Monday, December 16, 2013

Who Messed Up the Obamacare Website? Maybe Private Industry

The flawed rollout of the Federal insurance exchange website has been a huge embarrassment to the President and seems perfectly designed to reinforce the basic economism narrative that the government can never do anything right and that all matters ought to be left to the so-called free market. It’s therefore instructive to review what has happened to one of the state websites, in Maryland, that also has failed to perform as promised (while other state sites, I gather, have been working well). Instead of being a simple parable about how government always messes things up, the true story is more complicated and lays a huge portion of the blame at the doorstep of the private sector.

The story can be found on the Health Care Renewal blog:
--which in turn cites the original coverage in the Baltimore Sun by Meredith Cohn and Andrea Walker:,0,6559272.story

To get the full picture I need to explain that Dr. Scot Silverstein, who blogs for Health Care Renewal about information technology, is very experienced in IT systems for physicians and hospitals, so has had a lot of opportunity to observe the IT industry at close quarters.
The whole story is quite convoluted and it also appears that we don’t know a lot of the story. The Sun reporters sought government e-mails about what went wrong with the Maryland site, but the state officials refused to release a number of the e-mails. Why? Because the withheld e-mails “involved the decision-making process of high-ranking executive officials.” Now, I would have imagined that that’s exactly why the reporters wanted to see those e-mails, and why the public arguably has a right to know what’s in them. But back to the actual website.

Maryland figured it would need a lot of help to get this website operational, and signed up a firm called Noridian to a $71M contract to construct the website. In doing so state officials bypassed the usual procurement procedures, presumably so they could get to work more quickly.
Noridian, having convinced the state that they knew exactly how to design and launch this website, then decided that they didn’t know how to do it after all, and turned around and subcontracted with another firm, EngagePoint. Apparently Noridian at least initially withheld this bit of news from government officials.

Noridian and EngagePoint between them kept reassuring the state that all was well and everything would work just perfectly and on time, leading several officials to make reassuring promises to the public which later came back to haunt them. The website went live and promptly crashed, and some time later the various parties were still trying to pick up the pieces.
As to why the site was such a flop, Noridian replied with a long list of excuses, as to how the site was such a complicated thing to develop and how many different, disparate functions all had to be coordinated in the same place—much more complex than Amazon selling you a book, for example. Dr. Silverstein’s response to this is telling. When you hire an IT firm that’s competent, he says, you expect them to tell you just how hard the job is going to be, how long it will take, and anything you need to know to make it work properly up front. His suspicion, based on his own sad experience, is that in order to snare the contract, Noridian deliberately put out a grossly overoptimistic schedule and work plan. Then, when everything blew up in their face, they suddenly discovered how hard things were after all.

Dr. Silverstein drew on his medical experience to note that, had a surgeon operated on a patient and encountered really nasty but easily foreseeable complications, and then tried to use the difficulty of the surgery as an excuse for not having anticipated and planned for the complications, we’d have a name for that—malpractice.
All this was bad enough, but it promptly got worse. Noridian and EngagePoint started pointing fingers at each other over the blame for the debacle. Eventually Noridian cancelled its contract with EngagePoint, but tried to keep the EngagePoint staff at their jobs and expected them to fix what was broken. EngagePoint sued and Noridian countersued. While the lawyers slugged it out, nothing got fixed.

I am reminded of stories from the very early days of fire departments in the U.S., when fire companies were private, for-profit firms. They would show up if your house was on fire and offer to put it out for a fee. If two rival companies both got to your burning house at the same time, they’d get into a fistfight out in the street as to who had priority to fight the fire, all while your house was burning down.
Not to suggest that the Maryland state government is blameless in this tale of woe and intrigue. But we eventually decided that if fire protection was going to be done in the public interest, we needed to get the private profit motive out of the picture. Maybe a similar lesson ought to be learned about how best to make an Obamacare website that works.

Saturday, December 7, 2013

Welcome to the Club, Mr. President—Obama on Economic Mobility

President Obama gave a speech to the Center for American Progress in Washington this past Wednesday on the theme of economic mobility:

Paul Krugman described this speech in his column as important, despite the relatively ho-hum if not actively negative reaction of the press:

Looked at from a political point of view, the speech seems to affirm Krugman’s analysis that it’s a sort of coming out of the closet for the President. Obama makes quite clear that he’s speaking as a fellow progressive and that he intends to conduct himself as such for the remainder of his term. Apparently, all pretense (if it ever was pretense) of being a centrist and being above all dedicated to bipartisan solutions, no matter how much he might have to give up to cut a deal with the Republicans (who usually refused to cut a deal anyway), is done with as a failed effort. Just as it is hard to imagine that the Congress could get any more partisan and nasty just because the Democrats changed the Senate rules to limit filibusters, it is hard to imagine that the Republicans could scorn Obama any more because he made this speech.
Our point of view here, however, is related to economism. I have quoted from previous Obama speeches, both in The Golden Calf and in this blog. As a rule, in the past, I was quite happy if I could identify one or two passages in an entire speech that seemed fully expressive of an anti-economism posture. In this speech, on the other hand, I was hard put to find a passage that did not seem to me to call out economism for the flawed ideology and policy that it is.

The main focus, as the title indicates, is the way that income inequality in the U.S. has led to a loss of economic mobility. It is simply no longer true that a poor person, or the poor person’s children, can hope that through hard work, or education, or whatever, they will become reasonably well off.  Obama labels this as a serious challenge to who we are as a nation.
Along the way, the President trots out many of the statistics that people worried about income inequality commonly cite—like the CEO who was content to make20 to 30 times that the average worker made in the 1960s now makes 273 times as much, and that the top few percent of the population are running off with an increasingly disproportionate percentage of wealth and new economic growth. He deals with many of the standard ploys that economism’s defenders use to defend the status quo (like the claim that raising the minimum wage would hurt poor workers) and points out why all of them are misguided or inaccurate. He insists that government policy must play a major role in redressing the problems.

The road back from economism (maybe that’s a good title for the book that refutes the standard reading of Hayek’s The Road to Serfdom) will be long and difficult, but it has to start with the flaws of economism becoming the subject of robust political debate. As I explained in The Golden Calf, for far too long, economism has thrived on the widespread belief that the key portions of its ideology are nothing but common sense and that no rational politician could possibly disagree with them. Just to call them out and to insist that the debate must start is a major step forward.

Monday, November 25, 2013

The Power of Ideology: A Conservative “Alternative” to Obamacare

Republicans hate Obamacare and mostly go around threatening to repeal or defund it. Every so often, somebody attracts their attention with the complaint that they have never said just what their preferred alternative would be. So they worry a little bit and play around and then trot out a half-hearted proposal, which would strike most sensible people as a woeful joke of an effort actually to reform what needs reforming in U.S. health care. They look at their proposal for a while, then say, “Naaah,” and go back to denouncing Obamacare.

