Ideologies at War

Discourse:  Formal and orderly
 and usually extended expression of thought on a subject.

Merriam-Webster

I finally figured out why there’s no discourse in economics. Or anywhere else, for that matter.

I started researching and writing about economics and the workplace three years ago. Right away, I noticed the topic was as polarized as everything else these days. I confess, I was surprised — I was a newbie, idealistic about my new course of study. I figured everybody would want to talk about it. But the pros? No. They talked past each other, nobody convincing anybody of anything they didn’t already believe.

And now I know why.

At first, I thought the divisions — right vs. left, capitalism vs. socialism, conservative vs. progressive, free market vs. Keynesian intervention, etc.  — were the result of opinions logically and studiously debated. Three years later, I can see it’s not so — those opposing positions are rationalizations after the fact, justifying prior beliefs grounded in ideology. When a topic — any topic — is dominated by competing ideologies, a fundamentalist dynamic takes over. Fundamentalism has no place for “formal and orderly and usually extended expression of thought.” Instead, it stifles discussion, damns doubt, brutalizes dissent. If you’re not with us, you’re against us — so choose sides, and the other side can talk to the hand.

We’ve seen, for example, how the Mont Pelerin Society and the Chicago School of Economics pursued their capitalist free market beliefs with fundamentalist zeal, and how the Democratic Socialists of America party has responded in kind. This, and other similar ideological standoffs have banished discourse from the field of economics.

The Berlin Wall fell because Soviet communism failed as a fundamentalist belief, leaving American capitalism the winner of the Cold War. Since then, political leadership in the U.S. and the U.K. has supercharged capitalism into its current hyper- competitive, hyper-privatized form, to the point that free market ideology has become not just economic policy but a cultural norm, and supporting it has become a patriotic duty.

Now in its fourth decade, the post-Cold War model of capitalism has failed in the same way Soviet communism failed before it:  it has neglected and alienated the “Public” — the res publica, the things that belong to the people, the things that assure citizens the basics of life and health, satisfying work, opportunity for educational, social, and economic betterment, and the sense of meaning, purpose, and well-being those things engender.

Fundamentalist ideologies wage war, and win at all costs. When free market economics became a fundamentalist ideology, it went to war. One of my daughters recently gave me a book published in 2007, at the height (depth?) of the Great Recession. The copyright date made me inclined to dismiss it as outdated. Now, as I read it, I wonder, how it is that we never knew these things, and most of us still don’t? This is from the book blurb:

“In this groundbreaking alternative history of the most dominant ideology of our time, Milton Friedman’s free-market economic revolution, Naomi Klein challenges the popular myth of this movement’s peaceful global victory. From Chile in 1973 to Iraq today, Klein shows how Friedman and his followers have repeatedly harnessed terrible shocks and violence to implement their radical policies.”

The Shock Doctrine:  The Rise of Disaster Capitalism, Naomi Klein (2007)

Pulitzer Prize winning journalist Chris Hedges wrote about the cultural dynamics of war in War is a Force That Gives Us Meaning (2014). As you read the following, substitute your ideology of choice — political, economic, religious, etc. — in place of war as armed conflict:

“War, in times of malaise and desperation, is a potent distraction.

“The cultivation of victimhood is essential fodder for any conflict. It is studiously crafted by the state. All cultural life is directed to broadcast the injustices carried out against us.

“The goal of such nationalistic rhetoric is to invoke pity for one’s own. The goal is to show the community that what they hold sacred is under threat. The enemy, we are told, seeks to destroy religious and cultural life, the very identity of the group or state.

“Patriotism, often a thinly veiled form of collective self-worship, celebrates our goodness, our ideals, our mercy and bemoans the perfidiousness of those who hate us.

“War makes the world understandable, a black and white tableau of them and us. It suspends thought, especially self-critical thought.

“Most of us willingly accept war as long as we can fold it into a belief system that paints the ensuring suffering as necessary for a higher good, for human beings seeks not only happiness but also meaning. And tragically war is sometimes the most powerful way in human society to achieve meaning.

“Before conflicts begin, the first people silenced — often with violence — are [those who] question the state’s lust and need for war. These dissidents are the most dangerous. Such voices are rarely heeded.

