Digressions&Impressions

7 March 1979: Foucault on the Radicalness of Liberal Governmentality (XXV)

First of all, we should not forget that the diffusion of the German neo-liberal model has taken place in France on the basis of a strongly state-centered, interventionist, and administrative governmentality, with precisely all the problems this entails. Second, the attempt to introduce and implement the German neo-liberal model in France takes place in a context of an initially relatively limited, and now acute economic crisis which is the motive, pretext, and reason for the introduction and implementation of the model and, at the same time, what checks it. Finally, for the reasons I have just mentioned, the third characteristic is that the agents of the spread and implementation of this model are precisely those who administer and direct the state in this context of crisis. Because of all this, the implementation of the German model in France involves a whole range of difficulties and a sort of awkwardness mixed with hypocrisy, examples of which we will see. Michel Foucault, 7 March, 1979,  translated by Graham Burchell, Lecture 8, The Birth of Biopolitics, 192

According to Foucault, the twentieth century is characterized by two kinds of "reduction of state governmentality." (191) One is through  the "growth of party governmentality," as occurred most dramatically in fascist and communist states.* Lecturing in 1979 the Marxist kind was not yet something of the past.

As an aside Foucault is also having a bit of fun here because for Max Weber the mediating function of parties (and party bosses) is characteristic of nineteenth century developing liberal democracies.  (Of course, that is compatible with the rule of law, which, by contrast, true party governmentality erodes.) This is a core commitment of twentieth political science (see, e.g., Schattschneider). As I have noted before, this feature of liberal democracy has been eroded by the development of the open primary (this started to happen in Foucault's life-time).

Liberal democracies, by contrast, "regimes like our own" experiment with the second "form of reduction" and "attempt to find a liberal governmentality." (191) And it is very important for Foucault's argument that liberal governmentality has two different templates: one that he calls the "German model," which is the ORDO liberal version he has articulated in the first seven lectures.  This ORDO model is ""being diffused, debated, and forms part of our actuality, structuring it and carving out its real shape, is the model of a possible neoliberal governmentality." (192) The other approach is the Chicago school.*

Now, what's crucial -- and what has taken me a long time to discern -- is that Foucault makes a rather sharp distinction between the way the German model functions in its origin and what happens to it when (ahh) its copy is diffused and 'implemented' elsewhere; the implementation is, simultaneously, a "radicalization," (207). But Foucault does not make the distinction (between original and copy) fully explicit because he does not repeat the analysis of the previous weeks to draw out all of the contrast.

For, in a seeming paradox, while the ORDOs confronted a much more distinctive circumstance, the collapse of Nazi Germany and occupation, Foucault treats original ORDO-neoliberalism as a kind of organic political solution to circumstances. (Here he implicitly kind of tracks Röpke conception of what ought to happen as factual.) Whereas the application of the copy of neoliberalism in France during the apparently more ordinary political crisis of the 70s is treated as disruptive. And so lurking in Foucault there is a surprisingly nineteenth century assumption in which ideas and society form a kind of organic whole.**

One way to track the most fundamental difference is that in Germany, post Stunde Null, the ORDOs had to invent (recall lecture 4) a new kind of sovereign power, which simultaneously made the NAZIs illegitimate, and that would constitute the legitimacy of the Bonn Republic by the maintenance of certain basic rights by way of the rule of law and economic growth with social characteristics. Whereas in France, liberal governmentality is imported by leading technocrats of a legitimate state in economic crisis. And for Foucault this starts to happen around 1970 or "from 1970 to 1975 or anyway in the decade now coming to a close." (195) 

As another aside, Foucault here very quietly, and prudently, skips the collapse of the third republic, and all the turbulence of the fourth republic, and the founding of the fifth, not to mention '68. Or to be more precise, he mentions some of it in the lecture, but from a vantage point, as if, of relatively little import. Given some of the flamboyant political persona associated with Foucault, it is  no surprise that his prudence when discussing his own society goes so unremarked so often. And, he turns the rise of Giscard into a turning moment in French history (197). But it means one misunderstands him easily.

Now, for Foucault the awareness among the technocrats that France is in economic crisis is triggered by the 1973 oil crisis. Foucault's interpretation of it is worthy of attention, but I skip to the effect of it (which gives a sense of his analysis of it):  

Liberalism, that is to say, the total, unrestricted integration of the French economy in an internal, European, and world market, was the choice which appeared, first of all, as the only way to be able to rectify the erroneous investment choices made in the previous period because of interventionist objectives, techniques, and so on; so, liberalism was the only means of correcting these investment errors by taking into account the new factor of the high cost of energy, which was in reality only the formation of a market price for energy. (196)

Crucially, then, the diffusion of the ORDO template means in France not just a correction on Keynesian countercyclical dirigisme, but more importantly an insertion of France into a new kind of political economy in which energy costs would be (potentially) high and a submission (to use a Hayekian phrase) to the discipline of impersonal market forces. For students of the EU Foucault's observation is key because it suggests that from a French political perspective, the EU's Delors era (starting in 1985) originates in a change of intellectual climate of the 70s. 

Foucault's discussion of French experience with social security and the negative income tax anticipates the far more elaborate treatment (and much to recommend) of American neoliberal (recall) family policy by Melinda Cooper (Family Values).  But while interesting today I skip  to Foucault's conclusion:

Full employment and voluntarist growth [of the Keynesian era] are renounced in favor of integration in a market economy. But this entails a fund of a floating population, of a liminal, infra- or supra-liminal population, in which the assurance mechanism will enable each to live, after a fashion, and to live in such a way that he can always be available for possible work, if market conditions require it. This is a completely different system from that through which eighteenth and nineteenth century capitalism was formed and developed, when it had to deal with a peasant population which was a possible constant reservoir of manpower. When the economy functions as it does now, when the peasant population can no longer ensure that kind of endless fund of manpower, this fund has to be formed in a completely different way. This other way is the assisted population, which is actually assisted in a very liberal and much less bureaucratic and disciplinary way than it is by a system focused on full employment which employs mechanisms like those of social security. Ultimately, it is up to people to work if they want or not work if they don’t. Above all there is the possibility of not forcing them to work if there is no interest in doing so. They are merely guaranteed the possibility of minimal existence at a given level, and in this way the neo-liberal policy can be got to work. (207)

Now, what's important, and remarkable, is that Foucault is not claiming to unmask. On his presentation, the new system is not hidden. It's a self-conscious construct of French technocracy explicit in "the speeches, writings, and texts." (194) It involves the creation of a floating population that is not starving, but available (note the modality) for possible work. And the intention is to keep this population above subsistence by a safety-net. The pay-off is both a more efficient and productive economy that is capable of giving consumers what they wish in a high cost energy environment as well as reduce the amount of compulsion in society. Because unlike the friends/partisans of taylorist social democracy, Foucault tacitly grants their critics that the previous era of full employment also involved a lot of forced homogeneity.+

Since plans for negative income tax and basic income are still thought radical (despite the earned income tax credit and equivalencies elsewhere), we must acknowledge that Foucault's diagnosis is in some sense premature. And as Cooper shows, when neoliberal ideas where implemented, when political winds followed, they involve non-trivial amount of force with an ideology of moral hazard--many more sticks than carrot we might say. From our vantage point, then, neoliberalism never arrived fully (because it was hijacked by intrinsically conservative ideology). 

 

 

 

Toward a Political-Moral Epistemology of Computational (process) Reliabilism for AI

Now, one way to reinterpret Goldman’s [process] reliabilism in the context of computer simulations is to say that researchers are justified in believing the results of their simulations because there is a reliable process that produces, most of the time, true beliefs about such results. We can now reinterpret computational reliabilism in the following terms:

(CR) if S’s believing p at t results from m, then S’s belief in p at t is justified. where S is a cognitive agent, p is any truth-valued proposition related to the results of a computer simulation, t is any given time, and m is a reliable computer simulation.