Princeton health economist Uwe Reinhardt caught the conservatives in the midst of one of these periodic pauses, and analyzed for the “Economix” blog of the New York Times one of the “alternative” plans:

Based on Reinhardt’s previous writings, I rather doubt he’d give such a plan the time of day, but he’s commendably even-handed, and willing to give the conservatives credit for at least offering something to talk about.
The specific plan is alluded to in general terms in a recent piece in the Wall Street Journal, but according to Reinhardt is most fully fleshed out in a report commissioned by the American Enterprise Institute, optimistically entitled “Best of Both Worlds”:

Reinhardt insists that there is enough major stuff in the details to make it mandatory to read the entire report, but then proceeds to offer a brief summary/overview. Being lazy, I will address only his summary.
Reinhardt begins by saying that the AEI authors want to get away from the redistribution of income that accompanies the Affordable Care Act, aka Obamacare, taking money from the healthy to pay for the sick, regardless of their income level.  I find this puzzling. Fire insurance redistributes income from those whose houses don’t catch fire to those whose houses do catch fire, and becomes affordable precisely to the degree that most of our houses don’t catch fire most of the time. (This is what current critics of the individual market in Obamacare call “being forced to buy coverage you’ll never use.”) Now, I would have thought that this is a basic feature of any actuarially sound insurance plan, and it seems odd that this would be the first thing people want to eliminate, especially if they want the private insurance market to be their savior.

But wait, there’s more. The authors don’t want to get rid of redistribution, and indeed apparently agree with the feature of Obamacare that most sticks in conservative craws—the redistribution of wealth from the rich to the poor.  They are okay with that redistribution, they just want it to be outside of the insurance market. So the plan calls for a combination of individual plans closely tailored to each individual’s supposed risk of having various diseases in the future, with a series of federal premium supports to help anyone who cannot afford the resulting coverage to obtain insurance.
I’m sure there’s more, but let me cut to the chase. As I read the summary version, what we have here is a strange mix of things that actually are already part of Obamacare but have been rearranged, and other things that don’t make very much sense but are made necessary to keep the jury-rigged plan held together with duct tape.  I would assert that what seems to be at the root of all this is not a desire, on the part of a set of smart economists, to build a sensible health plan from the ground up, and to put in the right mix of market measures and government regulations needed to accomplish that basic goal. Rather what seems to be going on is an overriding need to create a plan that can be called “free market” or “private enterprise,” regardless of whether it makes any sense or even whether it is all that different from Obamacare in ways that matter.

I assert that economism is characterized by just this sort of love affair with ideology over practical results.

Sunday, November 10, 2013

What Part of “Market Failure” Don’t You Understand? Health Costs As Seen through the Blinders of Economism

In the process of trying to keep up with my continuing medical education, courtesy Primary Care Medical Abstracts as provided by Drs. Rick Bukata and Jerry Hoffman, I had my attention called to this article which seemed instructive in illustrating how economism has succeeded in distorting the everyday perceptions of Americans in most every field.

A group based at the University of Iowa (subscription needed to access article) decided to try to find out what it cost to have a common elective surgical procedure, hip replacement with an artificial joint. They called two sets of hospitals, large community hospitals in all 50 states, and top-ranked orthopedic hospitals according to the infamous scorecards in US News and World Report magazine.  They asked for the hospital costs of the procedure and the cost for the physician’s services.

The first thing they found was that it was like pulling teeth to get any cost figures at all. A handful of hospitals in each category right away provided them with bundled costs for the entire package. To get some of the remaining hospitals to cough up any cost figures required numerous repeated phone calls. The questions were never answered for almost half of the hospitals.

The next thing that they found was that (no surprise if you’ve been following media stories on hospital charges this past year) the charges quoted them were all over the map. They were told that the operation could be as cheap as $11,000 or as expensive as $125,000.

So what do we have here? This seems as stark as you can get in terms of evidence for a broken system. If you had ever heard of economist Kenneth Arrow’s classic theory, that health care represents an example of market failure, you’d nod and say “yup.”

So what do these medical authors conclude? They admit that to some extent they are looking at the data through rose-colored glasses. But they twist themselves into knots to try to make this out to be good news for those patients who are willing to be smart shoppers. Just look how much you can save, they say, if you end up having your new hip at one of the cheaper hospitals vs. one of the ritzy ones.
So what do they have to ignore to come up with this Pollyanna prediction? They have to assume that the average patient is going to be as diligent and as smart in extracting price data from unwilling hospitals as they were. They have to assume that the prices actually quoted have some relation to reality. They have to assume that having learned the range of prices, the average patient is then going to have the means and interest to relocate to a strange city or state to take advantage of the best price. Finally they have to assume that the patient won’t just say, “Oh, heck, I have some health insurance, let them pay for it and I’ll deal with whatever is left over later on.”

In short, being faced with a ton of evidence that the marketplace is currently doing a lousy job of addressing out-of-sight health care costs, those who willingly put on the blinders of economism assume there is one and only one right answer to any problem whatsoever—invoke the powers of the marketplace.

Rosenthal JA, Lu X, Cram P. “Availability of Consumer Prices from US Hospitals for a Common Surgical Procedure.” JAMA Internal Medicine 173:427-432, March 25, 2013.

Tuesday, October 8, 2013

This Is Your Brain on Economism

Paul Krugman is back today with his regular column:
--in which he offers his analysis of the government shutdown and ensuing stalemate in the Capitol. (For an alternative view see the end of this post.)
Krugman describes a Republican Party that is being run by incompetents, who took it for granted that they could win a major victory by threatening to shut down the government and not raise the debt ceiling, assuming that that wuss Obama would cave immediately and give them whatever they asked for. Now that Obama is standing up to them, they have no Plan B.
How did the GOP arrive at this state of incompetence? Krugman offers the view that they got there by becoming a party which threw out, long ago, the basic distinction between faith and fact. They got used to the idea that they could make climate change, evolution, and whatever they did not like simply go away by refusing to believe it. That eventually led them to where they are now, where they believe whatever they want to believe and have no notion of what relationship their beliefs have to reality. They have become so incompetent they no longer recognize their own incompetence.
I have argued since I began this inquiry that economism has this effect—it claims to be scientific economics and the truth about the world and everything in it, but it actually is formed by an ideology that is religious or at least quasi-religious in nature. Economism at its core contains this self-contradiction, and proceeding to think in a way that conforms with the ideology of economism requires steadfastly ignoring that contradiction. As the White Queen told Alice, economism depends on how many impossible things you can believe before breakfast.
(I promised at the end to offer a contrary point of view—just so I don’t fall into the Republican trap of only believing what I want to believe. Yesterday, NPR broadcast an analysis of a recent Pew Research poll:
(According to this poll, it’s deceptive to characterize the impasse in Congress as caused by a minority having hijacked the process. The Pew opinion poll shows that those who believe that it’s the Democrats that are causing all the trouble by refusing to negotiate, and that it’s just fine and dandy to shut down the government over Obamacare, is indeed a minority, but it’s only a minority by single figures. The US populace seems largely split down the middle on this issue and so if indeed Congress was representing the will of the people, the Armageddon that we are getting on the Hill is just what we would expect.
(That analysis does not contradict the larger point that Krugman makes. It just would mean that it’s not only the core Republican strategists who live in the echo chamber of Fox News and right-wing talk radio; they have persuaded a goodly portion of the party faithful to live there with them, and to become persuaded that up is down and black is white and Obamacare is socialism. But it would cast doubt on the idea that a small contingent has somehow taken over the rest of the GOP, without the rest of the GOP being willing to go along.)


