New APPS: Art, Politics, Philosophy, Science

Weekly Philo Economics: metaphysical indeterminacy and the road not taken by Analytic Philosophy (and Political Economy)

"I believe that [W.E.] Johnson, like McTaggart and Aristotle, deserves commentators." A.N. Prior (1949) MIND.

"Mesmerized by Homo economicus, who acts solely on egoism, economists shy away from altruism almost comically. Caught in a shameful act of heroism, they aver: "Shucks, it was only enlightened self interest." Sometimes it is. At other times it may be only rationalization (spurious for card-carrying atheists): "If I rescue somebody's son, someone will rescue mine.

I will not waste ink on face-saving tautologies. When the governess of infants caught in a burning building reenters it unobserved in a hopeless mission of rescue, casuists may argue; "She did it only to get the good feeling of doing it. Because other-wise she wouldn't have done it." Such argumentation (in Wolfgang Pauli's scathing phrase) is not even wrong. It is just boring, irrelevant, and in the technical sense of old-fashioned logical positivism "meaning-less." You do not understand the logic and history of consumer demand theory — Pareto, W. E. Johnson, Slutsky, Allen-Hicks, Hotelling, Samuelson, Houthakker,... — if you think that is its content."--P. Samuelson (1993), The American Economic Review.

There is a school of thought that locates the origins of analytical philosophy in the Cambridge of the philosopher-economist, Sidgwick and his students. After all, in Sidgwick's writings we find all the analytical virtues, and it is, thus, no surprise that Rawls and Parfit treat him as our vital interlocuter. Those (that is, the circle around Sidwick) recognized in Boole's work -- to quote W.E. Johnson -- "the first great revolution in the study of formal logic...comparable in importance with that of the algebraical symbolists in the sixteenth century." (2.6, p. 136) While it is not the story I tend to tell (say, here and here), I like this approach because it reminds us of the non-trivial overlap between logicians and economists so distinctive of Cambridge between 1870-1940, and thus, puts Keynes (father and son) and Ramsey back into the origin of analytical philosophy.

Now, the logician-economist, W.E. Johnson (1858 – 1931), is a test-case for this school of thought.  (Recall the significance of Johnson to of our very own Mohan [and here].) For, while Johnson does not belong to the British Idealists, he does not figure in the stories we tell about our origins at all (selective evidence: Landini's Russell nor Candlish's The Russel/Bradley Dispute do not even mention Johnson). Even Wikipidia claims that his "Logic was dated at the time of its publication, and Johnson can be seen as a member of the British logic "old guard" pushed aside" by Russell and Whitehead. Wikipedia fits our narrative of progress; yet what to make of Prior's judgment? 

Weekly Philo of Economics: Central Banking with materially flawed models

The idea that there is something like an efficient market in scientific ideas (EMISI), supporting a ruling 'paradigm,' is very dangerous in the policy sciences. Even if we assume that scientists are individually pure truth-seekers, imperfections in scientific markets can produce non-epistemic (and epistemic) externalities (recall here, including criticism of a famous paper by Aumann). EMISI provides cover for 'The Everybody Did It' (TEDI) Syndrome (recall here). With Merel Lefevere, I have been exploring in what circumstances the presence of TEDI Syndrome is indicative of collective negligence (or a negative externalities). One possible consequence of our approach is that those scientists/institutions that interface with policy should seek out  critics and critical alternatives to the existing paradigm. Jon Faust, an economist, sometimes acts as such an in-house critic at the United States Federal Reserve (the Fed) and the Riksbank. Two of his relatively non-technical papers (here and here) prompted this post.

Central Banks rely, in part, on models developed by academic economists to set monetary policy. Yet, Faust notes two problems in the way the intellectual supply-chain works: (i) there is almost no venue for "high-level conversation" about "academic work and its relation to actual practice." (53) (ii) State of the art models are often applied without full knowledge of all their possible consequences in the real world because these models models "have substantial areas of omission and coarse approximation" (55)  In light of (i) and (ii), Faust's aim (iii) is to help central bankers and the modellers develop "a formal literature on best methods and practices for using materially flawed models in practical policymaking," (55) or "how to make the most responsible use in policymaking of what we now know." (60) My first reaction was, 'it is about time;' my second, more generous response was warmth in my philosophical heart that Faust is engaging in philosophy of scientific methodology and non-ideal regime/institution construction. His main idea is to adapt a kind of policy protocol from a literature that "goes under names like “human relevance of animal studies” and “interspecies extrapolation” (57) in the practice(s) of Toxicology.

A Currency Strategist explains.

"In fact, the very success of the owners of capital in securing the elephant’s share productivity gains and ensuring low effective taxes, lies at the very heart of the credit crisis."--Marc Chandler; read the whole article. [HT Bookforum--a very cool blog.]

