The importance of rhetoric
from Stuart Birks
In a course on rhetoric Adam Smith talked of deliberative eloquence and judicial eloquence (Smith, 1963). The former refers to politics and policy debate, while the later refers to law. Both describe processes of persuasion. We should not overlook the role that rhetoric has played and continues to play in economics, if only at the level of successfully persuading many economists to consider that rhetoric is not relevant through the emphasis on rationality and logical reasoning.
The Rhetoric & Public Discourse eJournal contains papers on politics and law. One paper, “Why Does Balanced News Produce Unbalanced Views?” is by Edward Glaeser and Cass Sunstein. It looks at response to news, but could apply equally to disciplinary perspectives underpinning “world views” (Dow, 2012). It is described as follows:
Many studies find that presentation of balanced information, offering competing positions, can promote polarization and thus increase pre-existing social divisions. We offer two explanations for this apparently puzzling phenomenon. The first involves what we call asymmetric Bayesianism: the same information can have diametrically opposite effects if those who receive it have opposing antecedent convictions. Recipients whose beliefs are buttressed by the message, or a relevant part, rationally believe that it is true, while recipients whose beliefs are at odds with that message, or a relevant part, rationally believe that the message is false (and may reflect desperation). The second explanation is that the same information can activate radically different memories and associated convictions, thus producing polarized responses to that information, or what we call a memory boomerang. An understanding of these explanations reveals when balanced news will produce unbalanced views. The explanations also account for the potential influence of “surprising validators.” Because such validators are credible to the relevant audience, they can reduce the likelihood of asymmetric Bayesianism, thus promoting agreement.
Another paper highlights the role of rhetoric in the law. This is an important point for economists on several grounds. First, if rhetoric is important, people’s behaviour cannot be based solely on logic. Second, if decisions in law are influenced by rhetoric, this will affect the way resources are allocated and the outcomes achieved by policies specified in terms of legal interventions. Third, if people’s beliefs can be shaped in this way, and accepted perspectives shape what is seen and how it is seen, this tell us something about the impact of an economics education on our students. Note:
In all disciplines theory plays a double role: it is both a lens and a blinder. As a lens, it focuses the mind upon specified problems, enabling conditional statements be made about causal relations for a well-defined but limited set of phenomena. But as a blinder, theory narrows the field of vision. (Minsky, 2008, p. 109).
The paper, “Perception and Persuasion in Legal Argumentation: Using Informal Fallacies and Cognitive Biases to Win the War of Words”, is by Cory Clements.
The abstract begins:
When zealously advocating a client’s position, the lawyer’s ultimate goal is winning. To win, however, the law-yer must convince a judge or jury to accept the lawyer’s (and reject opposing counsel’s) position. The best type of advocate accomplishes this goal using various rhetorical techniques, attempting to manage other people’s perceptions of such things as the facts, the lawyer’s own theory of the case, the credibility of eyewitness testimony, the weaknesses of opposing counsel’s claims, and the praiseworthiness of the lawyer’s own client. By de-sign, we have an adversary system.
But how does the lawyer successfully convince the fact finder that the lawyer’s (and not opposing counsel’s) position is aligned with justice? Success inevitably boils down to persuasive legal argumentation. If the lawyer’s ultimate goal is winning, the lawyer must master the art of persuasion. For the art of persuasion is intimately connected with the psychological process of perception. And perception is what convinces people whether to accept or reject the lawyer’s argument.
In this Comment, I propose an account of legal argumentation that explains the relationship between mental processes that psychologists label cognitive biases and legal arguments that philosophers label informal fallacies. Cognitive biases are errors in our thinking and reasoning, which alter our perceptions. Informal fallacies are verbal or written arguments containing material flaws, which enhance their persuasiveness. I also de-scribe the process of persuasion at play when the lawyer uses legal arguments that contain informal (material) fallacies. By using legal arguments that contain informal fallacies, the lawyer can play upon the listener’s inherent cognitive biases to persuade the listener to see things the same way the lawyer does. When lawyers use these rhetorical techniques — whether before or during trial proceedings — they induce in most listeners erroneous perceptions that can, and often do, powerfully alter their listeners’ beliefs.
There are many areas where economists’ standard approaches lead us to develop highly stylised representations of issues and relationships consistent with our conventions. We are conditioned to take the findings seriously, even when packed with qualifications and express mention of required assumptions. One consequence is the erection of barriers, preventing integration of relevant analyses from elsewhere. Dow, S. C. (2012). Foundations for new economic thinking: a collection of essays. Houndmills, Basinstoke, Hampshire: Palgrave Macmillan.
References
Minsky, H. P. (2008). Stabilizing an unstable economy (New ed.). New York: McGraw-Hill.
Smith, A. (1963). Lectures on rhetoric and belles lettres: delivered in the University of Glasgow by Adam Smith, reported by a student in 1762-63. London: Nelson.
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Some politicians, evangelists, snake-oil salesmen etc are successful because they have great skills in rhetoric. Do they make a better world?.
Stuart,
Rhetoric in the classical sense, which is the sense in which Smith uses it, is really irrelevant. That sort of stylized approach to communications and making decisions is destructive of conversation, as it hides or obscures more about what the actors involved believe and want that it can ever possibly reveal.
As to the paper, “Why Does Balanced News Produce Unbalanced Views,” at best it provides a partial look at how actors’ views and actions are polarized (assuming the definition of polarization you use). Producing views and actions that endure over time and place is difficult and none of this work is permanent. In other words getting actors to hold and retain a common and collective way of life and thinking is never permanent. For example, how long has so called “Tea Party” life existed? Probably about 10 years. And even with that many of those who have latched onto and call themselves “Tea Partiers” are merely using this device to advance their personal agendas, which often diverge from a Tea Party lifestyle. On top of that many of the actions and communications that appear to come from a polarized root are really just tactical devices to achieve another end. Also, believing or proclaiming something true or correct is not a black/white thing. For example, Tea Party members in Georgia actually supported not only government regulation but also increased government funding to defeat what many of them considered a more dangerous opponent, Southern Power.
As for rhetoric, law, and policy, it’s not news that actions and decisions are not based solely on logic. Logic like all things in our life together is built as part of that life, not separate from it. So logic is not something we bring into our lives together to fix them or redirect them. It is just one device or mechanism we create to explain how decision making is and/or should be done. So any reference to logical vs. illogical or rhetorical decision making is a red herring, as they all have the same origins.
Theory can certainly identify areas of concern and interest, in economics, social sciences, and other areas. But theory should never be the primary source for such concerns and interests. That should be the concerns and interests revealed in the actions of actors. To the extent it is reasonable and a successful theory should merely reflect these, in a shortened and somewhat clarified form. The paper you cite seems to ably describe some of the areas of concern and interest of trial lawyers. As to what psychologists and philosophers “label” hopefully the psychologists and philosophers are merely reflecting in different words what the actors they observe actually do, including lawyers. The paper author then does on to say,
By using legal arguments that contain informal fallacies, the lawyer can play upon the listener’s inherent cognitive biases to persuade the listener to see things the same way the lawyer does. When lawyers use these rhetorical techniques — whether before or during trial proceedings — they induce in most listeners erroneous perceptions that can, and often do, powerfully alter their listeners’ beliefs
The lawyer can certainly use such devices. The success of same is not by any means assured, however. Unless you assume the members of the jury and judge are merely intermediaries that accept all that the lawyer says as true and accurate and use it without question or changes in making their decisions. The chance of this being the case is I venture to say as near zero as possible without actually being zero.
But your conclusion is reasonable. Most sciences operate by consensus, even though it is by no means as simple to reach such consensus as most science texts depict. And in most instances the consensus is always questioned, which is productive and expected. And taking findings of consensus “seriously” does not change this. On the other hand it is quite normal for supporters of a belief or idea or way of doing something to invent devices to support these and to tear down opposing ideas, beliefs, and way of doing. These oppositions are overcome by integrating the ideas, beliefs, and ways of doing. And this is an ongoing, continual process. Stopping it is tantamount to stopping the building of collective life. But it is also a hard, difficult, and at tie destructive process. In WWII Germany occupied France with nearly 400,000 troops and still the German Army could not stop French Resistance.
Nice analysis. This problem indeed applies more widely, most notoriously in the sphere of climate change ‘debate’ where it allows obfuscators to claim equal time despite the 97% scientific support for the reality of climate change in the current literature – and 100% when it comes to the basic physics (Venus cooking pot and Martian fridge versus, for the time being, our relatively friendly climate). Sadly it seems that people of conservative economic persuasion use the phenomenon to peddle and reinforce their erroneous views by claiming equal chatter = equal validity.
To avoid wasting unnecessary time, let’s bury Adam Smith (AS) once and for all, in a few paragraphs. There are three key works in chronological order: “The History of Astronomy” (HA), “The Theory of Moral Sentiments” (MS) and “The Wealth of Nations” (WN). Based on Newton’s gravity, HA laid the foundation of his philosophy of wonder of an invisible force connecting seemingly unrelated objects.
The opening sentence of MS describes the invisible force governing human action or morality:
“How selfish soever man may be supposed there are evidently some principles in his nature, which interest him in the fortune of others, and renders their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.”
Without explicitly stating this moral assumption, he proceeded in WN to use the “invisible hand” as a rhetorical device to explain the function of markets. If the moral assumption is indeed universally true, then surely free markets would work universally. Evidently, the operators of the US sub-prime mortgage market were not interested “in the fortune of others”, for whom they were agents.
The “invisible hand” was an effective rhetorical device which had fooled everyone and succeeded in closing all minds to further inquiry into markets. Keynes blamed the failure of markets on “animal spirits” in face of uncertainty, but not on immorality. Let’s bury rhetoric with the “invisible hand”.
Rhetoric is not stale; it reinvents constantly. New categories, new terms and concepts. It undergoes development. Invisible Hand of Adam Smith could be The Unknown of Einstein. It’s Error Term in statistical science. And so on and so forth. Invisible Matter. Dark Matter, etc.