“Once we sign on for war’s crusade, once we see ourselves on the side of the angels, once we embrace a theological or ideological belief system that defines itself as the embodiment of goodness and light, it is only a matter of how we will carry out murder.”

Thus the Public has been “murdered” by economic policy as carried out under the current model of capitalism.

When the Public dies, so does public discourse.

It takes moral strength to dissent. The Business Roundtable recently took a step in that direction. According to its website, “Business Roundtable is an association of chief executive officers of America’s leading companies working to promote a thriving U.S. economy and expanded opportunity for all Americans through sound public policy.”

We’ll look at what the CEOs have to say next time.

The Free Market and the New Socialism

Mont Perlerin

The historic Mont Pelerin castle/hotel.

In 1947, economists  Friedrich HayekFrank KnightKarl PopperLudwig von MisesGeorge Stigler and Milton Friedman convened the Mont Pelerin Society in a castle/hotel overlooking Lake Geneva, with the express intent of displacing the Keynesian economic model that prescribed government intervention and spending to pull America out of the Great Depression and install the New Deal. The Society’s founding Statement of Aims is forcefully idealistic:

“The central values of civilization are in danger.  Over large stretches of the Earth’s surface the essential conditions of human dignity and freedom have already disappeared.  In others they are under constant menace from the development of current tendencies of policy.  The position of the individual and the voluntary group are progressively undermined by extensions of arbitrary power.  Even that most precious possession of Western Man, freedom of thought and expression, is threatened by the spread of creeds which, claiming the privilege of tolerance when in the position of a minority, seek only to establish a position of power in which they can suppress and obliterate all views but their own.”

The Statement goes on to carefully position the Society’s purpose as fostering intellectual inquiry, not the advancement of a new economic “orthodoxy.” In time, however, Milton Friedman did precisely that, championing capitalist free market economics through the Chicago School of Economics.

“The core of [the school’s teaching on the free market] was that the economic forces of supply, demand, inflation and unemployment were like the forces of nature, fixed and unchanging. In the truly free market imagined in Chicago classes and texts, these forces existed in perfect equilibrium, supply communicating with demand the way the moon pulls the tides

“Just as ecosystems self-regulate, keeping themselves in balance, the market, left to its own devices, would create just the right number of products at precisely the right prices, produced by workers at just the right wages to buy those products — an Eden of plentiful employment, boundless creativity and zero inflation.

“For this reason, Chicagoans did not see Marxism as their true enemy. The real source of the trouble was to be found in the ideas of Keynesians in the United States, the social democrats in Europe, and developmentalists in what was then called the Third World. These were believers not in a utopia but in a mixed economy, to Chicago eyes an ugly hodgepodge of capitalism for the manufacture and distribution of consumer products, socialism in education, state ownership for essentials like water service, and all kinds of law designed to temper the extremes of capitalism.

“The Chicagoans declared war  of those mix-and-match economists. What they wanted was not a revolutions exactly but a capitalists Reformation:  a return to uncontaminated capitalism.”

The Shock Doctrine:  The Rise of Disaster Capitalism, Naomi Klein (2017)

Compare that vision to that of the Democratic Socialists of America we met last time, whose Constitution unreservedly advances their own counter-orthodoxy:

“We are socialists because we reject an economic order based on private profit, alienated labor, gross inequalities of wealth and power, discrimination based on race, sex, sexual orientation, gender expression, disability status, age, religion, and national origin, and brutality and violence in defense of the status quo. We are socialists because we share a vision of a humane social order based on popular control of resources and production, economic planning, equitable distribution, feminism, racial equality and non-oppressive relationships. We are socialists because we are developing a concrete strategy for achieving that vision, for building a majority movement that will make democratic socialism a reality in America. “

Thus the free market and socialism champions have planted their flags at the poles of the economic ideological spectrum. In between, however, are those whose perspective and goals are more immediate and  pragmatic, such as greater economic equality, improved public access to healthcare (see endnote below[1]) and education unencumbered with government-financed debt.

“Socialism historically has been associated with the concept of public or collective ownership of property and natural resources and has long been associated with Marxism and communism. In 1949, with the Chinese Communists just having taken control of China, and with the Communist Soviet Union creating fear of an aggressive effort to spread their ideology around the globe, Americans’ view of the term embraced the classic elements bound up in these types of movements.

