Fear of Clowns

"Faith may be defined briefly as an illogical belief in the occurrence of the improbable."
- H. L. Mencken
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Saturday, April 30, 2005

The wages of sin are often a private jet 

brat at dave's birthday party

Gordon Bigelow challenges the dominant neoclassical school of economic thought in the May 2005 edition of Harper's. In "Let There Be Markets", he writes,

The problem is that the story told by economics simply does not conform to reality. This can be seen clearly enough in the recent, high-profile examples of the failure of free-market thinking - how media giants have continued to grow, or how loose accounting regulations have destroyed countless millions in personal wealth. But mainstream economics also fails at a more fundamental level, in the way it models basic human behavior. The core assumption of standard economics is that humans are fundamentally individual rather than social animals. The theory holds that all economic choices are in fact authentic, unmediated selfhood, rational statements reflecting who we are and what we want in life. But in reality, even our purely "economic" choices are not made on the basis of pure autonomous selfhood; all of our choices are born out of layers of experience in contact with other people. What is entirely missing from the economic view of modern life is an understanding of the social world.

Bigelow illustrates his point by offering an example in the extreme,

If you bought a Ginsu knife at 3:00 A.M., a neoclassical economist will tell you that, at that time, you calculated that this purchase would optimize your resources.

The article continues on to place the roots of modern economic theory in the early 1800's Christian fundamentalist belief that God created an orderly and rationally knowable universe and when the free-market failed the impoverished, it was a designed spiritual condition - part of God's orderly Creation - not a problem in need of fixing,

In the 1820s evangelicals were a dominant force in British economic policy ... their first major impact was in dismantling the old parish-based system of aiding the poor and aging, a policy battle that resulted in the Poor Law Amendment of 1834 ... The Poor Law nationalized and monopolized poverty administration. It forbade cash payments to any poor citizen and mandated that the only recourse be the local workhouse. Workhouses became orphanages, insane asylums, nursing homes, public hospitals, and factories for the able-bodied. Protests over the conditions in these prison-like facilities, particularly the conditions for children, mounted throughout the 1830s. But it did not surprise the evangelicals to learn that life in the workhouses was miserable. These early faith-based initiatives regarded poverty as a divinely sanctioned payment-plan for a sinful life.

The article concludes that economists ought to let go of thinking of markets as governed by scientific laws and standing as a perfect self-regulating system, divinely mandated or not,

The first evangelicals fought for free trade because they thought it would encourage virtuous behavior, but two centuries of capitalism have taught a different lesson, many times over. The wages of sin are often, and notoriously, a private jet and a wicked stock-option package. The wages of hard moral choice are often $5.15 an hour.

The whole issue of this Harper's is riveting, particularly if you're interested in the current influence of American fundamentalism in politics. The issue is also given enthusiastic props by I cite, Mahablog, MyDD, Consolation Champs, and Liberal Rapture.

Also, don't miss the brilliant 5 page adaptation from the English translation of the Czech Europeana: A Brief History Of The Twentieth Century by Patrik Ourednik, which begins and ends,

The Americans who fell at Normandy in 1944 were tall men measuring 68 inches on average, and if they were laid head to foot they would measure 24 miles. The Germans were tall, too, but the tallest of all were the Senegalese, who measured 69 inches, and so they were sent into battle on the front lines in order to scare the Germans ... And in 1989 an American political scientist invented a theory about the end of history, according to which history had actually come to an end because modern science and new means of communication allowed people to live in prosperity and universal prosperity was the guarantee of democracy and not the contrary, as the Enlightenment philosophers had once believed. And citizens were actually consumers and consumers were also citizens and all forms of society evolved toward liberal democracy and liberal democracy would in turn lead to the demise of all authoritarian forms of government and to political and economic freedom and equality and a new age in human history but it would no longer be historical. But lots of people did not know the theory and continued to make history as if nothing had happened.

