Political Economy

As I mentioned a few days ago, the best paper I’ve read on Ireland and the economic crisis was “this one”:http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1642791 by Sebastian Dellepiane Avellaneda and Niamh Hardiman. I’m happy to say that Niamh has agreed to do some guest-blogging for us over the next several days on the Irish crisis as it continues to unfold, and its implications for the EU. Niamh is a “senior lecturer”:http://www.ucd.ie/research/people/politicsintrelations/drniamhhardiman/ at University College Dublin’s School of Politics and International Relations. She has written extensively on political economy and public policy in Ireland and the EU. We’re grateful and lucky to have her. Her first post will be up shortly.

“Tyler Cowen”:http://www.marginalrevolution.com/marginalrevolution/2010/11/second-thoughts-on-ireland.html links to my post on Ireland, which is somewhat embarrassing, as I was convinced in comments that my basic argument was wrong (short version: _always_ check taxation statistics you think you have a fair idea of before you post opinions regarding their implications). While property taxes played a crucial role in Ireland’s fiscal disaster, corporate taxes were simply not a large enough part of revenue to be worth talking about (and probably would not have been under any plausible alternative regime).

Nonetheless, I still want to make a (weaker and more indirect) argument about the relationship between Ireland’s efforts to attract inward investment (which included, but were not limited to, its taxation regime) and its current state of disaster. The short version: the desires (a) to attract inward investment, and (b) to maintain peaceful industrial relations helped reinforce an unsustainable fiscal strategy. This has implications for the left as well as for the right.

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Windsor and Maidenhead Council (UK) “is planning a reward scheme”:http://www.guardian.co.uk/politics/2010/oct/31/council-plans-big-society-reward (supermarket tokens and the like) for volunteers to help implement David Cameron’s “Big Society”:

bq. it is likely residents would get a loyalty card similar to those available in shops. Points would be added by organisers when cardholders had completed good works such as litter-picking or holding tea parties for isolated pensioners. The council says the idea is based on “nudge theory” – the thought that people don’t automatically do the right thing but will respond if the best option is highlighted. Points would be awarded according to the value given to each activity. Users could then trade in their points for vouchers giving discounts on the internet or high street.

Maybe the Council should have read more widely, since according to another body of literature (Bruno Frey, “Sam Bowles”:http://www.sciencemag.org/cgi/content/abstract/320/5883/1605 ), they risk sending out a signal that only a mug performs good works for no reward. An interesting natural experiment, to be sure, but not one that I’d wish on the residents of Windsor and Maidenhead.

Karl Marx in the Preface to vol. 1 of _Capital_ : “The country that is more developed industrially only shows, to the less developed, the image of its own future. ”

Here’s “part of an interview from IHE”:http://www.insidehighered.com/news/2010/10/20/schrecker with Ellen Schrecker, author of _The Lost Soul of Higher Education: Corporatization, the Assault on Academic Freedom, and the End of the American University_ :

bq. Reduced support from state legislatures and the federal government’s decision to aid higher education through grants and loans to students rather than through the direct funding of individual institutions forced those institutions to look for other sources of income, while seeking to cut costs. In the process, academic administrators adapted themselves to the neoliberal ethos of the time. They reoriented their institutions toward the market at the expense of those elements of their educational missions that served no immediate economic function.

bq. As they came to rely ever more heavily on tuition payments, they diverted resources to whatever would attract and retain students — elaborate recreational facilities, gourmet dining halls, state-of-the-art computer centers, and winning football teams. At the same time, they slashed library budgets, deferred building maintenance, and – most deleteriously – replaced full-time tenure-track faculty members with part-time and temporary instructors who have no academic freedom and may be too stressed out by their inadequate salaries and poor working conditions to provide their students with the education they deserve. Meanwhile, rising tuitions are making a college degree increasingly unaffordable to the millions of potential students who most need that credential to make it into the middle class.

bq. Unfortunately, the competitive atmosphere produced by the academic community’s long-term obsession with status and its more recent devotion to the market makes it hard for its members to collaborate in solving its problems. Institutions compete for tuition-paying undergraduates and celebrity professors who can boost their institutions’ U.S. News & World Report ratings. Faculty members compete for tenure and research grants. And students compete for grades after having competed for admission to the highly ranked schools that will provide them with the credentials for a position within the American elite.

