Digressions&Impressions

Milton Friedman's Belated Public Choice Art of Economics

In trying to influence policy, economists have typically adopted a public interest view of government. They have written as if government officials, whether elected or appointed, were selflessly dedicated to achieving the public's welfare and as if the role of economists were simply to figure out how to do so--to decide what is the right to do and to persuade people dedicated to the public interest that it is the right thing to do....I'm no exception to my generalization about the typical approach of the economist in dealing with public policy.--Milton Friedman (1986) "Economists and Economic Policy" Economic Inquiry 24.1: 1-2. [HT Scott Ashworth]

The art of economics, also known as the 'art government,' is presented here as presupposing public interested economists and public interested government officials or statesmen, both serving the public's welfare, or 'salus populi' in Cicero's (and Locke's) famous phrase. Let's call this 'the standard view' of the art of economics. 

It's worth noticing, of course, that on the standard view it is by no means obvious what counts as the public's welfare and how it is related to knowledge the economists may possess. It's also worth noting that the standard view presupposes skill in the art of rhetoric because it requires skill in persuading those government officials that serve the public interests that what the economist advices is indeed "the right thing to do." By using 'rhetoric' I don't mean to suggest the standard view disparages science communication. But rather to suggest that government officials are not expected to become expert economists on the standard view.

As an aside, I don't think it's a rhetorical trick (in the bad sense) that Friedman includes himself as past adherents of the standard view (which he associates with J.M. Keynes). In the 1986 essay, he gives examples of his past behavior, and the standard view is also espoused (recall my recent post) in his famous (1953) "The Methodology of Positive Economics" (which goes curiously unmentioned). The standard view is characteristic of the Benthamite, radical-utilitarian tradition (which often models the public official as a 'philanthropist').

In 1986, Friedman claims to have rejected the standard view under the influence of public choice (he explicitly mentions Anthony Downs' (1957) An economic theory of democracy and Buchanan & Tullock's (1962) Calculus of Consent.) One insight Friedman takes from public choice is that decision-makers are also self-interested in the same way businesspeople are (and for Friedman this is no criticism).

But, and this is a crucial point, for Friedman the public choice perspective does not mean that public officials are busy lining their own pockets or even consolidating individual power. But rather that public officials conceive of the public interest, in part, in terms of the interests of the institutions they serve. My point is not about the stipulated absence of pecuniary motives in some public officials. But rather that in Friedman's thought there is a shift from self-interest understood as individual advancement toward self-interest understood as one's institutional advantage; it is quite explicit but goes unremarked by Friedman (who spent some time in government): in trying to shape public policy, "[economists] are dealing with human beings," Friedman writes, "who pursue their own interest whether they be politicians whose self-interest is to get re-elected, or members of bureaucracies whose self-interest is to have the bureaucracy bigger and more powerful." (4)

My interest here is not to deny that some bureaucrats identify strongly with the agencies they serve (say, in virtue of esprit de corps, or an enlarged conception of their selves/identity). All I note it is odd that the politician's self-interest is theorized in terms of re-election (and, not say, advancement  in the party) or the interests of the body they serve, whereas the official's interests are not theorized in terms of advancement through the government bureaucracy but rather the agency they work in. The slide among such perspectives is not uncommon in the reception and development of public choice theorizing. I return to this at the end of the post.

Be that as it may, the public choice perspective does seem to change the character of the art of economics. For now it has, as Friedman notes, to presuppose the interests of those who are to be persuaded. It is worth adding here (with the help of Foucault's Birth of Biopolitics) that there is a sense in which this revisionary understanding of the art of economics/government is simultaneously also a return to the art of government of the 18th century which appealed to the self-interests, properly understood, of that element within the ruling classes whose interests naturally align with the public's (in Adam Smith and Benjamin Constant this is the propertied class). 

Given this public choice perspective, Friedman posits three ways that economists can practice the art of government:*

1. Drawing on near unanimity among professional economists, where it exists, to persuade the general public of some general principles of economics (free trade, tariffs are bad, etc.). (p. 5) Friedman leaves unexplained why this Enlightenment move would follow from the public choice perspective, but it follows naturally from the idea that politicians are elected by the public (in democracies). This assumption also operates in the next way:
2. Studying institutional arrangements that can promote the general welfare and advocate those to the general public (e.g., a constitutional amendment that prevents a tariff).  Friedman offers different kind of examples: (i) the example of a constitutional amendment appeals to Friedman because it involves a singular public opinion 'crusade' and then government policy is tied by it (and so the topic is removed from political life). Others involve the imposition of policies that change or remove the interests of bureaucrats and elected officials. An example of the former is (ii) to persuade officials to cut agencies in order to cut functions from the government. Friedman recognizes that this is, in non-trivial ways, less efficient than cutting government budgets modestly across the board. But such budget cuts that leaves bureaucratic lobbies intact. (p. 6) An example of the latter is (iii) a balanced budget amendment changes part of the interests of elected officials, who now must seek re-election not just by increasing spending on their constituents, but also by negotiating complex trade-offs with many other elected officials. 
3. It is to wait for moments of "crisis" to advocate changes that serve the public interests. The underlying idea is that bad political circumstances open the way toward the acceptance of good economic policies. (Friedman's favorite example is the breakdown of Bretton Woods and the acceptance of floating currencies with flexible exchange rates.) The point is not that during a crisis economists suddenly become more persuasive to office holders or the public (Friedman explicitly denies it). But rather that during a crisis "drastic action" (7) may be required. (It is worth noting, given the recent association of his name with 'crisis capitalism,' that Friedman's example does not involve the overthrow of governments!) Friedman here implies that the job of the economists is to work out the details of possible institutional arrangements on sound economic principles in advance of their adoption which may only occur once the political time is ripe. (This is very much anticipates the dynamics of reason of Michael Friedman in which philosophers of science anticipate Kuhnian crises and help imagine future science.) Such anticipatory economics is not empirical but a kind of model world building (of the sort that Stigler advocated back (recall) in 1965). 

Now anyone who is reflected a bit on public choice of philosophy of science, will note that these three ways leave aside the interests of the economists. (In Gordon Tullock's (1966) famous example, some economists get bought to argue for tariffs.) At the close of the article, Friedman addresses the issue as a kind of 'paradox' of economists (in terms that are about two decades behind the then research frontier).

Here, and this picks up my earlier argument above, it is worth noting that Friedman treats economists as a class with shared professional interests not as individual celebrity or Hscore seekers. (Friedman does not use 'class!') And he suggests that this shared interest or interest in the advancement of the profession, leads to the advocacy of policies that establish the value to governments of hiring economic expertise (the example he offers is of antitrust policy requiring economic expertise for its implementation and he also notes that Keynesian tax policy also requires such expertise).

Friedman does not solve this 'paradox'. And his response to it is not especially sophisticated. His main response to the 'paradox' seems to be a kind of transparency requirement--namely to state the enlarged incentives of the theorist, as members of a professional class or discipline, when advocating public policy. This kind of disclosure is not an especially far-reaching requirement on professional economists. But it is also worth noting that, unlike by now some standard conflict of interests disclosures, it is by no means a norm to remind the public of such enlarged interests when one pleads one's case to it (think of all public health interventions of our age) and this makes me suspect that it is worth trying it as a policy.

 

Friedman and Mill on the Art of Economics (with some J.N. Keynes)

IN HIS admirable book on The Scope and Method of Political Economy John Neville Keynes distinguishes among "a positive science ... [,] a body of systematized knowledge concerning what is; a normative or regulative science . .. [,] a body of systematized knowledge discussing criteria of what ought to be... ; an art . .. [,] a system of rules for the attainment of a given end"; comments that "confusion between them is common and has been the source of many mischievous errors"; and urges the importance of "recognizing a distinct positive science of political economy."--Milton Friedman (1953) “The Methodology of Positive Economics” in Essays on Positive Economics, Chicago: The University of Chicago Press, p. 5. [The ellipses are in Friedman. Hereafter: Friedman 1953][1]

According to Milton Friedman the art of economics is a system of rules for the attainment of a given end. Implied in Keynes’ definitions is a division within the art of economics into two: first, if the given ends follow from normative economics then the art of economics is the system that generates normative policy. This way of putting it stipulates that the art is – like a deductive logic – moral truth preserving from input to its output. The implied nature of the second part of this division within the art is left unclear. For, unless normative science is completed, it is possible, of course, that a given end is moral but not part of a body of systematized normative knowledge. In fact, when one starts musing on it, more combinations between given ends and the output of an art are possible (from a-moral ends to moral output; from a-moral ends to a-moral output, etc.) One can even entertain the possibility that an immoral given end (say, state enforced birth-control) may lead to welcome policy results. So, it is by no means obvious what the status of the output of the art is when the given ends do not follow directly from normative economics.

Much of Friedman essay is devoted to the nature and defense of the possibility of positive economics and, while less important, how it contrasts with normative economics. In fact, the art of economics seems so little pertinent to Friedman’s essay, that in a (1992) paper in the Journal of Economic Perspectives, David Colander comments, “Friedman placed Keynes' tripartite distinction in the open and then he lost it.” (p. 192)

But, as Colander notes, Friedman does address the art of economics at least once more in his 1953 essay. It is worth quoting the passage in full:

Normative economics and the art of economics, on the other hand, cannot be independent of positive economics. Any policy conclusion necessarily rests on a prediction about the consequences of doing one thing rather than another, a prediction that must be based-implicitly or explicitly-on positive economics. There is not, of course, a one-to-one relation between policy conclusions and the conclusions of positive economics; if there were, there would be no separate normative science. Two individuals may agree on the consequences of a particular piece of legislation. One may regard them as desirable on balance and so favor the legislation; the other, as undesirable and so oppose the legislation.

I venture the judgment, however, that currently in the Western world, and especially in the United States, differences about economic policy among disinterested citizens derive predominantly from different predictions about the economic consequences of taking action-differences that in principle can be eliminated by the progress of positive economics-rather than from fundamental differences in basic values, differences about which men can ultimately only fight. (Friedman 1953: 5)

Friedman treats the art of economics as dependent on empirical science. For it’s this science that provides the knowledge that constitute at least part of the rules of how one gets from given ends to proper outcomes. That is, the dependence of the art on positive science is epistemic in character.

This dependence claim can also be found in the relevant chapter of J.N. Keynes’ (1891) book, but he argues for it slightly differently (than Friedman does): “it is both possible and desirable to discuss [positive] economic uniformities independently of [normative] economic ideals, and without formulating economic precepts [of the art], although the converse cannot be affirmed.”[2] From this quote it is not quite clear in virtue of what the art is dependent on positive science, but Keynes claims elsewhere that the dependence is “logical…for we cannot satisfactorily lay down rules for practical guidance expect on the basis of knowledge of facts.”[3]

Of course the passage just quoted from J.N. Keynes is rather important: for Keynes consensus over facts is eminently possible, but elsewhere it may be “prevented by conflicting ideals, as well as by divergent views as to the actual and possible.” (Keynes 1891: 51.) And so, on Keynes’ view, conflict over given ends and disagreement over feasibility will prevent consensus over the art of economics according to Keynes.[4] A view like this – there is natural value conflict but relatively easy agreement over facts and theory -- we also find in Keynes’ colleague Sidgwick and a generation later in Robbins, and is used to argue for a disciplinary distinction between economics and ethics.[5]

By contrast, and strikingly, on Friedman’s picture, rather than disagreeing about the given ends that are the inputs of the art of economics, it is likely people will disagree about the outputs of the art. And that is because Friedman presupposes that in the context he is writing (“the Western world, and especially in the United States,”) there is kind of basic value unanimity over the given (major) ends while there is disagreement over what science predicts.

Because the main aim of Friedman’s essay is to explore “whether a suggested hypothesis or theory should be tentatively accepted as part of the "body of systematized knowledge concerning what is,"” (Friedman 1953: 3) while Friedman assumes consensus over the input of the art of economics and treats its output as dependent on empirical/positive science, he does not really pause to reflect on the contents of the art. Colander seems to think this is due to a lack of interest. But there may be a rather obvious reason for Friedman’s silence (which also points to an important difference with Colander).

If we reflect a bit on the form of the art of government, which (when we plug in Keynes’ definition as quoted by Friedman) just is a rule “for the attainment of a given end;” this is highly reminiscent of Robbins’ famous characterization of the nature of positive economics, which just is “a relationship between [given] ends and scarce means which have alternative uses.”[6] So, if in the context of consensus over given ends, one takes this relationship between ends and means to be known, as supplied by positive economics, then a fortiori there is no further fact of the matter that enters into the rule of the art of government.

