Tag Archives: review

Not all economists are neoliberal, honest

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It was because of a tweet linking to her LSE lectures that I decided to read Wendy Brown’s [amazon_link id=”1935408534″ target=”_blank” ]Undoing the Demos: Neoliberalism’s Stealth Revolution[/amazon_link]. My relationship with the concept of neoliberalism is an uneasy one, in that I don’t really know what it means. Often, radical writers use it to mean ‘most of economics’ – Philip Mirowski’s Never Let A Serious Crisis Go to Waste is a good example of this –  making an exception only for certain Marxist or otherwise unimpeachably heterodox economists. I understand the idea well enough to know [amazon_link id=”178360610X” target=”_blank” ]Yanis Varoufakis[/amazon_link] is not neoliberal. However, writing off all the rest of economics makes it an unhelpful concept in my book. Of course there are ideologically right wing economists but there is a wide range of views about both politics and economics within the profession.

[amazon_image id=”1935408534″ link=”true” target=”_blank” size=”medium” ]Undoing the Demos: Neoliberalism’s Stealth Revolution (Zone Books Ner Futures)[/amazon_image]

I thought Brown’s book was going to be subtler. Here is her definition: “neoliberalism is not about the state leaving the economy alone. Rather, neoliberalism activates the state on behalf of the economy, not to undertake economic functions or intervene in economic effects, but rather to facilitate economic competition and growth, and to economize the social, or as Foucault puts it, to ‘regulate society by the market’.” She adds that neoliberalism entails “the dramatic curtailment of public values, public goods and popular participation in political life.” This definition makes sense to me – and makes neoliberalism a political ideology, one that uses its claim about the primacy of markets to extend a certain political order into more and more areas of life. It is similar to Michael Sandel’s argument in [amazon_link id=”0241954487″ target=”_blank” ]What Money Can’t Buy[/amazon_link].

However, Brown goes on to list all the neoliberal economists who include Milton Friedman, Friedrich Hayek, Gary Becker – but also Joseph Stiglitz. Wait – Joe Stiglitz in the same camp as Becker?! Barack Obama also gets labelled as neoliberal, along with Reagan and Bush. So this is back to vacuous.

It’s a shame because the argument that the primacy of the market has been extended into inappropriate domains needs to be taken seriously. People regard ticket scalping as unfair – this includes many economists – so those of us who do economics have to respect the fact that some values other than economic efficiency might have to win out. Freedom, civic cohesion, fairness are all important values. Where it is appropriate to prioritise efficiency, or to use market processes to achieve either efficiency or other outcomes, should always be a matter of public and political debate. Most of the economists I hang out with – applied micro people – think it will depend on both people’s political choices and on the exact circumstances: the US trade in SO2 emissions works well, the EU market in carbon emissions does not; [amazon_link id=”B00ODG9VUM” target=”_blank” ]Alvin Roth[/amazon_link]’s matching markets for kidneys or medical jobs are magical (and no money changes hands). My kind of economists tend to be pragmatists, unlike those in politics who argue the market is always best.

There are some real dilemmas. Later in the book, Brown gives short shrift to the idea that ‘governance’ is ever more important than politics, and argues that independent, technocratic bodies such as central banks should not take decisions with political consequences – and no doubt the many critics of the ECB and the right-wing critics of the Fed would warmly agree. It does not seem so obvious to me. Central banks take ‘better’ decisions when they are independent in the specific sense that growth is less volatile and inflation lower. Yet of course they need legitimacy – answering to parliament, fulfilling a remit set by the government. And the Greek crisis has indeed demonstrated that central banking is political at times of great stress. Perhaps Brown is right but I don’t think she argues the case well, when there are areas of policy in which expert advice or decisions made by technocrats delivers good outcomes. Surely this is debatable.

Anyway, [amazon_link id=”B00YDJ33RG” target=”_blank” ]Undoing the Demos[/amazon_link] is an interesting book even though I ended up disagreeing with much of it. I will say that whenever anybody next tells me economics is an abstract, wholly theoretical subject, I will make them read this. But it still helped me understand Michel Foucault’s almost totally incomprehensible [amazon_link id=”1403986541″ target=”_blank” ]The Birth of in Biopolitics[/amazon_link], which I read recently. And I do think it’s important to push back against the political stance that disguises ideological projects with the claim that market are always right.

Be happy! (Or else…)

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It has been a busy and dyspeptic week. [amazon_link id=”1781688451″ target=”_blank” ]The Happiness Industry: How the Government and Big Business Sold Us Well-Being[/amazon_link] by William Davies has been the perfect accompanying reading material. The enthusiasm of many of my fellow economists for behavioural economics has made me increasingly uneasy. This is, after all, a profession strongly  inclined towards social engineering, and I’ve written here before about the likelihood that nudges are seen as an exciting new tool for this job. After all, they seem to work, and as even the status quo is a nudge, why wouldn’t you design better nudges to deliver better outcomes?

