Political Economy

On “Unfogged”:http://www.unfogged.com/archives/week_2012_06_03.html#012211, Lizardbreath continues the ‘fuck me or you’re fired’ debate

bq. The Crooked Timber discussion is pretty good, with attention to issues of abuse of power, and how sex work is fundamentally different from other work, so even if you think it should be legal, there should be more protections for sex workers. What I found interesting, though, is a simple point that’s implicit but not really highlighted in the CT conversation: that using consent as a baseline rule of thumb for determining whether someone is being wrongfully mistreated or injured in an interaction between people isn’t useful at all. … And while bringing sex into it helps drive my belief that there’s something wrong with quid pro quo harassment even where the victim consents, I don’t think there’s a specific sex-only problem with consent. Unpaid internships work just as well: in a tight labor market, you can get people who are willing to work hard and usefully without pay so that they have the experience for their resumes, and may be able to get paying work in the future. People who do this sort of unpaid work are clearly straightforwardly consenting to do it. They’re still being exploited by their employers, and an agreement to work for an employer for free, in the absence of an educational or charitable motive, is still the sort of thing that should be prohibited. Workplace safety rules? People will consent to take jobs knowing that they’re likely to get hurt — the workers’ knowledge and consent does not mean that it’s all right to leave the safety guards off the machine tools. … lack of consent can tell you there’s a problem, but the presence of consent doesn’t, by itself, give rise to any kind of presumption that an employment or other relationship is not a serious problem.

And, on email, by coincidence, Doug Henwood points me to this “very interesting discussion of charter cities by David Ellerman”:http://www.blog.ellerman.org/2011/02/the-charter-cities-debate-and-democratic-theory/.

bq. One of the interesting sidelights of the charter cities and seasteading debates is how they “out” the lack of any necessary connection between liberalism and democracy. As Mallaby puts it in the FT article about Romer: “In mild professorial language, [Romer] declares that poor countries should hand control of these new cities to foreign governments, which should appoint technocratic viceroys. The better to banish politics, there must be no city elections.”

bq. For classical liberalism, the basic necessary condition for a system of governance is consent. Consent could be to a non-democratic constitution which alienates the right of self-governance to some sovereign–which in the case of a charter city would be the technocratic viceroys, or their principals such as some well-meaning foreign governments. Consent plus free entry and exit suffice to satisfy the governance requirements of classical liberalism. Classical liberalism per se sees no moral necessity in democratic self-governance at all (with or without safeguards). Most modern libertarians are not “against” democracy; it nice if you have it (and it works well with safeguards) but it is also OK if you don’t have it but have a consent-based non-democratic governance regime with good rules and the possibility of exit.

Discuss.

Over the last couple of years, Cosma Shalizi and I have been working together on various things, including, _inter alia_, the relationship between complex systems, democracy and the Internet. These are big unwieldy topics, and trying to think about them systematically is hard. Even so, we’ve gotten to the point where we at least feel ready to start throwing stuff at a wider audience, to get feedback on what works and what doesn’t. Here’s a paper we’re working on, which argues that we should (for some purposes at least), think of markets, hierarchy and democracy in terms of their capacity to solve complex collective problems, makes the case that democracy will on average do the job _a lot better_ than the other two ways, and then looks at different forms of collective information processing on the Internet as experiments that democracies can learn from. A html version is under the fold; the PDF version is here. Your feedback would very much be appreciated – we would like to build other structures on top of this foundation, and hence, really, _really_ want criticisms and argument from diverse points of view (especially because such argument is exactly what we see as the strength of democratic arrangements).

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In lieu, I presume, of a reply to my previous posts disagreeing with him on Hayek and Judt, Tyler Cowen links to “this post”:http://bleedingheartlibertarians.com/2012/05/hayek-on-serfdom-and-welfare-states/#more-2954 by Kevin Vallier on _Bleeding Heart Libertarians_ which frames the debate thusly:

bq. Every once in a while folks in the political corner of the blogosphere start talking about Hayek’s argument in The Road to Serfdom. As Matt Yglesias said Monday, lots of people, conservatives and liberals alike, say that Hayek believed that any welfare state inevitably leads to totalitarianism. Then some people who have actually _read_ Hayek reply that he always supported social insurance, safety nets, public goods provision and many forms of regulation. Then confusion ensues.