“Now, almost 70 years later, Americans’ views of socialism have broadened. While many still view socialism as government control of the economy, as modified communism and as embodying restrictions on freedoms in several ways, an increased percentage see it as representing equality and government provision of benefits.”

The Meaning of “Socialism” to Americans Today, Gallup Polling Matters (Oct. 4, 2018)

Meanwhile, Millennials’ interest in this more temperate version of socialism is increasingly putting their free market elders in an awkward position:

“Perhaps the most significant thing about the rise of millennial socialism in the US is that it is forcing conservatives to articulate what exactly is so bad about a more equal system – often with results that are beyond parody.

“A writer for the ultra-conservative website the Daily Caller, for example, recently attended an Ocasio-Cortez rally and reported, completely straight-faced: “I saw something truly terrifying. I saw just how easy it would be … as a parent, to accept the idea that my children deserve healthcare and education.

“Kids deserving healthcare, imagine that! It’s a slippery slope, it really is.”

Socialism Is No Longer A Dirty Word In The US – And That’s Scary For Some, The Guardian (July 29, 2018)

What is going on, that a parent would say something like that? Digging deeper reveals a dynamic at work that is more powerful than a generation gap, polarized ideologies, or campaign issues such as healthcare. We’ll look into that next time.

[1] For those leaning toward socialism’s new version, the leading issue is healthcare. See also these Gallup survey results announced November 12, 2019:  “More than 13% of American adults — or about 34 million people — report knowing of at least one friend or family member in the past five years who died after not receiving needed medical treatment because they were unable to pay for it… Dovetailing with these results is a rising percentage of adults who report not having had enough money in the past 12 months to ‘pay for needed medicine or drugs that a doctor prescribed’ to them. This percentage has increased significantly, from 18.9% in January 2019 to 22.9% in September. In all, the 22.9% represents about 58 million adults.”

The Public Good [2]

drinking water

Photo by Kobu Agency on Unsplash

American schoolkids learn that their country has a republican form of government, which means everybody doesn’t get to vote on everything; we vote for people who do the voting for us.[1] But there’s more to the word republic than that:

republic (n.):  c. 1600, “state in which supreme power rests in the people via elected representatives,” from Middle French république (15c.), from Latin respublica (ablative republica) “the common weal, a commonwealth, state, republic,” literally res publica “public interest, the state,” from res “affair, matter, thing” (see re) + publica, fem. of publicus “public” (see public (adj.)). Republic of letters attested from 1702.

Etymology Online.

Publica (the people, the state) + Res (affair, matter, thing) = “the people’s stuff.” The republican state holds the people’s stuff in trust, and its elected representatives, as trustees, administer it for the public benefit. That’s the plan, anyway. A more elegant term for “the public’s stuff” is “commonwealth”:

commonwealth (n.):  mid-15c., commoun welthe, “a community, whole body of people in a state,” from common (adj.) + wealth (n.). Specifically “state with a republican or democratic form of government” from 1610s. From 1550s as “any body of persons united by some common interest.” Applied specifically to the government of England in the period 1649-1660, and later to self-governing former colonies under the British crown (1917). In the U.S., it forms a part of the official name of Pennsylvania, Massachusetts, Virginia, Kentucky, and Puerto Rico but has no special significance.

Etymology Online

Several online searches turned up a surprisingly long and illuminating list of things that are or used to be considered part of the common wealth trust portfolio. For example:

  • education
  • news
  • law
  • governmental administrative functions
  • healthcare
  • childcare
  • clean water
  • clean air
  • certain interior spaces
  • certain exterior spaces — e.g. parks
  • natural wonders
  • shoreline and beaches
  • mail and home/rural delivery service
  • trash removal
  • public toilets
  • sewage processing
  • food, clothing, and shelter
  • heat and lights
  • streets, roads, highways
  • public transportation
  • freight shipping
  • telephone and telegraph
  • pest control
  • use of public lands/wilderness access
  • the “right to roam”
  • the “right to glean” unharvested crops
  • the right to use fallen timber for firewood
  • defense
  • police and fire
  • handicapped access

Some people argue for the inclusion of additional, more contemporary items on the list:

  • information
  • internet access
  • net neutrality
  • open source software
  • email
  • fax
  • computers
  • cell phones
  • the “creative commons”
  • racial, gender, national, and other forms of equality
  • birth control
  • environmental protection
  • response to climate change

The res publica is made up of those goods, services, and places everybody is entitled to just by being human, or by being a citizen or member of the applicable socio-cultural institution. Somebody’s got to administer all that, and somebody’s got to pay for it. Plus, as we saw last time, there are competing private interests as well.

