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Anti-social economics

from Peter Radford

Some jumbled thoughts prompted by my recent reading of Robert Skidelsky’s book, “Money and Government”

Just how anti-social is economics?

I don’t think the question is difficult to answer: economics in its modern mainstream form is, at its heart, designed to undermine democratic government.  It is, therefore, profoundly anti-social.

The genesis of this antipathy towards democracy is all the way back in the beginning moments of economics as an intellectual discipline when its earliest proponents had a very specific objective, which was to build an argument for the elimination of politics from the social space we now refer to as the “market”.  This effort to de-politicize commerce was driven by the perceived need to rid it of the constant interference of whimsical and debt ridden monarchs.  So the discipline’s founders built their new framework to denigrate or demean government, where government could be equated with an authoritarian despot.

The problem with this is that the same sentiment grips modern economics even though the presence of authoritarian despots is minimal, and many more governments are comprised of democratically elected officials who represent the very same people who are lionized as ‘rational agents’ in the economic domain.  To undermine the legitimacy of democracy economists had to construct a theory to eliminate any socially inspired action on the part of those officials and relegate them, instead, to just another group off self-serving agents incapable of acting on behalf of others. 

The central premiss of economics became that social issues were best resolved within the market and that government was, at best, inevitably an imposition on the pursuit of liberty, and, at worst, deleterious to, or destructive of, that same liberty.  Oddly in order to prove that politics ought be eliminated from commerce and that markets ought simply be set free, economics had to become politically committed to an ideology.  Economics had to engulf politics in order to make sure it was the ‘correct’ politics of the rugged individual rather than anything tainted by social activity.

The problem for economics is that politics did not disappear.  Nor was the need for it obviated by the wonders of the market.  On the contrary, as individual liberty became more and more synonymous with what we now loosely call capitalism, economic theory was driven into ever increasing efforts to express that liberty in quasi-scientific terms.  The early critiques of capitalism produced a counter-movement expressed as ‘marginalism’ and eventually as general equilibrium.  In each case the ideological intent was to prove that defiance of markets was futile.  Markets, inevitably so the story went, provide the most social welfare, whereas governments can only muck things up.

Great efforts went into erecting proofs to support these conclusions.  Maximization and optimization were seen as inevitable outcomes of individual agents interacting freely, with their interaction producing no sullying or inconvenient result dependent upon their cooperation.  Indeed, cooperation disappeared altogether from theory.

Still politics refused to cooperate with economics.  The steady rise of industrialized populations with their attendant problems and demands forced the extension of democratic politics into all corners of society.  Despite the best efforts of economists social organization outside of the market continued to gather strength.  Society actually existed beyond the borders of the market.

In the middle of the 1900s this gathering strength triggered a crisis in economics.  The evident failures of markets around the world  during the 1930s produced economic theories that incorporated or tolerated a social view.  But in the eyes of ideologically committed economists even the most benign of these new theories were seen as simply the beginning of a slippery slope into oblivion.

Thus there was a renewed attack on social activity in commerce.

Planning of the kind undertaken in Soviet era governments was attacked as irretrievably flawed by dint of the cognitive incapacity of planners to absorb all the information available in an economy.  Any effort at planning was bound to produce sub-optimal results because of this cognitive incapacity.  The defense of markets and the attack on democracy then became one of a least worst kind.  Economists argued that we knew for certain that planners could not digest and act on all the information available and were thus condemned to fail lamentably.  So we ought let the market do the digesting and acting: it could do no worse, and was surely more able since all that locally held, and centrally indigestible, information was represented in the actions of individuals in the marketplace.  Magically individuals in markets have super cognitive powers not available to government employees.

