Digressions&Impressions

On Information and the State: from Justin Smith to George Stigler

[Over time I plan to phase out D&I at typepad. This post was first published at  digressions.impressions.substack here. To receive new posts and support my work, consider becoming a free or paid subscriber at <digressionsimpressions.substack.com>]

A recent wide-ranging, erudite, and politically salient Substack post by Justin Smith defends the thesis that "we may identify a vast process currently underway whereby we are moving, in our efforts to understand reality and to harness it to our ends, from its to bits. It seems to me the real story of the past few decades, a story that easily explains the rise in popularity of the simulation argument...is of a fairly total regime change, from physics to informatics —here I am adapting the French informatique, which names the research domain in question far more appropriately than “computer science”— as the Prima Scientia or ultimate science of reality." (The post may be gated so you will have to trust me on its interest or take a subscription to Justin's excellent substack, Hinternet.) Presumably, by 'regime' Smith is suggesting that the wide world of learning is fundamentally ordered and (he makes an explicit nod to Hacking here) ordering and authoritative in some sense. 

In these digressions, I have been joking over the years that economics will soon be displaced by computer science. But as is usual while I have been focusing on a change in one tree, Justin is noticing the shifts in the wider forest.

Unfortunately, Smith never defines 'information' (and its non-trivial cognate,) 'units of information processing' despite it playing a key role in his overall argument. That's probably a feature and not a bug of his argument because part of his point is that in virtue of the significance and fluidity (within constraints) of symbolic representation information is not (ahh) ontically stable, eternally out there. 

Inform has Latinate roots (to give form to, to shape, educate, etc.), and, perhaps, there are echoes of the scholastic doctrine of hylomorphism lurking here. (Not so long ago, I was pleased to learn that computer scientists use 'hylomorphism' to refer to a certain recursive function which struck me as very funny and profound at once.) As I was barely conscious contemplating the possible significance of this, through the mystery of the associative process and the rapidity of modern networks (and Google), I looked up and downloaded George Stigler's (1961) "The Economics of Information." This paper has over 12000 citations, and alongside his work on economic regulation, crucial to his importance to the development of economics (for which he got a Nobel).

Somewhat amusingly, Stigler also fails to give a definition of information. He tends to use 'knowledge,' 'advertising,' subjective beliefs, and the comparison of prices by consumers as ways of understanding and describing information. Information can be 'pooled' and has a 'flow.' Most famously, information is costly (and can be bought and sold).

That information is costly is both part of the cause and part of the effect of the dispersion of prices. (In an older tradition of economics -- as David M. Levy taught me, one can think of Wicksteed -- prices were thought to be uniform in a market at a given time; although earlier, during the 18th century, Adam Smith and his contemporary, James Steuart, thought that prices dispersed, too although their analysis is not identical.) I don't mean to suggest that this exhausts the role of information in Stigler's analysis of economic life because it connects means and ends, but about that some other time more.

In Stigler's paper, I encountered a fascinating passage that is worth quoting and discussing (and this is the real point of this digression):

The maintenance of appreciable dispersion of prices arises chiefly out of the fact that knowledge becomes obsolete. The conditions of supply and demand, and therefore the distribution of asking prices, change over time. There is no method by which buyers or sellers can ascertain the new average price in the market appropriate to the new conditions except by search. Sellers cannot maintain perfect correlation of successive prices, even if they wish to do so, because of the costs of search. Buyers accordingly cannot make the amount of investment in search that perfect correlation of prices would justify. The greater the instability of supply and/or demand conditions, therefore, the greater the dispersion of prices will be.
In addition, there is a component of ignorance due to the changing identity of buyers and sellers. There is a flow of new buyers and sellers in every market, and they are at least initially uninformed on prices and by their presence make the information of experienced buyers and sellers somewhat obsolete.
The amount of dispersion will also vary with one other characteristic which is of special interest: the size (in terms of both dollars and number of traders) of the market. As the market grows in these dimensions, there will appear a set of firms which specialize in collecting and selling information. They may take the form of trade journals or specialized brokers. Since the cost of collection of information is (approximately) independent of its use (although the cost of dissemination is not), there is a strong tendency toward monopoly in the provision of information: in general, there will be a "standard" source for trade information. (Stigler 1961, 220)

Chicago economists are not exactly known for assuming that any market will tend toward a monopoly. As I noted last week, in the 1950s Stigler's work was, in fact, prominent for undermining empirically the Marxist (and Marx-inspired) thesis that markets tend naturally tend to monopoly. 

Now, later when (in part inspired by the work of the sociologist Morton and in part because of his interest in which economics Phds would be hired where) Stigler turned to the sociology of scientific knowledge, he tackled this tendency toward monopoly in knowledge production head on. And so I will return to it some other time. But in the 1961 paper he leaves the point in the quoted passage alone.

It would be tempting here to discuss the role of google or wikipedia or the stanford encyclopedia of philosophy as standard sources of information in our ecologies. (And to what degree ChatGPT can displace these or become one itself.) But I want to close with an important broader context in which i situate Stigler's passage.

In the liberal tradition — with which Stigler was very familiar — which understands, as a a core function of the state, it (the state) as a machinery of record, a collector and disseminator of accurate public data. A lot of our social practices, inside and outside the market, presuppose a social infrastructure in which the machinery of record is reliable, allowing public authorities and private actors to plan their activities. For that to happen, the public must be well-informed, and the only way citizens can possibly be well-informed on complex matters of policy is for state experts to organize and process information. Elsewhere, also in joint (forthcoming) work with Nick Cowen I have argued that Walter Lippmann's (1922) Public Opinion puts this vision forward.[1]

In fact, the germ of Lippmann’s idea is expressed in the closing paragraph of John Stuart Mill’s and Harriet Taylor’s On Liberty (1869, Ch. 5), where they claim that “the greatest dissemination of power consistent with efficiency” should be allied with “the greatest possible centralisation of information, and diffusion of it from the centre.” In context, it is clear (recall) that they are responding to Tocqueville’s fears that in order to prevent democratic despotism through local self-government, incompetent art of government is inevitable.

So, lurking in Stigler (1961) is a causal account that both explains the origin of the state and justifies the state's continued existence as a (perhaps even natural) authoritative monopoly provider of the machinery of record. (In fact, this is how Smith explains the epistemic origin of the state: as guarantor of measures and weights and the soundness of currency. ) And that even in a bit-rich world this will remain so.

Of course, Marxists and Libertarians may object that the account hinted at here effaces the violence of the state. This is undoubtedly so, but I consider this a feature not a bug of the argument.

• This first appeared at: <On Information and the State: from Justin Smith to George Stigler (substack.com)> a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

On Foucault's Discipline and Punishment & Chicago Economics

It is understandable that the criticism of the public execution should have assumed such importance in penal reform: for it was the form in which, in the most visible way, the unlimited power of the sovereign and the ever-active illegality of the people came together. Humanity in the sentences was the rule given to a system of punishment that must fix their limits on both. The ‘man’ that must be respected in the sentence was the juridical and moral form given to this double delimitation.
But, although it is true that reform, as a penal theory and as a strategy of the power to punish, took shape at the point of coincidence of these two objectives, its stability in the future was due to the fact that, for a long time, priority was given to the second. It was because the pressure on popular illegalities had become, at the period of the Revolution, then under the Empire, and finally throughout the nineteenth century, an essential imperative, that reform was able to pass from the project stage to that of an institution and set of practices. That is to say, although the new criminal legislation appears to be characterized by less severe penalties, a clearer codification, a marked diminution of the arbitrary, a more generally accepted consensus concerning the power to punish (in the absence of a more real division in its exercise), it is sustained in reality by an upheaval in the traditional economy of illegalities and a rigorous application of force to maintain their new adjustment. A penal system must be conceived as a mechanism intended to administer illegalities differentially, not to eliminate them all.--Michel Foucault (1975) Discipline and Punish: The Birth of the Prison [Surveiller et punir: Naissance de la prison] translated by Alan Sheridan, pp. 88-9 [in the Vintage & Penguin classcis edition]

The passage quoted from Discipline and Punish (hereafter D&P) caught my attention because the final sentence expresses an idea that later in the (1979) lecture series, Birth of Biopolitics, Foucault associates with the 'Chicago' (that is, Becker and Stigler) approach to crime. Let me explain.

At the end of the second lecture of 17 January 1979, with an explicit nod to Beccaria, Foucault had summarized  the"new regime" of "the well-known principle of mildness of punishment appears:" "...government is basically no longer to be exercised over subjects and other things subjected through these subjects. Government is now to be exercised over what we could call the phenomenal republic of interests." (p. 49) In fact, in 1979, Foucault here explicitly denies that this change has anything to do with a new humane sensibility.