You’ve heard of technological singularity — the point at which technology overtakes human ability — e.g., artificial intelligence and machine learning. Nowadays, administration of both private interests and the commonwealth has been delegated to a near-universal economic singularity:  the “free” market, carried out in the form of American-style capitalism, as also exported to the rest of the world. Superstar Italian-American economist Mariana Mazzucato[2] thinks this practice has skewed the private/public balance to the point where the commonwealth has been eliminated from policy-making:

“[Government is] an actor that has done more than it has been given credit for, and whose ability to produce value has been seriously underestimated – and this has in effect enabled others to have a stronger claim on their wealth creation role. But it is hard to make the pitch for government when the term ‘public value’ doesn’t even currently exist in economics. It is assumed that value is created in the private sector; at best, the public ‘enable’ [that privately created] value.

“There is of course the important concept of ‘public goods’ in economics — goods whose production benefits everyone, and which hence require public provision since they are under-produced by the private sector.

“… the story goes [that] government should simply focus on creating the conditions that allow businesses to invest and on maintaining the fundamentals for a prosperous economy:  the protection of private property, investments in infrastructure, the rule of law, an efficient patenting system. After that, it must get out of the way. Know its place. Not interfere too much. Not regulate too much. Importantly, we are told, government does not ‘create value’; it simply ‘facilitates’ its creation and — if allowed — redistributes value through taxation. Such ideas are carefully crafted, eloquently expressed and persuasive. This has resulted in the view that pervades society today:  government is a drain on the energy of the market, and ever-present threat to the dynamism of the private sector.”

The Entrepreneurial State: Debunking Public vs. Private Sector Myths (Rev. 2018) See also The Value of Everything: Making and Taking in the Global Economy (2018)

Prof. Mazzucato isn’t the only one concerned about this. When Occupy Wall Street puts up its “We are the 99%” sign, when voters support populist politicians[3], when French farmers don yellow vests and riot in Paris, when Malala Yousafzai advocates for educational opportunity, when Greta Thunberg scolds world leaders on climate change… all these are advancing their own responses to the current public/private balance.

In the search for remedies, the younger generation is more likely than their elders to reject populist nationalist politics and private capitalist solutions, and to push instead for an expanded commonwealth administered under a new version of an economic system many of their elders consider an economic dirty word.

More on that next time.

[1] Pure democracy — all those ballot initiatives — has joined republican lawmaking since California’s 1978 Proposition 13.

[2] The Times called her “the world’s scariest economist.”

[3] Here’s a list from the BBC of European nationalist politicians.

Progressive Capitalism

torn dollar bill

Torn dollar bill image source and license.

We’ve been looking at economic winners and losers in the zero-sum economy — particularly in the context of higher education, where cultural belief in the importance of college and post-graduate degrees on upward mobility and success in the job market is driving behavior that harms both parents (the college admissions scandal) and the economic and mental health of their children (student loan debt, general anxiety disorder, depression, suicide).

This series of blog posts is now in its third year — throughout, we’ve seen how hyper-competitive capitalism and its staunch faith in the implicit justice of the “free” market is causing other economic loses. For example:

  • the stagnation of middle class real incomes;
  • the rise of the numbers of statistically poor people in the U.S.;
  • the dismantling of compassionate social safety nets in favor of expensive, counterproductive, and humiliating replacements;
  • the rise of the “rentier” economy in which formerly public benefits have been privatized, making them accessible only to those who can afford them through the payment of economic “rents”;
  • the end of the American ideal of upward social and economic mobility;
  • the high cost of housing and the death of the American dream of home ownership;
  • the elimination of “normal” jobs through off-shoring, outsourcing, and the delegation of productivity to intelligent machines;
  • the advent of the short-term, contract-based “gig economy” with its lack of fringe benefits and its precarious prospects for sustainable income;
  • economic inequality that favors the wealthiest of capitalists at the expense of the bottom 90% (or 99%, or 99.9%, depending on your data and point of view);
  • the creation instead of an insular top-level “meritocrat” socio-economic class;
  • the new state of “total work” and the “monetization” of goods and services;
  • rising rates of career burnout, mental illness, and suicide resulting from social isolation and the vain struggle to find meaning and purpose at work;
  • the rise of corporate nation-states with economic and policy-making power that dwarfs that of many governmental nation-states;
  • the private (non-democratic) social policy-making initiatives of the wealthiest elites;
  • and much, much more.

