyler Cowen, economists at George Mason University, have recently argued that the wealth of information now available makes information asymmetry a thing of the past. Everyone becomes his or her own detective because there is some version of Carfax for everything – whether uncovering the history of a used car or a potential lover – there are no secrets. Might that new reality make the detective story go away?

No. In literature, as in life, there is always information asymmetry. The ultimate question at the heart of the detective story and, in fact, all of literature is: who am I and what does all this mean? For such an inquiry, there is never enough information. The search for clues never ends.

This article originally appeared on The Conversation