Highlights from Jacobin

by Corey Robin on December 27, 2012

The latest issue of Jacobin is now online, and it’s fantastic. Before I give you some highlights, let me make a pitch: subscribe or donate to Jacobin. I’m a contributing editor, so I’m biased. But I know I’m not alone in saying it’s one of the newest, freshest magazines around. It was founded by an undergrad in his dorm room (seriously). But, hey, Trotsky was 25 (or 26?) when he led the St. Petersburg Soviet in 1905 and Martin Luther King was 26 (or 25?) when he led the Montgomery Bus Boycott. So who knows where this can go? In any event, subscribe, donate, help out.

I’ve got a piece in the new issue on the politics of national security.  Via Hobbes, the War on 1812 (yes, the War of 1812), World War I, and Trayvon Martin, I argue that the problem we face is not that we live in a world of Hobbesian states, but that we live in a world of failed Hobbesian states.  Though we claim there’s a tradeoff between freedom and security, we repress only some people’s rights and offer only some people security. What’s worse, there may be no way around that, a fact that liberals have yet to confront. To their peril.

Security is an ideal language for suppressing rights because it combines a universality and neutrality in rhetoric with a particularity and partiality in practice.  Security is a good that everyone needs, and, we assume, that everyone needs in the same way and to the same degree.  It is “the most vital of all interests,” John Stuart Mill wrote, which no one can “possibly do without.” Though Mill was referring here to the security of persons rather than of nations or states, his argument about personal security is often extended to nations and states, which are conceived to be persons writ large.


Unlike other values — say justice or equality — the need for and definition of security is not supposed to be dependent upon our beliefs or other interests and it is not supposed to favor any one set of beliefs or interests.  It is the necessary condition for the pursuit of any belief or interest, regardless of who holds that belief or has that interest.  It is a good, as I’ve said, that is universal and neutral.  That’s the theory.


The reality, as we have seen, is altogether different.  The practice of security involves a state that is rife with diverse and competing ideologies and interests, and these ideologies and interests fundamentally help determine whether threats become a focus of attention, and how they are perceived and mobilized against.  The provision of security requires resources, which are not limitless.  They must be distributed according to some calculus, which, like the distribution calculus of any other resource (say income or education), will reflect controversial and contested assumption about justice and will be the subject of debate. National security is as political as Social Security, and just as we argue about the latter, so do we argue about the former.



Because the rhetoric of security is one of universality and neutrality while the reality is one of conflict and division, state officials and elites have every motivation, and justification, to suppress heterodox and dissenting definitions of security.  And so they have, as Hobbes predicted they could and would.  But because a neutral, universal definition of security is impossible to achieve in practice, repression for the sake of security must be necessarily selective:  only certain groups or certain kinds of dissent will be targeted.  The question then becomes:  which groups, which dissent?


Because government officials are themselves connected with particular constituencies in society — often the most powerful — they will seldom suppress challenges to security that come from the powerful; instead they will target the powerless and the marginal, particularly if the powerless are mobilizing to threaten the powerful.  So the US government during WWI made it illegal to urge people, like the Socialists, not to buy war bonds — but it did allow a Wall Street adviser to counsel his client not to make a bad investment.


Or, when Congress passed the Sedition Act in 1918, which made it illegal to “willfully utter, print, write, or publish any disloyal, profane, scurrilous, or abusive language” about the United States government or the military or to bring these institutions “into contempt, scorn, contumely, or disrepute,” the Republicans attempted to insert an amendment that would have protected themselves and their constituencies, who were aggressively criticizing Woodrow Wilson and the Democratic leadership of the US government.  “Nothing in this act shall be construed,” the amendment read, “as limiting the liberty or impairing the right of an individual to publish or speak what is true, with good motives and for justifiable ends.”  Suppressing dissident socialists or activists against the draft was fine; suppressing dissenting Republicans was not.


But there is a second reason why security has proven the most potent justification for the suppression of rights.  And that has to do with the liberal tradition, which historically has offered the greatest theoretical resource for opposition to the suppression of rights.  While liberalism as a theory has given us excellent reasons to oppose the use of coercive state power on behalf of religious or moral orthodoxy, it has given us far fewer reasons to oppose the use of that power on behalf of security.  In fact, if we look at three touchstones of liberal discourse — Locke, Mill, and Oliver Wendell Holmes — we find that each of them actually provides excellent justifications for the use of coercive and repressive state power in the name of security.


Each of these writers tried, in his way, to prevent the state from using its coercive power on behalf of some controversial question of ideology or belief: for Locke, it was religion; for Mill, it was morality; for Holmes, it was politics.  And each of them formulated a test or condition for when the use of such power was legitimate:  for Locke, it was to protect “the security and safety of the commonwealth”; for Mill, it was to prevent harm; for Holmes, it was to thwart a “clear and present danger.”


The assumption behind the proscription against using coercive power in the first set of cases — religion, morality, and politics — and the endorsement of it in the second set of cases — the security and safety of the commonwealth, harm, or a clear and present danger — was not only that the first set was a source of controversy and division while the second set was not.  It was that the first was by its very nature a source of controversy while the second was by its very nature a source of unity.  Unlike religion, morality, and politics, in other words, security offered the basis for an uncontroversial exercise of coercive state power.


As we have seen, this assumption has not been borne out by reality.  But that failure has not stopped liberals from arguing, as the saying goes, that politics stops at the water’s edge.  And so when they have tried to chastise conservatives for using security for political ends (even though they do the same thing themselves), they have often found themselves, particularly since the Reagan years, hopelessly outgunned.  Having endorsed — indeed, invented — the idea that security is not, properly speaking, a subject of and for the political arena, liberals cannot possibly hope to beat their opponents at a game which their chief theoreticians claim does not even exist.


