Dives and Lazarus: An Economic Fairytale

Someone has read their Grundrisse I see, only this time with gratuitous conceptual art bashing.

Watson Ladd @ 1

Nicely done. As nicely done, in fact, as Cosma’s original post. All that’s lacking is a final movement from Brad DeLong (maestoso, ma non troppo) noting once again that Marx was wrong.

Brad DeLong @ 4

I have to admit it, you’re more instructive and more fun to read these days than almost anyone else. That I also don’t have to pay to read you is truly amazing. Maybe the Internet will save us after all.

Watson, you really do not want to pick a fight with Cosma.

As someone completely in sympathy with Cosma here, let me play devil’s advocate. Over time, wouldn’t the society functioning through an economy in which every Alice sold to every Dives rather than to every Lazarus eventually starve to death? (And isn’t that what may eventually happen in our own? I’m thinking global warming, especially.)

Cosma, this argument appears in the Grundrisse in the section discussing the alienation of the worker eventually becoming his death by starvation and the cultivation of the senses. Now, my edition of the Grundrisse is trapped in Chicago, but I will get to it and find a citation. So Marx anticipated the argument. But he goes further: more then just a society in which people can do bad things through lack of charity, capital is a society with a dynamic that affects how one relates to things. The worker instrumentalizes himself in ways that prohibit his development of any sort of culture or appreciation. He comes to feel his hovel is part of him. In a sense the robber barons have done us a big favor by preserving the bourgeois art even as they worsen the conditions under which it makes sense.

The crucial distinction is between bourgeois society and industrial society. Industrial society produces the conditions for a mass social organization devoted to ensuring that everyone can flourish. But it also makes that possibility more distant. None of this has to do with the fact that those with nothing to sell starve: its not a question of giving people things to trade but rather enabling them to satisfy their needs. Everyone can be bourgeois, no one is guarantied to succeed in that. There is an emancipatory side to capitalist social relations that just focusing on distribution ignores, namely that it’s a global society everyone is a part of.

Watson, I think you’re misunderstanding the argument that Cosma is making. There’s an economic notion called “Pareto optimality”. In some sense, it’s a purely mathematical notion that can be applied to any social arrangement, not just capitalism. Cosma is pointing out that the definition permits absurd outcomes.

Cosma also disclaims at the very top that the point he’s making isn’t very original, and that it should be obvious who knows anything about the subject. I hope to God that he’s right on this one, and that everyone who hears the definition immediately invents an absurd social satire. (When I first heard the definition, my reaction was to make up an example of Pareto optimality where third parties had “right to kill” permits to kill individual people that are traded on markets.)

Walt, the turkey going to Dives also is on the Pareto frontier.

Cosma, you are correct about my confusion of the two. Nevertheless on page 104-105 of the Tucker Marx-Engles Reader we see “If I have no money for travel, I have no need, that is no real and self-realizing need-to travel. If i have the vocation for study but no money for itI have no vocation for study-that is no effective, no true vocation.” and earlier in the Manuscripts we have Marx remarking on slavery as an example of the alienation of political economy from ethics. (page 97) So Marx did argue that economic rationality could lead to bad outcomes from a moral perspective, even if the bagmen of free trade was Bastiat and not Friedman.

William, come again? I’m sure there is something interesting beneath that mass of metonymy, but I’m not sure what. Anyway, from what I can tell it seems like there are no bagmen because no one is really trying to overthrow capital. Occupy Wall Street is no Second International! Even if the capitalist system enters into crisis and reconstitution the free sale of labor will continue.

Yes, I know, Watson. CT deals in facts, and careful extrapolations from those facts. Above all, careful, above all free of frivolous metaphor. Expertise isn’t a devalued commodity here, as it is elsewhere among Serious People, and good on all concerned, yet even experts need an attentive and engaged audience which extends beyond the circle of their expert colleagues. Otherwise, why go to the trouble to set up up a blog, or write for the NYT? You might say I’m just doing my job, although I do admit that no one hired me to pose as the Layman’s Trumpet, and probably wouldn’t, even if such jobs actually existed.

