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The
New Alchemy
January
23, 2002
by Ernest Partridge
 When
an intelligent man [in the past] expresses a view which [today]
seems to us obviously absurd, we should try to understand
how it ever came to seem true. This exercise of historical
and psychological imagination at once enlarges the scope of
our thinking, and helps us to realize how foolish many of
our own cherished prejudices will seem to an age which has
a different temper of mind. — Bertrand Russell
All for ourselves, and nothing for other people, seems,
in every age of the world, to have been the vile maxim of
the masters of mankind. — Adam Smith, The Wealth
of Nations
Suppose the model for our public policy-making and the foundation
of our dominant political philosophy were an admittedly imaginary
creature inhabiting an admittedly mythical environment.
Unfortunately, this approximately describes the condition
of contemporary policy-making and politics in the United States.
The imaginary creature is so-called "economic man," and the
mythical environment is "the perfect market." The model for
public policy is "cost-benefit analysis," a conceptual device
that "commensurates" all values into the common denominator
of "cash," thus rendering policy-analysis an applied extension
of economics.
The political philosophy is "neo-conservatism" which, while
it has captured the Republican Party, also holds a strong
influence upon the Democratic Party. This philosophy all but
asserts that whatever government can do, "the free market"
can do better - as Ronald Reagan put it in his first inaugural
address, "government is not the solution, government is the
problem." Nobel-laureate economist Milton Friedman concurs:
"There is nothing wrong with the United States that a dose
of smaller and less intrusive government would not cure."
With the body-politic reduced to a market-place, this line
of thinking leads to a dead end bluntly expressed by Reagan's
dear friend, Margaret Thatcher: "There is no such thing as
society, there are individual men and women and there are
families."
"Economic man" (homo economicus) is a rather weird
critter. He is a complete egoist, motivated solely by the
self-interested desire to "maximize his utility" - a concept
variously described as "want-" or "preference satisfaction."
This motivation is manifested and measured by "economic man's"
willingness-to-pay for these "satisfactions" in a free market.
(Given the disagreeable nature of homo economicus,
feminists should take no offense at this gender-specific language).
Clearly, this is not the sort of an individual that one would
want as a next-door neighbor.
Homo Econ's bailiwick is a conceptual space called
"the perfect market"-- a "conceptual space," since it need
not be any particular "place" at all. Instead, "the perfect
market" of formal economic theory is defined by the following
conditions: the participants (all "economic men" of course)
must be numerous and completely informed, and their transactions
must be voluntary, mutually beneficial, open, without collusion,
and their exchanges free of transaction costs and externalities
(such as pollution of others' air and water). This model of
social organization, we are told, is far superior to an established
and familiar alternative arrangement; namely popular government.
To the "free-market" enthusiasts, "Big Government"
is anathema.
As a moment's reflection will tell us, "the perfect market"
does not exist - not even remotely. Furthermore, history teaches
us that "cowboy capitalists" do not really approve of free
markets for themselves - only for their rivals. Driven, as
economic beings, by "self-interested utility maximization,"
the capitalist much prefers monopoly - his monopoly.
And since the "front runner" enjoys decisive advantages over
the rest of the field, the natural result of "the free market"
is monopoly. In a sort of inner logic that Hegel would admire,
"the free market" contains within itself, the seeds of its
own destruction. Evidence? Look again to history: then it
was J. D. Rockefeller; now it is Bill Gates.
The remedy? Now, as before, the remedy is anti-trust legislation,
which is to say "Big Government," of course! What else?
The (approximately) free market is, in fact, a very fragile
institution that can only survive if carefully monitored and
managed by an instrument represented by and accountable to
the public at large - i.e., the government. (See my, "Kill
the Umpire!")
"Neo-Classical economic theory," which has put the concepts
of "economic man" and "the perfect market" into the center
of public policy making and political debate, claims to be
a "value-free" discipline. Yet the preferred terminology of
this discipline is freighted with value connotations. For
example, the behavior of "economic man" (i.e., self-interested
utility maximization) is described as "rational." By implication,
then, the behavior of such saints and heroes as Gandhi, M.
