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Economics and civil society

from Peter Radford

I have been subject to quite a bit of push back on my repeated critique of the anti-democratic nature of orthodox/classical/neoclassical economics.

So I am going to double down on the basis that when you’ve hit a nerve and produce a knee-jerk reaction it is wise to hammer away.

Allow me to restate my opinion in brief: economics in the general tradition of Smith’s invisible hand up to and including the notions of Hayek, Friedman, and their disciples is, at its core, an attempt to conceive of a society stripped of politics. By this I mean it is an attempt to argue that passivity in the face of overwhelming “forces” that are “objective”, “decentralized”, and “systemic” will allow for an optimal distribution of wealth, and the attainment of the maximum possible total wealth compatible with that optimum. All that is needed is a goodly dose of rational decision making, a hopelessly large level of cognitive ability, enormous foresight, and an unobstructed view of absolutely everything. Oh, and under no circumstances ought there be any active interference in the economy to adjust the perfect outcomes. It is a perfect-in-perfect-out wonderland in which no one need concern themselves as to the ethics of the outcome. It is, after all, perfect. It cannot be improved upon. Free markets rule!

This wonderland system, so constructed, will, we are assured, give back to everyone a return justified by their so-called marginal productivity.  Mucking around in the system, no matter how well intentioned that activity might be, can only move society away from the optimum. It is, therefore, not possible for government action to improve the distribution of wealth. We all simply have to bow before the system and accept whatever it gives us. Hence the utter passivity of the vision.

And hence the elimination of politics, since it is through politics of various kinds that humans arbitrate life, with economic outcomes merely being one aspect of that life.

I attribute the desire to eliminate politics to an early age in modernity when the world was still cluttered with arbitrary forms of government. The rising bourgeois class needed theoretical justification for a change in the power structure of the economy, and, in particular, it needed a way of neutering the tendency of autocrats, monarchs, and their ilk to get in the way of the accumulation of private wealth.

Thus the success of Smith and his heirs.

To this day economists working in that tradition begin with a bias that all government is arbitrary at worst, or misguided at best. No matter what form of government. It is my contention such economists never took on board the arrival on the scene of democracy. Hayek et al are still fending off the evils of autocracy. They are living deeply entrenched in a past era. They have not adjusted to the reality of representative government when there is almost a one for one overlap between “we the people” as represented actively on the political system, and the so-called agents inhabiting the economic system.

We are asked, by economists in that tradition, to suspend our criticism of people when they acting self-interestedly in the act of exchange, but, at the same time, to be deeply skeptical of the activities of those same people when acting through the agency of representation in politics.

The contradiction is extraordinary.

On the one hand we are all perfectly functioning, almost robotic, rationally driven consumers when we are in the supermarket. On the other hand we are naive, limited, and incredulous when we are in the ballot box. The self-interest of government employees is bad. The self-interest of those self same people as consumers is good.

No wonder right wing economists work hard to isolate the economy as a self-contained entity for analysis. For to admit cross pollination with the political system would be to infect their pristine world with all the evils they attribute to that political system. It would bring their pretty utopia crashing down. It would open the door to the efficacy of active government.

In a democratic system the people who comprise the market are those who comprise the government. To criticize one ought to be to criticize the other. To idolize one ought to be to idolize the other. You cannot have it both ways.

Unless, of course, you disagree with the outcomes of one of the systems.

And since economists working in the Smith through to Hayek/Friedman tradition are unrelenting in their criticism of all things governmental, I can only deduce that they disrespect if not despise democracy. Which, perhaps it escaped their notice, is our current form of government.

Modern economics was born at a time when government was, indeed, too arbitrary for our collective good. It has failed to adapt as we-the-people sought to gain more control over our social outcomes. It is out of step with history. It has become an anachronism that does ever greater harm the more its origins recede from our current reality. It is a relic of an intellectual uprising two hundred years ago, and is content with re-litigating the events of the early 1800′s endlessly. Its relevance to the 2000′s is questionable because of its failure to update its core notions and concepts from those of its inception and early development. What we have now are simply highly polished and formalized versions. The core, with its inherently anti-governnmental bias, remains the same.