bq. … Obviously Farrell and Judt’s claims are over the top due to their use of various “of any sort” “unequivocally” “at all” and “Hitler” modifiers … instead of beating up on them, let’s use our collective annoyed-by-someone-on-the-internet energy in a constructive fashion: to see what we can learn about Hayek’s real arguments against socialism and the welfare state. … Caldwell concludes, rightly, that Hayek was right about this. But he points out that Hayek’s criticism of the welfare state is subtler and involves two claims. The first problem with the welfare state is that it is a philosophically slippery target. … when Farrell reads this, he concludes that Hayek basically made the same claims about the welfare state and socialism, namely that both institutions will lead, eventually, to totalitarianism, even if the socialism gets us there sooner than the welfare state. … In my last post, I pointed out that _even the later Hayek_ defended a universal basic income … Thus, Hayek supported what we typically call a welfare state throughout his career. … In my view, then, Hayek’s target is not “the welfare state” as such, that is, not a social insurance or safety net state, but rather a _state based on a robust conception of distributive justice applied to its economic components_ … Hayek’s critique of the welfare state simply falls out of his broader conception of the legal order of a free people. … So let’s distinguish between two kinds of welfare states: the welfare state of law and the welfare state of administration. Hayek’s preferred welfare state is limited by his insistence that the law be regulated by clear, public, general principles rather than administrative bodies.

bq. Hayek opposes the welfare state of administration. … But the second problem with the welfare state of administration is that it contains an internal dynamic that pushes in a socialist direction. … Of course, this is not totalitarianism by any means. For one thing, if citizens affirm even modest economic freedoms (as most members of liberal democracies do), then they will resist this accretion effect before things get too bad. And that’s the pattern we see: even in Scandinavian countries, people resist regulation due to their concerns about efficiency and, yes, concerns about property rights (sometimes more effectively than we supposedly libertarian Americans). …

bq. Hayek overplayed his hand by arguing that the tinkerer’s welfare state will inevitably lead to totalitarianism, but not by much. The most free and economically successful liberal democracies hybridize welfare states of law and welfare states of administration. They’re hybrids largely due to the fact that most citizens of liberal democracies endorse elements of both liberalism and socialism. But if citizens of liberal democracies gave up liberalism entirely and stopped minding regulation so much, then I think the dynamic of the administrator’s welfare state would lead to significant authoritarianism that, while not totalitarian, would be uncomfortably close.

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Two references worth reading in light of the last post.
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A few months ago, Tyler Cowen “argued”:http://marginalrevolution.com/marginalrevolution/2012/02/tony-judts-new-book-thinking-the-twentieth-century.html that Tony Judt had been unfair to Hayek in his final book.

it doesn’t show Judt in such an overwhelmingly favorable light. He is cranky, unfair to his intellectual opponents, and he repeatedly misrepresents thinkers such as Hayek on some fairly simple points. …

One does not have to agree with Hayek’s Road to Serfdom to find this an unfair characterization:

Hayek is quite explicit on this count: if you begin with welfare policies of any sort — directing individuals, taxing for social ends, engineering the outcomes of market relationships — you will end up with Hitler.

But is that actually so unfair? I meant to follow up at the time, and never quite got around to it. Then, yesterday, I re-read “Hayek’s own introduction to the US edition”:http://delong.typepad.com/sdj/2012/05/the-1956-preface-to-friedrich-von-hayeks-the-road-to-serfdom.html.

bq. That hodgepodge of ill-assembled and often inconsistent ideals which under the name of the Welfare State has largely replaced socialism as the goal of the reformers needs very careful sorting-out if its results are not to be very similar to those of full-fledged socialism. This is not to say that some of its aims are not both practicable and laudable. But there are many ways in which we can work toward the same goal, and in the present state of opinion there is some danger that our impatience for quick results may lead us to choose instruments which, though perhaps more efficient for achieving the particular ends, are not compatible with the preservation of a free society.

bq. … Of course, six years of socialist government in England have not produced anything resembling a totalitarian state. But those who argue that this has disproved the thesis of The Road to Serfdom have really missed one of its main points: that the most important change which extensive government control produces is a psychological change, an alteration in the character of the people.