490,000 public sector jobs to go, and just wait for the multiplier effects.

“Here’s Joe Stiglitz”:http://www.guardian.co.uk/commentisfree/cifamerica/2010/oct/19/no-confidence-fairy-for-austerity-britain :

bq. Thanks to the IMF, multiple experiments have been conducted – for instance, in east Asia in 1997-98 and a little later in Argentina – and almost all come to the same conclusion: the Keynesian prescription works. Austerity converts downturns into recessions, recessions into depressions. The confidence fairy that the austerity advocates claim will appear never does, partly perhaps because the downturns mean that the deficit reductions are always smaller than was hoped. Consumers and investors, knowing this and seeing the deteriorating competitive position, the depreciation of human capital and infrastructure, the country’s worsening balance sheet, increasing social tensions, and recognising the inevitability of future tax increases to make up for losses as the economy stagnates, may even cut back on their consumption and investment, worsening the downward spiral.

Greg Mankiw’s recent, much derided NY Times column reminded me of a passage from Simon Schama’s Citizens: A Chronicle of the French Revolution [amazon]: [click to continue…]

Charles Ferguson has “a nice piece”:http://chronicle.com/article/Larry-Summersthe/124790/ in the _Chronicle of Higher Education_ about Larry Summers, the economics profession and their position in American public life. Definitely worth a read.

In May this year, I did an interview with Amartya Sen in Cambridge (the British one) on the Quality of Life. The concrete occasion for this interview was “a workshop/conference”:http://www.nwo.nl/nwohome.nsf/pages/NWOP_86JGUU I was involved in, organized by the Dutch National Science Foundation, on the Quality of Life.
Sen couldn’t come to give a talk at this conference, but was happy being interviewed by me. So if you fancy watching 22 minutes of Sen’s views on how to conceptualise and measure the quality of life, on the Sarkozy report on the measurement of economic progress (Mismeasuring Our Lives: Why GDP Doesn’t Add Up) and, at the end, on global poverty and whether the rich people really care about the global poor, you can watch it “here”:http://www.nwo.nl/nwohome.nsf/pages/NWOP_87KDRS.

I recently had the pleasure of attending the “European Society for Philosophy and Psychology conference in Bochum, Germany”:http://www.ruhr-uni-bochum.de/philosophy/espp2010/index.html . The highlight for me was attending a talk by “Michael Tomasello”:http://email.eva.mpg.de/~tomas/ of the Max Planck Institute, Leipzig on pre-linguistic communication. Getting home, I ordered a copy of Tomasello’s “Why We Cooperate”:http://www.amazon.com/exec/obidos/ASIN/0262013592/junius-20 in which he argues, on the basis of detailed empirical work with young children and other primates, that humans are hard-wired with certain pro-social dispositions to inform, help, share etc and to engage in norm-guided behaviour of various kinds. Many of the details of Tomasello’s work are controversial (the book is essentially his Tanner Lectures and contains replies by Silk, Dweck, Skyrms and Spelke) and I lack the competence to begin to adjudicate some of the disputes. But this much is, I think, clear: that work in empirical psychology and evolutionary anthropolgy (and related fields) doesn’t – quelle surprise! – support anything like the Hobbesian picture of human nature that lurks at the foundations of microeconomics, rational choice theory and, indeed, in much contemporary and historical political philosophy.
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In the spirit of more engagement with the left rather than a mere continuation of lobbing potshots at libertarians, let me point out a disjunction between these two “recent”:http://leninology.blogspot.com/2010/07/imperialism-of-market-reason.html “posts”:http://leninology.blogspot.com/2010/08/on-class-structure-and-income.html at Lenin’s Tomb

The first, riffing on David Harvey, and what sounds to be a terrible book by Ben Fine and Dimitris Milonakis, is your standard-issue dismissal of economic notions of rationality as a kind of imperialism.

