The Beginning of the End of Economism? One View

E.J. Dionne's latest column:
http://www.chron.com/opinion/outlook/article/Dionne-What-change-sounds-like-6021317.php
--takes aim at one of the central features of this blog. Dionne claims that we may be witnessing the beginning of the end of economism (which he refers to as neoliberalism).


As President Obama prepares to deliver a State of the Union address which features calls for greater income equality (increased taxes on the richest to counteract tax cuts for the middle class), Dionne is interested in the Republican response. He characterizes that response as a shift from the standard Republican reaction to Obama, which has basically been to ignore the substance of what he is proposing. He cites several GOP leaders as now admitting that income inequality is serious and that something should be done. Their prescriptions are inadequate, but they are at least signaling a willingness to enter into a debate about the issue.


Dionne also goes beneath the latest headlines. He characterizes the Republican position since Reagan as being captive to economism. Economism requires that one ignore the issue of income inequality. The so-called free market, left to its own devices, will spread income around as it should be spread, and that is the end of it. To focus on income inequality as an issue is to pull the rug out from under one of the central features of economism--and to admit that something besides the free market ought to have a say in how goods and benefits are distributed in society.


Dionne is therefore describing recent political events in the US as a major turn away from economism. To follow along the route of the theory he's sketching, I would argue further that the 2016 presidential race seems a crucial event. If the winner is someone sufficiently like Obama, with the steadily increasing criticism of economism that he's put forward, then we can expect a considerable if gradual change in the overall political philosophy of the US (and indeed the world). If another person wins, then we can expect things to settle back to the status quo for some time yet.

Piketty, Capitalism, and Progressive Taxation

One of the most important graphs in The Golden Calf is taken from Wilkinson and Pickett (The Spirit Level, 2009) and shows the widening gap between the richest and poorest in America in income, between 1975 and 2004. It’s the second half of my life. The first part of my life, beginning in 1949, was the “good news” part, when the economy worked well, and a worker with one job could buy a home and raise a family and send kids to college. This was followed by the “bad news,” economism or neoliberalism, especially under Reagan starting in 1980, when income stagnated for the lower and middle classes and virtually all the new wealth was snapped up by the top few percent. By this picture, economism was a bizarre development, and one was hard pressed to explain why such a thing should have occurred.

Thomas Piketty, Professor at the Paris School of Economics, has now cast considerable new light on these developments (Capital in the Twenty-First Century, trans. Arthur Goldhammer, Cambridge: Belknap Press of Harvard University Press, 2014). As he points out, until modern computers, economics tended to be light on facts. It’s only within the past couple of decades that the available data have been recorded and investigated, to allow those familiar with them a reasonable peek at the actual history. And history, in fact, is what economics should be concerned about; Piketty takes a dim view of American neoclassical economics and favors a collaborative view of the economist as one of the social sciences.

Piketty offers data on capital and income between 1800 and the present for Britain and France, and going back to the late 1800s for the United States and other major countries. He focuses a good deal of the basic equation, r > g, meaning that the rate of return on capital virtually always exceeds the growth rate of the economy; the former tends to be 3-5 percent and the latter runs from less than 1 percent to 1.5 percent. Piketty notes that this is basic to the whole idea of civilization—it allows people to be engaged in something besides pure subsistence.

When Piketty graphs the history of the relationship between the after-tax rate of return to capital and the growth rate of world output, as best as is known from the year 0 to the present, capital return always exceeds the growth rate except at one point—the years 1913-2012. So the data that informed my standard way of thinking between 1949 and 1975-80 turns out to be wildly out of sync with the norm.

Piketty describes what he considers most important, capital/income ratio, roughly as follows. For Europe, inequality was very pronounced, until the shocks of the twentieth century, in the years 1914-1945. Then income inequality rose again. The major change was that before the twentieth century, there were a small number of rich people who had almost all the wealth, and the vast majority of laborers who had virtually none of it. Now there is a middle class which collectively holds a significant amount of wealth, one-quarter to one-third of the total; while the extreme upper class, especially the top 1 percent, now holds around 60 percent of the wealth.