He then returns to the theme of crime as a major subject (recall this post) in his tenth lecture of 21 March 1979, which is the second one devoted to American (Chicago) neoliberalism (in context he explicitly mentions Ehrlich, Becker, and Stigler).* There he starts his discussion by claiming that "Their analysis of criminality at first appears to be the simplest possible return to the eighteenth century reformers like Beccaria and especially Bentham." (248)+ He then goes on to summarize a kind of synthesis of the reformers as follows (and uses Coase-ian language):

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. The law is the most economical solution for punishing people adequately and for this punishment to be effective. First, the crime must be defined as an infraction of a formulated law, so that in the absence of a law there is no crime and an action cannot be incriminated. Second, penalties must be fixed once and for all by the law. Third, penalties must be fixed in law according to the degree of seriousness of the crime. Fourth, henceforth the criminal court will only have one thing to do, which is to apply to an established and proven crime a law which determines in advance what penalty the criminal must suffer according to the seriousness of his crime. An absolutely simple, apparently completely obvious mechanics constitutes the most economic form, that is to say, the least costly and most effective form for obtaining punishment and the elimination of conducts deemed harmful to society. (p. 249)

So, in 1979, Foucault implies that the late eighteenth century penal reformers (Beccaria & Bentham) invent the economic analysis of the law in terms of transaction costs and cost benefit analysis. It is worth noting that this reflects a modest change from Discipline and Punishment, where Beccaria is not treated as a progenitor of law and economics, and where (with nods to Capital) Bentham is treated as someone who helps create or constitute the homo economicus through a 'disciplinary mechanism' (D&P, pp. 205-209), but does not take homo economicus as given (in the way, say, Chicago economics does). This change, reflects a rethinking on Foucault's part of the role of interest (and of a decrease of Marx's significance and an increase of Hume's significance to his overall argument), but about that some other time more.

Now, in the passage quoted from p. 249 it seems as if Foucault allows that the 18th century reformers allowed for the complete elimination of conduct deemed harmful to society. But recall (again here) that this will come at a cost. And so, de facto, the way Foucault introduces the eighteenth century reformers is that in their law & economics of crime, one can calculate a kind of optimum crime rate at the lowest cost to society. And, after explaining that the reformers did not have a pure law & economics, this is, in fact, the view he ends up attributing to Stigler as "the objective of a penal policy: “The goal of law enforcement,” he says, “is to achieve a degree of compliance with the rule of prescribed behavior that society believes it can procure while taking account of the fact that enforcement is costly.” This is in the Journal of Political Economy in 1970." (256; as the editors note, this is a reference to “The optimum enforcement of laws,”) And then Foucault glosses Stigler's point as follows: "Consequently, good penal policy does not aim at the extinction of crime, but at a balance between the curves of the supply of crime and negative demand. Or again: society does not have a limitless need for compliance. Society does not need to conform to an exhaustive disciplinary system." (256)**

That a "penal system must be conceived as a mechanism intended to administer illegalities differentially, not to eliminate them all" is, thus, a key insight of Stigler (1970), and Foucault makes a point of emphasizing this in his 1979 lecture where he treats it as a return to the reformist sensibility of the late 18th century (before it was, as it were, corrupted by criminology's search for the anthropology of the criminal). Foucault thinks this is highly significant because, looking forward, "On the horizon of this analysis we see instead the image, idea, or theme-program 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, emphasis added on the Hayekian, 'rules of the game'). While I would not go so far as claiming that Foucault endorses this horizon in normative fashion, I do think he is intrigued by the opportunities this affords.

Before I conclude. You might think I have made way too much of Foucault's claim that the "penal system must be conceived as a mechanism intended to administer illegalities differentially, not to eliminate them all" as an anticipation of his analysis of Chicago law & economics. After all, the quoted paragraph leading up to it does not seem very law & economics at all. Fair enough. However, in his own gloss, he goes on to write the following:

Shift the object and change the scale. Define new tactics in order to reach a target that is now more subtle but also more widely spread in the social body. Find new techniques for adjusting punishment to it and for adapting its effects. Lay down new principles for regularizing, refining, universalizing the art of punishing. Homogenize its application. Reduce its economic and political cost by increasing its effectiveness and by multiplying its circuits. In short, constitute a new economy and a new technology of the power to punish: these are no doubt the essential raisons d'etre of penal reform in the eighteenth century. (D&P, 89)++

So, it's clear that in 1975, Foucault understands the significance of the late 18th century penal reformers in terms of a political economy. And he presents them as anticipating the very point that in 1979 he attributes to Stigler (who he treats as returning to the best insights of the reformers). And this theme is really introduced as early as D&P p. 82, so it's not a mere  throw away remark.

Let me conclude with two speculations. First, it is not impossible that Foucault was familiar with Stigler's work before he published Discipline and Punish. There is an annotation on Stigler 1970 in his hand (see here). After all, Foucault was enmeshed in prison reform activism, so not just doing historical research on prisons in the early 1970s. This hypothesis is strengthened by the fact that Stigler 1970 is absent in Lepage (1978), which is often treated as Foucault's source to Chicago neoliberalism.** So, if that's right, Foucault was already interpreting his source material in light of some familiarity with the Chicago approach to crime.

Second, it's also possible, of course, that Foucault's familiarity with Stigler and the Chicago approach to crime came after he wrote Discipline and Punish. And then that opens up the possibility of not just an epynomous disovery (a term coined by George's son, Stephen Stigler), but also a kind of convergence between Foucault and Chicago economics on a non-trivial issue. This suggests that Foucault's purported late affinity with American neoliberalism (a much debated issue among Foucault scholars) may have roots in his own intellectual development in reflecting on the role of crime and punishment in society.

 

Mill, The Art of Government, Tocqueville (and Foucault), Part II

The native of New England is attached to his township because it is independent and free: his co-operation in its affairs ensures his attachment to its interest; the well-being it affords him secures his affection; and its welfare is the aim of his ambition and of his future exertions: he takes a part in every occurrence in the place; he practises the art of government in the small sphere within his reach; he accustoms himself to those forms which can alone ensure the steady progress of liberty; he imbibes their spirit; he acquires a taste for order, comprehends the union or the balance of powers, and collects clear practical notions on the nature of his duties and the extent of his rights.--Tocqueville (1835) Democracy in America, Translated by Henry Reeve, Esq. (1835) Vol 1. Book 1, Chapter 5, Necessity Of Examining The Condition Of The States—Part I

The quoted passage also caught Mill's attention because he quotes it verbatim in his review of the Reeve translation.* My interest here is not in the empirical basis of Tocqueville's presentation of New England.+ But in the claims about the art of government. Anticipating Dewey (and his followers), Tocqueville emphasizes that the New England township facilitates practical learning of the art of government in a relatively circumscribed political domain. The effects of such practice have a multiplicity of purported benefits: some are relate to individual character formation (e.g., a taste for public order), some involve knowledge of the structure of government (the balance of powers), some involve an education in citizenship and one's legal protections (the nature of one duties as well as acquiring the "spirit" of freedom, and extend of one's rights), and some involve practical knowledge  (how to promote liberty). What's striking here is the heterogeneous character of the consequences of engaging in the art of knowledge locally. 

Now, this heterogeneity can be partly explained by the fact that, as Tocqueville explains, while townships end up delegating a lot of tasks to particular individuals, the setting of the tasks in light of each other and in light of a whole number of practical constraints: e.g., what taxes will pay for them, do county, state, and federal laws impact these aims: how will neighboring townships respond, does the town have capacity and expertise to pursue them. The nuts and bolts deliberation is a collective enterprise. (As Mill notes ruefully, this is easier in the context of "high wages and high profits," [where] "every citizen can afford to attend to public affairs." And, surely, one of the motives for defending a basic income on democratic grounds.)

Tocqueville is unclear exactly which parts of the process are included in the art of government. But here it seems to involve (i) the setting of political aims, (ii) the assigning of positions and officers to complete these, and (iii) the execution/administration of these. And the skills required for this clearly involve training by doing it. And what makes townships so useful for this is that the issues are relatively low stakes, and tend to repeat over time and in nearby townships. So, that in any deliberative body there will be those that have experienced how the township has handled the problem before (and there may well be legal precedents around) and how others might have tackled them. In his review, Mill puts the point as follows in his review:

But the ever-increasing intervention of the people, and of all classes of the people, in their own affairs, he regards as a cardinal maxim in the modern art of government: and he believes that the nations of civilized Europe, though not all equally advanced, are all advancing, towards a condition in which there will be no distinctions of political rights, no great or very permanent distinctions of hereditary wealth; when, as there will remain no classes nor individuals capable of making head against the government, unless all are, and are fit to be, alike citizens, all will ere long be equally slaves.**

Even so, Tocqueville is quite clear that township education in the art of government is not a panacea for the more topdown art of government. As he writes in chapter 13 (in a section titled, "Instability Of The Administration In The United States"):

But the persons who conduct the administration in America can seldom afford any instruction to each other; and when they assume the direction of society, they simply possess those attainments which are most widely disseminated in the community, and no experience peculiar to themselves. Democracy, carried to its furthest limits, is therefore prejudicial to the art of government; and for this reason it is better adapted to a people already versed in the conduct of an administration than to a nation which is uninitiated in public affairs.