That is to say, on Friedman’s account there is no substantive difference between positive and the art of economics. For the art of economics is then just a proper subset of its science restricted in scope by a more limited set of given ends and dependent on the development of the relevant positive science! So, for example, Friedman explicitly affirms “there is an underlying consensus on the objective of achieving a "living wage" for all, to use the ambiguous phrase so common in such discussions.” (Friedman 1953: 5.) And it is pretty clear he thinks there is a similar consensus over the importance of economic growth as one of the main “long run objectives.”(“Monetary and Fiscal Framework for Economic Stability” in Friedman 1953: 133. He tends to ignore disagreement over distribution!)

Colander does not offer the reconstruction of this second passage I have just given, but I suspect he does recognize something like the position I have ascribed to Friedman. Because he writes,

The problem with this statement is the inserted phrase, "differences that in principle can be eliminated by the progress of positive economics." This phrase assumes that policy conclusions flow directly from positive economics. However, as Keynes argued, the art of economics is contextual and as much dependent on non-economic political, social, institutional, and historical judgments as it is on economics. (Colander 1992: 197.)

I hedge my interpretation of Colander because he also claims that Friedman’s lost the art of economics. Whereas it is more accurate to say, as an interpretation of Friedman, that he differs in his understanding of what the content of the art of economics is from Keynes (and Colander), and that for Friedman [Thesis A] the art of economics just is a subset or extension of positive economics. Or to be more precise, in societies with a fundamental consensus over ends, the art of economics is a subset or modest extension of positive economics. Friedman tacitly denies there is a significant difference between applied economics and economic science.

I mention this for two reasons. First, Colander’s analysis has been influential on those that notice Friedman mentions an ‘art of economics. For example, while citing Colander, Thomas Mayer writes that “in stressing the positive–normative distinction Friedman furthered the unfortunate tendency to ignore a third category of economics, J. N. Keynes’s (1891) art of economics, that is the knowledge required to apply positive and normative economics in a way that results in successful policies.”[7] (Emphasis added.)

Second, Friedman's account of the art of economics matters because while it would be wrong or misleading to treat Friedman as a kind of rational choice theorist in the way familiar from Becker & Stigler 1977,[8] I want to suggest that by implying that [Thesis A] the art of economics just is a subset or extension of positive economics, Friedman does give voice here to – and now I am stipulating -- a distinctly and broadly agreed upon Chicago understanding of the art of economics as continuous with its (positive/empirical) science.[9]

An anticipation of Friedman's position can, indeed, be found in Keynes’ Scope an Method. When the “end at which the art of political economy aims” at is agreed upon (as Friedman stipulates, recall, is the case among disinterested citizens in the ‘Western world’) – say, “simply the increased production of wealth” – “its scope is certainly definite.” (Keynes 1891: 76.) And in such cases statements of positive science in the “indicative mood” can be transformed into statements “in the imperative.”[10] Colander is right to suggest that Keynes does not accept this position in his own voice because Keynes denies such unanimity over ends in the wider context of the passages I have just quoted. But the position does have an important earlier advocate: J.S. Mill.

In the final Chapter XII of (the final) Book VI of Mill’s Logic, after distinguishing between a science and art, Mill writes:

the reasons of a maxim of policy, or of any other rule of art, can be no other than the theorems of the corresponding science.

The relation in which rules of art stand to doctrines of science may be thus characterized. The art proposes to itself an end to be attained, defines the end, and hands it over to the science. The science receives it, considers it as a phenomenon or effect to be studied, and having investigated its causes and conditions, sends it back to art with a theorem of the combination of circumstances by which it could be produced. Art then examines these combinations of circumstances, and according as any of them are or are not in human power, pronounces the end attainable or not. The only one of the premises, therefore, which Art supplies, is the original major premise, which asserts that the attainment of the given end is desirable. Science then lends to Art the proposition (obtained by a series of inductions or of deductions) that the performance of certain actions will attain the end. From these premises Art concludes that the performance of these actions is desirable, and finding it also practicable, converts the theorem into a rule or precept.[11]

So, unlike Keynes (and Friedman), Mill includes the setting of ends within the art. But as it happens, the end (growing a nation wealthy) the art of political economy pursues is treated as given in the fifth essay of some Unsettled Questions. But anticipating Friedman, Mill treats the art and science as sharing content.[12] And while Friedman and Mill have slightly different conceptualizations of what an economic theory is and Mill surely should not, I think, be treated as a proto rational choice theorist, Mill, too, endorses [Thesis A]. (As an aside, while my argument for this conclusion is wholly distinct from Foucault’s, at a high level of generality the position echoes Foucault’s understanding of Chicago economics as a kind of radicalization of the radical-Benthamite tradition. ) 

Mindful of inductive risk, Mill is cautious to remind the reader that what I have called '[Thesis A]' presupposes a mature science. Imperfect or incomplete science will generate bad rules:  “If, in this imperfect state of the scientific theory, we attempt to frame a rule of art, we perform that operation prematurely.” (Mill 1882: 654) Of course, one may not know that one’s science is incomplete or one must act on imperfect knowledge. So, for “a wise practitioner, therefore, rules of conduct will only be considered as provisional.” (Idem) As an aside, for Mill, then, there is also no difference in kind in the art of political economy and the of government. In the Logic, in the very next paragraph, Mill goes on to offer a sketch of the art of political science.

That Friedman appeals to the existence of (an idealized) ‘disinterested citizen’ as a theoretical posit may be surprising given that the rest of his paper argues for the legitimacy for positing firms that behave as if they are maximizing returns. (Friedman 1953: 21.) And since later Chicago economics became associated with a theory of rent-seeking, it might seem odd to see him posit a disinterested citizen. In addition, that the disinterested citizen agrees over values is by no means obvious if one thinks that modern society is intrinsically pluralist.

But it’s clear that in the 1940s and 50s, the idea circulated among Chicago economists with reference to J.N. Keynes. For example, in the context of a polemical exchange with Samuelson over the new welfare economics, Friedman’s friend, George J. Stigler wrote a decade earlier:

Talcott Parsons probably had economists in mind when he wrote: “For it is a fact that social existence depends to a large extent on a moral consensus of its members and that the penalty of its too radical breakdown is social extinction. This fact is one which the type of liberal whose theoretical background is essentially utilitarian is all too apt to ignore—with unfortunate practical as well as theoretical consequences.” At the level of economic policy, then, it is totally misleading to talk of ends as individual and random; they are fundamentally collective and organized. If this conclusion be accepted, and accept it we must, the economist may properly exceed the narrow confines of economic analysis. He may cultivate a second discipline, the determination of the ends of his society, particularly relevant to economic policy. This discipline might be called, following J.N. Keynes, applied ethics.[13]

Parsons attributes the claim to Durkheim, who, on Parsons’ view, advocated “moral conformity.”[14] (To be sure with a minimal use of compulsion.) Even in the passage quoted by Stigler it’s clear that Parsons is contrasting Durkheim with a position one might associate with the liberal interpretation of Mill for whom increasing moral “diversity” is an “increase in happiness” not social instability.[15] So what follows may be a bit counter-intuitive because I  claim that in addition to both embracing [Thesis A] Friedman’s position is itself in in the ambit of Mill’s philosophy in more ways than one here.

To the best knowledge, J.N. Keynes would never posit the existence of a kind of value unanimity among citizens. But the ‘disinterested citizen’ that Friedman appeals to is an entity that is posited, as a normative ideal, in Mill’s Utilitarianism, where “as between his own happiness and that of others, utilitarianism requires him to be as strictly impartial as a disinterested and benevolent spectator.” In general, Mill praises disinterestedness.

In addition, Friedman clearly is presupposing a conception of progress such that in the ‘Western world’ there is a moral consensus and possibility for disinterestedness conception of citizenship. The implied contrast are communist states and less developed countries, of the sort that Mill infamously thought (temporarily) lacking in capacity for self-rule. I don’t mean to suggest Friedman agrees with Mill’s imperial policies. But Friedman does embrace a model of development. (Friedman 1953: 202.)

Now, ordinarily, among liberal interpreters, Mill is usually not associated with moral consensus. He is considered the great advocate of individuality, spontaneity, and authentic experiments in living that see moral conformism as oppressive. Nothing I say undermines that reading.[16]

But some conservative critics of Mill take him to be an advocate of a revisionary moral consensus to be propagated initially by the clerisy, and eventually adopted by the disinterested citizen.[17] The two interpretations of Mill are, incidentally, not necessarily in conflict with each other if the experiments in living are treated as a means toward the discovery of moral truth and so a new consensus. And I do not mean to suggest this interpretation is exclusive to conservatives. For example, late in life, Rawls seems to have understood Mill as advocating a “comprehensive philosophical and moral doctrine” that involved “a society united on a form of utilitarianism.”[18] I do not want to suggest that Friedman must be echoing Mill here. [19]

In the fifth essay of some Unsettled Questions, Mill contrasts sharply between the science and art of economics. And according to Mill,

These two ideas [of science and art] differ from one another as the understanding differs from the will, or as the indicative mood in grammar differs from the imperative. Science is a collection of truths; art, a body of rules, or directions for conduct. The language of science is, This is, or, This is not; This does, or does not, happen. The language of art is, Do this; Avoid that…An art would not be an art, unless it were founded upon a scientific knowledge of the properties of the subject-matter…Rules, therefore, for making a nation increase in wealth, are not a science, but they are the results of science. Political Economy does not of itself instruct how to make a nation rich; but whoever would be qualified to judge of the means of making a nation rich, must first be a political economist. The one deals in facts, the other in precepts. [20]

In context, with an appeal  to Adam Smith, the ends of political economy are taken as given (that is, growing a nation rich). This pretty much anticipates the material Friedman quoted from Keynes.

 

Hayek's concealed conflict argument (and Foucault), and a bunch of other pro-market arguments

I have been reading more widely in Hayek, and also re-reading stuff I thought I was familiar with (in light of some of Foucault's stuff).. And I want to write about one of his arguments for markets -- I call it the 'concealed conflict argument' below --, and then I realized that it might be helpful to distinguish among his pro-market arguments. So, first I'll list seven of his arguments that one can encounter fairly frequently in his work. I won't scrutinize or evaluate these arguments. I hope to say just enough about them that even novice readers of Hayek have a sense of what I am talking about, and that those familiar with his work have a 'aha' moment. The list is not ranked in importance, and probably not exhaustive. In Hayek, the arguments tend to be contrastive with attempts at top-down planning or what he calls 'collectivism' (so this includes straight up Marxism, market socialism, and Keynesian kinds of planning).

A few more things before I start. Below the arguments are presented as kind of ideal types with a lot of implicit Ceteris paribus conditions; and I won't actually try to spell out or reconstruct Hayek's position as arguments. If that annoys you, you can read them not as 'arguments' but as 'commitments.'  In addition, in many cases the argument actually presupposes well functioning state institutions (connected to law and patents), and Hayek is actually surprisingly explicit about the limitations of each of the arguments (so don't treat my versions as his!) And, in practice, the arguments may be blended. Okay, here goes:

1. The efficiency argument. (See, chapter 7, of The Road to Serfdom, p. 102 in the 1944 edition reprinted by Routledge.) I am always a bit surprised to find this argument in Hayek because I tend to think it fits uneasily with his Austrian commitments. And it's not an argument he rolls out much. But it's pretty clear that he thinks that over time markets are more efficient than various alternatives, especially in the context of multiplicity of ends. This is also an argument attributed to defenders of markets by their critics and not infrequently conceded by the critics.
2. The (epistemic) Engine of discovery argument (recall). This is one of my favorites. And I love the version in his Hayek (1945) The Use of Knowledge in Society The American Economic Review. A well functioning "price system" is a "mechanism for communicating information." (527) In particular, the information is (i) dispersed, and (ii) often hidden from other market participants and spectators (in some versions even the agents principally concerned), (iii) and it may be costly to elicit it. And lurking in here is (iv) the idea that prices are effects of what may be the totality of salient-to-human-causes that relieve any agent from the need to keep track of all these causes, or at least their relative significance. I don't want to overstate what can be discovered according to Hayek because on his official view, prices also collapse a rich modal structure of possible causes ("anything that happens anywhere in the world that might not have an effect") into relatively coarse-grained dimensions. (And, in fact, today's post is also about the information that is occluded by the market.) Anyway, this argument is often presupposed in his other arguments, and some version of it got Hayek the Nobel.
3. The catallactic argument. (I think I first encountered the argument in The Fatal Conceit, but the most elaborate, clear version is probably in chapter ten of volume 2, The Mirage of Social Justice, of his trilogy Law, Legislation and Liberty.) Hayek tends to credit Whately with originating it, and it was especially influential on (recall) James Buchanan (and the Virginia school of public choice). It's the argument that in markets there is voluntary and pacific exchange. (I actually think the spirit of the argument is very Lockean.) And, in particular, that it allows enemies to be friends of a certain kind. (I don't know if Hayek ever mentions Schmitt in this context, but it's pretty clear that it is also part of a battery of different arguments directed against Schmitt one can find in Hayek.) The argument does not require that consumers are sovereign, but it does presuppose that within really competitive markets, agents can shape their own ends without being coerced to some degree. 
4. The coordination argument. (This argument and the following three can also be found in chapter ten of volume 2, The Mirage of Social Justice.) Competitive Markets are mechanism to coordinate the plans of people with very different, even conflicting ends especially in the context of division of labor and large population sizes. Prices act as signals or indicators that facilitate, even guide the coordination. 
5. The (cost-effective) want satisfaction argument. In markets strangers may discover that it's profitable for them to satisfy the needs of people they may never meet in person. 
6. The non-zero-sum argument. The idea that over time, dynamically markets create more wealth for everyone than counterfactually any other system of organization. Despite the fact that at a given time there may be winners and losers in the market-place, and that some people's expectations are necessarily disappointed, over time the pie gets enlarged (such that people who arrive later can benefit from progress) and all benefit.
7. The adaptation argument. Relative changes in supply and demand feed into price changes rather quickly. This means that markets allow one to start adjusting to changing circumstances rather quickly. Market societies are then rather capable of dealing with 'shocks' or sudden changes in external circumstances.

