New APPS: Art, Politics, Philosophy, Science

On an alternative Political Economy (Seneca, Letter 1)

Omnia, Lucili, aliena sunt, tempus tantum nostrum est.--Seneca, Letter 1.

At 280 words -- shorter than most frivolous blog posts -- Seneca's first letter to Lucilius takes full advantage of the economy of Latin prose. Its brevity may, thus, be thought to be an exemplar of what it seems to preach (in the first sentence): not to lose time.* Economy is a major theme of the letter as it explores the nature of possession, scarcity, value, profit, and other familiar economic concepts. In fact, in the brief span of the letter Seneca introduces two conceptions of economy (or axiological frameworks): in one we exchange commodities governed by the values established in the market, that is, uncertain popular opinion; in the second necessary loss reigns.+ Given that Seneca devalues the "foolish" attachments formed in the former (and seems to embrace the latter), we ought to reconsider the idea that losing time is a problem.

In order to teach a political economy that is an alternative to the usual one, Seneca turns to a bit of metaphysics: time is our only intrinsic property--our other properties are alienable. Seneca suggests that time's supreme value is due both to this peculiar fact and the necessity of our mortality. In this first letter, Seneca does not fully explain why the time(s) of our lives is the only such intrinsic property. (One may wonder why not the space of our lives?) If we substitute dying (for time(s) of our lives), the thought presents itself that the reason why the time of our life is our only intrinsic property may be that one's death(s) is the only necessity in a life. (We can, after all, not pay our taxes.) 

Clearly, for Seneca to think or have a name is not necessary.

If time is of the essence, why write 280 words?

Economics as/and science; on treating Milton Friedman as the villain

The fact that the discipline of economics hasn’t helped us improve our predictive abilities suggests it is still far from being a science, and may never be....Over time, the question of why economics has not (yet) qualified as a science has become an obsession among theorists, including philosophers of science like us...What is economics up to if it isn’t interested enough in predictive success to adjust its theories the way a science does when its predictions go wrong?--Alex Rosenberg and Tyler Curtain, in the New York Times.

Sometimes I receive the following back-handed, compliment-question, "Why do you do history?  You might make a decent real philosopher." A part of the answer is that the second-order stories we tell ourselves -- often handed down by mentors and supervisors, and senior peers -- about where we come from and what we do often are just as interesting and important as the first-order activities; they may also influence us and others in ways that are often hard to spot. This by way of introduction because in what follows I primarily challenge the conceptual oppositions (and associated historical myths) in Rosenberg and Curtain's Opinionater piece (allowing that the genre they are writing in need not require scholarly precision). Perhaps, my challenge allows some clarity about the first-order issues to emerge.

The main stated point of Rosenberg & Curtain (hereafter RC) is that "the task of the Fed’s next leader will be more a matter of craft and wisdom than of science." Surprisingly enough, given that RC are philosophers, they spend very little words on conceptualizing the nature or origin and causes of such "craft and wisdom," even though at the end of their piece they boldly assert that "the Fed chairman must, like a first violinist tuning the orchestra, have the rare ear to fine-tune complexity (probably a Keynesian ability to fine-tune at that)." We are not told why of all the crafts and skills, the fine-tuning violin is the most appropriate exemplar for a Fed chairman. Even if we grant the fruitfulness of the tuning metaphor, a fine-tuning violinist possesses a skill that may not  require (much) wisdom; she tunes an orchestra that is oriented toward a common goal with skilled performers. The Fed-chairman deals with a more heterogeneous population with ends that are -- I hope -- not unified.

In fairness to RC, most of their piece is focused on a self-described "obsession:" is economics 'science?' So, let's turn to that first.