So it saddens me deeply to witness right wing attempts to explain modern economic facts such as our level of prosperity or contemporary inequality with, what is effectively, one arm tied behind their backs. By being so in the thrall of so-called invisible hands, so-called free markets, so-called equilibria, so-called marginal productivity and the other paraphernalia of the Smith-Hayek/Friedman tradition, they simply reveal themselves to be anti-democratic. They do not reveal an understanding of that part of modern civil society we recognize as the economy.

And they do not understand history. Which is odd because that’s what they purport to be doing when they deploy the Smith-Hayek/Friedman bag of tricks to debunk Piketty.

  1. December 2, 2014 at 2:47 pm

    I live in an advanced civilization (USA) which, I do admit, following Darwin, evolved from the barbarian neanderthals in other countries like europe, africa and siberia. But here, when faced with ‘push back’, we have evolved democratic Mec(h)an-Iisms (yes we can!!! see for example ‘mechanism design’ by roger myserson of u chicago —lots of fresh water there, like lake michigan—and he even got some sort of prize, since he kept his eye on it) to deal with conflicts like this. All you have to do is say ‘hands up, don’t shoot’.. (Of course, even advanced civilizations have a few unsolved problems—‘they shoot horses, don’t they’ (patti smith).

    Regarding the last paragraph (‘and they do not understand history’ (not to mention herstory, though as some historians have said about africans, maybe they don’t have any history—if you don’t get it, you just don’t get it), as I’ve pointed out before:

    1. ‘those who do not study history will repeat history
    and
    2. what we learn from studying history, is that we don’t learn anything from studying history

    These axioms have been my main inspiration; hopefully it can become a major competing religion, with a huge sanctuary, TV station, street corner missionaries, etc.

    History is good because it keeps Niall Ferguson (he even has a suburb in Missouri named after him; Brian Ferguson (anthropology, rutgers, nemesis of Chagnon—-also freshwater, i think) has studied the violence involved with the FerguSons) off the street, along with other teachers so they dont shoplift since the taxman pays them. Support education!!!

    I didn’t know Adam Smith personally, nor eve, but I don’t put him in the same class as Hayek or Friedman . (Hayek has these old debates on the ‘socialist calculation problem’ with Lange and Lerner (also at U Chicago i think) , and he did have one point (aggregating choices is a difficult problem, now known as ‘np-hard’ or sortuh like SMD theorem) ; his book ‘road to serfdom’ i think ranks in elocution with d w griffiths ‘birth of a nation’ and modern talk radio (of the ‘hate radio’ variety—michael savage, some catholic from the 30’s, mark levin (he even had a job with reagen and has a law degree—certainly he deserves a sentence greater than what you get for a 3rd degree—maybe like slaughterhouse 5), etc. though I prefer more religiously rigorous stuff like Godard’s ‘weekend’ , ‘el topo’, ‘eraserhead’, ‘pink flamingos’, ‘black orpheus’ and orphee (jean cocteau)). Friedman’s progeny include the geophysicist ‘Uncle’ Tom FriedMan of the NYT’s—who discovered that actually, Columbus was not even wrong, and instead ‘the world is F(l)at’.

    I don’t have a big issue with Smith, or marginalism, or Marx (labor theory of value)—a recent blog (November 19) on ‘economist’s view’ with mark thoma, b milanovic, and rakesh bhanduri (what kind of name is that?) proves conclusively that Smith was actually a closet marxist, though he couldn’t come out at the time , because of the calvinist tradition and the fact that, being neanderthals, they didn’t have a name for it yet. Even so, he plagiarized from the future, in my view (see Interstellar film for details on how to plan your time travel agency ).