Okay, with those in place I want to get to the trigger of today's post. For, I want to show that in Hayek, there is also (8.) the concealed conflict argument, viz., that markets conceal the latent conflict in a pluralistic society with value conflict. I think that once one is aware of the concealed conflict argument one can probably discern it in the catallactic and coordination arguments, so I don't want to suggest it's entirely free-standing. Anyway, let me quote the passage in The Road to Serfdom that alerted me to it, and then I'll elaborate:

The illusion of the specialist that in a planned society he would secure more attention to the objectives for which he cares most is a more general phenomenon than the term of specialist at first suggests. In our predilections and interests we are all in some measure specialists. And we all think that our personal order of values is not merely personal, but that in a free discussion among rational people we would convince the others that ours is the right one. The lover of the country-side who wants above all that its traditional appearance should be preserved and that the blots already made by industry on its fair face should be removed, no less than the health enthusiast who wants all the picturesque but insanitary old cottages cleared away, or the motorist who wishes the country cut up by big motor roads, the efficiency fanatic who desires the maximum of specialisation and mechanisation no less than the idealist who for the development of personality wants to preserve as many independent craftsmen as possible, all know that their aim can be fully achieved only by planning-and they all want planning for that reason. But, of course, the adoption of the social planning for which they clamour can only bring out the concealed conflict between their aims.--Hayek (1944) The Road to Serfdom, Chapter 4 (The Inevitability of Planning), pp. 56-57. 

The wider context of this passage is a theme to which Hayek returns over and over again throughout his career: that it is the educated and, especially, those with technical knowledge (e.g., engineers, and skilled functionaries) that are likely to favor collective planning and collective or deliberative decision making by way of discussion (which also favors their discursive advantages). My own view is that In the Managerial Revolution (a book Hayek cites later in The Road to Serfdom and which he had reviewed respectfully in Economica in 1942), Burnham had nailed this wider point. 

But my interest here is really only in the final sentence of the quoted passage. For, it clearly implies that in a market economy our conflicting values can stay latent, and (crucially) can be hidden from each other and ourselves. 

Notice, by the way, that the argument can be agnostic on the source of the conflicting values. It can accommodate either the Weberian point that such value conflict is an effect of the advanced division of labor and the diversity of social interests, or the more Platonic point that it is the diversity of our natures and our unruly passions that causes such conflict. It can also accommodate the Marxist point that markets generate class conflict. 

And the mechanism that is lurking here is that the market order prevents certain conversations from happening that are required when there is collective decision-making. That is to say, somewhat jokingly, the market creates a veil of ignorance about other people's aims and so suppresses conflict about these.

To avoid confusion, the argument should not be conflated with the (Kantian) claim that trade generates peace because of shared interest in enrichment or the Doux Commerce thesis that suggests that trade softens or pacifies passions. Rather, it anticipates (as Stefan Kolev reminded) Milton Friedman's (and Rose Friedman's) point (1962) that "the market reduces the strain on the social fabric by rendering [mutual] conformity unnecessary with respect to any activities it encompasses" (Capitalism and Freedom, fortieth anniversary edition, Chicago: The University of Chicago Press, p. 24 (see also pp. 117-118)).

Let me close. The concealed conflict argument does not deny that competitive markets may produce conflict of their own. Hayek recognizes that they stimulate groups to seek protection against competition through the political process, and they may induce resentment over riches obtained through the market or fuel wider class conflict. 

Rather, the concealed conflict argument is a reminder that sometimes politics is well-served by -- and now I quote Hayek who in the postscript to The Constitution of Liberty (p. 354) tacitly quotes Walpole -- Quieta non movere (which I prefer to translate as 'let sleeping dogs lie'), that is, don't disturb settled things. Hayek recognizes that the maxim has little standing in (political) philosophy, but that it is often a wise maxim for, and a crucial part of the art of government of, the statesman.*

Foucault pretty much starts the Birth of Biopolitics with this quote (recall), and does name Walpole. And I think the concealed conflict argument helps explain one reason why Foucault treats Hayek and the ORDOs as providing a response to a problematic left to them by Max Weber (recall here), that is (what Foucault calls) 'irrational rationality of capitalist society.' For, part of its rationality is to find ways of non-politicizing what cannot or, perhaps, may not be resolved by politics (even if, in his account of neo-liberalism the market requires constitution by politics).

 

 

On Foucault and the Anxiety of the Left; pt.1: 'Economic Liberalism'

What both Foucault's critics and his defenders have failed to consider is a deep affinity between Foucault's thought and neoliberalism: a shared suspicion of the state. Foucault's antistatism was, in the first instance, theoretical. He famously complained that “in political thought and analysis, the king's head has still not been cut off.” What he meant was that political theorists too often understand power on the model of the state, viewing it as flowing top-down from a transcendent authority, rather than as a force disseminated across the social space through complex and open-ended relations, involving a wide range of actors and institutions. This position was a logical consequence of Foucault's antihumanism: the main fallacy of state-based models of politics is that they anthropomorphize power by viewing it as the conscious expression of a will. The theoretical antistatism implicit in Foucault's thought required, however, a specific configuration of circumstances to be actualized. In the 1970s, however, Foucault's theoretical antistatism became increasingly normative: his claim that we should abandon the state as our model for understanding power evolved, in other words, into an argument that the state should cease to be the primary focus of engaging in politics. The context in which this shift occurred is both significant and underappreciated. The economic crisis that struck France in 1973, accompanied by the implosion of the statist assumptions that had driven the country's remarkable postwar growth, suddenly made economic liberalism far more relevant to public discourse than it had been for decades. Spurred by these events, Foucault seems to have recognized the affinity between his theoretical objection to state-based conceptions of power and the economic liberalism that was the subject of contemporary debates. The onset of prolonged economic malaise in the early 1970s, I argue, proves to be as critical a factor in the intellectual transformations of the 1970s as antitotalitarianism or the so-called “death of Marx.”

Thus Foucault did indeed have a liberal moment – but it was inspired not by the political liberalism of Benjamin Constant, Alexis de Tocqueville, or François Guizot, whom other intellectuals were busily dusting off at the time, but by economic liberals like Adam Smith, Wilhelm Röpke, and the Chicago School. In his 1978 and 1979 lectures, the antistatism latent in Foucault's theory of power was nurtured by the resurgence of neoliberal ideas that the 1973 economic crisis precipitated. In this climate, Foucault found economic liberalism to be intellectually appealing for two crucial reasons. First, at a juncture when he, like a number of his contemporaries, was attempting to free French intellectual life from the headlock of revolutionary leftism (or gauchisme), economic liberalism proved to be a potent theoretical weapon for bludgeoning the Left's authoritarian proclivities. Second, Foucault could endorse economic liberalism because, unlike its political counterpart, it did not require him to embrace philosophical humanism – the outlook that Foucault had, from the outset of his career, contested with all the energy that his intellectual skills could muster. The theoretical condition of possibility of Foucault's neoliberal moment was his insight that economic liberalism is, essentially, a liberalism without humanism. The limitation of state power that defines the practice of economic liberalism does not occur, Foucault maintained, when “subjects” are recognized as having “rights.” Of such hypotheses it has no need. Rather, economic liberalism justifies itself on the basis of its greater efficiency: it is a practice that arises when power realizes that it has an interest as power in limiting power. Far from being grounds for denouncing it, this is precisely why Foucault found economic liberalism so appealing: it offered a compelling terrain upon which his practical aspiration for freedom might merge with his theoretical conviction that power is constitutive of all human relationships.--Michael C. Behrent (2016 [2014]) "Liberalism without Humanism: Michel Foucault and the Freemarket Creed, 1976-1979." in Foucault and Neoliberalism, edited b Daniel Zamora & Michael C. Behrent, pp. 29-31. [The paper was first published in 2009.]

It is fair to say that Zamora and Behrent's volume set off an anxious debate on 'the Left' on how to evaluate late Foucault's work. My interest here is not to save Foucault for 'the Left;' but I want to engage some of the more important contributions of that debate because some of its terms prevent, I think, an adequate appreciation of Foucault's position. The problems I want to call attention to are present in Behrent's essay.

But before I get to that, I want to avoid some misunderstanding. I like, even admire Behrent's attempt to situate Foucault's thought in political and activist developments of the 1970s in France and its political economy (including stagflation, and debates over the electoral alliance between communists and socialists). So, if you are  not familiar with his paper, do read it!

In addition, in the passage quoted above, Behrent notes an important oddity in Foucault's treatment of liberalism in the Birth of Biopolitics; Foucault seems to skip the French, nineteenth century liberal tradition, including its leading lights, Constant, Tocqueville, and Guizot. (We know that Foucault was quite familiar with Tocqueville, especially.) This apparent omission matters because it entails that Foucault's treatment of the 'radical' tradition --  utilitarianism -- is biased toward Bentham and Robbins (and later Becker), and away from J.S. Mill (who was shaped by Tocqueville and Constant, especially) and who is never mentioned in the Birth of Biopolitics (nor is Sidgwick). 

Unfortunately, Behrent ends up misunderstanding the significance of this because he treats the omission as instantiating a distinction between political and economic liberalism with political liberalism committed to (philosophical) humanism and economic liberalism not. To be sure, I don't mean to deny that Foucault's engagement with liberalism exhibits anti-humanist tendencies, but Behrent's presentation ends up conflating a number of issues. 

First, the distinction between political and economic liberalism is Behrent's not Foucault's. Unfortunately, it is orthogonal to Foucault's own distinction between (recall 17 January 1979, lecture 2  The Birth of Biopolitics. p. 42) (i) an "axiomatic, juridico-deductive approach" which starts from law (and which Foucault associates with Rousseau). That is a republican-contractual approach. and (ii) "The other approach does not start from law but from governmental practice itself...and tries to analyze it in terms of the de facto limits that can be set to this governmentality." This (ii) Foucault associates with English radicalism, that is utilitarianism. And according to Foucault (i) and (ii) are two traditions of conceptualizing freedom in liberalism. That is to say, while Constant is not mentioned Foucault is actually engaged in a polemic with him.

I have quoted Foucault to make clear that in Foucault's hands (ii) is also a political form of liberalism (it's focused on governmental practice, after all). Moreover, as Behrent belatedly recognizes, it is kind of odd to slot Röpke, and Ordoliberalism generally, into a non-political or economic liberalism. And so Behrent introduces a further ad hoc claim (about the status of law in liberal thought) that ends up undermining his own distinction between political and economic liberalism:  

the Ordoliberals were not, however, crude free-marketeers. Their beliefs boil down to a single crucial insight: everything that neoclassical economics says about the free market's virtues is true; the problem, however, is that competition is a quasi-mathematical ideal, not an empirical reality. For competition to work its magic, it must first be jump-started by the state. Specifically, the state needs a robust legal framework, one that allows marketplace competition to approximate its ideal form (though like the utilitarians, it should be noted, the Ordoliberals conceived of law as a political tool, not as the state's metaphysical foundation). What seems to have intrigued Foucault about Ordoliberalism is that it confirmed his intuition that economic liberalism should be thought of as a political and not merely an economic system. Behrent "Liberalism without Humanism," p. 49

To save his distinction between economic and political liberalism, Behrent introduces a further distinction between those that treat the law "as the state's metaphysical foundation" (that is, "political liberals") and those that treat it merely as a political tool (that is, "economic liberals").