Weekly Philo of Economics: articulating an optimal blend of competition and cooperation in society

Unlike geometry, economic theory does not consist of theorems which must be a sacred seal set upon some part of a man's, or a woman's, life. The ethics of commerce must draw on ethics as a whole, and for this, we, however “we" are constituted, must draw on ourselves through an inward look, of picturing something that we cannot see, of making a composite and being satisfied with a rough outline that allows us to cope and carry on. The question, and now I keep repeating myself as in a stutter, is how are we to do this? How is one to foster an optimal blend of competition and cooperation in society and in theorizing about that society, to control self-interest and to acknowledge the possibility of self-deception, to prevent one particular picture overshadowing the composite, putting the analyst and the analyzed, the theorist and theorized, on the same plane of existence so that an ethics of theorizing, rather than a narrative of self-serving or group-serving domination, can emerge? (Khan 2003: 19)

M.A. Khan, a  mathematical economist (whose career I helped celebrate this week-end), concludes an important essay on Alfred Marshall, Frank Hahn, Joan Robinson, and Keynes (all Cambridge economists who engaged in serious reflection on their craft and its role(s) in society) with the lines quoted above. Now as Khan puts it, “Economists do not have a comparative advantage when it comes to ethics,” (Khan 2005: 40) so he turns  to philosophy, but not philosophical theory (recall his criticism of Singer). Rather, inspired by Wittgenstein and Cavell and aided by philosopher-economists from the past, Kahn turns primarily to an extended self-examination. Now, the aim of his ethic is “to cope and carry on” without domination. So, the aspirations are in some sense quite minimal. But, of course, a moment's reflection makes one realize that a society without domination and with an "optimal blend of competition and cooperation" is, of course, far beyond present existence anywhere. Even a dominance-free theorizing about such a society may still be beyond our reach. (Yes, I expect protests from our political philosophers and ethicists.) Khan's focus on "society" (and not, say, a system of individuals [recall here]) makes him altogether a strange bird among contemporary economists, yet an heir to Adam Smith. 

Government protecting corporations - iteration #10,741,692

Here is a truly appalling story concerning the rise of corporatism in America.  The general issue I want to raise is this: most of those who defend capitalism in the sense that includes allowing for private ownership of the means of production, wage labor, and massive wealth disparities as a result, typically claim that genuine capitalism must be distinguished from "crony-capitalism" and that we cannot allow the government to become an organ for the support of the most economically powerful.  But I've simply never understood how this was supposed to work.  The whole theory of the beast presupposes that people are self-interested maximizers.  Does that not apply to those in government?  And if it does, then how exactly do we prevent their corruption?  Is there some magical way to take the possibility of graft in all its myriad forms from bending government to the will of those with the most money?  In short, if the watchdogs of the level playingfield are just people like us, growing up in a system that encourages self-interest and greed, why would one think there was any hope of stopping the slide from capitalism to corporatism.

Anyway, even if you don't share my concerns about the general issue, I trust that this story is revolting enough to be worth a post on its own.   

Peter Singer, class warfare-ist

Obesity is an ethical issue, because an increase in weight by some imposes costs on others... [a] way to achieve the same objective would be to set a standard weight for passengers and luggage, and then ask people to get on the scales with their luggage. That would have the advantage of avoiding embarrassment for those who do not wish to reveal their weight...the point of a surcharge for extra weight is not to punish a sin, whether it is levied on baggage or on bodies. It is a way of recouping from you the true cost of flying you to your destination, rather than imposing it on your fellow passengers.--Peter Singer [HT Feminist Philosophers.]

I'll leave it to others to dissect the use of racialized/gender stereotypes [e.g., "a slight Asian woman" vs "a man who must weigh at least 40 kilos more than she does"] by Singer in the piece.  Let's also grant Singer that air travel is not a "human right" (and stipulate that Singer could grant some exceptions). In effect, Singer advocates differential pricing. This is not uncommon: in higher education Stateside we are familiar with tuition discounts ("financial aid") based on, say, need.

Singer ignores need or ability to pay entirely in his analysis. It is unclear why that ought not be included in this "ethical issue."  Evidently, "true cost" does not mean subjective utility. Need is not irrelevant to Singer's proposal because Singer talks about "true cost of flying" without calling attention to all the subsidies offered to airlines, airports, and aircraft manufacturers by the general public (Singer uses the vocabulary of "public transport" without irony by the way); these may well involve non-trivial financial transfers from the poor to the middle classes and rich. Given that Singer selectively focuses on body weight (and shapes) when talking about "true cost" of flying, one cannot help but feel that he is selectively using (Euro/US-centric) upper-class moral sentiments to advocate policies that will disproportionally impact others.

Weekly Philo of Economics: Of Picturing Something that we Cannot See (I) [Milton Friedman, Alfred Marshall, and Khan]

Random variables and elementary particles have neither values nor intentions; they may constitute a system but surely do not make a society.--An Economic Theorist (2004).