All men act and behavedifferently. Even within same person, his words are different from his deeds. His principles may differ from his actions. The world of duality and dialectics operate everywhere and every moment. So balance and equilibrium plays a key role. Real world rarely displays this (desirable) feature. See Buddha’s middle path. Not General Equilibrim Model. See Spinoza.
Definitely persuasion is a very very potent and human tool. Some men act by instincts and emotions and passions (alone or mostly). Some act by reason. Reason and logic must not be equated as same thing. But what we require is a balancing act b/w emotions/instincts and reasoning/ intellect. This is where persuasion and mental training/guidance is needed as all men are not capable of doing that (women are). Therefore rhetoric is not a wastage. It must be taught in school curriculum to make a child articulate and rich in reasoning and controlling his emotions (particularly negative). This is how duality and divided life could be put under control. Balanced life and equilibrium may not exist but it may be a desirable human state.. Persuasion, not force may bring collectivities to flourish.
The invisible hand may be a bit more complex than you suggest. Fore xample, see Persky, J. (1989). Retrospectives: Adam Smith’s Invisible Hands. The Journal of Economic Perspectives, 3(4), 195-201.
Sure, anyone can make simple things complicated, after all that’s what rhetoric is about: an implicit claim to special complex knowledge, demanding unwarranted trust (e.g. snake-oil salesman).
The Persky’s article concludes with an irrelevance, “The invisible hand is of great importance, not because it is the last word in social policy, but because it suggests such a rich range of economic issues”. Any vague notion can lead to a multitude of interpretations and complex discussions (see e.g. Warren Samuels’ recent book).
Academic ramblings matter little. What matters is: what those in charge and have the power to act, do with the ideas. Greenspan’s (and others) push for deregulation was based on rhetoric such as (Age of Turbulence, p.367):
” As I saw it, from 1995 forward, the largely unregulated global markets, with some notable exceptions, appeared to be moving smoothly from one state of equilibrium to another. Adam Smith’s invisible hand was at work on a global scale.”
Persky should have told Greenspan, “The invisible hand may be a bit more complex than you suggest”. If anyone had listened we might have avoided the repeal of Glass-Steagall and the deregulation of OTC derivatives.
I have no idea why, but this post brought me to very interesting book: “Dewey, Pragmatism and Economic Methodology” edited by Elias Khalil.
Rhetoricians typically tell you with conviction how important rhetoric actually is in commanding a persuasive outcome. In this writing we have the unconditional statement: “The best type of advocate accomplishes this goal using various rhetorical techniques, attempting to manage other people’s perceptions of such things as the facts,…” which is simply an assertion not a reality. The best lawyers decipher truth from the facts they obtain and make truth incontestable. If rhetorical style beats reality then it is perverse. Rhetoric as manipulation in loo of the facts or at wits against truth is simply elegant deception. Rhetoric in the courtroom is called advocating for a client. Rhetoric in economics is called SALES and manipulation.
Wish I could agree with you, but it depends on the goal. In a battle, the commander that leads (Napoleon had great rhetorical skills) charismatically is admired, not denigrated. Most of us have met this type of person and admired him/her.
“Invisible hand” is beautiful abstraction, however neoclassical economists in rhetoric about it brings us to unbelievable conclusions supported scientifically by sophisticated mathematic models: Their conclusions are following:
1. Invisible hand does work, you need to believe in it.
2. Believe in invisible hand and work very hard, produce more and efficiently.
3. Maximize utility from income which is given to you by invisible hand.
4. Too much money can cause inflation. We can control it, our another invisible hand can do it. All you need is just work as hard as you can.
5. Believe in invisible hand and save more, as our Solow model tells you.
FYI, there is another short piece on the geenral theme of rhetoric and economics here:
http://www.worldeconomicsassociation.org/the-importance-of-rhetoric/
Stuart, when’s the last time you heard a neoclassical, let alone a neoliberal economist of any stature speak of rhetoric, the use of rhetoric, or the use of persuasive speech to support, defend, or further the ends of her/his form of economics? Whether for research, teaching, or policy these economists are much likely to turn to mathematics (models and otherwise), complex theories of causation, and/or loads of so called empirical data. They want to beat their opponent into submission. They have little interest in “persuading” (eloquently or otherwise) anyone. Plus as Aristotle makes clear, rhetoric is an art. Being artistic is not something that would endear most economists either to tenure committees or to corporate power brokers or to political apparatchiks. Some lawyers, not all still employ rhetoric in the general, everyman way referred to by Aristotle. They work to arouse prejudices, induce emotional responses, or make another experience being lost or uncomfortable. But they, like economists do not employ persuasion – to demonstrate that something is true, right, and just (generally via syllogism), to move beyond appeals to data and knowledge, and to clearly show why the facts (perhaps not the data or emotions) are with her or him, not those who oppose him or her. That’s rhetoric in the classical sense. I would be much amazed if there is much of that around today. This is what passes for rhetoric today: “When you are in a hole, stop digging!”― Bill McKibben. Or, “Blaming speculators as a response to financial crisis goes back at least to the Greeks. It’s almost always the wrong response.”–Lawrence Summers
But that is the point, Ken. Economists generally act as if there is no such thing as rhetoric, although (1) economics itself is full of it, and (2) it is an important dimension of real world attitude formation and decision making.
Don’t just think of rhetoric in terms of Aristotle, Schopenhauer or even Adam Smith. They focus on the acts of individuals trying to persuade other individuals. Think of rhetoric in a broader sense, such as in the use of language to frame issues so they are seen in a particular way.
An illustration from discourse analysis could be the move from reference to doctors and patients to health care providers and customers. This redefines the nature of the relationship and the obligations and expectations of the respective parties.
The term rhetoric was used in this wider sense in a book title, McCloskey, D. N. (1998). The rhetoric of economics (2nd ed.). Madison, Wis.: University of Wisconsin Press.
Economists need to define what they mean and sticking to their definitions consistently. McCloskey’s book is an example, where the meaning of “rhetoric” shifts and changes according to the topic under discussion.
If “rhetoric” merely means “an effective use of language” to convey information or idea, then the importance of rhetoric is not in dispute. For example, McCloskey’s assertion that “rhetoric is a better way to understand science”, can only be understood in terms of this definition of rhetoric. But this definition is not consistently applied and it is generally not what is meant by rhetoric, in most contexts.
Rhetoric, in literature and in most situations, means undue exaggeration, using metaphors, similes etc. and bombast (which as you say “economics itself is full of”) to persuade. It is in this sense that Napoleon, Hitler etc. were skillful at rhetoric. Rhetoric used in this sense distorts the truth and should be deprecated.
Your example of “doctors and patients” and “providers and customers” as different ways to view the relationship falls under the first and not the second definition of rhetoric, because the two different aspects are not necessarily in conflict. There is no exaggeration or distortion of the relationship, provided all aspects are considered.
Economics suffers generally from bombast and distortion from over-simplification.
Stuart, to the many definitions of rhetoric used by McCloskey I will add, “the art of muddling through.” All of the forms of rhetoric referred to by McCloskey fit here. They also fit into Aristotle’s “Rhetoric” as the everyday rhetoric used by virtually all humans. That is, they are efforts to sway others via arousing prejudices, emotions, or creating a sense of isolation and need. Muddling through is generally how humans workout most problems. They somehow find a way to fit a solution(s) (if only partial and temporary) together and get it (them) out “in the world.” In this sense I admire McCloskey for her assertion that economists should argue and muddle through by their own logic, by their own standards of argument. Then the first question economists must answer is what are these standards, this logic. At this point we are well beyond everyday rhetoric and could be entering formal rhetoric as set out by Aristotle and others. But McCloskey quickly disabuses us of that notion. She spends page after page claiming to work out just what the logic or standards of argument for economics ought to be. And at no point is she rhetorical in the sense of Aristotle. But she is also not rhetorical in the everyday sense of Aristotle. She is attempting I think to work out a rhetorical for economists. But that only works if she can persuade other economists that what she says is right and correct, and has the facts (if not the data or emotions) on its side. And voila we’re back to Aristotle’s rhetoric.
If economics is not a science but a form of rhetoric dressed up in a scientific language, and if an understanding of how the economy works is something that a broad group of people should acquire beyond the confines of a small expert group of pretended scientists, then why shouldn’t the rhetoric of economics be expressed in ordinary expository prose. McCloskey understands that because she is an historian.
Robert, rhetoric in the everyday sense of convincing others a certain position or way of doing something is correct and should be adopted by society at large is precisely as you suggest a usual part of how collective life is put together. That effort can be presented in “ordinary expository prose,” mathematics, special vocabularies such as science, religion, art, etc. No matter, they all are seeking the same end, for a variety of reasons. So what really is the distinction between so called “expert” and “non-expert” ways of organizing our collective life? Whatever it is, it is not the use vs. non-use of rhetoric.
Well put, Ken.
Economics is not a science, because there has been a serious misconception of what science is, by economists. Economics can be a science and it must become a science, if we are to replace the pseudo-science which is ruling public policy. At the moment, economics is closer to literary narrative, religion and history, allowing economic to be seen as rhetoric: an idea which is invalid if specific or is vacuous if general.
Lyonwiss, to be a science economics would be …? Who’s allowing economics to be rhetoric? If it that, is it not? If economics were not seen as literary narrative, etc. what would/should it be? Help me out here.
Ken Zimmerman, See Robert Locke’s comment. If economics is a science, i.e. neoclassical economics worked, we probably would not be having this discussion about rhetoric. There are certain things economics must do to be a science and imitating physics is not one of them.