Unfortunately, we're now slipping furth away Foucault's own understanding. For, first, Foucault doesn't treat "axiomatic, juridico-deductive approach" as treating the law as a metaphysical foundation for the state--he actually thinks that in so far as law is derived from anything, it's revolutionary violence (or war). But let's stipulate for the sake of argument that Behrent is correct about this.

More important for present purposes, second, it it is quite clear that Foucault treats the "axiomatic, juridico-deductive approach" as leading into Kantianism and he understands Ordoliberalism (plausibly) as itself explicitly a species of Kantianism, but one shaped by the influence of phenomenology (recall especially lecture 5). For, in fact, when Foucault treats of ordoliberalism, they are represented as recognizing explicitly (recall my treatment of lecture 4, 31 January 1979, The Birth of Biopolitics)  that "a state which violates the basic freedoms, the essential rights of citizens, is no longer representative of its citizens." That is to say, the ordoliberals constitute the state in terms of its capacity and willingness to respect citizens' rights. (It is no surprise that James Buchanan, who is a contractualist, admired the Ordoliberals.) So, while Behrent is right to claim that the law is also a tool for Ordoliberals (in particular a means to help battle the effects of concentrated power), Behrent's distinction between economic and political liberalism mischaracterizes them (as an interpretation of Foucault and of their self-understanding). 

As an aside, Behrent's distinctions make a total hash of Röpke's political philosophy. For, Röpke himself is a big fan of Tocqueville (their mutual overlap can be characterized as a kind of 'aristocratic liberalism'). And while Foucault doesn't mention it, it would have been odd if he had missed it.

Now, above I noted that I am open to Behrent's idea that Foucault's attraction to neoliberalism, if it is one, might be found in a kind of shared anti-humanism. The problem with Behrent's way of articulating this insight is that Foucault is quite clear that the Ordos are humanists (this is actually evident from the titles of Röpke's books alone: Civitas Humana; Mass und Mitte; Humane Economy.) Crucially, Foucault explicitly treats and recognizes the Vitalpolitik and Gesellschaftspolitik  of Ordoliberalism as enmeshed in humanism, I quote (recall) lecture 10 (21 March, 1979) of The Birth of Biopolitics: for the Ordos, "The individual’s life must be lodged, not within a framework of a big enterprise like the firm or, if it comes to it, the state, but within the framework of a multiplicity of diverse enterprises connected up to and entangled with each other, enterprises which are in some way ready to hand for the individual, sufficiently limited in their scale for the individual’s actions, decisions, and choices to have meaningful and perceptible effects, and numerous enough for him not to be dependent on one alone." (p. 241, emphasis added; there is an echo of Heidegger here, but without his anti-humanism!)

As an important aside, while Foucault clearly admires Ordoliberalism, Behrent misses that Foucault treats the French uptake of their ideas as a "radicalization" (lecture 8, p. 207; in context Foucault is discussing Giscard and Barre). And so Behrent misses, I think, how Foucault is criticizing how Giscard and Barre have applied ordoliberal (and Austrian) ideas in France. But about that another time more.

Now, as I have noted before, inscribed in the Birth of Biopolitics, is a natural history of the changing conceptions of homo oeconomicus: (i) in the Smithian period he is the man of exchange (224) or with explicit reference to Hume (as an exemplar of English empiricism) "the subject of interest" (273); in the (ii) classical period starting with Ricardo he is man the consumer in terms of satisfaction/pursuit of needs (p. 225);+ (iii) in the neoliberal period, especially in the (recall) ORDO senses, "he is the man of enterprise and production." (147, lecture 6). And (iv) at Chicago he is also "an entrepreneur," but now, especially, "an entrepreneur of himself," who develops and produces/maintains his own human capital as a source of earnings (226), even a possible earning stream into the future (230), and (crucially for present purposes) "reacts to reality in a nonrandom way." (p. 269, 28 March 1979).* 

Now, of these only Becker (iv), perhaps, may be slotted into a kind of philosophical antihumanism in Foucault's hands (recall this post). (I return to that some time.) But in so far as there is a tradition of economic liberalism as constructed by Behrent, it is not constituted by philosophical antihumanism in Foucault's presentation (or, I would add, in 'reality'). And so this means that in so far as we're trying to explain Foucault's attraction, if any, to neoliberalism something has gone off the rails. And this is, I have argued, because Behrent mistakenly treats "economic liberalism" as a kind term that somehow combines Smith, Röpke, and Becker whereas Foucault does not. It doesn't follow from this, of course, that 'the Left's anxiety' about Foucault's seeming attraction to neoliberalism is itself mistaken. To be continued.

The Virginia School and Carl Schmitt: Wagner's Entangled Political Economy (pt 1)

    The second type of tension points to some challenging issues of dialectical theorizing. Perhaps most significantly, it appears in Buchanan’s distinction between constitutional and post-constitutional politics. This distinction was central both to The Calculus of Consent and The Limits of Liberty, and it was the dominant theme within his body of work. This tension appears clearly in the Calculus of Consent, and continues in his various subsequent efforts to use the playing of parlor games as serving as a useful framework for thinking about problems pertaining to the organization of human affairs. This scheme of thought is closed and deterministic and not open and creative. Yet there can surely be no doubt that despite his flirtations with closed schemes of thought, the Buchanan (1982) who asserted that order could be defined only through some emergent process was someone who necessarily embraced open schemes of thought that is not reducible to a few people deciding what kind of parlor game to play.
   This tension within Buchanan’s scheme of thought points toward a distinction between sentimental and muscular versions of liberalism. Perhaps nowhere is this distinction illustrated in sharper relieve than in comparing John Stuart Mill’s (1859) On Liberty with James Fitzjames Stephen’s (1873) Liberty, Equality, Fraternity. For Mill, a liberal order was easy to achieve and maintain because personal liberty, equality before the law, and humanity were universal values, so human nature provided a bedding ground within which liberalism could flourish. Stephen agreed with Mill about liberty and equality, but not about the fraternal imperative being resident within human nature. Hence, Stephen thought that force would always be part of a well-ordered society, though he recognized that force could be used to subvert a liberal order as well as to support it. For the sentimental version of liberalism conveyed by Mill and later John Rawls (1971), human governance could be reduced to ethics, law, and commerce, leaving no room for the political insertion of force into society. For the muscular version of liberalism, free societies are not self-sustaining, and can degenerate without the proper use of force. While Stephen illustrated the muscular version of liberalism luminously, James Burnham (1943) traced that muscular version back to Machiavelli, and also associated it with such figures from the early 20th century as Vilfredo Pareto, Gaetano Mosca, and Roberto Michels. Burnham could very well have added Carl Schmitt (1932) and his recognition of the autonomy of the political to his menagerie of thinkers in the spirit of muscular liberalism.

    Buchanan’s position relative to the divide between sentimental and muscular liberalism is ambiguous. Much of this thinking reflected an “end of history” style of thinking whereby political force could be abolished through the creation of the proper constitutional rules. Yet, Buchanan never fully embraced this style of thinking. Sentimental liberalism treats liberty as a universal value. If so, people should readily embrace the challenge of living as free persons. But if a good part of the population is thought to be afraid of living freely (Buchanan 2005), either sentimental expressions of liberalism will transform liberty into servility (Belloc 1912) or political power will be
marshaled to lead protesters into accepting the liberal order. --Richard E. Wagner (2017)) James Buchanan’s "Liberal Theory of Political Economy: A Valiant but Failed Effort to Square the Circle" [published in Buchanan's Tensions: Reexamining the Political Economy and Philosophy of James M. Buchanan Edited by Peter J. Boettke and Solomon Stein , 2018.]

There is persistent strain of scholarship that aims to link important theorists of neo-liberalism -- Hayek, Eucken, Buchanan, Milton Friedman, etc. -- to Carl Schmitt's legal theory in order to unmask or show the true character of neo-liberalism. This is often illustrated with some references to their entanglement with Pinochet's dictatorship. While I do not want to dismiss such scholarship out of hand -- in some neoliberals, especially in Hayek, there is a strain of accommodation with temporary benevolent dictatorship --, but it is often not very illuminating. Sometimes, more rarely really, the point of the exercise is self-consciously to rehabilitate Schmitt as a kind of liberal, although one "free from democratic contamination." The quote is from a fascinating (1984) article in the Canadian Journal of Political Science by F.R. Cristi, a philosopher then at Wilfred Laurier.

I became aware of Cristi because I have been recently reading Richard E. ('Dick') Wagner's late works (at the urging of some of his students and admirers). Wagner is James Buchanan's first PhD student (or among the first), and also among his most prominent ones who played an important role in the development of 'Virginia school' public choice (alongside Buchanan, Tullock, and Nutter). More recently, Wagner has been developing an approach within public choice -- entangled political economy -- which draws on network theory, systems theory, polycentrism, and the Italian elite school (especially Pareto, Mosca, Michel, etc.) as well as the left strain of Austrian economics (associated with Wieser). Wagner also has a fondness for the sociologist, Elias. Wagner is widely read in social theory, and unusually for an economist, does not hide it. One reason to be interested in Wagner's entangled political economy is in its sober analysis of political life. For if corrosive rent-seeking by the powerful and connected is one of the Achilles-heels of liberal democracy then liberalism, or at least a realist liberalism (say of the sort defended by Matt Sleat) needs to come to terms with it. 

Much to my surprise, in Wagner's late works, Schmitt repeatedly shows up as an 'authoritarian liberal' and he cites Cristi's work repeatedly as source for this. (To be sure not the 1984 article I quoted above, but Cristi's 1998, book Carl Schmitt and Authoritarian Liberalism. But judging by Wagner's description of the latter the view is close to the 1984 article.) My own view -- which I share with Perry Anderson (no friend of liberalism) is -- that (recall) "Schmitt...never had any truck with liberalism." Leaving aside Cristi's motives and project, the question that I wish to pursue here is to what degree Wagner's position -- with its advocacy for a 'muscular' species of liberalism -- remains broadly liberal. 

The problem is that Wagner inserts his analysis in a historical set of contrasts attached to familiar names in the liberal tradition. On one side are Mill, Rawls, and much of Buchanan. These are sentimental liberals. And they are so called because and now I re-quote Wagner "human governance could be reduced to ethics, law, and commerce, leaving no room for the political insertion of force into society." I suspect that strictly speaking this claim is false about all three purported sentimentalists. But it's also a sufficiently familiar (realist) criticism of the latter two that I will accept something like it for the sake of argument.* In another work, Wagner explains this point (about the reduction of human governance to ethics, law, and commerce) as follows:

To assert the autonomy of the political seems superficially to clash with the traditional or classical notion of a society of free and independent individuals, perhaps still associated most strongly with John Stuart Mill (1863). This notion of liberalism appears to seek to reduce the political to some combination of economics, law, and ethics. The reduction to economics reflects the autonomy of economizing action. The reduction to law reflects the idea of a rule of law as replacing a rule of men, about which Rajagopalan and Wagner (2013) voice skepticism. The reduction to ethics reflects a presumption that humanity can will itself to be governed along the principles of one of those peaceable kingdom paintings where lions are lying with lambs. "The logic of economizing action: Universal form and particular practice" in (2016) Politics as a Peculiar Business: Insights from a Theory of Entangled Political Economy.

Before I get to this, I have to admit I find the way Wagner draws a contrast (in the material quoted at the top of this post) between Mill and Stephen a bit puzzling. While Stephen had many perceptive criticisms of the kind of hypocrisy and ideological blinders required to call Victorian England in any sense 'equal', his own underlying commitment was (as was clear to then contemporary commentators like Morley) un-egalitarian. To quote a key line from Stephen: "Men are fundamentally unequal, and this inequality will show itself arrange society as you like." See Liberty, Equality, Fraternity (LF ed.). Liberty Fund, 1874, pp. 152-153. (This is from the chapter 5, on the 'modern creed' of equality.) I return to Stephen's position below. I also found it odd to see Mill characterized as holding that "a liberal order was easy to achieve and maintain because personal liberty, equality before the law, and humanity were universal values." After all, Mill thought, to simplify, that many societies required English tutelage to be prepared for a liberal order.

