You Had Me at “Swedish-American Economist Ronald Coase”

by Henry on May 11, 2013

I like the Los Angeles Review of Books quite a lot. I’ve given them real, actual money. But this article by James Harkin on Marx and public choice theory is, to put it plainly, shit. Below the fold, a lengthy and repetitive diatribe, which I’m posting less because I think it will be especially entertaining to readers, than to do my little bit to discourage others from writing similar articles in the future. Also, perhaps it might get LARB to rethink their quality filters.Taking various claims stated by the argument in turn …

(1) The claim that there is “a distinctive approach to political economy, sometimes known as game theory or public choice theory” is itself rather … distinctive. Public choice theory is not the same thing as game theory. Not only is the preponderance of classic public choice theory decidedly non-game theoretic, but many public choice theorists are actively suspicious of game theory. See e.g. Charles Rowley’s introductory essay to the standard collection of classic public choice articles, which hints strongly at the deviant tendencies of the ‘Rochester’ (i.e. game theoretic) school (which after all might suggest that market failure, as well as government failure is endemic in strategic situations). Game theory is a set of analytic tools, which, whether you like them or not, are compatible with a wide variety of political approaches. Public choice is a set of tools combined with an explicit ideology – in the words of the aforementioned Professor Rowley (a long time editor of Public Choice) it is “a program of scientific endeavor that exposed government failure coupled to a programme of moral philosophy that supported constitutional reform designed to limit government.”

(2) “Public choice political economy was born out of American military think tanks in the late 1940s, and set itself the task of dissecting the burgeoning role of government in advanced industrialized economies.” Oh dear. Game theory did get some impetus from American military think tanks (I’m travelling, but I recall William Poundstone’s book being good on this), but because it was perceived as being useful for military strategy, that being what military think tanks are in the business of caring about. Public choice theory really gets going in the 1950s, and is descended from a different line of inquiry in economics – social choice theory. This non-game theoretic approach builds on theoretical work by Kenneth Arrow (who’s incidentally as social democratic as they come) and Duncan Black.

(3) “As public choice theory has spread its influence across the entire social sciences in the last 70 years, this central idea that society is made up of no more than self-interested, strategically aware individuals gave rise to “rational choice theory” and became central to the entire Western social sciences.” This is exactly backwards. Rational choice theory gave rise to public choice theory, not vice-versa.

(4) “An example: the prisoner’s dilemma collective action problem, the most glittering weapon in public choice theory’s armory — quite simply one of the most important and most intractable logical puzzles of the last 100 years.” Prisoner’s dilemma and collective action are two distinct concepts. Mancur Olson’s seminal work on the collective action problem is entirely non-game theoretic,and makes no reference to the prisoner’s dilemma. As best as I know, the first book to systematically analyze collective action problems in terms of the prisoner’s dilemma is Russell Hardin’s 1982 Collective Action, which spurred responses from Michael Taylor and others pointing out that other logics (assurance games; chicken) could equally well underly collective action dilemmas.

(5) “The idea of the prisoner’s dilemma, which subsequently became the collective action problem or the “free rider problem,” As noted – the collective action/free rider problem was initially formulated by Olson without any reference to the prisoner’s dilemma. Prisoner’s dilemma is one useful way you might formalize the analysis of a particular kind of collective action problem, if you wanted to use game theory. That’s all.

(6) “In the last 50 years, [prisoner’s dilemma] has troubled the best mathematicians and social scientists of the modern era, and has been an ideological plaything and a weapon in the battle of political ideas. Intellectuals of every different stripe have fought over who owns the prisoner dilemma game because within it lies clues as to how to answer key social questions: how to organize society, the role of the market, the role of pressure groups, the purpose and prospects for collective mobilization, when the state should intervene to provide public goods for its citizens.” This potted intellectual history is not only terribly written (“an ideological plaything and a weapon in the battle of political ideas” …”every different stripe”) but wildly eccentric. Prisoner’s dilemma is an interesting and useful game for many purposes. It is not, nor does anyone consider it, a master-key to the great and enduring questions of the social sciences.

(7)”Brilliant economists like James Buchanan (who died in January) went on to argue that all kinds of collective action were bound to fall victim to the free rider problem; their conclusion, by and large, was that both politics and government were hardly worth the bother.” I think that the author is trying to describe some garbled version of Buchanan’s arguments about rent seeking but can’t be entirely sure. The claim that Buchanan thinks that politics and government “were hardly worth the bother” is decidedly peculiar – Buchanan’s criticism of government was most certainly not that it was barely worth any effort.

(8) “By the 1970s thinkers working within the new discipline of “law and economics” set about raiding game theory to explain the stuff of everyday life. The Chicago economist Gary Becker borrowed this calculus of material self-interest to explain the workings of marriage and the family: we marry in order to maximize our long-term utility, reckoned Becker, and according to strict laws of supply and demand.” The last time I looked, Becker’s arguments about the family were not game theoretic, nor inspired by game theory. If you really wanted to be pedantic, you could say that they implicitly invoke Von Neumann-Morgenstern utility functions, but I don’t imagine that the author of this piece would know a Von Neumann-Morgenstern utility function if it bit him on the arse.

