Reflections on Science & Political Economy

Robin Hahnel – an alternative vision of economic justice January 19, 2012

This post is to recommend Robin Hahnel for those looking for an alternative vision of what has gone wrong in the past hundred years and how we might move into the future. Two books I would mention in particular are:

The ABCs of Political Economy: A Modern Approach– this is extremely basic but also extremely clear.

Economic Justice and Democracy: From Competition to Cooperation — contains a postscript to one of the chapters by Chomsky on libertarian socialism.

I don’t know why I haven’t come across Hahnel before. He also wrote a book with Michael Albert that is now out of print but is available digitally — A Quiet Revolution in Welfare Economics — http://www.zcommunications.org/zparecon/quietrev.htm.

Well, that’s it for the moment. Happy reading.

Lying about Santa Claus January 2, 2012

We lie to ourselves all the time: about ourselves, about others, about the kind of society we live in, the kind of people we are, &c. The lies we tell ourselves about ourselves are perhaps not properly lies but more mythologies about the kind of person we either are or think we can be.  So I am going to distinguish among lies, bullshit, and myth-making. For bullshit, I will only direct you to Harry Frankfurt’s brilliant essay on the topic (http://athens.indymedia.org/local/webcast/uploads/frankfurt__harry_-_on_bullshit.pdf). Another philosophically oriented analysis of lying as opposed to bullshitting is Sissela Bok’s Lying: Moral Choice in Public and Private Life (1999).

Myth-making in its traditional sense is an honest attempt to provide an explanation or some kind of understanding where none exists.  Origin myths are the principal example. These are not lies. Rather they are attempts to make sense of something that otherwise would be difficult or impossible to understand.  Myth-making has often been used synonymously to lying. But I am not using the term in that sense. An analysis of the kind of myth-making I am referring to can be found in Emile Durkheim’s Elementary Forms of the Religious Life (1912). In his analysis, such elemental myths contain a germ of truth because they are projections of the existing social structure. Hence, worship in such a system is worship of one’s own social arrangements. In his view, simple societies have a relatively simple connection to such mythical structures while complex societies have a much more complicated one, but they have one nevertheless.  It would be deception of one kind or another to deny that such a connection existed, even in a secular scientific society.

Lies, on the other hand, are deliberate attempts to get the listener to believe something it would be to his disadvantage to believe and possibly would not believe otherwise. I wish to distinguish this kind of lie, which I will designate as a lie simplicter, from what is known as a white lie. A white lie is a lie told not to disadvantage the person being lied to but to save them future or present embarrassment. For example, should a person who is dressed inappropriately for a particular occasion asks if they look all right, you would be doing them no favors by lying to them and telling them that they look fine. So, a good and steady friend would tell them the truth – that they ought to alter their sartorial appearance. On the other hand, we often lie when such a lie would simply make the person feel ok about themselves without bringing about further disadvantage. So, a white lie, which is a lie, is not intended to render or sustain a disadvantage.

A lie simpliciter, however, is intended to do just that. But before we get onto this sort of lie, we need to distinguish it from another kind of lie, one intended to create a kind of fictional, benign universe. A good example is the lie (some call it a myth) about Santa Claus. No parent intends to disadvantage their children lying to them that Santa brings their presents. And, in fact, this lie has been around in one form or another for centuries. The longevity of a lie, which in itself may make it seem to take on the status of a myth, is no less pernicious because of this fact.

Whatever might have been the historical function of the lie about Santa Claus, what function does it currently serve? I can think of none. What it does do is to provide an early instance of a trusted adult telling a child a lie, knowing it is a lie, and leading to the inevitable outcome that the child will come to understand that his/her parents have been lying to him/her about Santa all the time. This can lead to the child losing a good deal of trust in the adults closest to them and whom they, at least up to this point, have trusted implicitly. Can this be considered a beneficial outcome?