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Comments:

It really is strange that no matter who says it's over, history just seems to keep chugging along.
I hate to break your socialistic bubble, but human nature is such that even in a system of pure communism, there would be those who would expolit the system for their own benefit. Capitalism also has its share of exploitation, yet I still say it is the most fulfilling and satisfying economic system known to man.
Beth -

The essay has nothing to do with socialism or communism. You are reacting like someone who listens to Rush Limbaugh. The essay is a criticism of the dominant economic model used to understand the way markets behave (that the economies are conglomerations of discreet individuals all acting in their own economic self-interest).

The author suggests this understanding is wrong because "all of our [individual economic] choices are born out of layers of experience in contact with other people. What is entirely missing from the economic view of modern life is an understanding of the social world."
Could you please tell me I am mistaken without your usual accusations that I listen to Rush Limbaugh when you know perfectly well that I do not? Thank you.
I wrote that you were "reacting like" a dittohead.

Maybe pickup the May Harper's, I think I gave a pretty good synopsis of the essay: That the author

a) points out flaws in the economic model most economists use (it does not account for "impulse purchases" such as the Ginsu knife),

b) gives examples of how using the model to inform policy often results in unintended consequences (not regulating accounting practices results not in efficiency, but fraud)

c) points out that using the model to inform policy decisions does nothing to help the impoverished (socializing charity as Britain did in the 1820s did nothing to alleviate poverty),

d) asserts that the error of looking at markets as if they behaved in accordance to mathematical laws is rooted in a belief that God created laws whereby consumers operate as independent entities, but reality is that there is a large social component to consumer behavior.
My comments were based on the quote:

"The first evangelicals fought for free trade because they thought it would encourage virtuous behavior, but two centuries of capitalism have taught a different lesson, many times over. The wages of sin are often, and notoriously, a private jet and a wicked stock-option package. The wages of hard moral choice are often $5.15 an hour."

I got the impression that the author was calling capitalism evil, to which I assumed the opposite was being considered a better plan.
And that's why your reaction is Limbaughesque: Dittoheads are taught to think "socialism" every time they hear "government regulation and oversight."
Since I don't listen, I wouldn't know. How do you know this?
The "ideal" of pure capitolism dictates that the consumer regulates industry. Simply stated the government has no need to place any regulations on business because the purchaser will decide what sorts of corporate behavior they will accept.

The reality of capitalism is that the masses are both ignorant and misinformed. Monopolies would drive reasonable compitition under. And when you mix it with democracy, democracy falters because business owns the politicians. Neither side of the republicrat fence is immune. Ultimately if we don't grow out of capitalism the human race is doomed and life on this planet as we know it will probably not make it either.

Pure communism dosn't and has never existed. Communism is not meant to be an end but a means to an end. Communism was meant to be nothing more than a workers revolution to bring forth a social democracy. In the ultimate end Marx was calling for a responsible anarchy. Marx managed to acurately predict over 150 years ago that mixing capitalism with democracy would ultimately put business in control of government to the detriment of the citizenry. He beleived that if society was able to control both business and government society would progress toward an ultimate equality and in fact grow out of the need for government.

Keep in mind he did not beleive this transformation would happen overnight. He believed it would take several generations to come to it's full fruition. Had the Soviet Union not had Stalin as well as others and not had the U.S. breathing down it's neck the great socialist experiment might have had different results. The main problem I see is that the more you concentrate power the more easily corruptible it becomes so it may have been inevitable.

Persanaly I am rather keen on anarchy unfortunately society is far from ready for such a system. For those who would argue that anarchy begets chaos, if you take a group of resonable, responsible people they are going to treat each other reasonably. Marx thinking was that if you take a group of people, a nation for example, and gave them ownership of their lives, in increments, over several generations eventualy that society would evolve into a responsible anarchy.

I'm not advocating communism. I don't in fact believe communism is the right direction to go towards demacratic socialism. In fact I believe that democracy is the essential starting point. But I do believe that social democracy is an essential step if humans are going to survive.
Oh, and communism/socialism is not the opposite of capitalism. That would be like saying catholic is the opposite of protestant. While there are some profound differences there are even more similarities.
Call me pessimistic, but I don't think human nature would do well with anarchy either without exploiting it as well.

treban, I'd love to discuss capitalism vs. socialism with you at a different venue.

 

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