Burnham was not confused about these matters during the phase when he was most enamored by Machiavelli and the Italian elite thinkers. In that period he did not think of himself as a liberal (either in the progressive twentieth century sense or the more nineteenth century classical sense that Buchanan ended up identifying himself with). After all, Burnham (a philosophically trained ex-Trotskyite) thought that managerialism would make liberalism (and Marxism) obsolete. One reason why his writings from the 1940s [recall The Managerial Revolution (1941) and The Machiavellians: the Defenders of Freedom (1943)] are so fascinating is that he is extremely insightful on the implosion of early twentieth century liberalism and the contours of the post WWII settlement, while completely missing the possibility of a neo-liberal revival.

I don't mean to suggest that there are no liberal ideas in Burnham. Burnham is explicitly not laissez-faire, and he denies that respect for private property is the end all or be all to defend what he calls 'freedom.' Rather he thinks that what's required for freedom is the possibility to provide criticism of the government, which must be constrained by law. And he thinks (in Madisonian fashion, and certainly this picks up a strain in Machiavelli) that it is competing powers/forces that maintain this freedom (beyond mores/norms). For Burnham the lesson is that concentrated power is dangerous. So, here Burnham is an accord with the ordoliberals of his own age, and trustbusters of the progressive era. But he argues this without much interest in much of what characterizes liberalism. (Burnham's rejection of equality slides into outright racism and sexism in his later work see (e.g. Suicide of the West)).

As an aside, I don't mean to suggest that there is no route into liberalism from Pareto (who was a liberal for most of  his life) and Italian Elite theory (as mediated by Burnham). The French political sociologist, Raymond Aron, read Burnham carefully and did develop a species of liberalism in which responsible elites play an important role.+

If we turn to Wagner's own use of Burnham and Schmitt, we see that what's crucial for him within his development of entangled political economy is what Wagner calls the 'autonomy of the political.' By this he means I think three distinct (but mutually supporting) claims: (i) politics is not reducible to economics or the economy (and so also has a proper form of activity of its own [and that analytically must be captured by its own methods])--sometimes there is an added claim that politics is 'parasitic' on the economy; (ii) the use of force is intrinsic to the political and, ultimately, unavoidable in political life. (The "parlor games" tend to obscure this fact.) Liberals who take liberal values for granted, and democrats who take democratic commitments of the people for granted, ultimately miss this point. (iii) Left to their own devices, the liberal economic order and civil society are not self-sustaining (hence the recurring crises within liberalism). What's needed is political will and force to save the liberal economic order from its own impotence (or crises).

In my view the great significance of Wagner's entangled political economy is its willingness to address the possibility (and dangers accompanying) the fact that liberalism may not be self-sustaining. And I hope to return to it before long. But I do want to register that Wagner's purported realism has slid into illiberalism in two characteristic ways. First, it's bedrock in liberalism, and anachronistically or not, Locke is the godfather of the idea, that force has to be backed by (legitimate) law and that if such law is unavailable, but the survival of individual members of society requires discretion, the use of force can be made accountable after the fact. (I owe this way of formulating it (recall) to Hume and Nomi Claire Lazar's States of Emergency in Liberal Democracies.)

It is by no means obvious that Wagner embraces this bedrock idea because his repeated invocations of Schmitt are meant to convey the idea "that the autonomy of the political within society is bound up in the ability of those who hold political power to act on and grant exceptions to rules and to act on and reinforce distinctions between friends and enemies." (from "Parasitical political calculation" in (2016) Politics as a Peculiar Business.) And accountability is never paired with this principle. 

Second, I have a sneaky suspicion that Wagner agrees with Stephen's rejection of egalitarianism. This is clear from another passage in Politics as a Peculiar Business that I will quote at length:

The autonomy of the political reflects recognition that power is ever present in society, along with recognition that people differ among themselves in both abilities and interests as these pertain to the relative attractiveness of comparatively introversive and extroversive lines of activity. In this respect, participation in political activity seems likely to hold generally stronger appeal for relatively extroversive types who find public interaction to be a source of energy rather than draining it away. While the autonomy of the political appears in the surface impression that a small number of rulers dominate large masses of citizens, that surface impression hides the sub-surface recognition that power is latent in human nature, and which manifests itself in numerous particular ways historically. That latency and its particular manifestation starts from recognition that humans could potentially be studied within the rubric of ethology as the study of the higher mammals, as against being studied as an independent species....While there may be little difference between a street porter and a philosopher (Levy and Peart, eds. 2008) when operating alone in Crusoe-like fashion, differences arise in societal settings, increasingly so as societal complexity increases as represented by an increasingly stratified division of labor, and with those differences both promoting hierarchy and intensifying the autonomy of the political.
To refer to human sociality is not necessarily to refer to something pleasant. Sociality might be pleasant, but often it is not. Sociality refers simply to orientations and activities that involve a multiple of people, and so are not phenomena recognizable to a Robinson Crusoe. The social mammals mostly exist in cooperative packs. A pack of wolves can bring down a moose even though the aggregate weight of those wolves is less than that of the moose. From time to time, quarrels will arise among the wolves in a pack, and with one of the quarreling wolves emerging as the leader of the pack. The social mammals display cooperation, conflict, and hierarchy as inseparable or entangled qualities, and human societies are no different in this regard.

It is possible that Wagner here is merely making a descriptive claim about the inevitability of social hierarchy in societies characterized by an advanced division of labor. But it is notable that he does so while stipulating that Levy & Peart's analytic egalitarianism only holds in small societies. For it is central to their analytic egalitarianism (which I tend to defend) -- which treats humans as broadly equal [in the way that Hobbes does] -- that any observed differences are due to social causes (not necessarily reducible to innate human differences). And so it looks like Wagner wishes to emphasize those features of elite theory that emphasize innate differences and social hierarchies and so implies that the elite that rules (with calibrated force), does so by nature (not law).

 

Michael Polanyi on the collapse of liberalism and the Rise of Fascism: Religion and Liberty

Anglo-American liberalism was first formulated by Milton and Locke. Their argument for freedom of thought was twofold. In its first part (for which we may quote the Areopagitica) freedom from authority is demanded, so that truth may be discovered. The main inspiration of this movement was the struggle of the rising natural sciences against the authority of Aristotle. Its programme was to let everyone state his beliefs, and to allow people to listen and form their own opinion; the ideas which would prevail in a free and open battle of wits would be as close an approximation to the truth as can be humanly achieved. We may call this the anti-authoritarian formula of liberty. Closely related to it is the second half of the argument for liberty, which is based on philosophic doubt. While its origins go back a long way (right to the philosophers of antiquity) this argument was first formulated as a political doctrine by Locke. It says simply that we can never be so sure of the truth in matters of religion as to warrant the imposition of our views on others. These two pleas for freedom of thought were put forward and were accepted by England at a time when religious beliefs were unshaken and indeed dominant throughout the nation. The new tolerance aimed pre-eminently at the reconciliation of different denominations in the service of God. Atheists were refused tolerance by Locke, as socially unreliable.

On the Continent, the twofold doctrine of free thought — anti-authoritarianism and philosophic doubt — gained ascendancy somewhat later than in England and moved on straightaway to a more extreme position.--Michael Polanyi (1951) "Perils of Inconsisency" in The Logic of Lberty, p. 117 (in the Libertyfund edition.)

In The Great Transformation, Karl Polanyi popularized (recall here; and here) for many Marxists and progressives a fairly straightforward narrative about the rise of fascism, totalitarianism, and national-socialism (sometimes I'll just use 'fascism' for this whole group): by undermining social cohesion the markets promoted by liberalism give rise to fascism. And (echoing a trope from Adam Smith himself) the workplace in the capitalist economy undermines cognitive proper functioning and the functioning of wider culture (this is especially so when it is accompanied by violence as it was under imperialism and even domestic development). In particular, because markets are also inherently fragile, they generate disruptive crises which fatally undermine the authority of ordinary politicians and open the doors to strongmen of various types (or 'fascism') who take advantage of a wider sense of despair and humiliation.

Sometimes people also add an idea (recall) derived from Lenin to this argument: that is, that capitalist economies naturally become monopolistic. And (partially drawing on the liberal Hobson) such monopoly promotes violent imperialism and/or militarism (and not to mention opens the door to the a concentration of power in the hands of few oligarchs). And from there it is small step to a strongman (if a worker's revolution doesn't stop the process). 

By contrast, market friendly liberals (e.g., Austrians, Ordoliberals, and neoliberals) when confronted with the collapse of liberal civilization after World War I and the aftermath of the Wall Street crisis, offered a different analysis one that also harkened back to Hobson's views: while on the surface the nineteenth century looks liberal, liberals were never so powerful as to defeat mercantilism (which historically preceded it). And depending on the liberal thinker the details will differ, but all agree that in its political guise liberalism suffered setback after setback from the 1870s onward (or even earlier). On this view the early partial success of liberalism actually enhanced the rent-seeking and militaristic forces of mercantile imperialism. On this view, monopoly is not a necessary byproduct of market economies, but the effect of political decisions (tariffs, especially). And one may add, even if monopolies were the consequence of market economies left to themselves, this only shows the need for robust antitrust (ordoliberals especially argued this). The problem for this 'solution' is that it has to prevent rent seeking even though the view itself predicts its likelihood.

It should be noted that both explanations suggest that democracy (broadly conceived) cannot save itself if the economic circumstances are dire enough. And it is no surprise that some theorists thought that democracy inevitably led to Bonepartism (or military dictatorship by plebiscite), also sometimes known as caesarian democracy (recall here). Marx's The Eighteenth Brumaire of Louis Napoleon offers a nice expression of the idea, and as I recently learned (recall) it became a staple of the so-called Italian Elite school. 

In particular, as James Burnham notes, while drawing on Michels' (1911) Political Parties: A Sociological Study of the Oligarchical Tendencies of Modern Democracy in his (1943) The Machiavellians, because of mechanisms that drive elite capture (recall) and because of the doctrine of the general/popular will, it is actually fairly predictable that a leader of a democracy can turn himself into the true representative of the general will of the people. And so rather than Bonepartism being at odds with democracy it is actually its "logical culmination," (Burnham, p. 145). To be sure Bonepartism itself is not totalitarianism, but the step to it may not be so difficult.

But all these explanations suffer from an obvious problem: some states managed to remain broadly liberal warts and all (Switzerland, Holland, the United Kingdom and many of its Dominions, as well as the United States), despite suffering many of the same evils as the countries that did succumb to various strongmen. And this opens the door to alternative approaches.

As I noted before (recall), Karl Polanyi's brother, Michael Polanyi went in a different direction, one of the attendees of Lippmann Colloquium in 1938. (Today he is primarily known for ideas about tacit knowledge in the philosophy of science. In what follows, i will first be alluding to his (1941) "The Growth of Thought in Society, Economica). He noted that in places where fascism (now broadly conceived) succeeded, there had been a previous successful ideological and violent campaign attacking society's intermediaries: these partially self-governing intermediary societies (within science, art, law, the crafts, engineering, medicine, the press, etc.) are for him constitutive of liberal society. This form of liberalism partially harkens back to features we now more often associate with Burke's little platoons and with continental corporatism. But in his Rationalism, Pluralism, and Freedom, Jacob T. Levy has shown that what I here call Michael Polanyi's move is, in fact, a recurring theme within liberalism (that we can also find in Adam Smith).

And in fact Michael Polanyi thereby provides a mechanism for an observation that had figured prominently in Karl Polanyi's argument: that liberal authority seemed to collapse in the face of an organized but not especially threatening minority.  The collapse may look sudden, but it builds on a period of successful intimidation of the ordinary functioning of lots of intermediaries that stabilize liberal society. And if I can glance obliquely to our own time, one crucial lesson of this is that it is really important to bring the rule of law down on those that intimidate these intermediaries. It's to be feared that our own governments have not really learned Michael Polanyi's lesson.

Michael Polanyi himself must have felt that this account leaves out a crucial bit: motivation. Where do the would-be-elites and early cadres of fascists come from in a liberal society? In "Perils of Inconsistency," first published in his collection The Logic of Liberty (1951), Michael Polanyi tackles this question. Echoing and anticipating themes one finds in Hayek, Polanyi thinks that the difference maker is to be found in differential uptake of certain philosophical ideas. (And this also echoes Russell's views in The History of Western Philosophy then recent.) 

For Michael Polanyi, liberalism has its roots in a rejection of religious fanaticism and Church authority (p. 116). Both were replaced by a conception of liberty involving intellectual freedom. And for Polanyi this conception was internally contradictory (see above).* He claims one cannot simultaneously obtain a market place of ideas in public opinion -- notice that he does not attribute this idea to Mill -- and profess a mitigated skepticism at the same time. 