Friday, September 27, 2013

Hayek, Move Over—Milton Friedman’s Rejection of Economism

A while ago, in the early days of this blog, I did a 4-part post on why the advocates of economism today who worship Friedrich Hayek and his The Road to Serfdom appear not actually to have read the book:

I did read The Road to Serfdom, but admit to never having read Milton Friedman, who according to historians is right up there with Hayek as one of the original architects of neoliberalism, aka economism. Now, however, Notre Dame philosophy professor Gary Gutting has come to my aid to show that many of the things I said about Hayek apply equally to Friedman—namely, that if you go back and read his original stuff, he was rather far removed from the position that characterizes economism today:

Here are some highlights. Prof. Gutting starts with the standard Friedman quote—that business has only one social responsibility, to maximize profits. But Friedman immediately adds qualifications—that business can maximize profit only so far as it follows the rules set down by society, which prohibit fraud and deception for example:

“This qualification acknowledges a key restriction on the maximization of profit. More important, it commits Friedman to the principle that there can be restraints on the capitalist system that are not self-imposed but rather imposed by the society that employs this system for its own purposes. This principle is also implicit in Friedman’s claim that if a business used any of its profits for social goods, it would be usurping the role of the political system.

“It follows that, on Friedman’s own account, capitalism is not an economic system that operates independently of the political system in which it is embedded. It is a creature of that system, which has goals (of morality and social responsibility, for example) that go beyond the profitable exchange of goods.”

Gutting goes on to list other things that Friedman says that would probably shock today’s conservatives who bow at his altar (including support for a negative income tax), concluding:

“Our current political impasse over economic issues has arisen because so many conservatives have moved well beyond Friedman’s position. They object to almost all regulation of business, reject the need for any governmental solutions to social problems, and often seem to insist on judging corporate success in terms of short-term profits. But whereas Friedman offers a plausible theoretical case for capitalism, there doesn’t seem to be any intellectually respectable support for current conservatives’ much more radical understanding of the system.”

In other words, as we have long insisted here, economism as a quasi-religious ideology has no coherent defense or justification.

Thursday, September 19, 2013

The Republican Assault on Obamacare, Continued

A while ago I discussed what it is about “Obamacare” that so enrages Republicans (and other devotees of economism):
Within the last day, two further news items have cropped up that shed some further light on this matter. First is a Bloomberg editorial that addresses a new proposal emanating from the GOP that purports to be an alternative to the Affordable Care Act:

Finally realizing fully that they have no credibility at all so long as they simply throw stones at the Democrat’s health reform and offer nothing in its place, the Republicans have introduced a bill with two main provisions—individual tax deductions to aid in buying private insurance; and increased funding of public assistance for lower-income people to do the same. Bloomberg News jumps on the weakness of this proposal that’s ethically most significant—the fact that it would do nothing to increase the total number of people who now have health insurance. Bloomberg claims that Obamacare would reduce the rolls of uninsured by 25 million (out of an estimated 48 million), while the Republican bill would do zilch.

I certainly agree that the biggest priority is to insure more people. I would simply add another strange feature of the Republican bill that makes it silly to call it “an alternative” to Obamacare. It looks, for all practical purposes, just like Obamacare. The main provision of the latter is that it would juggle subsidies and tax breaks to get more people to buy private insurance.
That’s not so strange if you take a minute to remember where Obamacare came from. The model for this devoutly middle-of-the-political-road measure, which only a Tea Party wingnut could ever call “socialized medicine,” was after all the Massachusetts health plan that was the darling of then-Gov. Mitt Romney, until he decided to run for the GOP presidential nomination and then suddenly discovered that he hated the Massachusetts health plan.

Next up is Gail Collins’ New York Times column:

Collins asks: “Why do you think the Republicans have gone so completely lunatic when it comes to this issue?” Why threaten to wreck the global economy over shutting down this one piece of legislation?
Collins reminds us of what is normally supposed to happen within our political system when a piece of legislation like this becomes law, and a bunch of folks hate its guts. The bunch of folks are supposed to organize, elect candidates who believe as they do, and then repeal the offending bill in the next Congress.

So why don’t the Republicans take that approach? Why, as she says, do they act as if once Obamacare is allowed to take effect, it will cement itself in place as if it were an amendment to the Constitution?
Simple, she says—the Republicans are scared that when the U.S. public actually sees the Affordable Care Act rolled out, they’ll find that they like it. And that they won’t vote for candidates who want to repeal it.

So the Republicans are in the interesting position of opposing a law, and demanding brinksmanship to defeat it, because they are so worried about how popular it will be. I think that says something powerful, especially (as noted in previous posts) about the inherently antidemocratic nature of economism.

Sunday, September 8, 2013

Does Economism = Fundamentalism?

In an earlier post:
--I discussed why Philip Mirowski, in his important book, Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown (Verso, 2013), dismissed the label “fundamentalism” as applying to economism (or neoliberalism as he prefers to call it). I decided that dismissal requires a bit more inquiry.

First off, what is “fundamentalism”? I decided to consult the two ends of the intellectual spectrum, the OED and Wikipedia, but found that the OED had no such entry. Wikipedia offers the basic definition that fundamentalism, in religion, refers to unwavering adherence to core basic doctrines and implies a rejection of modernist approaches.
Just why does Mirowski dismiss “fundamentalism” as a descriptor for economism/neoliberalism? Here is what he says: “[Critics on the left should] resist simple-minded characterizations of the neoliberal approach …as some evangelical ‘market fundamentalism.’… it…debases comprehension to conflate [neoliberalism with] ‘fundamentalism’—a sneer unfortunately becoming commonplace on the left. It seems very neat and tidy to assert that neoliberals operate in a modus operandi on a par with religious fundamentalists… Counterpoising morally confused evangelicals with the reality-based community may seem tempting to some; but it dulls serious thought. …Neoliberalism does not impart a dose of that Old Time Religion. Not only is there no ur-text of neoliberalism; the neoliberals have not themselves opted to retreat into obscurantism… Instead they have developed an intricately linked set of overlapping propositions over time….”

