Books

Over the page, the draft preface for my book-in-progress, Economics in Two Lessons

I got some great comments first time round, but I can see it would be easier if I presented my drafts in a more orderly fashion, though not necessarily sequential. So, I’ll begin at the beginning. Comments, both critical and favorable, much appreciated.

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After a couple of preliminary posts, here goes with my first draft excerpt from my planned book on Economics in Two Lessons. They won’t be in any particular order, just tossed up for comment when I think I have something that might interest readers here. To remind you, the core idea of the book is that of discussing all of economic policy in terms of “opportunity cost”. I’ll update as I go, in response to comments and criticism; this may create some difficulties reading the comments thread, but hopefully the improvement in the final product will be worth it.

My first snippet is about

Pareto optimality

The situation where there is no way to make some people better off without making anyone worse off is often referred to as “Pareto optimal” after the Italian economist and political theorist Vilfredo Pareto, who developed the underlying concept. “Pareto optimal” is arguably, the most misleading term in economics (and there are plenty of contenders). Before explaining this, it’s important to understand Pareto’s broader body of thought, one which led him in the end to embrace fascism.

Pareto and the “libertarian” path to dictatorship

Pareto sought to undermine the version of liberalism that dominated 19th century economics, according to which the optimal (most desirable) economic outcome was the one that contributed most to human happiness[^1], often (if somewhat loosely( summed up as ‘the greatest good of the greatest number’. Particularly as developed by the great philosopher and economist John Stuart Mill, this is a naturally egalitarian doctrine.

The egalitarian implications of the classical framework reflect the fact that the needs of poor people are more urgent than those of the better off. So, the happiness of the community as a whole all be increased by policies that benefit the poorest members of the community, even if these benefits come at the expense of those who are better off. It follows that a substantial degree of income redistribution will be social desirable and that large accumulations of individual wealth, which contribute only marginally to the happiness of a small number of people are undesirable in themselves, though they may in some circumstances be a by-product of desirable policies.

Pareto’s big achievement, further developed by a large number 20th century economists, was to show that much of economic analysis could be undertaken without invoking the concept of utility. Hence, interpersonal comparisons of utility, which invariably lead to the conclusion that redistributing wealth more equally is beneficial, could be dismissed as ‘unscientific’.

Pareto didn’t stop with an attack on the economic implications of Mill’s approach. Mill’s philosophical framework implied support for political democracy, including the enfranchisement of women. Since everyone’s welfare counts equally in the classical calculus, the political process should, as far as possible, give everyone equal weight.

Pareto reversed this reasoning, arguing that a highly unequal distribution of income was both inevitable and desirable; he proposed what he called a power law, described by a statistical distribution which also bears his name. Pareto’s “Law” may be summed up the 80-20 proposition, that 20 per cent of the population have 80 per cent of the wealth.

The supposed constancy of income distribution implies that any attempt at redistribution must be essentially futile. Even the aim is to benefit the poor at the expense of the rich, the effect will simply be to make some people newly rich at the expense of those who are currently rich. Pareto called this process ‘the circulation of elites’. (Footnote: In his dystopian classic 1984, Orwell has the Trotsky-like character Emmanuel Goldstein present the same idea as the starting point of The Theory of Oligarchical Collectivism. Orwell almost certainly derived the idea from James Burnham, an admirer of Pareto whose work Orwell saw as the embodiment of ‘power worship))

All of this led Pareto to become one of the first advocates of a political position combining an extreme free-market position on economic issues with hostility to political liberalism and democracy. Pareto welcomed the rise of Mussolini’s fascist regime, and accepted and accepted a “royal” nomination to the Italian senate from Mussolini.

Pareto was not really a fascist however. Rather, he developed a version of liberalism similar to that of his more famous successors, Hayek and Mises, both of whom embraced and worked for murderous regimes that had come to power by suppressing democratic socialist parties. Like Pareto, neither Hayek nor Mises can properly be described as fascists – they weren’t interested in nationalism or in the display of power for its own sake. Rather, their brand of liberalism was hostile to democracy and indifferent to political liberty, making them natural allies of any authoritarian regime which adheres to free market orthodoxy in economics. (Fn Supporters of Hayek and Mises commonly describe themselves as “libertarians”, but their alliance with brutal dictators makes a travesty of the term – they have been derisively described as “shmibertarian”).