Seth Ackerman has a piece on market socialism. It has some fascinating details like this:

 

Because the neoliberal Right has habit of measuring a society’s success by the abundance of its consumer goods, the radical left is prone to slip into a posture of denying this sort of thing is politically relevant at all. This is a mistake. The problem with full supermarket shelves is that they’re not enough — not that they’re unwelcome or trivial. The citizens of Communist countries experienced the paucity, shoddiness and uniformity of their goods not merely as inconveniences; they experienced them as violations of their basic rights….


In fact, the shabbiness of consumer supply was popularly felt as a betrayal of the humanistic mission of socialism itself. A historian of East Germany quotes the petitions that ordinary consumers addressed to the state: “It really is not in the spirit of the human being as the center of socialist society when I have to save up for years for a Trabant and then cannot use my car for more than a year because of a shortage of spare parts!” said one. Another wrote: “When you read in the socialist press ‘maximal satisfaction of the needs of the people and so on’ and … ‘everything for the benefit of the people,’ it makes me feel sick.” In different countries and languages across Eastern Europe, citizens used almost identical expressions to evoke the image of substandard goods being “thrown at” them.


And this:

 

Around the time of the Soviet collapse, the economist Peter Murrell published an article in the Journal of Economic Perspectives reviewing empirical studies of efficiency in the socialist planned economies. These studies consistently failed to support the neoclassical analysis: virtually all of them found that by standard neoclassical measures of efficiency, the planned economies performed as well or better than market economies.


Seth’s piece is filled with surprises (to me, at any rate), and it’s refreshingly clear of piety and dogma.

Peter Frase has a piece on the old and the new Baffler. Frase’s one of my favorite writers, and this piece is a good example of why that’s the case. He’s open and generous but never pulls his punches. And as always, he uses his targets as an opportunity to open out onto the culture in the widest way possible:

“Lazy, reflexive libertarianism” fits the era in which the Baffler emerged, but does it really fit ours? At a time when capitalist apologetics and “There Is No Alternative” resignation were emanating even from allegedly radical quarters, there was value in reminding us that the market was still “the God that sucked.”


Cultural studies was degenerating into a bizarre kind of obscurantist populism that found agency and resistance in every television sitcom. Investment boosterism elevated stock market speculation into an ecstatic demos in which the common man could command his own destiny. Drinking Mountain Dew and listening to Pearl Jam was sold as a revolutionary act. Even the best cultural criticism of the era, like the online magazine Suck.com, tended toward cynical snarking and what Fredric Jameson called “blank irony,” a degenerate form of ridicule that no longer recognizes any authentic standard of comparison for the things it derides.


Snark and sarcasm, on the one hand, and market boosterism on the other, still dominate the discourse, but their content and purpose has changed. Today’s culture is characterized not so much by pervasive nihilism as by a series of peculiar inversions, in which the Onion presents incisive news analysis in the guise of satire and TV news passes off cheap entertainment as useful information. Some of the most class-conscious and bitingly political commentary in the popular media can be found on Gawker, ostensibly a gossip site. These publications are the descendants of the Generation X culture of the nineties, but their young writers tend to use humor more as a container for sincere rage than as a vehicle for narcotizing apathetic detachment.


This represents an incipient failure mode of what Mark Fisher calls “Capitalist Realism,” the condition in which all political alternatives are obliterated, and the system persists through sheer inevitability rather than legitimacy. The tech bubble represents, in retrospect, capitalism’s last serious attempt at an overarching positive ideology, which Frank aptly diagnosed as market populism. What remains in the wake of its collapse is a grim politics based on fear — fear of terrorism, the Tea Party’s fear of the Other, and the fear generated by economic insecurity and high unemployment. The housing bubble briefly graced the fear era with a parody of a positive ideology. But the notion that we can all be rich by selling ever-appreciating houses to the next greater fool was weak sauce even by the standards of market populism.


Beneath the scares and bubbles there remains the exploitation of labor, which leads inexorably back to dissatisfaction and revolt. The thinkers of the young left have revived interest in Italian autonomist Marxism, which posited the resistance of workers at the point of production as the motor of history that impelled capitalists to transform their own productive relations. This approach is at least well-suited to the conditions of cultural workers churning out content for websites that soak up the attention of bored office workers. By identifying an appetite for class war in their audience, the blogging proletariat, doing a new kind of piece-work, has turned the amoral hunger for page views to subversive ends. This is not subversion in the shallow discursive sense of mediocre nineties cultural theory, but in that of fomenting solidarity with real movements, from striking fast food workers to Strike Debt activists.


Anyway, you can read these articles here. And, again, subscribe or donate here.

{ 61 comments }

1

JW Mason 12.27.12 at 7:17 pm

The market socialism piece is very bad.

If you believe Seth, none of our existing arrangements for non-market coordination, from urban transit systems to public health insurance, from police and fire protection to public parks, from collective provision in the family and all kinds of mutual aid to voluntary cooperation in all kinds of unpaid creative work, can or should exist. Seth thinks (well, not really, but if he believed what he writes) that the problem with the privatization of public schools has nothing to do with the Taylorization, deskilling and casualization of teaching labor that teachers unions in places like Chicago are fighting against, but is only a problem because the resulting surplus isn’t properly distributed through public mutual funds.

On the other hand, once you do admit there’s a place for public institutions and some degree of worker self-management, then there’s no reason to think that existing capitalism has gotten the proportion of such stuff exactly right (especially since there’s such variation across capitalisms) and no reason to exclude it from your vision of the socialist future.

It’s just an extra bit of silliness that he describes as “concrete and practical” a proposal that assumes e’ve already expropriated all private wealth, and simultaneously ignores all existing forms of non-market production. It also misses the obvious question for any “concrete and practical” proposal: where do we see incremental progress in this direction today? Of course there are lots of public pension funds, sovereign wealth funds, ESOps and all the rest, and guess what? the firms they own act just like any other capitalist firm. It’s not just Roemer and Elster he ignores (or rather repeats second-hand, if he hasn’t actually read them); it’s also Peter Drucker’s The Unseen revolution, Rifkin’s The North Shall Rise Again, etc., which were confidently predicting that the democratization of ownership of financial assets would achieve all the goals of socialism without any need for a sudden rupture. How’d that work out?