This cognitive argument was ultimately successful.  Theorizing at a social or macro level was regarded as ineffective or counter productive.  Instead all theory had to start from the perspective of an individual.  Theory went back to its anti-democratic roots in order to preserve the sanctity of individual liberty.  The anti-social ideology of economics managed to squeeze out any vestiges of social action from mainstream theory.  Everything became an expression of individual choice.  At its most appalling yet logical extreme came the pronouncement that all unemployment is voluntary and that variations in the business cycle are simply representations of the latest rationally expressed information.  Thus was content sacrificed in the defense of ideology and logical consistency.

The cost was that economics rapidly lost relevance, with its last claims to such evaporating after the 2008 crisis: a crisis which according to theory could not occur.

A modern economy is riven through with interconnected processes that need extensive oversight and organization.  Such oversight and organization lies beyond the reach of even the most committed rational individual.  Hence the rise of modern corporate bureaucracy and its wholesale adoption of planning as a technology for governing production, distribution, and most other elements of commerce.  The original model of individual action upon which the anti-social attitudes of economics was based is obsolete.  Explanations of modern economies inevitably require accommodation with social activity since most commerce is entirely social.  Society manifestly exists even in the private sector where organization dominates activity and belies the notion that everything can be resolved back down to acts of individuals.

Yet economics doggedly plods on denying the political landscape and the social advances of the past two hundred years.  It still privileges individuals over the social.  It still cannot comment usefully on organization other than that of markets.  And it steadfastly looks aghast at democratic governance because it cannot tell the difference between a democracy and an authoritarian despot.  All government is simply lumped together in one malign bucket whether it expresses the will of the people or not.  And great efforts go into moving important economic decisions beyond the reach of elected officials.  This is even if the technocrats that economists entrust with those decisions are manifestly wrong.  Apparently, it is better to deny society than to re-invent economics.

No matter what gloss economists put on their efforts, at its core economics remains anti-democratic:  by design.

  1. Mike Ryan
    March 6, 2019 at 4:19 pm

    There are 25 right to work states. Right to work laws are anti-labor laws,

    Economics as taught in high schools is also anti labor. The myths the hs econ classes teach as a science are blatant thought control with completely false concepts like “economic profits are 0” and marginal product of labor. This short video exposes the false science of economics. If the math doesn’t work – it’s not a science.

    For these same 25 states – 20 of them REQUIRE high school students to take a class on economics. It is clear the power elite in these states are doing everything they can to undermine labor and the middle class. This brainwashing of our kids should be against the law.

    Call your state legislature and demand our kids be taught something useful = i.e financial literacy.. not the Orwellian class on Economics.

  2. Patrick Newman
    March 6, 2019 at 4:28 pm

    Modern computing technology combined with high-speed networks and high productivity automatic data capture surely creates conditions for a planned economy that could not possibly exist when Gosplan was in its heyday. Large manufacturing companies with JIT technology create a closed environment of a planned economy at super-enterprise level. There is no free enterprise there!

  3. March 6, 2019 at 8:58 pm

    Thank you, Peter, for that very astute observation about the philosophic foundation of “economics” and especially the “neoliberalist” adaption of that philosophy. It is an observation that has been completely overlooked in any teaching and reading on the subject. The Mises Institute is hell-bent on ensuring that philosophy is maintained and promulgated. It seems that MMT is the obvious way to counter the philosophy as there is no way our society can eliminate either Government or “economics”.

  4. Rob Reno
    March 6, 2019 at 10:08 pm

    Great post! Makes me think of a book I am reading now:

    The ‘public choice’ doctrine of James Buchanan (NPW, 1986) was hostile to democracy, which he feared could vote away the rights of property. In that spirit, macroeconomic policy was taken away from elected governments and handed over to the technocrats of so-called independent central banks, whose discretion was restricted to achieving a given rate of inflation. Even that narrow discretion was a concession, designed to hold down the pressure of wage demands. When it came to asset price inflation, to the price of shares and houses, no intervention was allowed: one law for wages, another for capital. Real choice can be difficult. In contrast with the premises of deterministic economic modelling, the future is unknown, and choice often intractable, with no optimizing algorithm available. (The Nobel Factor: The Prize in Economics, Social Democracy, and the Market Turn” by Avner Offer, Gabriel Söderberg, http://a.co/fuNcQSN)

