Cowen and Drezner Join the Sixth International (Repentant Libertarians Cadre)

by Henry on August 26, 2010

Since I’ve been getting some (well justified) flak from commenters for paying too much attention to interlocutors in the center and right, and not enough to e.g. Marxists, I’m going to try to turn the tables, by pointing out that some of these right wing interlocutors are in fact Marxists without knowing it. Tyler Cowen takes up this bit from Drezner’s review of John’s book (also quoted in John’s post below).

Quiggin thinks he’s only writing about the failure of free-market ideas, but he’s actually describing the intellectual life cycle of most ideas in political economy. All intellectual movements start with trenchant ways of understanding the world. As these ideas gain currency, they are used to explain more and more disparate phenomena, until the explanation starts to lose its predictive power. As time passes, the original ideas become obscured by ideology, caricature and ad hoc efforts to explain away emerging anomalies. Finally, enough contradictions build up to crash the paradigm, although current adherents often continue to advance the ideas in zombielike form. Quiggin demonstrates with great clarity how this happened to the Chicago school of economics. How he can think it won’t happen with whatever neo-Keynesian model emerges is truly puzzling.

hmmm … Stable mode of production. Gradual accumulation of contradictions. Crisis. Emergence of new mode. I wonder where we might have encountered these claims before ….

More seriously – I don’t buy Dan’s arguments here. As with most stage theories (not only Marx, but also Kuhn), the mechanisms of institutional reproduction and change in his account are sorely underspecified. ‘Contradictions accumulate’ isn’t a much more helpful empirical claim than ‘shit happens.’ To really understand what is happening, you need a proper theory of the underlying conditions for ideational retention and reproduction. Why do some ideas decay into self-parody, while others do not? After all – not all ideas decay (or at least: not all ideas decay at the same rate). Some economic ideas have continued for centuries (the limited liability corporation), while others have disappeared completely, while others yet have disappeared and reappeared. We don’t know why – but if we want to make the kinds of claim that Dan is making, we need to know why, or at the least, have some rough idea. Otherwise, what we have is at best a sometimes-observed empirical regularity melded to a smidgen of intuition, which is not enough (in my book at least) to dismiss a counter-claim (that one particular idea may have a longer shelf life than previous versions) out of hand. The only large scale effort to come up with a proper theory that I am aware of is the sociological literature on performativity, but this is distinctly more useful in explaining how ideas succeed than how they become ossified, and lacks any account of the mechanisms producing variation.

Shorter version: if you want to dismiss someone else’s argument on the basis of a theoretical claim about the life-cycle of ideas in political economy, it’s a good idea to have an actual theory (with mechanisms and such) of the life-cycle of ideas in political economy. I’m not seeing that Dan has one here.

Update: see Dan’s response here, with a set of postulates about what may explain ideational persistence. As he notes, this is not a theory – but in fairness, political science and international relations in particular has done a terrible job in providing such theories to date (some interesting work on norm diffusion, which is not quite the same thing, aside).



More Dogs, Less Crime 08.26.10 at 2:36 pm

I’m guessing the more direct inspiration was Kuhnian type theories of scientific paradigms. I’ve never read Kuhn and it’s likely Cowen has, but that sort of popularization of his ideas is widespread.


Yarrow 08.26.10 at 2:36 pm

I read Drezner as saying that economics is more analogous to fashion, say, or to schools of painting than it is to science.

The idea has a certain attraction . . .


mds 08.26.10 at 2:41 pm

All intellectual movements start with trenchant ways of understanding the world.

Er… no. Not remotely.


engels 08.26.10 at 3:26 pm

I’m not that sure scoring points off Dan Drezner by accusing him of resembling a Marxist bogeyman (which is taken as read to be BS) really qualifies as engagement with Marxism but perhaps I was expecting too much…


Henry 08.26.10 at 3:41 pm

It’s a joke (I hoped that was obvious) …


Dan Drezner 08.26.10 at 3:58 pm

Henry, you’re gonna be the first one up against the wall when the revolution comes….

You raise some interesting questions. I’ll try to respond in a follow-up on the blog.


mpowell 08.26.10 at 4:02 pm

I am not sure the LLC is as solid an example as you presume. It is definitely a concept that deserves revisiting or substantially reforming due to a long history of moving perhaps too far in the wrong direction.