In any case, the problem I have with the good people grappling seriously here and elsewhere with the nuts and bolts of macroeconomic policy, and all the associated difficulties of political legitimacy, is the forest and trees problem. If OWS isn’t to be the New International (your idea of the numbering and mine differ somewhat), then where should we look for it? That really is the question isn’t it? Even if I concede that what we need to do isn’t controversial, how we should go about doing it is as much a mystery as it was before Cosma’s fields of study even existed.

William, I meant second in the sense that the Second International overthrew capitalism in Russia, while others didn’t. OWS isn’t the second coming of Communism but rather cannot aspire to be that overcoming, which I think we both agree on. I also think we both agree that even if the future changes we want could be agreed on, the political forces that could make them don’t exist or aren’t apparent. Where you and I probably differ is that I think this is the result of not thinking through the past history of the Left, and we can right now only aspire to bring that issue into focus rather then start building the revolution now.

Yes, Watson, I realized what you meant after I posted. And in fact I agree with you particularly with regard to the limitations on what we can aspire to right now. That’s why I limit my comments here to sometimes fanciful exhortations, while taking what I learn and trying to apply it to my dealings elsewhere.

I wave signs on street corners, do grunt work and fundraising for the Democratic Party, while also bitching at the county and state apparatchiks where appropriate. I collaborate on an AM progressive talk radio show, where I do a sort of populist Keynes was right shtick with themes borrowed not only from what the unfortunate Professor Williamson not so long ago called the Krugman/Thoma/DeLong League, but also from its Australian farm team. Last week I moderated a teach-in on what OWS wants attended by a grand total of 43 people. Penny-ante stuff, to be sure — and in AZ, where it actually might be more useful to preach to rocks in the desert. (Which, to be honest, I wouldn’t mind doing, if I thought I could come back later and baptize an actual messiah.)

No, I’m by no means a revolutionary, but I think that in spirit, if not in fact, Marx was more perceptive about what free labor actually implies than just about anyone else before, during or since. Free labor can so easily result in nothing more than atomization, fragmentation, alienation, and finally defenselessness, and the collective defenses inherited from earlier stages of historical development, even with all their modifications since, have simply not kept pace with the concentrated forces of capital that are now arrayed against them.

Even after we’ve said all anyone can say about gentlemanly ways around the political obstacles which threaten a sedate and beneficial social democracy, recent events seem to me poised to make nonsense of even our most modest aspirations on that front. My own instinct is that if, in the face of a credible threat of chaos and mayhem, we voluntarily restrict our aspirations to bringing issues into focus, we should concentrate on how to manage a complex political economy with, to coin a phrase, a decent respect to the opinions of mankind. That would do for starters, anyway.

No, being an old fart, I can confirm that it most definitely wasn’t what any of us wanted. The idea that the same apparatus which oversaw our New Deal social democracy could also moonlight as the wheelhouse of global imperialism was anathema to us. I still remember the horror amongst my embryonic sociologist grad student friends when Ramparts blew the whistle on Michigan State’s involvement in the Strategic Hamlet program. If we’d lacked a certain clarity about who owned us before that moment, we were certainly never in any doubt afterward.

Tony Judt was a thoughtful man, and never, as I read him at least, a callous or vicious one, and never an ideologue, much less anything remotely resembling a fascist. Chapter 6 of Postwar is coldly eloquent about the reasons why, despite misgivings about what their own governments were up to, many thoughtful people in the West became fervent anti-communists after the war. Whatever the Left is now, or will be in the future, it can’t wish away what it was then.

Anyone looking for a contemporary example of the virtue of thinking one’s own thoughts, and keeping one’s own counsel, or an antidote to the fear-driven ideological solipsism which always seems to get us into the worst kind of trouble, Tony Judt’s work is there to provide it. It’s really too bad that he wasn’t allowed to live long enough to provide us with a lot more of it.