And simply put: on Polanyi's view, because of the demands of religious toleration (p. 122), Locke taught some places how to live with this inconsistency, while maintaining the authority of conscience and ideals pertaining to reason and justice formerly associated with church authority. (This is the bit, I think, is also in Russell--apologies that I lack an exact reference.) To put this amusingly, Locke taught the virtue of hypocrisy to Anglo-Saxon political culture--one continues to pay more than lip-service to certain ideals and so prevent their popular collapse. (On Polanyi's view this one also sees in Utilitarian practice.) As Polanyi puts it (again echoing Russell): "I believe that the preservation up to this day of Western civilization along the lines of the Anglo-American tradition of liberty was due to this speculative restraint, amounting to a veritable suspension of logic within the British empiricist philosophy." (121) One person's shallowness, is another's heroic self-command.

But, by contrast, under the influence of the French Enlightenment, other places tried to remove the inconsistency and replace Church authority with the authority of a public and objective reason. And to simplify greatly, nineteenth century continental philosophy -- special animus is directed by Polanyi at Hegel and Fichte, and then Marx and Nietzsche -- showed that this cannot be done, and that a species of nihilism is a result:

The process of replacing moral ideals by philosophically less  vulnerable objectives was carried out in all seriousness. This is  not a mere pseudo-substitution, but a real substitution of  human appetites and human passions for reason and the ideals  of man.

This brings us right up to the scene of the revolutions of the twentieth century. We can see now how the philosophies which guided these revolutions and destroyed liberty wherever they prevailed, were originally justified by the anti-authoritarian  and sceptical formula of liberty. They were indeed anti-authoritarian and sceptical to the extreme. They set man free  from obligations towards truth and justice, reducing reason to its own caricature : to a mere rationalization of conclusions, pre-determined by desire and eventually to be secured, or already held, by force. Such was the final measure of this liberation: man was to be recognized henceforth as maker and master, and no longer servant of what had before been his ideals.

This liberation, however, destroyed the very foundations of  liberty. (p. 126)

And this opened the door, on Polanyi's view to fanatics that could mobilize the serious moral passions of individuals who had been taught contempt for public morality. So, crucially, rather than seeing the varieties of fascism as inherently "savage," Polanyi sees fascism as building on a moral inversion  developed by Marxism. On this view, where public reason and public morality are seen as ideological, or merely a fig leave for the operation of power, fascism and authoritarianism can appeal to the moral sensibility of dissatisfied (and ambitious) individuals.

The important point here is that rather than seeing the success of strongmen as merely the success of cynicism, Polanyi glimpses that they can win in contexts where liberal society has lost its inner faith because they (the fascists) manage to channel moral grievance and moral disgust into a politics of violent renewal. 

Polanyi's own conclusion is that that liberalism and certain forms of religion are natural allies. (He is greatly cheered by the Christian Democratic defeat of Communism in Italy, and elsewhere.) Historically this was an important move because it prefigures the fusionism (of market friendly and religious conservative types) that made the Republican Party so successful in the latter half of the twentieth century (and so interestingly studied by Melinda Cooper in Family Values). And confronted by the success of Trumpism, I have been tempted by the idea (recall), in dialogue with Thomas Pink, that liberalism needs the help of religion, a revitalized Catholic Church, especially.+ 

Okay, let me wrap up. I don't mention all of this because I think Polanyi's history of philosophy is especially accurate or insightful. Nor do I mention it because I think we should go back to fusionism Stateside or Christian Democracy in Europe. But rather, I think Polanyi, is insightful that a successful public culture must do some justice to, or find a way to channel to proper public ends, the moral sensibility of the population. This means, I think, that liberal neutrality needs to be rethought without giving up on the virtues of liberalism.

 

28 March 1979: Foucault on Locke's World Historical Conceptual Shift (XXXVII)

To simplify things, and somewhat arbitrarily, I will start, as from a given, with English empiricism and the theory of the subject which is in fact put to work in English empiricist philosophy, with the view that—once again, I am making a somewhat arbitrary division—the theory of the subject in English empiricism probably represents one of the most important mutations, one of the most important theoretical transformations in Western thought since the Middle Ages.

What English empiricism introduces—let’s say, roughly, with Locke—and doubtless for the first time in Western philosophy, is a subject who is not so much defined by his freedom, or by the opposition of soul and body, or by the presence of a source or core of concupiscence marked to a greater or lesser degree by the Fall or sin, but who appears in the form of a subject of individual choices which are both irreducible and non-transferable. What do I mean by irreducible? I will take Hume’s very simple and frequently cited passage, which says: What type of question is it, and what irreducible element can you arrive at when you analyze an individual’s choices and ask why he did one thing rather than another? Well, he says: “You ask someone, ‘Why do you exercise?’ He will reply, ‘I exercise because I desire health.’ You go on to ask him, ‘Why do you desire health?’ He will reply, ‘Because I prefer health to illness.’ Then you go on to ask him, ‘Why do you prefer health to illness?’ He will reply, ‘Because illness is painful and so I don’t want to fall ill.’ And if you ask him why is illness painful, then at that point he will have the right not to answer, because the question has no meaning.” The painful or non-painful nature of the thing is in itself a reason for the choice beyond which you cannot go. The choice between painful and non-painful is a sort of irreducible that does not refer to any judgment, reasoning, or calculation. It is a sort of regressive end point in the analysis.
   Second, this type of choice is non-transferable. I do not mean that it is non-transferable in the sense that one choice could not be replaced by another. You could perfectly well say that if you prefer health to illness, you may also prefer illness to health, and then choose illness. It is also clear that you may perfectly well say: I prefer to be ill and that someone else is not. But, in any case, on what basis will this substitution of one choice for another be made? It will be made on the basis of my own preference and on the basis of the fact that I would find someone else being ill more painful, for example, than being ill myself. In the end the principle of my choice really will be my own feeling of painful or not painful, of pain and pleasure. There is Hume’s famous aphorism which says: If I am given the choice between cutting my little finger and the death of someone else, even if I am forced to cut my little finger, nothing can force me to think that cutting my little finger is preferable to the death of someone else.
    So, these are irreducible choices which are non-transferable in relation to the subject. This principle of an irreducible, non-transferable, atomistic individual choice which is unconditionally referred to the subject himself is what is called interest.

    What I think is fundamental in English empiricist philosophy—which I am treating completely superficially—is that it reveals something which absolutely did not exist before. This is the idea of a subject of interest, by which I mean a subject as the source of interest, the starting point of an interest, or the site of a mechanism of interests. For sure, there is a series of discussions on the mechanism of interest itself and what may activate it: is it self-preservation, is it the body or the soul, or is it sympathy? But this is not what is important. What is important is the appearance of interest for the first time as a form of both immediately and absolutely subjective will.--Michel Foucault, 28 March, 1979,  translated by Graham Burchell, Lecture 11, The Birth of Biopolitics, 271-273 

Because most of lecture 11 is a brilliant analysis of the history of criminology and the (sometimes overlapping) significance of Gary Becker's redefinition of homo oeconomicus, it is easy to miss how Foucault embeds his analysis in a narrative in which the least genius of the tradition, Locke, is a world-historical -- "one of the most important mutations, one of the most important theoretical transformations in Western thought since the Middle Ages"* -- figure (in Nietzsche's sense). In my last post (episode 36), I had already observed that lecture 11 is tied by Foucault to the start of the lecture series and Locke's conception of the liberal art of government.   

As an aside, it is striking how conventional Foucault's philosophical categories (e.g., 'Western thought;' 'British Empiricism;' 'Middle Ages' etc.") can be sometimes. But as we know, artistic genius in this convention is characterized by the virtuosity of playing with the given constraints. And as Foucault teaches in this very lecture (recall), that fits the definition of rational agency.

The way I understand Foucault's conceptual analysis of the empiricist agent, the subject of interest, is that he reveals the thin conceptual pre-conditions that ground the nature of homo oeconomicus that figure into the importantly different definitions of economics (say offered by Robbins ("the optimal allocation of scarce resources to alternative ends") and Becker (the "science of the systematic nature of responses to environmental variables")). Recall that inscribed in the Birth of Biopolitics, is a natural history of the changing conceptions of homo oeconomicus: (i) in the Smithian period he is the man of exchange (224); in the (ii) classical period starting with Ricardo he is man the consumer in terms of satisfaction/pursuit of needs (p. 225);+ (iii) in the neoliberal period, especially in the (recall) ORDO senses, "he is the man of enterprise and production." (147, lecture 6). And (iv) at Chicago he is also "an entrepreneur," but now, especially, "an entrepreneur of himself," who develops and produces/maintains his own human capital as a source of earnings (226), even a possible earning stream into the future (230). 

And what Foucault notices is that this agent has properties that in so far as there is agency at all, cannot conceptually be reduced to other properties (that's the irreducible element and that cannot be exchanged (or traded)--that's the non-transferable property. Now, I want to pause at this second feature. 

For, to be a subject with interest, one that at the start of liberalism is capable of trading commodities with others (and to be held accountable, etc.), requires that one is constituted by (I use Hume's phrase) elements that themselves are irreducible and that cannot be traded. (This raises interesting questions on the natural limits of economics as a totalizing science.) And so the liberal tradition is founded by a conceptual distinction between entities that can be traded (by subjects of interest) and entities that compose/constitute agents and (at least when they are doing such grounding) cannot be traded as such.* And this conceptual bifurcation between these two kinds of entities survives through the other transformations of the natural history of homo oeconomicus. What does happen is that the manner in which the subject capable of interest is conceptualized shifts. The agents of the contemporary prisoner dilemma or in an agent-based simulation do not need to have Humean impressions and ideas, etc. But they do have these two features that ground their irreducible interest.

As an aside, perhaps far from Foucault's thought, the Lockean/Humean subject of interest with its irreducible elements is a monster from the perspective of (principle of) sufficient explanation. Because in them explanation bottoms out without a proper ground. As Michael Della Rocca has shown, Hume was clearly aware of  this feature of his own theory. What this tells us is that well before the arbitrary initial conditions of natural science were treated as a standing problem for adherence to sufficient reason, the (liberal) subject with an interest was so.

Let me close with a critical observation. It is somewhat unfortunate that Foucault treats the subject of interest as 'atomistic individual.' Even leaving aside the conventional categories he is playing with, and Hume's "famous aphorism," it is kind of natural for him to use this terminology because it seems that the two elements that help constitute a subject of interest are, like Robinson Crusoe, isolatable (in modelling terms) from other subjects of interest. So, there is a sense in which what he says is unobjectionable. And, to be sure, in so far he is thinking, as he is, of Becker (and we would include the effective altruists) for whom the welfare of others (especially in the family) can contribute greatly to our individual utility, he is not unfair. 

But as is made transparent by Adam Smith, building on Hume's philosophy, our (social) feelings, even without "judgment, reasoning, or calculation" incorporate irreducibly and inescapably the (imagined or inherited) judgments or perspectives of others (in my book I call these "social feelings" or "derived passions").** That is, others are an in-eliminable part of, and help constitute, our identity. As we know (recall) J.S. Mill made this, perhaps somewhat too greedily (and without sufficient clarity), a firm foundation of his version of utilitarianism. To be sure this Smith-Mill tradition (revived by the humaneconomics of Vernon Smith and his students) is distinct from the Becker tradition. So, there is another sense in which Foucault reinforces a misleading trope about the possibilities of liberalism. It is unusual for him to do so. And it is worth keeping in mind as we explore Foucault's final arguments.