Henry 08.26.10 at 4:17 pm

mpowell – certainly it may _deserve_ revisiting, but the challenge I’m trying to pose is an empirical one – that it has been around, like it or not, in a reasonably recognizable form, for centuries.


mds 08.26.10 at 4:59 pm

As #1 has noted, this does seem to have more than a dollop of warmed-over Kuhn in it. But my own comment at #3 very tersely attempts to express why I think this is a problem: there’s a reason why Kuhn put “Scientific” in the title. Is your intellectual movement founded in an attempt to correct the empirical shortcomings of prior movements? Or does ideology come first, with everything else subordinated to it? Newtonian mechanics and Lysenkoism are not comparable examples of what Kuhn was on about.


Roger Albin 08.26.10 at 6:08 pm

“All intellectual movements start with trenchant ways of understanding the world. As these ideas gain currency, they are used to explain more and more disparate phenomena, until the explanation starts to lose its predictive power. As time passes, the original ideas become obscured by ideology, caricature and ad hoc efforts to explain away emerging anomalies. “

Maybe in economics, not in the natural sciences, despite what Kuhn argued. See Kragh’s Quantum Generations and Rudwick’s books on history of Geology for strong counter-arguments to Kuhn.


Irrelephant 08.26.10 at 6:26 pm

Well, maybe it’s time for the guy with the dirty fingernails (working class) to pipe up. Mightn’t the self-parody decay and production of an actual theory just have something to do with empirical data? Granted, you guys don’t have a good control over counterfactuals the way a chemistry experiment does, but still, don’t real world events play any sort of roll?


Dan Cole 08.26.10 at 7:52 pm

Drezner seems to believe that every economic theory must eventually be found wanting. Does he suppose that price theory will eventually be overturned, or that it will eventually be determined that incentives do not matter? I’m not saying that he’s necessarily wrong about neo-Keynesian theory, which like pretty much everything else in macroeconomics, seems to rest on pretty shaky foundations. But he paints with a very broad Kuhnian brush. Moreover, even if we were to presume that he’s right to claim that neo-Keynesian theory will eventually prove wanting, that doesn’t begin to answer the question of what should be done now, in the midst of an economic downturn, given the current state of knowledge.


John Quiggin 08.26.10 at 8:27 pm

The limited liability corporation pretty much disappeared for a century or so after the South Sea Bubble. Adam Smith regarded it as a proven failure. So, it’s an example of disappearance, reappearance, subsequent longevity, and as at #7, some possible future re-evaluation.


Cosma Shalizi 08.27.10 at 12:47 am

13: What about the East India Company?


tomslee 08.27.10 at 1:02 am

Aside: what do you think of the performativity of markets approach? And can anyone point to a good introduction?


Robert Waldmann 08.27.10 at 7:18 am

Consider applying Drezner’s criticism to Drezner’s criticism. He claims a universal law based on one example.

More importantly, who needs a neo Keynesian approach. What’s wrong with Keynes’ approach. I find him one of the most insightful commentators on the current crisis in spite of the disadvantage of having been dead for decades.

If Drezner can point to one claim in The General Theory of Employment Interest and Money which has not stood the test of time, then he might be on his way to getting a second example. I really doubt that he can (commenters are invited to try please).

The point is that Keynes, though personally not uhm very modest, made modest claims in the book. They were also radical and shocking. Most people haven’t begun to understand what he wrote (as demonstrated by polling data).

I’d also be interested if someone could point to anything genuinely useful that Keynes could learn from later work on the topic he discussed (that is macro but not growth theory). I am absolutely serious.


alex 08.27.10 at 7:27 am

Does not Raymond Williams somewhere talk about all ideologies [or perhaps just ideas] having a curve of rising and then declining cultural/political influence, or did I imagine that?


Pete 08.27.10 at 7:28 am


I’ve always liked this paper by Michel Callon:

The only large scale effort to come up with a proper theory that I am aware of is the sociological literature on performativity, but this is distinctly more useful in explaining how ideas succeed than how they become ossified…

Isn’t Donald Mackenzie’s whole counter-performativity thing about how ideas become ossified? When I first read the Drezner review I actually thought that that was what he was channelling.


Zamfir 08.27.10 at 7:46 am

@ Cosma: by the end of the 17th century, the East India Company, and its likes in other countries, were already morphing into some sort of public-private partnership. Parliament owned a lot (perhaps most?) of its shares, and had a direct control of the company. Technically, it was a corporation during the entire 18th century, but in practice it was slowly becoming a Ministry of Indian Affairs. Sort of like Gazprom in reverse. Or like the American Federal bank.

So I don’t think it is really a good example of a limited liability corporation in the 18th century. It’s place in the country was just too unique for that.