Nobody meant economic policy to do this, but it has, for roughly the past 30-40 years. Good intentions; unplanned results.

We’ve seen that both plutocrats and progressives advocate for systemic change, while status quo inertia weighs in on the side of those who don’t see what all the fuss is about, since capitalism is undeniably the best economic option and always has been, and besides it’s still working just fine, thank you very much. Instead of meaningful discourse, we have a predominant nostalgic, populist doubling down on the neoliberal socio-economic cultural ideology that jet-propelled post-WWII recovery but finished running its course in the 1970s, while the retrenchers and the media slap those who beg to differ with the kiss-of-death label “progressive.” As a result, we’re left with incessant lobbing from one end of the polarized spectrum to the other of ideological bombs that originate in data and analysis skewed by cognitive biases, intentional blindness, and fake news . Economic policy-making resembles WWI trench warfare — a tactical grinding down of the opposition and the numbing and dumbing of everyone else. It was a bad idea then, and it’s still a bad idea now.

I had no idea this is what I was getting into when I decided three years ago to research and write about the new economy and the future of work.

It’s in the context of this toxic environment that Economics Nobel Laureate Joseph E. Stiglitz, offered his “progressive capitalism” alternative, based on “the power of the market to serve society.” Progressive Capitalism Is Not an Oxymoron: We can save our broken economic system from itself, New York Times (April 19, 2019). His article, like virtually all of the economics books and articles I read these days, begins with a long parade of evils and ends with a handful of policy ideas. His version of the former is by now quite familiar:

“Despite the lowest unemployment rates since the late 1960s, the American economy is failing its citizens. Some 90 percent have seen their incomes stagnate or decline in the past 30 years.

“This is not surprising, given that the United States has the highest level of inequality among the advanced countries and one of the lowest levels of opportunity — with the fortunes of young Americans more dependent on the income and education of their parents than elsewhere.

“There is a broader social compact that allows a society to work and prosper together, and that, too, has been fraying. America created the first truly middle-class society; now, a middle-class life is increasingly out of reach for its citizens.

“We confused the hard work of wealth creation with wealth-grabbing (or, as economists call it, rent-seeking).

“Just as forces of globalization and technological change were contributing to growing inequality, we adopted policies that worsened societal inequities.

“Even as economic theories like information economics (dealing with the ever-present situation where information is imperfect), behavioral economics and game theory arose to explain why markets on their own are often not efficient, fair, stable or seemingly rational, we relied more on markets and scaled back social protections.

“Politics has played a big role in the increase in corporate rent-seeking and the accompanying inequality.

“Markets don’t exist in a vacuum; they have to be structured by rules and regulations, and those rules and regulations must be enforced.

“We are now in a vicious cycle: Greater economic inequality is leading, in our money-driven political system, to more political inequality, with weaker rules and deregulation causing still more economic inequality.

“If we don’t change course matters will likely grow worse, as machines (artificial intelligence and robots) replace an increasing fraction of routine labor, including many of the jobs of the several million Americans.

“The prescription follows from the diagnosis: It begins by recognizing the vital role that the state plays in making markets serve society.

“Progressive capitalism is based on a new social contract between voters and elected officials, between workers and corporations, between rich and poor, and between those with jobs and those who are un- or underemployed.

“Part of this new social contract is an expanded public option for many programs now provided by private entities or not at all

“This new social contract will enable most Americans to once again have a middle-class life.

“The neoliberal fantasy that unfettered markets will deliver prosperity to everyone should be put to rest.

“America arrived at this sorry state of affairs because we forgot that the true source of the wealth of a nation is the creativity and innovation of its people.”