(9) “Coase’s contribution was to argue that harmful effects could be resolved by means of a simple logical bargain between its immediate perpetrator and victim and without the intervention of the state or anyone else. If the flowers in your garden are aggravating my hay fever, for example, both of us could come together to find a solution. All that was required, he maintained, was a legal system that allocated rights to each party. After that, it was up to the bargaining parties to trade their rights depending on how much their respective activities were worth to them.” As a respected English economist (who by a bizarre coincidence is also called Ronald Coase) has noted, this interpretation (while regrettably common) completely misses the intended point of the argument about social cost. Coase ‘maintained’ and maintains no such thing.

There’s much more I could say. Some of the claims about Marx are nearly as remarkable as the author’s cockeyed understanding of public choice – e.g. the claim that Marx retired from active politics after 1848 to think great abstract thoughts about social theory will come as a surprise to his biographers. But that’s likely more than enough to give a general picture. It’s perfectly reasonable that a wide variety of people on the left don’t like public choice theory as it is currently formulated (I’m not especially fond of it myself). But if you want to criticize it, you need to understand it. The willingness of otherwise good publications to publish sloppy polemics about economic theory, as long as they have the right politics, is highly unfortunate. I’d like to think the LARB will do a better job in future.

{ 56 comments }

1

John Quiggin 05.11.13 at 11:23 pm

Lots of fun! Given the segue to discussions of how to revive Marxism, I was hoping for some discussion of the similarities between public choice theory and Marxist-Leninism, about which I’ve been banging on forever

http://crookedtimber.org/2013/01/11/buchanan-and-market-marxist-leninism-re-re-post/

2

Mark Field 05.11.13 at 11:31 pm

You might want to identify which Duncan Black you’re referring to. Kids these days, you know.

3

LFC 05.11.13 at 11:37 pm

This is a better link to the article than the one in the OP (at least per my browser):

http://lareviewofbooks.org/article.php?id=1653

4

Alex K. 05.11.13 at 11:49 pm

More wisdom from the review:

” Eschewing the classic economic models that focused on production, public choice theory’s foundational idea was the utility-maximizing consumer. “

According to the author, “public choice” and game theory were born when the marginalist revolution displaced classical production theories of value — and all this was essentially the offspring of American military think tanks in the late 1940s.

“If Marxism is to inspire millions of people once again, [...] it needs to fight for the commanding heights of intellectual life”

And what a way to start the fight!

5

Henry 05.12.13 at 12:02 am

” Eschewing the classic economic models that focused on production, public choice theory’s foundational idea was the utility-maximizing consumer. “

I somehow hadn’t spotted that. Or my brain had mercifully blocked it out. Good Christ.

6

P O'Neill 05.12.13 at 12:10 am

I may have to rewatch The Treasure of the Sierra Madre, because according to this fine article, I missed the main point.

7

Kieran Healy 05.12.13 at 12:17 am

As best I can tell from the article, I think Jim Buchanan and Ronald Coase starred in The Treasure of the Sierra Madre, which was financed from the profits made by The Communist Manifesto, a tract written by Gary Becker and funded by the U.S. Department of Defense in the 1940s.

8

Donald A. Coffin 05.12.13 at 1:24 am

I thank whatever powers there be that whoever wrote that was not teaching in my graduate program…we’d have died laughing…

9

roger nowosielski 05.12.13 at 1:32 am

Henry,

You might be interested in the following article on the “free rider problem”:

“Why Not Eat an Eclair?” — a book review by David Runciman in London Review of Books.

10

Ben 05.12.13 at 3:33 am

Ha the author’s been doing it for years.

From his website, in a Financial Times article dated 10/15/05:

The Paradox of Choice strikes at the heart of the “hard” social sciences. It aims its daggers at the foundation stone that draws together the disciplines of modern economics and political science, the idea of the “utility-maximising consumer”. This utility- maximising consumer . . . forged the beginnings of a new type of political economy – the so-called game theory, rational choice theory or public choice theory.

At least he’s separated rational choice theory from the lump in the past eight years, that’s progress of a sort.

11

Chris Mealy 05.12.13 at 3:51 am

I wonder what percentage of American economics graduates could tell you what’s wrong with this article. My econ degree certainly didn’t help. The only one of Henry’s points I would have had a clue about would have been #9, and even then I’d have probably agreed with the author.

12

Gabriel 05.12.13 at 4:07 am

Game theory is a famous example: it was founded by (mostly social democratic) public choice theorists who broke from George Mason University in Santa Monica in the 1950s, forming co-authorships of twenty to forty people with their rent-seeking models in each other’s military think tanks.

13

John Quiggin 05.12.13 at 5:26 am

Gabriel wins the thread!

14

thomas 05.12.13 at 8:17 am

“In the last 50 years, [prisoner’s dilemma] has troubled the best mathematicians”

If you look at the winners of the Fields Medal or the Abel Prize this looks dubious. The Prisoner’s Dilemma has troubled some significant thinkers, but I would have said more in computer science (broadly construed) than in mathematics.

15

Tim Worstall 05.12.13 at 10:05 am

“but this is hack work.”

Did he really have to put that in there?