One could argue that the removal of this veil of ignorance is a good thing because it is the beginning of the child’s social learning process, that not everyone can be trusted and that such development is essential and that it is beneficial because it takes place in a context that is otherwise benign. Nothing of any real consequence hinges on whether one believes in Santa Claus or not. This I believe is bullshit.   Should a young child, however, be placed in such in invidious position before they possess the cognitive armory to deal with such deliberate deception?   In my rendition of the motto of the early days of The X Files: Deny everything; trust no one, the context is clearly one where adult conceptualization is essential for its understanding and ability to deal with such a context and its possibly inevitable outcomes.  It is absurd to expect a young child to understand the context of lying and to be able to distinguish a “harmless” lie from a less than harmless one.

Societies are filled with mythologies and lies and it is often difficult to distinguish between them. We do not have to go far back in history to see that lying is endemic in public figures, for example.  Is it too much of a stretch to relate lying about Santa Claus to the process of inculcating a feeling that lying is ok if it is done for the best of all possible purposes, i.e., those you have in mind, no matter how outrageous the lie? Goebbels’ advocacy comes to mind here though he is an extreme example. However, I would argue that his is not as far-fetched an instance as many would like to believe. How about the economic lies told by many over the past 40 or so years? Milton Friedman had a perverse attitude to data, caring more about the theory than any evidence there might be for it, and in debates often made up figures on the fly.  If you find this statement incredible, have a look at Craig F. Freedman’s Chicago Fundamentalism: Ideology and Methodology In Economics (2008). Such lies have resulted in countless misery for untold millions. The fact, if it is in fact a fact, that such lies were told for the best possible reasons, and that some mahy not even know they were lying, is no excuse.

Can someone unconsciously lie? Of course they can. People compartmentalize their thoughts all the time. It is part and parcel of everyone’s social and cultural programming.  We are culturally programming to believe certain things and socially programmed to act in accordance with such beliefs. These two distinct types of programming are collected together in the literature under the umbrella term socialization. When we think of programming, we think of computer programming, which is intentional and goal directed and indeed self-conscious. Most social and cultural programming, however, is not of this sort. A good deal of research in clinical and social psychology shows such programming taking place without the programmers knowing that they are consciously engaged in such a process.  In fact, it could not be otherwise. Most social interaction, in order to flow smoothly, depends on the success of such programming.

The question is: does the smooth flow of most everyday social interaction depend essentially on a framework that not only allows but encourages lying and fails to supply the cognitive and emotional machinery that would easily facilitate people distinguishing harmless from harmful lies?  The only justification I can think of for facilitating and supporting this kind of deception as part of our socialization, if it is a justification at all, is that it assists in stabilizing the status quo.  That seems to be to be its one and only function. And in a well-educated society, if indeed we live in such a society, is such a function needed?  And if not needed, it can hardly be beneficial.

Altering a society where lying is so pervasive might begin by ceasing to lie about Santa Claus. Could this be a small first step?

Ancillary reading related to economics/political economy December 30, 2011

Here is some reading I have found over the years to be helpful in placing economic/political economic reasoning in a broader perspective, and I hope that they are reasonably accessible. They are not in any particular order. I have included more than a few in the hope that at least one will prove of interest.

Goffman Unbound: A New Paradigm for Social Science (2006) by Thomas Scheff. This is a quite brilliant exposition of the thinking of Erving Goffman, the late behavioral social scientist, whose own writing can be a little difficult. His first, ground-breaking work was Presentation of Self in Everyday Life. Had you read this in your early twenties, as I did, I could virtually guarantee that, if the work spoke to you at all, you would look at what your friends and acquaintances did and said in a new and somewhat disturbing way. Goffman placed individual behavior in its social setting and explained their interaction via role theory interpreted as theater.