The United States presents a different picture. The middle class was establishing itself all along. However, during the Gilded Age, income inequality rose in America as well. It then decreased during the world wars and depression, but America was spared the extreme trials of Europe. Since 1975, income inequality has risen even higher in the U.S. than in Europe.

Piketty talks then of the future of the remainder of the twenty-first century, and finds increasing income inequality to be an unstable factor, so he is hopeful that something can be done about it. His favorite is a progressive tax on capital. He favors a modest plan that would produce maybe 2 percent of GDP, but argues that the capital tax is more important than the amount raised, since it carries an important message. In particular, for it to work at all, it would require that data be gathered in a way that it is not currently, and particularly that international tax havens be opened to scrutiny. On Piketty’s plan, everyone would know everyone else’s wealth, throughout the world. He admits that this is a nearly-utopian goal and will require many stages of development.

Piketty speaks of the future as if everything will be smooth and there will be no more “shocks” equivalent to the World Wars. He admits that he cannot predict what would happen if shocks supervene.

Returning to my own views, it’s discouraging to find that the time that one had thought of as the halcyon days when everything was most fair and reasonable (the era 1945-1980 roughly) was a brief, highly atypical time period. It is, by contrast, encouraging to find that progressive taxation can so effectively reverse the worst of the trends. The only problem will be gaining the political will to succeed in such a mission in the US. Piketty’s own guess is, “Without a radical shock, it seems fairly likely that the current [state of affairs in the US] will persist for quite some time. The egalitarian pioneer ideal has faded into oblivion, and the New World may be on the verge of becoming the Old Europe of the twenty-first century’s globalized economy. [514]”

How Can You Expose What’s Already in Plain Sight?

Many of the recent posts on this blog have been book reports. Maybe I am just getting book fatigue, but I wanted to explain why I do not plan to read a new book that’s being recommended by none other than one of my usual heroes, Paul Krugman:

http://www.nytimes.com/2014/04/25/opinion/krugman-the-piketty-panic.html?partner=rssnyt&emc=rss&_r=0

Krugman praises a new book by the French economist Thomas Piketty, Capital in the Twenty-First Century. Piketty apparently goes over a lot of old ground, explaining the worsening income inequality in a world sold on the ideology of economism. What he then does especially well, says Krugman, is documenting the fallacy of the idea that somehow, the One Percent have earned their incredible wealth through hard work and smarts. He shows that just as the rich in the pre-World War I era were overwhelmingly those born to wealth and privilege, today’s wealth is gained much more by inheritance than by anything resembling “earnings.”

Krugman is so big on Piketty’s book apparently because it has gotten the knickers of the right-wing pundits in a knot. The usual response to income inequality from the economism-friendly think tanks is first to deny the data, saying that the rich are poorer and the middle class are wealthier than it seems. Once they get over that lost cause, the next chestnut they pull out of the fire is how the rich made all their money because they are such brilliant entrepreneurs (as we all know, they are not wealthy, they are “job creators”). For some reason which I’d presumably find out if I read the book, Piketty makes it much harder than in the past to trot out this rationalization. So the right-wingers are reduced to name-calling, accusing Piketty of being a Marxist—which presumably you are these days if you believe that social classes or income inequality exist.

I can’t quite bring myself to get excited about reading this book because, just as Krugman admits that previous authors have already “done” income inequality, I had thought that it’s already been pretty widely shown that the rich-are-better ploy is a crock as well. Of the books that I cite in The Golden Calf, Thomas Frank’s One Market Under God first comes to mind here, but other authors have certainly also addressed the question.

It cannot be very hard to show that the wealth of the super-rich cannot possibly be explained in this manner. If the really rich were 10 or 20 times richer than me, then I’d be willing to grant that they may well be 10 or 20 times smarter or work that much harder than I do. But when they are 300 times richer than me, or more, it is really hard to argue that it must be a matter of pure merit.

If, on the other hand, we are in the throes of economism, and cling to a quasi-religious faith that the rich are rich because it’s God’s will and they are the subject of divine favor, then I suppose it all makes perfect sense.  Too bad the right-wingers can’t say out loud what they believe in their hearts; it would same them a lot of mental gymnastics.