I don’t know if this is the worst thing the Jacobin has printed, but it’s certainly the worst thing I’ve seen by Seth.

2

david 12.27.12 at 7:23 pm

Those who like Seth Ackerman’s piece may also like Shalizi’s 1994 review of Roemer, which makes very similar arguments and elegant summarises Roemer’s own socialist finance.

To me both seem a lot like just another ambitious provident-fund/development-bank scheme, though. We’ve already got those, these are not new innovations as far as human civilization goes, although they are foreign to the West.

3

bianca steele 12.27.12 at 8:03 pm

I might suggest to the editors and/or designers of the online edition that one sentence to describe an article that’s only available in the print edition, though it makes for a sleek appearance, isn’t enough to whet a reader’s interest enough to get her to buy the issue.

4

Steven Tran-Creque 12.27.12 at 8:13 pm

Afraid I have to agree with JW Mason. Ackerman’s piece was provocative and contained some stuff I liked (the historical stuff about the DDR and Soviet productivity, mainly), but there are enormous problems—starting with the relatively simple observation that all kinds of stuff in our society is organized along completely different lines from the standard capitalist model of production, and if anything, it tends to be vastly more efficient.

I think Mason’s right that it lines up really well with old arguments that the market would be the revolution—which is ironic, since that’s pretty much the stuff Frase spends his time praising the Baffler for eviscerating in the 90s.

To be fair, though, if it’s in the running for Worst Jacobin Piece Ever, it’s running against that embarrassing review of Debt and James Livingston’s argument that socialism is already here—so, stiff competition.

A lot of the other stuff in this issue was rather nice, at lest. I liked the piece on student loans (even if Jacobin seems to have some kind of sneering, one sided blood feud with Strike Debt), Frase’s always excellent, and I liked Robin’s thing on liberals and security.

5

Bhaskar 12.27.12 at 8:24 pm

Bianca, the paywalled articles are definitely worth reading, but most people subscribe to sustain the forum — the articles that are available online and all the blog material we produce. Point taken though.

6

Seth Ackerman 12.27.12 at 9:40 pm

JW Mason: Josh, I can truthfully say that the article you describe sounds even sillier to me than it does you do. It’s not the piece I wrote, though – or at least the piece I intended to write. What I was trying to say is exactly the opposite. For me, the fact that so many dollars of profits get socialized and redistributed is by far the *least* important thing about this set-up. Meanwhile, the most important thing is exactly what you think I don’t care about at all: the expanded possibilities for reorganizing production in profit-*defying* ways.

The premise of the article is that profit-and-market considerations should be put in their place, and that the question of how big a place they should get – how far production should be market-conforming and how far it should be market-defying – should be a matter for democratic decision-making. Yet the troubled history of social democracy and “mixed economies” has shown that the irresistible pressure of market logic always rears its head in the end as long as you leave the preponderance of society’s productive wealth in the hands of a private and unaccountable profit-seeking caste. That’s the dilemma the piece is trying to address and overcome.

The whole point of the idea, for me, is all the things I barely even mentioned in the piece – the possibilities, many of them unthought of today, that such a system could open up in the future: reductions in working time, ecological reconstruction, changes in the gender division of labor, etc etc. All of these projects require deep interventions to counter the logic of profit-maximization, and while *on paper* they could be achieved by well-meaning social democrats in a capitalist society, in reality we all know that the limits under capitalism are too narrow. That’s what the piece is trying to address.

7

Dave 12.27.12 at 10:05 pm

I guess my problem with Corey Robin’s writing is that it’s all self-evidently academic language games, staged for some imaginary board of editors. Was Thomas Jefferson an American fascist? Was the ratification of the 13th amendment just some pointless formality? Have we failed to comprehend that we live in a failed Hobbesian state, to our peril? Exciting thoughts here, read all about it!

I get that one wants there to be something at stake in a given argument, but a lot of this is overblown. I dunno, mate. I’d say get a grip.

8

Anderson 12.27.12 at 10:18 pm

The name of the publication is sufficient to deter my interest, I’m afraid.

9

david 12.27.12 at 10:18 pm

Seth, there is no universe where any form of market socialism can evade Mason’s fears. He doesn’t oppose “profit-driven mis-valuation”, he opposes “Taylorization, deskilling, and casualization” and he supports “non-market coordination”.

The first means that no separation of principal/residual-claimant and agent can possibly satisfy, since the principal must monitor the agent somehow and that entails obliging the agent toward verifiable actions.

The second means that the non-market-coordinating entity must exercise all the rights of ownership over its capital, including the right not to be outbid for it in the socialized capital market. If it could, then its actions would be constrained by market forces. The fact that the receipts of the rent go toward The People instead of The Capitalists doesn’t plausibly alleviate the constraint, I’m afraid. In effect, there must be some private ownership of the means of production in Mason’s utopia, albeit possibly by entities that are internally communally managed.

So your visions, and his, are fundamentally opposed.

10

david 12.27.12 at 10:22 pm

To wit: you celebrate the separation of ownership and control. He condemns it. There is no unifying these aims, sadly.

11

JW Mason 12.27.12 at 11:22 pm

David’s got it.

12

Thomas Mayne Reid 12.27.12 at 11:45 pm

I have literally zero income. Therefore, I don’t subscribe to Jacobin. I read all of the online content, though.

I think that, in this era, to be truly, seriously revolutionary — as in, serious about actual revolution (serious as Orwell in Spain) — you can’t be restricting access to content. If Jacobin’s content was really that important, there is no way it would sit behind a paywall to go unread by people like me. Revolutionary spirit does not correlate well with discretionary income.

For this reason I don’t take Jacobin completely seriously, but I read what I can just the same.

13

david 12.27.12 at 11:57 pm

Do I? Great.