[amazon_image id=”1781688451″ link=”true” target=”_blank” size=”medium” ]The Happiness Industry: How the Government and Big Business Sold us Well-Being[/amazon_image]

[amazon_link id=”1781688451″ target=”_blank” ]The Happiness Industry[/amazon_link] eloquently reinforces my suspicions. It locates the fashion for “well-being” in the long tradition of making the internal world measurable and reducing questions of morality and political choices to scientific decisions. Economics, rooted in [amazon_link id=”1508738734″ target=”_blank” ]Bentham’s utilitarian calculus[/amazon_link], plays a leading role in the story, as do the successive waves of management science from Taylorism on. Indeed, in management, the growing surveillance of employees’ ‘well-being’ by wearable devices is the latest version.

Davies points out there is an inconsistency at the heart of this: “Workplaces put a growing emphasis on community and psychological commitment, but against longer term trends towards atomization and insecurity. We have an economic model which mitigates against precisely the psychological attributes it depends upon.” Yet the emphasis on resilience or mindfulness puts all the onus on the individual to adjust: “one progressive route would involve changing [the] context. But another equivalent would be to focus on changing the way it is experienced.”

He is also critical of the economists’ use of the idea of revealed preference: that you can infer somebody’s inner preferences or desires from their choices, usually their choices about what to spend their money on. Shopping speaks louder than words. Perhaps wearables that can measure heart rate or sweat will replace money as the best revealed preference metric, but meanwhile what someone spends is a readily-measurable indicator, easier to count and compare than what people say about their emotions. “This granted money an exceptional psychological status, as it allowed others to peep into people’s private desires.”

Disliking money as a metric, Davies is therefore also critical, as many people have been, of using the technique of contingent valuation to put monetary values on, say, the impact of an environmental disaster. “What we witness in this sort of example is economics becoming used as a basis for broad public agreement well beyond the limits of the market place,” Davies writes. He’s in good company. [amazon_link id=”B007IO1X5C” target=”_blank” ]Michael Sandel[/amazon_link] and [amazon_link id=”014197558X” target=”_blank” ]George Monbiot[/amazon_link] are among those who dislike the use of money as a measure of non-monetary values, such as nature, or relationhips, or civic virtue.

However, this seems to me distinct from the reductionism of the behavioural economists and psychologists. It is one answer to the question of how you resolve conflicts when there is no market: if you have to make interpersonal comparisons, how should you go about it? Or, in the words of a well known survey article, is some number better than no number? If you want to calculate compensation after an oil spill, how else could you go about it? So I am far more comfortable with these valuation techniques than I am with the happiness tendency.

On the latter, my instincts are with Davies: ” Behaviourism stretches Bentham’s dream of a scientific politics to its limit, imagining that beneath the illusion of individual freedom lie the cold mechanics of cause and effect, observable only to the expert eye.” When I teach my students behavioural economics – and they’re very interested in it – I ask them to look at this Adam Curtis blog, From Pigeon to Superman and Back Again. While not dismissing the policy sense of some nudges, beware economists who know how to make you happy and beware even more bosses demanding it of you.

Talking proper

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Oliver Kamm’s book [amazon_link id=”0297871935″ target=”_blank” ]Accidence Will Happen: The non-pedantic guide to English usage[/amazon_link] is a treat. I’ve always tried to write clearly about economics, a field strewn with jargon used in proper (as shorthand) and improper (as obfuscation) ways. I believe clear writing is a pretty reliable guide to clear thinking on the part of the author, and always liked George Orwell’s famous essay [amazon_link id=”B00AZQTM5I” target=”_blank” ]Politics and the English Language[/amazon_link].

[amazon_image id=”0297871935″ link=”true” target=”_blank” size=”medium” ]Accidence Will Happen: The Non-Pedantic Guide to English Usage[/amazon_image]  [amazon_image id=”B00AZQTM5I” link=”true” target=”_blank” size=”medium” ]Politics and the English Language[/amazon_image]

[amazon_link id=”0297871935″ target=”_blank” ]Accidence Will Happen[/amazon_link] is a heartfelt plea to respect the vitality of English as a living language whose usage changes. It scorns the “shibboleths” of grammar pedants and usage sticklers. (Orwell too argued against the tyranny of ‘standard English’, although his rules for writing are over-rigid in their turn.)

I largely agree with Oliver Kamm, even though I have a fondness for using ‘whom’ in the ‘right’ places and considering ‘data’ to be a plural. And this observation in the book strikes me as true and to the point: “Shibboleths are not rules of grammar, let alone marks of civilisation: they are a means of keeping divisions sharp. …. The sticklers’ clause is not about culture but about class.”

As an observer of teens who attended the local school, this class distinction is evident in the way the kids from middle-class families readily switch between standard English at home and the local London street dialect with their friends. And growing up myself in a working-class household in north west England, it was all too clear that losing one’s regional accent was a requirement for upward mobility.

The moral is: pause before you sneer at the greengrocer’s stray apostrophes.