On the other hand, the Bubble Act of 1720 made new private corporations much more difficult to establish.


Rob 08.27.10 at 12:16 pm

My understanding is Keynes thought his model of money just wasn’t powerful enough to move the economy and so monetary policy wasn’t a real policy tool. So Friedman was right about monetary policy being important even though in Friedman’s zeal to trash Keynes and bring back Fischer lead to crap models and in the end the 1981 recession. So while Keynes model ended up being accepted as pretty much correct he sort of ignored monetary policy.


Chris Brooke 08.27.10 at 12:32 pm

@13, 14, 19: It’s probably reasonable to say that Smith included the East India Company in his list of proven failures. This is from The Wealth of Nations, IV.7:

*** Since the establishment of the English East India company, for example, the other inhabitants of England, over and above being excluded from the trade, must have paid in the price of the East India goods which they have consumed, not only for all the extraordinary profits which the company may have made upon those goods in consequence of their monopoly, but for all the extraordinary waste which the fraud and abuse, inseparable from the management of the affairs of so great a company, must necessarily have occasioned. The absurdity of this second kind of monopoly, therefore, is much more manifest than that of the first. ***


Ebenezer Scrooge 08.27.10 at 3:16 pm

The limited liability company in England was not possible until (IIRC) 1844 or thereabouts, and really didn’t stabilize until the end of the nineteenth century. (See Salomon v. Salomon & Co. [1897] App. Cas. 22 1895-99 All ER 33.) It was the norm in antebellum America, but various forms of multiple liability persisted until the 1920’s or so, and a bit later in the banking industry.

Corporate law concepts have been in a constant state of evolution. Contemporary corporate law would appear weird to a 1950’s practitioner, and completely bizarre to an 1880 practitioner.

All this being a detailed way of saying that, even if ideas persist in somewhat recognizable form for awhile, they are busily a-mutating all the time.


Castorp 08.27.10 at 3:20 pm


Castorp 08.27.10 at 3:30 pm

I think Drezner is right that the LLC is probably better understood as an institution, but I also agree with mpowell above that it deserves revisiting.

I wonder if Ricardo’s international trade model could be an example of what Henry is talking about. Of course since then we have had Pareto, Heckscher–Ohlin, Ricardo-Sraffa and Krugman’s models, but I think it is fair to say that Ricardo’s serves as the basis for the rest and still has a fair amount of explanatory power to this day, or, rather, about as much as it ever had.


tomslee 08.27.10 at 3:38 pm

@Pete – thanks. Just the kind of thing I was looking for.


Dan Drezner 08.27.10 at 3:52 pm

I was about to say that I responded on the blog, but @Castorp beat me to it.

It’s a blog post and not a fully fleshed out pasper, so there should be lots of room for savaging.


burritoboy 08.27.10 at 5:47 pm


One problem with this cycle is that classical economics (or various descendants) has been dominant three times over the past 250 years. It’s not that political economy just shifts from one paradigm to another: in general, it shifts from non-classical economics back to classical economics and then on to a very different non-classical economics then back to classical economics. Then we might (or might not) have the current phenomenon of Keynesianism appearing twice (depending on future events). But the Historic School, institutionalism and Marx-derived economics seem very unlikely to be revived.


Neil Bates 08.27.10 at 6:57 pm

I think Cowen is referring to market fundamentalism and its failure. This is the ideology-driven ferver to support the idea that free markets always work fine, government bad, etc; but then market failures (as most of us would call them) happen, we have horrible meltdowns like the recent mess, but true believers don’t want to admit their purist idea is flawed. It is similar to the resistance Kuhn describes among conservative scientists who don’t want their theories overturned: they find the evidence hard to believe. Actually, TK may have been too hard on physical scientists since they did e.g. readily accept proof that parity was violated in 1956, etc. despite it being intuitively appealing for the universe to have total symmetry (did I get that right?)


Judith Butler 08.27.10 at 9:33 pm

Fucking morons.


Cosma Shalizi 08.28.10 at 12:25 am

19, 21: Thanks!


Henri Vieuxtemps 08.28.10 at 8:35 am

Perhaps the acceptance and application of a theory can cause a change in paradigm, which (the change) renders the theory useless. Observation affects reality, experiment affects the outcome, that sort of thing.

For example, knowing that Keynesianism has been accepted as a policy tool might cause market actors to change their behavior. And, perhaps, to change it in such a way that makes Keynesian policies ineffective, or even harmful.


Kevin Donoghue 08.28.10 at 9:08 am

Rob @ 20: My understanding is Keynes thought his model of money just wasn’t powerful enough to move the economy and so monetary policy wasn’t a real policy tool.