Leon Festinger, Theory of Cognitive Dissonance (1957). And Festinger, Rieken, and Schacter, When Prophecy Fails (1956). The latter is a test of the theory set out in a more formal way in the former. This is one of the great theories of social psychology. It influenced George Akerlof, at least until he collaborated with Shiller on Animal Spirits and began to incorporate Prospect Theory in an unhelpful manner. There are two versions of Prospect Theory, one that takes history into account and one, the original version, that doesn’t. In either case, it is still insufficiently developed psychologically for the purposes envisioned by economists.

Spiros Latsis, ed., Method and Appraisal in Economics (1976). The pieces in this book use Imre Lakatos’s approach to the history and philosophy of science to assess the predominant economic theory of its time, which was the neo-classical paradigm. The general consensus was that the paradigm consisted of a degenerating research program. The neo-classical paradigm was considered to be degenerative from a logico-philosophical perspective, which is consistent with a discredited paradigm continuing to be used by professionals in the field.

Imre Lakatos, The Methodology of Scientific Research Programmes (1978) (Vol. 1 of collected essays). Lakatos viewed his work as improving on and extending that of Karl Popper. He felt that Popper’s notion of falsification was too simplistic and failed to account for what actually took place in scientific testing scenarios.  Some Italian economists are currently using Lakatos’s methodology and outlook to inform their own perspectives of their field. One example is The Wealth of Ideas, a history of economic thinking, by Allesandro Roncaglia (2006).

Robert Heilbroner, Behind the Veil of Economics (1988). This terrific work concentrates on the power and ideology behind economic ideas, as does the work of the great Kenneth Boulding (too many to list).

The Unresponsive Bystander: Why Doesn’t He Help? by Bibb Latane and John Darley (1989). This is another theory of social behavior, where individual and small group behavior is interpreted as a consequence of situational influence. It complements Goffman’s work, as it does Stanley Milgram’s justly famous study of Obedience To Authority (1974). The results of this study are incredibly disquieting. No one wants to believe that out of a large crowd of people who don’t know them, more than 60% will engage in acts that could kill them if told to do so by a suitable authority, that is, if the situation is appropriately influentially structured. Zimbardo’s Stanford prison experiment, described in The Lucifer Effect: How Good People Turn Evil (2007), also supports Milgram’s results. While Milgram’s study has been replicated all over the world with very similar results (with the exception of Australia), and thus his original results confirmed, you see virtually no studies like this currently. This is because ethics committees will not pass them. Milgram was himself deeply concerned about the consequences of his experiment on his subjects and checked up on them afterwords.

Roger Brown, Social Psychology (1^st ed. 1965). This is a beautiful exposition of work that isn’t much discussed these days. Included is a critical assessment of The Authoritarian Personality by Adorno et al. In some ways, this edition is better than its second incarnation.

Barrington Moore, Jr., Moral Aspects of Economic Growth and Other Essays (1998). This is by an historian whose most famous works are Social Origins of Dictatorship and Democracy: Lord and Peasant in the Making of the Modern World (1967) and Authority and Inequality under Capitalism and Socialism (1987).

In my opinion, this is essential reading even though some of it has been superseded: John K. Galbraith, The New Industrial State (orig. 1967; but the new edition (2007) with a forward by his son, James K. Galbraith, is the best choice). This is part of a trilogy, preceded by The Affluent Society and succeeded by Economics and the Public Purpose.

A sequel to The New Industrial State is James K. Galbraith’s own The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too (2008). Neither of the Galbraith works are strictly speaking examples of economic analysis. Galbraith pere’s colleagues considered him to be a “policy wonk”. The pejorative tone is obvious. The truth is that he was both more interesting and more relevant than his more mainstream economic colleagues.

Jerry Ravetz’s No-Nonsense Guide to Science (2006). This comes out of work he carried out with Silvio Funtowicz, a good bit of which can be found on Jerry’s web site, http://www.nusap.net/. I worked on this as well and came out with a computer-based statistics tutorial, Statistics Without Pain, that included my modifications of Jerry and Silvio’s scientific assessment paradigm, which I dubbed NUSPA to differentiate it from theirs.