So let’s see if I’ve got it. Economic science would work on understanding how the economy works (actually the economies since there are many varieties of economics). Since economies and economics are made in ongoing processes of interaction among all sorts of actors, many of whom use rhetorical devices, many of whom are not alive (e.g., all sorts of technical devices to communicate such things as prices, the commodities bought and sold in economic transactions), and some of whom can’t be seen directly (e.g., local trading strategies passed from parent to child, the emotions of traders), I suggest the science of economics has a big job ahead of it. Science is more not less encompassing. If you’re really a scientist you’ll have to follow economic actions and transaction wherever they lead. Even if that’s rhetoric, calculations, equations, craft skills in trading, business schools, and of course prices. Physics doesn’t study economic actions, but its efforts to understand its objects are no less pressing than those of economists. I think that as far as the comparison goes for me.
I would not jump to conclusions about what a new economics would look like in relation to prices, supply, demand, transactions etc, because many of these basic notions are more rhetoric than science.
For example, how do you define and measure demand? How do you empirically prove or disprove the law of demand? Have you seen anyone scientifically construct a demand curve? Economists pulls one “out of thin air” and proceed to deduce how an economy works. You could classify such arguments as
rhetoric.
I agree with you saying, “I suggest the science of economics has a big job ahead of it”. Let start with a basic ingredient of science: data. Economists rarely question their data; they just use them as given to spin stories. Yet economic data is unlike physics data. In physics, there is widespread consensus about length and time, leading the universal agreement about the positions of planets, their velocities etc.
Economic data are not universal as they depend on conventions, purposes and assumptions which may be arbitrary. For example, there is a lot of debate in the US about what is the true rate of inflation. Officially, US inflation is less than two percent, while Shadow Government Statistics asserts that it is closer to six percent.
Such disagreements are even more dramatic in some other countries. For example, the Argentinian Government declared their inflation rate is around ten percent. No one believes this, not even the IMF. Argentinian economists who come out with alternative estimates, which are much higher, are threatened
with prosecution and imprisonment.
If the inflation estimates are wrong then all other data such as real GDP, consumption etc are distorted. Academic economists such as Reinhart and Rogoff are completely unconcerned about the quality of the data they use, comparing the data across dozens of countries over decades, as though they are all measuring the same economic variables.
This is just one example of why economics is not a science like physics, but how the deficiency can potentially be fixed, even if it may take a long time.
lyonwiss, you lay out well some of the issues economists working on scientific study need to address. I do not contend that economics is now a science. Only that if it wishes to be so it needs to pursue a consensus among its practitioners on the economic actions and actors you mention, among others. One of the hallmarks of science is a consensus among practitioners on the “facts” of the object of its study. As I’ve said before there seems little interest among economists to develop such consensus. They seem more interested in debate and lack of consensus.
Few economists realize that formal mathematics actually proved the non-existence of general equilibrium. Because most economists are too weak in mathematics to understand the details (which are unimportant in any case), they “fail to see the forest for the trees”. That is, the main conclusion of Arrow-Debreu is: general equilibrium cannot possibly exist.
Here is my formal proof. Let P = proposition that general equilibrium exists and Q = the set of mathematical assumptions required to prove the proposition. Since are no other sets of assumptions which are known to be sufficient to prove the equilibrium considered, then P necessarily implies Q, or symbolically:
P => Q
But by a rule of logic called transposition,
not Q => not P.
Since we know that some of the mathematical assumptions in Q are false, then by the logical rule of transposition P must be false and therefore general equilibrium cannot exist. This remains the only valid conclusion until we can find a set of acceptably “true” assumptions which leads to a proof of general equilibrium.
Economics is full of theorems (e.g. Coase’s theorm) where the opposite conclusions are drawn or (e.g. Lucas Critique) where the conclusions are acknowledged but ignored.
Economists who, intuitively, do not believe in some conclusions of mathematical theorems, are too weak mathematically to challenge those conclusions. It reminds me of the story (probably apocryphal), that when challenged by Diderot in the Court of Catherine the Great to prove the existence of God, Euler said, “Sir, (a + b^n)/n = x, therefore God exists!”. Unable to reply, Diderot sought Catherine’s permission to return to Paris. It was rhetoric at its most powerful.
Ken, lyonwiss. Why start with the assumption that economics should aspire to be a science, why not start with the assumption that economics and the economy can best be understood as cultural phenomena. I’ll give you a reason. Economists who dominate the field do not know much about culture, specific knowledge of which is essential if economics is to be understood through cultural embeddedness. Learning about cultures, in their diversities, is very hard, time-consuming work, much more so than learning mathematical modeling, which is why it takes PhD students in the humanities three times as long to finish their dissertations as PhDs in science.
Of course a lot could be done to speed-up cultural assimilation in economics and management studies if people in these fields exploited the knowledge-pool available in the parts of our splendid universities that house and develop historical and cultural studies. But they have not. An Example. I tried to get the dean in the business school, University of Hawaii, to cross-list my course on the history of comparative management in the schedule of classes of the School of Management. She turned me down with: “It is not our business to recruit students into courses in fields (history) that no longer can draw students.” (This was in the 1980s) When I protested about being treated in such a shabby way, the Vice-President for Academic Affaires marked me down as a “trouble-maker.”
.
The reason that neoclassical economics has such a dominant influence is because it pretends to be a science. Only by being a science (even as a false claim), can economics be useful for organizing trade (and regulation) among nations. This is the likely reason why neoclassical economics cannnot easily be replaced, even with its failures now evident.
The need for scientific consnesus is why economics cannot be understood just as a cultural phenomenon. It is cultural differences which lead to different preferences for economic specialization, leading to even greater necessity to coordinate activities and to trade.
Economics does not need a full characterization of human or culture to be useful. Indeed economics would only be useful if it makes the simplest, but adequate, assumptions about “homo economicus”.
The problem with economics is that it failed in its attempt to be a science. A common assumption now is that economics cannot be a science and therefore should not be one. This assumption is either false or at least premature.
We need to identify and correct the mistakes of economics from the perspectives of a scientific epistemology. In my previous comment, I showed how the lack of mathematical education among most economcists has led to their inability to resist mathematical rhetoric, such as: “general equilibrium has been proven to exist and therefore the equilibrium approach of neoclassical economics is soundly based”.
I agree that “Science” with a big “S” has become a dominant political and economic “black box” for explaining the world and telling us what to do next, and how to solve the next problem. Like the Church in the 14th century Science’s hegemony is almost unchallenged today, and since the middle of the 20th century. That does not mean it cannot be successfully challenged. Look at what happened to the 14th century Catholic Church. Economists have it seems latched their wagon to the Science star. But for all its downsides, sciences demand consensus to function. Whether this is called physical laws, like with physics, rules like with some social sciences, or standards like with such applied sciences as penology and government regulation doesn’t really matter. What does matter is that the practitioners in each of the sciences have developed a consensus about what the laws, standards, rules, etc. are and they use this consensus as the basis for their work and research. So far as I can see economists have not done this. And in all this work mathematics is merely a tool, not a main player. Physicists use mathematics extensively to describe physical “laws” but penologists and psychologists do not. Consensus on the “facts” is the thing, however you get there. There is little consensus on the facts in economists’ practices.
Ken. Economists use inflation data to draw all sorts of conclusions, implying the data are factual and they know what the data represent. We know inflation data are defined by the weighted average price changes of a basket of selected goods and services. So the data depend on the weighting and on the selection of the basket.
Who decides on the choice of weighting and the selected basket? If there are no standards or criteria applied universally to the calculation of inflation data, then inflation data can be anything you like, by changing the weighting and the basket selection. The lack of discipline of the collection process makes economic data a farce, which is conveniently ignored as normal.
If economic data are arbitrarily collected how could they correspond to theoretical concepts which are presumably clearly defined and fixed? How could theory and empirical observations be compared? How could there be possibly an economic science?
I’m asking very basic questions about the fundamental elements of a scientific process. I’m not even discussing what inflation data ought to measure or what causes inflation. Whatever we decide inflation data should measure, we cannot arbitrarily change the measurement process without widespread consultant and public notification, which is now not the case.
The data problem is one of the many reasons why economics (and not just neoclassical economics) is a pretend science. The problem can be fixed if we are serious about making economics a science. Economists have to care and be serious about enforcing data standards. Otherwise the interpretation of economic data is just a random process of noise.
Robert, speaking for myself I do not begin with the assumption that economics is or ought to be a science. And I agree economics could indeed be structured to be an historical or cultural studies area. It was after all that when it was political economics. Since I’m a mathematician as well as an historian, I took longer to complete my math degrees than my history degrees. I’m sure it varies. As for the notion that most things are interconnected and our education establishments ought to reflect that, I agree. My experience is the same as yours on finding college or even business administrators who will or even see the need to cross disciplinary lines, especially when it means putting a popular field at risk for a field “no longer drawing students.”
You said rightly, “There is little consensus on the facts in economists’ practices”. In many countries (e.g. US), there is disagreement about facts such as what is the true rate of inflation.
Economic as historical or cultural studies cannot solve such problems, which matter a great deal to our economic well-being, which is surely a primary concern of economics.
lyonwiss. Let me be direct here. What exactly is inflation? Just looking at inflation straight on I see: a resource or product that cost $1.00 this time last year, now costs $1.05. Am I close? Why did the price change? Labor is paid more. The cost of borrowing money increased. Investors insisted on more return on investment. A revolution in country XXX increased the cost of a primary input to the product or resource. These are all areas of concern. We might look to “solve” these areas of concern with laws to cap investor return or labor wages. With finding new investors or new sources of raw materials. With diplomatic negotiations with country XXX. Or we might just accept that the 5% price increase is acceptable. What role do economists play in this process? Historians, yes. International relations, yes. Law, yes. Mining and engineering, yes. Sociologists, yes. But just don’t see a role for professional economists. Help me out here.