His point seems to be that merely reciting litanies of economic woes won’t bring about systemic relief — for that, we need to embrace an essential factor:

Paradigms only shift when culture  shifts:
new ideas require new culture to receive them,
and new culture requires new belief systems.

Systemic change requires cultural change — remodeled institutions and revised social contracts that tether ideas to real life. Trying to patch policy ideas into the existing socio-economic system is like what would happen if a firm were to abruptly change its products, services, and strategic and marketing plans without bothering to change its mission statement, values and beliefs, and firm culture.

Like that’s going to work.

Coming up, we’ll look beyond policy bombs to the higher ground of revised cultural beliefs, starting with next week’s search for the “public” that’s gone missing from the Republic.

What’s With Student Loans?

obama state of the union 2013

“It’s a simple fact:  The more education you’ve got,
the more likely you are to have a good job
and work your way into the middle class.”

2013 State of the Union Address

President Obama was repeating an enduring cultural belief. Maybe it was still true when he said it, but not anymore — for a lot of reasons we’ve looked at throughout this series, but especially in light of today’s social and economic calamity of soaring higher education costs and student loans.[1]

student debt graph

Chart from Next Gen Personal Finance (May 30, 2015)

Student debt grew steadily 2000-2014. Toward the end of that period, a revenue provision tacked onto the 2010 Affordable Care Act gave the Federal government a monopoly on the student loan business. Since then, total loans have risen exponentially — by 50%, to $1.52 Trillion.

Nationalizing student debt has been a government money-maker, in terms of both capital and income:

“The trillion plus in student debt that the state holds makes up a plurality of its financial assets — 37 percent, far more than national reserves officially held in gold or foreign currency.

“Because the government’s borrowing costs are so low, student lending is incredibly profitable. The Department of Education expects to reap $18.99 in profit on evert $100 in loans originated in 2014… and we’re talking over $25 billion in projected negative subsidy — that is, profit — off the 2014 cohort alone.”[2]

Kids These Days: The Making Of Millennials, Malcolm Harris (2017)

Meanwhile, educational costs have also soared.

educational costs

Tuition data from National Center for Education Statistics. Inflation data calculated using 1963–1964 tuition and tuition increase at rate of inflation from CPI Inflation Calculator. Graph by Noa Maltzman

Today, average undergraduate loans are $30,000. Paying them off represents a 21-year mortgage. What’s the ROI from the students’ point of view? Answering that question requires examining (1) the loans themselves — how they’re originated, paid off, etc., (2) what higher education is doing with the loan proceeds students are handing over, and (3) the cultural belief Pres. Obama articulated. For all of that, I refer you to the book Kids These Days, cited above, and to a 70-minute film Broke, Busted, and Disgusted, which I just watched.[3]

What’s to be done? The remedies in the film are prospective — they’re too late for the $1.52 Trillion already in place. Going forward? Well, it is an issue in the election coming up — at least for the Democrats — and here are summaries of candidate proposals:

Writing this makes me revisit my own experience with student loans and the cost of higher education.

I went to an expensive private college. My financial aid package included scholarships, work study, and student loans. I paid off the loans in five years. The relief was tangible. I vowed never again.

My financial aid package at DU’s MBA/JD program included scholarships and student loans. I declined the loans and worked a lot, sometimes full time. I made it through the first three years without loans and would have finished that way. An accountant friend told me I was crazy — it was cheap money. I took out a loan my fourth year. I paid it off in six years. The relief was tangible. I vowed never again.

In 2009, just after the Great Recession and an ill-timed, ill-advised, and poorly executed exit from law practice, I was short of funds to pay for two of my kids’ final years at expensive private colleges (they’re two years apart in age, but their final years coincided). I took out $30.000 in “parent plus” loans to make up the difference. I declared bankruptcy the following year, and found out student loans hadn’t been dischargeable since 2005.

In 2013, as part of an attempt at mid-life reinvention, I was accepted into a graduate program in sports psychology at DU. There was no way to pay for it other than student loans. I decided not to attend. The relief was tangible. Lesson learned.

In 2016, I qualified for disability income. I used most of my back-pay award to pay off my parent-plus loans. The relief was tangible. Lesson learned. I vowed never again.