Pareto optimality

Now back to “Pareto optimality”, and why it is such a misleading term. In ordinary language, describing a situation as “optimal” implies that it is the unique best outcome. As we shall see this is not the case. Pareto, and followers like Hazlitt, seek to claim unique social desirability for market outcomes by definition rather than demonstration.

If that were true, then only the market outcome associated with the existing distribution of property rights would be Pareto optimal. Hazlitt, like many subsequent free market advocates, implicitly assumes that this is the case. In reality, though there are infinitely many possible allocations of property rights, and infinitely many allocations of goods and services that meet the definition of “Pareto optimality”. A highly egalitarian allocation can be Pareto optimal. So can any allocation where one person has all the wealth and everyone else is reduced to a bare subsistence.

Recognising the inappropriateness of describing radically unfair allocations as “optimal”, some economists have used the description “Pareto efficient” instead, but this is not much better. It corresponds neither to the ordinary meaning of “efficient” nor to the meaning with which the term is commonly used in economics, which is also misleading, but in a different way.

The concept of opportunity cost gives us a better way to think about the possibility of making some people better off while no one is worse off. If such possibilities exist, then there are potential benefits that have no opportunity costs. Conversely, if there is a positive opportunity cost for any benefit, then we can’t make anyone better off without making someone else worse off. So, a “Pareto optimal” situation may be described, more simply as one where all opportunity costs are positive.

[^1]:This approach is often described as “utilitarianism”, and, until relatively recently, economists have mostly talked about “utility” rather than “happiness”. This terminology has been the subject of heated, but not enlightening, debate, with the result that it is best avoided.

Working on my Economics in Two Lessons book, I’ve had to address the concept of Pareto optimality, which naturally raises the question of how it fits into Pareto’s larger body of anti-democratic and anti-egalitarian thought, which culminated, at the end of his life, in his embrace of Mussolini’s fascism. This led me to an article (paywalled, sorry) published by Renato Cirillo, in 1983, defending Pareto against the charge of being a precursor of fascism. Cirillo asserts that, far from being a fascist, Pareto

“manifested consistently a strong attachment to a type of liberalism not dissimilar to the one later attributed to Mises and Hayek”

These are rather unfortunate examples, in view Mises writings in praise of fascism and work for the Dollfuss regime, and (even more), Hayek’s embrace of Pinochet, at the very time Cirillo was writing [^1].

This, along with my discovery that Locke was actively involved in the expropriation of the native American population, justified by his theory of property, led me (back) to the question of the relationship between the writings of political theorists (broadly defined to include economists, sociologists and philosophers engaged with these issues) and their personal political activity and commitments. I’ve come to two conclusions about this.

First, for serious writers on political theory, political engagement is and ought to be the rule rather than the exception. I don’t mean that philosophers should (necessarily) run for office. Rather someone whose political theory doesn’t lead them to have and express views on the great political issues of their day probably doesn’t much of interest to say about theory either (unless of course, their theory leads them to some form of quietism). That’s true of the writers whose commitments were creditable (for example, John Stuart Mill and Bertrand Russell) as well as the discreditable cases I’ve mentioned.

Second, it makes no sense to look at the theoretical writings and ignore the political commitments with which they are associated. For example, it is easy to construct readings of Pareto, Mises and Hayek in ways that make them appear either as friends or as enemies of political liberalism. Their (remarkably similar) actions make it clear which reading is correct. Eventually, of course, ideas outgrow their creators to the point where original intentions, and the texts in which they were expressed, cease to be relevant. But, as the Locke example shows, that’s a very slow process. As long as a writer is regarded as having any personal authority, the weight of that auhtority must be assessed in the light of their actions as well as their words.

[^1]: To be sure, none of these writers can properly be described as fascists – they aren’t interested in nationalism or in the display of power for its own sake. Rather, their brand of liberalism is hostile to democracy and indifferent to political liberty, making them natural allies of any fascist regime which adheres to free market orthodoxy in economics.