Second, whatever economic actions and actors are, that is not determined by economists. If an “economic system” exists it is made by the actors who live in and through it. Whatever areas of concern there are here will be the result of what these actors make or do not make. Whatever tools, devices, and theories are invented to deal with this system will be the work of these actors. Economists, if they exist are involved in describing to themselves and others what these actors have made and the reasons the actors give for such inventions. Economists can certainly add to this work their own theories, explanations, tools, devices, etc. And by so doing change the economic system. So far I’ve seen few economists who do well either of these jobs. So again I ask, why do we need economists?
Sorry Ken. wrong thread above. Economists use inflation data to draw all sorts of conclusions, implying the data are factual and they know what the data represent. We know inflation data are defined by the weighted average price changes of a basket of selected goods and services. So the data depend on the weighting and on the selection of the basket.
Who decides on the choice of weighting and the selected basket? If there are no standards or criteria applied universally to the calculation of inflation data, then inflation data can be anything you like, by changing the weighting and the basket selection. The lack of discipline of the collection process makes economic data a farce, which is conveniently ignored as normal.
If economic data are arbitrarily collected how could they correspond to theoretical concepts which are presumably clearly defined and fixed? How could theory and empirical observations be compared? How could there be possibly an economic science?
I’m asking very basic questions about the fundamental elements of a scientific process. I’m not even discussing what inflation data ought to measure or what causes inflation. Whatever we decide inflation data should measure, we cannot arbitrarily change the measurement process without widespread consultant and public notification, which is not the case.
The data problem is one of the many reasons why economics (and not just neoclassical economics) is a pretend science. The problem can be fixed if we are serious about making economics a science. Economists have to care and be serious about enforcing data standards. Otherwise the interpretation of economic data is just a random process of noise.
Give me a thousand incrasing prices and one falling one – and I can calculate a declining average price level… however, there sure are tacit as well as formal rules when it comes to the weights given to prices. To give an idea an excerpt about one of the most contested parts of the consumer price index, housing costs, from one of the many manuals (which nowadays, contrary to the bad old days, are freely available on the internet!):
“The treatment of owner-occupied housing. In the HICPs, the imputed prices for the services provided by owner-occupied housing are currently excluded. However, an index based on housing acquisition costs is being piloted for possible inclusion in future. It will be compiled separately from the HICPs on an experimental basis before any decision is made to incorporate it within the HICPs. National CPIs use a variety of methods – for example some use an approach involving imputed rents, some include mortgage interest in their CPI, while others entirely exclude the shelter costs of owner-occupiers.”
Source: http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-BE-04-001/EN/KS-BE-04-001-EN.PDF
A tremendous amount of conceptual thinking precedes actual measurement. This does of course not mean that these data are beyond criticism. But it is my stated opinion that empirical macro-economics (i.e. the measurement of macro economic data) has made much more progress during the last decades than theoretical macro.
Such manuals have, i.e., to become part of undergraduate as well as graduate education of economists.
lyonwiss. So it seems we agree. Economists have made little effort to create an economics science. As for the “…fundamental elements of a scientific process” that’s a somewhat more difficult process. Two books will help: “Science in Action” by Bruno Latour and “Laboratory Life: The Construction of Scientific Facts” by Bruno Latour and Steve Woolgar. From the latter I’ve always liked this short summary of laboratory life, “Instead, he [the anthropological observer] was able to portray laboratory activity as the organization of persuasion through literary inscriptions.”
Colleagues, perhaps our views of evidence and analysis are colored by personal experience in education and research.
In history every young PhD has drummed into him/her that primary sources are superior to secondary when telling the human story. So, when the subject of the relative failure of the nineteenth century French and late Victorian entrepreneur came up in my studies, I looked for answers in original sources, i.e., the experiences of people living in the epoch under consideration. For instance, I discovered in the attic of a French chateau, letters, written by a young French engineer to his father while on an inspection tour of British ironworks in 1842 (he was member of a visiting team headed by a famous engineering Professor Frederic Le Play) that praised the technological prowess of British vis-à-vis the French; I found a report at the Bibliotheque nationale in Paris, a report by a French engineering professor about the backwardness of the French chemical industry compared to the German (Albert Granger, three reports c. 1900 cited in my The End of the Practical Man about the relationship between educational systems and industrial development in Germany); a report by German steelmaking engineers about the state of the French steel industry in occupied France (1916) that concluded that it, the most advanced steel producing area in prewar France, was backward vis-à-vis the Geman; report in the UK about the state of the color dye industry in Germany (1905) compared to the British, etc. This contemporary evidence basically confirmed the thesis about the “failure” of entrepreneurship in Victorian Britain and 19h Century France.
Then, in the late 1970’s with the appearance of the New Economic History, based on neo-classical economics and econometrics, the entrepreneurial failure was refuted – not on the basis of some new contemporary evidence (original sources) but on that of methodologies (secondary analysis). It did not take long to find shortcoming in the new methodologies. So I concluded that, when methodologies that were highly questionable (neoclassical economics and econometrics) permitted conclusions that ran counter to the evaluation of contemporaries, that I would believe the contemporaries. The science, as we read continually in this blog, is too weak to do otherwise.
Lyonwiss @ #25, well put, but one doesn’t start science with data, one starts with the ability to detect and interpret it and an understanding of how to.
Ken @ #26, consensus among ignorant practitioners certainly isn’t the purpose of science; that is a myth created in 1740 by Hume’s “Treatise on Human Nature”. As a scientist myself I can argue that normally, science aims to overcome problems by applying an existing understanding (like Newton’s laws) to the resolution of practical problems (e.g. building bridges), but the practice sometimes reveals residual problems which challenge the existing understanding and (perhaps over centuries) can only be resolved by revolutionary science, the practical paradigms of which illustrate the changed understanding. If the Kuhnian labels don’t yet make this obvious, we could say the difference is between pure and applied science, the one looking back ‘retroductively’ (look up Peirce or Bhaskar) to deepen or otherwise rectify the foundations, the other looking forward ‘deductively’, seeking logical solutions (i.e. technology and products) which can be made to work in particular or even many contexts.
Robert @ #28, it follows that ‘revolutionary’ scientists need to go back to through the history of science to find where things went wrong, and ‘normal’ scientists back through the history of diverse contexts to understand what will work in current cultures. So I agree with you: as I wrote recently, I’ve learned to understand economics and mathematics more by studying their histories than through practicing specific techniques.
The problem with of economics, though, is not that its neoclassical practitioners did not find deep enough foundations in revolutionary Maxwellian physics; it is that they threw the baby out with the bathwater by losing sight of a field being a field before Newton grew gravity in it, and motion being directional – with direction conveying information about the existence of sources.
“Read all about it” (their misunderstanding of the ‘field’ metaphor) in Philip Mirowski’s “More Heat than Light”. If you already have done, can you see the point of the proposition that physical science is an off-shoot of information science (which is about the physical embodiment of information) and the social sciences/economics more applied communication/information science than applied physics? The history of this remains largely unwritten.
You said, “but one doesn’t start science with data, one starts with the ability to detect and interpret it and an understanding of how to.” This is factually incorrect.
Astronomy was the oldest science which started with data which no one had initially the ability to detect or interpret or understand, except through mythology. From the first recorded data to any inkling of an “understanding of how”, it took humanity probably at least tens thousands years, if carvings and paintings in paleolithic caves are counted as recorded data.
Jump to the present era, the whole branch of science, viz the physics of relativity was started with experimental data on the detection of the “luminiferous ether”. A life time of accurate experimental data proved that the speed of light is constant. The special theory of relativity was Einstein’s explanation of this data.
Quite contrary to your assertion, science starts with data. A scientific theory lives or dies by data. Any theory which does not conform to this requirement is simply not a scientific theory. Economics fails to be a science because it does not pay sufficient respect to data: data have not been carefully collected and theories have rarely been tested with data.
By the way, this is precisely my reason for asserting that economics is not science. My reason has little to do with the studies of history, culture, pluralism, rhetoric etc which many on this blog have diverted their energy.
Lyonwiss, I’d say you’re looking for certainties and consistencies where none exist. Science begins wherever the hell scientists say it does. Scientists are searching for the “facts” and they have shown again and again they will employ all sorts of observational activities and devices, and persuasion techniques to “show” one another (and it other scientists the scientist first has to convince) that this or that statement is a “fact.” Einstein used mathematics, which for years failed to convince many scientists. Experiments, mostly simply by today’s standards with results consistent with Einstein’s mathematics began to persuade scientists that Einstein might have indeed stated facts. Now we see other experimental work proposing to reshape some of Einstein’s facts. For example, the speed of light is not consistently constant and light warps space, not just the other way round. Are enough scientists convinced yet to make these statements facts? No, not yet. All this applies to economics as well. What statements have economists made that they claim are “facts” and have they persuaded all the other economists that these are indeed facts? Data, experiments, measurements of all sorts can be used to make these statements and also to persuade other economists that they are facts. But as they say, the proof is in the pudding. Have all the other economists (scientists) bought into these statements as facts?
As you say Dave, “…science aims to overcome problems by applying an existing understanding (like Newton’s laws) to the resolution of practical problems (e.g. building bridges)…” These existing understandings are the consensus of which I speak. All practitioners agree on them and use them to not just build bridges but map out new research projects or search for unknown that the laws say should be there to be found. But you are correct that all such consensuses are temporary and will eventually fail. But then the movement will be to search for new consensuses, new scientific facts to guide our bridge building and search for atomic particles (for example). Kuhn was on target in a sense, but this is not revolution but evolution. It is the way scientific consensuses are built up, used, and fail. Since I’m an historian as well as a mathematician, my own work in history shows me that reaching consensus is not the main objective of historians, and when they do reach it, its life is likely to be much shorter than most scientific consensuses.
Good, Ken. You say this is “not revolution but evolution”. I could agree with you, but if I did we would fail to mark the difference between a new branch on the tree of life (at a higher or lower level) and adaptation of the existing tree to changes in its environment. Not a very good analogy? Let’s compare, say, the development of new breeds of dog with the discovery of a cat. Or of the moon pulling a falling apple. Or the need for circuits to circulate electricity. Or telephone exchange switching circuits performing logic and storing information. Or dynamic logic indexing regeneration of a changing world.