 

28 March 1979: Foucault's Rational Choice Analysis of Science (XXXVI)

In the end, is not economics the analysis of forms of rational conduct and does not all rational conduct, whatever it may be, fall under something like economic analysis? Is not a rational conduct, like that which consists in formal reasoning, an economic conduct in the sense we have just defined, that is to say, the optimal allocation of scarce resources to alternative ends, since formal reasoning consists in deploying certain scarce resources—a symbolic system, a set of axioms, rules of construction, and not just any symbolic system or any rules of construction, but just some—to be used to optimal effect for a determinate and alternative end, in this case a true rather than a false conclusion which we try to reach by the best possible allocation of scarce resources? So, if it comes to it, we do not see why we would not define any rational conduct or behavior whatsoever as the possible object of economic analysis.
   In truth, this already extremely extensive definition is not even the only one, and Becker, for example—the most radical of the American neoliberals, if you like—says that it is still not sufficient, that the object of economic analysis can be extended even beyond rational conduct as defined and understood in the way I have just described, and that economic laws and economic analysis can perfectly well be applied to non-rational conduct, that is to say, to conduct which does not seek at all, or, at any rate, not only to optimize the allocation of scarce resources to a determinate end. Becker says: Basically, economic analysis can perfectly well find its points of anchorage and effectiveness if an individual’s conduct answers to the single clause that the conduct in question reacts to reality in a nonrandom way. That is to say, any conduct which responds systematically to modifications in the variables of the environment, in other words, any conduct, as Becker says, which “accepts reality,” must be susceptible to economic analysis. Homo oeconomicus is someone who accepts reality. Rational conduct is any conduct which is sensitive to modifications in the variables of the environment and which responds to this in a non-random way, in a systematic way, and economics can therefore be defined as the science of the systematic nature of responses to environmental variables.
   This is a colossal definition, which obviously economists are far from endorsing, but it has a certain interest. It has a practical interest, if you like, inasmuch as if you define the object of economic analysis as the set of systematic responses to the variables of the environment, then you can see the possibility of integrating within economics a set of techniques, those called behavioral techniques, which are currently in fashion in the United States. You find these methods in their purest, most rigorous, strictest or aberrant forms, as you wish, in Skinner, and precisely they do not consist in analyzing the meaning of different kinds of conduct, but simply in seeing how, through mechanisms of reinforcement, a given play of stimuli entail responses whose systematic nature can be observed and on the basis of which other variables of behavior can be introduced. In fact, all these behavioral techniques show how psychology understood in these terms can enter the definition of economics given by Becker. There is little literature on these behavioral techniques in France. In Castel’s last book, The Psychiatric Society, there is a chapter on behavioral techniques and you will see how this is precisely the implementation, within a given situation—in this case, a hospital, a psychiatric clinic—of methods which are both experimental and involve a specifically economic analysis of behavior.
    Today though, I would like to emphasize a different aspect. This is that Becker’s definition, which, again, although it is not recognized by the average economist, or even by the majority of them, nonetheless, despite its isolated character, enables us to highlight a paradox, because homo oeconomicus as he appears in the eighteenth century—I will come back to this shortly—basically functions as what could be called an intangible element with regard to the exercise of power. Homo oeconomicus is someone who pursues his own interest, and whose interest is such that it converges spontaneously with the interest of others. From the point of view of a theory of government, homo oeconomicus is the person who must be let alone. With regard to homo oeconomicus, one must laisser-faire; he is the subject or object of laissez-faire. And now, in Becker’s definition which I have just given, homo oeconomicus, that is to say, the person who accepts reality or who responds systematically to modifications in the variables of the environment, appears precisely as someone manageable, someone who responds systematically to systematic modifications artificially introduced into the environment. Homo oeconomicus is someone who is eminently governable.--Michel Foucault, 28 March, 1979,  translated by Graham Burchell, Lecture 11, The Birth of Biopolitics,  269-270 (emphasis added)

At the start of the eleventh lecture, Foucault says he wants to go back to the starting point of the year, which (via Freud and Walpole) was (recall) on the liberal art of governing. This is a bit disappointing because he ended the tenth lecture with hints of a new kind of governmental practice. But before we have time to reflect on this, he turns, quickly, to the nature of (what I have been calling following Talcott Parsons) 'economic imperialism. This is odd because it is the topic (recall) he had introduced at the start of the previous lecture. Foucault quickly name-checks Mises Human Action (268) as the fount of neoliberalism, and then goes on to reveal that he has been reading back-issues of the Journal of Political Economy (hereafter: JPE) the house-organ of the The University of Chicago's economics department, from the years 1960–1970, and recommends a "series of articles" from 1962 by "Becker, Kirzner, and others." (268)*

It is by no means obvious what the liberal art of government and the shifting definitions of homo oeconomicus have in common. But, amazingly, by the end of the lecture it is completely clear. To give away the punchline (and to look ahead to some future posts), in Foucault's hands (and this is already clear in what I quote above), Becker's very redefinition of homo oeconimicus effectively betrays the original achievement of liberalism, which consists in not just "limiting the sovereign’s power," but "stripping the sovereign of power" by revealing an "essential, fundamental, and major incapacity of the sovereign, that is to say, an inability to master the totality of the economic field," (292); and the betrayal is, in a certain sense, as Foucault argues during the eleventh lecture, a return to physiocracy. In Foucault's telling Becker throws away the very achievement of Adam Smith, and creates a subject capable of being (to use the phrase Foucault had introduced in lecture 9) programmed, nudged, and shaped by a knowing sovereign.

But just before Foucault explains the significance of the shift from the Robbins definition of economics ("the optimal allocation of scarce resources to alternative ends") to the Becker definition (the "science of the systematic nature of responses to environmental variables"),** he (that is Foucault) inserts a new analysis of the nature of science. Foucault does this in the first paragraph in the passage quoted above this post.

Now critics of the Robbins definition (itself indebted to Max Weber) tend to notice that it turns economics into a kind of engineering; for the ends are given, and act as constraints on an optimization problem. And since the Robbins definition is topic neutral (neither the resources, nor the ends, nor the implied agent/allocators(s) have to be trading or using money, etc.) it is no surprise that economic analysis so constituted can be applied across many different domains (and economic imperialism is out of the gates). Of course, the critics will see in the Robbins definition a paradigmatic case of instrumental rationality.   

But if one looks at the Robbins definition, as it were, 'formally,' even the pinnacle of substantive rationality -- the inferring of true conclusions from, say, a set of axioms, can be treated, or, better yet, modelled as an instance of it. One is reminded here of Leibniz thinking of the "divine perfection" in terms of God as a perfect geometer in the Discourse of Metaphysics: "He who acts perfectly is like an excellent Geometer who knows how to find the best construction for a problem." (par. 5; Clarke is also tempted by this language.)+ 

So, economic analysis can be applied legitimately to God's choices and to scientific reasoning. Of course, and to be sure, while in God the context of construction/choice and context of justification coincide, one need not claim this about ordinary scientists. So, Foucault, is not here proposing to apply economic analysis to most scientific activity -- what I call 'public choice philosophy of science' of the sort Gordon Tullock and, at Chicago, George Stigler pioneered (and made mature by Sandra Peart and David Levy, now familiar within philosophy in the burgeoning Zollman school of philosophy of science [e.g., O'Connor Weatherall; Kofi Bright, etc.]). To be sure Foucault is not ruling it out. (I follows trivially from what he says.) 

But rather, he is making the more audacious point that economic analysis is a way of conceptualizing disciplined scientific speech speaking the truth (when its claims are justified). And this is a kind of existence proof for the claim that "any rational conduct or behavior whatsoever" is "the possible object of economic analysis" with economic analysis understood in the sense of Robbins' definition. So, economic analysis might be philosophical speech, that is, capable of analyzing itself if and only if it generates "true conclusions." 

I could close with the fate of that lovely sentence hanging in the balance. But I want to note two things here: first, there is a sense in which Foucault agrees with the Frankfurt's school's claim that under capitalism even science becomes conceived as a species of instrumental rationality. But he is not critical of it. He explicitly grants that all rational action can be modelled by economic analysis in this sense. And so, second, he rejects the distinction between instrumental and substantive rationality. For, while Foucault need not accept the much stronger claim that no other form of analysis, no other grid of intelligibility, is possible (he is clearly a pluralist about such matters [Robbins' definition "is not even the only one"]), he does not accept here the possibility that something is a species of rational agency and not capable of falling under the Robbins definition.++ 

And with that, I conclude my seventh full year of solo blogging and will take my customary winter break; I wish you happy holidays my dear reader!

21 March 1979: Foucault on Economic Imperialism (XXXIII)

I would like to talk a little about one aspect of American neo-liberalism, that is to say, the way in which they try to use (i) the market economy and (ii) the typical analyses of the market economy to (iii) decipher non-market relationships and phenomena which are not strictly and specifically economic but (iv) what we call social phenomena. In other words, this means that I want to talk about the application of the economic grid to a field which since the nineteenth century, and we can no doubt say already at the end of the eighteenth century, was defined in opposition to (v) the economy, or at any rate, as complementary to the economy, as that which in itself, in its own structure and processes, does not fall within the economy, even though the economy itself is situated within this domain. In other words again, what I think is at stake in this kind of analysis is the problem of the inversion of the relationships of the social to the economic.--Michel Foucault, 21 March, 1979,  translated by Graham Burchell, Lecture 10, The Birth of Biopolitics,  239-240.

The main point of the tenth lecture is introduced in the first paragraph (quoted above). As I have noted before, the phenomenon described by Foucault is usually called 'economic imperialism,' a phrase that goes back to Talcott Parson's analysis of the effect of Robbins' re-definition of economics back in 1934. 

Now before I get to the main point of Foucault's analysis -- the 'inversion' mentioned in the last quoted sentence --, I want to note explicitly that Foucault does not explain what an 'economic grid' is. It is immediately tempting to assume that the economic grid is the kind of thing studied by (ii) or, if we remember the language of 'programming' in lecture 9, partially constituted by (ii), perhaps in interaction with (i). And my reason for noticing this is that Foucault does not pause to reflect on the relationship between (i) and (ii).

For, as any informed observer can tell you, the relationship between (ii) the typical analyses (note the plural) of the market economy, presumably as typified now by Chicago economics (in particular Becker, Mincer, Stigler, Schultz, etc.), and (i) the market economy is by no means simple. For example, I often joke that the Black-Scholes-Merton formula for (rational) option pricing makes no reference to supply and demand. (While the formula is a product of Chicago economics this formula is far from what Foucault has in mind here.) There is a similar, more sophisticated joke to be made about the absence of money in the GE Arrow-Debreu model (manifestly not Chicago).

Another strange slippage occurs, when Foucault moves from (i) the 'market economy' to the (v) economy. Even nineteenth century laissez-faire economists noticed that not all activity which could be sensibly called 'economic' were within or facilitated by 'the market' (not the least because slavery existed for a good chunk of the nineteenth century). 

When a few pages down, Foucault returns to the theme he speaks, more precisely:

In comparison with the ambiguity, if you like, of German ordoliberalism, American neo-liberalism evidently appears much more radical or much more complete and exhaustive. American neo-liberalism still involves, in fact, the generalization of the economic form of the market. It involves generalizing it throughout the social body and including the whole of the social system not usually conducted through or sanctioned by monetary exchanges. This, as it were, absolute generalization, this unlimited generalization of the form of the market entails a number of consequences or includes a number of aspects and I would like to focus on two of these.
First, the generalization of the economic form of the market beyond monetary exchanges functions in American neo-liberalism as a principle of intelligibility and a principle of decipherment of social relationships and individual behavior. This means that analysis in terms of the market economy or, in other words, of supply and demand, can function as a schema which is applicable to non-economic domains. And, thanks to this analytical schema or grid of intelligibility, it will be possible to reveal in non-economic processes, relations, and behavior a number of intelligible relations which otherwise would not have appeared as such—a sort of economic analysis of the non-economic. (243)

Here it is pretty clear that what it means to be a market economy (i) involves 'monetary exchanges'. Now Foucault is saying that (ii) just is the canonical way of analyzing (i). And striking one can use (ii) to study activities (iii) that do not involve monetary exchange, but still can be made intelligible (by (ii)) as falling under an 'economic form.' Somewhat annoyingly Foucault does not say what  the content of the economic form is. But it is clear that form of the market economy seems to be constituted by 'supply and demand.'  So, the economic form can be materialized in monetized (market) exchanges and in non-monetized (non-market) exchanges and be studied with the same tool-kit (ii), which involves (inter alia) analysis of supply and demand.

Now, the initial pay-off of this is a new possibility: [A] "to reveal in non-economic processes, relations, and behavior a number of intelligible relations which otherwise would not have appeared as such."

Now the strong version of [A] suggests that without the tools of (ii) some human phenomena would simply remain unintelligible. This strong version presupposes that no other grids are possible or (if we weaken it a bit) available. Because Foucault does not explain the conditions he puts on the nature of intelligibility, it is hard to evaluate this claim (which rules out grids derived from, say, "demography, sociology, psychology, and social psychology," (245) etc.). But it seems to entail that Foucault thinks most of what passes for social science fails to generate intelligibility of what they study (that is the social phenomena). That's no reason to doubt that Foucault did not hold the strong version of [A].

As slightly weaker version of [A] I have hinted at before. And it presupposes the thought that in order to make phenomena involving human  behavior intelligible, we need to see them/us as agents. And, as Foucault notes (recall also lecture 9) it is the Chicago version of tools of (ii) to make it possible to see choice, and thus, agency in the patterns of social life. This weaker version still entails that there is a sense in which passes for social science fails to generate intelligibility of what they study, but they themselves might (legitimately even) think otherwise.

The weakest version of [A] is to make it relative to professional economists; such that non-economic processes, relations, and behavior become intelligible to them qua professional economist. 