Let us note that the formulation of process reliabilism remains largely unmodified by computational reliabilism, as it is evidenced in (CR). An important – and rather obvious – difference, however, is that process reliabilism is no longer a general account for any p and m, but rather specified for computational undertakings. In this respect, computational reliabilism takes that p is a truth-valued proposition related to the results of a computer simulation. These could be particular, such as ‘the results show that republicans have won,’ ‘the results suggest an increase of temperature in the Arctic as predicted by theory’, and ‘the results are consistent with experimental results,’ among others. Alternatively, they could also be general such as ‘the results are correct of the target system’, ‘the results are valid with respect to the researcher’s corpus of knowledge’, and ‘the results are accurate for their intended use.’ Naturally, the reliable process m is identified with the computer simulation (see Sect. 3.2 for further differences with process reliabilism).
We can now assimilate Goldman’s process reliabilism into our analysis of computational reliabilism: researchers are justified in believing the results of their simulations when there is a reliable process (i.e., the computer simulation) that yields, most of the time, trustworthy results. More formally, the probability that the next set of results of a reliable computer simulation is trustworthy is greater than the probability that the next set of results is trustworthy given that the first set was produced by an unreliable process by mere luck (Durán 2014).-- Durán, Juan M., and Nico Formanek (2018)" Grounds for trust: Essential epistemic opacity and computational reliabilism." Minds and Machines 28.4, 654. [HT Federica Russo]*

In what follows I take Durán & Formanek's computational reliabilism (about simulations) as a baseline. This work draws on some of the best work in recent epistemology and philosophy of science, and offers a compelling framework for how to think of the strictly epistemic grounds for trust for computer simulations. In what follows I  use 'algorithmic mediation' where they use 'simulations.'1

But since the pathbreaking work by Heather Douglas, we also know these epistemic grounds are conceived rather narrowly. So, here I explore how their approach might be enhanced if one takes seriously (to use a jargon from philosophy of science) inductive risk in AI. In particular, I reflect on  the conceptualization of how one should internalize social consequences into the design and programming process of algorithms as they figure in contemporary AI.+ And in particular discussions over machine learning algorithms.

In this post I sketch three areas where this baseline must be enhanced, of which the latter two are specific to machine learning AI, when one takes seriously social consequences for the grounds of trust. The idea is to work toward Ethical Computational (process) Reliabilism (ECR).

First, when one looks at the application of a reliable process outside the lab into social context, one is not just interested in its reliability for a specific task. One would also like to know what the effects are of failure. In particular, one would like to know something about the distribution of possible or likely harms on different kinds of populations, especially if these populations have different kinds of vulnerabilities (and appetites for risk). 

So, for example, something may function reliably as designed with industry beating low failure rates; yet when it breaks, all too rarely, the artifact may still be especially dangerous for kids. Or, some safety gears work swimmingly on average male subjects, less so on average female subjects. Some medicines interact badly with pre-existing conditions in subsets of the population. Now, in many cases the harms that follow from such selective or asymmetric vulnerabilities can be internalized in the design and testing process (and often this is mandated legally or by in-house risk assessment).

Selective or asymmetric vulnerabilities can map onto socially salient issues when they map onto political or morally salient demographics. In the previous paragraph I mentioned children and sex differences. A lot of public discussion of machine learning in AI has (quite naturally) focused on its reinforcement of racial and economic injustice(s). 

How to characterize what counts as as an asymmetric vulnerability is not so easy especially because many of the ethically or politically most salient harms may only become asymmetric due to causally intersectional effects. In addition, some asymmetric harms may be due to the fact that a truthful p reinforces or entrenches a socially bad status quo. For many purposes one may wish to distinguish among such selective vulnerabilities, but here I lump together as an especially important set of unfair outcomes. So, to begin formulating a possible framework:

(ECR) if S’s believing p at t results from m, then S’s belief in p at t is justified. where S is a cognitive agent, p is any truth-valued proposition related to the results of an AI, t is any given time, and m is a reliable algorithmic mediation without generating asymmetric harms to vulnerable populations.

Here 'reliable' already presupposes an ordinary use of the reliable algorithm in an assigned task. One thing that follows from this is that in order to generate an ECR, its sources -- again following,  Durán & Formanek, 1) verification and validation methods; 2) robustness analysis; 3) feedback from trial runs and (prior) implementations; 4) expert knowledge -- must also be made to seek out and track asymmetric vulnerabilities. While this clearly makes initial R&D more expensive, it may reduce litigation costs and social harms (including withdrawal fo the product) downstream. 

Second, algorithmic mediation may generate both unintended and unforeseeable outcomes. Here, too, there are many subtleties.  Some unintended consequences may just be a matter of negligence. And these can be simply assimilated to (ECR).  Morally, legally, and politically one may  be held accountable for those if there are harms in use. As it happens because of concerns over opacity and traceability, algorithmic mediation does generate some special concerns over accountability which are especially salient in the context of informational asymmetries and asymmetric vulnerabilities (with players that range from huge transnational economic agents to dispersed individuals). I return to this before long. But it is morally and politically a very important issue.

Other consequences may be unforeseeable in detail, or their tokens unknown, even though the outcome pattern (or outcome type) may be quite predictable after a while. For example, algorithmic mediation has made financial markets move (i) at much higher speeds and (ii) has also increased the likelihood of mini and maxi flash crashes. The first (i) was entirely predictable (and desired), but the (evolution of) exact speed(s) and volume of market transactions may have been unknowable in advance. And that it would generate new kinds of financial transactions was also known, even if the exact strategies were not. By contrast, it's possible that (ii) was initially unexpected. But by now any given mini-crash may be surprising or unpredictable, but that they occur is foreseeable and so they become a 'new normal.'

That is to say, unforeseeable tokens can occur in foreseeable outcome patterns/types. If an outcome patterns has possible tokens with asymmetric vulnerabilities, these patterns should, all things being equal, be avoided and ought to be internalized in ECR. (Of course, sometimes one can compensate for downside risks, etc.) So, I propose the following modification:

(ECR) if S’s believing p at t results from m, then S’s belief in p at t is justified. where S is a cognitive agent, p is any truth-valued proposition related to the results of an AI, t is any given time, and m is a reliable algorithmic mediation without (intentionally) generating foreseeable asymmetric harm patterns to vulnerable populations.

Obviously, this leaves the prevention, accountability, and remedy of some unforeseeable asymmetric harm patterns outside (ECR). And that is for another occasion.

Third, one instance of an asymmetric vulnerability is the reinforcement of a bad status quo. For many it seems intuitive that p (which is true after all) is ethically neutral, so that p reinforces a bad status quo can elicit shrugs from many. But we should resist the shrug. Classic examples can be found, I learned this via Kristie Dotson, in the way in which crime data is presented and thereby stigmatize vulnerable demographics or promote policies which have side-effects that also harm vulnerable demographics asymmetrically. I return to such harms before long.

But a crucial feature of algorithmic mediation is (as Mittelstadt et al (2016) note) that it can affect how our social reality is conceptualized, and becomes actionable in ways that are utterly unexpected (including a reinforcement of a bad status quo). So, algorithmic mediation can generate  consequences that are not just unintended, but also unforeseeable in principle because they are transformative (Mittelstadt et al also use this terminology going back to Floridi (2014).**

Here, too, the fact that an algorithmic meditation is transformative may be intended and foreseeable. And it is possible that some of the higher order outcome-patterns including the asymmetric vulnerabilities can be predicted. And that is assimilable to (ECR). But some transformations are (ahh) transformative. And these require special treatment. To be continued.

Hobson, and the Liberal explanation of Imperialism

By the late 1890s, he became convinced that the “new” imperialism, unfolding mainly in Africa and Asia, represented an overriding danger to British democracy. It threatened “peace, economy, reform, and popular self-government,” catalyzing instead militarism, reaction, and jingoism. Imperialism presented a multicausal explanation for the emergence of the “earth hunger” that had gripped the imperial powers since roughly 1870. Its “leading characteristic” was competition between great capitalist empires.

The main stimulus was investment. Oversaving among capitalists and underconsumption by the masses meant that the rich could not invest their money profitably in the domestic market. In search of a high rate of return, they pushed for the opening of foreign markets, which in turn required territorial acquisitions. This system benefitted the few—chiefly financiers and their allies in the political establishment—at the expense of the many. The “business interests of the nation as a whole are subordinated to those of certain sectional interests that usurp control of the national resources and use them for their private gain.” Employing a common radical trope, he argued that imperialism was “irrational from the standpoint of the whole nation,” although “it is rational enough from the standpoint of certain classes in the nation.” Using various forms of manipulation and misleading propaganda, this profit-driven imperialism was disguised as necessary government policy; it was a “calculating, greedy type of Machiavellianism” wrapped in the evocative language of “national destiny” and the spread of “civilization.” Like Hobhouse, he warned against the corrupting effects of disingenuous language.--Duncan Bell (2009) "Hobson, Hobhouse, Liberalism" in (2016) Reordering the World: Essays on Liberalism and Empire, 356-357 (emphasis added) [HT Chris Brooke]

I was directed to Hobson by the following remark by Perry Anderson (recall) in his famous (2019) NLR review of Adam Tooze's Crashed: "Durand’s answer [in Fictitious Capital] is that they represent an updated version of Hobson’s vision of the future at the start of the twentieth century: namely the extraction of high levels of profit from investment in production in zones of cheap labour on the periphery of the system, above all in Asia. If this is so, the ‘enigma of profits without accumulation’ would dissolve, because firms are indeed investing; not in their domestic economies, where growth, employment and wages stagnate, but in overseas locations, where they have secured very high rates of return." In Anderson's argument the mention of Hobson is, at first sight, a mere aside. 