bq. One aspect of this specious conception of “reason” is the encroachment of a set of analytical principles established by marginalist economics into other fields of social science. … Underpinning this approach is three basic analytical principles. … individualism … rational self-interest … exchange. … This imperialism of “reason” (“economic imperialism”, as Fine and Milonakis dub it), has policy consequences. ‘Public choice’ economics, for example, has acquired a prized position in the academia, in think-tanks, and among policy ‘wonks’. … rightist political animus … What I’m describing as the imperialism of market “reason” is nothing other than the ability of the ruling class to naturalise and universalise its accumulation activities, to express it as an ideology, a pseudo-sociology with pseudo-explanations for social phenomena, and to use that ideology as a justification for advancing on and enclosing all areas of public life that are not commodified, not subject to the laws of accumulation.
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Since I’ve been getting some (well justified) flak from commenters for paying too much attention to interlocutors in the center and right, and not enough to e.g. Marxists, I’m going to try to turn the tables, by pointing out that some of these right wing interlocutors are in fact Marxists without knowing it. “Tyler Cowen”:http://www.marginalrevolution.com/marginalrevolution/2010/08/a-very-good-point-from-dan-drezner.html takes up this bit from Drezner’s review of John’s book (also quoted in John’s post below).

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

hmmm … Stable mode of production. Gradual accumulation of contradictions. Crisis. Emergence of new mode. I wonder “where we might have encountered these claims before …”:http://www.marxists.org/archive/marx/works/1867-c1/.

More seriously – I don’t buy Dan’s arguments here. As with most stage theories (not only Marx, but also Kuhn), the mechanisms of institutional reproduction and change in his account are sorely underspecified. ‘Contradictions accumulate’ isn’t a much more helpful empirical claim than ‘shit happens.’ To really understand what is happening, you need a proper theory of the underlying conditions for ideational retention and reproduction. _Why_ do some ideas decay into self-parody, while others do not? After all – not all ideas decay (or at least: not all ideas decay at the same rate). Some economic ideas have continued for centuries (the limited liability corporation), while others have disappeared completely, while others yet have disappeared and reappeared. We don’t know why – but if we want to make the kinds of claim that Dan is making, we _need_ to know why, or at the least, have some rough idea. Otherwise, what we have is at best a sometimes-observed empirical regularity melded to a smidgen of intuition, which is not enough (in my book at least) to dismiss a counter-claim (that one particular idea may have a longer shelf life than previous versions) out of hand. The only large scale effort to come up with a proper theory that I am aware of is the sociological literature on performativity, but this is distinctly more useful in explaining how ideas succeed than how they become ossified, and “lacks any account of the mechanisms producing variation”:http://orgtheory.wordpress.com/2010/08/17/performativity-of-markets-and-endogeneity/.

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

Update: see Dan’s “response here”:http://drezner.foreignpolicy.com/posts/2010/08/26/the_ideational_life_cycle_in_political_economy, with a set of postulates about what may explain ideational persistence. As he notes, this is not a theory – but in fairness, political science and international relations in particular has done a terrible job in providing such theories to date (some interesting work on norm diffusion, which is not quite the same thing, aside).

The second part of Stuart White’s excellent interview with Edward Lewis over at The New Left Project is now out, covering basic income, republicanism, equality and liberty. Check it out.

A “recent piece of research”:http://ideas.repec.org/p/lec/leecon/09-23.html by British economist James Rockey into people’s misperception of their place on the political spectrum got a certain amount of “gleeful mileage”:http://blogs.telegraph.co.uk/news/edwest/100047245/why-middle-class-lefties-believe-stupid-things-because-their-friends-do/ in the right-wing press, and for predictable reasons. The research claimed that many people mislocate themselves – identifying with the “left” even though they hold opinions that are fairly right-wing. Having worried this over for a few weeks now, my considered view is that whilst the research is flawed at a quite fundamental level, the conclusion might contain some truth. Let’s see if I can express that thinking without contradicting myself!
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Part one of a superb interview of Stuart White by Edward Lewis over at the Next Left Project. Meritocracy, luck egalitarianism, status inequality, negative liberty and republican liberty all get some discussion. I particularly liked Stuart’s observation that contemporary politics is keen on the “choice” side of luck egalitarian argument but tends to little or nothing about the correction of brute luck.