bq. This is necessarily a slow affair, a process which extends not over a few years but perhaps over one or two generations. The important point is that the political ideals of a people and its attitude toward authority are as much the effect as the cause of the political institutions under which it lives. … the change undergone by the character of the British people, not merely under its Labour government but in the course of the much longer period during which it has been enjoying the blessings of a paternalistic welfare state, can hardly be mistaken. … Is it too pessimistic to fear that a generation grown up under these conditions is unlikely to throw off the fetters to which it has grown used? Or does this description not rather fully bear out De Tocqueville’s prediction of the “new kind of servitude” …

bq. Perhaps I should also remind the reader that I have never accused the socialist parties of deliberately aiming at a totalitarian regime or even suspected that the leaders of the old socialist movements might ever show such inclinations. What I have argued in this book, and what the British experience convinces me even more to be true, is that the unforeseen but inevitable consequences of socialist planning create a state of affairs in which, if the policy is to be pursued, totalitarian forces will get the upper hand.

You can certainly argue that Judt is too sweeping when he says “welfare policies of any sort.” It would undoubtedly have been more accurate if he had said “welfare state policies of any sort,” as Hayek clearly believes that there are non-statist, non-paternalist ways of achieving some (if not all) of the same ends. The conditions under which Judt was writing (or more precisely dictating) go some very considerable way towards mitigating this inaccuracy.

However, even if Hayek qualifies his claims in the first paragraph quoted, he’s changed his tune towards the end. He very explicitly claims that the paternalist welfare state is creating the conditions under which (unless the policy is changed or reversed) totalitarianism will blossom, reducing the populace (as described in the bit of Tocqueville that Hayek quotes) into a “flock of timid and industrial animals, of which government is the shepherd,” which will surely sooner or later come under the control of “any group of ruffians.” More tersely: Welfare Statism=Inevitable Long Term Moral Decline=Hilter! ! ! !

Hayek surely had his moments of brilliant insight, but this wasn’t one of them – for all his protestations of anti-conservatism it’s a fundamentally conservative, and rather idiotic claim. I don’t think that Judt was being unfair at all.

Let me begin with an apology—for two things, actually. First, for the fact this response to the seminar on my debt book was so long in coming. It happening that at the time the seminar was going on I was desperately trying to finish a book with a very firm deadline (not to mention I was also struggling with a flu, which added all sorts of interesting complications. I did finish it though. Only just.) Second, for the fact that, to make up for the delay, I seem to have overcompensated and the response became… well, as you can see, a little long.

Sorry.

Allow me also to remark as well how flattered I am by so much of this discussion. When I wrote the book it never occurred to me I would end up being compared with the likes of Polanyi, Nietzsche, or even Ernest Mandel. I shall try very hard not to let this go to my head. Now how shall I start? It would be ungracious not to respond to each in some way. But I think it might be best to start by clarifying a few issues that seem to crop up pretty frequently, both in this seminar and in other reviews and comments I’ve seen on the internet. Then I will take on the specific responses.
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This morning brings news of new plans by Britain’s Tory/LibDem coalition, this time to privatize parts of the road network. Presented (again) merely as a way of getting things working more efficiently, this is both part of a pattern and – the philosophical point here – a further reduction in the liberty of individuals. The pattern is a gradual shift of resources that used to be common in to the private or quasi-private sector. Not long ago, higher education was free: now it is not. Fairly large amounts of formerly public space in cities are now in the hands of private developers who employ security guards to enforce their rules on what can be done on their land. Government plans to privatize publicly-owned forest and woodland have been defeated, but for how long? The “reforms” of Britain’s National Health Service allow for new charges to be brought in for treatments and services deemed “non-essential” (although NHS trusts are already denying treatment for some conditions that used to be treated for free). Generally, there’s a shift from formerly taxpayer-funded services towards privatized ones that users have to pay for.

No doubt our “libertarian” friends approve of this shift, but those who don’t have an ideologically distorted view of liberty should be alarmed. First, the extension of chargeable private space means that the range of actions permitted to individuals who lack money is reduced. Lack of money reduces your purely negative freedom,[1] as anyone who tries to perform actions encroaching on the state-enforced private property of others will quickly discover. Second — and this point should hold even for those silly enough to reject the view that private property restricts the freedom of those who have less of it — the increase in privatized public space means that we are increasingly subject to the arbitrary will of private owners concerning what we can and can’t do. Rights of assembly? Rights of protest? Rights to do things as innocuous as take a photograph? All of those things are now restricted or prohibited on formerly public land across the United Kingdom or subject to the permission of the new private owner. The interest of those who endorse a republican conception of freedom is thereby engaged, as is those of liberal persuasion who think a list of basic liberties should be protected: less public space, less capacity to exercise those basic liberties. The proposed privatization of the roads is just an extension of this.