I’ll take the opportunity to point out that I regard your vision as populist reactionism, jealously guarding the privileges of traditional institutions from outsiders… destroying family dependency and undermining the value of artisanal skills is a social good, for we are not born with equal families nor equal ability or opportunity to acquire these skills.

14

JW Mason 12.28.12 at 12:29 am

Oh, I know, yours was a hostile summary and in a different context I would have picked at it. But I think you described the main lines of division well so I’m not going to quibble.

I’d prefer to look at it this way. I think the teacher in the classroom should be free and autonomous, we should trust to their intrinsic desire to help students learn. That’s what the teachers in Chicago were fighting for. Whereas you, presumably, think there’s no problem in principle with treating teaching as just another instance of maximizing the quantifiable outputs of a production process relative to its quantifiable inputs, and regarding the human beings involved as no different from the electricity bill, just a cost to be minimized. It’s an unfortunate ativism, in your view, that elementary school students aren’t produced according to the same principles as potato chips, an ativism that socialism as much as capitalism will have to overcome.

I think that Seth Ackerman, the human being, agrees with me; but I think that “Seth Ackerman,” the author of that Jacobin piece, agrees with you.

15

JW Mason 12.28.12 at 12:33 am

So yes, the ownership of the “human capital” employed in teaching should not be separated from the control of the teaching process. I’m ready to go to the barricades for that principle. Who is with me?

16

david 12.28.12 at 1:05 am

Really? How approving are you of religious mission schools? Do you oppose obligatory sex ed? What about publisher-author collusion over textbook choices, a phenomenon well-exhibited in higher ed?

Or does the autonomy only apply when it is employed in pursuit of goals that you approve of?

17

Joshua Holmes 12.28.12 at 1:07 am

I don’t see any reason a Bank of the People would continue to value profits. Capital invests in firms so that the capitalists will make money that they themselves get to use as they wish. A Bank of the People will not have an income stream that the BotP’s owners get to enjoy personally. It would be less like profit and more like a government budget. That ends the profit motive, which ends the “rational” allocation of resources. And then you get Hungary all over again.

18

Russell Arben Fox 12.28.12 at 1:14 am

Peter Frase’s essay, “Modify Your Dissent,” makes a fair number of claims which I’m dubious of, but it included at least one observation which struck me as brilliantly provocative:

The Theory-inflected quality of Occupy’s rhetoric was inevitable, however, given the wasteland from which it emerged. Most young people didn’t grow up reading the Baffler, nor did they have contact with whatever remains of the organized left. Aside from a few isolated corners of the Internet, the only place they are likely to have encountered ideas to the left of liberalism is the classroom, where New Left exiles continued to teach radical thought through the lean years. Post-structuralism and related bodies of theory are therefore bound to make up much of the vocabulary for young activists attempting to develop their political analysis beyond gut-level rage.

As, I suppose, another one of those white guys whose leftism is grounded in what I understand to be economic populism and local organizing and action, and hence has usually viewed cultural identity as primarily something which exists to enlist and empower communities, I’ve never been particularly friendly to the theoretical play of multiculturalism, and haven’t had a lot of respect for demonstrators who make make that their rallying cry. But Frase’s point here is a sound one: for most of those members of the educated classes inclined to the left for the past 20 years, what other models have been available to them besides Henry Giroux and Jodi Dean? For a lot of them, not any. So this passage makes me feel and need to rethink my attitude, a little bit.

19

JW Mason 12.28.12 at 1:59 am

does the autonomy only apply when it is employed in pursuit of goals that you approve of?

If people inherently prefer ignorance to knowledge, or slavery to freedom, then no institutions will help us.

20

david 12.28.12 at 2:02 am

Are the people allowed, in their knowledge-and-freedom-preferring-wisdom, to appoint governments to consider and act on their behalf?

21

Tim Worstall 12.28.12 at 7:49 am

I (for whatever value this opinion has, not much I’m afraid) thought the market socialism one was very good until the section on what is to be done. This for example:

“Thus, free entry and multiple autonomous sources of capital mean that anyone with novel production ideas can seek resources to implement their ideas and don’t face a single veto point within a planning apparatus. As a result, they stand a much greater chance of obtaining the resources to test out their ideas. This probably leads to more of the waste inherent in failed experiments — but also far greater scope for improved products and processes, and a constantly higher rate of technological improvement and productivity growth.”

That’s pretty much Baumol on technological advance in planned or market economies. Either can invent things, but innovation (here used to mean inventions actually being used) is something far more common in a market economy. Thus, as Solow pointed out, the huge rise in tfp in market economies in the 20th century and as Krugman pointed out, the quite possibly zero increase in tfp in the Soviet ones.

That also explains the efficiency numbers for Soviet and GDR organisations. Sure, places doing roughly the same thing with roughly the same technology will be roughly as efficient as each other under either or any system. We see this today as well: a factory in China using roughly the same tech as one in the US is roughly as efficient. The difference across the economy is, well, how much of the economy is using that roughly equivalent tech? What’s the average productivity, not what is the specific productivity of small parts of said economies?

From personal experience of Russia immediately post Soviet. There were indeed factories that were as advanced, as efficient, as anything further westward. As there were those that were decidedly not. Some even significantly more productive (a titanium maker, a beryllium maker, come to mind). What was very difficult indeed though was changing any of them. In any direction: those who tried to get excellent military factories to lower quality to meet the lower commercial market requirements found that just as difficult as people trying to get abysmal consumer factories to raise standards to the new commercial ones.

Another way to put it, it’s not what is the static efficiency, it’s how quickly or not does that efficiency increase?

Of course the real reason it appeals to me is that it appeals to my prejudices. In this capitalism/markets system that we’ve got if you forced me to choose I’d say we must have the markets and the capitalism can go hang if you’ve a better idea. Can’t say that I think that the described system would be better. Sounds like it would decay into the bureaucratic allocation of capital and as above, you’ve got Hungary all over again.

