When assessing commentary on the current unfolding tragedy of war in Ukraine and its possible motivations, as well as its potential direction and outcome, I am finding it useful to revisit some alternative approaches to history and social science. In particular, these include the ‘great men’ theory of history, and at the other end of the spectrum, that of history largely determined by impersonal forces, and the downplaying of individual action. I blogged about this here in one of a series of posts in response to former economist and UK government minister Vince Cable’s book Money and Power: the World Leaders who Changed Economics. Continue reading
Following Monday’s post introducing a series inspired by Vince Cable’s new book Money and Power: The World Leaders who Changed Economics, this is the first of several posts in that series. To reiterate, I will not fully review the book, as I am sure that is being done sufficiently elsewhere. Rather I will try to look in depth at some of the key issues tackled in the book, by taking them as a point of departure. Broadly speaking, they are to some degree inspired by the book, but they will also critique it.
In the book’s introduction, Cable discusses his approach:
“I try to pursue the links between economics and politics through individual politicians. Carlyle once observed that ‘history is the study of great men’ and I adopt that approach. It can reasonably be argued, however, that the study of ‘great men’ (and women) is to trivialize economic history: to reduce it to the world of ‘good’ and ‘bad’ kings in the manner of 1066 and All That. It ignores the power of technological change, demographics and migration, nutrition and medicine, changing social mores and popular movements…much of the critical commentary on the market-based transformations of the last few decades tends to dismiss individual leaders as mere flotsam on a tide of ‘neo-liberalism’.
Yet it is possible to overdo the impersonal. When future generations look back on the twentieth century with the same detachment as we currently see the Middle Ages, it will very likely be a tale of three destructive monsters (Stalin, Hitler and Mao) as well as the less memorable and more anonymous people who helped to create unparalleled prosperity and technological advance in Europe and North America and who lifted poor countries out of centuries of destitution…
Through my examples, I hope to better understand the links between good (and bad) politics and economics…sometimes, politicians emerge who make a big difference. That is my focus here.”
“At its core, the ideology of “burdensome government” comes from a fundamental and intentional misrepresentation of human existence. It forms a key part of the literally egocentric worldview that people exist as individuals, and individuals create institutions which they can join or leave as they wish. The cult of the individual produces this illusion. In reality, “government” is nothing more than a word for the mechanism by which groups of human beings administer their existence. In the absence of purposeful administration, existence degenerates into chaotic violence.
We find as a close familiar of this illusion the belief that “markets” and “governments” represent separate realms. This misconception results in the associated misconception that governments “intervene” in markets. If we again touch base with reality, we recognize that markets require governments as a precondition of their existence, as well as a necessary condition for their continued functioning. To put it simply, markets function because of government regulations, not despite those regulations.
Every market exchange involves a transfer of ownership. As a result, exchange always involves a prior structure or “regulation” of the definition and rights of ownership. An exchange as simple as purchasing an apple from a street seller requires that the buyer accept that the vender owns the apple. Similarly, prior to the exchange, the vender accepts that upon payment the ownership of the apple passes to the buyer. While it may appear that such an arrangement could arise spontaneously, reflection reveals that it cannot.
Exchange requires clear ownership rights, and with those rights go equally clear obligations. All exchanges place upon the seller the obligation not to defraud the buyer. A food seller must not poison the buyer, and claims of the qualities of the food do not constitute a defense. All countries have legal systems that enforce the obligation of the seller to adhere to basic standards without which exchange would be impossible or severely limited. Governments enforce property rights and the obligations associated with them. The regulating government cannot in most cases be local if commerce extends across national or international markets. This is why the US constitution grants the federal government control over commerce.
The idea that markets and the exchange that occurs in them arise spontaneously, and subsequently suffer government regulation motivated by self-serving interests, challenges credibility and common sense. Every successful exchange requires guarantee of property rights, enforcement of health and safety standards, legal oversight of credit and debt, and prevention of fraud, to list the most obvious. Even arriving at the market, if actually a place, requires governments to manage traffic flow, keep unsafe vehicles off the road, and monitor the qualifications of drivers. The nature and extent of regulations and management vary from place to place and from country to country, and in no meaningful sense do “governments intervene in markets.” It is the equivalent of saying, “Umpires intervene in baseball games” or “Referees interfere in football matches.” That is why they exist.”
John F. Weeks, Economics of the 1%, Anthem Press, p. 117-9.
Last night I watched an episode of the BBC documentary Earth From Space, which used satellite imagery to observe the patterns, colours and structures of the natural and man-made world from space. Each episode provided a commentary on different aspects of the Earth, zooming in to examine in some detail the activities that such an elevated view draws one in to see. It was truly fascinating, and made me think about the consequences of the pictures taken of Earth as a whole in the early 1970s, known as The Blue Marble. This became a symbol of the environmental movement, and spoke to many of the frailty of the natural world as a whole. Around the same time, The Limits to Growth report was published and, though it remains controversial, it continues to inspire popular resistance to and criticism of the growth trends of industrial economies and populations across the world. Continue reading
This blogger has for many years been drawn to non-mainstream or heterodox approaches to economics. Heterodox economics is dominated by leftist analysis and policy conclusions. It is not exclusively so: Austrian economics is one exception. Many heterodox thinkers prefer to use the term political economy instead of economics. The former emphasises that there is more to analysis than the definition and use of the ‘science of rational choice’, dependent on methodological individualism. They are more willing to engage in interdisciplinarity, to draw on and integrate ideas from politics, philosophy, biology and so on. Continue reading
“Starting from the Disney animations that we watch as young children telling us that if we believe in ourselves, we can achieve anything, we are bombarded with the message that individuals, and they alone, are responsible for what they get in their lives. We are persuaded to accept what I call the L’Oréal principle – if some people are paid tens of millions of pounds per year, it must be because they are ‘worth it’. The implication is that, if people are poor, it must be because they are either not good enough or not trying hard enough.