(The Liberal Democrats as part of the Tory-led coalition bear a particularly heavy responsibility for failing to prevent these changes for which the UK government has no democratic mandate. With luck they will be destroyed at the next election, as they deserve to be. Let no-one forget, though, how far the last Labour government took us down this path and legitimized these changes through measures like student fees and the Private Finance Initiative.)

fn1. For an argument to this effect and a demolition of the idea that lack of money confers lack of ability rather than unfreedom, see G.A. Cohen, “Freedom and Money”:http://howardism.org/appendix/Cohen.pdf (PDF)

Since it’s starting to “filter”:http://krugman.blogs.nytimes.com/2012/03/05/economics-in-the-crisis/?pagewanted=all into “debate”:http://modeledbehavior.com/2012/03/06/in-which-i-am-won-over-by-paul-krugman/, it’s probably time that the paper that John Quiggin and I have written on Keynesianism in the Great Recession be released into the wild. It’s currently under journal review, but still has some holes (we figured it was at the stage where it would be helpful to have reviewers point out what we needed to do rather than try to model their likely responses internally). So, it’s here for downloading – and criticisms, comments and suggestions for improvements will be gratefully received. NB that both John and I have participated in this debate – but we have tried, as best as we can, to look at what happened not from the perspective of whether the people who were winning at any one point in time _deserved_ to win or not according to our subjective criteria, but instead, whether there are general explanations (independent of the quality of the arguments on the one side or the other) for the influence of different arguments at different times. In short, we’ve tried to write a paper about what happened, and why, rather than what should have happened. NB also, that we are aware of some holes (e.g. the fit between some of the theory, and the practical application is not as tight as we would like), and would love to hear suggestions for improvements.

Update: It would be particularly interesting to hear from people with strong, divergent perspectives, so as to make sure that the piece reflects as much information and as many points of view as possible. People should also feel free to email me at keynespaper@henryfarrell.net if they would prefer to make criticisms or suggestions privately rather than in public.

David Graeber’s three social principles – hierarchy, exchange and communism – are useful devices to think about the world, particularly when you become sensitized to the way in which one can turn into or mask another. One site of human interaction that may be illuminated by Graeber’s principles is the modern university: perhaps especially the British version which has evolved from nominally democratic modes of governance to extremely hierarchical ones within a generation.
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David Graeber’s Debt: The First 5000 Years begins with a conversation in a London churchyard about debt and morality and takes us all the way from ancient Sumeria, through Roman slavery, the vast empires of the “Axial age”, medieval monasteries, New World conquest and slavery to the 2008 financial collapse. The breadth of material Graeber covers is extraordinarily impressive and, though anchored in the perspective of social anthropology, he also draws on economics and finance, law, history, classics, sociology and the history of ideas. I’m guessing that most of us can’t keep up and that we lack, to some degree, his erudition and multidisciplinary competence. Anyway, I do. But I hope that a Crooked Timber symposium can draw on experts and scholars from enough of these different disciplines to provide some critical perspective. My own background is in political philosophy and the history of political thought: so that naturally informs my own reactions as do my political engagements and sympathies. So mine is merely one take on some of the book’s themes.

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Last week’s nef event on shorter working week, which I blogged about a few days ago, is now available to watch via the LSE channel. Enjoy.

Last Wednesday I attended an event at LSE (under the auspices of the New Economics Foundation) exploring the idea of working-time reduction with an eventual goal of moving to a normal working week of 21 hours. Various people asked me to write up the event, so that’s what I’m doing, though I claim no special expertise in the surrounding economics and social science. The lectures were filmed, so I expect that they’ll be up somewhere to watch soon, which will make my comments superfluous. Tom Walker of Ecological Headstand was also present, so I wouldn’t be surprised to see some remarks from him there soon.
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David Cameron’s use of the veto in the recent EU summit opens an era of deep uncertainty (and possible catastrophe) for British and European politics. Two things seem to be true: Cameron is an incompetent opportunist in thrall to his backbenchers and the proposed treaty is a disaster for the Eurozone countries themselves. The fact that it is a disaster (a fact recognized by Francois Hollande’s declared intention to renegotiate) might seem to give some support to Cameron. But of course it doesn’t, since the remaining 26 countries will just go ahead without the UK. All Cameron has done is isolate and exclude himself. As one MEP is reported as saying today, “If you’re not at the table, you’re on the menu.”