It’s just one of the laws of Trotskydynamics: Internationals once mentioned will overtake the previous topic, to a degree inverse to their relevance to same.

Matt McIrvin @34

I think we can do this just as easily with a real example. Lets imagine that stocks of basic grain are very low because of the failure of the Russian crop due to a drought and the Indian crop due to floods, and we have a global speculator (lets call him Morgan Goldman for short) who sees an opportunity for making a profit by buying substantial amounts of next years grain and removing parts of it from world markets for a few months in the northern winter to make the world really desperate in order to increase the value of his holdings (betting on the long range forecast of another bad harvest). Nothing illegal and markets are working as they should – BUT ….

The supply-side claim is that if we cut Alice’s expenses enough, by cutting her taxes, deregulating her suppliers, letting her hire people who are as bad off as Lazarus for a penny a day, etc., she’ll actually be able to sell that turkey dinner for ten cents at a profit.

Or, alternatively, if the government just gets the hell out of the way then there will be nothing to stop Lazarus from starting his own restaurant.

ajay @37

That is pretty clever given how he has just starved.

I thought he’s called Lazarus because he’s going to be resurrected anyway. So, he ain’t got nothing to worry about.

There’s a possible solution whereby Lazarus no longer needs to get his food on the open market, namely providing him a wife, or at least helping him get it together enough that he can get married. Viz. all those Douthat and Brooks columns about how marriage and family life cause economic security.

reason @ 38

If we see lots of pitchforks and torches when we step out on our balcony, we can presume that we got it wrong. It would be nice if we had a way of making earlier and more precise measurements, but the state of current technology unfortunately doesn’t allow us to.

Henry V @ 32

It has to do with what we’re now pleased to call — in the European context, at least — the democratic deficit. Yes, our little foray into Marx et al. was a digression, but the politics of who gets to split our resource allocation hairs is as current as today’s headlines. Despite its contribution to our understanding of the technical management of who gets what under what circumstances, welfare economics can’t do much to resolve the associated political problems, which are as thorny today as they were when the Internationals were still just a gleam in the old boy’s eye. Yes, all the smart folks know this already, thank you, but then here we are again anyway…aren’t we?

The point of the original parable is that God is going to fry Dives for not heeding the prophets.

Apt pun supplied upon request.

I love parables.
Alice has fed herself. Dives is not hungry. Only Lazarus is hungry, desperately hungry.
Now. Today.
What about tomorrow? Alice and Dives will need to eat again at some point. Each of them is already Lazarus, too, even if neither yet (or ever) realizes it.

I’ll probably mangle this wonderful parable, attributed (as I recall) to Hillel. Sorry.
Hell:
A group of people wander hungrily through the snowy cold forest till they sight a copse, wherein is a cozy cottage, smoke rising from its chimney. They enter. A table is laid out with a huge, steaming pot of soup at the center. They seat themselves and pick up their spoons — very, very long handles these spoons have, and each person struggles unsuccessfully to maneuver his or her soup-filled spoon to his or her mouth. They all die.
Heaven:
Same scenario. But each person extends his or her soup-filled, long-handled spoon to another person at the table, and everyone eats to the full.

My elaboration (inspired, perhaps, by a very happy Thanksgiving): as all those long-handled spoons criss-cross and clang over the table, a good deal of soup slops onto the table (what waste! and who’s going to get those stains out of the tablecloth?). And between the slurpy spoonfuls that everyone eventually enjoys, a great deal of laughter.

Because a spoon that long has quite a hefty pommel (etc).

But even if a satisfying explanation can be found for the events depicted, the problem of mapping the analogy onto some real-world target phenomena in any detail remains. (Sorry Meredith, nothing personal.)

There is no spoon.

—

(Please don’t beat me, I’m so very sorry)

I’m confused by the original article, and the comments are even bewildering to me (I need to work out – or care – what “N” is in “the N’th International would have ‘liked’ this post” ??!).