In Durand's Fictitious Capital (2017; originally appeared as Le capital fictif in 2014), Hobson's concerns about the rise of a "new financial aristocracy" in light of (now quoting Durand) China's insertion into the circuits of world capitalism, are presented as "strangely prophetic" (140-141). Durand, in turn, is explicitly echoing Lenin (see here), whom he cites as his source on Hobson. Now Durand -- who is a trained economist -- goes on to summarize Hobson as follows:

The World Hobson describes is characterised by three elements: 1) ‘a financial oligarchy’ dominates the rich countries; 2) the workers of these countries are employed in ‘personal services’ or ‘minor industrial services’; 3) the centre draws a ‘tribute’ from the peripheral countries in the form of both profits and industrial and agricultural products. We can translate this system of relations into contemporary terms: the financial profits that feed the upward concentration of income in the rich countries are founded on the exploitation of industrial labour and natural resources in the countries of the global South. Industrial activities that have become redundant in the countries of the centre are reduced to their bare bones, with the result that workers in such areas find themselves limited to support or service activities with little added value (personal services in particular), which cannot be traded at the level of international commerce. Durand's Fictitious Capital, p141 (emphasis added)

Now, Bell and Durand give a good sense of Hobson's overall argument. And neither of them can be said to misrepresent Hobson's (1902) Imperialism.1 Even so, I think they both end up failing to convey Hobson's underlying argument. (I return to Lenin below)

For, the existence of a "financial oligarchy" that oversaves, and a mass of workers that under-consumes, is for Hobson not a natural fact as it might be taken to be if one thinks it is the ordinary effect of monopoly capitalism. But Hobson is quite clear that such over-saving, "which is the economic root of Imperialism is found by analysis to consist of rents, monopoly profits, and other unearned or excessive elements of income, which, not being earned by labour or by head or hand, have no legitimate raison d'étre." In particular, as he explains on the previous page, such monopoly profits are not themselves the effect of market-forces, but the consequence of "trust[s] or other combine[s]." (Quoted from Chapter VI) In addition, monopoly profits are fueled by tariffs; this is why, for Hobson it is axiomatic that "Imperialism repudiates Free Trade, and rests upon an economic basis of Protection." (Quoted from Chapter V) Why does this matter?

So, rather than seeing Imperialism as a natural outgrowth of the ordinary development of capitalism, Hobson takes imperialism to be the effect of a political corruption of capitalism: it's the imposition of tariffs and the failure to secure proper antitrust law* that create the economic conditions for imperialism.** For, without tariffs and other anti-competitive policies, profits would be lower and wages higher. (Hobson's argument is entirely Smithian.) Once the state has been captured by protectionist interests, which generates high profits, but underconsumption, a military-financial-evangelical complex (a parasatic class) can easily promote Imperialism. Lenin sums up Hobson's point very nicely, "in its economic essence imperialism is monopoly capitalism.... monopoly arose out of the concentration of production at a very high stage. This refers to the monopolist capitalist associations, cartels, syndicates, and trust." (Lenin, 1916 Imperialism, Chapter 10. I return to Lenin below.)

Now, for Hobson imperialism is the effect of political decisions that are reversible if only Great Britain returned to Liberal projects. He thinks that in reversing imperial projects, the working poor of Great Britain will be wealthier, resources for public investment (in a public education, public goods, and perhaps a welfare state) will be opened up; the nation much richer, and also that it would open the door to less dangerous forms of nationalism, even the possibility of pacific international federation. (Something I return to soon.) I don't mean to suggest that Hobson has no interest in colonial (as distinct from imperial) projects or that he is free from an interest in racism/anti-semitism and eugenics--there are plenty of passages that may well have him canceled today. But at bottom Hobson's economic analysis of imperialism is rooted in political economy of a sort that anticipates the ORDO-liberal interpretation of the political dangers of economic concentration.

As I noted, Lenin does justice to Hobson's analysis. But at one point he differs, and I think this helps explain the reception of Hobson I started this post with. After Lenin writes:

At the beginning of the twentieth century, monopolies had acquired complete supremacy in the advanced countries, and although the first steps towards the formation of the cartels were taken by countries enjoying the protection of high tariffs (Germany, America), Great Britain, with her system of free trade, revealed the same basic phenomenon, only a little later, namely, the birth of monopoly out of the concentration of production.   

For Lenin monopoly capitalism just is the natural byproduct of being economically "advanced." And rather than being the exception, Great Britain, with its history of free trade, confirms the rule by also exhibiting monopoly capitalism despite having a different starting point. From Lenin's perspective this is converging evidence. So, if one takes the Leninist diagnosis for granted one need not mention the political conditions that generate a "financial oligarchy" that oversaves, and a mass of workers that under-consumes; it just is the natural condition of developed capitalist economies!

My interest here is not to settle the debate between a putatively Marxist and putatively liberal interpretation of the rise of imperialism. Rather, from my skeptical liberal position, what the confrontation shows, is that there is a challenge, one that has not gone away, that one might formulate toward the liberal position: how does one prevent anti-competitive state capture that serves already existing, powerful economic interests, if these interests benefit or are enriched from such capture? For, it is no good to say that normatively desirable liberalism would not generate imperialism, if really existing liberalism cannot prevent it.+ 

 

Polanyi (Karl), Adam Smith, The Great Transformation, and Credit.

The presence or absence of markets or money does not necessarily affect the economic system of a primitive society-this refutes the nineteenth-century myth that money was an invention the appearance of which inevitably transformed a society by creating markets, forcing the pace of the division of labor, and releasing man's natural propensity to barter, truck, and exchange. Orthodox economic history, in effect, was based on an immensely exaggerated view of the significance of markets as such. A "certain isolation;' or, perhaps, a "tendency to seclusion" is the only economic trait that can be correctly inferred from their absence; in respect to the internal organization of an economy, their presence or absence need make no difference.
   The reasons are simple. Markets are not institutions functioning mainly within an economy, but without. They are meeting place of long-distance trade. Local markets proper are of little consequence. Moreover, neither long-distance nor local markets are essentially competitive, and consequently there is, in either case, but little pressure to create territorial trade, a so-called internal or national market. Every one of these assertions strikes at some axiomatically held assumption of the classical economists, yet they follow closely from the facts as they appear in the light of modern research.
   The logic of the case is, indeed, almost the opposite of that underlying the classical doctrine. The orthodox teaching started from the individual's propensity to barter; deduced from it the necessity of local markets, as well as of division of labor; and inferred, finally, the necessity of trade, eventually of foreign trade, including even long distance trade. In the light of our present knowledge we should almost reverse the sequence of the argument: the true starting point is long distance trade, a result of the geographical location of goods, and of the "division of labor" given by location. Long-distance trade often engenders markets, an institution which involves acts of barter, and, if money is used, of buying and selling, thus, eventually, but by no means necessarily, offering to some individuals an occasion to indulge in their propensity for bargaining and haggling.--Karl Polanyi (1944) The Great Transformation, p. 61-62

Polanyi's official target here is the "nineteenth century myth," treated as "orthodox economic history," of the "classical economists" in which money causes the creation of markets and so facilitates the division of labor. This nineteenth century myth, in turn, adopts a theory of human nature theory, which includes the "propensity to barter, truck, and exchange," a reference to Smith's account of the origin of the division of labor.  And this propensity can (finally) express itself in the developing markets (and division of labor). 

The chapter I am quoting has been enormously influential in economic sociology, generating, somewhat ironically as Jens Beckert argues, a huge scholarly literature on embeddedness, and a certain kind of soft-marxist and republican political economy now fashionable again. I cannot tell you how often I read purported refutations of Adam Smith, classical economics, or liberalism more generally that echo Polanyi. I find this amusing because the story Polanyi tells after the "true starting point" is pretty much David Hume's account of the rise of commercial society in "Of Commerce" (except that Hume is more focused on the causes of productivity and adopts a kind of labor theory of value) and (recall) Smith's own account of Europe in Book III of Wealth of Nations (which, admittedly, Smith calls "retrograde" and does not rely on a labor theory of value.) But my interest today is not in defending the Enlightened Scots.

Polanyi's theory of the great transformation treats the development of markets as an imposition of the mercantile national and nationalizing state on towns and country that resisted this.* And this imposition inverted a kind of natural or at least better order of things: "Instead of economy being embedded in social relations, social relations are embedded in the economic system." (60)

And where markets did originally (before the great transformation) arise, they are hemmed in by local  restrictions, such that "Local markets are, essentially, neighborhood markets, and, though important to the life of the community, they nowhere show any sign of reducing the prevailing economic system to their pattern." (66) In other words, prior to the great transformation, markets are tamed by political life and serve community needs. And this story has an enormous pull on communitarians, social democrats, christian democrats and others partially nostalgic for a lost world. (Marxists tend to play a double game here: promoting the disaffection of the nostalgics, but accepting capitalism's destruction as needed for a better future.)