16

Tim Worstall 05.12.13 at 10:23 am

This is also very odd:

“But Adam Smith forgot about something. In a state of nature without rules or government, taking your goods to market is only one of the available options. If both Bill and Bertha would be better off trading with each other, each would be even better off if they stole each other’s stuff and kept it for themselves. Given that each doesn’t know the intentions of the other, and assuming that both are rational and sensible people, it will always be in their best interest to steal from each other rather than to trade — a strategy which has the effect of leaving both worse off. Aware of the dilemma, they could sign up to a voluntary agreement not to steal from each other. The collective action problem, however, says that any such pact is bound to come unstuck, since each trader will conclude that the best thing to do is to back out of the agreement at the last minute and cheat his/her opponent. Once again, the gains from trade envisaged by Adam Smith disappear through a trapdoor of selfishness and the pursuit of strategic interest.

How can we go about solving this anomaly? The answer, it turns out, is not a complex mathematical formula cooked up by cunning social scientists but an agreement between the traders themselves. Precisely because each trader knows that it will always be in his or her trading partner’s best interest to steal, each agrees to give some of their bread and sausages to a third party, one whose job from then on will be to police the agreement not to steal. The existence of this policeman has the effect of changing the incentives of both traders who hired him. Since both no longer wish to be punished for falling foul of the law, each now comes around to the view that it would be better off to trade rather than steal. Thus — abracadabra — do we arrive at a simple logical explanation for the development of a modern state whose job it was, at least initially, to watch over and protect the gains from trade.”

As with those software/strategy competitions about how to “win” in the prisoners’ dilemma. The correct answers are different for one time playing and multiple iterations. And human interactions like bread and sausages are multiple iteration games. And the ultimatum game shows how much we’ll all quite naturally, without the state, attempt to police such interactions.

Might well be better that the state regulates, but it’s not actually essential in the sense that Harkin is proposing.

There’s a much stronger case for state intervention in single iteration games: like, say, buying a pension or a mortgage, something we do once or a couple of times in a lifetime. It may well be that only such regulation can remove that temptation to cheat. But trading hot dog buns for hot dog rolls as the necessary foundation of the State?

17

Chris Bertram 05.12.13 at 11:18 am

I’m guessing that the source of Harkin’s garbled splurge is Mirowski’s Machine Dreams, though it reads a bit like an undergraduate exam answer where the author is trying to regurgitate a source, but can’t actually remember what it is.

18

Noni Mausa 05.12.13 at 12:12 pm

“… harmful effects could be resolved by means of a simple logical bargain between its immediate perpetrator and victim and without the intervention of the state or anyone else…”

Has anyone ever truly believed this? I mean, beyond the first year of college. Lots of theories of the world can be devised and held to so long as those “unnecessary” protections are in place and the student in question has not yet gotten out much. The use of the word “victim” is interesting, since it seems to undercut the whole idea that the victim and perp can sit down and work out a solution like sensible grown-ups.

In truth, these sorts of negotiations are a very rare exception, the sort of thing so rare it only shows up in Reader’s Digest and Chicken Soup books as heartwarming fairy tales. Hell, even in very well policed societies, the pressure is always there for the perp to get his way as sneakily or baldly daring a way as possible. Examples are published formally every day, in distinguished journals called “newspapers.”

Sheesh.

19

Ronan(rf) 05.12.13 at 1:09 pm

Is Mirowski’s book any good?

20

Chris Bertram 05.12.13 at 3:07 pm

ronan: I bought it following a warmish endorsement from dsquared, but I didn’t manage to extract a great deal of value myself. It is quite fun to read in places, but not all that reliable was my impression.

21

Aaron Bady 05.12.13 at 3:08 pm

I am much too lazy to even try to understand what the hell this whole argument is about, but I would like to add a solid LOL to the closing paragraph of the LARB piece: “If Marxism is to inspire millions of people once again, rather than the flaccid hand-wiggling of the Occupy movement or the academics who spend their time picking over the corpse of what Marx actually wrote, it needs to fight for the commanding heights of intellectual life”

WE MUST READ BOOKS WHICH ARE PENETRATING AND TUMESCENT IF MARXISM IS EVER TO THRUST BACK INTO THE THROBBING HEART OF PUBLIC DISCOURSE

22

Kieran Healy 05.12.13 at 3:12 pm

Ronan—here’s my initial reaction from (!?!) 2002.

23

Hazel Meade 05.12.13 at 3:38 pm

It’s fair to say that public choice theory didn’t arise from game theory, and the author is certainly conflating a lot of ideas that didn’t originate together, but I think you are unfairly throwing up intellectual walls between various fields that don’t really exist. Is it really fair to say that game theory didn’t influence public choice theory or vice versa? It’s not like these people aren’t reading eachothers work. We’ve got 70 years of intellectual history and intermingling of these ideas, and I for one can certainly see how game theory can inform public choice theory. If you aren’t concerned with the origins of ideas, there’s nothing particularly wrong with borrowing from various strands of thought letting them mix, and come up with a unified theory. Maybe game theory and public choice theory are headed towards merging into a cohesive whole.

This is like complaining loudly that “natural selection” and the “theory of genes” are two comepletely separate things that have different intellectual origins, and therefore it’s somehow invalid and perverse to blend them together into a unified set of concepts.

Or are you worried that public choice theory is somehow intellectually contaminated and that if it touches game theory the disease will spread?