The Rise of Economism in the US: The Business Side

I recently posted about Daniel Stedman Jones’s book, Masters of the Universe, a history of the rise of economism (which he terms neoliberalism) in the US and the UK since the 1940s. Stedman Jones has a bit of a burr under his saddle about Marxism, and he appears to interpret any historical account that stresses how the wealthy supported economism-type policies out of their own self-interest as a Marxist account. So he stresses the growth of economism as a set of ideas, promulgated by think tanks. He has to admit that these think tanks relied upon the financial support of sympathetic capitalists, but as far as he is concerned, that’s more of a footnote.

In connection with other research, I had my attention directed to the book by historian Kim Phillips-Fein, Invisible Hands: The Businessmen’s Crusade Against the New Deal (New York: Norton, 2009). It seems to me that this volume makes a nice bookend with Stedman Jones. Phillips-Fein is most interested in why the US business community (she does not address the UK) found it in its interests to support conservative counterattacks against the New Deal from the 1930s up to the eventual triumph of conservatism (and economism) with the election of Reagan in 1980. Where Stedman Jones focuses on the ideas and the think tanks, Phillips-Fein focuses on the organizing and proselytizing among the businessmen to raise the money to support these ideological and political movements. I would suggest that between them they provide a more thorough history of the US part of this story than either volume would by itself. (Phillips-Fein talks about Hayek, von Mises, Friedman, and the Mont Pelerin Society, but does not mention the terms ‘neoliberalism’ or ‘economism’—just another clue as to how the terminology issue continues to vex.)

In reading Phillips-Fein’s narrative, two themes especially struck me. First, if one looks at the later years of the conservative movement, one can find among the grievances of the business leaders specific instances of overreaching among labor unions and government regulators, for which the businessmen might be forgiven for thinking that the free enterprise system was under serious attack. However, in the very early years, before either unions or government had amassed that much power, we still see a core of conservative capitalists viewing the New Deal as an unmitigated disaster. As Phillips-Fein analyzes their thinking and quotes from some of their letters and speeches, what emerges appears to be a very basic sense of entitlement to rule. These white male business leaders seemed to think that they were, in fact, those chosen to run America, and they expected to be deferred to. The very idea that anyone else should demand an equal right to be heard, much less to guide public policy, was treated by them as a fundamental affront to their status. While various other segments of the population came along and joined the conservative bandwagon as it picked up steam in the 1960s and 1970s, these capitalists were at the center of it from the start.

Second, Phillips-Fein obviously exercised a lot of control over the quotes that she selected, but a rather surprising number of the quotes from these conservative capitalists, again reaching well back into the 1930s, are frankly racist. In keeping with the idea that they are the natural leaders and deserve deference on all sides was the further idea that minority groups had better stay in their place. As the conservative movement started to make headway, and as more politically-minded business leaders realized the need to form strategic alliances, the main groups this core of business leaders reached out to along the way were those that in various ways were opposed to integration and civil rights. Here Phillips-Fein’s poster child is the late Sen. Jesse Helms of North Carolina. To a person like me, raised in the North as a self-ascribed liberal, Helms was nothing but a racist demagogue, pure and simple. Phillips-Fein shows that in fact Helms was much more clever and original than that. He was actually a master at reframing Southern segregation into the language of freedom and free enterprise. For example, he agreed that to the extent that a lunch counter was a public service, blacks had just as much right as whites to sit down and be served. The only problem, he was quick to point out, was that a lunch counter was not properly viewed as a public service at all; a person owned the lunch counter and it was his private property. To demand that he serve black customers in the South was to demand that the Federal government could come in and dictate to private property owners what they could do with their property. Helms was shrewd about avoiding attacks against blacks and always changing the subject to freedom and opposition to Federal government power over local communities and private individuals.

In short, the political success of the conservative movement that ultimately enshrined economism as the common-sense political discourse of the US would never have succeeded had the movement not been willing to ally itself at every step with racism and segregation, while at the same time denying that it was racist and segregationist.