Now, when liberals confront the Polanyi style story, in response they sometimes note that the taming of markets also involves repeated acts of violence, but generally they tend to trot out the sudden upward curve of growing prosperity (wealth and consumption) since the industrial revolution. And the more insidious liberals may even justify colonialism and imperialism because those born late (including the descendents of surviving natives) benefit greatest from the creative destruction that follows from the spread of markets embedded in this curve.+ So, rather than addressing the roots of nostalgia generated by the present status quote, these liberals offer a consequentialist account about the status quo in terms of the good-making features of submitting to forces beyond most community's control (a great financial power, perhaps, excepted). Despite my (skeptical) liberal sympathies, it is obvious that the liberal response won't persuade. (That point is compatible with the further fact that most nostalgic folk are unwilling, in practice, to give up the comforts of modern life.)  

Polanyi had kind of anticipated the response. For, Polanyi pre-market societies are characterized by a different fundamental motive than market societies: the "transformation implies a change in the motive of action on the part of the members of society; for the motive of subsistence that of gain must be substituted." (43-44) And while Polanyi does not say this explicitly, a society based on  gain is in no sense properly reciprocal. (Here Polanyi cheats a bit because he relies on the reader to view gain as zero-sum not mutual.)

In the few words remaining in the Digression, I can't settle the debate. But in returning to Polanyi, I noticed a curious absence in Polanyi's argument. He completely misses that the primitive economies of medieval europe were suffused with debt; as a leading authority puts it, "it was an important part of medieval life."** People had to make "many deals on credit to allow consumption." (Christine Desan Making Money, 214) Now, Graeber has much of interest to say, also to philosophers, about the role of virtual money in such credit/debt patterns (and perhaps being the original form of money). But here I just want to note an important effect, that a society characterized by mutual credit/debt relations was enmeshed in open ended mutual acrimony and litigation (Desan 218ff.).

So, the social relations that embed pre-market society, if there is such a thing, is one of open ended mutual score-keeping (of mutual loans) and mutual promises of repayment that themselves are potentially precarious, and potential open-ended conflict about trying to call in outstanding debts. And while, if Desan is to believed, it is true that matters were worse in medieval England - because of the English policy of making low denomination coinage scarce --, medieval England is the source of the beginning of the great transformation (recall this post on Adam Smith's account on the origin of capitalism) and so highly relevant to evaluating Polanyi's argument (Desan also names him as one of her targets early in her book). 

That is to say, one way to understand the great transformation is that it liberated ordinary people from being routinely in each other's debt, that is, a suffocating embrace of unsteady and stifling mutual obligations that could be called in at the worst possible moments. And in particular, because these credit obligations predictably generated lots of mutual conflicts, they created an opportunity for authorities to settle conflict. This may have helped develop the rule of law in the very long run, but it is pretty obvious in the interest of the powerful to have the not so powerful be in regular conflict with each other and need their mediating/legal services to settle conflict among ordinary people. This form of social embeddedness undoubtedly helped ensure the long-term stability of this mode of governance.   

 

 

 

Financial Crises, Lisa Herzog on Iris Marion Young on Systemic Harm/Structural Injustice

Can one ascribe individuals a responsibility to address systemic harms? I draw on arguments developed by Young (2011) in order to show that this is indeed possible. Young develops her notion of forward-looking responsibility in the context of a broader account of ‘‘structural injustice.’’ One can understand the imposition of systemic harms as a form of structural injustice: it puts some people into positions of privilege, e.g. because they benefit from risky investment strategies, while others are put into situations of disadvantage, as they are exposed to increased risks and volatility. It is, however, unlikely that individuals can overcome the problems of systemic harms by themselves. Nor can they be held individually responsible in the sense of backward-looking responsibility. In order to understand the responsibility to prevent such injustices or harms, Young argues that we should understand responsibility not only according to the ‘‘liability model’’ of accountability for harm done by specific individuals, but also as a ‘‘forward-looking’’ notion (2011, p. 92). We have a responsibility to care about the institutions within which we live and act, ‘‘watching [them and] monitoring their effects to make sure that they are not grossly harmful’’ (2011, 88). This notion of responsibility is ‘‘essentially shared’’ and ‘‘can be discharged only through collective action’’ (2011, p. 105). In Young’s words: one has an ‘‘obligation to join with others who share that responsibility in order to transform the structural processes to make their outcomes less unjust’’ (ibid.).
Thus, it suggests itself to turn to existing collectives that could carry these responsibilities. These should be the groups of those who can jointly take steps to prevent systemic harms. Young argues that factors that help determine who should be ascribed responsibility include the power to address the problem, the fact that agent benefits from existing injustices (or harms)—and are hence under a special obligation to do something about them—, and the fact that there are already organized entities that can take action (2011, 144ff.). These factors all point to bankers as addressees of such responsibility. Even if they are not personally guilty of misbehavior, they have a responsibility, as members of the profession, to take steps to prevent systemic harms, or at least to minimize the risks of their occurrence.--Lisa Herzog ([2017] 2019) "Professional Ethics in Banking and the Logic of ‘‘Integrated Situations’’: Aligning Responsibilities, Recognition, and Incentives" J Bus Ethics, 536

Lisa Herzog is one of the leaders of a developing field in the ethics and political theory of finance.* And I often find it very useful to think my way to my own views by grappling with hers. The paper partially quoted above argues, by using what Talcott Parsons' called ‘‘integrated situations,’’ for a significant role for professional associations of folk working in finance to help confront the ethical failures of bankers and to help create the right mix of regulation, incentives, recognition, and norms to tackle a whole bunch of systemic harms that follow from financial crises in particular. While I like the spirit of Herzog's proposal -- which echoes ideas about the significance of intermediary societies I tend to ascribe to Michael Polanyi --, I am a bit skeptical about the possibility of turning finance workers/traders/bankers (etc.) into professionals of the relevant sort (which is why I proposed, once, recall (here; here and here;  for background here) regular drilling and simulation-games by regulators and traders/managers, etc.). But about that some other time more. Here I want to focus, more narrowly, on the backbone of Herzog's normative argument which relies on increasingly important work by Iris Marion Young Young on structural injustice.**

Let's stipulate, for the sake of argument, that Young's argument for forward-looking responsibility is sound and convincing.+ The question, challenge, I wish to pose today whether it is right to think of the systemic harms of the sort generated by financial crises as species of structural injustice? (And my answer is, no.) To be sure, and not unimportantly, I fully grant that the policy responses to financial crises, often, in recent times, exhibit patterns of outcome that are well interpreted as structural injustice in many instances shockingly so. That is, the moral hazard involved in privatizing gains and socializing losses from the financial industry is indeed an instance of structural injustice due to rent-seeking and a kind of political blackmail. (I return to that below.) And so what follows is, perhaps, more of academic than of political interest. 

It is natural to assume that members of the financial community are relative wealthy. But even the UK, which has a permissive bonus culture and a large financial sector (and, by European standards, higher political tolerance for inequality), average pay for a banker is £39,412. Since averages can hide huge distributional variance, it is likely this means means that the vast majority of bankers really should not be thought of as wealthy (by advanced economy standards). Folk working in brokerage securities as a trader make, on average, £60,000, but they do average 30K in bonuses. Obviously that's compatible with some making a lot more than this.++ And this puts traders above average, but net yet among the structurally privileged (for an economy like the UK).

In addition, bankers and traders can lose their jobs when their firms go bankrupt as happened with Lehman--in the UK alone this led to 4000 people losing their jobs. Less high profile, in the collapse of Northern Rock, an once important British mortgage bank, about 2,500 jobs were lost. So, absent political decisions, bankers and traders do have real skin in the game when their firms go bankrupt. There are also more complex issues pertaining to pension coverage. 

The previous two paragraphs suggest that it is by no means obvious that we should think of the average member of the financial industry as especially privileged or immunized from the fall out in a financial crisis. That does not rule out that Herzog's argument would apply to some of the better paid members of the industry.

As an aside, I do not mean to deny that various forms of, say, deposit insurance, also involve de facto a hidden subsidy to bankers in times of crisis. But since these forms of insurance prevent systemic harms I leave them aside.

In addition, and more important, the systemic harms that accompany a major financial crisis -- characterized by liquidity crisis, bank-runs, bank-collapses, inability to complete trades at any price, the regular, automatic (etc.) imposition of circuit breakers, etc. -- are not intrinsically re-distributive from poor to privileged. As Piketty shows, en passant, in Capital, left to its devices, a financial crash, and its aftermath, tends to be a great leveller (because financial assets deflate across asset classes).1 It's only recent central bank policy -- which we can describe as the so-called Greenspan put -- and the way bailouts are now acted and priced in that has changed this historical correlation. 