A kind of follow-on from Jerry’s book is the best and most accessible history of the concept of zero that I have seen: The Nothing That Is: A Natural History of Zero by Robert Kaplan (1999). I unreservedly and unhesitatingly recommend it. It is a beautiful work.

Since economists virtually never engage in statistical analysis these days, different from days of yore, a discussion of how to avoid statistical errors written for the non-statistician is important if only in order to see what economists currently don’t do that perhaps they sometimes should.

First, the most famous of these is Darrel Huff’s How to Lie With Statistics (1954). What can I say that hasn’t already been said? It is exceedingly elementary, however, but lovely to read.

A more up to date, and less elementary, exposition with a little more detail is P. I. Good and J. W. Hardin’s Common Errors in Statistics (And How to Avoid Them), 3^rd ed. (2009). The examples aren’t from economics or political economy, where experiments are virtually impossible, but the general issues are much the same. The perspective is that of the Neyman-Pearson descriptive and hypothesis testing perspective (rather than the Bayesian).  But that should prove no obstacle. The essential thing is to know the scale type of the data you have and the character of their distributions. Only then can you decide what sort of statistical analysis to adopt.

Well, I guess that is enough for this year, though I might think of something else. I hope you enjoy at least one of these or another in similar vein and that it helps you assess what is being said about the economic and political state we find ourselves in.

Recommended econ reading for the new year that are actually readable & contrary to the mainstream December 28, 2011

Below are both books and articles you can find on the net. On second thought, if you couldn’t find it on the net, what would be the point of recommending it.

Let me begin with a book that is both entertaining and enlightening about the current crisis – The Global Minotaur by Yanis Varoufakis (2011). He is scathing about the Euro crisis and who to blame which is summarized nicely in his parable of the ant and the grasshopper to which he gives his own twist: “Never Bailed Out“.

Extremely readable accounts of how to look at the economic system in general are by the late Robert Eisner. They are the following:

The Misunderstood Economy: What Counts and How to Count It (1994). This trashes what has become the standard view of how the economy works.

How Real Is The Federal Deficit? by Robert Eisner (1986). This is essential reading given the bullshit that is promulgated practically every day by dim economists and the mainstream media. A sovereign country with sovereign control over its own currency which has a floating exchange rate with other currencies has no deficit problems with respect to its own debts, and that includes social security, national health costs, education, or anything else like these. While about the US, the argument applies with equal relevance to the UK. The Eurozone, with its Euro, is in a different position, as none of the countries in the EMU have their own currencies, having relinquished them to use the Euro.

The Great Deficit Scare and Other Economic Myths by Robert Eisner (1997). This is a short but sweet account of the economic mythologies that virtually completely surround us.

Now for others.

Debunking Economics by Steve Keen (2nd ed: 2011). A definitively scathing attack on the neo-classical world view that underlies much current economic policy recommendations. He shows in exquisite detail what bollocks it all is. So, when a government official or economist suggests a remedy for an economic malady, ask yourself: what are the probable assumptions behind this particular set of recommendations. Keen argues that it is likely that you will discover neo-classical assumptions hidden within the verbiage, which in his view completely invalidates the advice.

“The Big Lie” by Michael Thomas (2011) in the Daily Beast. Brilliant invective against the bankers and politicians, the latter of whom he considers the greater malefactors, by an ex-banker who admits that his daily job consisted of lying to customers.

“Slash and Burn Capitalism” by George Monbiot (2011). This is one of his blog posts that castigates Osborne et al.’s approach to the environment using the economic crisis as an excuse for a particularly despicable kind of cronyism.

If you would like to know more about what Keynes said but find his expositional style a little offputting, then do give The Economics of J. M. Keynes by Dudley Dillard (1948) a try. Or you can have a gander at the shorter Keynes: The Return of the Master by Robert Skidelsky (2010).