22

Freddie 12.28.12 at 1:33 pm

I love Jacobin. I’m not a subscriber yet but I’m hoping that can change early in the new year. Ackerman’s piece is very thought-provoking, as I think this comment thread shows. I also have deep, deep reservations about what he’s describing, but I need to think those through. Regardless it’s nice to see those ideas given a fair hearing. I also was glad to see Peter Frase take down Thomas Frank’s ludicrously condescending attack on Occupy, although I think I like the current Baffler more than Frase does.

I guess my problem with Corey Robin’s writing is that it’s all self-evidently academic language games, staged for some imaginary board of editors. Was Thomas Jefferson an American fascist? Was the ratification of the 13th amendment just some pointless formality? Have we failed to comprehend that we live in a failed Hobbesian state, to our peril? Exciting thoughts here, read all about it!

I guess my problem with this comment is that it has no content.

23

Tim Wilkinson 12.28.12 at 5:16 pm

The Ackerman piece looks very much like I, Pencil all over again.

…the problem of economic calculation. In a market economy, prices perform this function. And the reason prices can work is that they convey systematic information concerning how much of one thing people are willing to give up to get another thing, under a given set of circumstances.

But they don’t generally do that, do they.

They certainly don’t literally tell us “how much of one thing people are willing to give up to get another thing” – this looks very much like barter-mythology. That’s perhaps a somewhat pedantic point, and I don’t know what specific comclusions one should draw from it. Nonetheless, I think it’s worth drawing attention to the loose and impressionistic nature of Invisible Hand rhetoric which, I’d suggest, reflects similar faults in the underlying theory.

Prices – and the accompanying choice of technique and output level – are mostly set by specialist employees working within large bureaucracies called corporations. The price having been set, partial information about the relevant consumer ‘preferences’ is then provided by the actual behaviour of consumers. Plenty of other information is also used as input to production decisions – the process of gathering this is often called ‘market research’, though it is not actually about markets. It is, though, much more useful than the information based on consumer behaviour in response to price-setting inasmuch as it provides information before relevant production and pricing decisions are actually made and implemented, unlike the trial-and-error method of ‘the market’.

The basic ideas underlying the idea of ‘the price mechanism’ as it applies to consumers are roughly: (a) there needs to be some kind of rationing, given limited resources, and (b) people should have some choice between different goods.

I suppose this means there must be some calculation of relative values, and some way of keeping account of or otherwise regulating individual’s consumption levels – but it’s far from clear that this must involve markets as we know them. One may stipulate that any system with these features is a ‘market’ system, but if so, this definition needs to be made explicit – after all, ‘market’ proponents wouldn’t want to commit any fallacies of equivocation, would they. Would they?

And actually, ‘markets’ (even supposing a sufficiently left-libertarian setup that would prevent disproportionate weight being given to the preferences of the lucky, rapacious etc. on the basis of their wealth) don’t necessarily do a very good job of distributing scarce resources. It’s trite n-c economics that in the absence of perfect price discrimination (which is unfeasible and probably impossible in a pretty strong sense), consumer surplus is possible (and, on minimally realistic assumptions, widespread).

On the supply side, it’s equally trite that in the absence of perfect competition, firms have some leeway in price-setting, and will attempt to derive maximal profit (or ‘supernormal’ profit: what ultimately – non-circularly – determines the ‘normal’ profit rate remains obscure to me). So it’s very unclear that prices alone can tell us anything much about the underlying productive processes. Given the existence of predatory pricing, for example, one can’t even presume in any given case that AC<=AR.

The rhetoric of price-prestidigitation relies on massive exaggeration of the modest point that capitalistic firms cannot, without outside support from non-market sources such as government bailouts, continue indefinitely in business if the numeraire-value of their revenue/input is below that of their costs/output. The economic-Darwinist mechanism – with its attendant waste and destruction – is a very crude way of optimising production, and as apt to produce the economic equivalent of parasitic wasps as anything else.

As for the claim that the profit motive is indispensable, that too is over-specific – the general points it supposedly instantiates are roughly: 1. incentives should exist such that outcomes for those making production decisions should tend to reflect how good those decisions are, and 2. there should be some incentive for people to invent things and communicate their inventions to those making production decisions.

(1.) is really just a question of getting competent and well-motivated people into the relevant posts – and "having got hold of a lot of capital by some means or other" is not a particularly good proxy measure for those qualities.

(2) is likewise not obviously best served by the current situation in which inventors (where they're not employees in R&D posts, and thus, again, selectable by ordinary recruitment processes) are presumably supposed to be motivated by a small chance of huge rewards, and are generally expected to bear the burdens of performing such un-nerdish tasks as touting their ideas around the venture capitalist circuit.

24

Tim Wilkinson 12.28.12 at 5:59 pm

Should have specified that the above criticism was directed at the second section of the Ackerman piece, in which the problem of econ. calculation is set up. Some of the issues I mention are of course addressed in the piece, at least indirectly by allusion to alternative theories, and there are some unobtrusive caveats. The point is that the initial statement of the issue seems, almost despite itself, to idealise the price and (to a lesser extent) profit ‘mechanisms’ in the ways described.

25

Tim Worstall 12.28.12 at 6:26 pm

“is really just a question of getting competent and well-motivated people into the relevant posts”

Well, yes, but that’s an awful lot of hand waving going on there. How do you actually do so? We have, historically, tried a number of ways to do that. None of them seemed to work all that well.