Now a skeptical reader may think that here I am playing the government failure card a bit easily in suggesting that the imposition of systemic harms as a form of structural injustice are a consequence of government policy and not financial crises as such. I do recognize an exception to my claim, and that is, in fact, cases where a government cannot repay its debts in the context of a financial crisis. It's quite clear that restructuring, budget cuts, and devaluations that accompany such government debt crises can frequently involve cases of structural injustice even when, in executing austerity or a devaluation the government avoids (as it often does not) targeting the poor, vulnerable, and pensioned. (In practice, we have seen shockingly large forms of structural injustice in the Greek debt restructuring where Northern European banks were bailed out at the expense of the Greek poor.)*** For, in general citizens have very ineffective control over Government debts, while the investment banks, debt market makers/specialists, and treasury officials do. 

To sum up, in practice it is good to have an eye toward structural injustice given how policy de facto, alas, works. In my view this can only be solved if we end the effective blackmail of the financial industry of  policymakers since Lehman and the practice of using quantitative easing as our major, almost only, policy response to financial collapses--these do have enormous redistributive effects from the underprivileged to privileged in practice. (So, we need to develop alternative policy responses.) But I also suspect that the initial harms that follow from financial collapses, while systemic in character, are not forms of structural injustice. And so these require a different kind of normative argument than the one offered by Herzog.

21 February 1979: Foucault on The Rule of Law (XXII)

Now, they say, how can we avoid the error of planning? Precisely by seeing to it that the tendency Schumpeter identifies in capitalism towards the organization, centralization, and absorption of the economic process within the state, which he saw was not a tendency of the economic process but of its social consequences, is corrected, and corrected precisely by social intervention. At this point, social intervention, the Gesellschaftspolitik, legal interventionism, the definition of a new institutional framework of the economy protected by a strictly formal legislation like that of the Rechtsstaat or the Rule of law, will make it possible to nullify and absorb the centralizing tendencies which are in fact immanent to capitalist society and not to the logic of capital. This is what will enable us to maintain the logic of capital in its purity and get the strictly competitive market to work without the risk of it ending up in the phenomena of monopoly, concentration, and centralization observable in modern society. As a result, this is how we will be able to mutually adapt to each other, on the one hand, a competitive type of economy, as defined or at least problematized by the great theorists of the competitive economy, and, on the other, an institutional practice whose importance was demonstrated in the great works of historians or sociologists of the economy, like Weber. Broadly speaking, according to the ordoliberals the present historical chance of liberalism is defined by a combination of law, an institutional field defined by the strictly formal character of interventions by the public authorities, and the unfolding of an economy whose processes are
regulated by pure competition.
This analysis, political project, and historical wager of the ordoliberals has, I think, been very important, forming the framework of modern German policy. And if there really is a German model, it is not the frequently invoked model of the all-powerful state, of the police state, which, as you know, has so frightened our compatriots. The German model being diffused is not the police state; it is the Rule of law (l’État de droit). And I have not made these analyses just for the pleasure of engaging in a bit of contemporary history, but so as to try to show you how it was possible for this German model to spread, on the one hand, in contemporary French economic policy, and, on the other, in a number of liberal problems, theories, and utopias like those we see developing in the United States. So, next week I will talk about some aspects of Giscard’s economic policy and then about American liberal utopians. Michel Foucault, 21 February 1979,  translated by Graham Burchell, Lecture 7, The Birth of Biopolitics, 178-179

Foucault closes his seventh lecture -- the midpoint of the series -- with a two-fold clear contrast between the realististic German Ordo-Liberals (ORDOs) and Schumpeter, who is the pessimistic outlyer toward the left, and the Chicago school American liberal utopians, which fuel, it seems, "a stubborn American extreme Right born in the Midwest" (174).* The key point vis a vis Schupeter is that for ORDOs capitalist monopoly and concentration is always the effect of a political process, or badly formed laws, that facilitate rents or high profits. So, a proper rule of law both aims to prevent that from occurring, or intervenes not by redistributing income (or wealth) directly, but by proper antitrust law, patent-law, property-rights, etc. And crucially, the latter must not be ad hoc, but ground in principles. In addition, there must be an investment in human capital, and even culture that can help shape an enterprising spirit. 

The nature of the rule of law then becomes crucial. The core of the lecture is, in fact, Foucault's analysis of the competing conceptions of the rule of law. In a crucial way, law must be capable of doing four things at once: first, (i) it must be a site where citizens (and corporations) encounter each other as relative equals and resolve conflicts peacefully; second, (ii) it must be a site where individuals can hold the state to account, the "possibility of judicial arbitration, by one or another institution,
between citizens and the public authorities," (171) ; third, (iii) it is a site where new social problems -- due to technological change and increasing growth, and so more mutual "friction" (175) -- are diagnosed and resolved. (Obviously, (i)&(iii) can blend in each other.) And (iv) "public authorities act within the framework of the law and can only act within the framework of the law" that is, there is no political or conceptual space for non-law-governed sovereign agency as is common in despotism or security-states. (169; this is why states of exception attract our notice.) 

Now, I call, following Lippmann and Rougier (recall here;  and Locke; here), the rule of law in (iii) the source of the 'principle of adaptation' that liberal society must instantiate if it is to survive in liberal fashion (164). One natural problem is that is by no means obvious that existing legal principles can survive the encounter with new sources of friction and technological change unscathed. So, (iii) will also be a source of legal innovation in the principles that are supposed to guide the framework (which I call principled rule of law). 

There is an obvious problem here in how the principle of adaptation and the principled rule of law interact once they go out of sync. There seem three option: (a) for Lippmann (who is not discussed by Foucault) it is clearly the role of politics to do the mediation, but for this to succeed he requires from politicians that they do so in impartial, judicial faction. This strikes me as too far-fetched to expect in practice. For, (b) Hayek, who is discussed at length in this lecture, we must trust the evolving jurisprudence of the common law as a kind of bottom up discovery engine. It can only be such an engine, if economic agents can feel secure in the expectation that "the legal framework is fixed in its action and will not change." (173, Foucault paraphrasing Constitution of Liberty.)+ A fixed legal framework is uncertainty reducing, confidence inspiring, and allows for mutual coordination. This approach can allow existing principles to be reinterpreted, but as Lippmann noted, it can be abused as an instrument to preserve a status quo (which registers previous existing economic/social powers). So, it is not obvious that this allows for the transformation of legal principles where needed. As Hayek and with Hayek James Buchanan became more influential among ORDOs this more status quo friendly tendency is also visible among them.

Even so, as Foucault clearly recognizes, a third option (c), is visible among the (early) ORDOs. To be sure all ORDOs agree with Hayek that even soft forms of planning (associated with Keynes and New Deal) are to be rejected. But these early ORDOs recognize that intellectual and political leadership is needed to implement, and, where necessary, develop an apt legal framework. That is to say, an intellectual class must be nourished, students who combine/integrate law, history, economics, sociology and philosophy become the source of innovation in the principles that can guide the framework, or Gesellschaftspolitik. This class must, in particular, generate expertise in the workings of institutions within and among (legal, economic, social, etc.) orders as well as in their wider frameworks (see, especially, 167).

Admittedly, Foucault does not quite explicitly say (c), although his repeated quotes from Ropke and, especially, Eucken suggests indicate it. The problem, of course, is that (c) shades into views more commonly associated with Pareto and Schumpeter, an administrative technocracy/elite. But regardless whether the development of such a class was fully intended by Eucken (as I think it was), it is clear that is partially generated by the ORDO agenda  in light of (iii). And, I think, it is no surprise we encounter such a class in the institutions -- be it the 'Geneva' ones centered on internal trade and law, described by Quinn Slobodian or in the EU -- non-trivially influenced by ORDO thought.

I should close here, but I do want to note that the tension between (iii) and (iv) is characteristic of the European Central Bank's (ECB) problems during the 2007-2013 Euro-crisis. It needed new principles to act, but it felt constrained by a lack of legal mandate; and it lacked the intellectual class to supply it (and the political elites/democracies) with the principles to do so. From the perspective of the ORDOs, the ad hoc and upwardly redistributive nature of European monetary policy is clearly a threat to the survival of liberalism and rule of law, in terms of (i), if only because it has enshrined in law a class of economic agents (systematically significant banks) as privileged (because too big to fall). 