Whenever we get a glipse of economic man he is not selfish. On the contrary he is generally hard at work saving capital chiefly for the benefit of others. (Marshall 1885: 28)

Milton Friedman and Anna Jacobson Schwartz gave A Monetary History of the Unites States an epigraph from Alfred Marshall. Friedman's engagement with Marshall was not superficial; his one serious contribution to the history of economic theory was on the Marshallian Demand Curve (1949). Friedman's famous (1953) methodology essay, "The Methodology of Positive Economics," is sprinkled with references to and quotes from Marshall. One role for Marshall in Friedman's hands was against the 'Walrasian' general equilibrium analysis associated now with names such as Arrow, Debreu, and McKenzie, among others. 

One such a name, Frank Hahn, once remarked (1984) in print:

Some friends [of economic theory] in what might be called roughly, and a bit unfairly, 'Chicago' economics -- have taken the theory in practical applications a good deal more seriously than at present there is any justification for doing. Paradoxically, they are rather hostile to its abstract foundations, yet are happy to put a great deal of weight on them. (75)

The "paradox" of [A] friendship to economic theory when applied accompanied with hostility to its "abstract foundation," is said  to be the "primary interest" of MA Khan's essay (2004) "Self-Interest, Self-Deception and the Ethics of Commerce." (I would give it the subtitle: "a Wittgensteinian reading of Four "False Prophets" of Cambridge Economics.") Of course, the mathematical economists, Hahn and Kahn, know that there is no formal paradox in [A]--as long as the abstract foundations (associated by Friedman with Walras) are treated as dispensable in practice. Khan also owns up to a form of [B] "self-interest," that is, [B*] "the ethics of commerce," one that somehow requires Khan [C] to "understand" himself, that is, to be philosophical. (I write "that is, to be philosophical" not because of the occurrence of the word "ethics," but rather in recognition that within theoretical economics there is no place for self-understanding, while we philosophers still pay lip-service to Socratic wisdom.) Initially, Khan leaves the relationship between [A]-[C] ambiguous; his way of self-examination passes through Marshall's (1885) Inaugural Lecture The Present Position of Economics.

Weekly Philo of Economics: the architect of neo-Liberalism (Harberger) and his theoretical critic (Khan)

Let's distinguish among three uses of "neo-Liberalism:"

1. The imposition of markets absent rule by discussion (imperfectly approximated in Liberal Democracies)--often, by way of a dictator, foreign aid institutions [IMF, World Bank, etc.], foreign experts [e.g., Post-Communist Russia]); this is generally associated with 'shock therapy' of some sort and often occurs in times of 'crisis' or 'emergency.'
2. The use of market-friendly-rhetoric within democracies to justify "privatizing" government services; the privatized entities become private (quasi-) monopolies managed by a rent-seeking, credentialed, managerial class.
3. The tendency by the financial services industry to 'privatize gain and socialize risk' at the expense of their much poorer fellow tax-payers. 

Now (2) and (3) are deplorable, but only (1) primarily involves social engineering by experts.

Of course, in practice (1-3) can be blended in all kinds of ways: often the 'privatized' industries come with various implicit government guarantees, so then an instance of (2) turns into an instance akin to (3).  There may be more uses of "neo-Liberalism" that I am overlooking, of course! But I want to distinguish between these three varities of neo-Liberalism from instances of what is known as "economic imperialism." Economic imperialism occurs when the methods and doctrines of economics are extended into domains not previously associated with economics. Gary Becker's work on the family is a paradigmatic instance of economic imperialism. (As I have pointed out "economic imperialism" predates Becker; it was probably first diagnosed by the sociologist Talcott Parsons a few generations before Becker.)

Neo-Liberalism and economic imperialism are both commonly associated with so-called "Chicago economics." But distinct aspects of economics have been brought to bear to support the varieties of neo-Liberalism. In my previous blogging I have focused quite a bit on how aspects of finance theory paved the way for (3). Below I focus on the way the economics profession became/is implicated in (1). A key figure is the "Chicago"-economist, Arnold Harberger. Harberger's entanglement with neo-Liberalism is not merely academic; he was the key mentor to the Chilean (and other Latin American) "Chicago Boys" prior to and at the time of the dictatorships of the 1970s. The understandable focus on Milton Friedman by critics of "Chicago" has made informed discussion of these matters more complicated. As I have tried to explain, there are genuine technical differences in the ways Friedman and Harberger practice economics. (This is not meant to exonerate Friedman's role(s) in (1-3) nor his attempts at defending the Chicago Boys [see my piece].)

Playing the right kind of games

So I’m not going to get into the game of thinking thoughts too many, of trying to break down the wrong of raping an unconscious person in terms of psychic discomfort at disapproval.  It’s the wrong game to play.--Jacob T. Levy at BHL.