 I take it from this that the reasons for Mirowski’s objection to the label “fundamentalist” are that it seems to him:

·         Sneering and pejorative

·         Simple-minded, failing to take the true intellectual rigor of economism into account

·         Suggestive of an obscurantist approach that requires the literal interpretation of some single holy text
Let’s work down this list. First off, if you believe as I do that economism poses a serious threat to the future of humankind across the globe, then it’s hard for anything you call it not to be pejorative. The real question is whether it combines its pejorative connotation with some descriptive power, or whether it’s nothing but mindless name-calling.

As to whether there is something descriptively useful about “fundamentalism,” we should note that unwavering adherence to fundamental core principles requires neither that one believes that these principles are all written down in some Divinely inspired text, nor that one has gone about deriving and stating those principles in a mindless, unthinking manner.

I would propose that at least one important distinction between fundamentalist and non-fundamentalist approaches to religion is that the former create the most limited sphere possible for the further exercise of human reason, once the fundamental principles have been laid down and agreed to.  Stating it somewhat crudely, a non-fundamentalist religion envisions a God that created a world that contains (among other entities) humans with brains. It is part of this God’s plan that humans will use those brains, and this religion calls upon people to try to use their brains for the good of the world. A fundamentalist religion instead stresses that God has a plan, and that we had better all turn off our brains and forget any heretical ideas that we can out-think God, or for that matter, even fully figure out what God is up to. Our role is not to think for ourselves but fully and meekly to accept what religion tells us are the rules.

Now, as previous posts have illustrated:
--I can’t read Mirowski in any other way except portraying economism as much more closely resembling the second sort of beast. So I’d argue that calling it a form of “fundamentalism” is descriptively powerful. If such a label causes people on the left to dismiss economism is not a serious threat, then that simply shows how befuddled these folks are, since anyone with even a nodding acquaintance with economism realizes full well what a powerful foe it is. If it wasn’t we wouldn’t be having this conversation.

Mirowski: Can Neoclassical Economics Be Saved?

[This is one of several posts discussing Philip Mirowski’s plausible and well-referenced Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown (Verso, 2013). Mirowski uses the term ‘neoliberalism’ for what I call ‘economism’; for purposes of this blog I have relabeled his ideas accordingly.]

When I wrote The Golden Calf, I tried to remain agnostic on the subject of neoclassical economics (NE)—not a hard thing to do, given my lack of any training in the field of economics. I tried to acknowledge a spectrum of opinions, all the way from NE and economism are joined at the hip, to economism represents a distortion and basic misunderstanding of NE, which itself remains fully valid even if economism turns out to be a sham.
Mirowski is qualified to take a firmer stand on the matter, being a professor of economics at Notre Dame. (Indeed, the only thing he needs to explain is his own existence as such an individual. He offers a good case for thinking that NE has been essentially taken captive by economism, and accordingly all economists who don’t toe the orthodox NE/economism line have been purged from university econ departments. Why he is not among the purgees is never explained.)

Anyhow, be that as it may, Mirowski offers a number of thoughts about NE that are worth cataloguing as a supplement to what’s in The Golden Calf.

·         Mirowski agrees with my account that both at the time of its origins in the 1870s and later on, NE is marked by a severe case of physics envy. Believing that only a field that outwardly resembles physics can claim to be any sort of “science,” NE has fallen in love with mathematical models, quite apart from whether those models actually predict anything useful about the real world, or are based on a set of sensible assumptions. Mirowski describes NE today as full of what he derides as “toy models” which merely “explain” after the fact things that have already happened, mostly things that the moneyed interests who line the pockets of the economics professors want to hear.

·         Regarding the Great Recession of 2008, the main focus of Mirowski’s book, NE simply lacked any theoretical tools to predict such an event, because all of its theories and models said that no such event could ever occur. Once the NE forces managed to regroup after the debacle, however, they lost no time in proclaiming that the Recession proved that nothing was basically wrong with NE. Mirowski notes that George Soros, who’s credited with coining the term “market fundamentalism,” sponsored a conference in Cambridge in April, 2010 called the “Institute for New Economic Thinking,” at which 70% of the speakers stoutly defended NE as in fine shape and requiring no substantial modification. Mirowski added sardonically, “If this was New Thinking, one trembles to contemplate what Old Thinking had looked like.”

·         Given that economism’s principal working short-term strategy when faced with any crisis is to spread doubt and obfuscation (, the point above illustrates NE’s incredible value for economism when things like the Great Recession happen. What could be better to sow confusion among the populace than to have an event as severe as the Recession happen, and then to have the world’s greatest economists saying things like nothing at all is wrong with any of their theories, or that their theories are just fine because really, they predicted that this would happen all along; or that actually they didn’t predict it but that’s just fine because it’s really not the job of NE to predict things anyway, or so many contradictory things before breakfast that no one could make any sense of it?

·         One of the features of economism is its attempt to reduce all of human life and society to one vast Market and then to insist that Market principles and rules explain everything important in human life. Mirowski claims that that’s not economism run amok, but that NE itself has taken this turn. It has fallen in love with “choice theory,” and has found, no surprise, that a great deal of all of human life seems to be about choices. “Yet explanatory hubris brings its own special tragedy: it is a philosophical commonplace that a doctrine that nominally explains ‘everything’ in fact explains nothing at all. Everything can potentially be portrayed by neoclassical economists as the orderly product of disembodied ‘self-interest’ so long as the ‘interest’ is defined in a sufficiently post hoc manner, order is conflated with the status quo, and the ontology of the ‘self’ changes from one application to the next. As with all good zombies, there is something missing where a brain should be.”

·         Mirowski quotes one rather astoundingly candid statement from an NE star: “As the economist Paul Romer is reported to have said, ‘Every decade or so, any finite system of financial regulation will lead to a systemic financial crisis.’” This assessment is on the one hand fully in keeping with the dictates of economism—if what seems to us mere mortals is something terrible happening, it can’t really be bad, because it’s nothing more or less than The Market adjusting itself and the world according to its inexorable laws; what makes it seem bad is our own inability to understand such sublime reasons. The problem is of course that when NE practitioners are eagerly sought out by the media and treated like visiting royalty, it is with the na├»ve idea that these people first, can tell us that something bad might be on the horizon, and second, actually advise us what to do to head it off. So NE has a serious problem getting its real beliefs in line with its preferred public persona. (Though economism doesn’t much care whether NE succeeds in this or not, because either way, that much more confusion is sown among the public.)