24

Jerry Vinokurov 05.12.13 at 3:54 pm

But game theory and public choice theory don’t just have different origins, they’re different frameworks altogether. Obviously you can borrow between them, various scientific fields do this all the time, but that doesn’t imply any sort of dependence between the two. Game-theoretic approaches are mostly orthogonal to public choice theory, and just because PC can use game theory doesn’t mean that it is game theory. It’s a whole other beast.

25

Henry 05.12.13 at 3:57 pm

Have you read the piece? It isn’t a hopeful prognostication that perhaps game theory and public choice theory can better inform each other. It’s a set of claims about the intellectual history of the two and relationship between them, which betrays some very deep confusions, which I would imagine are even more annoying to actual public choicers than to people like me. If you really want to throw in an evolutionary example, then pray imagine how you would respond if someone started an article about evolution by telling us about the “distinctive species of mammals, or, as they are sometimes known, cats” and then, with an air of apparent authority began expounding on how all mammals descend from mountain lions that were selectively bred in US military think-tanks in the 1940s, in a program masterminded by renowned Swedish-American geneticist Charles Darwin.

26

Henry 05.12.13 at 3:58 pm

#25 responds to #23 not #24 …

27

Jerry Vinokurov 05.12.13 at 4:03 pm

If you really want to throw in an evolutionary example, then pray imagine how you would respond if someone started an article about evolution by telling us about the “distinctive species of mammals, or, as they are sometimes known, cats” and then, with an air of apparent authority began expounding on how all mammals descend from mountain lions that were selectively bred in US military think-tanks in the 1940s, in a program masterminded by renowned Swedish-American geneticist Charles Darwin.

I would personally respond by asking whether this was the plot of a Harry Turtledove novel.

28

Walt 05.12.13 at 5:23 pm

If there was a Kickstarter project for a movie with that premise, I would donate.

29

Kindred Winecoff 05.12.13 at 6:12 pm

The article now refers to Coase as British-American, but no correction notice has been posted.

Marx was a much better public choice thinker than game theorist, as it’s turned out. That thread is worth pulling on (esp in context of the recent Aeon articles by Farrell and Quiggin) but my lord this article isn’t helping. The conclusion has it backwards: the left’s problem isn’t poor economic theory, it’s poor political theory.

@11 Mine was nothing but new Keynesian and RBC models, completely divorced from historical context. Or any context, really. When I was considering grad school programs I asked my undergrad advisor where I could go to study political economy. He said “We don’t do that anymore”. So I switched to political science. Unfortunately there’s not as much there as I’d like either.

30

Ecurb 05.12.13 at 6:32 pm

Chris Mealy, my half-remembered econ undergrad got me all but the ‘history of ideas’ thing in #2.
The Gary Becker one was particularly blatant, because game theory explanations of how family members bargain were developed as a direct response to his altruistic decision maker model.

This is intro-level stuff even sociology and philosophy majors are taught as part of their econ requirement, even if they only take the “economics of social justice” course departments offers to foist them off on whichever prof draws the short straw…

31

Tom Lutz 05.12.13 at 7:04 pm

Hello, Henry, and thanks for your support and for your correctives. We are, despite the contributions you and others have made, still a largely volunteer group (I am a volunteer, too) publishing more reviews, essays, and interviews than the NYT and the NYRB put together. We do it as a public service. With more financial support we could hire professional fact-checkers; now we rely on our contributors and our volunteers (none of them with economics degrees). We also rely on the fact that we publish pieces from many different disciplines and subdisciplines and perspectives, and allow people to have their say — and this is why I am adding this comment:

As an academic myself, I know how riled up people can get about theoretical boundaries, and without forgiving any actual errors of fact on the part of our contributor, I wanted to note a few things — the first is that Harkin does not pretend to be an academic economist or political theorist — he is a journalist, and he is obviously writing for nonacademics, giving them some notion of what is going on in various kinds of academic thought. This is not something that, as you suggest, we should stop doing, I don’t think, but something we should do ever more of. The general literacy on these topics is obviously quite low, and as Chris Mealy notes above, his economics degree did not help him see any problems with the essay except the misreading of Coase, which you, yourself, say is a “regrettably common” misreading. I invite you, Henry, and any of the readers of this blog who have a better piece, for a general audience, on this or any other topic, to let me know — tom@lareviewofbooks.org. I would love to post them. Thanks for reading and for your comments, Tom

32

James Foster 05.12.13 at 8:16 pm

I much enjoyed this discussion in no small part because I was — being now an old man — a party to many of the “intellectual” developments and debates considered in this article. My concern, however, is that this article is of a type now becoming very common. Example is this growing tsunami about the dominance of neoliberalism and how Milton Friedman took over the world.
Couple of points. I was at RAND in the period considered. Don’t remember VonNeumann being there. There was a project on developing game theory. The principle was one Tom Schelling. He produced a truly great book entitled Strategy of Conflict but the government (and, therefore, RAND) refused to publish it or be associated with it. It simply did not generate arguments desired. And I would not put Tom on the right-wing of politics.
Strange to me that the search for the ecomist-devils who brought us here does not seem to have given any attention to several of the most important economists on the past 60 years. One is obvioulsy Samuelsonwho seems to be teflon even for the most aggressive Marxists. Another is Lucas — who deserves more than little criticism but I don’t think the critics can begin to understand him. Ken Arrow is another. Yet, I would ague that these three are the most significant theorists — tight or wrong — of the period.
If you all could help me decipher this ever more popular work by Harvey on neoloberalism I would be so appreciative.