In one other passage, Phillips-Fein contributes to our list of logical inconsistencies within economism by going back to the core ideas of Friedrich Hayek and Ludwig von Mises. She notes the irony of their views of the free market and their need to protect it from any outside interference and efforts at regulation. On the one hand they were in awe of the power of the marketplace, “the spontaneity of the economy, a complex system that came into existence without forethought or planning.” Yet at the same time they saw the market as “a terribly fragile entity” which could be destroyed by even a little bit of government interference or regulation. As she notes, they never confronted or admitted, let alone explained, just how the marketplace could be so robust and all-powerful on the one hand and so delicate and vulnerable on the other.

Masters of the Universe: An Alternative History of the Rise of Economism?

A colleague kindly referred me to this book review—

http://www.salon.com/2013/03/09/the_world_according_to_milton_friedman_partner/

--of Masters of the Universe by the British barrister and historian Daniel Stedman Jones. (Both the review by Michael Clune of the Los Angeles Review of Books, and Stedman Jones’s book, refer to what I call ‘economism” as neoliberalism, so I will use “N” for short to refer to that terminology.)

Stedman Jones’s book can be read simply as another historical treatment of the rise of N during the era 1940-1980, in both the US and the UK, and as such it seems a reasonable and thoughtful volume. However, according to both the author and the reviewer, the agenda is more ambitious. Stedman Jones wishes to argue as to the inadequacies and indeed errors of other works, notably David Harvey’s A Short History of Neoliberalism, which some of my historian and social science colleagues treat as a standard reference on the subject, and Naomi Klein’s Shock Doctrine, upon which I relied considerably in writing THE GOLDEN CALF. So it naturally interested me to see how well Stedman Jones could defend his case as to the errors of those other authors.

Before that, what does Stedman Jones have to say? Very briefly, he argues that the route from N as a fringe philosophy held by a small number of thinkers in the late 1940s, to its triumph under Thatcher and Reagan in the 1980s, was not at all the slam-dunk that right-leaning thinkers now believe, nor was it the result of an organized conspiracy among capitalists as he thinks that Harvey argues. It was a long, slow slog that could easily have turned out differently. Stedman Jones places a lot of weight on what happened in the 1970s with economic doldrums and “stagflation,” which discredited in many politicians’ minds the long-standing Keynesian orthodoxy. First it’s important to note that just as Freud’s reputation was trashed at the hands of many Freudians, among the worst enemy of Keynes’s reputation were the Keynesians. While Keynes himself was quite cautious as to the ability of economics to predict and control events precisely, his followers grew fat and sassy and promised much more than their theories could deliver. Hence they were easy to discredit when supposedly Keynesian remedies failed to restore economic prosperity during those years.

Enter monetarism—Milton Friedman’s own theory of what to do in difficult economic times. The review stresses that monetarism and today’s N are quite different species of animal; N rejects government interference with the economy while monetarism is a method of government interference in the economy. Accordingly, the left-center governments in power in the UK and US in the late 1970s thought they could adopt monetarist policies without buying whole hog into anything like N. But because of both the economic doldrums and other events such as the Iran hostage crisis, these folks were then voted out of office and replaced by more extreme ideologues who bought the whole N deal—even though by today’s standards Reagan’s brand of N was considerably more moderate than the going ideology, and usually has to be spruced up with some revisionist history so that today’s N devotees can properly worship Reagan.

OK, so that’s the history, and knowing more about its ins and outs is certainly valuable. What about the criticisms of Harvey and Klein?

Harvey’s besetting sin, according to both Stedman Jones and Clune, is apparently being a Marxist, or at any rate what they consider to be a Marxist, which presumably translates into soft-headed. Looking into the details as to exactly how this invalidates Harvey’s historical writings, Clune offers the observation that Harvey apparently believes in a Marxist theory of labor that has long been discredited. I cannot recall, in my reading of his history, that whether he believed that theory or not made much difference for most of the book.