This seems to me the right kind of response to the pseudo-philosophy [Trigger warning: the post discusses rape] of Steven Landsburg, an economist and popularizer at Rochester.

As Levy writes, Landsburg's post

demonstrates, first, the familiar problems with blunt hedonic utilitarianism that has been detached from utilitarianism’s roots as a moral theory, and, second, the selection effect about what kinds of people are attracted to that theory. Lansburg [sic] is entirely too pleased with himself for being willing to Think Challenging Thoughts (thoughts that pretty much get covered in a first semester moral philosophy class as the frosh learns why blunt hedonic utilitarianism is not a very good theory), and determined to get through his cute hypotheticals for the fun of it, regardless of whether they convey anything useful or not.

It's just a fact of the matter that economists are not trained to be philosophers (and they are no better at it [recall here and here] than we are at economics [here]). But (not unlike philosophers) they do get socialized into thinking they are really smart boys (recall this). Since the Samuelsonian, revealed preference revolution cut the link between economics and hedonic utilitarianism (utility curves are not supposed to refer to mental pleasure entities entities, they are just a ranking of choices--recall this post), Landsburg is not even bringing any of the standard economic's tools to bear on the case. He is simply out of his depth. (Of course, that's just a daily fact of life in blog-land, the problems start when one forgets this.)

Now, the interesting issues here pertain to Levy's decision to speak up about Landsburg's moral and intellectual obtuseness without giving Landsburg credibility in doing so.

Whose property-rights, whose growth...

This report introduces a very interesting article, "Property Insecurity," by Terra Lawson-Remer (go to pp. 145), on the complex relationship between property-rights and growth. [HT Michel Heijdra.] I hope to give it more attention some other time.

Gushing over Libertarians

As loyal readers of NewAPPS may recall, I warmly welcomed the founding of  Bleeding Heart Libertarians (BHL), which has been a wildly succesful blog. While I have followed BHL regularly (and sometimes blog about issues of shared interest [e.g., here, here, here, etc.), I had also grown a bit wary of the general fondness for expert-rule among some of the BHL crowd. (As always with a group blog, one is not allowed to make claims about the whole group.) But ever since Sarah Skwire started blogging at BHL my enthusiasm has been rekindled. (Take a look at, for example, this post--trigger warning it discusses rape.) She challenges Libertarians to live up to their own best principles and, in doing so, challenges us all to think through how fondness for state institutions (the military, prisons, etc.) facilitates a rape-culture.

'In the of challenging Libertarians to live up to their own best principles (and reminding us all of the vitality and the need of the tradition today) genre' is a another post by Roger Koppl, who does not blog at BHL (but is certainly a kind of fell0w-traveler), about the significance of income-inequality at Thinkmarkets.

The Euro on the Brink

I try to avoid commenting on economic events, and hopefully my pessimism means that the nadir has already been passed.--ES

In september 2008 as the liquidity crisis that followed the fall of Lehman unfolded, the US Federal Reserve and the Treasure extended insurance and guarantees to Certificates of Deposit and Money Market funds--relatively, uncomplicated financial products used as (slightly higher yielding) bank deposits by professional and the investing middle-classes alike. Essentially this extended deposit insurance to instruments that were sold, marketed, and used as the new kind of bank-deposits. These decisions prevented a classic (yet modern-day) system-wide bank-run. I view this as the key decision that prevented financial collapse and 1930s style depression and the one most able to withstand scrutiny from the most skeptical enquirers of later generations. It is really a stroke of luck (or providence) that Ben Bernanke, arguably one of the foremost living authorities on monetary policy in the 20s and 30s, is at the helm of the Fed. (It is extremely rare to find a top economist of his generation with a deep interest in economic history; for obvious reasons that is changing rapidly.)

Weekly Philo of Economics: Analytical Egalitarianism makes the New York Times

In this week-end's New York Times, the economist, Tyler Cowen, reminded us of the noblest features of the history of economics: the "egalitarian and civil libertarian core." (On his his own blog, Cowen also calls it "cosmopolitan" for good reasons because the piece attacks the nationalist bias in much public policy economics.) In particular, he argues that these are linked: "If you treat all individuals as fundamentally the same in your theoretical constructs, it would be odd to insist that the law should suddenly start treating them differently." Cowen's additional claim, the economist's mantra that "economic analysis is itself value-free," is more problematic. Let's leave aside the non-trivial, problematic jump from positive analysis to normative advocacy (recall the Summers-Khan exchange.) As I have argued elsewhere, non-trivial values are inevitably smuggled into what counts as an "individual" (and "same") as well as any attempts to aggregate these. 