Merijn makes some important points. There are several steps in the construction of price indices, and, in fact, any index. Briefly, the construction of an index requires three steps: i) the constituent items have to be selected; ii) weights must be assigned to these items; and iii) values for
each of the items must be determined. Unless there is a specific basis for each step, it may be possible to construct numerous indices, all apparently measuring the same phenomenon, but giving different results.
There are criteria relating to each stage that indicate the accuracy and suitable interpretation of the results. These criteria have a wider relevance, given the increasing use (and misuse) of indices in economics. You can see them discussed in a paper at: http://ssrn.com/abstract=1080328
There may appear to be a “tremendous amount” of effort put into measurement and index construction. But that effort falls far short of what’s required for the data to be used as “given” for public use, as you warned in your paper.
Anyone can construct indices and there are far too many constructed for various purposes, particularly in financial economics. Do they ever prove that they are accurate in measuring what they are supposed to measure? There are of course many indices for inflation, even for in one country, let alone across different countries. Do they reconcile or understand the implications of the differences.
Economic data is qualitatively different from physics data. Yet economists use data as “given” like physics data, often without any explanation of its suitability. I suspect most economic data are misleading and useless, because they are used without knowing a lot of the details of how they are collected.
You said, “The legitimacy of the index construction process and the interpretation of the resulting values may be specific to the particular index being considered.” I would say more explicitly instead, “The legitimacy of the index construction process and the interpretation of the resulting values may be specific to the particular USE OF THE INDEX.”
In other words, I’m saying most economic data have only very limited use. For example, one could not use vast amounts of economic data across time and geography to discover universal laws of economics. This was the empirical fallacy committed by the German Historical School. The same fallacy is still being committed today in applied econometrics (e.g. by Reinhart and Rogoff).
I agree on legitimacy being context-specific. In the conclusion to the paper I make this point, “In addition, the suitability of an index for a particular analysis depends on the specific application and the associated variables and relationships.”
To elaborate on this point, consider the use of indices in econometrics. This is now very common, often with indices with components which are not cardinal measures, and with arbitrary choice of weights, which should immediately raise concerns. Even with cardinal measures, there is the problem that an index is an attempt to represent many variables through one measure. Hence:
“an index is an aggregate. There is no loss of accuracy from the use of aggregates if the components of the aggregate are homogeneous in terms of relationships with other relevant variables, or there is a fixed mix of components (i.e. there is a constant “representative element” of the index). Conversely, there can be problems with aggregates if the elements i) do not have the same impact on other variables, and ii) do not move together. This suggests that indices can be problematic even when there is a specific statistical reason for the weightings. We should not assume that their components have identical relationships with other variables under analysis. In particular, this means that the legitimacy of an index is dependent on the particular application and the variables with which it is associated. Its validity cannot be determined independently of context.”
Absolutely agree that “the legitimacy of an index is dependent on the particular application” and ” Its validity cannot be determined independently of context”. That is why, even without the ergodic fallacy, most of econometrics is mathematical statistics at best and not economics, because data analysis cannot be carried out meaningfully without context.
The major difference between economic data and physics data is that economic data are much more dependent on context and even economic theory than it is the case for physics. It is impossible to have a purely empirical approach to economics (the German Historical School fallacy). On the other hand economic theory without data is just speculation. A new science of economics has to understand a tighter coupling of theory and data than is the case for physics.
Are any of you persuaded? Have these here “efforts to persuade” produced an agreement among just the scientists talking here that all or some of the statements made here are facts? If so then perhaps the process can continue. There are thousands of other economists who still have to be convinced. This is science.
Ken, Thread # 49. Even if we could agree that the numbers are facts, they still have to be explained and that takes us out of what people usually call economics. For example, If the figures that show a growing gap between the rich and the poor (incomes) are facts, then we have to explain why? My own investigation shows that an economics that does not take into consideration the constitution of the firm (my post some days ago) lacks verisimilitude in this respect.
5% is the inflation rate can be a fact. That inflation is always the result of poorly functioning labor markets can be a fact. To the extent those who study such things reach consensus that these are facts, and then they are indeed facts. And to the extent this is the case, and then those who study such things are involved in a scientific discipline. Similarly with such statements as differences is wealth inequality of no more than 15% between the upper and lowest 20% of the adult population do not harm the well-functioning of economic life. Differences greater than 15% create the following risks for economic life … Such statements are made facts because those who study and report in these areas reach consensus that they are facts. And consensus is the result of data gathering, measurements, publications, theory, and of course persuasion, among other things. So is this economics? You tell me.
Why not, as long as why, for example, some market based societies have more than 15% wealth inequality and others do not is explained.
Robert, these I said might be facts. Economists moving toward science need to seek consensus on what facts exist for economics. If they’re able.
What continues to be missed is that even a measurement is an index of the thing measured.
The point of an index is to help you look in the right place: at the pages on which the use of a word can be seen in context; at what e.g. 16% unemployment means in practice in the differing countries and regions which are experiencing it.
PS. I meant “missed” in general. Looking back through the contributions above I’m delighted to see how nearly Stuart, Lyonwiss and Robert are saying the same thing.
Ken, Thread 53 “Economists moving toward science need to seek consensus on what facts exist for economics. If they’re able”.
The trouble I find with this is that it seems to limit our source of knowledge about the economy to the scientists themselves and to the science they create. There are lots of people who are not economists but who are engaged in an economy or a study of it, who provides insight into how the economy works that economists do not; for example, those in jurisprudence, the sociology of work, engineering, history, etc. Economists are so busy consulting-debating each other in order to create a “science” that the methods they use and are accepted in their club, as economics, shut out important avenues of investigation into what is going on in a community’s economic life. As an observer, once I pose a question that I think needs to be answered, I never turn first to the economists to seek the answer, but to the people working in the economy; then I turn to economists to see if their body of knowledge gives me insight into the answer that an examination of the world of work does not.
Dave Thread # 55. “The point of an index is to help you look in the right place: at the pages on which the use of a word can be seen in context; at what e.g. 16% unemployment means in practice in the differing countries and regions which are experiencing it.”
Dave’s comment seems to resolve the contradiction that I note in the above comment on Ken’s thread, because it permits the observer to take into consideration the specificities of time and place that economic scientists do violence to in their efforts of reification and which lead, especially in this age of ideologies, to economics being a “Tendenzdisziplin” (spokesman for vested interests) when evaluating economic action and consequences.
Robert, a physicist might reply that knowledge of the physical world that is not scientific is inferior knowledge, if it is knowledge at all, rather than anecdotes, myths, or just plain fictions. Lots of people “study” the physical world, from novelists to boat captains to cooks. But they are not scientists because they do not create facts among physical scientists creating those same facts, with the goal of achieving consensus on those facts. They are just dilatants, sometimes well-meaning and at times perhaps even helpful to physical scientists, but NOT scientists. Science sets up clear dividing lines. This is one of them. I sympathize with your wish to consider the advice of non-scientists (and most of whom do not wish to be scientists). But as a physicist friend of mine says, this will get you only stories. Sometimes interesting and even accurate stories, but still just stories. Economics science is similarly situated, don’t you think?
Ken, If I thought economics could be made in the image of a physical science, the answer would be yes. But it is no because I do not believe it can. Here is my reason.
“The experience of the social-historical world cannot be lifted up to science by the inductive process of the natural sciences.” (Gadamer 1990, 10) Natural sciences deal with objects, social ones with subjects, i.e. with human beings. This basic difference has a decisive impact on the transferability of concepts from one to the other. The reason for the problem of quantitative-mathematical social science is hence not, as is so often claimed, “bad maths”; not its abuse and possible mistakes, but the “thing in itself”. Frank
Knight’s recommendation of 1935 seems therefore to be well-taken:
The first step to getting out of this slough, we suggest, is to recognize that
man’s relations with his fellow man are on a totally different footing from his
relations with the objects of physical nature and to give up, except within
recognized and rather narrow limits, the naïve project of carrying over a
technique which has been successful in the one set of problems and using it
to solve another set of a categorically different kind. (1935, 147) W. Drechsler, “Understanding the problems of mathematical economics: A ‘continental’ perspective,” rwer, # 56, 2011, p. 47.”
I would go a step further. I would say that people who are scientists will react to economics differently from those who are not. I point this out in my article, “Reform of finance education in US business schools: An historian’s view” rwer # 58, 2011,” when I noted that moral issues did not arise when French ingenieur-economists applied science to economics during their renovation of the French economy after WWII as they did for finance professors in US business schools using the same scientific techniques to model markets for the US finance industry, because French ingenieur-economists were driven by a desire to serve their nation, and US finance professor to serve the insatiable greed of private moneymakers.
If economics deals with human beings, it must within itself, deal with the attributes of human being, that is, both good and bad – something that physical scientists do not have to contend with, as a science, which is why they can say that questions of morality are not part of science. But questions of morality are very much part of economics, which is why I think it, in its pretense to be like a physical science, is pretentious and devious – a real Tendenzdisziplin, whose purpose has been to serve vested interests. If we are not honest about that, then reform of economics cannot make any progress.
Robert, the “sciences” (small “s” and multiple) in practice differ for lots of reasons, including the objects studied. But the overall goal does not change: To follow and study the object, down every crevice and road. Devotion is to allowing the object to show itself. All the scientific language must enhance this, not inhibit it. That being said, it would be wrong to conclude that there is no “human” dimension in physics, and no “material” element in economics (and the social sciences). From this perspective the object of the sciences is “socio-technical” arrangements (some say systems, though that word make me a bit uncomfortable, as it is often taken to portray “rationally organized” connections). The content and history of the arrangements differ from area to area, as the sciences reflect, but all the objects are this. So obviously the economic “socio-technical” arrangements will show through (or that’s the plan for economics science) as they are, different from (not entirely) from the “socio-technical” arrangements that show through (again that’s the plan at least for physical sciences) as they are. So the difficulties faced by sciences, including an economics one are much more complex and daunting than your post suggests. There is no “bright line” keeping us in the camp of the human or the material. They are constantly involved with one another, to the point of human-machines and machine-humans. And even the greatest humanists (Gadamer included) cannot change this.