Jim

33

Sebastian H 05.12.13 at 8:47 pm

This is a side note–I realize that many liberals aren’t fond of the ideological underpinnings of public choice theory, but the concepts of regulatory capture or of government negative sum actions perpetuated by concentrated benefits with diffuse costs (see especially farm policy) seem very useful. When people raise public choice, I immediately think of those things. Is that wrong? Do you use those concepts under other names? Or maybe they are concepts which are used despite their public choice heritage?

34

James Foster 05.12.13 at 9:06 pm

Sebastian

Your comment seems to me to again get to the point of “whose idea belongs to what school?” The notion of regulatory capture was not Buchanan but an even older idea of Stigler I believe. The notion of “concentrated benefits and diffuse costs” is again NOT Buchanan but Mancur Olson.

The good guys versus bad guys assessment of economists seems to me so limiting.

35

roger nowosielski 05.12.13 at 9:43 pm

@31, Tom Lutz

Kudos to LARB for their response and commitment to continue to present usually inaccessible topics for public consumption. Considering what passes nowadays for intelligent and challenging discussion in MSM, we should have more of it, not less. Academicians, such as Harry, should be more understanding of the underlying intent, even if the article he’d chosen to critique is marred with minor, and I repeat, minor factual inaccuracies.

As regards Mr. Harkin’s treatment of Marx, I also find it interesting that only a factual claim is being disputed, namely, “that Marx retired from active politics after 1848 to think great abstract thoughts about social theory.”

Again, however grossly accurate or inaccurate the claim, it’s hardly of any bearing on the substance of Mr. Harkin’s admittedly popularized version of Marx. The OP had simply thrown his hands up in the air, deeming the author of the LARB’s article as undeserving of any further comment.

“But that’s likely more than enough to give a general picture” says it all.

36

Ronan(rf) 05.12.13 at 10:47 pm

Thanks Chris & Kieran

37

Harald K 05.13.13 at 7:35 am

Crooked Timber economists: I for one would be very happy if one of you took up Tom Lutz’s offer. I am probably just as misinformed as James Harkin (though I didn’t write an article!); I mixed up public choice and social choice and was of the belief that Amartya Sen and Gordon Tullock were more or less working in the same branch of economics.

A correct history, with meaningful lines of demarcation, would be really useful.

38

derrida derider 05.13.13 at 7:39 am

No, roger, Larkin’s article was riddled with MAJOR – in fact laughable – inaccuracies that discredits whatever general thesis he is trying to present. Henry is ideologically sympathetic to Larkin and keen to see the LARB do well, and that is precisely why he is so upset about it.

But Henry, I do not see how you can now refuse the LARB editor’s request to provide an article which does it right.

39

DRN 0001 05.13.13 at 4:56 pm

The LRAB article now refers to Coase as “British-American” but, shamefully, does not note the update.

40

Alex 05.13.13 at 5:51 pm

re: Sebastian @33 and James Foster @34:

My (admittedly limited) understanding of this topic is that Stigler, Buchanan, et al. basically stuck fancy names on ideas that had been floating around in the US since the Progressive Era. Buchanan and his ilk broke with liberal public administration scholars concerned with, e.g., farm subsidies, by rejecting the idea that regulatory capture (and related problems) could ever be solved in a majority rule political system. The only solutions, in their view, were explicitly counter-majoritarian constitutional provisions and/or privatization.

41

dbk 05.13.13 at 8:42 pm

I’m with other commenters above, i.e. in light of LARB editor Tom Lutz’s gracious invitation @31, it would be very good of you to provide an extended discussion of public choice theory, its intellectual origins, its objectives, and its major characteristic features.

I am a humanist with no economics background, but took a course called “The Economics of Public Goods” about a million years ago. Skimming through the wiki page on “public choice”, I note that Buchanan’s “The Calculus of Consent” is considered a foundational text in this field – this was one of the required texts for the course I took, the other being Heilbroner’s “The Worldly Philosophers”. My humble humanistic training aside, I consider that course to have been the most significant one I took during 10 years of undergraduate and graduate study. In a very real sense, it shaped my belief system, forever – and that belief system has nothing to do with economics or politics as they are currently being practiced. What happened? I await enlightenment, Henry, from your “counter-review-cum-discussion”. Many thanks in advance.

42

Henry 05.13.13 at 10:32 pm

Tom – I hope that this did not come across as a blanket condemnation of LARB, which is in general an excellent publication that manages both to be intelligent and unstuffy at the same time. I also understand that you have to rely on the people who you can get to volunteer to read stuff. This said, I think that popular pieces which set out to explain academic debates need to reflect a reasonably solid understanding of these debates. This piece suggests that the author doesn’t have that understanding, and Bhaskar’s tweet saying that the author had railed at him and his colleagues at Jacobin as “posh boy fuckers” when they rejected it for quality suggests he’s probably not apt to learn new ways either. I would very much like at some point to write for LARB on a related topic – probably not right now though (am snowed under with other writing obligations).

43

clew 05.14.13 at 1:33 am

all mammals descend from mountain lions that were selectively bred in US military think-tanks in the 1940s, in a program

designed to combine with ARPANET to produce the ultimate social control: cat macros.