I was especially pleased  that Cowen linked his treatment to the scholarship of my friends and mentors, Sandra Peart and David Levy, on what they have called “analytical egalitarianism.” (Here and here [the latter contains a contribution by (ahum) me].) On Cowen's account analytic egalitarianism rejects the competing theoretical approaches that:

postulate natural hierarchies of religion, ethnicity, caste and gender, often enforced by law and strict custom. Economists too often forget that we are part of this broader battle of ideas, and that we are winning some enduring victories.

Quite right! But even so Cowen does not seem to have fully grasped the crucial insight of analytical egalitarianism. In effect, Cowen treats analytical egalitarianism as a theory that [a) postulates a homogeneity of human nature (when it comes to motives to action). This is indeed a necessary condition in analytical egalitarianism. But it is not sufficient: what needs to be added is that (b) the theorist has to be included in his or her model with the same motivational setup as the subjects studied. (To be clear (a) and (b) are jointly necessary for analytical egalitarianism, but they are also not sufficient.) Too often economists tacitly treat their own public utterances and policy-suggestions as themselves disinterested or un-incentivized (by considerations other than  truth) and the product of a value-neutral method. Why does this matter?

Weekly Philo of Economics: when Larry Summers was just an Imperialist Economist and a footnote to Derrida

Before "Larry Summers" became synonymous with expert for hire by Wall Street, he was the Harvard President, who suggested, while claiming that he wished to "provoke,"  that "there are issues of intrinsic aptitude, and particularly of the variability of aptitude," that might explain the relatively low presence of women "in high-end scientific professions." Summers insisted that his is an "entirely positive" not "normative approach." (Summer 2005; he is deploying a standard distinction among economists.) The lecture set off a furore that contributed to his eventual resignation from Harvard (it surely did not help he was in charge of a nearly US$ 1 Billion loss on speculative investments). But...before his notoriety Summers was one of those economists that effortlessly move between academia and government (while generally serving the interests of the wealthy). Such folk become prominent within public policy economics through highly regarded academic work, which won Summers the John Bates Clark Medal (1993) and which partially accounted for his selection as Chief economist at The World Bank (1991-3). As the politically influential, but nevertheless academic Vice-President of the World Bank,  Summers was invited to Pakistan to give The Quaid-i-Azam Lecture in 1992, "Investing in All the People," to the Pakistan Society of Development Economists. The main point of Summers' lecture, which has been cited close to 300 times and is easily found on the internet, is:

Investing in the education of girls may well be the highest return investment available in the developing world. As such, increasing the level of female education is an especially high priority in Pakistan.

So, before Summers became synonymous with sexism in academia he was an advocate of underprivileged women's education. (A topic Summers continues to talk about.) The paper was admiringly profiled in Business Week, and created the meme of Summers as "iconoclastic Liberal." For those that like their irony fully symmetric, I note that the 1992 magazine article treats Summers as an academic "provocateur." Summers' Pakistani hosts asked a mathematical economist hailing from Waziristan, MA Khan (then as now at Johns Hopkins), to offer comments (see here). Rather than dazzle his famous American colleague and "the Pakistani Minister of Defence and Minister of Water and Power" (quoted from Richard H. Sabot's response to Summers) with state of the art mathematical technique, Khan quotes Derrida and Clifford Geertz in the process of calling Summers "reckless."

Weekly Philo of Economics: The Economist as Physician...Plato, Milton Friedman, and Jason Stanley

Jason Stanley continues his important series of opionator columns on the dangers to democracy of misleading public discourse. In his most recent one, Stanley also engages with the impact of misleading speech by experts (for example, Bernanke's coining of "fiscal cliff"). Along the way, he reminds the reader of a Platonic analogy:

Plato was right to regard his views as inconsistent with democracy. His view that citizens are not competent to make judgments about public policy, that economics and policy are areas of expertise like the physician’s, is profoundly undemocratic.

And then again here:

In the arena of contemporary fiscal policy, very much in the news now, Plato’s problem is particularly perplexing. Here, the analogy between someone competent to engage in decision making and a physician seems apt. It is natural to think that competent judgment about fiscal policy requires expert training in economics akin to a physician’s training in medicine. But if only experts can make the judgments here, it isn’t clear that democracy is possible.

Now, to be clear Stanley is not endorsing the analogy between economist and physician (I checked with him first). The Platonic analogy between the economist and the physician was trotted out in Newsweek by Milton Friedman when he was under attack for meeting with and advising Chile's dictator, Pinochet (for more of the context see my piece here):

In spite of my profound disagreement with the authoritarian political system of Chile, I do not consider it as evil for an economist to render technical economic advice to the Chilean Government, any more than I would regard it as evil for a physician to give technical medical advice to the Chilean Government to help end a medical plague. (June 14, 1976)

Erik Loomis's "This Day in Labor History" series

It would be unjust to allow Erik Loomis's presence in the blogosphere to be defined only as someone to whom those concerned with free speech rallied when he was attacked in the wake of the Newtown massacre. For Loomis is also the author of an extraordinary series of posts at Lawyers, Guns, and Money entitled "This Day in Labor History." 

