1809. Economics and political thought

Provocation # 73 Economics and political thought.
These provocations are in the spirit of emerging thoughts, incomplete, even contradictory.

Society has gotten itself in ever deeper dysfunction and faces frightening futures. What role has economics played in that emerging dysfunctionality?

I lately have been reading lots of political science, political theory, political philosophy. It is striking how the shift toward more formalistic analysis has played in economics the most of the social sciences and political thought the least. Politics is more a question of ideas and feelings and belief and less of material relationships. But the real story may be the reverse. Political thought is closest to real human concerns and economics has slowly eliminated all social feeling.

Economics has not been innocent. Ideas in economics such as the firm as person supports the crazy idea in politics that a corporation is a person, or the idea in economics of equilibrium supporting a politics of “don’t touch”. or the idea of the rational individual supporting the isolated individual of consumerism where one dollar one vote has replaced citizenship. “Free market” Hayekian thinking supports the “marketplace of ideas” in politics. But the Economic market is not free. It depends on regulations, contracts, laws. banks. So the imputing of “free” to marketplace of ideas hides the way that market is also skewed by money and regulations. We all know that big corporations own most of the press, yet we don’t let ourselves think through how distorting this is.

Economic thinking always has a political implication just as political thought always has economic implications. If we had a functioning democracy of educated people, media and value savvy, it could work out, but given the distortions in wealth, we are in sad shape. Economists have since 2008 generated a lot of prose about what is wrong, but very little about what to do beyond “more growth” . Growth is probably bad for the environment and motivates increased automation. Growth is usually paired with “competitive advance”. But are we stupid? “Competitive advantage” guarantees that there are losers. What kind of society is that? I think we cannot afford more losers.

We have a near consensus that things are going badly, but no consensus about what to do.
Economists seem still to want to find solutions from within economics rather than taking seriously political issues and quality of life outcomes that are outside current economic thinking (I am clearly talking about “for the most Part.” There are of course some economists who are struggling more broadly. But as for proposing solutions? Very little. Show me examples).

A return to humanism in economics would mean taking people seriously. We would recognize that to satisfy humans with needs and desires requires much more than economy. People have much more to do than participate in the consumer or asset markets.

Economics works for the rich because it provides them with more than their fair share. All the institutions, from infant care, grade school, college, and access to good jobs is class based and – why do economists put up with this? Obviously to talk of Capital and Labor is evocative of a caste based system. We are all against caste and slavery – but we are in the middle of sustaining it.

If economics was more scientific it would be more interested in things like

  • What is capital?
    How did it get entwined with ownership?
    What is the relation of social power to economics.
    What is the impact of the way we organize our economy with the health of our environments?
    Why do we treat firms as people?
    What is quality of life?
    Is there an alternative to money as the leverage for political power?

Economics sticks with the applications of formalist models but this is closer to engineering than science , interested in formalism rather than understanding phenomena. This is a cover for protecting the rich. A scientific attitude is more interested in finding a method to explore the most important phenomena, not to find a domain data that can be mapped into the model.

Both the progressives and the weird right are afraid of losing what they gained in the post ww2 period. Labor lost out first, starting in the 60’s with Regan, and the middle class through till 2000, and since. It is the one percent tho are afraid now because they see that the system that developed them is coming apart, and the professionals that supported the one percent are also afraid.

But there is no new narrative.
Here is a comment quoting Stiglitz. (sorry lost the source)

Indeed, in light of China’s insulation from the worst effects of the crisis, Joseph Stiglitz reversed The  Economist’s  contention,  arguing  that  the  Chinese  success  was due precisely to not having given up  gradualism in favor of the shock therapies  advocated by  the  so-called  Washington  Consensus. Unlike Russia, he  claimed,  China  “never  confused  ends  [the  welfare  of the population]  with  means  [privatization  and  trade  liberalization] .”

It recognized  that  if  it  was  to  maintain  social  stability,  it  had  to avoid  massive  unemployment.  Job  creation  had  to  go  in  tandem with restructuring.  When  China liberalized, it did so gradually  and in  ways  that  ensured  that  resources  that  were  displaced  were redeployed  to  more  efficient  uses,  not  left  in  fruitless  unemploy­ment.

We do not do as well.

Joseph Tainter’s Collapse of Complex Societies is a good example or a more scientific approach. His powerful argument: as society grows larger, infrastructure costs go up faster, until infrastructure maintenance costs move past the capacity of the society. Worse, elites own the infrastructure and when it gets in trouble, instead of new investments, moves to cut costs and maintain profits.

This sounds like good science But where is economics on this? Absent.

To summarize, economics is more like engineering with its measurable than like political thought with its concern with thought and value. We can’t make picking a party or a vote based on a model that looks like rational man in the market. . Understanding political decisions require an expansion of rational beyond logic to belief, deep tradition, emotions and relationships.

But strikingly there is no consideration there of the implication for politics (Not regulation but party appeal to voters) and the basic model of ownership and wealth concentration, aided through investment, is left in place (appear to be progressive but support the base).

So, there is a strong tendency in economics to leave out the kind of thinking that goes into political science, and even more broadly, political thought. Without an expansion of he boundaries, economics will become increasingly marginalized.
We can act as if things are not real changing but Schumpater makes clear that we are always in creative destruction. Math does not help much when nothing is constant. We can respond to the times, or ignore them. But this from Brookings (Robert Kagan)

In recent years, the liberal world order that has held sway over international affairs for the past seven decades has been fragmenting under the pressure of systemic economic stresses, growing tribalism and nationalism, and a general loss of confidence in established international and national institutions. The incoming U.S. administration faces a grave challenge in determining whether it wishes to continue to uphold this liberal order, which has helped to maintain a stable international system in the face of challenges from regional powers and other potential threats, or whether it is willing to accept the consequences that may result if it chooses to abandon America’s key role as a guarantor of the system it helped to found and sustain.

Economics is not terrific at such narratives.

From a good historian

The complex psychology of commercial society, which Smith had devoted his life to understanding John Stuart Mill abolished. – From John Buchan, The Authentic Adam Smith

And, in a difference voice, from across the aisle in the arts,

Marquez is an exemplary storyteller in a tradition which to us in our NATO culture has become rare. By understanding better Marquez’s storytelling, we can perhaps learn more about most people in the world and even about our own future, when our culture falls apart. –  From John Berger Landscapes

What doe he know that we don’t, that he can say this?


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