26

Harold 12.28.12 at 6:36 pm

What inspired the title?
from wikipedia:

At the outset, the Jacobin Club was not distinguished by unconventional political views. The somewhat high subscription confined its membership to well-off men, and to the last it was—so far as the central society in Paris was concerned—composed almost entirely of professional men, such as Robespierre, or well-to-do bourgeoisie, like the brewer Santerre. From the first, however, other elements were present. Besides the teenage son of the Duc d’Orléans, Louis Philippe, a future king of France, liberal aristocrats of the type of the duc d’Aiguillon, the prince de Broglie, or the vicomte de Noailles, and the bourgeoisie who formed the mass of the members, the club contained such figures as “Père” Michel Gerard, a peasant proprietor from Tuel-en-Montgermont, in Brittany, whose rough common sense was admired as the oracle of popular wisdom, and whose countryman’s waistcoat and plaited hair were later on to become the model for the Jacobin fashion. The club ostensibly supported the monarchy up until the very eve of the republic; it took no part in the petition of 17 July 1791 for the king’s dethronement, nor had it any official share even in the insurrections of 10 June and 10 August 1792. The club was radicalized by the departure of its conservative members to form their own Feuillants Club in July 1791. This club saw far less success than the Jacobins, surviving barely a year before its members were arrested and tried for treason.

27

dsquared 12.28.12 at 7:13 pm

I suppose this means there must be some calculation of relative values, and some way of keeping account of or otherwise regulating individual’s consumption levels – but it’s far from clear that this must involve markets as we know them.

Actually it is clear. Kantorovich proved it.

28

Chris Mealy 12.28.12 at 9:06 pm

Everybody’s going to debate it to death before my issue arrives in the mail. Wah.

29

Brett 12.28.12 at 9:28 pm

@Tim Wilkinson

(or ‘supernormal’ profit: what ultimately – non-circularly – determines the ‘normal’ profit rate remains obscure to me).

I don’t think it’s that complicated. “Normal profit” is just the margin above costs that firms have to get just to stay in the market, in the absence of external shocks (such as a sudden rise in the cost of inputs, a sudden drop in demand, etc). If the margin drops below that, companies start shutting down or changing their business.

@Tim Worstall

Well, yes, but that’s an awful lot of hand waving going on there. How do you actually do so? We have, historically, tried a number of ways to do that. None of them seemed to work all that well.

It’s a huge amount of handwaving. I’m not just talking about the obvious case with central planning in the Soviet Bloc, but stuff like milk price supports and the like (which has gotten into the news recently). And the latter are officials who should at least theoretically be accountable to the voting public.

30

Harold 12.28.12 at 9:35 pm

Rationale for the title? Crickets.

31

Anderson 12.28.12 at 9:41 pm

30: I was gathering it was the radicalized Jacobins they had in mind, which is why I was put off by it. Robespierre is not one of my role models.

But good catch on the ambiguity!

32

Brett 12.28.12 at 9:42 pm

Sorry, that wasn’t clear.

“Normal profit” is the amount of margin that companies have to earn above cost in order for them to stay in the market in the face of alternative uses of their time and money. If the margin drops for a long period of time below that level, then companies start shutting down or changing their business because the owners could be doing something else more satisfying with their money (which doesn’t necessarily include other businesses).

33

Walt 12.28.12 at 9:49 pm

Kantorovich proved what?

34

Harold 12.28.12 at 10:10 pm

Radicalism as a posture?

35

Bhaskar 12.28.12 at 10:34 pm

We’re actually named after the birds. Personally hobby of mine: http://en.wikipedia.org/wiki/White-necked_Jacobin

36

Bhaskar 12.28.12 at 10:36 pm

A better explanation is here: http://jacobinmag.com/2012/03/the-black-jacobin-2/

“Girondist” didn’t have quite the same ring.

37

Random Lurker 12.28.12 at 10:42 pm

@Brett 32
“Normal profit” is the amount of margin that companies have to earn above cost in order for them to stay in the market in the face of alternative uses of their time and money.

What you are describing is actually the “average” rate of profit: if I have a company that produces laptops and have a RoP of 3%, while my friend Steve has a company that produces smartphones and has a RoP of 8%, I will try to change my business to produce smartphones. Competition in the smartphone business increases while in the laptop business decreases, so that all profits tend to converge to an average rate, let’s say 5%, that then we call the “normal” rate of profit.

But, what are the macroeconomic determinants that cause the average rate of profit to be of 5% instead than 3% intead than 198%? You can’t use the definition “in the face of alternative uses of their time and money” because it is tautological (it actually just say that the normal rate of profit is the average rate of profit).

Plus, the rate of profit is calculated as profit/capital, but the imputed value for capital goods can change a lot, so that the RoP also depends inversely on the appreciation of capital stuff (although, to be honest, I think that it really is the appreciation of capital stuff that depends on the RoP and not the opposite).

38

Cranky Observer 12.28.12 at 10:47 pm

= = = Actually it is clear. Kantorovich proved it. = = =

And yet, firms exist. And every firm I have been a part of over the last 30 years that has tried a 100% priced-based allocation method for internal services (e.g. the “information economics” method of allocating IS resources that was popular in the early 1990s; the requirement that internal machine maintenance departments bid against outside contractors for all maintenance services) have ended up in a bad way – often collapsing.

Cranky

39

Harold 12.28.12 at 10:50 pm

Both the bird and the logo are very beautiful and I thank you for this explanation, such as it is. I think it would be nice if your website could add a few sentences about this.

I do have some slight reservations, though, about the focus, in the content of the magazine, on identifying Abraham Lincoln, Thomas Frank, and Billy Bragg as prime enemies of human equality and freedom.

40

rf 12.29.12 at 2:01 am

re Robins article, two quick questions.

Isn’t it unrealistic to want greater state involvement in the economy but less in society/national security (with one comes the other)

Also, a lot of the history is very selective, but this:

“Because government officials are themselves connected with particular constituencies in society — often the most powerful — they will seldom suppress challenges to security that come from the powerful”

Seems to be conflating two things; government officials beholden to particular constituencies and ‘the powerful’ -if by the powerful you mean the endless American obsession/chimera of the plutocracy etc.

Surely ‘ideology’ is more important than domestic interest groups (It’s difficult to blame the Civil War, Cold War, War on terror (even war on drugs) etc primarily on domestic constituencies – at least initially?) In this story the white Christian working/middle class (ordinary) American stands in for the caricatured ‘powerful’ plutocrat .. unless I’m reading you wrong?