Today's post begins: 

On January 25, 1941, A. Philip Randolph, head of the Brotherhood of Sleeping Car Porters and the most important civil rights leader of the World War II era, called for a March on Washington to protest discrimination in defense industry work. The success of this movement in convincing the government to act on employment discrimination both opened unprecedented economic opportunities for African-Americans during the war and helped lay the groundwork for the modern civil rights movement after the war. 

One of the key insights:

Roosevelt was desperate to avoid the embarrassment of a nation preparing to fight fascism having its own caste system publicized before the world.

You should do yourself a favor and read the whole thing.

Weekly Philo of Economics: the "gentle hand" of James Steuart, neo-Liberalism and Smithian theodicy

I have the same opinion of Sir James Stewarts Book that you have. Without once mentioning it, I flatter myself, that every false principle in it, will meet with a clear and distinct confutation in mine.--Adam Smith to William Pulteney Esqr, Member of Parliament, Kirkcaldy, 3 Sept. 1772

When an expert speaks to a member of parliament we should always be a bit mistrustful. However, in the Wealth of Nations (1776) Smith does not mention Steuart's nearly forgotten (1767) An Inquiry Into the Principles of Political Economy. (As Salim Rashid has explored, Smith is not generous in his citations.) So, we do not learn what Steaurt's true principles are by Smith's lights. James Steuart (1713-1780) had an exciting life, but after the publications of the Wealth of Nations Steuart's political economy became completely overshadowed by Smith's, despite their shared debts to Hume. This is a shame. For, while Steuart, who -- as the late Andrew Skinner has noted -- has a fantastic treatment of price-formation (a topic that is handled very schematically in Smith's Inquiry),  is not the most elegant writer, Steuart's Inquiry is prophetic of the world we live in: in Steuart's economic universe there are free markets alongside active government interventions. (What's missing in Steuart's treatment are the large bureaucratic agencies that simulate markets--Oskar Lange and data-mining came much later.)

In particular, according to to Steuart: "The duty of the statesman is to support the double competition every where and to permit only the gentle alternate vibrations of the two scales." (229; quoting from the Dublin edition of 1770). This is the only duty of the statesman mentioned by Steuart. Steuart's is, in fact, the vision of neo-liberalism, especially the ordo-Liberals (Röpke, Eucken, and to some degree Hayek), which -- as Foucault has nicely described -- also make it the state's primary goal to create and maintain the possibilities of free markets. (This is not to claim that Steaurt and the ord0-Liberals have the same ideas about the means of doing so.)

RIP: James M. Buchanan (1919-2013)

Tyler Cowen reports that the economist, James M. Buchanan (Nobel, 1986), has just passed away. Together with his sometime co-author and colleague, Gordon Tullock, Buchanan 'invented' public choice economics. Buchanan had a non-trivial impact on the development of political philosophy in the second half of the twentieth century; he was a keen student of and interlocutor with philosophers, especially Rawls. I will always be very proud to have a paper published alongside the Buchanan-Rawls correspondence.

I also owe a personal debt to Buchanan: he participated in the very first conference on Adam Smith that I co-organized. He was very generous and critical, and made all the young scholars present feel that they were active in an important enterprise. (It's the conference where New Voices on Adam Smith was conceived.)

Some other time I may post a bit more on Buchanan's intellectual development alongside the 'Chicago' and 'Virginia' economists (Nutter, Vining, Knight, etc.) that are part of my scholarly focus (and occasional blogging here).

Social integration and brain chemistry approaches to treating PTSD

This NYT article (h/t Greg Downey on FB; check out his Neuroanthropology blog) lays out research on the effects of social conditions (isolation vs integration) on PTSD. Greg excerpted this quote: 

It turns out that most trauma victims — even survivors of combat, torture or concentration camps — rebound to live full, normal lives. That has given rise to a more nuanced view of trauma — less a poison than an infectious agent, a challenge that most people overcome but that may defeat those weakened by past traumas, genetics or other factors. Now, a significant body of work suggests that even this view is too narrow — that the environment just after the event, particularly other people’s responses, may be just as crucial as the event itself.

I thought this one about Nepalese ex-child soldiers provided a good concrete example: 

But in villages that readily and happily reintegrated them (usually via rituals or conventions specifically designed to do so), they experienced no more mental distress than did peers who had never gone to war. The lasting harm of being a child soldier, it seemed, arose not from the war but from social isolation and conflict afterward.

Contrast* the social integration approach to an individual pathology approach, using cognitive behavioral therapy and / or SSRIs to handle symptoms or beta-blockers to intervene in memory formation (another h/t to Greg Downey for this link). 