1) Maybe economics is doomed never to be science? Perhaps the political can never be subtracted from political economy? That’s my personal view. My prejudices are confirmed by: The manner in which neo-classical conquered academia, what it did once it had won the battle, it’s reaction to it’s critics.
2) @lyonwiss
[quote]The reason that neoclassical economics has such a dominant influence is because it pretends to be a science.[/quote]
Much of neo-classical is rhetoric. I’m not in the least impressed by their maths because it’s unclear where all that maths came from. Is it just a mass of ‘thought experiments’? Thought experiments are more likely to generate nonsense than science. For every Einstein or Heisenberg there are an army of forgotten failures. Einstein / Heisenberg thought experiments were also built on existing science and data. Just about every physicist already agreed upon the meaning of that data and the validity of their science.
Economists don’t seem to understand the difference between axioms, theories and hypothesis. Much (all?) of mathed economics has no criteria relating it to reality. Economists seem to have entirely avoided dealing with Popperian falsification.
I can’t think a any great economist who’s made a contribution to general scientific theory or practice. For it to work, economic science would need to break new ground in theory and practice. Much of it hasn’t got beyond cargo cult Einstein.
Robert Locke and Mark Pawelek,
I agree with many of your points. Permit me to summarize the situation in following way.
Economics as a science must be different from physics as a science, as humans are not robots (Lucas said they are). Economic data are qualitatively different from physics data (evolutionary versus universal). Failure to recognize this has led to unimaginative imitation of physics (cf Miroswki).
Unwarranted hubris about what economics can achieve with limited intellect from a flawed education (taught like physics), economists have made many wrong and typically unstated assumptions in order to deduce mathematically far-reaching conclusions about the economy. The apparent formal rigor of the paradigm has deceived the public in accepting its scientific status (even Nobel Prizes), granting economics unearned power and influence over public policy.
Economics is a pretend science because none of the theoretical structures used to guide public policy has ever been verified by observations (actually broadly contradicting). Economic data analysis has had little to do with economic theory, as econometrics itself is full of unwarranted assumptions (e.g. linearity and normal distributions) about economic data (which are open to government manipulation in any case). At the same time, all the tables and charts of economic statistics have fooled uncritical observers that they are seeing an empirical science.
Economics is not a science because theory and data have separate and parallel existence. Each is practiced separately and badly, with their own forms of make belief. The failure of economics has less to do with its tools: mathematics, deductive methods, empirical methods, rhetoric etc, but has more to do with the dishonesty of its most influential practitioners, in pretending to do science when they are not.
Economics is a scam, based on a false scientific claim, which is now allowing extreme monetary policies unproven theoretically or empirically to be tested on world as an unfolding catastrophe. We have to stop this scam.
lyonwiss, yes if economics were to be a science it would look different, have different methods, and different theories and experiments than physics. But the overall objective of economics the science and physics is the same: to establish a consensus among its practitioners on the facts. As I’ve said before it doesn’t seem economists have an interest in this objective. This would make it impossible for economics to pursue being a science. Whether or not economics could be a science is a separate question. As is whether economists are lying to themselves and others about what economics is or could become. And this of course includes the possibility that economics and economists is no more than a dishonest tool for gaining wealth and power for one or another select group.
Ken, Thread # 59. Although you don’t seem to give me credit for knowing that there is a “human” dimension in physics, and a “material” element in economics (and the social sciences), I’ll follow the same accusatory path and say that you do not seem aware of the anti-empiricism tradition in continental thought that leads to Post-modernism (people like Foucault and the Frankfort School, i.e, Adorno, Habermas, Marcuse), because if you are aware and give this tradition any credence you would not have such faith in economics as science. See Thomas Klikauer’s book, Managerialism: A Critique of an Ideology, just out at Palgrave/Macmillan, and you’ll get more of an idea about where I am coming from.
Robert, my apology if I’ve mistaken your understanding of postmodernism and post structuralism. But anyway my comments have nothing to do with either of these, and certainly nothing to do with anti-empiricism. And I’m certainly not a fan of the Managerialism Klikauer writes about. If anything I’m more of a fan of William James’ radical empiricism. In fact part of my job is criticism of “management science” and everything MBA. I’ve probably been the cause of dozens of MBAs being fired or not being hired. My advice to the companies who are my clients is simple and direct: MBAism and “management science” is harmful to your future and your profits, not to mention the world in general. But I did not know that the discipline of economics and economists suffered from this same problem. If that’s the case, your diagnosis of the future of the economics discipline may have merit.
You raise a good point. What is the relationship between economics and management studies? We know that neo-classical economics, borrowing heavily from operational research techniques, brought them to business schools during the reform of these institutions that took place in the 1960s. I note in Confronting Managerialism that most of the people involved in the development of financial economics had close connections with people in operations research after the war. But economic does not seem to pay much attention to managers in its graphs and principles. Still if financial economics leaned heavily on the management techniques of operational research, which are bastions of managerialism, there is a methodological connections between the two. We need some clarification here.
“Hume tried to write an Abstract of the Treatise in 1737 and failed. In 1739 Hutcheson, Professor of Philosophy at Glasow, set as an exercise to his 17 year old pupil Adam Smith (author-to-be of ‘The Wealth of Nations’) the task of epitomising the Treatise, Books I and II. He sent the result to Hume, who was so pleased with it that he had it printed in London, and sent Adam Smith a presentational copy of the Treatise”.
Not that Hume is not worth reading: one just needs to be sceptical of the sceptic and aware of his historical situation, as I realised myself when first encountering him (as an apprentice Catholic scientist) in 1958. Here’s another interesting titbit I entirely agree with (from “An Inquiry Concerning Human Understanding”, 1748, Liberal Arts Press edn, 1955, p.89 [end section VII]):
“In all abstract reasonings there is one point of view which, if we can happily hit, we shall go further to illustrating the subject than by all the eloquence and copious expression in the world. This point of view we should endevour to reach, and reserve the flowers of rhetoric for subjects which are more adapted to them”.
Newton found such a point; so did the guy who (familiar with static electricity) discovered the need for electric circuits; so did Shannon (twice: finding electric circuits performing logic and that efficient use of information capacity [indexing meaning] permits encoding of redundant capacity to enable error correction); so have I (with simplifying explanations of matter and consciousness). Hume didn’t. He sent post-1604 [Baconian] science and post-1694 [Bank of England] economics up the blind alleys of logical positivism and financial control of government. That, anyway – in summary – is my considered conclusion.
Sorry, I’ve miscopied #66: my fault. Here’s the first bit.
Ken @ #51. “To the extent those who study such things reach consensus that these are facts, and then they are indeed facts. And to the extent this is the case, and then those who study such things are involved in a scientific discipline.”
So do you say this with the authority of a scientist, Ken, or of a historian who hasn’t read and thought enough of the history of the philosophy of science to realise that, like most Anglophile as against European Cartesians, he is regurgitating the opinion of a 1740’s non-scientist sceptic, David Hume? Hume argued himself (using arguments which 270 years on are refutable) into the philosophical decision (not fact) that we can’t know anything for sure, so we’d best stick to what we agree on. Hence modern party politics, run by those who can pay, blackmail or brainwash you to get you to agree with them. As for the connection of this with economics, here is an interesting titbit from MacNabb’s introduction to “A Treatise of Human Nature”, Vol 1 (of 3), Fontana edn, 1962, p.31:
davetaylor1, I say it with the same authority as most who study science and scientists. I follow the scientists. Consensus on the facts is what scientists pursue most often and most consistently. We could go into great detail on this but that would require a closer look at historical, anthropological, journalistic, literary, etc. examinations of science than there is room for here. As for Hume, we can and do “know” lots of things, as one critic of Hume said, how to go from office to local pub, for example. But facts are a special kind of knowing, a kind that was established over a 500 year period as part of the creation of “modern” science. Facts simultaneously describe and interpret, while being taken as immune from theory or interpretation. That is, facts are “objective.” Science is about facts. Scientists work for consensus about facts. You can see this everywhere in science work. For example, in one of my areas of interest I just read “Measurements of methane emissions at natural gas
production sites in the United States” by David T. Allen of the University of TX and others. “This work reports direct measurements of methane emissions at 190 onshore natural gas sites in the United States (150 production sites, 27 well completion flowbacks, 9 well unloadings, and 4 workovers). … “The 957 Gg in emissions for completion flowbacks, pneumatics, and equipment leaks, coupled with EPA national inventory estimates for
other categories, leads to an estimated 2,300 Gg of methane emissions from natural gas production (0.42% of gross gas production).” Data and facts are the focus. And in the end the study report asks for other scientists to test, add to, and accept these results. So far there is no consensus on “the facts” of methane emissions for natural gas production, but this is clearly what scientists doing such work are pursuing.
Blog # 65. What is the relationship between management (managerialism) and economics?
Management — Managerialism — and classical economics (the basis of mainline economics) are different.
Classical economics assumes a forests of firms in an unfettered market where the invisible hand of competition assures efficiency. the market is the determinant.
Management (managerialism) assumes that a group of experts with right knowledge, the visible hand, runs the firm more efficiently, especially in a global era when the scale and scope of the international corporation triumphs over the forest of small firms. The assumptions are that managers are the professional agents of the owners, the former for their salaries working to maximize return for the latter on their investments.
All this is a fiction.
In the 20th century director-primary increasing took over the firm, leading to managerialism. This cancels the notion that directors are hired hands of the stockholders. The management caste, through the powerful voice that CEOs have in politics, in gaining tax and other advantages for their firms, including those from offshore operations, and, within the firm, through their monopoly of decision-making who gets the lion’s share of the rewards of enterprise, i.e., themselves, the top 1%.
