Greetings, Pilgrims,
One of the wonders of travel, perhaps like other joys somewhat dangerous, is the sense of jumbling one’s own sense of time. More than once I have left the mountains in snow, only to drive down 9500 feet or so, into almost summer Heading eastward over the last weeks, I left New York City at the height of springtime, the plantings of the uber-rich on Park Avenue looking especially nice. Kansas was radiant, most of the flowers gone but the leaves and grasses taking on the green gold vigor of early summer. In the mountains, the birds are back, including the male hummingbirds that arrive first, and the big animals are restless. Thunderstorms bring hail changing over to snow. The aspens won’t leaf out until the latter part of May, and we creatures wait for the green. Nothing will flower until June.
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Letters and Rabbit Holes
I am going to try and signal a little more frequently. I want to keep things light, rather than wait till work piles up and then opening the floodgates. More importantly, some of you are now supporting distribution of my work (thank you!), so I should do more distributing. But not too much — I don’t want to clutter your inbox.
A word about organization: work that is fairly accessible, not too long, and of fairly general interest go in the newsletter, along with polite and I hope kind observations on the present dispensation. Stuff you can and should share!
Links are likely to take you down subterranean passages to work that tends to be longer, more demanding, more specialized, and/or less polite, even disturbing. Trigger warnings!
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Paranoia Within Reason
After a hiatus, I’ve published another podcast. I am slowly turning Maguire & Westbrook, Getting Through Security: Counterterrorism, Bureaucracy, and a Sense of the Modern (book) into an audiobook. Our plan is to give the first few chapters away for free, and then to sell the entire book – especially to members of the global security community – for cheap.
Episode 13 Getting Through Security Part III (podcast) is about the ultimate insolubility of “security” as a concept, the relationship of security to sovereignty (in our time, bureaucracy), and “paranoia within reason.” You can get it at the link above, or pretty much wherever you get podcasts. I’m really proud of it.
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For many years I thought/wrote via emails, which sometimes were sent to many people, becoming semi-open letters. I started using Medium, and now Substack, as a way to express such thoughts to many people in less direct, more conventionally third party, fashion. But I still like the “open letter” format. Most of the back of the Bible, it seems, consists of letters. Here’s one, perhaps a bit too technical for the newsletter.
Open Letter: After Liberal Economics?
A buddy wrote, expressing interest in the World Economics Association “and particularly its goal of promoting a more pluralist approach to economics,” and went on to ask “whether I was aware of any movement on this front? It seems as if all of the economists I encounter are conceptually bound by liberalism, but perhaps you know of alternatives?”
I encouraged him – and you, gentle reader – to check out the WEA. I’ve done a lot of writing for them over the years; it’s a big, if scattered, audience. My substantive response might be of interest to some of you, especially in the critical social sciences.
Turning to your question, I woke up yesterday thinking about how it might be answered with less than a book, which I’m taking the opportunity to sketch, I guess. It’s a disease.
Many people, including me, spent decades criticizing the strong form of orthodox microeconomics, which powered “law and economics” in the US and undergirds most of what is nowadays called “neoliberal.” Understanding was gained, sometimes, but I don’t think most of it mattered, in the sense of moved the needle within “economics” or much of the polity, where academic economics remains highly respected. [Another interlocutor cannot help reminding me that it was shall we say easy (as in virtue), to fund projects that led to certain policy prescriptions. But as is my wont, I’m going to consider all concerned to be pure as the driven snow.]
The only strand of criticism that gained real traction within academic economics and its sympathizers was “Behavioral Economics,” ultimately blessed by a Swedish Banking prize. Unlike many other forms of critique, which were skeptical, postmodern, moral, historical, and so forth, behavioral economics claimed to have the authority of relatively hard science, much like microeconomics. There are experiments! Second, behavioral economics presented itself as a refinement: economic actors were rational, except in some circumstances (empirically demonstrated) when they were not. This or that “biased” decision-making, i.e., skewed it from the straight and narrow represented by “rationality.” The paradigm was reaffirmed as it was refined. In short, at least as I read (sense?) the recent history, behavioral economics ultimately did not threaten the core intellectual and social aspirations of orthodox economics, to become a verifiable science and respected as such.
Come the GFC, Greenspan tells Congress that the “entire edifice” of risk management collapsed. I thought a paradigm change was imminent, and even wrote a book trying to suggest what a new paradigm for political economy might look like if it abandoned informational efficiency as an organizing principle: Out of Crisis: Rethinking Our Financial Markets. Out of Crisis: Rethinking Our Financial Markets. A few years later, however, it became clear that the paradigm was chastened, but had not gone away.
As you suggest, the traditional criticisms of the paradigm remained, and became boring in their silos, and remained irrelevant in other silos.
Two intellectual developments that might have made a difference, but I don’t think have. Mervyn King, once of the Bank of England, wrote a very good book, The End of Alchemy. It was a big book that said a lot of things, but to the point here, King suggested that economic actors were by and large pretty rational, but the object of their rationality, the future, was inherently uncertain. So money became a way to institutionalize the uncertainty (as opposed to risk) associated with Chicago economist Frank Knight, a contemporary of Keynes. And clearly, in moderating (bump-steering) the money supply, central banks are engaged in a speculative and deeply political enterprise, as I think they should. But it’s hardly a science, as recent events have amply demonstrated. I reviewed King’s book, thought this was a real advance, and have been meaning to write about it since, but life, etc.
