Status Quo Bias, Classical Liberalism, And the Original Sin of Neo-Liberalism

So what the political economists had conceived in their science was not a picture of the world as it is but a picture of the world as it needs to be remade. They had imagined the kind of human society in which the social problems arising from the division of labor are solved. Thus inadvertently, in the act of trying to simplify the facts in order to understand them, they had been inspired to discover the criterion by which these social problems can be truly defined and the true solutions can be indicated. By making certain assumptions they had described a just society based on the division of labor; then it followed that in the real world of injustice and maladjustment these assumptions were the proper objectives of policy. What they overlooked was that in order to imagine how the division of labor would work with perfect justice, it had been necessary  to assume a reformed society of reformed individuals. It should have followed, then, that, in order to achieve the result in practice, it is necessary to make the reforms in practice.

Instead of the classical economics being an apologetic explanation of the existing order, it is, when properly understood, a searching criticism of that order. It is a theoretical measure which reveals how far short of the promise, how unadjusted to the needs of the division of the labor, is the actual society in which we live. Had the liberal economists realized this implication of their own hypothesis, they would have embarked at once upon the task of exploring the legal, psychological, and social circumstances which obstructed and perverted the actual society. They would not have left the criticism and the reform of society to those who did not understand, or were determined to abolish, the new mode of production. They would have seen  that the mission of liberalism was to develop the principles by which mankind could readapt its habits and institutions to the industrial revolution. They would have carried on the tradition that Adam Smith founded, and, like him, they would have been the critics of the status quo and the intellectual leaders of its necessary reform.

They did not do this. The liberal economists from Ricardo until recent times were obsessed by the deadly confusion that their imaginary world was not a critical introduction to research and reform but the delineation of an order to which the real world conformed approximately, and sufficiently. This error sterilized the scientific advance of liberal thought, paralyzed the practical energies of liberal statesmen, and destroyed the prestige of liberalism. So the economists were properly rebuked by Carlyle, who had his eyes on the real world, as the teachers of a Dismal Science.11--Walter Lippmann The Good Society, 201-2. [HT: David M. Levy]

Lippmann's (1938) The Good Society is the proximate cause of neo-liberalism because the term was caused (recall) at a Paris colloquium in response to his book. It is very much worth re-reading because in the book, Lipmann grapples searchingly and searingly with the failure of (what I have called [recall]) the first wave of liberalism, while aiming to lay the ground-work -- in the midst of a world economic crisis and the ascendancy of Nazism, fascism, and communism -- for liberalism's renewal. I intend to return to it because many of his observations are worth rediscovering. But to do we have to explore first some of Lippmann's failures.

In the quoted passage, Lippmann diagnoses a structural problem with nineteenth century classical (let's call it Ricardian) liberalism. He accuses them of status quo bias in conditions of injustice such that their (normatively desirable) science becomes implicated in serving the needs of the powerful. On his view (one I like), liberalism is a tool to combat status quo bias because reality inevitably falls short of the normative ideal. How it supposed to do that, I won't elaborate (today) beyond his words above (but there is more). 

Here I want to focus, on his claim, "that the mission of liberalism was to develop the principles by which mankind could readapt its habits and institutions to the industrial revolution." Lippmann's underlying idea is that the (ongoing, unfolding) industrial revolution driven by the division of labor is a very disruptive event which turns people's habitats from self-sufficient communities to interdependent communities (part of a great society). Lippmann thinks that both people's habits and institutions needs to be reformed in order to flourish in an industrial society. And this is a process of adjustment that never ends because industrial revolution creates open ended change. Lippmann embraces this conclusion (some other time I return to this in order to discuss his attitudes toward the law).

So, modern society is constantly required to readapt. It follows then that Lippmann would argue for ongoing education not just in job skills, but also social habits. And this is indeed so.  He writes a few pages later, "The economy of the division of labor requires, and the classical economics assumes, a population in which these eugenic and educational problems are effectively dealt with." You may worry that he is describing the classical economists (who he criticizes in the passage I quoted above), but on p. 226 he endorses this in his own words.

Now, I have to admit that Lippmann's interest in eugenics disappointed me, but did not surprise me. My friend, David Levy, had called my attention to the footnote (11), which is a reference to Carlyle's "The Nigger Question." Somehow Lippmann misses (or ignores) that Carlyle is defending slavery and in that famous paper is attacking the (dismal) political economists for their abolitionist criticism of slavery. (Levy has written a terrific book on this.) I kind of suspect that Lippmann's reference to Carlyle is totemic, because Lippmann is certainly not defending slavery. But even so, it raises uncomfortable questions about the nature of Lippmann's eugenics. 

I don't think his eugenics is racialized, but because of the weird Carlyle reference can't be wholly ruled out. But the rationale for Lippmann's defense of eugenics is not to create a superior master race, nor to prevent undesirables from out-breeding the would be master race, or from corrupting the population in the survival of the fittest. Instead it is as quoted above to create what we might call the human capital capable of dealing with adjusting to permanent changing circumstances.  He returns to the topic once more: 

In a wealthy society, there would still remain maldistribution, arising not from injustice, but from the accumulation of more wealth than its possessors need for the then prevailing middle-class standard of life or than they can effectively use in private enterprise. This maldistribution has to be corrected by public investment in the eugenic and educational improvement of the people, in the conservation and basic development of their patrimony in the land and its resources. These public investments would draw upon the excess capital through the levying of taxes and through borrowing at the lowest possible rate of interest. (231-2)

So, Lippmann's eugenics is re-distributive in character: even in a just society, human enhancement of the (not wealthy) "people" will be required. This will be financed by taxes on the capital of the wealthy (there are shades of Piketty here) directly or thought subsidized loans. That's about all he says about the topic in the book. All the (few) mentions of 'eugenics' are coupled with 'education'--and the underlying point is pretty much the same each time. Most humans are not necessarily naturally so adaptable, so in addition to massive education, they will require enhancement to get there. What this involves is left unclear.

Comments

[David Duffy]

Lippmann is more usually remembered, I thought, as

"Although not a biologist, journalist and essayist Walter Lippmann (1889–1974), took on the eugenicists broadside in the 1920s over everything from immigration and sterilisation to I.Q. tests and education. Lippmann pointed out that the results of the acclaimed Army Intelligence Tests administered during World War I by Robert M. Yerkes of Harvard (and a committed eugenicist) started with the assumption that intelligence was inherited, and collected test data on recruits (1,700,000 of them)...However, Lippmann found that a far more compelling correlation existed between scores on the tests and number of years of schooling (Lippmann, 1923: p. 97). Furthermore, arranging group scores by region of the United States, and by availability of schools (per capita) in these regions, yielded another more significant correlation. Could not education, Lippmann asked, account for a large amount of higher scores compared to lower scores on the tests? Lippmann was sophisticated enough to realise that correlations do not prove causality, but his point was that the psychologists such as Brigham, who were also staunch eugenicists, had not bothered to make such comparisons themselves."

From Allen (2011) Eugenics and Modern Biology: Critiques of Eugenics,
1910–1945.

[Eric Schliesser]

That's swell, David. (I am not surprised Lippmann caught such problem because I am rather impressed by his insights.) In a way, it makes the problem of my passages even more interesting.