More to the point, Stedman Jones apparently wishes to attribute to Harvey’s Marxism, and not to a correct reading of history, the role that capitalists played in the rise of N. Stedman Jones’s account, as one would expect, is big on the role of N think tanks. And being a decent historian, Stedman Jones relates just who footed the bills for all those think tanks. And it was not the poor. So it’s not clear to me how Stedman Jones can on the one hand admit the crucial role of many capitalists, presumably following their own self-interest, to fund these N think tanks, and then turn around and say that capitalists had nothing to do with N’s eventual triumph.

What about Klein’s theory of the shock doctrine, which she attributes to Milton Friedman and his followers in the Chicago School of Economics? Well, Klein’s idea, as I understood it, was that the so-called “Chicago Boys” saw their opening whenever a nation suffered a crisis. They then showed up with their monetarist policies as a way to get the fiscal crisis under control. At first the offering seemed modest—a nation could adopt these monetarist policies without having to abandon whatever other political policies they wished to espouse. But then as soon as the technocrats took over, they used their opening to institute a wide range of “reforms” that completely instituted an N program, and that effectively repealed all the existing policies, especially any that favored organized labor. I don’t see much difference between such a program and what Stedman Jones says actually occurred under Thatcher and Reagan. Certainly one could quibble about details but the outline seems valid.

In short, Stedman Jones’s attempt to separate his own book from previous work seems more of a marketing ploy than a sober assessment of what he actually has on offer—and what he has on offer seems to be useful in its own right, and not in need of any such trumpeting.

Daniel Stedman Jones, Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics. Princeton University Press, 2012.

It’s All about Freedom—Only Not That Way

I generally ignore op-ed columns by Jonah Goldberg, who claims to be a conservative columnist but who appears actually to be an anti-liberal columnist—whatever liberals believe, he’s agin it. I happened to catch sight of a passage in his column in the January 8, 2014 Houston Chronicle, however, that seems to offer an instructive commentary on economism vs. progressive/liberal thinking.

Here’s what Goldberg has to say:

One of the wonderful things about America is that both the left and right are champions of freedom. The difference lies in what we mean by freedom. The left emphasizes freedom as a material good, and the right sees freedom as primarily a right rooted in individual sovereignty.

Goldberg then goes on to attack such horrible liberal folks as the Soviets and Franklin Roosevelt for assuming that freedom meant showering you with all sorts of material goodies.

Well, let’s have a look. With regard to the first part of Goldberg’s statement, I entirely agree—to the extent that I had intended to call the book that I thought about writing, as a sequel to The Golden Calf, Visions of Freedom. (I may yet get around to writing it but that’s another matter.) I completely agree that at the root of the difference between economism and progressive thought lies in alternative views of human freedom.

Predictably, however, Goldberg then immediately goes off track. Let’s take his ideas in reverse order. He suggests that for the right (i.e., economism), freedom is “a right rooted in individual sovereignty.” As I have shown both in this blog and in The Golden Calf, this is a partial truth. Economism recognizes exactly one form of “sovereignty” and “right,” which is to be a buyer and seller in the so-called “free” market, which does not in actuality exist anywhere. When push comes to shove, no other “right” is important, and all other so-called rights must give way to the all-powerful market and its high priests.  So to argue that it’s the left that has confused freedom with mere material things is at best a highly selective view of what’s really going on.

Next we come to the claim that for the left, “freedom” means one thing only, freedom from material want, the solution of which is a nanny state giving each of us stuff, and so robbing us of our (real) freedom and responsibility. Let’s look at this in two stages. First, the much-maligned FDR, in his “four freedoms” speech that included “freedom from want,” made the point that still seems valid—that a person who is in some theoretical sense free, and yet is starving, or naked, or homeless, or lacks basic medical care, is in no real sense free. This person is a slave to material deprivation. Without some basic set of the material conditions necessary for a minimal human life—not everything imaginable, not wealth, but a very basic minimum—a person cannot be “free” in any meaningful sense of the term.

That’s hardly a complete philosophical theory of what freedom might mean in a world that has broken loose from the ideology of economism. The next stage, therefore, is to ask which thinkers have taken us the farthest in recent years toward fleshing out what Roosevelt apparently had in mind, in a way that represents a defensible and justifiable framework for a decent and just society. That theory, in my view, is the capabilities approach developed by philosopher-economist Amartya Sen and philosopher Martha Nussbaum. Perhaps the most accessible account is in Nussbaum’s Creating Capabilities: The Human Development Approach (2011).