In this passage from chapter 13, the 'art of government' almost seems equivalent to what we would call 'public administration" (recall (iii)).  'Tocqueville's underlying point is also registered by Mill in his review. Tocqueville intimates that one of the benefits of an aristocratic political order is that it provides a ruling class leisure to prepare for and acquire the theoretical, empirical, and practical skill-set of running a great state. And one may well add that getting elected may itself not be so useful in running things. (Schumpeter, of course, picks up on this theme.) Lurking in Tocqueville's account is also a more general view that while democracy involves a raising of median and mean quality of the population along many dimensions, it also involves a certain kind of leveling, which generates the conditions of despotism (something highly salient again, and that also attracts the attention of learned commentators). It's passages like these that create the reperation of Tocqueville as a kind of aristocratic liberal.

But on Tocqueville's view this leveling should impact the quality of science and art of administration.  With regard to science, democracies have found it useful to develop lengthy apprenticeship programs and many decades of education in degreed programs to combat this problem. (And one may add that in more recent times assortative mating among scientists is also nudged by the way such education is organized.) No such equivalent exists for the running of society (except the existence of occasional political dynasties in families.) 

The final use of the 'art of government' in Democracy of America is found in the chapter summary of chapter 16. Initially, it also seems to involve the fairly narrow use of he term as public admininistration (which, of course, is a very heterogeneous category itself):

The townships, municipal bodies, and counties may therefore be looked upon as concealed break-waters, which check or part the tide of popular excitement. If an oppressive law were passed, the liberties of the people would still be protected by the means by which that law would be put in execution: the majority cannot descend to the details and (as I will venture to style them) the puerilities of administrative tyranny. Nor does the people entertain that full consciousness of its authority which would prompt it to interfere in these matters; it knows the extent of its natural powers, but it is unacquainted with the increased resources which the art of government might furnish.

The underlying point is an important one for those that defend the social utility of federalism and intermediary bodies against desposotism (and more prosaically) bad legislation. But a closer look suggests that the art of government is more than public adminsitration, if we think of it as just the skill at running things. Clearly here (iv) the art of government provides resources for active citizenship. In fact, what we might call the version involved 'civil disobedience' or 'practical resistance against authority' from below. (Passages like this tend to get ignored by friends of aristocratic liberalism.)

Notice that one of the effects of the art of government can teach citizens the extent of their own power to resist. I suspect lurking here is the idea that in a democracy, even the despotic kinds, ultimately authority rests on (informed) opinion. Informed in so far as that the art of government teaches theoretical knowledge and practical skills. And in particular it teaches citizens where in the gigantic state structure local action can be effective in slowing things down, if not halting them.

As regular readers know, yesterday (here) I suggested that in his (1861) Considerations on Representative Government, Mill divides political theory/philosophy in two. One is engaged with  the basic structure or as he puts it, the "fundamental constitution of the government." This is institutional design. (Recall this post, which discusses some of the pertinent vies of Mill's System of Logic.) And the other, is the art of government, that is, the understanding of the mode of conducting the practical business of government, including a normative version of it in liberal democracies.

Now, there is a rather prominent use of the phrase 'art of government' that I have skipped so far. So let me close with it. The final stirring paragraph of Mill's (1859) On Liberty (which also the final section V), starts with the following passage:

To determine the point at which evils, so formidable to human freedom and advancement, begin, or rather at which they begin to predominate over the benefits attending the collective application of the force of society, under its recognised chiefs, for the removal of the obstacles which stand in the way of its well-being; to secure as much of the advantages of centralized power and intelligence, as can be had without turning into governmental channels too great a proportion of the general activity—is one of the most difficult and complicated questions in the art of government. It is, in a great measure, a question of detail, in which many and various considerations must be kept in view, and no absolute rule can be laid down. But I believe that the practical principle in which safety resides, the ideal to be kept in view, the standard by which to test all arrangements intended for overcoming the difficulty, may be conveyed in these words: the greatest dissemination of power consistent with efficiency; but the greatest possible centralization of information, and diffusion of it from the centre. Thus, in municipal administration, there would be, as in the New England States, a very minute division among separate officers, chosen by the localities, of all business which is not better left to the persons directly interested; but besides this, there would be, in each department of local affairs, a central superintendence, forming a branch of the general government.++ 

The reference to "municipal administration" in "New England" suggests that he is harking back to Tocqueville (and his own discussion of Democracy in America). And, in fact, Mill is suggesting here a way to correct the problems with township governance by creating a parallel administrative central structure to be alert to problems and whose main task would be to supply information and shared practices. (Nick Cowen and I have used this passage to discuss the role of what we call the articulate state.)

Here the art of government is clearly not merely public administration. It involves considerable judgment, and the capacity to balance empirical and normative considerations. In addition, while knowledge of the mode of conducting the practical business of government is presupposed in it here, it also involves what we might call questions of mechanism design, even institutional design in light of multiple political aims (efficiency, freedom, and progress).***

Since this post has gone on, I close here and leave discussion of the significance of this semantic instability, or broad reach of the 'art of government' to another time. 

 

Mill's Elitism and Progressivism, The Art of Government, Tocqueville (and Foucault), Part I

The mode of conducting the practical business of government, which is best under a free constitution, would generally be best also in an absolute monarchy: only, an absolute monarchy is not so likely to practise it. The laws of property, for example; the principles of evidence and judicial procedure; the system of taxation and of financial administration, need not necessarily be different in different forms of government. Each of these matters has principles and rules of its own, which are a subject of separate study. General jurisprudence, civil and penal legislation, financial and commercial policy, are sciences in themselves, or rather, separate members of the comprehensive science or art of government: and the most enlightened doctrines on all these subjects, though not equally likely to be understood or acted on under all forms of government, yet, if understood and acted on, would in general be equally beneficial under them all. It is true that these doctrines could not be applied without some modifications to all states of society and of the human mind: nevertheless, by far the greater number of them would require modifications solely of detail, to adapt them to any state of society sufficiently advanced to possess rulers capable of understanding them. A government to which they would be wholly unsuitable, must be one so bad in itself, or so opposed to public feeling, as to be unable to maintain itself in existence by honest means.--J.S.Mill (1861) Considerations on Representative Government, Chapter 2 ("The Criterion of a Good Form of Government.)

One can find passages in Mill's writings that suggest he was a skeptic about the very possibility of an art of government. But some of the works that endured endorse the art, and even suggest it, as above, that it is a "comprehensive science." In Mill, this tends to mean, amongst other things, that it is a body of rules (see System of Logic). But in the quoted passage he also emphasizes that these involve certain "doctrines."

In virtue of the fact that these rules are context insensitive, Mill is willing to call these rules a 'science.' Presumably the rules, which are built on a body of empirical generalizations (in the indicative), have the character of (what he and his followers) would call 'imperative statements' (recall this post). These have the task of providing one the means for given ends, that is, a kind of instrumental or conditional rationality. This is actually something meta, because government itself has this kind of instrumental rationality baked into its purpose according to Mill; it exists (no surprise here given his utilitarianism) to promote "the interests of any given society." 

Interestingly enough, and this anticipates Foucault's observation (recall here) on the liberal art of government as such in the first few sentences of the Birth of Biopolitics, for Mill there is a version of the art 'which is best under a free government.' Now undoubtedly he does not mean to say, in the first instance, that this is the optimal art of government, but in the second instance he notes that is best sans phrase. It turns out that there is a normative art of government that would be context invariant.

Obviously, I overstate Mill's explicit position. As the ancients teach there are more modes of tyrannical government, where, as he notes, the normative art of government is impossible by definition because it would be self-underming ("A government...so bad in itself, or so opposed to public feeling, as to be unable to maintain itself in existence by honest means").* But what Mill calls a 'free constitution' and an 'absolute monarchy' do not exhaust the non-tyrannical options. (By a 'free constitution' Mill means something like what we call a 'liberal democracy' to considerable degree.) I return to this issue below. But Mill allows (and there are echoes of Hume here), that good government is, in principle, possible in an absolute monarchy even if it is rare in practice.