Generally economics ignores the rise of director-primary management in huge firms. Instead it clings in its analysis to a forest of firms operating in unfettered markets. On the other hand economists with their original market driven assumptions, oppose attempts of working people to organize labor unions or get minimum wages.
At best this is, as lyonwiss puts, it ‘uncorrected obsolescence’ in economics,” which “can only mean one thing: economists’ use of obsolete ideas of history to understand today’s economic reality. This leads to an educated blindness or Veblen’s “trained incapacity” to see or observe what is in front of their own eyes, except through the distorting lens of economics concepts of the irrelevant past.”
At worse, the economists are purposively furthering the interests of the 1%, that’s a Tendenzdisziplin.
To me, managerialism is the belief that management is a science, which provides universal principles, which once learnt (e.g. through a Harvard MBA), will provide the student with the necessary knowledge to manage multi-billion dollar, multi-national corporations of any complexity. The fallacy behind this belief is the same fallacy that has infected economics since its modern beginnings. Absolutely agree that economists at best unwittingly (and at worst ‘purposively’, as you say) furthering the interest of the 1%.
Your understanding of managerialism is the usual one, lyonwiss, but the ism means there is much more to it than that. The Wedipidea says “Managerialism in the economic sense is the application of managerial techniques in businesses. Managerialism in this regard has to do more with the strategic approach of setting goals. In order to achieve previously unimagined levels of accumulation and production, business within a capitalist economy needed a way of connecting their strategic plan of actions to desired implementations of those plans. Within an organization, the individuals at the top of the organizational hierarchy determines a mission or set of goals, which is then strategically analyzed by individuals lower on the hierarchy a.k.a managers to devise local goals to carry out the overall mission. Put simply that managerial standard is to receive goals from above and to create new goals for those below.[6]
Also, in Managerialism, there is a belief that organizations have more similarities than differences, and thus the performance of all organizations can be optimized by the application of generic management skills and theory. To a practitioner of Managerialism, there is little difference in the skills required to run a college, an advertising agency or an oil rig.[7] Experience and skills pertinent to an organization’s core business are considered secondary.
The term can also be used pejoratively as in the definition of a management caste. Robert R. Locke defines it accordingly as “What occurs when a special group, called management, ensconces itself systemically in an organization and deprives owners and employees of their decision-making power (including the distribution of emolument), and justifies that takeover on the grounds of the managing group’s education and exclusive possession of the codified bodies of knowledge and know-how necessary to the efficient running of the organization.”[8] This view is further considered in the forthcoming book (as of September 2011) “Confronting Managerialism: How The Business Elite and Their Schools Threw Our Lives Out of Balance”[9] by Locke and J.-C. Spender, and “The Collapse of the American Management Mystique” (Oxford, OUP).”
Also see Thomas Klikauer’s new book: Managerialism: A Critique of an Ideology, Palgrave/Macmillan.
Everything you have said about managerialism is only possible if management is considered a “science”, as you said “a belief that organizations have more similarities than differences, and thus the performance of all organizations can be optimized by the application of generic management skills and theory.”
I’m asserting that the assumption that one can learn management from a textbook like physics and be competent, is false. I cannot see that there is really “much more to it than that”, despite volumes of writing on the subject..
lyonwiss, # 72. Agreed, one cannot learn management from a textbook like physics and be competent. But it isn’t just about running an organization.
Managerialism, as Klikauer says, is ideology that occurred in the late 20th century when “management mutated into full-fledged ideology under the following formula: Management + Ideology + Expansion = an ism.” When management became an ideology it constituted a “set of ideas that are proposed by a dominant class or group. Members of such a group or society receive the ideology in order to create a false consciousness. As Jaeggi outlined, ideologies are the means by which the predominant situation is instilled in the hearts and minds of the individual.” (Klikauer, p. 2). In this case the ideology of managerialism is instilled in individuals to guarantee the management caste’s control over society’s organizational life. It is not about science but power and wealth distribution.
Robert, I’m somewhat sympathetic to your ranting against “managerialism.” But really the pristine divisions you assume in your comments are comical, or would be in the hands of a good standup comic. It is not so easy to distinguish between what you call “ism,” or “ideology,” or just a particular way of life that supporters are working hard to have most of their fellows adopt and follow. Your formula of “management + ideology + expansion” certainly applies to lots of situations that you might not object to. For example, the masterful job of the EDF, Sierra Club, etc. in manufacturing a sympathetic “nature” for us poor dumb Americans to defend and worry over. And if this nature did rage against people with climate change, Hurricanes, and killer rain, it was really the people who had caused this rage. Or Ronald Reagan turning a backward, poor, and generally undereducated Central American country into an enemy as bad as the USSR or Red China. He sold it and most Americans (even many so called “liberals”) bought it. Or how about sociologists in general convincing almost everyone from journalists to historians to public officials to CEOs that something called “society” existed for itself, whether humans wanted it or not. “Society made me do it” became a joke, but only one taken as a danger by some backward conservatives like William Buckley (the smarter and classically educated ones). All good examples of “instilling in individuals to guarantee the management caste’s control over society’s organizational life.” And certainly about power and wealth distribution, and not science (if you take science as a single set of actions).
Where have you been, Ken, haven’t you noticed how “director primacy” has taken over the firms. I object to any system of firm governance that allows an elite group to make the decisions. Or don’t you think that we live under a system of “director primacy.” Something happened to US management (and democracy) when it warped into managerialism in the late 20th century. When Chandler originally wrote about The Visible Hand (pulizer prize in history 1977), he was just talking about efficiency. That was not ideology: ideology comes when the IDEA of management expertise promotes the interests of a group–even when it breeds inefficiency. Most of my publications are about that. You don’t think that is happening. You’ve been coopted through the HBS. The biggest manageralism propaganda mill around. How is it that the Germans and Japanese managed their businesses without MBA’s and US type business schools. Poor guys.
Robert, I agree that MBAs and “management experts” have too much influence in the operations of US large businesses (very little in the smaller ones). I make a presentation to my business clients on “MBAism” and the “professional MBA manager.” It notes the following. Such managers consider themselves members of an elite group of experts who have no obligations to merit, efficiency, or even democratic decision making if these interfere with maximizing shareholder and the expert’s compensation. These experts often place themselves ahead of shareholders for compensation and deference. But the feedback since the 1950s shows clearly companies run by professional managers are less productive and efficient and their employees have greater feelings of being treated unfairly or dishonestly. Plus such companies have led to greater confusion and tension all around the business world. But most damning is that MBAs have shown themselves to be unqualified technicians unable to manage anything effectively with no ethical yardstick to keep company and management on an even keel. MBAs manage companies simplistically. Based on a company’s balance sheets, departments and managers that bring in the greatest revenue are expanded and promoted. Those that don’t are reduced and demoted. Simple rules of human action are used within which such management makes sense. For example, the only motive for humans is self-interest, being decisive is more important than knowledge, etc. MBAs accept and work to have others accept such rules questioningly. And since the 1980s the stranglehold of such experts has only become stronger in the US.
MBA expertism or what you call managerialism is part of larger picture, however. With the development of science, both academic and applied over the last 500 years has also emerged “expertism.” Expertism is the notion that there is a group within society called experts who know the “facts” as found through science and can use these facts to solve all sorts of problems, from crime to business to government to economics to energy. Look around you, experts are everywhere. They are elevated above others offering knowledge and advice, organized into “professional” societies with regular meetings, speak frequently before Congress, state legislatures, and city councils, and regularly warn us about this or that coming crisis. What sets experts’ advice and knowledge apart from other knowledge and advice is that expertism as a way of life casts experts as beyond everyday controls and always superior to other forms of knowledge and action. The main issue isn’t whether such knowing and doing as expertism can exist, which is possible but I doubt. The main issue is what expertism is constructed to do, how it does it, and what the consequences are. What you’re talking about is some of those consequences.
You can define managerialism in anyway you like, including ideology and imperialism or exapnsionism or dictatorship of the manager class. I define managerialism simply as the phenonmenon that managers have taken charge of many organizations based on little more than some management qualification (MBA or membership of directors etc).
Myself and many others have experienced managers who can hardly switch on a computer making multi-million dollar decisions on their companies’ IT systems, managers who have limited research experience managing highly qualified research teams, managers who hardly know about Black-Scholes formula managing major banks’ derivatives books etc. There have been monumental blunders, but little seems to have changed.
In the case of management of economic research, one sees managers in government and university bureaucracies making funding decisions without any knowledge or interest in economic research. They use “objective” or “scientific” formulas based on output measured by the number of publications and unproven rankings of research journals and institutions.
The efficacy of the management approach is never reviewed or critically assessed on a broader societal context. The failure by economists, in power and in charge, to have any inkling of the GFC should have given pause for re-evaluation. The failed economic managers are trusted with even more responsibility and greater power. My experience in government is that the greater the failure, the greater the increase in resources. According some research I’ve read, the cancer of managerialism has spread even to the natural sciences.
Tread # 76. I wouldn’t disagree with what you have written. We do live in a world of experts. In Germany, where I live, what might be called Fachkenntnisse (expert knowledge) is fundamental to a well functioning work-world. But Germans have never believed that “management” is an expert field, and so they never followed the Americans after WWII down the path of Masters of Business Administration. My point and that of others like Klikauer is that this MBAism, which is an education meant for a general management expertise is really not about experts (since general management is not an expertise) but an ideology, which serves the interests of the managerial class that runs huge financial, service, and industrial firms. Small business is a different subject, as you say. In Germany, however, the SME owners would shun MBAs for highly skilled experts in their carefully selected workforce. But don’t you think the management professionals that run the big international corporations under the system of director primacy run those corporations in their own interests rather than those of employees and stockholders and that they through a disproportionate distribution of the rewards of enterprise contribute to the growing gap between incomes of top 1% and the rest of us.