Not so:

If the monetary authority were prepared to deal both ways on specified terms in debts of all maturities, and even more so if it were prepared to deal in debts of varying degrees of risk, the relationship between the complex of rates of interest and the quantity of money would be direct. The complex of rates of interest would simply be an expression of the terms on which the banking system is prepared to acquire or part with debts; and the quantity of money would be the amount which can find a home in the possession of individuals who – after taking account of all relevant circumstances – prefer the control of liquid cash to parting with it in exchange for a debt on the terms indicated by the market rate of interest. Perhaps a complex offer by the central bank to buy and sell at stated prices gilt-edged bonds of all maturities, in place of the single bank rate for short-term bills, is the most important practical improvement which can be made in the technique of monetary management. [GT pg 205]

He goes on to say that we need to consider “the special characteristics of the method actually employed by the monetary authority” before reaching conclusions based on his theory.


marcel 08.28.10 at 12:56 pm

More Rob @ 20:

My understanding is Keynes thought his model of money just wasn’t powerful enough to move the economy and so monetary policy wasn’t a real policy tool.

This really confuses the version of Keynes that was dominant in the US after WW2 through say the 1960s – let’s call it the neo-classical synthesis – with Keynes. A reasonable reading of the General Theory indicates that he thought monetary policy usually quite powerful and effective.[1] Exceptions included periods during and after crises that generated what we’ve come to know as a liquidity trap. He used the phrase monetary policy a l’outrance, which I understand to mean as monetary policy in the extreme or to the utmost, and was his preferred approach to nipping incipient crises in the bud. Unfortunately, I do not recall where he first used this term.[2]

[1] Prior to the GT, it is clear that Keynes thought monetary policy very powerful. Beyond leaning on his well known comment, “When the facts change, I change my mind. What do you do, sir?”, and interpreting the GT as a rejection of all his earlier economic analysis, it is difficult to come to a definite conclusion about the relationship between the GT and his prior work, certainly one that commands widespread agreement.

[2] It has been many years since I read the GT carefully, and my memory is a bit hazy. I have tried to be careful to avoid saying anything that would indicate strong adherence to one or another interpretation of Keynes/GT here.


Glen Tomkins 08.28.10 at 5:38 pm

Ask me a hard question

“Why do some ideas decay into self-parody, while others do not?”

Ideas that stay on the shelf, are little applied to actual cases, can have a very respectable shelf life. The Doctrine of the Trinity, for example, does not face any opportunity for falsification in practical life, therefore is as strong as it ever was, sitting on its shelf somewhere hermetically sealed away from any contact with the oxygen of empiricism. Under such conditions, being a theologian, and plumping for some specific theological theory, is a very safe career choice.

I chose that particular example because there was a time when belief in vs denial of the Trinity, or the choice between Consubstantiation vs Transubstantiation, were believed to have a very direct, foundational, connection to one’s ability to live in society and behave morally towards one’s fellow man. Denial of the One True alternative belief in such cases was thought to prove that the denier was an immoral social predator, who would, of course, commit the most horrific crimes, given their error on the supposedly foundational beliefs about the Trinity, etc. Practical experience of the behavior of people on the other side of such confessional disputes — the massacres, the judicial lynchings, the treasons and civil wars — behaviors all undertaken in self-defense and retaliation against similar behaviors from the other side, of course confirmed the belief that you just couldn’t trust people who believed in, or denied, the Trinity, that they were a cancer that needed to be eliminated. Theologians and theological beliefs could have a pretty short shelf life under such conditions.

Now, for theories of the universe that don’t have any actual connection with reality, where the connection is only hallucinated (And please, I’m not being anti-religious here. Isn’t the whole point of the parable of the Good Samaritan that the idea that there is a connection between religious belief and moral behavior cannot be supported?), the hallucinated connection will eventually burn itself out. Such ideas can then go back on the shelf into their hermetically sealed jars, where the Trinity and Transubstantiation live to this day.

The opposite case to theological theories, in terms of their vulnerability to emprical falsification, would be scientific theories. They have to be falsifiable to really be science. That’s really their only criterion to be science, rather than the many alternatives to science as a source of beliefs about this world that we live in that homo theoreticus generates as necessarily as we breathe. So scientific theories would be inherently subject to a rate of decay determined by how avid people are to probe at the limits that any theory is subject to. But at least that rate of decay should be, usually has been since science freed itself of theology, free of the extreme turbulence that theological theories can get themselves into when people imagine that they have any connection to the real world. Being a scientist in Bruno’s day wasn’t that safe a career choice, because people thought that acceptance of certain scientific theories was linked to supposedly critical theological alternative beliefs. Maybe we’re getting there again, but mostlyu we have been able to keep science free of externally generated turbulence for th past few centuries.