Enlightenment values

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I’ve been slowly reading [amazon_link id=”0691150648″ target=”_blank” ]The Shape of the New: Four Big Ideas and How They Made the Modern World[/amazon_link] by Scott Montgomery and Daniel Chirot. Slowly because it’s too big to carry in my bag on the tube. It’s an intriguing history of the modern world as shaped by – yes – Big Ideas. The authors’ argument is that: “Ideas have been among the primary forces behind modern history during the past three centuries.”

[amazon_image id=”0691150648″ link=”true” target=”_blank” size=”medium” ]The Shape of the New: Four Big Ideas and How They Made the Modern World[/amazon_image]

This isn’t a new argument in itself. In the context of economic history, Joel Mokyr’s [amazon_link id=”0691120137″ target=”_blank” ]The Gifts of Athena[/amazon_link] and his [amazon_link id=”0140278176″ target=”_blank” ]The Enlightened Economy[/amazon_link] give pride of place to ideas, then embodied in innovations.

[amazon_image id=”0691120137″ link=”true” target=”_blank” size=”medium” ]The Gifts of Athena: Historical Origins of the Knowledge Economy[/amazon_image]  [amazon_image id=”0140278176″ link=”true” target=”_blank” size=”medium” ]The Enlightened Economy: Britain and the Industrial Revolution, 1700-1850[/amazon_image]

And as Keynes famously said at the close of [amazon_link id=”B00N47UOI4″ target=”_blank” ]The General Theory[/amazon_link]:

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil.” (The quotation is usually shortened but it’s better in full.)

[amazon_image id=”B00N47UOI4″ link=”true” target=”_blank” size=”medium” ]The General Theory of Employment, Interest, and Money[/amazon_image]

The Shape of The New does though have a distinctive version of the ideas that created our world. The first four chapters cover Adam Smith (morality and self-interest in political economy), Karl Marx (the desire for revolutionary redemption), Charles Darwin (embedding humanity in nature, the scientific method turned on ourselves) and the Jefferson-Hamilton debates (the nature and meaning of democracy). I knew the least about the last of these, so found it particularly interesting. The second half turns to the backlashes: the counter-Enlightenment all the way through to Fascism; and Christian and Muslim counter-reactions to modernity.

As the book concludes, the debates are still live, although of course taking new forms constantly. Those of us who hold Enlightenment values dear have to fight for them.

However, it ends with a bit of a damp squib, the conclusion being that the humanities are essential in higher education, and one of the most important aspects of study should be the history of ideas. I do happen to agree (even in economics), but it’s a rather low key ending to an ambitious and interesting book.

 

Economics of empire – then and now

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I’ve enjoyed reading Tristram Hunt’s T[amazon_link id=”014104778X” target=”_blank” ]en Cities that made an Empire[/amazon_link], out now in paperback. It’s a clever prism on British imperialism, taking a tour of major colonial cities and using a period in their history to explore the wider politics and economics of colonialism, and the cultural relations between the “mother country” and her colonies as expressed in architecture and urban design in particular.

[amazon_image id=”014104778X” link=”true” target=”_blank” size=”medium” ]Ten Cities that Made an Empire[/amazon_image]

The geographic and historical tour starts in Boston in the late 18th century (the Revolutionary War), then Bridgetown, Barbados (looking at slavery and the triangular Atlantic trade), Dublin (and the painful relationship between the two countries), Cape Town (as the base for the extension of Empire), Calcutta (early Indian adventurism by the East India Company), Hong Kong (the opium wars), Bombay (the apogee of Victorian Empire), Melbourne (and the distinctive characteristics of an Anglo-Saxon colony), New Delhi (and the independence movement) and Liverpool (where Empire ended on 22 April 1981 when Tate & Lyle closed its refinery and the docks stood empty, Tate & Lyle blaming EU membership and the change in trading patterns that involved).

The wide perspective makes very clear the commercial interests driving the politics of imperialism, from the slave trade to the exploitation of Indian cotton supplies and the market it provided for cheap Lancashire textiles, and the eastern triangular trade of Indian opium to China, Chinese luxuries to Britain and British manufactures to India. I can’t read anough about the Lancashire cotton industry for obvious reasons & have [amazon_link id=”024101171X” target=”_blank” ]The Empire of Cotton: A New History of Global Capitalism[/amazon_link] on my wish-list.

[amazon_image id=”B00PYY1AQU” link=”true” target=”_blank” size=”medium” ]Empire of Cotton: A New History of Global Capitalism[/amazon_image]

There was also a *fabulous* In Our Time recently about the Lancashire weavers standing (at great cost to themselves) with the Union and the slaves during the American Civil War – Abraham Lincoln presented a statue to Manchester afterwards, in recognition of the support.

Lincoln in Manchester

Lincoln in Manchester

Modern globalization is driven just as much by drugs, arms and slavery, or people trafficking as we now call it; but these are veiled and never discussed in policy conversations, although of course the financial and professional support these trades require is big business. Nor do economists analyse it much; after all, you can’t download the data from the internet and run it through Stata. I often think we should take this illicit global economy far more seriously.