·         For all of the above reasons, Mirowski’s judgment is that NE cannot be salvaged and needs to be at least radically overhauled if not completely jettisoned. Mirowski thinks badly of one of the economists I have been most eager to quote, both in this blog and in The Golden Calf, Paul Krugman. Mirowski views Krugman as a sort of fake leftie, mainly because he refuses to let go of his basic adherence to NE theory and practice. Despite saying mostly the right things about how flawed economism-inspired policies are for the US and the world, and how trying out such policies has uniformly led to disaster, Krugman persists in employing NE-based reasoning whenever he has to do any actual economic modeling or forecasting.

Saturday, September 7, 2013

Mirowski: Why Economism Spreads Ignorance and Doubt

[This is one of several posts discussing Philip Mirowski’s plausible and well-referenced Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown (Verso, 2013). Mirowski uses the term ‘neoliberalism’ for what I call ‘economism’; for purposes of this blog I have relabeled his ideas accordingly.]
Both in The Golden Calf and in this blog I have stressed economism’s internal contradictions. Not too surprising for somebody trained in philosophy, I have treated this aspect of economism as a major weakness, one that can be exploited by those seeking to oppose its hegemony in American policy circles today.

Mirowski stresses this feature of economism also, referring to it as the “double truth doctrine.” However, Mirowski offers a deep analysis of where this comes from, and why, in a sense, economism is immune to any objections people like me might launch against it on this score.
We start with what Mirowski (here following Freidrich Hayek) believes to be the most important central feature of economism-think, which he accuses the left today of really missing the boat on: that the market, much more than being a vehicle for the physical transfer of goods, is a super information processing system. Going back to my own terms, in which economism functions logically as a quasi-religious ideology, we have the idea of an omniscient God who has laid out a plan for the history of the universe, in exquisite detail, but only God and never mere mortals can comprehend this plan. Just substitute “market” for “God” and you have economism.

It follows from this view that there can be no such thing as a “market failure”—something even Hayek in his sensible moments was able to contemplate. Whatever the market says must be right. If the market appears to be producing a disaster, it must be our problem of limited perceptions and understanding that make it seem as a disaster; if we only had the God’s-eye (or market’s-eye) view of the matter, we’d see that all is really happening for the best, and the only way it could have. Think the Black Death sweeping Europe and killing off a third of the population, and all the religious of the day could do was go to church and pray, and say that God must have done all this for excellent reasons.
The next thing that follows logically is that we humans must become much more humble about thinking we know anything at all. The market knows all, but being of such limited information-processing capability compared to the market, that phenomenal supercomputer, we don’t know diddly. The people who have to come in for special opprobrium in the economism world, whom must be publicly derided and sneered at at every opportunity, are the intellectuals and the scientists, those people who dare to assert that they know things independently of what the market decrees. (Presumably, according to economism diehards, the law of gravity would cease to function, if ever the market decided in its infinite wisdom that gravity was inefficient.)

So now we come to the danger point. The know-nothing populace is OK with the teachings of economism,, and are happy to buy into the propaganda that intellectuals and scientists are just a bunch of elitists trying to snooker the really-wise Average Joe on the street for their own suspect agendas, so long as everything is going along swimmingly and we all have jobs and cash in our pockets. But when the stuff hits the fan, as it did with a vengeance in 2008, then the natives get restless, and start to call for answers and (worse), programs that might fix things. The unruly populace at times like this must first be mollified and ultimately distracted from interfering with economism’s pro-market and pro-corporation policies.
Mirowski believes that economism has, over its roughly four decades of dominance, perfected a strategy for accomplishing this distraction and mollifying, and it’s called agnotology (you can look it up in Wikipedia). Agnotology is the study of ignorance, when that ignorance is deliberately created as a political tactic. The term was coined following analyses of how the tobacco lobby reacted to the initial scientific claims that smoking causes cancer. The tobacco folks figured out pretty quickly that they were going to lose if they ever claimed that they could prove that smoking did not cause cancer and was safe. So they brilliantly realized that they could accomplish all their political goals, at least in the short run (and giving them enough time to plan a longer term strategy) if all they did was spread doubt about whether smoking causes cancer. They hired on a few like-minded scientists (however marginal these people were within the legitimate scientific community) to study all the findings and proclaim, “Oh, it’s not really certain, all the data aren’t in yet,” and so on—a strategy that worked so well that the forces of economism followed it exactly later with climate change.

The media (assuming they needed any urging and were not simply captive to the economism program to start with based on which huge corporations own the media outlets) aided the campaign mightily with their so-called “fairness doctrine,” meaning that if you quoted a real scientist saying real facts about the dangers of smoking, you then had to give equal time to a fringe, wacko scientist spreading the message of doubt. Being told by the media that doubt was every bit the intellectual equal of facts, the public naturally became befuddled, lost interest, and went back to watching football or “reality” shows. Economism mission accomplished.
Now we come to the key point--is all this merely an exercise in cynicism? If so, then economism contains at its core a critical intellectual weakness. At some level its devotees have to know they don’t really believe what they are saying. But Mirowski shows how economism dodges this bullet (maybe the single most important message in his book). Recall that the overriding take-home message for economism is that we humans can’t know much of anything and have to be subservient to the omniscient market. If that’s so, then of course scientists know nothing either, and when economism befogs the public debate with ignorance and doubt, all it really does is teach us the important lesson about how little we know and how we have no choice but to trust the market. So the believer in economism can promulgate all the ignorance and doubt he wishes and feel righteous about doing so.

This finally shrinks the scope of the “double truth doctrine,” since there is no contradiction in the everyday economism devotee spreading doubt and ignorance. The only people subject to “double truth” are the inner circle of intellectuals like Hayek himself back in the 1940s and 1950s—who claimed on the one hand that only the market could know, and on the other hand that he knew that only the market could know. People like Hayek then presumably become economism’s equivalent of the Grand Inquisitor in Dostoevsky’s The Brothers Karamazov. These few high priests know that their doctrine is riven though with illogic, but suck it up and accept the heavy burden of knowing that and keeping it secret from the masses. It’s all done out of love for the common people, ignorant asses that they are.

Mirowski: What, Exactly, Is Economism?

