Interests and ideas
from David Ruccio
Self-interest is central to neoclassical economics.
My students certainly know that. According to the neoclassical economics they’ve learned, all choices made by economic agents can be reduced to and explained in terms of self-interest.
But Dani Rodrik [ht: kd] is right:
Interests are not fixed or predetermined. They are themselves shaped by ideas – beliefs about who we are, what we are trying to achieve, and how the world works. Our perceptions of self-interest are always filtered through the lens of ideas.
And, according to Rodrik, neoclassical economics has played a key role in shaping interests:
In the aftermath of the financial crisis, it became fashionable for economists to decry the power of big banks. It is because politicians are in the pockets of financial interests, they said, that the regulatory environment allowed those interests to reap huge rewards at great social expense. But this argument conveniently overlooks the legitimizing role played by economists themselves. It was economists and their ideas that made it respectable for policymakers and regulators to believe that what is good for Wall Street is good for Main Street.
Additional evidence for the effect of economic ideas on self-interest comes from game theory—beginning with the famous ultimatum game study by John Carter and Michael Irons (“Are Economists Different, and If So, Why?” Journal of Economic Perspectives, Spring 1991) and continuing through the work of Robert H. Frank, Thomas Gilovich, and Dennis T. Regan. What they find is that, across a variety of games, economists and students who have taken courses in neoclassical economics are less likely to engage in cooperative behavior than noneconomists and students who have not been exposed to those ideas.*
So, here we have two key ideas: First, interests are not predetermined, and depend at least in part on ideas that are “in the air.” Second, neoclassical economics plays an important role in shaping interests, and therefore has performative effects in making the world in which it exists.
*Of course, within bourgeois culture, it’s impossible for anyone not to be exposed, at least to some degree, to the idea of self-interest.
Perhaps, perhaps all who speak, teach or instruct should have as their guide not “self-interest” rather:***** “Believe nothing merely because you have been told it…But whatsoever, after due examination and analysis,you find to be kind, conducive to the good, the benefit,the welfare of all beings – that doctrine believe and cling to,and take it as your guide.”- Buddha[Gautama Siddharta] (563 – 483 BC), Hindu Prince, founder of Buddhism
Dear David, just to be more formalist to the issue you raise, from a philosophical perspective, we can think either on terms of materialism and of idealism. Apparently your focus is more on the idealism realm, kind of Hegelian perspective of the ideas shaping the real world. However, consider for a minute the opposite, the materialist perspective, in which neoclassical economics is nothing else that the ideological expression of capitalist class in the realm of economics. The world “want to be” neoclassical because that is the best for capitalists (banks, big corporations, main western governments), and the western world turn into neoliberalism around the ’70s just needed its own theoretical validation, within the classrooms also. The valuable attempts to move the gravity centre of economic science toward pluralism is great, and supported by the dialectical movement of ideas and the reality, but it will not succeed unless the real world, the real economy, changes as well, and that requires a political and social movement, already starting, but of which economists are usually outside. We should get more involved in politics and social movements. Otherwise, our work will not be much fruitful.
Best regards.
Dear Luis,
With all due respect, since when is the argument that ideas matter—that they shape our conception of what is in our diverse, changing, and contradictory interests—not a materialist proposition?
It is true, and we should not forget, that ideas are also shaped by the rest of social reality. But the ways the cultural and noncultural aspects of social reality shape—technically, “overdetermine”—each other is much more complex than the argument that ideas simply represent the class interests of one or another social group.
At least, that’s the way I see it. . .
There is an inherent screening process in discipline selection and people who study economics are already, I would propose. gearing towards self interests and controlling their stake in the economic (prior to the social or political…) domain. This begs a certain truism in your formula for self indulgence.
Given the “self interest” orientation of capitalism itself, one can only say that people who study domains of interests are self-interest oriented (which of course is circular reasoning).
Guided by another bias, the sophisticated category of self-interest driven “classical” economics (being dominant by any measure…) reeks of Social Darwinism.
There is a direct link between the evolution of “clockworks” and industrial production and the interpretation of society and the emergence of a specialized “economic” methodology in line with systems, statics and dynamics (for state tax purposes as well as conscription purposes to serve in armies).
Ultimately it can be argued that economics does not create any influence upon self service and interests that did not already exist and that the other wary around is more dominant. Self interest created economic formulations and perspectives upon society and environments (ecology) so much so that the world has been perceived as providence and pastoral in nature.
see Glacken’s fabulous work on the History of Ideas entitled Traces on the Rhodian Shore. (http://search.aol.com/aol/search?q=Glacken+traces+on+the+rhodian+shore&s_it=spelling&v_t=webmail-searchbox)
see Arthur Lovejoy on the Great Chain of Being: http://search.aol.com/aol/search?s_it=topsearchbox.search&v_t=webmail-searchbox&q=Arthur+Lovejoy+The+idea+of+Progress
Both demonstrate that ideas are created that reflect human ‘centricity: and not the other way around…although the ramifications upon ideological generations is another matter.
Economics is particularly bad as it discourages even consideration of enlightened self-interest, in favor of unenlightened self-interest.
The contemporary understanding of self interest emerged with the likes of Calvin, Luther and Hobbes, who painted human existence in dark tones. With the advent of the British industrial revolution, and the subsequent American industrial revolution, the idea of self interest became relevant, as economies centralized and labor markets became competitive. With centralization, human dignity, individualism (not the hyperindividualism we have today, which is a mere caricature of individualism) and society could no longer be tolerated.
Decentralized economic structures allowed for dignity, individualism and community, as affirmed by the writings of Grotius, Locke, Paine, Adam Smith, Algernon Sidney and Jefferson. Of these, Locke was the most crucial to understanding to human dignity and society, since he saw both natural rights and society as emerging before government (yes, Locke defended society, despite gross misinterpretations to the contrary).
Smith’s and Ricardo’s writings assumed competitive markets with multiple producers, _not_ the monopolistic/oligarchic markets we have today, enabled with governmental collusion. We can understand the assumptions of these writers because when we place their view of the world in the context of the late 18th-/early 19th-century, neither Smith nor Ricardo could have possessed an understanding of highly centralized economies or economic institutions. Such entities simply didn’t exist, so to use them for justification of unregulated centralized markets is a fallacy.
In the end, to view individualism in a positive light must be done so within the contexts of pre-industrial revolutionized U.K. and U.S., and what existed then. Since the 19th century, individualism and self interest has been co-opted and distorted by the status quo, in the interest of maintaining their power.
http://www.scribd.com/doc/22328155/The-Dignity-of-Humanity
Financial inclusion for remote low-income communities. Risk 1: How to make sure people at remote low-income communities pay for their credit to create an attractive model for parties involved.
Any ideas?