I take it that the 'art of government' just is, for Mill, well grounded skill at what he calls 'the practical business of government.' And this happens to be subdivided into a whole number of practical disciplines commonly taught we might surmise in law schools ("General jurisprudence, civil and penal legislation") and public policy or and/or economics departments ("financial and commercial policy.") The point is not just that within the art of government there is a cognitive division of labor, specialization, but also that these disciplines are ultimately subordinate to a larger purpose.

Some of you may be eager to remind me that strictly speaking the art of government is not really context insensitive. Mill quite clearly presupposes something like a distinction between advanced civilization, and those cultures that still require some tutelage. As he puts it at the start of the chapter that I have been quoting, "the proper functions of a government are not a fixed thing, but different in different states of society; much more extensive in a backward than in an advanced state." This stadial idea of cultural development is deeply woven into Mill's social theory (and, obviously, is a part of his support for a certain kind of reformed imperialism.) Strictly speaking, and this is a further strain of elitism in Mill, only those that would have to apply the art of government need to 'advance' to the level familiar from civilized culture. 

As an aside, every time I confront these features of Mill's thought I always despair a little bit for the liberal tradition. But I also find in it a salutary lesson that great moral sensitivity is compatible with great obtuseness, and this should make us skeptical in our dispositions about our own certitudes. (No, I won't preach more of my skepticism today.)

Be that as it may, somewhat paradoxically, where the art of government is most needed (the underdeveloped state), according to Mill, because there government must have many functions, it is unavailable because (to put in modern slightly more neutral terms, well only slightly) of a lack of human capital to develop and implement it. Mill himself uses puts it as follows: "the most important point of excellence which any form of government can possess is to promote the virtue and intelligence of the people themselves." So, lurking here is the idea that real development presupposes considerable state capacity and expertise that rests on considerable human capital. And as a people develop government functions disappear or wither away. (I put it like that because there is something analogous in Marxism.) A nation of super-intelligent spinozist sages would not need any government. But the tragedy of human life (and development) is, on Mill's view, that (knowledgeable) investment in human capital only really gets going after decent enough government has been achieved.

For Mill, "one criterion of the goodness of a government, the degree in which it tends to increase the sum of good qualities in the governed, collectively and individually, since, besides that their well-being is the sole object of government, their good qualities supply the moving force which works the machinery [of government]." When I started this post, I wanted to say something about how we can discern here in Mill a response to Tocqueville but about that some time more. I do note that we can see here some non-trivial kinship between Becker and Stigler and Mill. So, when discussing the programming of human capital by Chicago, Foucault's tendency to treat Becker and Stigler as the natural culmination and intensification of the utilitarian-philosophical-radical traditon (in context Mill is clear that his views on this point have an affinity with Bentham's) is actually well grounded. (I have a suspicion that Halevy and Lepage have something to do with this. But again, some other time more.)

One element of the art of government is guided by the following doctrine (which looks back to Hume and Spinoza and Madison): "The ideally perfect constitution of a public office is that in which the interest of the functionary is entirely coincident with his duty." And this, for Mill, scales up to what Rawls calls the 'basic institutions:' "What we have said of the arrangements for the detailed administration of the government is still more evidently true of its general constitution. All government which aims at being good is an organization of some part of the good qualities existing in the individual members of the community for the conduct of its collective affairs." 

That is, we may say then, that Mill divides what we can call political theory/philosophy in two. One is engaged with  the basic structure or as he puts it, the "fundamental constitution of the government." This is institutional design. (Recall this post.) And the other, is the art of government, that is, the understanding of the mode of conducting the practical business of government, Obviously, there is an important connection between the two because there are going to be many interaction effects between them. While it is tempting to see the designing of the 'fundamental constitution' as the more important institution (since it molds the rest), as the argument above has revealed, without the proper clay it won't get off the ground. And so that means that, in practice, the constitution, and even the most general principles that enter into the art of government must respect context. (The rest of the chapter articulates this very point.) In this chapter, Mill treats the art of government as part of political philosophy.** 

Here I want to close with an observation. One may well think in light of the significance of professional schools above, that fundamentally the art of government is something technocratic for Mill. But I don't think that's quite right. Not only because of the ways in which empirical and normative elements blend in it. For the aim of the art is something programmatic: the capacity to articulate and implement modes of government that "favor and promote, not some one improvement, but all forms and degrees of it." And while that  presupposes an ideal constitution, which is to be developed theoretically, it also presupposes a program of open-ended intellectual, moral, and social progress in our capacities for (and this is the significance of my Spinozist joke above), self-government. 

 

 

 

Adam Smith's Stadial History; On Paul Sagar's Adam Smith Reconsidered, Pt 1.

According to the natural course of things, therefore, the greater part of the capital of every growing society is, first, directed to agriculture, afterwards to manufactures, and last of all to foreign commerce. This order of things is so very natural, that in every society that had any territory, it has always, I believe, been in some degree observed. Some of their lands must have been cultivated before any considerable towns could be established, and some sort of coarse industry of the manufacturing kind must have been carried on in those towns, before they could well think of employing themselves in foreign commerce.--Adam Smith (1776) Wealth of Nations (hereafter WN), 3.1.8, 380)

The quoted paragraph presupposes a distinction between a stagnant and a growing society. This is as an important distinction because for Smith only growing societies, with the right sort of institutions -- especially the legal protection of all against violence by the wealthy and with, as Lisa Herzog (2016) has put it, with the possibility of “working one’s way up” --  can really be flourishing, including the vast majority of the working poor. (Growth is as Herzog notes instrumental to that.)* This is not to deny that for Smith individual or sectorial/class flourishing (and individual great virtue) is possible in stagnant socities. 

In fact, in Smith's anlysis stagnant societies can be very wealthy. Then contemporary China "a country much richer than any part of Europe," (WN 1.11.n.1, 256) is the most prominent example. (See also WN 1.11.e.34,  208) In fact, as is well known, according to Smith "China seems to have been long stationary, and had probably long ago acquired that full complement of riches which is consistent with the nature of its laws and institutions." (WN 1.9.15, 111) On my account (which is pretty standard) this suggests that Smith thinks a different set of laws and institutions may well be capable of turning China into a growing society again. 

By contrast, most stagnant societies are poor (and miserable) because they are characterized by lawless violence. The characteristic exemplar of this is feudalism (e.g. WN 3.3.12, 405), “where men are continually afraid of the violence of their superiors.” (WN 2.1.31, 285) To be sure, very rich countries can engage in lawless violence abroad, and he relentlessly criticizes “the savage injustice of the Europeans” in their colonial imperialism (WN 4.1.32, 448), which is defended by ideologues and merchants (hence the name, 'mercantile system'). 

Now, in the quoted passage at the top of the post, Smith clearly presents a stadial growth model of the direction of capital (accumulation and) investment. This has three stages corresponding to three sectors of the economy (viz. "agriculture....manufactures...foreign commerce.) This natural growth model has a kind of ceteris paribus condition built into it. Because in the very next paragraph Smith recognizes that “unnatural and retrograde order(s)" are possible and in fact have existed throughout European history. (WN 3.1.9, 380) Somehow these do not falsify or refute the stadial growth model (or its natural path). I return to the relationship of the stadial growth model and historical reality below.

The present post is triggered by the first chapter of Paul Sagar's new (2022) book, Adam Smith Reconsidered.  The main point of the chapter is to suggest that nearly all scholars have misunderstood Smith's concept of a 'commercial society.' [Even by his own lights, Sagar is rather "polemical."  (p.10)] And that's because according to Sagar, who self-consciously is following his mentor István Hont (p.12), 'society' "properly denotes the internal relations of a given community." And this is "distinct from 'nation', 'country', or 'state'. In Smith's usage 'nation', 'country', and 'state' denote a community in regards to its external relations...in particular in the arenas of military and economic competition." (pp. 47-48. Emphasis in original.) And because other scholars (including Hont) tend to miss or forget the distinction, they end up misrepresenting or distorting Smith's views. Let me stipulate, for the sake of argument, that Sagar and Hont are right that there is an important theoretically salient contrast between Smith's use  of 'commercial society' and 'commercial nation' (state/country). And, so it follows that if one were to attend to the distinction one would represent Smith otherwise. So, in what follows I leave Sagar's main claim untouched (in part because it would require engagement with the rest of the book).