L. King, Sakharov and Mandela is "irrational." Furthermore,
transactions that leave both parties "better off" are described
as "efficient" and a society in which there can be no further
transactions without someone being disadvantaged is described
as "(Pareto) optimal." How many notice that by this account,
a slave society might be "optimal" (since one cannot free
the slaves without making the slave-holder "worse off"). A
system requiring the well-to-do to share their wealth with
the less fortunate is, by definition, "inefficient." The question
of the "just distribution" of a society's resources is simply
not a part of "neo-classical" economics.
“Rationality,” “efficiency” and “optimal” are value-laden
words, central in the vocabulary of this allegedly “value-free”
discipline.”
Clearly, "economic man" and "the perfect market" are severely
truncated accounts of human nature and society, and thus very
poor foundations for public policy-making, for practical politics,
and for just provision for future generations. (Or so I argue
in my forthcoming paper, "In
Search of Sustainable Values." This brief sketch
above of the make-believe "economic man" and "perfect market,"
along with my contention that this view of man and society
is unduly influential in our political institutions, is drawn
with very broad strokes and lacks the benefit of elaboration,
documentation and argument. I allow myself these bold simplifications,
mindful that my justifications thereof have been published
elsewhere and may be found at my website, The
Online Gadfly.
Even with that elaboration at hand, I would be well-advised
to qualify my rhetoric just a bit.
First of all, I am not "anti-markets." The failed economic
experiment in the Soviet Union proved conclusively that a
centralized command economy is vastly inferior to a market-based
system of pricing, distribution, innovation and quality control.
Having "shopped" in both the Soviet Union and the United States,
I know this from personal experience. Furthermore, because
human beings in significant aspects of their lives, do, in
fact, act upon economic motives, a scholarly examination of
market behavior has valuable implications for numerous disciplines,
including environmental studies and political science.
In short, I do not assert that a study of markets and economic
theory should count for nothing. Instead, I protest that they
should not count for everything. Homo economicus is
an ingredient of our nature that we would be well advised
to study. But our lives consist of much more than buying and
selling. We also love and we sacrifice, and we have goals
and concerns that transcend our self-interest. And we seek,
both personally and collectively, truth, justice, virtue,
and personal excellence - none of which can appropriately
be bought or sold in markets.
Consider, truth - the primary value of the scholar
and scientist. An authentic scholar will say, "show me your
evidence, and if it is well-founded and your argument is sound,
then you will convince me." Never will he, qua scholar,
say, "how much are you willing to pay to have me believe you?"
Similarly, judges and juries ideally decide their verdicts
on the weight of evidence. A purchased verdict is not only
invalid; it is quite properly regarded as a crime. And even
classical economists, when they publish their theories, offer
arguments, not bids.
Furthermore, love, friendship and loyalty that is bought
is less valuable than that which is given freely. Mark Sagoff
makes the point with his characteristic wit and eloquence:
"A civilized person might climb the highest mountain, swim
the deepest river, or cross the hottest desert for love, sweet
love. He might do anything, indeed, except be willing to pay
for it."
Among the severest critics of neoclassical economics are
economists. These include Herman Daly, Nicholas Georgescu-Roegen,
Kenneth Boulding and Amartya Sen, all of whom possess a clear
view of the limitations of their discipline. Indeed, my quarrel
is less with economists than with politicians and policy-makers
who have skimmed easy formulas and simplistic generalizations
off the top of the neo-classical economist theory, and put
them to work in behalf of their special political and economic
interests.
Even so, my dissenting economist friends, whom I admire enormously,
report that there is in fact a dominating "orthodoxy" of neo-classical
thought in the discipline of theoretical economics, and that
this orthodoxy has had enormous influence upon both public
policy and politics.