A neo-classical unionism

For the first century or so of the modern union movement, unions were esssentially extra-legal.  They were conceived as alternative centers of power that challenged the state and capitalist control of production that was itself instituted by state-enforced property regimes.  As such, unionization was not fundamentally about making better deals with capital, or improving conditions of wage-labor, but of changing the dynamics of economic control.  The primary goal was worker control of the means of production.  As such, there was no question of unions being legally sanctioned entities that would enter into state mediated bargaining with capital. 

"Not you alone, but with the state and so on"

This is how Gary Becker concludes his impromptu remarks at a May 2012 University of Chicago seminar (set up by Bernard Harcourt [1] with François Ewald [2]) on Foucault's reading in Birth of Biopolitics[3] of Becker's human capital theory[4].  

Or if I look at the United States, how can I understand what young African-American men are doing? To me, this theory—and I’m not saying I fully understand what they’re doing—but the theory says, well, they have a lot of different options available.

What we’re pointing out to them is, if you drop out of high school in the United States, you’re pretty much destined to be unemployed, to have low earnings, to be in poor health, to have low marriage rates, and the like. That’s what the theory points out to them. And what it then points out to them is that you can overcome that in various ways. Not you alone, but with the state and so on.

 Discussion and notes below the fold.

14N: European Day of Action and Solidarity -- against austerity

UPDATE: 14 November, 2:40 PM CST: Amazing 14N photos at Riot TV's Facebook page.

Guardian Business Blog live coverage / A Tumblr / The #14N Twitter feed. 

European Trade Union Confederation (ETUC), who called for the action: 

• ETUC Strategy and Action Plan.
• List of ETUC proposals:

Scaring Monkeys in Madison

The research in question is a new type of maternal deprivation research designed to study anxiety by creating adverse early rearing conditions and then exposing the maternally deprived young monkeys to a snake and other frightening stimuli.  The monkeys will be killed after the experiment is over and their brains will be studied. I believe this experiment is unethical and I also think it violates the spirit, if not the promulgated regulations, of the Animal Welfare Act which explicitly requires that the psychological well-being of primates be promoted (not intentionally destroyed).--Lori Gruen

Weekly Philo of Economics: Adam Smith, anti-Individualist.

[O]f the acquired and useful abilities of all the inhabitants or members of the society. The acquisition of such talents, by the maintenance of the acquirer during his education, study, or apprenticeship, always costs a real expence, which is a capital fixed and realized, as it were, in his person. Those talents, as they make a part of his fortune, so do they likewise of that of the society to which he belongs. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labour, and which, though it costs a certain expence, repays that expence with a profit.--Adam Smith, WN 2; emphasis added.)

The vivid paragraph above is a familiar passage from An Inquiry Concerning the Nature and Causes of the Wealth of Nations (WN) for those interested in the history of the so-called "human capital" concept. (Wikipedia quotes it in the background section; see here for more scholarly treatment.) Smith does not shy away from likening the skilled laborer to a machine. What is less remarked upon is that Smith is adamant that the "capital fixed and realized" consequent education (apprenticeship, etc.) also is part of the society to which the laborer belongs. This is not a slip of the pen in Smith. It's the point of his book to help explain what causes the "wealth of nations," after all.

Life imitates fiction, vol 5465

I recall* a Dr Who episode in which the cost of burying one's relatives triggers a debt cycle leading to slavery. A parable of the Thatcherite takeover of the UK, it points to the Autonomia spin on the notion of "real subsumption," that is, the commodification of every social relation, even mourning. Which brings us to Monday's Baton Rouge Advocate story, "East Baton Rouge Parish Coroner's Office to charge families for cremated remains."

Families that turn over the bodies of loved ones to the East Baton Rouge Parish coroner for a pauper’s cremation will have to pay if they want the ashes returned. Coroner Dr. Beau Clark said his office will begin enforcing state laws that kick in when family members agree to a pauper’s burial, which means they sign over the rights of the body to the state because they cannot afford or refuse to pay funeral costs, Clark said....

Clark said he decided to begin enforcing the law after funeral homes approached him with a concern that people were choosing what they thought was a free cremation over paying a funeral home when families could afford funeral or cremation costs.

Three steps remain, but they won't be long in coming: 1) billing the families whether they claim the ashes or not, 2) arresting those who can't pay, and 3) placing them in Louisiana's thriving private prison industry.

* Although I remember the episode, I have not been able to identify it, so please help in comments. Cites of other fictional treatments, or real historical parallels, are welcome too.

Anatole France's loss is George Orwell's gain

It appears that the magnificent equality of the law may indeed allow the poor to sleep under bridges as long as it is in the service of gaining "work experience."

Today's Guardian reports that "A group of long-term unemployed jobseekers were bussed into London to work as unpaid stewards during the diamond jubilee celebrations." Worse, they were told to sleep under London Bridge the night before the river pageant, had no access to toilets for 24 hours, and were taken to a swampy campsite outside London after working a 14-hour shift.