Cameron vetoed the proposed EU treaty on the basis, or pretext, that other countries wouldn’t agree to “safeguards” for the City of London. The reason he was asking for these was essentially just because his backbenchers had demanded he show the “bulldog spirit” and, since EU treaties need unanimity, he thought he could extract some symbolic gain to satisfy them. He didn’t clear this with Merkel or Sarkozy in advance and would have been inhibited in doing so because the British Tories withdrew from the mainstream Euro conservative grouping in order to hob-nob with a bunch of extreme nutters and anti-semites. Sarkozy, who wanted a more integrated core Europe without Britain in any case, took the opportunity to call Cameron’s bluff. All very good for Sarko in the run-up the the Presidential elections. Exit Cameron stage right, claiming to have stood up to the EU – and getting praised by the UK’s tabloid press and an opinion-poll boost – but actually exposing the City to further regulation under qualified majority voting. He’s also chucked away decades of British policy which favoured EU expansion with the new accession countries serving as a counterweight to the Franco-German axis. Where are the other countries now? Lined up with the French and Germans.

The Euro treaty itself, assuming it goes ahead as planned and is enforced, mandates balanced budgets and empowers the Eurocrats to vet national budgets and punish offenders. Social democracy is thereby effectively rendered illegal in the Eurozone in both its “social” and “democracy” aspects. Daniel put it “thus”:https://crookedtimber.org/2011/12/09/euro-kremlinology/comment-page-2/#comment-391547 :

bq. a takeover of Europe by the neoliberal “permanent government” who failed to get their way by democratic means. All of the nationalism and anti-German sentiment is a distraction from the real scandal here. The ‘technocrats’ (which is apparently what they want to be called, although frankly I am seeing a lot of ideology and not much technical ability) want to reorganise the whole of Europe on neoliberal lines (ironically, to basically replicate the Irish economic transformation

One might think, then, that the left should be happy to be well away from it and that Cameron has inadvertently done us a favour. However, the short-term consequences in British politics could well be awful. My worst-case fantasy scenario has Cameron calling a snap General Election on nationalist themes, getting a majority dominated by swivel-eyed propertarian xenophobes and dismantling the welfare state, the Health Service, the BBC etc. Riots and civil disorder would be met with force, and those driven to resistance or crime would be incarcerated in giant new prisons. The Scots would then, understandably, opt for independence, and England and Wales would be left at the mercy of the crazies for several decades. Texas-on-Thames, in short.

And Nick Clegg? Well I wonder if even Daragh McDowell will make a case for him now.

Via DeLong and Econospeak, I found my way to Gregory Mankiw’s self-exculpation in the New York Times. Mankiw quotes Keynes drawing a contrast between method and empirical conclusions:

bq. The theory of economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique for thinking, which helps the possessor to draw correct conclusions.

Hard not to be struck by a parallel with Lukacs’s opening passage from History and Class Consciousness:

bq. Let us assume for the sake of argument that recent research had disproved once and for all every one of Marx’s individual theses. Even if this were to be proved, every serious ‘orthodox’ Marxist would still be able to accept all such modern findings without reservation and hence dismiss all of Marx’s theses in toto – without having to renounce his orthodoxy for a single moment. Orthodox Marxism, therefore, does not imply the uncritical acceptance of the results of Marx’s investigations. It is not the ‘belief’ in this or that thesis, nor the exegesis of a ‘sacred’ book. On the contrary, orthodoxy refers exclusively to method. It is the scientific conviction that dialectical materialism is the road to truth and that its methods can be developed, expanded and deepened only along the lines laid down by its founders. It is the conviction, moreover, that all attempts to surpass or ‘improve’ it have led and must lead to over-simplification, triviality and eclecticism.

I’ve never had sympathy for what Lukacs says here, and don’t know the context for the Keynes quote. But I’m struck by the way that both Mankiw and Lukacs implicitly endorse the idea that they can just keep on keeping on, whatever happens in the actual world.