[This is one of several posts discussing Philip Mirowski’s plausible and well-referenced Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown (Verso, 2013). Mirowski uses the term ‘neoliberalism’ for what I call ‘economism’; for purposes of this blog I have relabeled his ideas accordingly.]
When approaching economism, one of the things I had trouble with was both the myriad terms different authors used to describe what appeared to be the same set of ideas—economism, market fundamentalism, market populism, and most prominently, neoliberalism—and the relative lack of detail with which various authors defined their pet terms. In the end, I offered in The Golden Calf a 5-part definition, adapted from the work of Des Gasper, a scholar in the ethics of international development from The Hague.

One of the strengths of Mirowski’s work is a detailed 13-point description of economism (which, as noted, he calls neoliberalism). According to Mirowski, belief in economism entails all of these things:

  1. The good society must be constructed by political action; it will not come about naturally
  2. The market (though often simply left undefined, in the writings of economism advocates) is fundamentally a super information processor
  3. For public consumption, we must treat a market society (in which the market defines all human goals and purposes) as the natural and inexorable state of humankind (privately, economism’s intellectual elite can admit that it’s not all that natural, hence proposition #1)
  4. The goal of economism is reshaping the state, not destroying it, so that a strong state can do economism’s bidding and suppress any threats (in keeping with #1)
  5. Economism must promulgate a market theory of “democracy” to hide the fundamentally undemocratic nature of economism being imposed by a strong state—that is, economism must preach that under the state we are never really free, but we are only optimally free as participants in the marketplace (which by the way is part of the reason economism carries on always about the “free” market while hardly ever defining just what that means)
  6. We must radically reconceptualize the “self” as infinitely malleable and as not really existing, in keeping with the “self” that is the ideal participant in market society
  7. As with #5, freedom must be conceived solely in market terms: “no market can ever be coercive” (p. 61)
  8. Capital has a natural right to flow across national boundaries
  9. Inequality of resources and political power must be accepted as the “necessary functional characteristic of [economism’s] ideal market system” (p. 63)
  10. Corporations can do no wrong
  11. All solutions to problems caused by the market are to be found in the (reengineered) market
  12. Increased incarceration is an essential part of economism program [this is probably the least well defended and explained of Mirowski’s assertions]
  13. Economism has attempted to construct a moral order that flows naturally from its economic theories, but this remains a work in progress, since economism fundamentally is unable explicitly to address the realm of the transcendental

A number of things follow from this analysis. One thing that stands out is that while politically, advocates of economism often make common ground with libertarians, the two belief systems actually are quite different. In particular, libertarians are opposed to anything stronger than a “night watchman” state and are hence opposed to government regulations. According to Mirowski, economism long ago parted company with this creed and realized (attribute #1) that the ideal market of its dreams would never spontaneously come into being, and could only be created and fostered by state action, including regulations that were explicitly pro-wealth and pro-corporation.
In The Golden Calf, I cited sociologist Margaret R. Somers’ work, particularly her suggestion that economism must be seen as having three different facets:

·         An ideology or political narrative

·         An organized and well-funded political movement that advances that narrative

·         A set of technical recommendations as to how to solve policy problems
Somers agrees with Mirowski (and with me) that one of the most prominent features of economism, and a feature that those of us who wish to oppose it must call out at every opportunity, is its double-talk—the way that economism often tries to have it both ways and proclaim two mutually inconsistent “truths” at the same time (on which for example see the recent post, According to Mirowski, economism is one thing only, which he calls the “neoliberal thought collective,” referred to so often in his book that he abbreviates it as “NTC.” In a later post I’ll say more about Mirowski’s characterization of this thought collective as inherently double-talking and why, for devoted believers in economism, that’s not any sort of problem. For now, let me simply note that had Mirowski adopted something like Somers’ breakdown, it might be clearer where the double-talk comes from--if, for example, the political movement or the technical problem-solving aspect of economism calls for one thing and the fundamental belief system calls for the opposite.

Friday, September 6, 2013

Mirowski on Economism and Religion

[This is one of several posts discussing Philip Mirowski’s plausible and well-referenced Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown (Verso, 2013). Mirowski uses the term ‘neoliberalism’ for what I call ‘economism’; for purposes of this blog I have relabeled his ideas accordingly.]
Philip Mirowski accuses the left in America of seriously underestimating and misunderstanding economism. With that in mind he especially objects to one term sometimes used for economism, “market fundamentalism.” He sees in this term a desire to dismiss advocates of economism as the equivalent of ignorant Bible-thumpers.

I’d suggest that this concern causes Mirowski to put on blinders regarding the major issues I addressed in The Golden Calf. He fails to see the possibility that economism is a quasi-religious ideology, both because it may derive historically from important religious traditions, and also because logically, it resembles religious forms of thought. Indeed, Mirowski offers a number of points that support the account of economism that I previously offered.

Mirowski insists that understanding economism means that one has to stop imagining that by a “market” one means simply a mechanism for physically supplying goods for trade. Following Friedrich Hayek, Mirowski argues that for economism, a market is more properly seen as a supercomputer of sorts that’s the most excellent information processing system ever seen.  (Just how that works has to be discussed in another post.) All that’s important to know about anything is its market price, which exactly determines its value; and the market is an infallible instrument for determining a commodity’s proper price from one minute to the next.
The way economism devotees see the market, it simply cannot fail. While some economists are willing to talk about “market failures,” there really can be no such thing. Even when the market really seems to have made a mess of things, as happened with the Great Recession of 2008, that’s not the market’s problem—it’s our problem for imagining that we could somehow put our puny human intelligence up against the all-powerful and all-knowing Market. In actuality, whatever happened in 2008 and after was simply the market expressing its superior wisdom and working itself out. It would have done it faster if we’d not tried to get in there and mess with the gears; and so a huge agenda for economism is to control the state apparatus to prevent silly people from doing that in the future and getting in the market’s way.

One recurring feature of economism-think is that you seldom hear talk of “markets”; rather you more generally hear people say “the Market.” Somebody doing sensible economics might well agree that there are markets; which in turn would mean that markets might have local characteristics, and one of them might work slightly differently from another. But that won’t do for economism. Here is how Mirowski describes this image: “The market itself is never chaotic, because it exists outside of time. The market must be generic and unwavering, because if it were completely embedded in historical time (like society, like nature), then it could in principle be just as clueless about the true telos [purpose] of human striving as any deluded human being; in short, it could get things wrong.” (p. 335)
Think about this image for a minute. What Mirowski has described, and attributed to the underlying theory of economism, is an entity that is eternal, omnipresent, and omniscient, and in all these ways not only far beyond human powers, but also outside the grasp of paltry human intellect. In other words—God.