When we turn to Foucault' description of  analysis of how (ii) is applied to (iii) and (iv), we see that supply and demand is just one element in a larger analytical tool-kit "of investment, capital costs, and profit—both economic and psychological profit," etc. As Foucault notes, quoting Jean-Luc Migué, "the analytical framework traditionally reserved for the firm and the consumer" is applied to the ''household"...."This involves making the household a unit
of production in the same way as the classical firm." I don't mean to suggest this is exhaustive; I have already noticed (recall) the significance of the redefinition of  homo oeconomicus as utility maximizer in lecture 9.

In addition, among the 'social' are not just phenomena related to education, family, and crime, but also government (recall this post on the relevant passage in lecture 10). This matters because it turns that that if you deploy (ii) you don't just make phenomena intelligible, you can also criticize them, as noted, in light of an "economic tribunal." (247) As Foucault puts it, "these two aspects—the analysis of non-economic behavior through a grid of economic intelligibility, and the criticism and appraisal of the action of public authorities in market terms..." (248)

Now, Foucault does not really make an effort to explain how analysis slides into authoritative criticism. He mentions the use of cost-benefit analysis. But in a way this presupposes what needs to be explained. For, cost-benefit analysis presupposes a further standard. Either comparison with some reference class or the thought that beyond a certain baseline level/ratio some benefits are not worth the(se) cost(s). Now, the moment one writes this it is obvious that there will be contestation over the reference class or the baseline level.

I think a better understanding of the underlying idea of the move to analysis to normativity is also noticed by Foucault, but earlier in lecture 9. That is an effect of Robbins' definition (the one that prompted Parson's musing on economic imperialism), “Economics is the science of human behavior as a relationship between ends and scarce means which have mutually exclusive uses.” For the analysis of this relationship allows one to judge some courses of action objectively as ineffective, or with a lot of opportunity costs, or instrumentally irrational. 

And as Foucault notes, in his majestic treatment of the evolution of criminology from the eighteenth century to Chicago neoliberalism, this style of reasoning did not have to await Robbins' definition. In the eighteenth century Enlightenment reformers criticized "the ineffectiveness of the system of punishment, with reference to the fact, for example, that public torture and executions or banishment had no perceptible effect on lowering the rate of criminality, insofar as it was possible to measure this at the time...there was an economic grid underlying the critical reasoning of the eighteenth century reformer." (248) Foucault does not mention Grouchy, but we see such reasoning in her, too. He goes on to claim, that "this great concern of the law, the principle constantly recalled that for a penal system to function well a good law is necessary and almost sufficient, was nothing other than the desire for what could
be called, in economic terms, a reduction in the transaction cost." (248-249)

Somewhat amusingly, the otherwise diligent and excellent editors of the lectures, do not drop a note to Coase (or Commons) here. And so leave unexplained one of Foucault's jokes (one that Coase himself would appreciate, I think) that one strain of Chicago economics is a recovery of insights from the eighteenth century.*

The more important point left hanging now is the question what is distinctive about Chicago post-Robbins? One answer Foucault offers, in his treatment of the Chicago treatment of crime, can be discerned in his analysis of a point made by Stigler, "The regulatory principle of penal policy is a simple intervention in the market for crime and in relation to the supply of crime. It is an intervention which will limit the supply of crime solely by a negative demand, the cost of which must obviously never exceed the cost of the supply of the criminality in question." (256) Here we do see the spirit of Robbins. Because violations of this principle (which presupposes an idea of instrumental rationality) are now to be criticized. (Here, too, one can wonder about the relationship between the analysis and the phenomena analysed.)

I have noted before, and so won't repeat, that by taking the ends for granted, the analysis is weirdly un-transparent, even to itself, about its substantive normative commitments. But as usual Foucault is more interesting than me. He notes the following kind of implication, as a promissory note, we the idea "of a society in which there is an optimization of systems of difference, in which the field is left open to fluctuating processes, in which minority individuals and practices are tolerated, in which action is brought to bear on the rules of the game rather than on the players, and finally in which there is an environmental type of intervention instead of the internal subjugation of individuals." (259-260)

What Foucault is pointing to that if one sees/interprets the regulatory principle as providing one with or reflecting policy mechanisms that help determine different points on demand and supply curves (of crime, etc.), then one has levers by which to manipulate, say, (and I use Stigler's terminology) the "supply of offenses." (In Stigler, this is all articulated in terms of marginal costs/returns.)

For Stigler (who uses a lovely quote from Adam Smith), and Foucault tracks this, "offenses are in a sense demanded by the society." And so once one treats the regulatory principle as governing the (law) enforcement agency, one has a social/planning choice what range of offenses will exist (at what cost).

One may still wonder how one gets from Stigler to Foucault here. After noting that by Stigler's lights (of his economic analysis) much law enforcement is clearly irrational, Stigler offers the following thought: "a second and wholly different reason for the use of what appear to be inappropriate sanctions and inappropriate appropriations to enforcement bodies: the desire of the public not to enforce the laws....Variation in enforcement provides desirable flexibility in public policv," (Stigler 1970: 534-535)** 

21 March 1979: Foucault Diagnoses American Analytic Philosophy (XXXI)

The second interesting use of these neo-liberal analyses is that the economic grid will or should make it possible to test governmental action, gauge its validity, and to object to activities of the public authorities on the grounds of their abuses, excesses, futility, and wasteful expenditure. In short, the economic grid is not applied in this case in order to understand social processes and make them intelligible; it involves anchoring and justifying a permanent political criticism of political and governmental action. It involves scrutinizing every action of the public authorities in terms of the game of supply and demand, in terms of efficiency with regard to the particular elements of this game, and in terms of the cost of intervention by the public authorities in the field of the market. In short, it involves criticism of the governmentality actually exercised which is not just a political or juridical criticism; it is a market criticism, the cynicism of a market criticism opposed to the action of public authorities. This is not just an empty project or a theorist’s idea. In the United States a permanent exercise of this type of criticism has developed especially in an institution which was not in fact created for this, since it was created before the development of the neo-liberal school, before the development of the Chicago School. This institution is the American Enterprise Institute whose essential function, now, is to measure all public activities in cost-benefit terms, whether these activities be the famous big social programs concerning, for example, education, health, and racial segregation developed by the Kennedy and Johnson administrations in the decade 1960–1970. This type of criticism also involves measuring the activity of the numerous federal agencies established since the New Deal and especially since the end of the Second World War, such as the Food and Health Administration, the Federal Trade Commission, and so on. So, it is criticism in the form of what could be called an “economic positivism”; a permanent criticism of governmental policy.
Seeing the deployment of this type of criticism one cannot help thinking of an analogy, which I will leave as such: the positivist critique of ordinary language. When you consider the way in which the Americans have employed logic, the logical positivism of the Vienna School, in order to apply it to scientific, philosophical, or everyday discourse, you see there too a kind of filtering of every statement whatsoever in terms of contradiction, lack of consistency, nonsense. To some extent we can say that the economic critique the neo-liberals try to apply to governmental policy is also a filtering of every action by the public authorities in terms of contradiction, lack of consistency, and nonsense. The general form of the market becomes an instrument, a tool of discrimination in the debate with the administration. In other words, in classical liberalism the government was called upon to respect the form of the market and laisser-faire. Here, laissez-faire is turned into a do-not-laisser-faire government, in the name of a law of the market which will enable each of its activities to be measured and assessed. Laissez-faire is thus turned round, and the market is no longer a principle of government’s self-limitation; it is a principle turned against it. It is a sort of permanent economic tribunal confronting government.--Michel Foucault, 21 March, 1979,  translated by Graham Burchell, Lecture 10, The Birth of Biopolitics, 246-247 [emphases added]

It's difficult to leave the riches of lecture 9 behind without exhausting all possible angles of comment, but it it is clear that in lecture 10 Foucault starts harvesting the fruits of the first nine lectures. This lecture contains two great set-pieces: (i) the comparison between the neo-liberalism of ORDOs and Chicago-school in part to explore the contrasting analysis of the relationship between market/state and market/society; (ii) the evolution of what we may call law and criminality since the Enlightenment in light of Becker's approach. So, it may strike you as a bit perverse that today's post zones in on an apparent aside. 

So, the emphasized passage is odd because it is by no means obvious that Foucault's audience ("one") will have thought of this particular analogy. As I have noted throughout my comments, Foucault is constantly assuming a kind of Bien pensant marxism in his audience. I don't want to make too much of the grammatical structure of his thought -- and I am not conformatible in the French [On ne peut pas ne pas penser, en voyant s'exercer ce type-là de critique à une analogie que je laisse encore une fois sous la forme d'analogie], but it is notable that the (analogical) thought is inevitable (and that Foucault represents his own thought in such disassociated way, and being so analogical) while Foucault takes responsibility for conveying it in the (analogical) manner he has the thought. 

Before, I get to the substance of Foucault's claim, a bit of context is useful. First, I would not be surprised if the possibility of visiting Berkeley (which starts the following year) was not already on Foucault's horizon. As we know he was visiting California from the mid 70s onward. Second, Foucault would have tracked Derrida's confrontation with analytic philosophy, first in the brilliant, and oddly neglected, (1973) The Archeology of the Frivolous. This book is ostensibly about Condillac, but it is simultaneously (recall this post) a critique of Foucualt's earlier practice of archeology and a clever exploration of the nature of analysis. I would be amazed if Foucault were unfamiliar with it because I think it can help explain some important shifts in Foucault's method(s)/stance(s). And then in the infamous exchange with Searle (Foucault's future colleague) that unfolded through the 1970s.* I assume that Foucault would have been familiar with this 'event'. So, perhaps, for Foucault, a possible personal confrontation with American analytic philosophy would have made the thought inevitable.

Let's return to the emphasized bit in the quoted passage from lecture 10 above. And to avoid misunderstanding, Foucault here is not discussing ordinary language philosophy. Earlier, in Lecture 4 (see p. 76) Foucault had noticed the significance of the movement from Vienna (and Freiburg) of certain intellectual practices to the States.** And this point gets amplified by Foucault's surprising organicist commitment in lecture 8, that when ideas travel from their origin, they are radicalized/amplified in new environments. (We may call such intensification in a new ecological niche a law of memetics!) So, on Foucault's view, we may say that what starts out as possible source of emancipation in Left Vienna, is turned into a form of speech policing Stateside.+ 

And Foucault is explicit that the policing speech is not just directed at ordinary speech, but also at scientific and philosophical speech. The significance of this is that Foucault interprets the (ahh) tools and practices of this branch of analytic philosophy in terms of technologies of control.

As an aside, it is worth noting, and a kind of historical irony, that Foucault here is kind of tracking the general atmosphere of victory of Quine-ean regimentation and, especially, a wider naturalizing program(s) over the Carnapian explanation, which had explicitly limited itself (recall here; and here) to artificial speech. I use 'general atmosphere' because what Foucault is describing (as theoretical virtues and non-virtues "contradiction, lack of consistency, nonsense",) while undoubted familiar in some sense, is surely not Quine-ean regimentation (with its own specialist clarified language)--this is a diffuser form of score-keeping familiar from polemics and classroom instruction.

So, I use 'general atmosphere' for another reason. Because the analogy itself is I think itself intended to point to what happens when certain practices leave the rarified technical discussion in elite journals and seminar rooms, and become a more general mode of thought. For, as a disciplinary practice of deploying (philosophical) technologies of speech control that American analytic philosophy is used as an elucidatory analogy for the fact of what happens when think tanks deploy techniques developed by the Chicago school to try to score and police government policy.

This is not to say one can avoid mentioning Quine. For Quine's (rather juridical) tribunal of experience is now transformed (by way of the magic of analogy) "into permanent economic tribunal confronting government."  That is to say, as the ideas of the Chicago school leave Hyde Park and are institutionalizes by well financed interests, a democratic-republican government is now made to account itself not to the voters, and their representatives, or the press, or supreme court judges, but to an intellectual edifice that deploys (protected) theoretical speech. And this edifice represents itself a strand of the liberal tradition that, as Foucault argued in lecture 9, is itself one of the animating principles of the constitutional order. 

I return to the previous paragraph in subsequent digressions on Birth of Biopolitics. Foucault leaves hanging what to make of his view of American analytic philosophy. It's important to realize that the analogy is not a moralizing criticism. If I understand Foucault's larger meta-philosophical (political) position, he thinks that the development and application of technologies of control have a kind of inevitability to them. And it is not impossible -- but here i speculate -- that he believes that (the philosophical politics of) philosophical speech itself is (given the significance of the law of non-contradiction to its way of being) also, always, constituted by technologies of control. And what may be novel here, is unusual clarity and zest of the Americans in deploying such technologies of speech control.