 

 

 

 

Le Bon vs Condorcet

If the individuals of a crowd confined themselves to putting in common the ordinary qualities of which each of them has his share, there would merely result the striking of an average, and not, as we have said is actually the case, the creation of new characteristics. How is it that these new characteristics are created? This is what we are now to investigate.
    Different causes determine the appearance of these characteristics peculiar to crowds, and not possessed by isolated individuals. The first is that the individual forming part of a crowd acquires, solely from numerical considerations, a sentiment of invincible power which allows him to yield to instincts which, had he been alone, he would perforce have kept under restraint. He will be the less disposed to check himself from the consideration that, a crowd being anonymous, and in consequence irresponsible, the sentiment of responsibility which always controls individuals disappears entirely.
   The second cause, which is contagion, also intervenes to determine the manifestation in crowds of their special characteristics, and at the same time the trend they are to take. Contagion is a phenomenon of which it is easy to establish the presence, but that it is not easy to explain. It must be classed among those phenomena of a hypnotic order, which we shall shortly study. In a crowd every sentiment and act is contagious, and contagious to such a degree that an individual readily sacrifices his personal interest to the collective interest. This is an aptitude very contrary to his nature, and of which a man is scarcely capable, except when he makes part of a crowd.
   A third cause, and by far the most important, determines in the individuals of a crowd special characteristics which are quite contrary at times to those presented by the isolated individual. I allude to that suggestibility of which, moreover, the contagion mentioned above is neither more nor less than an effect.
   To understand this phenomenon it is necessary to bear in mind certain recent physiological discoveries. We know to-day that by various processes an individual may be brought into such a condition that, having entirely lost his conscious personality, he obeys all the suggestions of the operator who has deprived him of it, and commits acts in utter contradiction with his character and habits. The most careful observations seem to prove that an individual immersed for some length of time in a crowd in action soon finds himself—either in consequence of the magnetic influence given out by the crowd, or from some other cause of which we are ignorant—in a special state, which much resembles the state of fascination in which the hypnotised individual finds himself in the hands of the hypnotiser. The activity of the brain being paralysed in the case of the hypnotised subject, the latter becomes the slave of all the unconscious activities of his spinal cord, which the hypnotiser directs at will. The conscious personality has entirely vanished; will and discernment are lost. All feelings and thoughts are bent in the direction determined by the hypnotiser.
   Such also is approximately the state of the individual forming part of a psychological crowd. He is no longer conscious of his acts. In his case, as in the case of the hypnotised subject, at the same time that certain faculties are destroyed, others may be brought to a high degree of exaltation. Under the influence of a suggestion, he will undertake the accomplishment of certain acts with irresistible impetuosity. This impetuosity is the more irresistible in the case of crowds than in that of the hypnotised subject, from the fact that, the suggestion being the same for all the individuals of the crowd, it gains in strength by reciprocity.
The individualities in the crowd who might possess a personality sufficiently strong to resist the suggestion are too few in number to struggle against the current. At the utmost, they may be able to attempt a diversion by means of different suggestions. It is in this way, for instance, that a happy expression, an image opportunely evoked, have occasionally deterred crowds from the most bloodthirsty acts.
   We see, then, that the disappearance of the conscious personality, the predominance of the unconscious personality, the turning of feelings and ideas in an identical direction by means of suggestion and contagion, the tendency to immediately transform the suggested ideas into acts; these, we see, are the principal characteristics of the individual forming part of a crowd. He is no longer himself, but has become an automaton who has ceased to be guided by his will.
   Moreover, by the mere fact that he forms part of an organised crowd, a man descends several rungs in the ladder of civilisation. Isolated, he may be a cultivated individual; in a crowd, he is a barbarian—that is, a creature acting by instinct. He possesses the spontaneity, the violence, the ferocity, and also the enthusiasm and heroism of primitive beings, whom he further tends to resemble by the facility with which he allows himself to be impressed by words and images—which would be entirely without action on each of the isolated individuals composing the crowd—and to be induced to commit acts contrary to his most obvious interests and his best-known habits. An individual in a crowd is a grain of sand amid other grains of sand, which the wind stirs up at will.
   It is for these reasons that juries are seen to deliver verdicts of which each individual juror would disapprove, that parliamentary assemblies adopt laws and measures of which each of their members would disapprove in his own person.--Gustave Le Bon (1986 [1895] [Psychologie des Foules] The Crowd: A Study of the Popular Mind, pp. 6-8 (translation of second edition published by Dover)

The (1785) Condorcet Jury theorem tells us that with modest assumptions, the rule of more is better and, thereby, vindicates democracy from the verdict of history by all the learned. A century later, near the end of his book, Le Bon  admits that "the parliamentary system represents the ideal of all modern civilised peoples. The system is the expression of the idea, psychologically erroneous, but generally admitted, that a large gathering of men is much more capable than a small number of coming to a wise and independent decision on a given subject." (123) While the official theme of Le Bon's book is to offer an explanation of the functioning of crowds qua crowds, there are two sub-themes in his argument: first, how come the psychologically erroneous idea persists as a civilizational dogma (that is, Le Bon gives us a theory of the rise and fall of civilizations and institutions)?; second, why does the Jury Theorem fail so often in practice, despite the fact that it should function as a self-fulling prophecy given that people widely expect it to succeed?+ Lurking in the second sub-theme is an account of why institutions fail in different places despite the pull of incentives, and why demagogues may succeed.

Le Bon is no friend of democracy. But in this book he has little interest in offering a replacement for democracy because he accepts Tocqueville's claim that in an era of equality men have "an almost limitless confidence in the judgments of the public." In fact, he quite clearly argues that limiting the franchise to a meritocratic sub-set (a la Mill or Brennan) won't improve matters. Because for him once in a crowd, even widely diverging people behave similarly and lose a lot of the characteristics that give them their individuality.* In a crowd "men always tend to the same [low] level.....with regard to social problems... mean are substantially, equally ignorant."

Before I confront the announced subject of this post, I need to be clear about some of his population assumptions. Le Bon works with a contrast between barbarism and civilization. And once in a crowd otherwise civilized people are likely to become barbaric. Despite Le Bon's racism, all kinds of people can become civilized. (Throughout the book, he treats Islam as one of the great civilizations.) Le Bon also works with a racial theory. And it does important work for him because for him races have deep-seated commitments that help explain how people qua people respond differently to stimuli and incentives.

I actually think that what Le Bon calls a 'race,' is (for students) better translated by 'nation.' For, while Le Bon is undoubtedly casually racist (and sexist) in our modern sense (and clearly admires Anglo-Saxons over his own Latins), his race theory turns out to be primarily sociological: that is, a race is constituted by shared history, shared dogmatic commitments, and shared practices (including language). So, Le Bon's 'race' is not far removed from Renan's 'nation.' And crucially the biological stock of a race is never pure according to Le Bon. (This is because for him barbarism, which is always prior to civilization, is always a period of mixing.) And somewhat surprisingly -- given his reactionary mindset -- when explaining crowds no race escapes being barbaric in the crowd.

The brilliance of Condorcet's proof resides, in part, in the fact that (a) he assumes very modest voter competence. All that is needed (recall) is better than chance odds for getting things right. Let's call this average intelligence. Unlike modern students of Condorcet, who recognize that the conditions of (b) independence and (c) lack of communication, may often be violated, Le Bon thinks this (a) is the weak part of Condorcet's proof. For  while Le Bon accepts Condorcet's assumption that in a crowd we are (d) sincere, Le Bon thinks that once we become part of a crowd (and for him juries are also crowds) in our sincerity our competence reduces below such average. We become as it were for him hypnotized automatons. 

To be sure, Le bon thinks that in a crowd we stop acting independently in large part because through the mechanism of contagious sympathy, we end up being suggestible by the same influences. Group diversity, which might give a crowd intellectual strength, evaporates for Le Bon and we become homogeneous, hypnotized automatons in a crowd.  And while the Stoic sage is homogeneous with other Stoic sage in his philosophical virtue, crowds act like one in pursuit of one idol or another.

One may well wonder if the shared feeling of invincibility is really the triggering cause of crowd-like phenomena, and to what degree hypnosis is really the best physiological explanation and explanatory analogy for crowd behavior. I am here not to defend Le Bon. But I do note it is no objection to Le Bon's theory that some crowds get it right or produced fine political outcomes. Le Bon explicitly admits that crowds may well be heroic or help found great civilizations (etc.). If you are fond of great strikes or mass protests, Le Bon is happy to admit that these shape history.

Rather the key point is that friends of Condorcet's jury theorem assume methodological individualism: that being within a jury/crowd baseline competence is not reduced or at least not so reduced as to fall under average. And Le Bon points out this commitment (a) needs to be earned if, as is not wholly implausible, cognitive characteristics are changed when in large company (subject to polarization, group loyalty, sense of justice, etc.).

One way to put this is that in practice, the assumptions of independence and lack of communication secure the modest competence the Jury Theorem relies on. Le Bon's point is recognized by many procedural interventions/norms that prevent a group of deciding individuals to act as crowds.** That is to say, deliberative democrats are, in a way, Le Bon's true heirs. 