Moreover, the ideology of managerialism has become generalized in the organization life, in hospitals, public and private schools, government agencies without any evidence that the very well paid administrators improve organizational efficiency. As a university professor I certainly felt that this disempowerment of the faculty in the interest of this “new class” turned the universities into money-mills rather than places of learning.
As an aside, my wife, after she came to the US and worked for large US department stores, said the management class she encountered in the US, reminded her of the top managers in large industrial firms (she was in the coal industry in Poland) she encountered under Communism.
Robert, let me reduce the current dominant version of capitalism to its basics – every person for themselves to acquire and hold as much wealth as possible. Thus a management expert such as an MBA would have this goal in mind, along with the “expert” management goals he or she has been educated to perform. Thus from the start MBAs have a built in conflict – whether to use her or his management skills and knowledge to increase the company’s wealth or to increase one’s own wealth. In addition, the MBA’s work is hindered from the beginning frequently by the lack of what former GM CEO Jeff Immelt, calls “domain knowledge” –craft knowledge. Craft knowledge is the direct and intimate knowledge of the particular form and variety of business work being managed that is generally gained by managers through the apprenticeship process at various jobs and organizational responsibilities of the business. Immelt says no manager can be successful without craft knowledge. In Germany craft knowledge is still emphasized, even for managers and the absolute maximization of wealth, for company or manager is not a primary goal as in the USA. So the conflicts for a German MBA are actually a bit more complex, as we add to the above the view of German business that profit maximization is not a singular primary goal and that craft knowledge is needed to be a good manager.
I agree with you that the managerialism embodied in the MBA has become generalized into all areas of life in the US, including such places as colleges and hospitals and that has been generally detrimental to these organizations performing their duties well. However, none of this translates to MBA programs and managerialism being evil plots to enrich some members of society at the expense of others. MBAs and managerialism are parts of the historical evolution of capitalism and democracy, particularly in the USA. You give too much credit to the so called “top wealth 1%” both in terms their abilities to coordinate very disparate aspects of life in the USA and for the overall evolution of that life over the last 100 years or so. The USA was established by and for the wealthy. Few of the country’s founders were of modest means. And few of them trusted the un-propertied and mostly poorly educated “masses” to govern the country. Over the nearly 250 years since the country’s founding a battle, often bloody has been fought to define government and economics for the USA. The sides have changed and the success of the causes waxed and waned over that time. Right now the wealthiest Americans have the upper hand but it seems that is about to change. In fact the battle has been an uphill one for the non-wealthy since the beginning. But point is the general trend, also almost since the beginning has been toward greater democracy and economic egalitarianism. How that is defined is also heavily influenced by the Federalist/Anti-Federalist divisions that have played out, also since the beginning of the country. We see that today in the resurgence of opposition to centralized economics and government. Today’s “Tea Party” has roots that go back to Jefferson and Patrick Henry. Whatever your personal views of Anti-Federalist ideas and actions, you have to recognize the roles these have played in building the country.
I think we read US history pretty much the same way, except for one thing. The US changed into a nondemocratic country in the late 20th century. (Yes, the T Party is partially a reaction as misguided as it is to this development). The men who fought WWII did not do it for the top 1%. Although we already had giant corporations after the war, we came to consider them to be part of a democracy — meaning that when huge corporations replaced the forest of firms that constituted American capitalism at the turn of the last century, the idea grew that these firms, though a broad distribution of stockholder ownership, the development of health care schemes and pension plans, etc. provided for a people of plenty in the land. My claim is that “director primacy” managerialism does not espouse the goal of America as a people of plenty but is perfectly willing, and has to a large extent, to abandon the goal of a broad distribution of wealth in our country. This is especially true in the era of Investor Capitalism. You think this trend is reversing itself. On what grounds? The gap between the rich and poor keeps widening. And the control corporate-financial ceos exert over legislative, judicial, and executive Washington makes government an accessory to the crime.
Thread # 79 & 80 on director primacy
Ken, in my booklet, Management from Hell: How Financial Investor Logic Replaced People and Products in Firm Governance (Paris, Boostzone Editions, 2012) I write “In a director primacy model power and the right to exercise decision making (who decides and whose interests prevail) resides in the CEO and the Board of Directors. The issue, then, becomes who selects and controls the CEO and the board? And the answer that emerged in large US and International corporations was the CEO himself. Through control of the proxy process, incumbent CEOs nominated their own candidates for board memberships, thereby turning the boards into management-selected, instead of shareholder-selected entities. Shareholders ceased to exercise control over day-to-day operations or over long-term policy. The director primacy model signified that CEO dominated directors were not agents of the shareholders but Sui generis – “platonic guardians” of corporate interests. According to Bainbridge “director primacy” placed “power and the right to exercise decision making neither in shareholders nor the managers, but in the Board of Directors,” who asserts therewith the right to assure the “efficient maximization of shareholders’ residual claims,” but without the shareholders in effect being able to control the board. (Bainbridge, 2006)
Bainbridge, S. (2002). Director Primacy: The Means and Ends of Corporate Governance.” School of Law UCLA Research Paper N. 02-06.
______________ (2006) “Director Primacy and Shareholder Disempowerment,” Harvard Law Review, Vol. 119, UCLA School of Law – Econ Research Paper No. 05-25 – available at SSRN http://ssrn.com/abstract-808584.
Robert, people and movements that do not espouse, as you say, “…the goal of a broad distribution of wealth in our country…” have been around since the beginning of the country. Remember nearly 25% of the US population after the Revolution fled to Canada, where they actively tried to destroy the new country. Political democracy was part of what they objected to. They also strongly opposed the notion that wealth is or ought to be distributed either democratically or broadly in the US. Their view was that government decision making and wealth should largely rest in the hands of the “better” members of society. Their lobbying was intense, more intense than anything that exists today, and their use of money amounted to bribes and direct corruption of members of the government. The country survived them. I think it can survive the corporations and Chamber of Commerce today.
Yes, the gap between the richest and poorest in US society is growing again. But taking a longer view that gap is still small by comparison to what it was in 1800, in 1900, or even just before the beginning of WWI. The gap began to decrease noticeably after WWI and continued to do so through the next 50 years. Now there are pushes to reverse that. But I agree with the journalists who note this cannot continue. The demographic supporting it is dying and the ones behind it don’t have the intelligence or political clout to continue it, though they might want to do so. Plus the hold on control by the current generation of corporate CEOs, lawyers, bankers, etc. is not nearly as strong as you suggest. One scandal, one misstep in money laundering, one arrogant pronouncement too many could easily produce a backlash that would destroy their whole game. Read Warren Buffet on this. He clearly recognizes how precarious their position is and has spent considerable time, money, and effort to distance himself from it. And he’s one of the richest corporate types in the world, let alone the US.
Robert, you are correct that today CEO’s exercise a great deal of control over those who are supposed to be their reviewers and supervisors, the board of directors (BOD). In the past this state of affairs was not the norm, but still it was not unusual. In the sectors of the economy I’m most involved with, energy and utilities it was not usual even back to the beginning of the 20th century to have strong-willed CEOs who regularly buffaloed and abused the BOD. With the emergence of so called “professional managers” that situation became more common, and was more the result of CEOs seeing themselves as professional managers opposing the members of the BOD, who were not. That’s certainly the case in financial and banking corporations today. But interestingly it is just the opposite in the energy and utility sectors where BODs have begun to exert more control, including policy control. Activist institutional and individual investors have at times helped this process along, if only by attacking with equal rage both BODs and CEOs. Right now in the energy and utility sectors both CEOs and BODs are “on the run” from investors, particularly large private and institutional investors. So far this pattern has not spread to financial firms and banks, but if these continue to take the risks they have and find no benefactor like the US government to bail them out investor attacks on CEOs and BODs will likely become the norm for these firms.
Seems we disagree. Hope you are right,
Unfortunately history does not extend into the future. History can be a guide as to how things might play out in the future. But actors are defined as those things that make a difference. In making a difference they can change the path that might seem to flow from a careful study of history. So looks like we’ll both have to wait and see. It’s been a real pleasure conversing with you. Good conversations and conversationalists are not easy to find. Best, Ken
Idiotism: Capitalism and the Privatisation of Life (Dec 11, 2012)
by
Neal Curtis
Book description and editorial review statements (Amazon page)
“Idiotism examines the condition of society in late capitalism where the market logic of neoliberalism has become the new “common sense,” taken as the model for the organization and management of all aspects of social life. Using the Greek word idios, meaning “private,” Neal Curtis calls this privatization of the world “idiotism.”
“Idiotism recasts our conception of the new neoliberal “common sense,” presenting it as not simply a case of false consciousness, but an ontological problem related to our being-in-the-world.”
“This book is a comprehensive overview of neoliberal folly and the ceaseless process of privatization, whose devastating effects are already evident in the pervasive wave of unemployment, precariousness, misery and despair which are changing European society.”
“Those brave enough to acknowledge not just capitalism’s idiocy but the way it makes idiots of us will be grateful for this provocative, unyielding, and immensely readable book.”
What’s in a name?
———————–
“In the 1970s, “less developed countries” (LDCs) was the common term for markets that were less “developed” (by objective or subjective measures) than the developed countries such as the United States, Western Europe, and Japan. These markets were supposed to provide greater potential for profit, but also more risk from various factors. This term was thought by some to be politically incorrect so the emerging market label was created to hide the truth.”
“Originally brought into fashion in the 1980s by then World Bank economist Antoine Van Agtmael,[5] the term is sometimes loosely used as a replacement for emerging economies, but really signifies a business phenomenon….”
“The research on emerging markets is diffused within management literature.”
“In 1999, Dr. Kvint published this definition: “Emerging market country is a society transitioning from a dictatorship to a free-market-oriented-economy,…”
(all statements from:
http://en.wikipedia.org/wiki/Emerging_markets)
i rely apreciate…