  5. March 7, 2019 at 1:22 am

    Amen. In my article “Questioning the ontology of conventional economics” http://www.vcn.bc.ca/~vertegaa/ontology.pdf soon to be published as a chapter in the edited book “Examining the Relationship Between Economics and Philosophy” I argue that the “liberty” of orthodox economics, by being unfettered, is the antithesis of the just liberty axiomatically based on the golden rule. Thereby entering the justice realm of potential conviction, it opens up a far more profound critique of mainstream thinking than heterodoxy is doing now through trying to convince.

    • Craig
      March 7, 2019 at 8:32 am

      That is quite correct. Worshipping free markets is actually not liberty, but chaos. In the temporal universe there is only freedom amongst known and agreed upon barriers. That is both extremely relevant to economic and monetary theory….and a personal/mental paradigm changing insight as well.

    • Rob Reno
      March 7, 2019 at 9:59 am

      [J]ust liberty axiomatically based on the golden rule. Thereby entering the justice realm of potential conviction, it opens up a far more profound critique of mainstream thinking than heterodoxy is doing now. ~ John Vertegaal

      What a beautiful concept John. I look forward to reading your paper over the next few weeks as I settle into our new home here in Japan. I have been reflecting lately on symmetry and beauty when fact, meaning, and value are not viewed as mutually exclusive, but integrated in a balance of science, philosophy, and religion. Of course, by religion I do not mean institutional religion or the religions of authority, but the living experience of the hunger and search for truth as it is perceived in facts, meanings, and values — the experiential realization of truth, beauty, and goodness.

      The Golden Rule: Social, Economic, and Political Implications

      The golden rule is, first and foremost, a principle in the philosophy of living, expressing a personal standard for the conduct of one-to-one relationships. A Chinese teaching illustrates priority of the personal dimension: “If there is righteousness in the heart, there will be harmony in the home. If there is harmony in the home, the nation will be well governed. If the nation is well governed, there will be peace in the world.”

      (….) In a personal philosophy of living, the golden rule promotes social service, and its most basic systems application is a commitment to social equity. Applications to economic and political affairs extend that underlying commitment. The philosophy of living, in general, and the golden rule in particular, do not offer detailed patterns for social systems, or specific steps for a particular generation to follow toward actualizing ideals. The rule inclines towards peace, but cannot construct proposals for defense and disarmament. When it is clear what military policy is best for political evolution toward enduring world peace, then the golden rule will clearly authorize that as the policy requires. Those whose perspective on economics are clearest can see how to apply the golden rule in that realm. There is just one caveat: the way to apply a moral principle to complex systems is not always immediately obvious. Without wisdom of evolution, moral idealism and fanaticism take bold steps backward. The weakness of much of modern political philosophy is its failure to keep pace with Kant’s appreciation, expressed in his essays on history and politics, of the importance of a gradual and proper evolutionary approach to the ideals of an advanced civilization.[5] Complacent conservatism and attempts at revolutionary social transformations prove equally self-destructive. (Wattles 1996, 173-174)

      What the rule does for systems is to prompt questions that imply norms for systems. In the family, does parental authority degenerate into patriarchy, violating the equality of men and women and making fear predominate in the child’s relation to the parent? In society are extremes of inequality of wealth and power tolerated? Does talk of “community” along ethnic lines betray human kinship? In business, does the profit motive eclipse the service motive? In politics, does a nation go beyond intelligent patriotism to assert its sovereignty without regard for planetary responsibilities? Does an organization benefit those within and those without? By virtue of its implied respect for human dignity, the golden rule is inconsistent with sexism, nationalism, racism, and mistreatment of others based on distinctions of class, age, condition of health, religious belief or disbelief, level of education, linguistic preferences and so on. The rule illumines the ethics of social systems but its primary benefit is to individuals. The golden rule raises the question; a successful inquiry enables a golden rule explication of the result. That much, but no more, can be expected of a moral principle. (Wattles, Jeffrey. The Golden Rule. New York: Oxford University Press; 1996; c1996 pp. 172-174.)