Second, the rise of the social. Meme stocks, cryptocurrencies, stocks issued without voting or other legally enforceable rights, NFTs, ESG, and so forth. Amy and I did some work here, suggesting that much finance (at least in a low interest rate environment) should be understood more in terms of Mauss than Smith. Much more than “prestige” goods is at issue here; we are seeing markets used for identity formation mediated by digital forms of interaction. A handbag seller is, at the moment, the wealthiest man in the world.
That is, the rational economic individual: (i) might not be rational (behavioral economics); (ii) might be rational but cannot reason upon fundamentals (King and the narrative turn generally); or (iii) might not be an individual (status and the social).
The problem, for the academy anyway, is that neither “narratives about the future” nor “the social, the fashionable, the viral, the political” look anything like “economic fundamentals.” That is, making such ideas central to the discipline would, in fact, threaten the core aspiration of economics, which long has been to become a science, to float free of such human all too human ephemera. Liberal economists don’t like to say it, but they in fact employ the base/superstructure, material/cultural analytic espoused by the commies (one of the reasons I am not a Marxist, much as I enjoy the jokes).
But things have changed, out in the world. It wasn’t just the GFC. It was also Covid, and Ukraine, and . . . perhaps it is “efficient” for Germany to get gas from Russia, but maybe it is not wise? How are we supposed to think about climate change? Contemporary talk, much of it sensible, about resilience, and industrial policy, and the like do not fit within the paradigm. So, in the world of affairs, we are seeing lots of movement, perhaps theoretically underdetermined, but movement. Willingness to try new forms of competition law. Lots of subsidies. And so forth.
It is not with me, but from memory, John Kenneth Galbraith’s last book ends by claiming that, in a perfect world not too unlike ours, the problem of human material welfare could be solved – we make enough stuff, and could solve the distributional problems if we worked together. (We corresponded, shortly before he died, and he sent me the book – I am really proud of that.) The problem was war, or, one might more broadly say, politics.
I agree. One way to understand the triumphalism of neoliberal economics in the second half of the twentieth century, then, is as a symptom of the great moderation, the Pax Americana, and so forth. Though it hardly seemed like it at the time, in some ways politics receded, or at least receded from the imagination of astonishingly privileged academics in advanced economies. Only if things like war and vulnerability are placed in the background (at least in the Atlantic Academy, perhaps after Vietnam) can one dream that individual choices, aggregated by markets, produce informationally efficient social arrangements, not only powerful but true and even just. Looking back, it’s an incredible accomplishment of the North Atlantic countries, mostly, that substantial numbers of people could be situated to have such dreams, even if I then thought, and still think, that the dreams themselves are inhumane. Many fantasies are inhumane.
Be such things as they may, those days are clearly gone. Just a few days ago, Paul Krugman argued in the NYT that we shouldn’t worry about the rise of industrial policy, subsidies, and various restraints on trade undertaken in the name of global warming, and we should in fact hope the Europeans respond in kind. Such policies are not efficient, not liberal, for reasons going back through Ricardo and Smith, but hey, climate change is really important, so let’s throw money and renationalize markets. I suspect Krugman is right, but as a matter of politics, not economics conceived as an autonomous science: he violates most every tenet of the discipline on which he trades.
[As a son, husband and now (grand)father, understanding household management (oikonomia) as either autonomous or rational is simply hilarious. Which is not to say that household management, or for that matter climate change politics, are unimportant.]
Two other big things have happened. As Krugman perhaps unwittingly suggests, climate change, to which I would add ever-increasing inequality (not new), and especially the now widespread suspicion of tech – after Twitter and Trump and suicide rates and the general miasma of contemporary life – have called the underlying faith in markets, in something like the invisible hand, into question. AI has intensified this sense that maybe market actors are not helping us after all. The powers that be, not least in university administrations, scream “innovation” as if that were itself an argument that the future will be brighter. But that’s an article of faith, and many people think their futures will be worse, even without the apocalypse. The faith is waning.
Second, what I’ve been calling “social capitalism” since the GFC: labor penetration is low, and many existing jobs are, shall we say, dispensable. People may find more jobs in services, delivering meals on electric bikes and so forth, so unemployment rates among those seeking work may stay fairly reasonable. But, as technology gets better (unless we engage in a massive Luddite exercise, which is implausible but worth thinking), and people live at least as long as they currently do, we cannot base human welfare on labor markets. Solicitude for others, then, requires institutions and individuals to have some claim on the economy that cannot be reduced to wages. Or so I’ve been arguing for ten years or more now, when I can.
But to close with your question: why don’t we see more change? I think it is important to remember that the academy is its own world. It is not entirely independent, of course, but it has its own needs, processes, and rationales. It has, in many senses of the word, discipline. Personally, I think that political economy will never, cannot be, anything like a natural science, for reasons alluded to above. But saying that comes at no cost to me, to my status as a professional, my tenuous authority as a “knowledge worker.” Hah.
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I hope the spring merges into summer in the usual beautiful way.
Safe travels.
David A. Westbrook