44

James Foster 05.14.13 at 1:49 am

This was a wonderful discussion and if the outcome is someone will write the history of how or current “economics” came about — I want to read it. It needs to be written. BTW Alex you are dead right.

I could not resist offering this recent comment from Dani Rodrik about the current state of “economics”:

Dani Rodrik asks what use are economists. “There is one other thing that the public should know about economists: It is cleverness, not wisdom, that advances academic economists’ careers. Professors at the top universities distinguish themselves today not by being right about the real world, but by devising imaginative theoretical twists or developing novel evidence. If these skills also render them perceptive observers of real societies and provide them with sound judgment, it is hardly by design.”

45

Kindred Winecoff 05.14.13 at 2:45 am

Since a few folks have expressed that this stuff is not at all common knowledge, I thought I’d expand a bit on Henry’s points above. My numbers refer to Henry’s.

1. Part of the mix-up here may be that the “positive political theory” research program exists as part of the public choice tradition and uses analytical approaches taken from game theory, which are sometimes (but not always) formalized mathematically. Henry mentions that the journal Public Choice was antagonistic towards game theory at points in the past but fails to mention that today Public Choice is edited by folks who employ rational choice models rooted in game theory, and has been this way for some time. (Its associate editor – Georg Vanberg – taught me game theory in grad school). It is true that the Rochester school of public choice led by William Riker was in opposition to the Virginia school of James Buchanan in terms of method, but it is an overstatement to imply (as Henry almost seems to) that just because one public choice thinker believed the Rochester school was “deviant” that it is not really public choice; it is, it always has been, and is almost certainly the more influential of the two today, Buchanan’s Nobel notwithstanding. (One interesting thing about this is that the Rochester school was based in political science while the Virginia school was based in economics. This may seem a small difference, but (I think) it was what caused some normative space between the two to open up. Both involve political failures, but one put the blame on rent-seeking market agents while the other put the blame on mass politics itself.)
2. Henry has this exactly right, but the two dove-tailed fairly quickly in the form of William Riker, who published The Theory of Political Coalitions in 1962, the same year as Buchanan and Tullock’s Calculus of Consent and around the same time as major works by Downs, Olson, and others who were at least on friendly terms with public choice even if they were not themselves defined by that label. Several of these employed game theoretic approaches developed during the 1950s, some of which were developed in places like RAND (although not at all intended for that purpose). Keep in mind that in its early days the movement that became public choice included folks like Rawls and Vincent Ostrom, so it was pretty wide open in terms of normative predisposition and analytical approach. But it would have been fair to say that game theorists such as Schelling, who were not public choice, provided an analytical toolkit that was taken up by some public choice folks before practically anyone else in the social sciences and without which a particular strand of public choice – the positive political theory part – would not have been possible in quite the same way.
3. The only point of this I’d contend is that rational choice is a theory at all. It’s not. There are theories of rational choice, some of which occur in the public choice tradition, but nothing which could be identified as “rational choice theory” per se. Nor does “rational choice” reduce to Homo Economicus. Phil Arena has written a lot about this.
4. Henry could have been much more forceful here: the Prisoner’s Dilemma is not a collective action problem at all in the sense that Olson meant it, although (as Henry notes) some collective action problems may resemble Prisoner’s Dilemmas. Other CA problems may resemble Stag Hunts or Bach vs. Stravinsky or any number of other games (as Henry also notes). Neither is the P-D a logical puzzle or intractable. But I think it’s too much to claim that collective action does not involve game theory. Not game theory that has been formalized mathematically necessarily, but much early game theory was informal (e.g. Schelling). Olson does use game theory logics – it is explicitly rational choice – but there is nothing inherently “public choice” about it. The disjunction between individual and collective incentives is a present feature in pretty much all political economy theories going back to Malthus at least. It is mostly absent from Marx, which, for the purposes of the substantive discussion at hand, is kind of a big deal.
5. Strictly speaking, there is no free riding in the Prisoner’s Dilemma as the equilibrium offers nothing off of which to free ride. There can be free riding in n-player and dynamic extensions of the Prisoner’s Dilemma, but such extensions also provide possibilities for equilibria that are not Pareto-inferior. I’m not really sure what the author is going on about here, since the Prisoner’s Dilemma is most useful for establishing the need for third-party intervention, e.g. a state. To take one easy example, Olson was not at all a libertarian.
6. The Prisoner’s Dilemma has not troubled anyone, nor does anyone “own” it. The equilibrium concept is simple and available to all. People have considered what might be a good thing to do when one finds oneself in a Prisoner’s Dilemma, but that is something else entirely. Similarly, the Prisoner’s Dilemma does not provide clues to answer any social questions at all. At best it describes some of them. Anyway, to suggest that the Prisoner’s Dilemma is part of a Vast Rightwing Conspiracy is pretty nuts.
7. Buchanan believed that certain elements of democratic politics would lead to suboptimal outcomes (esp the accumulation of debt which would lead to crisis). Therefore, he believed that politics should be effectively abolished via constitutionalization. Buchanan was fundamentally anti-democracy. He was Madisonian. This did not automatically commit him to believing that markets work any better (Olson showed that they routinely didn’t) — although he did believe that — but that democratic politics was going to muck things up. Interestingly, this took him to the opposite conclusion of Olson. Where Olson saw a tyranny of the minority, Buchanan saw a tyranny of the majority. Olson was basically a bridge between public choice and the mainstream Samuelsonian economics that Buchanan opposed. Henry’s recent Aeon article could definitely be read in light of Buchanan’s Democracy in Deficit, although I doubt he meant it that way.
8. A better example for how Chicago was influenced by public choice would have been Stigler — and the rest of the regulatory capture school — rather than Becker. Buchanan himself was trained at Chicago (both he and Stigler were supervised by Frank Knight). But the Chicago school was always much more empirical than the Virginia or Rochester schools, which were not empirical at all.
9. Yup. Coase is completely misunderstood. That’s what you get for writing academic articles sarcastically.