On the Nussbaum-Sen account, what makes humans truly free is having certain capabilities that are consistent with a life of human dignity. Some of these capabilities, such as rights of political participation, require mostly that people leave us alone and not interfere with our free exercise of our capacities. Other capabilities require that we have at least minimal levels of material goods provided for us—such as the capabilities that require nutrition, shelter, health care, and education. On a capabilities approach, human dignity is a multi-faceted idea, and it’s arbitrary to say that the only rights worthy of the name are “negative” rights (much beloved by conservatives) merely to be left alone, or “positive” rights (presumably, much beloved by leftists) to get stuff given to you. Depending on the specific human capacity, both positive and negative rights are important.

The fleshing out of such a theory requires first that we explain what human dignity requires, and we see that material wealth, or all sorts of material goods, are hardly included; we only need a basic minimum. The next requirement is that we ask what a just, fair, and decent society is obligated to do toward providing each citizen with these basic rights and needs; and again there could be a lot of argument about what’s required, from and for whom, and why. I don’t have space here to try to develop such an account (hence the need for the book). But the bottom line, contra Goldberg, is that such an account can be given; it’s intellectually rich; and it cannot be adequately captured in caricaturish attacks on Soviet Communism or the usual bogeymen of the right. (And yes, by the way, the right to buy and sell in the market—real markets, not fake ones—to try to advance one’s own economic position, is included by Sen at least as a critical human capability, but only one of many.)

I’m quite confident that if the American public could be presented with two basic accounts of freedom—the capabilities approach suitably worked up and fleshed out, and the economism version presented honestly—the capabilities approach would win.  If I’m wrong, so be it. The whole purpose of my work on economism is to earn the alternative views a fair hearing.

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:

http://hcrenewal.blogspot.com/2013/12/sickness-in-information-technology.html
--which in turn cites the original coverage in the Baltimore Sun by Meredith Cohn and Andrea Walker:
http://www.baltimoresun.com/health/bs-hs-exchange-woes-20131207,0,6559272.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.

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:
http://www.whitehouse.gov/the-press-office/2013/12/04/remarks-president-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:

http://www.nytimes.com/2013/12/06/opinion/krugman-obama-gets-real.html?partner=rssnyt&emc=rss&_r=0

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.

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:

http://economix.blogs.nytimes.com/2013/11/22/a-conservative-alternative-to-obamacare/?_r=0

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”:
http://www.aei.org/issues/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.

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.

This Is Your Brain on Economism

Paul Krugman is back today with his regular column:
http://www.nytimes.com/2013/10/07/opinion/krugman-the-boehner-bunglers.html?_r=0
--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:
http://www.npr.org/2013/10/07/230192030/irked-by-shutdown-and-stalemate-public-still-oppose-compromise
(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.)

 

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:
http://theeconomismscam.blogspot.com/2012/09/republican-worship-of-hayeks-road-to.html

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:

http://opinionator.blogs.nytimes.com/2013/09/26/why-conservatives-should-reread-milton-friedman/?emc=eta1&_r=0

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.

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):

http://theeconomismscam.blogspot.com/2013/08/will-gop-ever-suffer-for-opposing.html

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:

http://www.bloomberg.com/news/2013-09-18/republicans-phony-obamacare-replacement.html

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:

http://www.nytimes.com/2013/09/19/opinion/collins-world-war-o.html?_r=0

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.

Does Economism = Fundamentalism?

In an earlier post:
http://theeconomismscam.blogspot.com/2013/09/mirowski-on-economism-and-religion.html
--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:
http://theeconomismscam.blogspot.com/2013/09/mirowski-why-economism-spreads.html
http://theeconomismscam.blogspot.com/2013/09/mirowski-on-economism-and-religion.html
--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 (http://theeconomismscam.blogspot.com/2013/09/mirowski-why-economism-spreads.html), 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 naïve 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.

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.