More historical works are these:

A beautifully written account of the events leading up to the Great Depression and the four bankers who participated in and tried in their own ways to prevent catastrophe but failed, primarily because of the actions they themselves took, is Liaquat Ahamed’s Lords of Finance: 1929, the Great Depression, and the Bankers Who Broke the World (2010).

If you think that the industrial revolution and its aftermath was a paragon of entrepreneurial competence, you might like to rethink this. A blistering account of the US railroad bonanza and its accompanying disasters is Railroaded: The Transcontinentals and the Making of Modern America by Richard White (2011). An appropriate response to this account is OMG! How could they have been so stupid? All I will say is: think of Larry Summers and what an idiot he is yet how lauded he is by many.

I would guess this is enough to go on. Should you get through this list, you will understand our present plight better than most. You can then decide for yourself whether Osborne, Geithner, et al. are either incompetent or venal. Certainly, what they are doing and saying is not in the interests of the majority.

On that note, I wish you a happier, and hopefully more prosperous, new year. Though I wouldn’t count on either.

A little addendum:

For complementary histories of financial misdeeds and the like, which complement Ahamed:

Bethany McClean & Joe Nocera, All the Devils are Here: The Hidden History of the Financial Crisis (2010);

Edward Chancellor, Devil Take the Hindmost: A History of Financial Speculation (1999).

For the best book on the Irish crisis that takes no prisoners, you can do no better than Fintan O’Toole’s Ship of Fools: How Stupidity and Corruption Sank the Celtic Tiger (2010 ed. with an added postscript).

Who not to read:

Krugman is excellent on the politics of the financial crisis but goes astray on the macroeconomics of it. For example, he thinks the standard demand-supply curves are good pedagogical tools for introducing students to how the economic system in the large works. They aren’t.  And he still thinks that you can use an analogy between a household and the government to illustrate deficit spending and the like. The analogy is completely inapplicable. For these reasons, among others, I am unable to recommend Krugman unreservedly. That said, he should not be avoided.

Read nothing by the IMF. Their recommendations are inevitably disastrous for those they are supposedly helping. They have no idea what they are doing.

Avoid Olivier Blanchard. He is wedded to a kind of neo-classical view of the economic world and thereby goes astray.

Do not believe anything about the economic situation put out by either the UK or US governments. It is either deliberate misinformation or the consequence of incompetence. Geithner, for instance, is a failed regulator. And so far, a failed Treasury Secretary. A sterling record. He is either a liar or doesn’t have a clue. Take your pick. Osborne has been conspicuous by his unblemished record for getting things so wrong you woudn’t think we and he lived in the same world. And in a strong sense, we don’t. Danny Blanchflower doesn’t think Osborne knows what he is doing. Bill Mitchell thinks that it is likely that Osborne and his clique know precisely what they are doing, which is screwing us over for their own benefit. Again, take your pick.

Heads of state in mid-19th C understood the nature of national debt better than current ones September 14, 2011

Some members of our social elites are among the most dangerous people in the world. Not in the way a Ted Bundy is or a Joseph Stalin might be, but in a more subtle way. They are dangerous in that they can destroy the lives of people indirectly and from a great distance. They are isolated from their communities and hold bizarre beliefs about what goes on in parts of the social network of which they have little or no experience. They have, for instance, no idea how the economic system works, other than how it works for them. This was not always so.

“The public debt on the first day of July last, as appears by the books of the treasury, amounted to $1,740,690,489.49.  Probably, should the war continue for another year, that amount may be increased by not far from five hundred millions.  Held as it is for the most part, by our own people, it has become a substantial branch of national, though private, property.  For obvious reasons, the more nearly this property can be distributed among all the people the better. …  The great advantage of citizens being creditors as well as debtors, with relation to the public debt, is obvious.  Men can readily perceive that they cannot be much oppressed by a debt which they owe to themselves.”
– Abraham Lincoln, 1864 Annual Message to Congress

Coming on to Kennedy, which is not all that long ago.