The security firm in question, Close Protection UK, was operating under the government's Work Programme, which attempts to make jobseekers more employable by offering them "work experience" with selected companies. 

See also.

Panagiotis Sotiris on Greece: From Despair to Resistance

We previously published a guest post by Panagiotis Sotiris on Linda Katehi and the neoliberal reform of Greek Higher Education. Here we just link to his analysis of the current Greek situation: "From Despair to Resistance." Excerpts: 

Greece is becoming the test site for an extreme case of neoliberal social engineering. The terms of the new bail-out package from the European Union, the European Central Bank and the International Monetary Fund, the so-called Troika, equal a carpet bombing of whatever is left of collective social rights and represent an extreme attempt to bring wage levels and workplace situation back to the 1960s....

According to the dominant narrative the problem with Greece is a chronic lack of export competitiveness which demands a new approach based on cheap labor and doing away with any environmental restrictions, urban planning regulations and archeological protections that could discourage potential investors. It aims at turning Greece into a big Special Economic Zone for investors. What is not mentioned in this narrative is that not only the social cost is going to be tremendous but also that low labour cost competitiveness necessarily would lead to a hopeless 'race to the bottom', since there are always going to be countries, even in the close vicinity such as Bulgaria, with lower wages. Moreover, it is a well known fact that competitiveness does not rely only on labour cost but also on productivity and this has to do with infrastructure, knowledge, collective experience and ability, exactly what is being dramatically eroded by the current economic and social situation in Greece.

Rawls, Sidgwick, scientific unanimity, and the (supposed) split between philosophers and economists

An unpublished piece by the creative economists, David Levy and Sandra Peart, called my attention to the following observations by Rawls, when he is about to introduce David Hume:

Utilitarianism was, and still is perhaps, the most influential longest continuing tradition in English speaking moral philosophy. While it perhaps can claim no writer of the stature of Aristotle and Kant (their ethical works being in a class of themselves), taking the tradition as a whole, and viewing its extent and continuity and ever increasing refinement in certain parts of the view, utilitarianism is perhaps unique in its collective brilliance. One must remember that utilitarianism is historically part of a doctrine of society, and is not simply a detached philosophical doctrine. The utilitarians were also political theorists and had a psychological theory. Also, utilitarianism has had considerable influence in certain parts of Economics. Part of the explanation for this is that if we look at the more important economists in the English tradition before 1900 and the well-known utilitarian philosophers, we‘ll find that they‘re the same people; only Ricardo is missing. Hume and Smith were both utilitarian philosophers and economists....Sidgwick and the great economist Marshall were both in the same department at Cambridge, when they decided to found a separate department of economics around 1896. Since that time there has been a split, although utilitarianism still influences economics, and welfare economics has a close connection to the utilitarian tradition. Still, since 1900 the tradition has divided into two more or less mutually-ignoring groups, the economists and the philosophers, to the reciprocal disadvantage of both...The division is not easy to rectify given the pressures of specialization, and much else. It is also very difficult nowadays to get a sufficient grasp of topics in both subjects for one person to intelligently discuss them. (Lectures on History of Political Philosophy, 162-3)

Massimo Pigliucci turns down (possibility of) Templeton funding

By contrast, I would accept funding from Templeton. Would you? It would be better if philosophy research (positions) would be funded entirely out of income from university endowments, where available, and enrollments. For as Massimo suggests, all funding comes with indirect strings. But I am not in the position to be too choosy; my research (and that of my PhDs) is funded by grant agencies. I view Templeton as a splendid possible, alternative source. It's called diversification (or portfolio-management). It also reduces the influence of any given funding source.

Annals of privatization, vol. 4683

Not the Onion, just the Baton Rouge (Louisiana) Advocate:

A contract signed by the Jindal administration offers a sizeable bonus to a financial firm if the privatization of a state employee health plan occurs. Morgan Keegan & Company Inc., based in Memphis, Tenn., could make up to $900,000 if a private company successfully bids for the state Office of Group Benefits’ book of business....

The contract with Morgan Keegan calls for the firm to help the state “make informed decisions as to the future direction” of the Office of Group Benefits. Morgan Keegan will be paid $150,000 to determine the office’s financial value. An ultimate privatization would net the firm an additional $350,000 to $750,000 for helping with the bidding process and contract negotiation.

State Commissioner of Administration Paul Rainwater, who is one of the governor’s top advisers, said Morgan Keegan will provide unbiased advice, despite standing to profit more from privatization than from the status quo. “Morgan Keegan understands very well they work for us, and their job is to do an analysis that gives us the information we need to make a decision,” he said.

No information was available as to whether Rainwater was able to keep a straight face while saying this or whether he broke out in a fit of laughter.