41

Bruce Wilder 12.29.12 at 2:44 am

The concept Brett is searching for is NOT “normal profit” (heaven forfend!), but economic rent. That this seems a mystery is pretty much all one needs to know about the pathos of Jacobin v. Neoliberalism. (Does no one know how to play this game?)

42

Bruce Wilder 12.29.12 at 2:47 am

rf thinks it is hard to blame the Civil War on domestic interests!

What part of “Civil War confuses him?

43

Bruce Wilder 12.29.12 at 3:02 am

Cranky Observer, as usual, cuts to the central issue: fundamental, complementary diversity. Society is not a team, it is an ecology.

“Market economy” is a lie. Whales need pilot fish. “Private” greed needs the disinterested selflessness of a public-spirited judge. Markets require a public good infrastructure. Every playwright needs a critic.

A thorough-going “privatization” ends in grief. Shocking, I know. Also, vice versa.

Now, could we move on from 1790 or 1848 to 2012. Civilization and the ecology is collapsing. Arctic sea ice simply does not care. Kill banksters, if you like. (Works for me.) But, get your excuses right with the century you are in

44

gmoke 12.29.12 at 5:24 am

Read through the Baffler and Disaster articles. Seems to me like mostly armchair theory and little experience down on the ground, writers straining mightily to squeeze events into ideological straitjackets.

45

david 12.29.12 at 7:04 am

Of course firms that are observed to exist cannot generally perform allocation-by-price-system. The ones which can allocate by price system, split until they cease to allocate by price system. It’s just the transaction cost theory of the firm all over again.

46

rf 12.29.12 at 7:50 am

Bruce
Maybe I got a little carried away and was unartful. Serves me right for posting after cocktail hour. Point was itd be more helpful to define who the ‘powerful’ are in each context, especially as in national security issues it’s the lefts baby, the state, overreaching. Anyway I’m a little hung-over so let me get back to you (Betcha cant wait?!)

47

PGD 12.29.12 at 8:15 am

“is really just a question of getting competent and well-motivated people into the relevant posts”

Well, yes, but that’s an awful lot of hand waving going on there. How do you actually do so?

The hand waving only begins with the issue of how you find the ‘competent and well-motivated’ managers. The much larger problem is how even competent and well-meaning managers in large organizations get effective measurements of the outcomes of their decisions. This is no small issue, and it is quite common in e.g. the non-profit or government world for good and well-intentioned managers to be unable to get realistic feedback on the real-world impacts of their resource allocation choices. This problem exists for mid-level managers in large profit-motivated organizations as well, but at least there is some eventual reality check in the form of customer choices in a marketplace that offers multiple options. This problem is not insoluble in a pure administrative setting, and the marketplace hardly addresses it automatically (profit signals obviously have a ton of problems, starting with externalities), but it’s still a huge issue that Tim does not grapple with in what is otherwise a very good comment @23.

48

Tim Worstall 12.29.12 at 8:55 am

“And yet, firms exist. And every firm I have been a part of over the last 30 years that has tried a 100% priced-based allocation method for internal services (e.g. the “information economics” method of allocating IS resources that was popular in the early 1990s; the requirement that internal machine maintenance departments bid against outside contractors for all maintenance services) have ended up in a bad way – often collapsing. “

Entirely true. And yet every economy that has tried to plan in that same sense as companies plan internally has failed (for any useful meaning of the word “fail”).

Which might lead to the observation that planning can indeed work but only at a certain scale. As with, say, Ostrom’s work on the communal management of a commons. It can work just fine but only up to a certain number of participants (a couple of thousand in Ostrom’s work).

With companies there are few that succeed long term over some 300k, 400k people. Diseconomies of scale could (and I only suggest this, not insist that it is true) be evidence of the limits to planning itself as opposed to a market method of organisation.

49

Peter T 12.29.12 at 9:28 am

Yeah. But organisation is a social technology. Back in 1800 the only people who could effectively run anything much over a few hundred people were government organisations (mostly military, but also revenue). Then private organisations copied them. Then governments found out how to run larger groups, and there was more back and forth. I don’t know that raising the threshold where diseconomies of scale set in would be a good thing, but there’s nothing to say the present limit is set in stone.

50

Cranky Observer 12.29.12 at 2:30 pm

= = = Entirely true. And yet every economy that has tried to plan in that same sense as companies plan internally has failed (for any useful meaning of the word “fail”).

Which might lead to the observation that planning can indeed work but only at a certain scale. = = =

Noting however that back when General Electric was a research and manufacturing organization it had income larger than many nations’ GNP. A&T, Siemens, GM too. That’s not a small scale. Not disagreeing with you, but not agreeing either at this point.

Cranky

51

Tim Worstall 12.29.12 at 3:18 pm

“Noting however that back when General Electric was a research and manufacturing organization it had income larger than many nations’ GNP.”

Yeah, but GNP does not equate to a corporation’s turnover. More like profits plus wages paid relates to GDP (or GNP).

At which point, yes, Exxon’s a huge company. But measured my way it’s around and about the economic size of Luxembourg. Which sounds about right, as both places have roughly 200k rich world workers adding value. And GDP and profits + wages paid are reasonable measures of value added. And rich world people are rich world people because they have high value added.

52

Antoni Jaume 12.29.12 at 4:03 pm

“And rich world people are rich world people because they have high value added.”

also known as robbed the world at gun point or via corruption. Yes a lot of high value added.

53

Cranky Observer 12.29.12 at 6:57 pm

= = = Tim Worstall 12.29.12 at 3:18 pm

“Noting however that back when General Electric was a research and manufacturing organization it had income larger than many nations’ GNP.”