On complicity, structural violence, and ideological blinders

Post WWII, Hanah Arendt made a valiant effort to turn moral and political attention to the ways that unexceptional individuals performing actions that, when looked at locally, were unexceptional yet contributed to exceptionally evil systems. Sadly, current attitudes across the professions, literature, the press, and philosophical ethics suggest that her efforts were a failure. And that is, in my view, a bad thing.  The overwhelming majority of the violence in the world today is what Galtung has labeled "structural violence" - roughly, the point is that far greater harm is done to people as the result of complex social forces than by individual actors. And in my view it is a scandal of philosophy that this is not a central issue in applied moral and political philosophy. (Of course there are philosophers who address such things.  But I doubt that anyone could claim that such work is generally treated as central to philosophy.)

Kettle logic: the artificial production of natural competition

Jason Read (yes, that guy) whose blog Unemployed Negativity expertly covers contemporary French and Italian political philosophy of the generally Autonomia strain, with special attention to Hegelian and Spinozist angles -- as well as television and movies) describes the same phenomenon as did Mark Fisher (author of Capitalist Realism) in the piece excepted in Monday's post: the production of competition and prevention of solidarity via massive intervention.

Here is Read, explicating Pierre Dardot and Christian Laval, La nouvelle raison du monde: essai sur la société néolibérale by emphasizing the kettle logic at work: the artificial production of natural competition:

Brennan responds, again (quickly)

to part II of my series on his views, here at BHL.

Jason Brennan's Bluster on Living Wages (Part II)

[I] We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and every where in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. To violate this combination is every where a most unpopular action, and a sort of reproach to a master among his neighbours and equals. We seldom, indeed, hear of this combination, because it is the usual, and one may say, the natural state of things which nobody ever hears of.--Adam Smith (1776) Wealth of Nations.

[II] Servants, labourers and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged.--Adam Smith (1776) Wealth of Nations.

Spatial and temporal frames in discussing Detroit's bankruptcy

This NYT article on the Detroit bankruptcy* is a perfect illustration of the pernicious effects of "localism" and "presentism" in political economy.** That is, here we see the unquestioning acceptance of a spatial scale focused on political boundaries (i.e., city limits) instead of the functional economic unit (i.e., the metro area), and a temporal scale focused on the short-term ("the crisis") rather than on the long-term (the processes allowing for the production of "the crisis"). Of course, the spatial and temporal scales are related; to understand the causes of the crisis you would have to understand post-war suburbanization and the concomitant ability of the surburbs to shift tax burdens while still benefitting from proximity to the city. 

*This is an ongoing story of course: see here for a judge's ruling against the bankruptcy claim and here for targeting of the municipal art collection by the disaster capitalists.

**If you want to be fancy about it, you could say this is an example of the trouble you get into by focusing on the properties of a product while neglecting the production process. (See the "illusion" discussed at Difference and Repetition, 240E.)

Brennan responds

to my post (part I), here at BHL.

I for one wish to welcome our new robot overlords

Actually, this piece is interesting and quite well done. First, it's interesting rhetorically in that it discusses classic Marxist concepts -- the effect on profit rates of automation in an end-game situation when spatial and social fixes are no longer available -- without using those terms (tendency of the rate of profit to decline; imperialism; formal and real subsumption...) Second, it's interesting in a symptomatic way since it doesn't seem to factor in eco-limits: the robot production / no demand future might never get here if peak X (where X = oil, water, arable land ...) happens sooner. Pull quote: 

The efficiency gains from automating production tend to create an abundance of products, which forces down prices. This sounds like a good thing: if goods and services are cheap and abundant, people can have whatever they want, can't they? Well, not if they are unemployed and have no unearned income.... [T]he efficiencies of production created by automating - including, eventually, the low-skill jobs that at the moment are too expensive to automate - may actually result in the destruction of profits. The fact is that robots are brilliant at supply, but they don't create demand. Only humans create demand - and if the majority of humans are so poor that they can only afford basic essentials, the economy will be constrained by lack of demand, not lack of supply. There would be no scarcity of products, at least to start with....but there would be scarcity of the means to obtain them. 

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.