It’s easy for me to feel entirely responsible for my own history. But as for today’s reality, as a young friend said recently, “I’m starting to believe it’s not all my fault.” Coming up, we’ll look at more economic support for that thought.

[1] As I write this, the headlines today show Felicity Huffman entering prison for her role in the college admissions scandal.

[2] Citing Department of Education Student Loans Overview Fiscal Year 2014 Budget Proposal. Click here for the 2020 numbers

[3] Of course the documentary has an agenda, but it’s well-done and worth watching.

Economic Storytelling [2]: Hail the Conquering Capitalist Comes

handel    hail the conquering

Handel wrote “See, the Conquering Hero Comes!” for his oratorio Judas Maccabaeus, created to commemorate the Duke of Cumberland’s stomping out of the Jacobite rebellion at the Battle of Culloden in 1746.

Two hundred years later, hay fever stricken non-hero Woodrow Lafayette Pershing Truesmith rode a myth of his own heroism, fabricated by well-intentioned friends, to a public moment of truth in the 1944 film Hail the Conquering Hero. But that was Hollywood, and everybody was happy in the end as Woodrow lived out the popular “redemption” narrative that Silicon Valley loves, as we’ve seen previously. As for the Jacobites, their story became a cautionary tale — a more sobering narrative genre.

These two conquering hero stories illustrate why non-narrative economists think we’re better off leaving stories at the water cooler:  narratives contain too much subjectivity, interpretation, cognitive bias, self-deception, and wishful thinking to be trusted, and therefore add nothing to economic policy-making, which is all those things already. You can talk “normative” all you like, but narrative policy will end up being a matter of power, not plot.

Plus, narratives can have unexpected outcomes. This article chronicles the pendulum swings that have characterized political/economic narratives for the past century, and warns that popular narratives of economic doom can have catastrophic consequences because they’re forged in simplistic thinking to the exclusion of more complex analysis:

 “[Catastrophe narrative favor] the politics of the strong man glaring down the nation-doubters… It’s globalism or ‘nation first’, jobs or climate, friend or foe.

“The alternative is not to be wistful about flat-world narratives that find solace in technical panaceas and market fundamentalisms; the last thing we need is a return to the comforts of lean-in fairy tales that rely on facile responses to a complicated world.

“Nowadays, the chorus of catastrophe presents differences as intractable and incompatible, the choice between them zero-sum.

“We need to recover our command over complex storytelling, to think of tensions instead of incompatibilities, to allow choices and alternatives, mixtures and ambiguities, instability and learning, to counter the false certainties of the abyss.”

Why We Need To Be Wary Of Narratives Of Economic Catastrophe, Aeon Magazine (Jan. 22, 2019)

I.e., if we’re going to have economic narratives at all, they need to be complex, not simplistic, and take into account the full range of “positive” and “normative” ethical judgments, as well as both mathematical modeling and fundamental human behavior. Anything short of that promotes polarized thinking, which is not only the standard of the day, but might be inescapable as long as the human brain is in charge. Coach, consultant, and author Karl Albrecht wrote the following in Psychology Today iun 2010 — before discourse disappeared entirely from American public life:

“Recent research suggests that our brains may be pre-wired for dichotomized thinking. That’s a fancy name for thinking and perceiving in terms of two – and only two – opposing possibilities.

“These research findings might help explain how and why the public discourse of our culture has become so polarized and rancorous, and how we might be able to replace it with a more intelligent conversation.

“The popular vocabulary routinely signals this dichotomizing mental habit: ‘Are you with us, or against us?’ ‘If you’re not part of the solution, you’re part of the problem.’’

Albrecht goes on to say that “imagination, creativity, and innovation all thrive in the ‘twilight zone,’ not at the poles of opinion,” and offers these seven antidotes to the plague of silo-building:

  1. Have fewer opinions.
  2. Keep your opinions and conclusions on probation.
  3. Let go of the need to be certain about everything.
  4. Seek the “third hand”- and any other “hands” you can discover.
  5. Modify your language.Replace the word “but” with “and” as often as you can, even if it sounds weird at first.
  6. Remind yourself every day that your “truth” is not the same as any other person’s truth.
  7. Avoid head-butting contests with opinionated people.