Now, as Sagar notes, it is common among Smith scholars to attribute to Smith a stadial account of history. And usually by this is meant a four-stage large scale social development model that runs from hunter-gathering, to shepherding, to agricultural, and to -- and this is key to Sagar's argument --the fourth stage, that is, 'commercial society.' These stages are kind of (Weberian) ideal types in which a particular form of economic organization predominates (and, user-friendly, gives the stage its name) and greatly shapes the social order. (This way of understanding Smith became especially popular through the influence of Marx and Marxist scholarship, but is now mainstream.)

In my view, there are two standard ways of understanding this stadial, large scale social develoment model. One treats it as a rough outline of actual historical development and another treats it as an instance of (what since Dugald Stewart, who, besides being an influential philosopher, also penned an early influential biography of Smith) is called 'conjectural history.' (To simplify: conjectural history is a kind of counterfactual, 'how possible' account that is generally causal in character.) I was a bit surprised to read Sagar claim that there is a 'standard model' of interpreting Smith in which nearly all scholars hold both ways at once. (p. 15) I had never noticed this (despite the obvious tensions it would entail). But let me leave that aside in what follows.

Here's the first important point: the stadial growth model and the stadial, large scale social development model are clearly not the same! They focus on different things (capital vs whole social orders) and they don't even have the same number of stages. While Sagar never quite diagnosis it like this (and misses some details), his polemics start from this textual fact. And I think he could agree with everything I said up until now (except that I explicitly added a Ceteris paribus condition to the economic model).

So, the existence of these two contrasting stadial models, requires a number of exegetical and conceptual choices among scholars. According to Sagar other scholars have botched those choices. (His footnotes are relentless on this.) This matters because Sagar wants to reject the idea that Smith is a defender of 'commercial society' in the (unqualified even anachronistic) way this is usually presented by other scholars, but really is a theorist of politics and (to look ahead to future chapters) that the choice is really about the kind of commercial society we want. I actually have lots of sympathy for, and agreement with, Sagar's larger project. So, while I will be critical of Sagar in what follows, I don't want to hide my agreements.

In my 2017 book, I had treated the large scale social model in chapter 6. (Sagar calls it a 'nuanced picture.') Sagar entirely misses that I had treated the stadial growth model in a chapter "The Methodology of the Wealth of Nations" that I think Sagar completely skipped. (In fairness to him my book is long and I don't alert the reader to the fact that I treat the stadial models differently in part because I was more interested in exploring the epistemic pay-offs of them.) On my account the stadial growth model is a tool to develop an analysis of the causes (many of them political in character) and institutions that prevent long term growth. (Recall the treatment of China above.) My account of the growth model and its focus on institutions builds on earlier, widely cited work by the economist Nathan Rosenberg (1960)  and the intellectual historian (1993) Jerry Muller.+ What I added to their approach is simple: historical deviations from the growth model (pretty much all of European history since the fall of the Roman Empire!) help identify major social (and natural) causes. (What I learned from Sagar's book (e.g. p. 24) is that I should have emphasized more the role of war among these casues for Smith.) I argued for this understanding of Smith's project in Books I-III of Wealth of Nations by offering a new account of Smith's philosophy of science. So, my reading of the stadial growth model rejects it as real history and rejects it as conjectural history.** 

By contrast, I argued that the large scale social model is indeed a kind of conjectural history. (Inspired by Emma Rothschild's work, most of my own interpretation of Smith is very cautious about accepting Dugald Stewart's account of Smith. By contrast Rothschild barely registers in Sagar.) But the large scale social model is, on my account, designed to identify important social-conceptual necessitation relations within and between stages. You don't have to accept my reading, I mention it here as an illustration of what a scholar might do. (And also to suggest that Sagar misses alternative options to the ones he diagnoses in others and to his own.) 

Sagar's own position is not far from my own, but he synthesizes the two stadial models into one, and then treats this as "a simplified economic model charactising the anticipated path of development for individual socities absent political distruption." (p. 16) As you can see that's not far of my chapter on the methodology of WN (and an earlier, well cited 2005 article, which was the core of my dissertation). I have to admit I was a bit surprised he did not drop a note to Rosenberg's, Mullers, or my work (anywhere between pp. 20-23), but since Sagar has no or negligible interest in the details of what we would now call 'Smith's economics' (and his philosophy of science) I would not expect detailed discussion of my analysis. (I do admit that I find it peculiar to do book length studies of Wealth of Nations without interest in the details of Smith's political economy, but to each their own.)

Now, Sagar is not uncommon in presenting Smith as offering one kind of stadial model.  Let's call this the monomodel approach, and Sagar may well be right it is the dominant approach (although as I suggest above his depiction of the consensus seems off to me). Moreover, while I reject the monomodel approach,  Maria Pia Paganelli has argued  that Smith holds no stadial model at all. Be that as it may, Sagar is, in fact, almost alone among contemporary monomodel-types of treating it as a "simplified economic model."

Another important feature of Sagar's approach is that the final, fourth stage is not a "commercial society," which recall from above has a technical meaning, but a "commercial age." And if he is right about Smith's usage, this is an important correction to the standard picture of the monomodel he is criticizing. 

At this point a reader may well wonder why Sagar attributes to Smith four stages (since the passage I quote at the top of the post only has three stages). In fact, to the best of my knowledge in this book he never engages with the passages I quoted at the top of the post (or if he does rather obliquely). This is rather odd because he treats surrounding passages in WN (e.g. p. 23); and the editors of the (standard) edition of WN that he uses and cites,  single it out in their general introduction (WN p. 55).

Now, it is worth noting that in Wealth of Nations, Smith never explicitly mentions a four stage model as many scholars have observed. But Smith does discuss a four stage model in his Lectures on Jurisprudence (and many commentators have projected it onto WN). In fact, I really admire Sagar's treatment of Smith's account of this material from the Lectures throughout the chapter. (Because I am interested in the public Smith, I had downplayed this material.) And Sagar is very attentive to development between the earlier Lectures and WN. So far so good.

But while Sagar is an official monomodeler, he does identify another ad hoc three stages model in Book of V of Wealth of Nations  (WN 5.1.a.7). [Sorry, I knew this might be dizzying!] Now Sagar claims that this three stage model is basically the standard stadial model circulating in the period (p. 36). He offers no evidence for the claim, although it is certainly true that three stage models (note the plural) circulated in the period. But in Sagar's account this three stage ad hoc model is only making a restricted point in Smith: "that matters of defense are conditions by the subsistence methods prevalent in any form of human community." (37) And, if I understand Sagar correctly, this is primarily a rhetorical/pedagogical device ("to make this apparent to his audience Smith" (p. 37)) and not to be confused with the official (four stage) model Sagar attributes to Smith.  

You may note that the ad hoc model shares an imfortant feature with what I have called the large scale social development model: that modes of production constrain and shape other important social features. Some Marxists have seen in this a partial anticipation of the materialist conception of history, after all. And it should be clear now why most monomodelers don't think of WN 5.1.a.7 as ad hoc at all. They see in it the application of the main four stage model. By contrast, I treat it as evidence to reconstruct my (nuanced) interpretation of large scale social model. Either way, I find it really odd that after so much sturm und drang, Sagar needs to introduce an ad hoc model into his account. 

Now, if we return to Sagar's analysis of the main model, it is crucial to Sagar's argument that, first, only the first two stages of Smith's model have a genuine counterpart in real history according to the sources available to Smith (16). And, second, in "real history," and the presence of pervasive violence, Smith identifies a developmental trap so that almost no societies advance to the third stage (25-26). The second, especially, is an important point and I hope generates further discussion. (I am not sure why Sagar would deny that for Smith there have been quite a few agrigultural ages.)

But notice that Sagar's diagnosis is compatible with the distinction I started out with in this post. While there is much fascinating change, when it comes to structural capital growth, most societies are in virtue of the effects of pervasive violence treated as stagnant by Smith. (As should be clear if Sahlins, James C. Scott, Graeber & Wengrow are right, Smith is wrong about this.) And, in fact, there is an important distinction lurking here.

Among stagnant societies there are really two kinds according to Smith. Those societies that stagnate in virtue of such pervasive violence are de facto barbarous (or savage). And wealthy societies (with arts and sciences) that stagnate in virtue of their laws and institutions fall under the class of civilized societies. (That is, there are stagnant and growing civilizations.) This distinction (made famous by Pocock) operates explicitly in a passage that Sagar quotes (p 50 n. 48):

The fall of the western empire is the third great revolution in the affairs of mankind, of which antient history has preserved any distinct or circumstantial account. It was brought about by the irresistible superiority which the militia of a barbarous, has over that of a civilized nation; which the militia of a nation of shepherds, has over that of a nation of husbandmen, artificers, and manufacturers. (WN 5.1.a.36, 704)

But rather than treating Rome as a 'civilized' state, Sagar insists that it is "made plain" here that Smith treats Rome as a "commercial society." (P. 50 note 48) Now, textually the passage simply does not support Sagar's claim. (In fact, Smith doesn't use 'commercial' anywhere near it.) My point is not to nitpick about this passage. But rather, that Sagar is so wedded to his own monomodel that he imposes it on the text in places where there is no need to do so. He could, of course, argue in the other direction that given that civilized states are always 'commercial society' in the technical sense diagnosed by Hont and Sagar, he can interpret the passage in the way he does. But this is not Sagar's procedure, and it would be false.