I’ve seen no end of dangerous economic arguments that rest on the claim/assumption that a non-Pareto-optimal solution is bad (because, if you just hand-wave away many actually rather important things, we can theoretically make things better with no one objecting to the change). This line of reasons seems worthy of dissection and criticism.

But to be fair on the other side, I don’t think I remember anything or anyone serious claim that if an outcome is Pareto optimal it is therefore _good_. In fact, personally, I don’t think I’ve seen a treatment of this doesn’t _actively_ warn against this mis-conclusion. So what/who is the original story supposed to be educating us against?

To 57 and 58 I would add that the while technocrats are responsible for writing scripture, it’s the usual suspects who most often quote it to their own purposes. So, pareto optimal often winds up meaning little more than screw the powerless, as Tim W. implies above. And as we saw so very recently, when the quants warned that under certain conditions, not entirely accounted for in their models, risk-spreading became risk-concentrating, nobody laughing on the top floors of the bank towers paid them any mind.

Internationals may be unhelpful handwaving to the smart folks, but if anyone in recent days has dropped the burden of proof, it’s been those very same smart folks. My little iPad CNN pop-up greeted me this morning with U.S. Federal Reserve, acting with other nations’ central banks, takes steps to support the global financial system. Should I hold my breath, d’ya think?

Yes, I found it hard to believe when, having walked through the fomrality of an economics A-level, I arrived at Oxford expecting to get the real grown-up version, and instead found that my tutors (the more junior ones at least) were still mired in the 50sd Cold War orthodox bullshit as concocted by Samuelson, Debreu etc.

Let me be quite clear and distinct about it. Pareto optimality is also called Pareto efficiency, and that is what economists are referring to when they use the term ‘efficiency’. That is what ‘efficient’ means, to provide a central example, in the expression ‘efficient markets’.

While – for the avoidance of doubt – I’m not accusing you of being disingenuous, your remarks about efficiency and ‘efficiency’ could be taken as a standard kind of equivocation – known in these parts as the ‘two-step of terrific triviality’. ‘Efficiency’ as used by (mainstream, neoclassical, what-have-you) economists taking a front-foot stance is indeed Pareto efficiency, even if they might (I suppose) try to deny it – or more relaistically – deny that they are comitted to it – when pinned down.

Supposing that they are actually being colloquial and using some informal and less determinate concept of efficiency is hardly workable in this case though – they really don’t have one to offer, because the raft of c0ncepts like revealed preference, interpersonal incommensurability of utility, individual property ownership as the general form of goods, etc that was built up in the 50s has a kind of coherence which means individual elements can’t really be altered piecemeal.

Actually, your requests for examples remind of nothing so much as Dershowitz’s response to complaints that defenders of Israeli state actions tend to assimilate criticism of Israel to the category of ‘antisemitism’. It’s a bravura biot of bullshit – he offered some impressive-sounding sum of money (good luck with claiming it in the courts) to anyone who could find an example of a ‘Jewish leader’ whatever exactly that is – stating that critcism of Israel is antisemitic per se. Which is exactly what those inviolved in a smear tactic will not commit themselves to doing.

You version is bordering on the demand that you not only be given an example of some myuthically ‘serious’ person explicitly stating that by efficiency they mean Pareto efficicncy, but also explicitly drawing out all the consequences that make this an unattractive position. While you’re at it, why not demand that this unimpeachably serious person also actually state that their opinion is stupid and wrong,?

Shorter Tim: straw man arguments cannot exist.

No, Sebastian – shorter Tim is: Pareto optimality is also called Pareto efficiency, and that is what economists are referring to when they use the term ‘efficiency’.

You don’t deny this, I assume?

On this business about straw man arguments, if you would supply a ‘longer Sebastian’, so that I can narrow down exactly where you’ve gone wrong, I will happily refute whatever point you are making (or, alternatively as a theoretical possibly, accept it).