More generally, one very easily could imagine a “Marxist public choice”. There is nothing in public choice which, by necessity, commits one to a pro-capitalist position; there is much in it which opposes the corporate-state nexus. Indeed, I have heard a prominent public choice intellectual approvingly refer to Marx as “the first public choice thinker” to a room full of baffled libertarians, and then advocate replacing Obamacare with a single payer system on public choice grounds! Had the Occupy movement culminated into anything intellectually identifiable, it likely would’ve been something along these lines. John Quiggin has also written on this at several points, as he mentions at the top of this thread.

The point being that if the goal is to make Marxism more appealing the author could have followed his own advice: “If Marxism is to inspire millions of people once again, rather than the flaccid hand-wiggling of the Occupy movement or the academics who spend their time picking over the corpse of what Marx actually wrote, it needs to fight for the commanding heights of intellectual life — in this case, to present a radical interpretation of the best formal political economy which has come our way since Marx’s time.”

Public choice is already pretty radical… the project could simply be to separate the positive theory of public choice from its typical normative conclusion.

46

James Foster 05.14.13 at 4:19 am

Kindred

Great post. My reaction to your reminding me of the great theoretical gestations of the late 1950s through the early 1970s is that you have left out the “schools” and people who really had some influence on policy then or later.

There was the Neustadt/May/Huntington/Schelling/Allison et al crowd at Harvard. They didn’t have a theory so much as a bunch of “models.” Their basic approach was to “get a bunch of smart guys together and make history.” And, oh by the way, lets call it the Kennedy School.

Probably more important — especially for economic policy — was the Samuelson/Solow/ Tobin/Okun (and Heller) crowd from MIT and Yale. They did have a theory — kind of — but the policy practice was one of pragmatic “engineering” of fiscal policy and “tinkering with effective demand.” They were far from sure “how much of what would work,” but they were damn sure they could figure it out.

If the issue is “where did the ideas come from,” then intellectual history is fun. If the issue is who and what ideas truly impacted policy, then the focus is different. I was an insignificant fly on the wall of policy from the 1960s through the early 1980s. I never saw Riker, or Buchanan or any of the others mentioned in this thread in policy circles at that time. I surely saw all the people I have mentioned, and they mattered.

My main point is that “grand theory” or even not-so-grand theory has had little to do with the impact of academics — and of economists especially– in actual policymaking. Greenspan may have had a grand theory but his policies are extremely hard to explain in terms of a consistent set of theoretical principles.

Kissinger was the only grand theorists that operated at serious policy levels that I ever knew — and look at what he brought us.

47

engels 05.14.13 at 1:01 pm

Los Angeles Review of Books

Never heard of that before. Sounds like it might be on the same shelf in my newsagents as the Greek Accounting Review or the Italian Journal of Public Administration

48

Henry Farrell 05.14.13 at 2:22 pm

Quick reply to one thing that Kindred says above:

In re: (1), what I said was “Not only is the preponderance of classic public choice theory decidedly non-game theoretic, but many public choice theorists are actively suspicious of game theory.” Both of these are true, as best as I can see. This potted history by Buchanan is useful in showing how public choice really began as applications of social choice theory, and how the classic work in the field applies arguments from Arrow, Black etc. This said, certainly, many public choice people moved towards applied game theory over time – but I didn’t say that game theoretic applications weren’t public choice – just that (a) the classic articles of public choice are mostly non game theoretic, and (b) that a lot of public choice theorists don’t like game theory, because it potentially muddies the story. That is not, of course to say that one cannot have game theoretic models representing public choice political arguments. The positive political economy perspective that Kindred mentions in passing is one example. Exercise 1 for Chapter 1 of Ordeshook’s game theoretic A Political Theory Primer is about how “Senator Billie Bob” proposes a regulation to stifle free competition and allow duopolistic collusion. It is followed by other examples for students to work through including defense department bureaucrats burying cost-overruns, and subsidy bills introduced by “Congressman Pork.”

On the “Marxist public choice” question, I think that there is some clear potential overlap. That said, if one wants to be crude and reductionistic, both lefties and libertarians can agree that the nexus between the market and politics is a very problematic one. However, libertarians who take this perspective tend (with some exceptions) to see this as the result of politics corrupting markets, while lefties (not all Marxists) see it as the result of markets corrupting politics. Charles Lindblom’s work on the latter is long overdue a revival.

Finally, if you want to see a really clearheaded account of the relationship between game theory and leftist ideas, from someone who doesn’t have any relevant academic qualifications, but has a deep understanding of the issues, I can only recommend Tom Slee’s work yet again.

49

Anderson 05.14.13 at 2:35 pm

47: mee-YOW-zah!