Good advice no doubt, but storytelling or not, these days capitalists and capitalism are the conquering heroes making their grand entrances. In fact, they’re so powerful that they’re eclipsing the historic “nation-state” in size and influence.

We’ll look at that next time.

Homo Economicus [4]: Enlightened Self-Interest

homo economicus

The concept of “homo economicus” captures the belief that the rigorous pursuit of self-interest in a free market improves things for everyone. This belief powered Milton Friedman’s famous dictum that “the social responsibility of business is to increase profits,” and finds a philosophical ally in Ayn Rand’s “objectivism”:

“The core of Rand’s philosophy… is that unfettered self-interest is good and altruism is destructive. [The pursuit of self-interest], she believed, is the ultimate expression of human nature, the guiding principle by which one ought to live one’s life. In “Capitalism: The Unknown Ideal,” Rand put it this way:

‘Collectivism is the tribal premise of primordial savages who, unable to conceive of individual rights, believed that the tribe is a supreme, omnipotent ruler, that it owns the lives of its members and may sacrifice them whenever it pleases.’

“By this logic, religious and political controls that hinder individuals from pursuing self-interest should be removed.”

What Happens When You Believe in Ayn Rand and Modern Economic Theory, Evonomics (Feb. 17, 2016)

Thus Ayn Rand became the patron saint of American capitalism in its current iteration. This is from a 2017 Atlantic article:

“’I grew up reading Ayn Rand,’ … Paul Ryan has said, ‘and it taught me quite a bit about who I am and what my value systems are, and what my beliefs are.’ It was that fiction that allowed him and so many other higher-IQ Americans to see modern America as a dystopia in which selfishness is righteous and they are the last heroes. ‘I think a lot of people,’ Ryan said in 2009, ‘would observe that we are right now living in an Ayn Rand novel.’”

Critics point out that there is no such thing as a free market or objectively rational self-interest, arguing instead that the market is inescapably skewed toward policy-makers’  beliefs and values — i.e., their particular interpretations of what “self-interested” behavior looks like.[1] As a result, economic policy always comes laden with ethical and moral beliefs about “good” vs. “bad” outcomes, which the not-so-free market then dutifully delivers:

“Milton Friedman argued that competition between big businesses suffices to safeguard the public interest, but in practice it is almost always insufficient, especially where there is collusion among the players to safeguard their market dominance – and their political influence.

“Free-market economists have an unwarranted faith in the capacity of price adjustments to produce technological changes in production and patterns of consumer demand. Their theories imply that the price system has infinite capacity to shape sustainable outcomes.

“But if the self-interested market behaviours continue to seek an unchanged goal – more personal incomes with which to purchase more material goods – ultimately they cannot be fulfilled.

 “Ultimately, the short-term self-interested economic arrangements are not sustainable anyway. As the US economist Kenneth Boulding once said: “Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist”.

“Economic inequalities also predictably widen where self-interested market behaviours dominate. Capital makes capital, while those without capital often remain consigned to poverty. Certainly, the very rich have become notably much wealthier during the last three decades while neoliberal ideologies and policies have been dominant. In the absence of strong unions and governments committed to some degree of egalitarian redistribution, the unequalising tendency is inexorable. The result is predictably unhappier societies that experience a higher incidence of social problems, as empirical research complied by Richard Wilkinson and Kate Pickett clearly demonstrates.

“Something has to give. An economic system that rewards amoral self-interest creates economic instability, fractures economic insecurity, fosters concentrations of economic power, exacerbates economic inequality and violates ecological sustainability. So much for the self-regulating market economy!

“There is currently much talk of ‘social responsibility’ in business and of ‘triple bottom line accounting’ that emphasises the use of social and environmental criteria, as well as a financial criterion, in assessing business performance… Indeed, businesses developing reputations for responsible behaviours may reap benefits in the form of worker and customer loyalty. But unless and until ethical behaviours become integral to how markets function – by directly affecting ‘shareholder value’, for example – it is hard to see the overall effect as much more than window dressing for ‘business as usual’.”

Oh, The Morality: Why Ethics Matters In Economics, The Conversation (in partnership with the University of Sydney) (March 22, 2012)

More on ethics and economics next time.

[1] For more on whether the market is truly “free,” see this article and this one. Or if you prefer, here’s a short video and here’s a TEDX talk.