 

 

 

21 February 1979: Foucault on Rougier and the Spirit of Adaptation (XXI)

The [Lippmann] colloquium was introduced and organized by someone you know, Louis Rougier, one of the rare and very good post-war French epistemologists who is especially known in history for having been the intermediary between Pétain and Churchill in the summer of 1940. So Louis Rougier is the organizer of the Walter Lippmann colloquium in the summer of 1939, in May or June I think. He introduces the whole of the colloquium and the different contributions, and I think his introduction is quite remarkable with regard to the general principles of this neo-liberalism. This is what he says concerning, precisely, the legal problem: “The liberal regime is not just the result of a spontaneous natural order as the many authors of the Natural codes declared in the eighteenth century; it is also the result of a legal order that presupposes juridical intervention by the state. Economic life takes place [in fact]* within a juridical framework which fixes the regime of property, contracts, patents, bankruptcy, the status of professional associations and commercial societies, the currency, and banking, none of which are given by nature, like the laws of economic equilibrium, but are contingent creations of legislation. There is then no reason to suppose that the current, historically existing legal institutions are definitively and permanently the best suited for safeguarding the freedom of transactions. The question of the legal framework best suited to the supplest, most efficient, and fair operation of the market has been neglected by classical economists and deserves to be the object of an International Center of Studies for the Renewal of Liberalism. To be liberal, therefore, is not at all to be conservative, in the sense of the maintenance of de facto privileges resulting from past legislation. On the contrary, it is to be essentially progressive in the sense of a constant adaptation of the legal order to scientific discoveries, to the progress of economic organization and technique, to changes in the structure of society, and to the requirements of contemporary consciousness. Being liberal is not like the ‘Manchester’ attitude, allowing vehicles to circulate in any direction, according to whim, with the consequence of endless congestion and accidents; and it is not that of the ‘planners,’ fixing the hours of use and routes to be followed for every vehicle: it means imposing a Highway Code, while accepting that at a time of faster means of transport this code will not necessarily be the same as in the time of stagecoaches. Today we understand better than the great classics what a truly liberal economy consists in. It is an economy subject to a double arbitration: the spontaneous arbitration of consumers, who decide between the goods and services they are offered on the market according to their preferences through the plebiscite of prices, and [, on the other hand,] the common arbitration of the state ensuring the freedom, honesty, and efficiency of the market†.
   This text contains a number of elements. Straightaway we can put aside some propositions that would clearly be unacceptable to the ordoliberals; everything concerning the natural character of the mechanisms of competition. When Rougier says that the liberal regime is not only the result of a natural order but also the result of a legal order, the ordoliberals would obviously say: “Not true, the natural order, what is understood by the natural order, what the classical economists or, at any rate, those of the eighteenth century understood by a natural order, is nothing other than the effect of a particular legal order.” So we can leave these elements at the turning point of classical liberalism and neoliberalism, or of this form of neo-liberalism, and move on to the more important elements in this text, those specific to neo-liberalism.
   First of all, I think we should note that for Rougier, as for the ordoliberals moreover, the juridical is clearly not part of the superstructure. That is to say, they do not conceive of the juridical as being in a relation of pure and simple expression or instrumentality to the economy. The economy does not purely and simply determine a juridical order that would both serve it and be constrained by it. The juridical gives form to the economic, and the economic would not be what it is without the juridical. What does this mean? I think we can identify three levels of meaning. First, a theoretical meaning. You can see that the theoretical meaning, I am embarrassed to point it out, is that instead of distinguishing between an economic belonging to the infrastructure and a juridical-political belonging to the superstructure, we should in reality speak of an economic-juridical order. In this, Rougier, and then the ordoliberals, place themselves strictly in line with Max Weber’s important perspective. That is to say, like Max Weber, they situate themselves from the outset at the level of the relations of production rather than at the level of the forces of production. At that level they grasp in one hand, as it were, both history and economics, both law and the economy strictly speaking, and, placing themselves in this way at the level of the relations of production they do not consider the economic to be a set of processes to which a legal system is added which is more or less adapted or more or less obsolete in relation to these processes. In actual fact, the economic must be considered as a set of regulated activities from the very beginning: it is a set of regulated activities with rules of completely different levels, forms, origins, dates, and chronologies; rules which may comprise a social habitus, a religious prescription, an ethics, a corporate regulation, and also a law. In any case, the economic is not a mechanical or natural process that one can separate out, except by abstraction a posteriori, by means of a formalizing abstraction. The economic can only ever be considered as a set of activities, which necessarily means regulated activities. It is this economic-juridical ensemble, this regulated set of activities that Eucken calls—in a perspective which is more phenomenological than Weberian—the “system.” What is the system? It is a complex whole including economic processes the specifically economic analysis of which is a matter for pure theory and a formalization which may take the form of the formalization of mechanisms of competition, for example, but these economic processes only really exist, in history, insofar as an institutional framework and positive rules have provided them with their conditions of possibility. This is what this common analysis, this combined analysis of the relations of production means historically. Michel Foucault, 21 February 1979,  translated by Graham Burchell, Lecture 7, The Birth of Biopolitics, 161-163

In Lecture 7, Foucault confronts the elephant in the room (recall; and here), Louis Rougier, who, perhaps, single-handedly discredited both liberal philosophy and analytic philosophy in France for a generation (or more) of the intellectually and morally sensitive young not just by his association with Petain in 1940, but also in his post-WWII  defense of Pétain and other far-right commitments(etc.). Strikingly, Foucault has no interest in using this history to discredit Rougier (or the commitments).* In fact, he explicitly praises Rougier's epistemology. And here he is interested in using Rougier's introduction to set up discussion, later in the lecture, of the neo-liberal responses to marxism, weber, and schumpeterianism. 

In reading Foucault's response to Rougier, I have a sense that Foucault (who seems to have read everything) has not read Lippmann's Good Society. Because I take Rougier's introduction as a perfect summary of the significance of Lippmann's book. The re-invention of liberalism as a progressive project by embracing as a liberal stance, the 'spirit of adaptation,' is (recall) central to Lippmann's argument (that Lippmann traces to Adam Smith, and I think is discernible in Locke). And this spirit is needed in virtue of the expectation of (i) technological change (e.g., faster means of transport vs the time of stagecoaches) and in virtue of the idea that (ii) the law may express and, thereby, entrench political power, which itself needs to be guarded against. In addition, (iii) as society develops and grows there will be more sources of mutual friction which require legal pacification or resolution. And so Lippmann and Rougier reject nineteenth century ('Manchester') liberalism and its adoption of laissez faire (while also rejecting the 'planners.')

And because (iv) the market itself generates never seizing outcomes ('spontaneous arbitration of consumers'), and so evolves according to its own logic, and in virtue of (i-iii), the liberal, who understands the need for the spirit of adaptation, always sees liberalism as an unfinished project, which requires the never-ending work by the state to create the framework in which markets can work. (Again, markets are not self-justifying but are a mechanism that do not just generate efficient growth and innovation, but are a mechanism by which political/concentrated power can be resisted.)

Foucault correctly corrects Rougier from the perspective of an ORDO. And he explains that the significance of Rougier's (Lippman-esque) reinterpretation of liberalism entails a rejection of the marxist thought that the law is a 'pure and simple expression or instrumentality to the economy' or is determined by the economy.  Rather, the law shapes the economy and, in turn, is shaped by it. Such that the legal and economic are in non-trivial inter-defined/intertwined as (in Weber's terminology) relations of production.** The legal 'regulation' that Foucault speaks of here is -- as I had noted the lecture before -- at the level of framework enhancing and framework ordening policies. (It is not regulation in the market place.)

The law helps create and constitute economic agents with rights and legal tender and practices of credit generation, and these in turn influence the shape of the law. Significantly, and here I make something explicit that Foucault gestures at, it also means that from the perspective of neoliberalism, that a well-functioning system of law is not just neutral arbiter, but itself a form of capital to society it helps order. And in so far as the system of law is 'more or less adapted' to the processes it simultaneously helps shape, the more productivity and freedom enhancing it is.

As Foucault  goes on to say, what the spirit of adaptation entails is that at any given time capitalism has the possibility to be (reasonably) adapted to its circumstances or not. And this means that from the reconstituted progressive liberal (not to be confused with the modern progressive), who resists the status quo bias of nineteenth century liberalism, capitalism always has a multiplicity of possibilities. This is not a bug, but a virtue of this liberalism. For, it both contradicts the Marxist analysis -- which treats capitalism as homogeneous 'with its own necessity' that is simultaneously self-contradictory (164) -- and it affirms liberalism (recall) as a potential (moral and political) critic of any really existing Mercantile-Imperialist capitalism.

And, second, it opens the productive role to what Foucault has been calling the liberal 'art of government,' which is rooted in a set of intellectual ideas as much as it is in a set of practices, as an instrument to reinvigorate liberalism's spirit of adaptation. In practice what this means is that in a liberal polity there must be a site of intellectual and scientific freedom in which its own dogmas are critically explored and rejuvenated in order to help shape the politics of liberal survival. 

Of course, this leaves hanging what it might mean for a system of law to be more or less adapted to the processes it simultaneously shapes? Or: what does a rule of law in the spirit of adaptation amount to then? This is the subject of the core of Foucault's seventh lecture, and I turn to that soon.