Individuals are in the end responsible for what they make out of their lives. Even if they are from broadly the same backgrounds, different people end up in different positions because they have different talents in different things and make different levels and types of efforts. It will be silly to blame everything on the ‘environment’ or luck. Attempts to suppress the effects of individual talents and efforts too much, as in the former socialist countries, can create societies that are ostensibly equal but fundamentally unfair…There are, however, causes of poverty that are ‘structural’ in the sense that they are beyond the control of the individual concerned.
Inadequate childhood nutrition, lack of learning stimulus and sub-par schools (frequently found in poor neighbourhoods) restrict the development of poor children, diminishing their future prospects. Parents may have some control over how much nutrition and learning stimulus their children get – and some poor parents, to their credit, make great efforts and provide more of those things than do other parents in similar situations – but there is a limit to what they can do. They are by definition under great financial stress. Many of them are totally exhausted from juggling two or three insecure jobs. And most of them had a poor childhood and poor education themselves.
All of this means that poor children start the race of life already weighed down by sandbags on their legs. Unless there are social measures to at least partially compensate for these disadvantages (eg., income support for poor parents, subsidized childcare, greater investments in schools in poor areas), those children won’t be able to fully realize their innate potentials.
Even when they overcome childhood deprivation and aspire to climb the social ladder, people from poorer backgrounds are likely to meet more obstacles. Lack of personal connections and a cultural gap with the elite often mean that people from underprivileged backgrounds are unfairly discriminated against in hiring and in promotion. If those people also happen to have other ‘wrong’ characteristics – in terms of gender, race, caste, religion, sexual orientation and what not – they will have an even harder time to get a fair chance to demonstrate their abilities.”
Ha-Joon Chang (2014), Economics: The User’s Guide, Penguin books, p.336-8.
Until recently, much of economic theory has neglected the roles that evolution, psychology and biology play in shaping the economy and its human constituents. This has been detrimental to mainstream economics’ narrow vision of economic man, who is supposed to behave in a selfish, rational fashion as he optimises social outcomes, primarily in the realm of markets.
A notable recent contribution which attempts to counter this conception is Rojhat Avsar’s The Evolutionary Origins of Markets. The book argues that the human brain and human behaviour have evolved in ways which make the creating and sustaining of socioeconomic institutions, not least the market and exchange, outcomes of social motives as much as selfish ones.
Avsar’s short book contains a wealth of ideas and applications of studies of human nature to the economy. I will not attempt to cover more than a few of them, or review the book, in this post. Instead I want to discuss one model of the human brain taken from the book and note its implications for our understanding of man in the economy. I will also introduce some ideas from a similar effort by institutional and evolutionary economist Geoffrey Hodgson, which also employs concepts from biology in its attempt to construct an alternative to homo economicus. Continue reading
Here is another extract from Ha-Joon Chang’s 2014 introduction Economics: The User’s Guide. I have posted a number of quotes from Chang’s popular books over the last few years. For me these works make accessible to a potentially wide audience important points about economics and political economy.
This one outlines what he sees as the “appeal of the individualist vision of the economy and its limits”. In particular, economic freedom may not always be aligned with political freedom, contrary to the claims of many free market economists.
Elsewhere Chang has argued that there is no such thing as a ‘free’ market anyway, as markets under capitalism are institutions structured and sustained by all sorts of rules, both formal and informal, whose emergence and management are frequently subject to political intervention and debate. Although this kind of argument starts becoming one of semantics, I find that it can be helpful to challenge conventional wisdom and elements of discourse and meaning which are widely influential. This reveals them as partially subjective as much as objective, and therefore able to be changed. Continue reading
Perhaps the most striking application of hyper-rationality occurs in Analytical Marxism, whose doctrines were outlined clearly and concisely by its leading philosopher Gerald Cohen … It is an anti-dialectical and anti-holistic attempt to ground Marxist notions in neoclassical methodology. It “believes that [neoclassical] economics is essentially sound” and consequently relies on rational choice theory, game […]
“[T]he academic models that are supposed to explain how, and under what circumstances the ideal system of human interaction in markets is supposed to work as well as the prerequisites for the existence of such a system to actually work not only ignore the essential role of government in our economic, social and political lives, but the assumptions on which these models depend – the most important being that no economic actor has the power to influence a market price, to influence the political process, to manipulate consumers, that information is free and therefore all market participants have perfect information about the determination of market prices, that there are no external costs or benefits associated with the production or consumption of goods, that an individual’s choices are unaffected by the choices of others, and that people behave rationally as ‘rationally’ is defined within the discipline of economics – are impossible to achieve in the real world…”
Taken from a recent review in the journal Contributions to Political Economy, 38, p.96-98, by George H. Blackford of John Komlos, The Foundations of Real-World Economics: What Every Student Needs to Know. Routledge: Abingdon, 2019.