      [5] Such an evolutionary perspective does not, of course, require blindness to symptoms of civilizational decline; but decline does not go on forever. Sooner or later we will find the inspired leadership and teamwork to reorient our planetary course, and who can say whether that reversal is not already under way? It is no simple matter to generalize regarding the countless ups and downs that simultaneously and continuously reshape the present and future. During years when I taught world history, I arrived at the conviction that history is like a decathlon in which the power of love competes with the forces of self-centeredness and materialism and destruction; I am not in doubt about the ultimate triumph of love, though in any given event on the horizon, there is uncertainty. There are so many positive persons to work with and so many promising projects to join that courage and faith can dispel anxiety and cynicism. Nevertheless, I believe that nothing short of a spiritual renaissance will have the power to remotivate and redirect our planetary course. Moral teaching and religious doctrine are not enough.

      • March 7, 2019 at 3:04 pm

        Thanks, both Rob and Craig, for your straight-out support of the concept. When I plugged the article into an online grammar checking app yesterday however, I got my worst fears confirmed. I’m writing at a post-graduate level, making the majority of my sentences hard to very hard to read. With a writing style this poor I’m going to need a lot of help to convince the masses of the fundamental rightness of my tack.

  6. Rob Reno
    March 7, 2019 at 4:14 am

    I argue that the “liberty” of orthodox economics, by being unfettered, is the antithesis of the just liberty axiomatically based on the golden rule. ~ John Vertegaal

    I completely agree John. Lars, in his book notes the same. Libertarians confuse license with liberty:

    Libertarians often contrast the importance of equality with that of liberty. But to Sen [1992:22-23] it can never be a question of liberty or equality. To pose the question in terms of this contrast is according to him a “category mistake.” Liberty is among “the possible fields of application of equality, and equality is among the possible patterns of distribution of liberty. (Lars Pålsson Syll. On the use and misuse of theories and models in economics (Kindle Locations 2824-2827). WEA. Kindle Edition.)

    Growth statistics are biased against countries with large public services. The GDP value of public sector output, by statistical convention, is measured at cost, so any improvements for example, better teaching or healthcare, would not be captured as a productivity increase. The same services provided privately would show an increase in welfare if they became more expensive (or profitable) at the same level of use. This bias discriminated against a large public sector country like Sweden, and is sufficient in itself to invalidate Lindbeck’s productivity comparisons. In reality, public sector social insurance is between one and two orders of magnitude cheaper and more efficient than market insurance for sickness, disability, and unemployment. Using standard national accounting conventions, the American health system, which costs about twice as much in relative terms as the UK National Health Service (and more than that absolutely), and is associated with inferior health outcomes, contributes twice as much ‘output’ to GDP as the UK health service. Likewise, due to good public health and a low birth rate, Sweden had a larger proportion of aged people. Controlling for such differences (and many others) is elementary statistical practice, which both Lindbeck and Korpi failed to apply. And if Swedish performance lagged behind (no sure thing), Lindbeck never demonstrates that the cause lay in inadequate incentives for labour or capital. A more careful Swedish economist, otherwise sympathetic to Lindbeck, called his sclerosis argument ‘silly’. (The Nobel Factor: The Prize in Economics, Social Democracy, and the Market Turn” by Avner Offer, Gabriel Söderberg, http://a.co/4za5gBP)

    The power to choose the measure of success (efficiency?) determines winners and losers, and those with power rigged the game from the start:

    The successful campaign to eliminate distributional issues from the core of the economic discipline has its mirror image in the popularity of GDP as the measure of economic success of a nation. While the pioneer of national accounting (i.e., GDP), Simon Kusnetz, explicitly said that GDP should not be used as a measure of welfare, and few economists would explicitly advocate such use, it is also true that economists as a group have done precious little to counter the popular opinion that growth, in the sense of maximization of GDP, should be the main goal of economic policy.