Finally, Sagar is just wrong that the ad hoc model that he ascribes to Smith in Book V just is the one circulating in the period. It is very clear that Smith disagrees with Hume's influential three-stage-model. (I have described this in my book p 309ff.) This bears on Sagar's treatment of the distinction between a society and a nation/state, so I will return to it before long. But for now I should stop.

 

 

Foucault on Hume on Interest and (Adaptive) Preference

What English empiricism introduces...and doubtless for the first time in Western philosophy, is a subject...who appears in the form of a subject of individual choices which are both irreducible and non-transferable....

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.--Michel Foucault, 28 March 1979, The Birth of Biopolitics, pp. 271-272. 

This is the third of my recent posts on Foucault's reading of Hume in The Birth of Biopolitics (recall here; and here). In the first paragraph of the quoted passage I have removed Foucault's reference to Locke as the world-historical origin of English empiricism as the fount of Utilitarianism. Foucault is almost certainly inspired by Élie Halévy's classic (1901-1904) The Growth of Philosophic Radicalism, which I now know Foucault studied. (We have some of Foucault's note-taking on volume 2 [see here].) I have also removed Foucault's taxonomy of different kinds of approaches to identify a subject in 'Western philosophy.' Here I am also skipping Foucault's treatment of Appendix 1, “Concerning Moral Sentiment” to Hume's (1751) An Enquiry Concerning the Principles of Morals, which illustrates  what it is for a choice to be irreducible in empiricism, according to Foucault. I do so not because these topics are uninteresting (on the contrary, they are too interesting), but because I want to focus on Foucault's analysis of Hume's account of the non-transferability of choices. (I am unfamiliar with other work on this topic so feel free to share your suggestions.)

In the paragraph I skipped Foucault had shown that for an empiricist (like Locke and Hume) "The painful or non-painful nature of the thing is in itself a reason for the choice beyond which you cannot go." (p. 272. This is irreducibility of choice, or what Foucault calls "the regressive end point in the analysis.") While a lot can be said about this, let's stipulate it's true for the sake of argument. But for what follows, you need to keep in mind that at bottom the agency of an empiricist subject consists in choices that are ground in (the desire for) pleasure or the aversion to pain. And according to Foucault this is what creates a subject with an interest (as a kind of characterization of agency.) That's a big claim, but I am interested here in the details. 

The non-transferability principle is cashed out by Foucault in terms of the fact that preferences are one’s own and that another has no fundamentally no access to them. Foucault really uses the modern (somewhat technical) language of ‘preference’ on p. 272. (It's also there in the French: "À partir de ma préférence à moi et à partir du fait que je trouverai plus pénible, par exemple, de savoir qu'un autre est malade que de l'être moi-même." Naissance de la biopolitique, p. 276.) While Hume certainly has ‘preference’ in his vocabulary, in Hume it generally means something like ‘favoring’ a particular outcome or state of affairs (which is also the use one can find in Ricardo). In Hume 'preference' is not used a technical term to track what is motivationally foundational. In my view it is only in Bentham that the use of 'preference' starts to obtain it's technical, familiar sense. (Something one might pick up from Halévy, who emphasizes Bentham's self-preference principle in various contexts but not in Hume i think.)

I mention this not to castigate Foucault's anachronism. But to remind ourselves that the treatment of Hume in the eleventh lecture follows on Foucault's better known analysis of Becker and Stigler (1977) for who (famously/infamously) hold "the hypothesis of stable and uniform preferences." While I have  no evidence that Foucault read Becker & Stigler (1977, although we know he read papers/works by both), it figures prominently in a fascinating book by Henri Lepage Tomorrow, Capitalism: The Economics of Economic Freedom [first published in French as Demain le Capitalisme in 1978.) As the editors of Birth of Biopolitics note several times (but not in context), Foucault almost certainly read Lepage ahead of his lectures (sadly I have been unable to find any annotations by Foucault on Lepage). I mention this because the stability of preferences in Becker & Stigler (1977) is highlighted by Lepage in his account of human capital more generally (see p. 165 of the English translation). And human capital had been central to the previous lecture of Birth of Biopolitics.

In fact, and as a kind of aside, the 11th lecture is used to tie two major narrative threads in Birth of Biopolitics together: first, Foucault provides a historical eighteenth century framework for his own account of the development of utilitarianism from Bentham to Stigler/Becker. This framework has the shape of a donut in whose hole one can discern the shadow of Halévy's classic The Growth of Philosophic Radicalism. (Basically Foucault skips the heart of Halévy's narrative, and only changes the origin and terminus ad quem of philosophical radicalism/Utilitarianism.) Second, Foucault had claimed that this radical tradition is one of two traditions within liberalism that has an account of liberty. Strikingly, in the material I ommitted, Foucault alludes to this. (I return to that another time, too.)  Now, Foucault does not claim that for Hume preferences are stable. But Foucault's anachronism here alerts us to Hume's role in these two threads. This is exactly made explicit by a passage shortly after the one quoted above:

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.
I think the problem and that which gets the problematic of homo oeconomicus underway is whether this subject of interest or form of will called interest can be considered as the same type of will as the juridical will or as capable of being connected to the juridical will. (273)

Be that as it may, in the present context 'non-transferable,' thus, refers to the brute fact that we cannot fundamentally feel another's pain or let them feel ours. Even sympathy's role is, as Foucault stipulates, a mechanism "to activate" or shape what we feel and thereby our interests not a means to share or trade one's feelings. Pleasures and pains are not portable from one subject to another. Even Adam Smith, who has a much more capacious understanding of the power of sympathy will grant this point. (For him mutual sympathy requires mutial modulation of our original feelings.) Now, as I mentioned above the point of the analysis is to connect Hume to the development of the formal features of homo oeconomicus as found in the radical tradition. Somewhat peculiarly, in Birth of Biopolitics Foucault shows no interest in Hume's economic writings (including a highly salient essay called "Of Interest.")

Now, the textual support that Foucault offers for all of this is rather fascinating (and that's what I'll end on today). As the editors of Birth of Biopolitics, who recognize in Hume's "famous aphorism" a reference to Treatise 2.3.3.6, and then (as I noted before) quote Hume: “Where a passion is neither founded on false supposition, nor chuses means insufficient for the end, the understanding can neither justify nor condemn it. ’Tis not contrary to reason to prefer the destruction of the whole world to the scratching of my finger.” This is indeed a famous aphorism (one that clearly exercised Hume's friend Smith at The Theory of Moral Sentiments, 3.3.4, 136–7.)

But while Foucault gets the spirit of Hume's remarks at Treatise 2.3.3.6 right, he is not slavishly following the text of Hume. In Hume the famous aphorism, is introduced to argue that feelings are, in a certain sense, beyond rational scrutiny. However, I use in a 'certain sence' because they are not wholly beyond scrutiny as Hume explicitly notes. For they are often accompanied by judgments and these may well be scrutinized and found wanting. And, more interesting for present purposes, as the quote eveals, when the feeling itself is triggered by "false suppositions" say in cases of adaptive preferences or wishful thinking (or simply bad epistemic luck), or, when it is action guiding and it "chuses means insufficient for the end" and so leads to failures of instrumental rationality. 

Because in the context of 2.3.3.6, Hume is talking about passions more generally and not just about the bedrocks of pain and pleasure, I don't think Foucault really is misunderstanding Hume's general point. But it is a shame that he does not dwell on the specifics because, as I note, 2.3.3.6 is rather important for Hume's ideas on thinking on the contexts in which even a picture that takes preferences as irreducible and non-transferable, one need not treat them as merely given, nor beyond all critical scrutiny. That is to say, Foucault comes incredibly close, but somehow misses, that were the radical tradition and Utilitarianism more Humaen from the start some enduring problems internal to it could at least be diagnosed.

Two Dogmas of The Image of Science

An image of science (recall these posts on Hume, Williamson, Spinoza) contains a list of characteristics that function as short-hand for representing science when these characteristics are used in debates where one side (or more) appeals to the (epistemic) authority of science to settle debate. Images of science can circulate within the sciences, in public discussion, and even in philosophy. Here are two dogmas in the contemporary image of science:

(1) While science may be a complex network of collaboration and competition, it also involves a self-correcting and free exchange of ideas.