I’ve been promising for a long time to write a new book, framed as a reply to a free-market tract Economics in One Lesson by Henry Hazlitt, published in 1946, but still in print and popular among free market advocates. Its popularity reflects the fact that it’s a reworking of Bastiat’s “What is Seen and What is Not Seen”, still one of the best statements of the case for free markets.

Bastiat’s argument is implicitly based on the concept of opportunity cost but, since the term wasn’t coined until 1914, he doesn’t use it. Neither, more surprisingly, does Hazlitt. Once this is made explicit, Hazlitt’s rather ponderous, and misleading statement of his “One Lesson”

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

can be boiled down to the much simpler statement “Market prices reflect opportunity cost”. In important respects, this is true, particularly when we consider the problem from the perspective of choices about how to allocate an individual, family or government budget. With fixed aggregate levels of public expenditure, for example, more money for the military means less for schools, and vice versa.

There are plenty of other questions about private and public decisions for which Hazlitt’s One Lesson is useful. Another example is the well-supported finding that the best way to fight poverty is to give money to poor people. This is unsurprising given that poor people themselves will usually have a much better idea of the opportunity costs they face than will those seeking to help them.

But as a general statement, Hazlitt’s One Lesson is false, which is why my working title is Economics in Two Lessons”. Lesson Two is “Market prices do not reflect all the opportunity costs we face as a society”
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The introduction to the American edition of *The Star Fraction* contains Ken MacLeod’s second-most famous dictum – “History is the trade secret of science fiction, and theories of history are its invisible engine.” The Fall Revolution books are all about history and people trying to make it (or perhaps more accurately, histories, and people trying to make them). They’re also books that reflect a very specific historical period – when the Berlin Wall had fallen or was about to fall but the Washington Consensus had yet to gel – a moment where the cold logic of nuclear deterrence still held, sort of, while the political transformation of Eastern Europe and the new market anarchism of Sachs, drugs and rock and roll was starting to get going. Maybe the closest thing to the manic intensity of the first three books (and chunks of the fourth) is the Zone of Thomas Pynchon’s *Gravity’s Rainbow* – black markets, hustlers, ideas, freewheeling politics, and the frozen arc of the Rocket still hanging above it all. They’re also (and much more so than Pynchon, whose zaniness is often forced) very *funny* books – they don’t play anything for obvious laughs, but are riddled through with intellectual black comedy.

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Socialism! That is really an unfortunate word.

– Adolf Hitler (quoted in Dietrich Orlow, The Nazi Party 1919-1945: A Complete History, p. 88

When one thinks of all the people who support or have supported Fascism, one stands amazed at their diversity. What a crew! Think of a programme which at any rate for a while could bring Hitler, Petain, Montagu Norman, Pavelitch, William Randolph Hearst, Streicher, Buchman, Ezra Pound, Juan March, Cocteau, Thyssen, Father Coughlin, the Mufti of Jerusalem, Arnold Lunn, Antonescu, Spengler, Beverley Nichols, Lady Houston, and Marinetti all into the same boat! But the clue is really very simple. They are all people with something to lose, or people who long for a hierarchical society and dread the prospect of a world of free and equal human beings.

– George Orwell

I was going to try to get good old Montagu to contribute a personal note about his own fascist flirtations, after his long and unaccountable absence from the blog. No dice.

So I’ve solicited some commentary from Oswald Spengler, at least. [click to continue…]

It’s Nazi week at Crooked Timber! Do you love thrilling stories about Nazis? Great! [click to continue…]