    Some of Smith seems to be common sense, like ‘bliss’ (Jevons or someone). Its just cost/benefit (subjectivity, vs Egmont K of RWER), and production/consumption (‘objective’, a la Egmnont K) . Some group i’m sort of a member of ( https://jacobinmag.com —there was an interesting exchange in NYRevbooks on jacobins, robespierre, etc. recently —someone trashed someone at IAS (same place Einstein and Godel worked at, but my impression is their social sciences seem to be a combination of catholic theology, alchemy, derrida, and lacan ) ) (though i wouldn’t be in any group which would have me as a member, so i’m in the mark twain, cool group—https://www.boycottholland.wordpress.com ) is reading H Braverman on ‘work’ this week (monopoly, capital, deskilling, taylorism, etc.). Last time it was on the nitwit Richard Florida’s ‘creative class’. I think, as a scholar of Smith (i read both titles of his two famous books, so i am qualified to speak on him—i guess some ‘fringe’ or ‘heterodox’ economist types would say there is something between the covers, but these are the same kind of people who say that beauty is more than skin deep). All of these people deal with the issue of ‘work’. This is one field I have heard of but am unfamiliar with; I posit its connected with ‘unemployment’. Also, jean tirole’s industrial organization stuff (I heard he won the lottery (see the short story by Shirley Jackson, and film) for being the emperor’s, and it came with a new set of clothes). But now I remember—work is connected to internal energy and heat exchange—dU=&Q-&W. But i don’t see the connection to unemployment—perhaps you need a fiber bundle (a la Eric Weissman of ‘gauge theory econophysics’).

  2. paul davidson
    December 2, 2014 at 3:32 pm

    I suggest you read the book ECONOMICS FOR A CIVILIZED SOCIETY by Paul Davidson and Greg Davidson (Macmillan, London) to see a discussion t of civilized economic policies and why mainstream economics reaches uncivilized polixies.

  3. December 2, 2014 at 8:27 pm

    Politics vs. Science
    Comment on Peter Radford’s ‘Economics and civil society’

    First of all one has to distinguish between theoretical and political economics. The goal of political economics is to push an agenda, the goal of theoretical economics is to explain how the actual economy works. From the viewpoint of science political economics as a whole is a no-go. The first problem of economics is that many economists are not scientists but agenda pushers of one sort or another. This, and not the peculiarities of the subject matter, explains the secular stagnation of economics in comparison to the real sciences.

    Currently, economists do not understand how the economy works.

    “As Joan Robinson said, our essential object in economics is “to understand how the economic system works”; or, putting the emphasis differently, as did Keynes, “Is the economic system self-adjusting?” Sadly, we economists have so far done little to address, much less provide satisfying answers to the issues posed by Newcomb, Robinson, and Keynes. … we know little more now about “how the economy works,” or about the modus operandi of the invisible hand than we knew in 1790, after Adam Smith completed the last revision of The Wealth of Nations.” (Clower, 1999, p. 401)

    Science is a trial-and-error process: ignorance is the starting point, great insights are few and far between. Economics is, in its present condition, a failed science. This, however, does not hinder economists to give policy advice. And this is not only ridiculous but illegitimate. Mill had stated clearly the distinction between positive and normative economics.

    “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” (Mill, 2006, p. 950)

    To recall, it were the ancient Greeks who first introduced the distinction between doxa and episteme, opinion and knowledge. And then they drew the line of demarcation between non-science and science.

    Clearly, Smith and Mill were agenda pushers against feudalism. Marx and Keynes were agenda pushers and so were Hayek and Friedman. However, all these economists insisted that they were doing science.

    It is not the question whether the one or the other of the above mentioned fought for the good or the evil cause. All abused science for their agenda pushing. As economists they have to be judged according to their scientific merits. As far as economics is concerned, Hayek and Friedman have to be criticized for zero scientific content, not for their political commitment, and Keynes has to be praised for his attempted paradigm shift but not for his political commitment.

    Economists are expected to deliver the true economic theory and not to save the world. Up to the present, they have not accomplished their primary task. In order to become a science, economics has to get rid of agenda pushers of ALL sorts. This is the theoretical economist’s most valuable and the only legitimate political contribution to a civil society.

    Never allow any economist to advertise poor theory as a contribution to the betterment of the world we live in.

    Egmont Kakarot-Handtke

    References
    Clower, R. W. (1999). Post-Keynes Monetary and Financial Theory. Journal of Post
    Keynesian Economics, 21(3): 399–414. URL http://www.jstor.org/stable/4538639.

    Mill, J. S. (2006). A System of Logic Ratiocinative and Inductive. Being a Connected
    View of the Principles of Evidence and the Methods of Scientific Investigation,
    volume 8 of Collected Works of John Stuart Mill. Indianapolis, IN: Liberty Fund.
    (1843).

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