(2) Consensus is the natural effect of a proper functioning mature science.

Within philosophy, these two dogmas are familiar from Thomas Kuhn's work. Within economics and formal decision theory the dogmas are linked (at least since Aumann (1976), where (1) helps generate (2)).

In some contexts such consensus within science is a species of higher order evidence and generally a cue to defer to the science. And this reinforces how science can settle debate, and thereby open space for public action (assuming that prior to action there is public debate). Lurking in the previous two sentences is the idea that science can provide (some) authority to public policy based on it. So it is no surprise that governments promote institutions that help discover or articulate such consensus. In practice, governments and science, while distinct from each other (and sometimes at odds), frequently lend each other (some) authority by presupposing and reinforcing the two dogmas. 

So far so good. 

But because settled science is so important to authoritative action [and consensus such an important proxy of it], this also creates incentives to generate or organize the appearance of consensus. And there is conceptual space for such organized consensus. For even if one grants that consensus is the natural effect of a proper functioning mature science, this is compatible with consensus also being the effect of malfunctioning science. Let's call the agreement that is the product of malfunctioning science 'ersatz consensus.' (And I'll use 'real consensus' when I distinguish a naturally occurring consensus from the ersatz type.) 

It's worth noting that, despite the way I have phrased it in previous paragraph, participants in malfunctioning science need not have the intent to produce an ersatz consensus. By this I mean two things: first, some strategic agents may well intentionally wish to promote deliberate confusion such that there does not seem consensus at all (think of the tobacco industry on the relationship between smoking and cancer; or the energy industry and man-made global warming, etc.). Second, sometimes an ersatz consensus is the product of the absence of proper exchange of ideas in science (because of bad replication or publication practices, or because of temporary embargoes on circulation of ideas [not uncommon in medical and defense sciences]). So, sometimes ersatz consensus is the effect of top-down organization, and sometimes it's the effect of bottom-up failures of process.

It's not surprising that for outsiders it's incredibly difficult to distinguish between an ersatz consensus and a real consensus, especially if the science is incredibly esoteric and/or interdisciplinary. But sometimes it is very difficult for insiders to know whether the consensus view is real or ersatz in their own science. There need not be anything nefarious about this; all that's needed is that because of say extensive cognitive division of labor even insiders may be unaware (of the nature and extent of) that the process that shapes the exchange of ideas within their own science is malfunctioning. 

Even though I have well known skeptical leanings, I don't want to exaggerate the claim in the previous two sentences. There are forensic techniques that provide signals about such matters. In addition folks in adjoining sciences may have the skill set to notice communicative problems I am hinting at. (In a way that's the story of how the replication crisis got tackled.) But it may take  time to sort such things out.

Notice that so far I have not touched the two dogmas of the contemporary image of the science (although I have hinted that (1) may be an idealization). What I have done is extrapolate some of their mutual entailments. 

As an aside, even without governments nudging us to accept a scientific consensus is authoritative, (2) has very deep roots in the intellectual culture. The Stoic sages and the Spinozistic wise are said to agree, and I am sure you can list a whole number of other examples. But -- pace Kuhn -- it is worth noting that there were scientific periods where within science persistent disagreement over many important issues was not taken to be embarrassing (I think this was common view of late nineteenth century physics if you go look at Poincare, Duhem, Hertz, Mach, etc.). 

For, it is worth noting however that (2) is not self-evident in all contexts. Sometimes different scientific research groups within the same scientific community rely on different auxiliary assumptions or computational shortcuts to generate (say) agreed upon predictions (go check out real-life examples of Quine-Duhem thesis). So even though at one level of description there may be consensus, at another level of description (including the auxiliaries) there is not. I suspect this situation is endemic in a lot of sciences. (Again, over time this may well be sorted out if the auxiliaries start to matter for some reason.)

In addition, in a very neat recent paper, Kevin Dorst has argued (on the Bayesian terrain of Aumann) -- in the context of trying to provide a mechanism for group polarization -- that if evidence is ambiguous we should not expect consensus. (He has a neat scientific example, so go read it.) My view is that in sciences with incredibly robust and mathematically refined background theories (and instruments) such ambiguity of evidence may well be rare, but that in many sciences ambiguity of evidence and, thus, lack of consensus is to be expected and rational. 

Let me stop here for now.

 

 

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.

 

Inflation, Interest Rates,and Political Meltdowns

In most wealthy countries, most professionals working in real estate and financial markets only know of broadly falling interest rates in a relatively low inflation environment (and deflation for many goods). The remaining people with memories of the before times are retiring. Because during the last few decades monetary policy has also been accommodating, and asset prices have risen it has been relatively easy, for those with access to credit, to make money in such an environment. (This has had upwardly distributive effects.) Here's a chart with inflation adjusted returns on the S&P 500 (and look at how steep that curve is from 2010-2020, and even from 1980 to the present, and then look at the Y axis):

 

Now with inflation at forty year highs, and several rounds of interest tightening in the pipeline we may be at a dangerous inversion point. There are really two questions lurking here: first, what kind of short-term carnage will this create to all kinds of business models used to cheap money and rising asset prices not to speak of those financial institutions that never really managed to clean up their balance sheet after the Great Recession? I suspect that the (painful) answer to this question will start to become clear this Fall and next year.

Since the mid 1980s most major financial corrections have been followed by easy money by the Federal Reserve (and eventually ECB). This was made possible by incredible low inflation (see here). If inflation does not come down, the FED may be unwilling to exercise the Greenspan put when the current bear market turns into a rout. And then we will be in uncharted territory for many in the financial sector and industries built around rising asset prices.*

Yes, folks lived through the financial meltdown of 2007-2009, but the business survivors are used to cheap credit and so are the fancy systemic risk models used in all the stress testing exercises. I looked through the Basel Committee's guidance and Bank of England instructions, and the main indicator they are using is the build up of the ratio of non-government credit/GDP.  The average in Europe is about 80% (with the Scandinavian countries and the UK being outliers over 140%). But in the United States it's over to 200%. (To be sure, these absolute numbers are not as informative than the change in the rate.) I saw no mention of inflation in any of the guidelines (but maybe I missed it). 

The Federal reserve's stress testing scenarios do include inflation. (This makes me suspect I missed it in the European guidelines.) In all the scenarios, including the worst case modeling, inflation comes down a lot from its current rates. So, second, what if higher inflation and higher interests rates are here to stay? The natural assumption for many is that with a bit of time the effects of post-Pandemic shortages and Putin's war will play themselves out alongside the higher interest rates. Even if prices don't return to pre-pandemic levels, and Ukraine becomes the site of a long-term war of attrition, an optimistic may well believe these rates may stabilize at some point like they have done every time in the last four decades. Especially in Europe, inflation really is still mostly an effect of high energy prices. (Stateside the economy really seem to be growing above the long term trend.)

But while not unprecedented, this, too, makes some heroic assumptions. First, Putin's war means defense spending will go up structurally around the world. Second, the free trade and relative open borders era has come to an end. This already started with Brexit and the Trump's trade wars in the Anglo-heartland of free trade, but effectively Russia has been decoupled from the world economy. This last fact alone will incentivize countries outside Pax Americana (and that's about 2/3 of the world population) to build up redundancies and to become more sanction proof and less vulnerable to the world market. This is especially so for the two colossuses: China and India, both of whom are governed by political classes who view Pax Americana with considerable suspicion. And in many OECD countries, the balance of political forces may well favor nationalists over their cosmopolitan rivals. The closed door to migration will only push inflation up. And this, in turn, that is such inflation, will radicalize people living on fixed pensions and those whose retirements are dependent on inflation adjusted outsized asset price gains.

As an aside, for the world's poor countries serious inflation in food and energy prices, even if relatively short term, are a real humanitarian disaster and it may well put hundreds of millions of people at risk of starvation. They will pay the price for the failure of collective security in Europe, again, (alongside, perhaps their political elites' cozying up to Russia and China.)

Third, climate change will keep putting upward pressure on prices both due to need to finance the transition to lower carb energy sources as well as due to the investment needed to mitigate the risks associated with it and due to pressure on food prices. While it's possible there may be great technological breakthroughs that counterbalance all these effects, our best hope is still for many countries simply to continue to catch up with the labor productivity of wealthier nations by better education of the labor force.