What we think of as Marxism, of course, is somewhere in the middle between science and theology. Marx himself thought of what he was doing as science, but when a theory, such as economics, has as its referrants facts that actually are foundational for moral action, such as the facts of wealth, poverty, work and how society is arranged to determine what work some will do versus others, and to facilitate the wealth and poverty of some people over others, you’re going to have an inherent and necessary overlay of the sort of turbulence that theological and scientific theories only come by dishonestly or by mistake.

On the one hand, Marx thought of what he was doing as just a continuation of the economics he inherited, a science handed down by his predecessor economists that would, of course, have its limits probed, and thereby improved and refined, by every new generation of economists. But his thought, like any theory in economics, as contrasted with physics or theology, had all sorts of moral entailments. Specifically, he believed the facts of society’s poltical organization called for revolution, and that economic and political evolution to that point made peaceful revolution impossible, that the rulers had already irretrievably doubled down on political reaction in response to industrialization.

So, in addition to the normal course of change that scienttific theories are subject to, some combination of refutation, extension, and refinement, Marxist thought had this burden of being put to practical use to justify or pillory particular political events and actors. But it could have proceeded to be thought of by most people as just a refinement or extension of Economics in general as long as it was just a kibbitzer in history. Then, about 2 microseconds after a set of people who thought of themselves as Marxists gained power in Russia, the entire process of change in Marxist theory was completely hijacked by the needs of various people to justify or vilify the least proceedings of the Soviet Union. Marxism was stretched into unrecognizable shapes to justify Soviet realities. An artifical counter to Marxism, Free Market Whatever, had to be born to counter Marxist theology. But the theoretical outpourings from either side have all been dominated by thought that has about as much relationonship to reality as the difference between Transubstantiation and Consubstantiation, and for the same reason, they became purely markers in a political struggle marked by horrific excesses on all sides, which excesses everybody is happy to attribute to belief in the opposing economic theory. Of course Obama wants to eat your children. He’s a damned Socialist!

Less inherently fraught economic theories may more or less avoid such extreme contamination by association with real world political movements, and may therefore decay into self-parody at different rates. And, certainly, such necessary entailments that any economic idea has to have in the real wolrd and moral universe, can be handled with more or less intellectual fastidiousness. I’m certainly not saying that both sides are equal in this respect. On the right we have the intellectual servants of the ruling class, and they have proven eager to tie their thinking to pragmatic causes that are in turn tied to paymasters with big money bags who will pay top dollar, and otherwise reward them handsomely. Of course these less fastidious people descend into self-parody at a faster rate. Maybe, in some cases, before they speak a syllable, faster than the speed of light. But that’s one of those liminal phenomenon whose close empiric investigation might bring down Special Relativity, so I’ll leave that to the physicists.


Eli 08.29.10 at 4:16 pm

At least in the case of free market ideology, you have an idea that was incoherent to begin with. Taken loosely, that economy ought to be mixed, it doesn’t say very much and is hardly an ideology. But taken strongly, that private markets are always better, you end up with endless contradictions and denialism. This was essentially the case with socialism. Taken strongly, that government is always better, it was disastrous. Yet taken loosely, that the economy ought to be be mixed, it doesn’t say much either.

Maybe the real problem is simply those with an inability to maintain serious and critical thought, and whose emotional investment in an idea clouds their objectivity.


ogmb 08.30.10 at 4:10 pm

Shorter Quiggin: “You know, Chevys are old and leaky and stinky and expensive to maintain, I don’t know why people still drive them, they should replace them with Volvos. I know Volvo had a manifold problem in the 1970s, but perhaps they fixed the problem since, so they should be ok now.”

Shorter Drezner: “Look, not only Chevys get old and leaky, all cars get old and leaky, so Quiggin contradicts himself when he says Volvos don’t get old and leaky.”

Shorter Quiggin: “But, but, I said perhaps!”

Shorter Cowen: “A libertarian argument! Let me blog u it.”

Shorter Farrell: “You can’t say Volvos are leaky without a real full-blown theory on the mortality of internal-combustion-propelled horseless carriages!”

Shorter Drezner: “If Volvos weren’t old and leaky, someone would’ve driven them off the yard already.”

Comments on this entry are closed.