I mentioned a little while ago that I had an excellent plan for a project. I have always wanted to make my own Tarot deck, since I was a young teenager. Well, I say this, but probably since I was nine or ten. At the time I imagined that I would have to successfully pull a wood-block print for all the backs, and paint each one, perfectly, all 78, and then if a drop of water got on them later? I would die. So I imagined having them laminated, but then I considered the state of much-used laminated papers such as those employed in classes, and I thought it unwise to entrust to the process anything about which I cared greatly. Yellowing, bubbling, peeling; these are all terrible. Now many things exist which can facilitate my devising of a deck of cards, such as the use of photoshop to create perfectly symmetrical arabesques for the reverses based on only one properly-inked section. But of course the infinitely more pleasing prospect is that of getting my designs printed on card stock, and the edges trimmed, and then all shared with others! I had only ever intended my own version of the designs in the Waite-Smith deck,* but then I remembered that I had had another idea, which was to make a set of cards based on Great-Aunt Nora Cloud’s deck in John Crowley’s Little, Big. Truly it’s Violet’s deck, but we see it used by Nora Cloud in the course of the book. (Violet is my younger daughter’s name; mine can be her deck also.) Those who have read the book will know that the deck, its reading, and physical disposition figure greatly in the work, and those of you who have not SHOULD GO READ IT NOW DEAR GOD READ LITTLE, BIG FOR THE FIRST TIME I ENVY YOU! Really, it’s maybe my single favourite book.

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I’m reading The Lord of the Rings to our daughters. (Famous trilogy of fantasy novels, in case you’ve been in a coma since 1953 and are just checking Crooked Timber to see what’s new.) Last night we began The Return of the King. One thing that happens at a couple points is our heroes narrate the tale of their travels to someone they meet, without fully revealing the true nature/purpose of the Fellowship (Merry and Pippin when they first meet Treebeard; Frodo to Faramir; Pippin to Denethor). Obviously Tolkien summarizes his way past these points, since the reader doesn’t need to hear it all again. But it’s impossible to imagine what Pippin actually said. He couldn’t tell Denethor 1) they’ve got the ring; 2) the goal of the fellowship; 3) the existence/identity of Aragorn; 4) the meaning of ‘Isildur’s Bane’.

‘Now tell me your tale, my liege,’ said Denethor, half kindly, half mockingly. ‘For the words of one whom my son so befriended will be welcome indeed.’

Pippin never forgot that hour in the great hall under the piercing eye of the Lord of Gondor, stabbed ever and anon by his shrewd questions, and all the while conscious of Gandalf at his side, watching and listening, and (so Pippin felt) holding in check a rising wrath and impatience. When the hour was over and Denethor again rang the gong, Pippin felt worn out. ‘It cannot be more than nine o’clock,’ he thought. ‘I could now eat three breakfasts on end.’

So here’s your challenge. What did Pippin tell to the shrewd Denethor for an hour? Narrate the tale of how and why Pippin and three other hobbits left the Shire in haste, traveled to Rivendell, Lothlorien, etc., without mentioning any of the things he has promised Galdalf he won’t. Here’s my best shot. Pippin tells Denethor ‘Isuldur’s Bane’ is some sort of exotic brand-name pipeweed Elrond is looking to score. He knows hobbits are into pipeweed, so he sent for them from the Shire. But they didn’t have any. So he sent them out to score it for him, and someone heard maybe there was a dealer in the Mines of Moria. But that didn’t work out. Meanwhile, Saruman and Sauron have this wrong idea that the hobbits are themselves pipeweed dealers, since orcs overheard them asking around after ‘Isuldur’s Bane’, and so …

If you’ve got a more plausible, false explanation for the Fellowship, I’d like to hear it. Pippin must be one hell of a liar.

So apparently the Hugos suck this year, thanks to an organized voting campaign. See Patrick Nielsen Hayden on the voting campaign, which seems to be in part a product of internal disputes within the field (various right wing people upset that f/sf isn’t ‘their’ field any more, and belongs to teh_women/teh_gay/teh_PoC) and in part overspill from Gamergate. I don’t know many of the slate of nominees put up by the campaign, with the minor exception of Marko Kloos (whose self-published book I read and thought was unexceptionable military SF with the usual odd politics), and the unlovely John C. Wright (whose work and political opinions remind me of Gene Wolfe if Gene Wolfe had been subjected to an involuntary lobotomy). I _did_ read and like Katherine Addison’s (Sarah Monette’s) _The Goblin Emperor_ (although I liked her Melusine books even more) but apart from that I don’t have much advice to prospective Hugo voters on what they should vote for. What I _do_ have is opinions on other work that didn’t get nominated but that seemed to me to be worth reading, and I hope that CT readers have too. One of the important functions of awards is to point readers towards good work that they otherwise might have missed. Since the Hugo Awards won’t be doing much of that this year, other people should do what they can.