Let me wrap up. With money cheap, during the last decade several countries have also let their debt balloon: Japan (a perennial), but especially US and Italy have government debt to GDP ratios over 140% now, and France and the United Kingdom are seeing levels of about 90-100%. Such countries may well welcome several years of moderate inflation in order to avoid insolvency. But if central banks engineer recessions to kill off inflation expectations, the political classes of those countries, especially, will have very unpleasant political choices to make. The next decade may well be turbulent and it is by no means obvious their political classes -- which in the US is nearly dysfunctional now -- are equipped to handle it. 

 

An Alternative to the Marxist-Liberal Debate, Belloc and The Servile State (pt 1)

A peasantry eager to purchase might have gradually extended their holdings at the expense of the demesne land, and to the distribution of property, which was already fairly complete, there might have been added another excellent element, namely, the more equal possession of that property. But any such process of gradual buying by the small man from the great, such as would seem natural to the temper of us European people, and such as has since taken place nearly everywhere in countries which were left free to act upon their popular instincts, was interrupted in this country by an artificial revolution of the most violent kind. This artificial revolution consisted in the seizing of the monastic lands by the Crown.
It is important to grasp clearly the nature of this operation, for the whole economic future of England was to flow from it.
Of the demesne lands, and the power of local administration which they carried with them (a very important feature, as we shall see later), rather more than a quarter were in the hands of the Church ; the Church was therefore the “Lord” of something over 25 per cent., say 28 per cent., or perhaps nearly 30 per cent., of English agricultural communities, and the overseers of a like proportion of all English agricultural produce. The Church was further the absolute owner in practice of something like 30 per cent, of the demesne land in the villages, and the receiver of something like 30 per cent, of the customary dues, etc., paid by the maller owners to the greater. All this economic power lay until 1535 in the hands of Cathedral Chapters, communities of monks and nuns, educational establishments conducted by the clergy, and so forth.
When the Monastic lands were confiscated by Henry VIII., not the whole of this vast economic influence was suddenly extinguished. The secular clergy remained endowed, and most of the educational establishments, though looted, retained some revenue; but though the whole 30 per cent, did not suffer confiscation, something well over 20 per cent, did, and the revolution effected by this vast operation was by far the most complete, the most sudden, and the most momentous of any that has taken place in the economic history of any European people.
It was at first intended to retain this great mass of the means of production in the hands of the Crown: that must be clearly remembered by any student of the fortunes of England, and by all who marvel at the contrast between the old England and the new.
Had that intention been firmly maintained, the English State and its government would have been the most powerful in Europe.
The Executive (which in those days meant the King) would have had a greater opportunity for crushing the resistance of the wealthy, for backing its political power with economic power, and for ordering the social life of its subjects than any other executive in Christendom.
Had Henry VIII. and his successors kept the land thus confiscated, the power of the French Monarchy, at which we are astonished, would have been nothing to the power of the English.
The King of England would have had in his own hands an instrument of control of the most absolute sort. He would presumably have used it, as a strong central government always does, for the weakening of the wealthier classes, and to the indirect advantage of the mass of the people. At any rate, it would have been a very different England indeed from the England we know, if the King had held fast to his own after the dissolution of the monasteries.
Now it is precisely here that the capital point in this great revolution appears. The King failed to keep the lands he had seized. That class of large landowners which already existed and controlled, as I have said, anything from a quarter to a third of the agricultural values of England, were too strong for the monarchy. They insisted upon land being granted to themselves, sometimes freely, sometimes for ridiculously small sums, and they were strong enough in Parliament, and through the local administrative power they had, to see that their demands were satisfied. Nothing that the Crown let go ever went back to the Crown, and year after year more and more of what had once been the monastic land became the absolute possession of the large land-owners...Hilaire Belloc (1912 [2nd edition] The Servile State, Chapter IV ("How the Distributive State Failed")

Hayek mentions The Servile State in The Road to Serfdom., and so I was curious about the connection. (I had never heard Beloc before.) The book is very brief and written in an engaging style, and it's full of stimulating observations. It's a bit peculiar I had never chanced upon it before because it is quite clearly one of the founding texts of what shortly thereafter came to be known as property owning democracy. (I was pleased to find Ben Jackson claim this a decade ago, too here.) In addition, Belloc does really anticipate a road to serfdom thesis (although surely does not originate it--it's in Tocqueville and probably earlier), but it's clearly not Hayek's (or Mises') version (Edward McPhail has a lovely paper explaining that it here). I intend to blog a bit about in the future -- not the least because of his description of biopolitics and his analysis of corporate welfare state.

But today, I want to do a more lighthearted piece. As is well known Marxists and Liberals have a fierce debate over the origin of capitalism (which on the liberal side is treated as the origin of mercantilism to which liberalism is a response.) On the Marxist side -- recall (here) my digression on Meiksins Wood and Adam Smith (and this follow up) --, capitalism emerges when term-limit leases are introduced in agriculture and the price of these leases are determined by an estimation by surveyors of the value of that land after improvement in light of prevailing, or at the least the abstract perception of prevailing, market conditions. And this, in turn, sets a landgrab in motion in which enclosures are forced on a politically weak rural population who live out a kind of natural communism. And this violence generates the 'productivity of property,' which gets capitalism going (which liberals will call Mercantilism).

As an aside, some Liberals have a tendency to treat the 'productivity of property' in consequentialist fashion as unequivocally a good thing. The other day, for example, I noticed that in The Constitution of Liberty (1960), Hayek mentions, in passing (while discussing mid twentieth century agriculture), that "there can be little question that the consolidation of dispersed holdings inherited in Europe from the Middle Ages or the enclosures of the commons in England were necessary legislative measures to make improvements by individual efforts possible." (p. 488-489 [Hamowy edition]; emphasis added). It's the kind of passage that gives critics and even friends of Hayek pause--he clearly thinks that some transitionary violence can be justified for the end it serves (but will not dwell on it).

Okay, if we turn to Belloc, he posits a kind of golden age (he calls it an "excellent state of affairs"): the distributed state: in which property was very widely distributed and guilds and country customs conspired to keep income and property inequality to a relative minimum. And the first quoted paragraph above gives his very schematic model for the natural course of events of the evolution of the distributed state. It's not a pure counterfactual (as in Smith's natural course in Book 3 of Wealth of Nations) because Belloc also suggests this natural evolution happened in France. (That's an odd claim, but let's ignore it.) But in England this natural evolution was interrupted by an artificial revolution: Henry VIII's landgrab of the monasteries.

Now, because of the weakness of the sixteenth century English royal family, the landgrab ends up reinforcing and creating a more durable oligarchy with a weak monarchy and a more powerless rural population.* Belloc tells what happens next:

All over England men who already held in virtually absolute property from one-quarter to one-third of the soil and the ploughs and the barns of a village, became possessed in a very few years of a further great section of the means of production, which turned the scale wholly in their favour. They added to that third a new and extra-fifth. They became at a blow the owners of half the land! In many centres of capital importance they had come to own more than half the land. They were in many districts not only the unquestioned superiors, but the economic masters of the rest of the community. They could buy to the greatest advantage.

The world-historical significance of this is as follows meant that before the industrial revolution, England was already an oligarchic state. 

Take, as a starting-point for what followed, the date 1700. By that time more than half of the English were dispossessed of capital and of land. Not one man in two, even if you reckon the very small owners, inhabited a house of which he was the secure possessor, or tilled land from which he could not be turned off.
Such a proportion may seem to us to-day a wonderfully free arrangement, and certainly if nearly one-half of our population were possessed of the means of production, we should be in a very different situation from that in which we find ourselves. But the point to seize is that, though the bad business was very far from completion in or about the year 1700, yet by that date England had already become Capitalist. She had already permitted a vast section of her population to become proletarian, and it is this and not the so-called “Industrial Revolution,” a later thing, which accounts for the terrible social condition in which we find ourselves to-day.

Now, I want to offer four observations about Belloc's story. First, it is an unintended consequence explanation: in which structural forces (pre-existing social arrangements and webs of local corruption) and historical contingency (Henry VIII's rupture with Rome) conspire to upend English economic development.

Second, in so far enclosures figure into his story, they are a late nineteenth century development in which oligarchic capitalism is performing a mopping up operation and they figure in tales of futile resistance by the old and their fathers. 

Third, in Belloc's account there never really was an early revolution in the productivity of property as an engine of history. Rather, it's the application of technology by entrenched wealthy landowners (who also become industrialists).

Fourth, and finally, Belloc is no liberal. But his origin story is a natural one to embrace by liberals who, while distancing themselves from capitalists as a class, want to explain why due to initial conditions capitalism turned mercantile (in which violence was part of its DNA), as (say) Röpke argues. And such liberals might wish to suggest that in so far as there were original sins of capitalism, they were performed by a capricious monarch. Of course, such liberals are scarce on the ground.