50

Bruce Wilder 05.14.13 at 4:51 pm

The subject article seems like something out of an alternative universe, playing Rumour with our own reality. But, maybe, that’s not a bad analogy for the effect of Public Choice economics or political theory on the public discourse and active politics: a great sound made at the mountaintop echoes in the valley below as propaganda and cliché, with misunderstanding more powerful than understanding.

You can talk about libertarian underpinnings, and stuff like that, as Kindred has ably done, but it doesn’t give a sense of the unrelenting ideological rhetoric or the cafeteria consensus of resentful scorn, in which the positive political theory, such as it may be, submerges.

Folks like Mancur Olson or James Buchanan, seemed to me to be perversely prescriptive, providing engineering diagrams for precisely the kind of political economy they purport to prophesy against.

51

Anderson 05.14.13 at 5:26 pm

48: Henry, thanks so much for posting that Buchanan pamphlet. I have gone from knowing zero about public-choice theory to knowing something about it, which I calculate to be an infinite increase. Now, on to learning something about maths ….

52

Chris Mealy 05.14.13 at 6:00 pm

Maybe Henry’s looking at this the wrong way. Shouldn’t the left have its own Megan McArdle?

53

Henry 05.14.13 at 6:19 pm

I met Olson once, about a year before he died, and liked him. We had a fun conversation about John Bowman’s book, Capitalist Collective Action (about how 19th century coal mining firms used unionization to bind themselves into compacts), which he didn’t know about but which (he said) bore out an idea he had once had himself. Didn’t share his politics, obviously, but he seemed like a genuinely intellectually curious and interesting person.

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Kindred Winecoff 05.14.13 at 10:17 pm

I don’t disagree with the gist or main thrust of what Henry wrote at 48, but I want to clarify a few points. Yes, public choice came after social choice and was in some ways a response to it. But that doesn’t mean it was “about” social choice. From Buchanan’s history to which Henry links (p. 3):

“It was at this point that I entered the discussion with a generalized critique of the whole corpus of analysis generated by the Arrow–Black approach (Buchanan 1954a, 1954b) … My concern, then and later, was always with means of preventing discrimination against members of minorities rather than ensuring that, somehow, majority rule produced stable sets of political outcomes.”

In this context “minorities”, of course, mostly means capital. Remember that the top marginal income tax rate at the time was 90%, the economy was heavily regulated, and public debt was very high. Buchanan thought this would eventually lead the collapse of the system, and set out try to dismantle the intellectual consensus which underpinned it. That meant critiquing social choice theory and punching a hole in the postwar Keynesian project.

As to whether he used game theory, we need to remember that the game theory of the 1950s and early 1960s is very different from the game theory of today. It was not very mathematical but it did employ deductive logic and methodological individualism: describe the nature of some strategic interaction, lay out some assumptions about the players and rules of the game, and try to find a solution (usually defined according to Pareto criteria). Thus, Buchanan and Tullock’s 1962 book is “game theory” — in that history he refers to the “game of politics” (p 4, bottom) and the “formalization” of the Madisonian constitutional project — but it’s first-generation game theory of the sort which is hardly recognizable now. If you look at the table of contents of Calculus of Consent — the most classic of the classic public choice tracts — you will see that the whole of Part III of the book concerns game theory. Chapters 11 and 12 even have “Theory of Games” or “Game Theory” in the title. So it’s not quite accurate to say that it wasn’t game theory, just that it was a very different sort of game theory than we typically encounter today.

This is largely due to Riker, who took game theory and ran with it. The Dept of Political Science at Rochester has been a haven for advanced (and highly mathematical) game theory since. Much of what we think of as modern day game theory, at least in public choice and political science, came from Riker’s project. And it’s true that Buchanan was somewhat skeptical of this, for two reasons: he felt that excessive formalization diluted the project, and Riker was more optimistic about the ability to find Pareto-improving solutions to social problems than Buchanan was. (Riker remained a democrat.)

On the Marxist game theory point briefly, Marx demanded revolution rather than working through Gotha-like incremental reforms for more or less public choice reasons involving the capture of the political system by capital. As such, Buchanan writes in the history Henry linked to that there was a natural affinity between public choice and Marxism. So public choicers, or at least the sophisticated ones, never really bothered critiquing Marxism (as opposed to welfare state social democracy) for this reason: there was no conception of politics to criticize. Their target was the Keynesian center-left technocratic consensus that they perceived to be pushing “socialism”, and they argued that attempts to fix market failures led both to cronyism via regulatory capture and to inefficient distribution of society’s resources. They had good grounds on which to make this critique, since Keynesian/Samuelsonian economics relies on the proverbial Benevolent Social Planner and is thus apolitical. Buchanan’s most famous quote is that he wanted “politics without romance”: there is no Benevolent Social Planner, so why pretend that there is? It’s hard to dispute that he had a point, whether one supports his particular project or not.

This remains the biggest challenge for the left. I think this is what Harkin was really trying to get at in the LARB essay, albeit in a very unsatisfactory way.

55

Hogan 05.15.13 at 5:47 pm

It aims its daggers at the foundation stone

I’m pretty sure that’s not going to work.

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Andreas Bergh 05.17.13 at 6:04 am

Henry,

Great work! Ill recommend your post to my students (some of which are almost as confused as the author in larb, though probably more willing to learn)

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