Mirowski proceeds to explain how economism steadfastly opposes efforts to control the market such as might arise from scientific concerns about climate change. One of the things that the left doesn’t get about economism, Mirowski insists, is that it has nothing to do with a conservative yearning for some past; it is instead deeply in love with the idea of the world as constantly evolving. Precisely because the world is constantly evolving, even the best science will always be trying to catch up; science can never be sure of understanding the world in all its complexity. The only instrument that possesses that ideal state of knowledge is the Market. But what follows from that is that the Market can never be wrong; so if we keep on polluting the atmosphere with CO2, and sea levels rise, and the climate goes all to heck, and vast areas of cropland turn into deserts, then it would still not be the case that anything bad happened. All of this (according to economism) was simply the Market working out all the kinks in the system. Whatever happened in the end, if the Market did it, was the best possible thing that could have happened; and if not, it was only because the Market didn’t really do it, but because mere humans messed up the market and tried to wrest control.
Now, what sort of ideology is this? Logically speaking, it seems to resemble nothing more than a religious belief in a Divine plan for the world, which God knows perfectly and exactly down to the last detail but which is opaque to mere mortals. So no human can ever say that anything bad ever happened; whatever happened was God’s will and it’s heresy to gripe about it.

Historically, such an image of God was something like that favored by the two religious traditions that I argue formed the roots of today’s economism—Calvinism and 19th-century English evangelicalism. Mirowski notes, “The doctrine of special dispensation for the Elect is one very powerful source of ongoing attractions of [economism], viz., the feeling of having surrendered to the wisdom of the market by coming to know something that most of the nattering crowd can’t possibly glimpse: freedom itself must be as unequally distributed as the riches of the marketplace.” (86) He says elsewhere: “People should be encouraged to envy and emulate the rich. Demands for equality are merely the sour grapes of the losers… ‘Social justice’ is blind, because it remains forever cut off from the Wisdom of the Market.” (63) If economism has become popular in American society, Mirowski ignores the possibility that this may be to some extent due to its powerful resonance with Calvinist and later Puritan doctrines, which he describes here quite accurately.
In short, as Mirowski develops his understanding of economism, and accuses most of economism’s critics on the left of failing to take the trouble to understand as well, he reinforces almost all the points that I tried to offer in The Golden Calf about economism’s religious roots and religious character as a system of thought.

A Cure for Poverty: Money

In a famous literary exchange that apparently never actually occurred (Google it for details), F. Scott Fitzgerald said, “The rich are different from you and I.” Ernest Hemingway replied, “Yes, they have more money.”

The text for consideration for today is: The poor are the same as you and I, only they have less money.

Which, just maybe, means that the quickest and most efficient cure for poverty is giving the poor money.

Exhibit A: As Brady Dennis recently reported in the Washington Post:

--an interesting line of research suggests that the stresses and strains of poverty, by themselves, can cause a person’s intelligence to deteriorate. Rather than people being stupid, making unwise choices, and then ending up poor, it may be that people are just like other people, but that when they are poor they can’t think as well, and no surprise then if they end up making some unwise choices. The fact is that if I have not been poor myself, I probably have no clue at all as to how mentally taxing it is to figure out just how to survive from day to day.

Exhibit B: NPR reporter Jacob Goldstein, writing here in the New York Times magazine:

--discusses the work of GiveDirectly, a charity that makes direct cash payments (to villagers in Kenya in this specific case). Goldstein reviews other examples of direct cash payments to the poor that have been shown to produce excellent results in other settings.

Goldstein addresses the objections raised by the received view of charity—that you can’t just give money to the poor because they’ll waste it on frivolous things, whereas charities are extremely wise and will give people what they really need, like health care, or a fishing pole, or whatever. This seems at least some of the time to be false. Amazingly, the poor (even if their poverty renders them less smart than they’d be if they were not poor) might actually know exactly what it is that they need, and what would be the best use of a sum of money if they had it.

Goldstein gives the example of many of the Kenyan poor using their $1000 payments from GiveDirectly to buy metal roofs for their houses. This might seem a good example of profligate waste: Isn’t the old thatched roof just as good, and a lot cheaper? But when you drill down you discover that the grass roof is actually more expensive. It regularly wears out and then you have to go and get more grass to patch it, and the grass is a special grass that’s expensive to purchase. Having a grass roof is like taking out payday loans; it’s cheaper in the short run but bleeds you in the long run. Paying up front for the metal roof is actually a smart money-saver and reserves future cash for more important purchases.

Economism proclaims a number of things about the poor. It says that they must be poor because of their own unwise and possibly immoral behavior. After all, the market is a free market; everyone has an equal chance to go out and make a fortune; if you don’t get rich it must be your own darn fault. If you go back to the religious traditions from which (I argue in The Golden Calf) we can trace economism’s origins, we see the idea that the poor are poor because of God’s plan for the world; to try to do something for them in this world to relieve their circumstances is to go against the divine plan, and could end up sending the poor to everlasting hellfire anyway because their poverty is designed by God to make them repent and then to accept Jesus as their savior. Something of this view is reflected in the “everyday” version of economism as recently described by Philip Mirowski (Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown. New York: Verso, 2013), in which it is commendable for us as a society become openly sadistic in the pleasure we take in shaming and ridiculing the “losers” who fall behind in the Market’s race to riches.

It is therefore sobering to think that contrary to the wisdom of both the boosters of economism on the political right, and the gurus of so many charities in the political middle, things go very well when you make direct cash payments to the poor, treating them as reasonably smart people who know what to do with money, and treating poverty itself as a deficiency of money more than anything else. If one looks at how many social ills all seem to be directly associated with income inequality (see The Golden Calf, again) it is perhaps reassuring to know that we could do a lot to reduce income inequality merely by redistributing income—if only we would.

Sunday, September 1, 2013

More on the Inherent Contradictions of Economism

I’m in the process of reading Never Let a Serious Crisis Go to Waste, by Philip Mirowski, a professor of economics at Notre Dame. He makes a number of excellent points about economism in the wake of the Great Recession (though he prefers the terminology favored by many historians and social scientists and calls the ideology ‘neoliberalism’). I plan to say more about his central thesis in later posts; but I could not resist addressing one issue now, because it nicely reinforces some of the core themes of The Golden Calf—specifically, why economism is riven with internal contradictions, and how it logically acts like a religious ideology and yet claims to be science.

In one section (Chapter 5) Mirowski notes the intellectual disarray among orthodox neoclassical economists after the recession. The media naturally wanted to know—why didn’t you brilliant people, to whom we have been turning for wisdom about how the economy works, predict this train wreck? The economists had two replies, and various among them offered each: 1) we did, you just didn’t notice; or 2) it’s really not the job of academic economics as a science to predict things like recessions.