I can validate their report with my own experience. Often,
when I have mentioned the names of such mavericks as Boulding,
Georgescu-Roegen and Daly to orthodox economist colleagues,
I find that I have evoked stares of disbelief or even condescension,
such as one might expect from Jerry Falwell upon hearing the
name of Charles Darwin. The chief offense of the heretics,
its seems, is that they have allowed the elegance of their
formal theories to become contaminated by compelling facts
of biology and physics. Meanwhile, the true believers read
with admiration the pronouncements of economists such as Julian
Simon, who confidently assert that the omnipotence of the
free-market and the omniscience of future entrepreneurs can
overcome trivial physical constraints such as the second law
of thermodynamics. (See my "Perilous
Optimism."
I once heard Paul Ehrlich remark that if an engineer proposed
to design an aircraft for an exponentially expanding crew,
he would rightly be regarded as mad. Yet when an economist
proposes an economic model that posits perpetually expanding
population and resource consumption, he is regarded as eligible
for the Nobel Prize for economics.
So why is neo-classical economics so influential?
Not, I submit, because of supporting evidence, experimental
validation, or clear and verifiable application to "the real
world." The dominance of "neo-class," I believe, is due far
more to "the sociology of belief."
First of all, neo-classical economics is what Nietzsche
called a "master morality." It is an ideology that is nurtured,
sponsored, and in the service of, wealth and power. Thus the
hostility to government of neo-class economics, and the neo-conservative
politics which embraces it, is no mystery. Popular government
, by enforcing "equal justice under law," is empowered to
protect the weak from the strong. (Read your Constitution!)
. Such solicitude toward the weak and the poor has no place
in a "master morality."
To the contrary, wealth and power prefer to regard society
as a market-place of "customers" with consumer preferences,
rather than a polity of citizens with inalienable rights.
The privileged believe it far better to apportion power to
wealth (i.e., the willingness and ability to pay - "let the
market decide"), than to relinquish power to a principle of
"one-person, one-vote.") With government "off our backs,"
writes Milton Friedman, free-market conservatism leaves us
"free to choose." But this is a "freedom" apportioned to wealth
and power - a "liberty" (for some) obtained at the price of
lost equality and fraternity (for the rest of us). (See my
"With Liberty for Some" [www.igc.org/gadfly/papers/liberty.htm]).
Secondly, "neo-classical economics" proves, once again,
the rule that "nothing succeeds like success." Senior professors,
pundits, and "think-tank scholars," the High Priests of the
reigning ideology, edit the scholarly journals, and determine
appointments, promotions and tenure (on the basis, largely,
of publications in the self-same journals). And how did these
elites obtain their seniority? Return to the beginning of
the paragraph - da capo, perpetuo moto. As the careers
of such courageous dissenters as Herman Daly will testify,
the punishment meted out by the priesthood upon the heretics
can be brutal.
Finally, "neo-class" suggests a seductive simplicity,
clarity and determinateness for politicians and policy-makers
seeking answers and disinclined to ponder disquieting "philosophical"
questions. (Much more about this "seductive simplicity" in
the first section of "...
Sustainable Values").
Looking back through history, we wonder how it is possible
that intelligent and educated people once accepted uncritically
such notions as astrology, judicial trial-by-combat, the demon-possession
theory of disease, and alchemy. Today, more and more sophisticated
observers of society and politics are wondering how homo
economicus, a creature bereft of sympathy, humanity, and
noble aspiration, and "the perfect market," a "place"
devoid of any social contacts more elevated than market transactions
- has come to be regarded by our political elites as the foundation
of a just political order.
I suspect, and devoutly hope, that in the near-future neo-classical
economic theory will be regarded as the "alchemy" of our age.
And intelligent men and women will wonder how it was possible
that anyone could ever have believed such nonsense.
Ernest Partridge is a consultant, writer and lecturer in the
field of Environmental Ethics, and a Research Philosopher
at the University of California, Riverside. He publishes the
website, "The
Online Gadfly."
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