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Having made one recent post that topped 1000 comments, I thought I would try to be more abstruse for a time.

I have a trivia question for you. I’m reading Volney’s The Ruins. Why? Because it’s one of the books that Frankenstein’s monster overhears: [click to continue…]

I was rereading David Graeber’s Debt over the weekend. The intervening two years, since our book event, have not caused it to be the case that Graeber doesn’t owe Henry an apology, after all. But the life of the mind goes on. We do not freeze intellectual accounts due to outstanding personal debts. That is to say, the free market of ideas is baseline communist, in Graeber’s sense. If I have a bright idea, I do not expect to be paid back, by those who receive it, in the form of two half-insights – or 100 comments, each containing but a grote’s worth of thought; none of that. (I expect intellectual credit, of course.)

My bright idea for the day is that I have no idea what the difference is between reciprocity and baseline communism. [click to continue…]

Since the thread is long now and it’s hard to respond to everyone individually, I thought I would post instead.

Objection 1: Chait has real-world examples of PC madness–you don’t even address those!

Counterpoints: In the opening anecdote, a guy wrote a relatively mild, not funny at all anti-feminist satire for the more conservative college paper in which he laughed about majoring in womyn’s studies (LOL), laughed about trigger warnings, and laughed about intersectionality. As if that’s a thing, right!? In response, some college kids egged his door, and the other more left-leaning paper he also wrote for told him they didn’t need his submissions any longer. Also, a thing happened in 1992 with terrifying monster of anti-man towering evil MacKinnon involved tangentially! Look, I’m sorry Chait, nothing in your article should have happened in 1992. (Yes, analogies, I know.)

Then, some people paying $55,000 a year to attend a private college decided they didn’t want one of the architects of the Iraq war to pick up a $100K check to speak at their graduation. Students protested against Condoleeza Rice on these grounds, against the head of the IMF because of its importance as an means of imposing capitalist norms on weakened developing nations, against a man who was most prominently known among the students themselves for a physically brutal crackdown on Occupy protestors at UCBerkeley, and against Ayaan Hirsi Ali, whom many regard as actively anti-Muslim, not just pro-religious-freedom in currently Muslim nations. They may have been neither entirely right nor entirely wrong in all these judgments, but preventing your school from paying money to rich, powerful people is not a form of stifling political correctness.
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By now you’ve probably heard that Jonathan Chait has written an article for New York magazine decrying modern liberalism for becoming little more than a series of Twitter-based convulsions of outrage. You may have heard that he has a point there. Or maybe you heard it was an argument against Political Correctness–a dragon from 1991 who has reared up wearing a crop top, ’70s jeans and 14-hole Doc Marten’s, and is taking the pain of her infected belly-button piercing out on others in inappropriate ways–and the reign of terror this dread P.C. has engendered in liberal academia. Or maybe you heard that a previously moderately well-regarded author has gone to the #slatepitch side of the Force. Or, perhaps, that Jonathan Chait has a skin so thin that he cries when someone gets the butter knife out of the drawer anywhere within six blocks of his apartment, and is also so allergic to his own tears that he then needs to use his EpiPen and ARE YOU HAPPY NOW BLACK FEMINISTS!?!1/1//! Unfortunately for Jonathan Chait, modern liberalism, the state of the publishing industry, feminism, concerns about racial equality, the extent to which previously marginalized voices can now pipe up and be heard in critical discourse, and all of us, it’s actually that last thing.

But what about his maybe having a point? The thing is, Chait has about 75% of perhaps two points, but the wheat/arsenic-laced chaff ratio is bad. Very bad. How so? The article is actually about how his feelings got hurt by people who say mean things on the internet–in the sense that this is the actual motive for writing it. ‘They claim to be too sensitive to take criticism or even hear discussion of sensitive topics, and that shuts down debate!’ whines sensitive man whose feelings have been hurt by criticism from the internet. ‘They are destroying our political project and they won’t even listen to my concern trolling crucial critique because I am…a white man!‘ [Faints on couch.] How did New York Magazine tease this article? “Can a white, liberal man critique a culture of political correctness?” Spoiler alert: YES.
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