“The myth persists that Federal deficits create inflation and budget surpluses prevent it. …  Obviously deficits are sometimes dangerous – and so are surpluses.  But honest assessment plainly requires a more sophisticated view that the old and automatic cliché that deficits automatically bring inflation. …  What we need is not labels and clichés but more basic discussion of the sophisticated and technical questions involved in keeping a great economic machine moing ahead.”
– Jack Kennedy, 1962

Now let us look at Kotlikoff who has recently been in the news.

“… [I]f there is no change in the net taxes paid by current generations, future generations will have to pay net taxes equal to 71% of their lifetime incomes.”
– Lawrence Kotlikoff, Harvard Business Review, May-June 1993

It would appear that we have gone downhill intellectually since 1864, though Kennedy suggests that the downhill trend hasn’t been steady but punctuated by hills and troughs and that we are presently in a rather deep trough of intellectual sloth and incompetence. Roosevelt himself wasn’t always sure of what he thought or of what he should do.  But that may be excusable because it could be argued that we knew less in his time. That excuse won’t wash this time.

It is a disgrace that Lincoln had a better understanding of how the economic system worked than do the incompetent ding-a-lings and their hangers-on that populate Congress and some other governments today.  The usual trade-off argument that is often trotted out that government heads have to compromise has no explantory value, as Lincoln was subject to similar contraints.

One difference between Lincoln’s time and today is the perspectives of the social elites.  The elites in Lincoln’s time, while self-interested, also felt that they owed something to the society in which they lived and which had offered them such opportunities.  Christopher Lasch, in his last book, The Revolt of the Elites and the Betrayal of Democracy, persuasively argues that present day elites are so isolated from the communities in which they live and from which they obtain their sustenance and privileges that they feel no social obligation whatsoever to their respective communities.  Effectively, this turns them into sociopaths.

Robert Hare, one of the leading experts on psychopathy, defines “psychopathy” and “sociopathy”as follows:

      Psychopathy:  No conscience and incapable of empathy, guilt, or loyalty to anyone but themselves;

      Sociopathy:  Not a formal psychiatric condition;  actions viewed as anti-social and criminal by society at large but not within their own socio-cultural group.

A psychopath exhibits no remorse or guilt or empathy in any situation or with any other person than him or herself, and sometimes not even then.  I would modify Hare’s definition of “sociopathy” as consisting of psychopathic behavior that is restricted to particular social roles or social situations the actor finds him- or herself in.  Under this modification, sociopathy becomes a limiting case of psychopathy.  This modification does not conflict with Hare’s definition but it carries the same emotional punch as the central term, psychopathy, does, as the terms refer to virtually the same behavior.  Sociopathy becomes a restricted kind of psychopathy.

The behavior that Lasch describes as being exhibited by the social elites seems to differ not at all from that of a psychopath.  Hence, the conclusion that a reader is tempted to conclude, though Lasch doesn’t, is that many member of the elite are psychopathic.  Certainly, some members of the Western banking community exhibit behavior consistent with psychopathic character traits, though these may be only situationally determined.  The situational influence of role behavior is something that is beyond my scope here, but it is a factor which may bring about psychopathic behavior in a person who might in other circumstances act and feel quite differently.  They are not true psychopaths, who are psychopathic no matter what situation they are in or what social role they are carrying out.  Nevertheless, partly as a consequence of their social and cultural isolation from the larger social network, and because they are basically intelligent, though not necessarily well educated in a broad sense, they are able to act psychopathically and to have such acts affect others in a quite negative fashion.

In a fundamental sense, their very isolation makes certain members of our current elites some of the most dangerous people in the world.  They can effectively destroy large swaths of the world around them while remaining unaffected themselves.  At least in the short run.  But as Keynes once aptly wrote, in the long run, we are all dead.