While supposedly legitimate and credible economists offered both statements, each was highly problematic. The first was in a small degree true—various economists did, at various times, dare to say that the wonderful world of the derivative bubble was going to come crashing down. The trouble was that the guardians of orthodoxy, like Larry Summers most famously, hooted these naysayers down in derision; and it was the hooting and not the warning that was accepted at the time as “the word” from the economist community. After the fact, theories were concocted about other predictions. Economist X was heard to say something to two of his friends over several beers once. Economist Y once developed a  mathematical model which, if you tweaked it six different ways, issued a prediction that somewhere, someplace there might be a bubble. These were taken to indicate that see? Neoclassical economics did predict what happened after all, so they were on the case from the start. But these self-evidently silly proposals gained little traction.

Other supposedly credible economists intoned the second theory, but that ran up against a classic paper written decades ago by one of economism’s founders, Milton Friedman. Friedman was irked at the time because of the persistence of critics of neoclassical economics (before the triumph of economism purged all such heretics from most university econ departments). These critics liked to point out that the assumptions that classical economists depended upon to create their nice mathematical models generally were obviously untrue and implausible (a point I addressed a bit in The Golden Calf and also previously in this blog). Friedman decided to do away with these critics in one fell swoop. He argued that it did not matter at all what assumptions they used. They could assume the earth was flat and the moon is made of green cheese. All that mattered, rather, was the accuracy of the predictions the models yielded about the real world. (Mirowski seems to imply that maybe Friedman did not actually say that, but what matters is not what Freidman said, but the lessons later generations of economists took from him.) So you now have to explain the disconnect between the great god Friedman saying that all that justifies economic models is their ability to predict, and (some) economists insisting in 2009 that economics is incapable of predicting.

There was yet another problem with the “we can’t predict” claim. It is not merely that Friedman made a theoretical point. In the past several decades, economists put their mouths where their money was. They sold their consulting services to big corporations, often raking in many multiples of their academic salaries, in exchange for predictions—usually predictions that happened to be precisely what their corporate paymasters wanted to hear. So it seemed especially self-serving now for some of them to suddenly discover that they could never have done what they obviously did.

So we now see that economism, in the form of the orthodox neoclassical economics peddled by these academic gurus, was inconsistent at two different levels. At the lower level, two different explanations were put forth for what happened at the time of the recession, but each explanation clearly contradicted facts about what economists had previously been saying.

At the higher level the two explanations were obviously in contradiction. In logical terms, the economics community was asserting both A and not-A. So the fact that some well-known economists preferred the first explanation (we predicted it, all along) and others preferred the second (economics can never predict anything) further illustrated that this field was internally incoherent.

Perhaps sensing what image of economics was being conveyed to the larger public through this time period, the Chicago economist Eugene Fama gave an interview to John  Cassidy for the New Yorker that Mirowski quotes:

Cassidy: “Back to the efficient markets hypothesis [a mainstay of orthodox neoclassical theory]. You said earlier that it comes out of this episode pretty well. Others say the market may be good at pricing in a relative sense—one stock versus another—but it is very bad at setting absolute prices, the level of the market as a whole. What do you say to that?”

Fama: “People say that. I don’t know what the basis of it is. If they know, they should be rich men. What better way to make money than to know exactly about the absolute level of prices.”

Cassidy: “So you still think that the market is highly efficient at the overall level too?”

Fama: “Yes. And if it isn’t, it’s going to be impossible to tell.”

Admittedly this exchange may simply show that Fama was getting testy at the end of a long, contentious interview. And Fama, who knows economics, may be able to explain in a way that I couldn’t some technical meaning that he can give to what he has said that makes it immune from the criticism that seems obvious. With those caveats in mind, let me proceed to state the obvious. There seem to be two ways to understand the basic logic of Fama’s defense of the efficient markets hypothesis. One is that it is a tautology, true by definition. We define ‘efficiency’ as whatever the market does; hence, if the market were inefficient, we’d never know, because there exists no outside vantage point from which to judge the matter. The other is that we have here what I alleged economism to be in The Golden Calf, a quasi-religious ideology. We simply have to have faith in the market, because it was created by Divine will and represents a Divine plan for humankind.
I trust it’s obvious that neither a tautological truth nor a quasi-religious, faith-based truth meets any reasonable definition for a science. So once again, economism is revealed as not what it proclaims itself to be.

Friday, August 16, 2013

Wealth Inequality in America Offends Our Sense of Justice

NBC News recently reported a “surprise” in Wal-Mart’s sales figures for this year:

We’ve been told that the recovery is finally settling in and consumers are now spending again. But Wal-Mart reported very cautious sales figures, and the article concludes that there are actually two different groups of consumers. Those at the higher end are indeed feeling secure and spending more. But the lower and middle folks are still pretty tight with their dollars.
What is happening to Wal-Mart sales is just one small manifestation of an issue I discuss in The Golden Calf, the worsening income and wealth inequality of the U.S. ever since economism became our dominant ideology. A new twist on the familiar data is very nicely illustrated in this animation by Adam Mordecai on the Upworthy site:

Mordecai starts with data that I more or less covered in The Golden Calf, that 1) we have extreme inequality in how income and wealth are distributed in America, and 2) most Americans have no clue that this is so, and while they think that the rich are indeed a lot richer than the poor, they guess at an income distribution which is much more equal than what actually obtains. Indeed Mordecai editorializes and suggests that we’d be a heckuva lot better off as a society if instead of the truly lopsided wealth distribution that actually occurs, we had the much less lopsided but still notably unequal distribution that most Americans think is what’s true.

Now, here’s what Mordecai adds to the discussion, which he gets from studies done by Harvard business professor Michael I. Norton, whose work is reported on here:

Norton found out both what the real wealth inequality is, and what people think it is. But he then proceeded to ask people what they thought it should be. What he discovered, quite contrary to the dominance of economism as public ideology, is a widespread sense that ideally the wealth distribution ought to be more equal than what Americans assumed it to be (which once again is far more equal than what it really is). Also very interesting, Norton found that those who reported voting for George W. Bush did not vary all that much from those who reported voting for John Kerry in preferring a more equal distribution. As Mordecai stresses, once again, the distribution Americans describe as ideal and desirable is hardly a socialist nirvana; there is significant disparity between the rich and the poor. But what most Americans judge to be the way the U.S. ought to be is nevertheless wildly more equal than what it really is.
Norton admits that some of this sense of justice depends on how you ask the question. He acknowledges that had the Bush voters been asked whether they supported redistributing wealth to reduce inequality, the majority would probably have said no.
My take-home message from all this is that despite the inroads that economism has made in reshaping what counts to most of us as basic common sense about public policy, it still seems true that most Americans would be really shocked if they actually understood what has happened to income and wealth inequality in recent decades, or even since the 2008 recession. It obviously serves important interests to be sure that most Americans never hear this factoid.