    GDP is the money value of final goods and services that an economy produces in a quarter or a year (i.e., not including those goods and services used as inputs in production of other goods and services). This definition makes it is a [sic] reasonable yardstick of how much money moved around in a quarter or a year, and therefore captures to some extent how much economic activity in money terms there was in that period. (Häring et. al. 2012, 28)
    It is a poor measure of actual activity in absolute terms due to using money rather than physically measuring human activity or indicators of human activity (e.g., how many tons of material were moving around in a year, or how many bits of information were exchanged in a year). Some activity that commands a large premium in money terms for institutional reasons, like investment banking, even if it is only one powerful person doing a moderate amount of work, will count the same as activities of hundreds of factory workers and much more than the activity of millions of housewives. Societal changes like providing more institutional childcare or reigning in the market power of investment banks can make a huge difference in terms of measured GDP, without significantly changing the actual activities performed. Because of this reliance on using money valuations, GDP has severe issues with accurately measuring technological progress. (Häring et. al. 2012, 29)

    This method of measuring economic activity has two things going for it. It makes the mathematics a lot easier than measuring in a sensible way. And it conforms with the implicit assumptions if mainstream economics that an extra dollar is worth the same to a poor person than it is to a rich person, just as it makes no differentiation between types of activity, for instance whether they are good (i.e., charitable work) or bad (i.e. criminal activity). If a hedge fund manager makes five billion dollars in a good year, as John Paulson reportedly did in 2010 (Burton and Kishan 2011), this is must as good in GDP terms as 13.7 million people living on a dollar a day doubling their incomes. (Häring et. al. 2012, 29)

    Policies that treat human beings as social creatures and try to reach the best results in the most important dimensions of human goals cannot flag their success with equally prominent and simple statistical measures like a single number where higher is “better.” The rich and wealthy benefit most from this way of measuring the economic success of a nation, since it de-emphasizes the gains of the mass low-income people relative to those of a minority if rich people. As far as nations are concerned, it benefits nations that champion the policies favored by this approach, with the US being foremost among these. (Häring, Norbert and Douglas Nial. Economists and the Powerful [Convenient Theories, Distorted Facts, Ample Rewards]. New York : Anthem Press; 2012; pp. 28-29.)

    • Craig
      March 7, 2019 at 5:46 pm

      The Golden Rule of do unto others that which you would have them do unto you is a way of expressing the the natural philosophical concept of grace as in love in systemic action/individual behavior. It is a definition of the process of two way communication. It is also the expression of the new paradigm in economics and money systems, that is, Abundantly Direct and Reciprocal Monetary Grace as in Gifting.

      The Golden Rule/concept of grace being both unitary and integrally underlying in all things human is therefore imminently applicable to any and all human endeavor.

      • Rob Reno
        March 8, 2019 at 2:24 am

        Nicely said Craig. Indeed, some day humankind will organize economic striving based more on the desire to serve one’s fellows than mere self-interest (the lowest and most base common denominator).

  7. Ken Zimmerman
    March 23, 2019 at 12:52 am

    Peter, everything you say here is accurate. But in condemning today’s economics as “anti-social” you don’t go far enough. As structured today, economics is anti-human. For example, apart from outright stupid “elites” such as Trump and his criminal associates, most CEOs and other “smart” business persons believe the science about climate change. Considering this acceptance, they follow some combination of these two paths in dealing with this danger. One, they search tirelessly for ways to make money from the crisis. Two, they look for safe places on the planet to “ride out” the effects of climate change. 90% or more of humans may perish from climate change but so long as they and a few others like themselves survive they count this as coping with climate change. This model of “correct” human action is the result almost entirely of modern economics, in combination with notions like “Social Darwinism” appropriated by economics. It’s Russian roulette with all cylinders loaded.

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