Yeah, but GNP does not equate to a corporation’s turnover. More like profits plus wages paid relates to GDP (or GNP). = = =

I’m no Paul Krugman and therefore not qualified to argue over the deep concepts of national income accounts, but just going on the simplistic definition of GNP provided by Wikipedia your assertion doesn’t seem correct; GNP of an independent nation maps fairly closely to gross revenue of a firm. Not EBIDTA or net profit, since the same things that have to be netted out of firm’s revenue to arrive at profit will also have to be netted out of a nation’s accounts to arrive at actual benefit to citizens. There would be the tricky bit of isolating XOM’s operations from the national accounts of Nigeria, say, but that’s just work that can be assigned to a first-year master’s student.

Cranky

54

Tim Worstall 12.29.12 at 8:20 pm

I’m no Krugman either but this is absolutely wrong:

“GNP of an independent nation maps fairly closely to gross revenue of a firm.”

No, absolutely not.

GNP is one of the various measures of value added in an economy. In order to compare we want some idea of value added in a corporation.

If GNP were equivalent to gross revenue (instead of net) then we’d have a serious problem. For Norway’s GDP is around $5oo billion a year. And Statoil’s turnover is $120 billion a year. And no, the oil company really is not 25% of the Norwegian economy.

55

Walt 12.29.12 at 9:06 pm

There are no accruals in the national accounts, so GDP is more like a cash-flow measure. But it’s closer to profits plus wages than it is to gross revenue. Expenses paid to other firms are like imports, which count as negative in the GDP calculation.

56

Cranky Observer 12.29.12 at 9:08 pm

Can’t really agree with your police work there Tim. Per their web site Stasoil operates in at least 37 countries worldwide:

http://www.statoil.com/en/about/worldwide/northamerica/pages/default.aspx

so clearly their gross revenue would not all be accounted against one nation. My original point was about absolute size comparison (the GE of 1970 vs. national economies), not size of a firm within a single nation. And I’ve already noted the issue of how to count (and not double-count) the operation of a firm within a nation would be tedious to unwind.

Not saying I’m right; I could be wrong. Disagreeing however with the certainty level of your response.

Cranky

57

Louis F 12.29.12 at 11:58 pm

I commend Seth Ackman, almost regardless of the substantive subject matter, for addressing so pointedly such an unappreciated but paramount topic; reconciling efficacious pricing signals (which, contrary to much under-theorised leftist economics are certainly necessary to any reasonable scheme of social and economic cooperation) with humane social relations. Namely absolving markets of hitherto mis-valuation of social opportunity costs (i.e. omitting externalities), economics interests undermining basic political rights, pervasive commodification, inhumane labour conditions, etc., while preserving the communication of fluxing social preferences via pricing signals.

This attaches to an under-publicised libertarian/liberal socialist debate among pareconista’s (i.e. subscribers to participatory economics) and other – usually quite entrenched – socialist positions; of particular interest here being Michael Albert’s debates with market socialist David Shweickhart – who, incidentally, was recently published in Martin O’Neill and Thad Williamson’s compendium on Property Owning Democracy (i.e. the left-Rawlsian socio-economic regime which Rawls endorsed, albeit with marked under-substantiation).

I think there is a tremendous debate to be had between the liberal egalitarian left-Rawlsian community and liberal/libertarian socialist community here, and the establishment of some overlapping consensus of a radical liberal socialist Rawls-inflected alternative. Jacobin is potentially a great vessel for such.

58

Fu Ko 12.30.12 at 6:46 am

In terms of planning, these dollar measurements strike me as very wrong-headed. We want an estimate of the complexity of the organization, not its cash value. An oil company might be quite simple, yet quite profitable, since it owns some quite simple, yet quite valuable, mineral rights.

A better measure is number of employees, but I think that might be deceptive as well: if the system is highly parallel, so that the same employees fulfill the same roles in different locations, then the complexity is low (e.g., think of retail chains: each new chain store is identical to all the others. Thus, a new store does not represent an increase in information, or complexity — at least not in proportion to the number of employees in the store).

The first “good” measure I can think of is number of independent departments. Defining “department” might not be easy, though. My second “good” measure is number of “edges” connecting nodes in the graph of all intra-organization communications. That is, define the corporate structure, not by power, but by who communicates with whom; the number of distinct communication pathways describes the complexity of the organization.

I’m way outside of my expertise here, and probably my speculations are worthless — but still better than talking about GNP, I think. I only give these specific measures to point in a general direction.

Complexity is a whole branch of mathematics, with which I am not at all familiar. Perhaps this work has been done already?…

http://en.wikipedia.org/wiki/Social_complexity

…so it has. I’ll have to look over some of those leads later.

59

Fu Ko 12.30.12 at 6:52 am

Also, I would really like to hear Bruce Wilder expound on “the pathos of Jacobin v. Neoliberalism.”

60

Tim Worstall 12.30.12 at 10:34 am

“Not saying I’m right; I could be wrong. Disagreeing however with the certainty level of your response.”

OK, another example. The turnover of the foreign exchange markets is of the order of $3 or $4 trillion a day globally. Global GDP/GNP is of the order of $60, $70 trillion annually.

With 250 trading days per year that gives us FX turnover of $1,000 trillion a year say. We obviously and clearly cannot be counting turnover as part of GDP.

What we do count is value added (leave aside all those question of whether such FX flows do indeed add value etc) as part of GDP. Essentially, the incomes of those FX traders and clerks and the people who sold them their computers etc plus the profits made on top.

Along the same lines. FX trading in London alone is some $1.5 trillion a day. The total GDP of the UK is some £1.5 trillion (say, $2 trillion roughly) annually. The contribution of the entire City to GDP (including all of the markets, not just the FX one) is around 4% (William Buiter’s estimate) or about $60 billion.

We’re just not measuring turnover in GDP. Thus we can’t use turnover of a corporation as against the GDP of a country to tell us anything interesting. They’re just measuring entirely different things.

61

Will Boisvert 12.31.12 at 12:07 am

I mainly disliked Peter Frase’s Jacobin critique of Tom Frank’s takedown of OWS in The Baffler. I hope people read the original Frank piece, which gives Occupy a trashing that it richly deserves.

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