14 February 1979: Foucault on Eucken and the birth of Biopolitics (XX)

What is a framework policy? I think it will appear clearly if we consider a text from Eucken’s Grundsätze, that is to say, from 1952, where he takes up the problem of German agriculture, although he says the same arguments apply to most of European agriculture. Basically, he says, agriculture has never been normally, fully, and exhaustively integrated within the market economy. It has not been integrated within the market economy because of protective customs that, throughout Europe, have marked off, and cut out the spaces of European agriculture. These protective customs were made indispensable both by technical differences and generally by the technical inadequacy of each country’s agriculture. These differences and inadequacies were entirely linked to an over-population that made intervention, the insertion of technical improvements, pointless and, in truth, undesirable. So, what must be done if we want European agriculture to function within a market economy? The text is from 1952. We will have to act on facts that are not directly economic facts, but which are conditioning facts for a possible market economy. So on what will it be necessary to act? Not on prices, and certainly not on a particular sector, ensuring support for a scarcely profitable sector, since these are bad interventions. What will good interventions act on? Well, on the framework. That is to say, first, on the population. The agricultural population is too large, so it will have to be reduced by interventions enabling population transfers, migration, and so on. We will also have to intervene at the level of techniques, by making implements available, by the technical improvement of elements like fertilizers, etcetera, and also by the training and education given to farmers, which will enable them to modify [agricultural] techniques. Third, we will also modify the legal framework of farms, and in particular the laws governing inheritance, governing tenant farms and the location of estates, trying to find the means to get the legislation, structures, and institutions of society to play a part through action in agriculture, and so on. Fourth, as far as possible we will modify the allocation of the soil and the extent, nature, and exploitation of the soil available. Finally, if necessary, we will have to be able to intervene on the climate.
You can see that none of these elements—population, technology, training and education, the legal system, the availability of land, the climate—are directly economic and they do not affect market mechanisms directly, but for Eucken they are conditions for agriculture to be able to function as a market, for agriculture to be able to function within a market. The idea was not, given the state of things, how can we find the economic system that will be able to take account of the basic facts peculiar to European agriculture? It was, given that economic-political regulation can only take place through the market, how can we modify these material, cultural, technical, and legal bases that are given in Europe? How can we modify these facts, this framework so that the market economy can come into play? You can see here something that I will return to shortly, which is that to the same extent that governmental intervention must be light at the level of economic processes themselves, so must it be heavy when it is a matter of this set of technical, scientific, legal, geographic, let’s say, broadly, social factors which now increasingly become the object of governmental intervention. What is more, you can see in passing that this 1952 text programs, even if in a completely rough and ready way, what will become the Common Agricultural Market of the next decade. The text is from 1952. The Mansholt plan is already in Eucken, or it is in part in Eucken, in 1952. So there you are for conformable actions, for conjunctural actions and organizing actions at the level of the framework. This is what they call the organization of a market order, of an order of competition. And this is actually what European agricultural policy is: How to reconstruct a competitive order that will regulate the economy? Michel Foucault, 14 February 1979,  translated by Graham Burchell, Lecture 6, The Birth of Biopolitics, 140-141.

I have devoted some attention to Lecture 6 because in the passage quoted above Foucault finally gets to the main theme of the lecture course.* Remember that on Foucault's reading of the ORDOs a framework policy is a government action that conditions the very existence of a market (sometimes Foucault calls this "organizing actions (actions ordonnatrices).") For, markets are  constructed. Because the contrast here is with ideas that treat the market as natural or spontaneous, and there has been a lot of heat about neo-liberal authoritarian governmentality, it is easy to assume mistakenly that markets are imposed top-down, grafted on societies, in the ORDO program. But that's not what Foucault claiming about the ORDOs.

Rather, to condition the possibility of a market means to let the materials that make markets possible emerge from existing societies and practices. I do no mean to deny that this involves government policy, and changes in the law, but people are not forced, say, to farm or forcibly transported to new areas.

Many of the policies proposed involve the removal of tariffs and regulations that prevented competitive or profitable (or both) farming. I mention this explicitly because the "interventions enabling population transfers, migration, and so on" involve removing barriers to voluntary movement into cities or other trades by agricultural population.  Of course, Foucault also recognizes that to let markets emerge requires government investment in education and technology and in laws that allow farms to be inherited without having to sub-divide them in inefficiently small parcels (something central to Mansholt's original plan). 

Now, originally, the liberal of government, as conceived by Locke (and as Foucault noted in first lecture), was committed to growing populations alongside growing and competitive economies in order to make possible extensive markets with cheap commodities and growing productivity. And, as a useful side-effect, growing populations allow, if necessary, for large armies and navies. What Foucault recognizes is that the ORDOs break with this and make the size of the population optative. Population now becomes a parameter in the service of the framework. This strikes me as the birth of biopolitics in Foucault's sense.

Now, the ORDOs do not invent this move. It is pretty clearly visible (recall here; here) in Plato's city of pigs, where controlling population size is the mechanism by which famine and/or the growth of luxury is prevented. (As some readers now, I tend to think of the city of pigs as an almost liberal utopia.) But the ORDOs improve on Plato by treating population as one of several parameters in a broader social policy so that an "economy can come into play"

Above, I have used the language of emergence to contrast the ORDO approach to the origin markets to both the spontaneous order as well as the top-down approach. It would be better, perhaps, to use the language of organization, or ordering, or development. This is generally thought of as something apt for the third-world or them. But what the ORDOs recognize, and Foucault is quite clear-sighted on this, is that the conditions of market society need to be cultivated and developed with pre-existing materials by policy (especially the legal, material, and educational pre-conditions). 

Now, once markets are developed they, in turn, can help regulate and order society (and prevent concentrated economic and political power). And, as markets enrich society, it in turn can invest in the preconditions for better markets and the policing of anti-trust (etc.).

Now, what I want to close with are three observations: first, note that the ORDOs are committed to a form of social and indirect perfectionism (recall here, and here)), which goes back to Adam Smith. (Against most commentators of Adam Smith, I claim the basic idea is in The Theory of Moral Sentiments; “some general, and even systematical, idea of the perfection of policy and law, may no doubt be necessary for directing the views of the statesman.” (emphasis added).) By 'indirect' here I mean that certain substantive moral commitments are pursued, but they are pursued by way of the framework and the general policy rules that leaves ample space for individual human diversity and pursuit of life-goals. Among the ORDOs this is most visible in Röpke, whose views sometimes edge into a species of social conservatism, although others are echt-liberal. So, rather than a neutral state, the ORDOs pursue actively (echoing Lippmann) a good society with liberal characteristics.

Second, the ORDOs presuppose considerable commitment to science in shaping society in three senses:  (i) considerable technical expertise in lots of domains; (ii) a kind of systemic knowledge that understands the interactions among domains. So, this requires a mixture of specialists and generalists, able to develop and steer (iiii) state capacity of weberian-rule following bureaucracies linked to proper functioning legal system. That is to say, among the framework institutions one finds also the reproduction of the institutions for framework knowledge. (Some other time we will explore the nature of the particular conception of science.)

Third, when Foucault gave these lectures, spending on the Common Agricultural Policy was about 70% of EU-10 budget. (Even now, it is still more than a third of the EU-27/28 budget.) That is to say, Foucault is reminding his worldly Parisian, urban audience, proud citizens of the most centralized European state, that European federation is ground in no small part in ORDO policies for peripheral, rural areas. 

14 February 1979: Foucault on Debt and the Neo-Kantianisn of Neo-liberalism (XIX)

The second important point in this neo-liberal program is the question of conformable actions (actions conformes). This theory of conformable actions, this programming of conformable actions, is essentially found in a text which was actually one of the great charters of contemporary German policy. It is a posthumous text by Eucken which appeared in 1951 or 1952, called Grundsätze der Wirtschaftspolitik (the foundations of economic policy) and which is, as it were, the other, practical side of the text called Grundlagen der Nationalökonomie published a dozen years earlier, which was the theoretical side. In this Foundations these Fundamental principles of economic policy, Eucken tells us that liberal government, which must be perpetually vigilant and active, must intervene in two ways: first, through regulatory actions (actions régulatrices) and second, through organizing actions (actions ordonnatrices).
Regulatory actions first of all. We should not forget that Eucken is the son of Eucken, the neo-Kantian Nobel prize-winner of the beginning of the twentieth century. As a good Kantian, Eucken says: How should government intervene? It should intervene in the form of regulatory actions, that is to say, it must intervene in fact on economic processes when intervention is imperative for conjunctural reasons. “The economic process always leads to temporary frictions, to modifications which risk giving rise to exceptional situations with difficulties of adaptation and more or less serious repercussions on some groups.” It is necessary then, he says, not to intervene on the mechanisms of the market economy, but on the conditions of the market. Rigorously following the Kantian idea of regulation, intervening on the conditions of the market would mean identifying, accepting, and giving free play to the three typical and fundamental tendencies in the market, but in order to encourage these tendencies and somehow push them to their limit and full reality. These three tendencies are: the tendency to the reduction of costs, the tendency to the reduction of the profit of the enterprise, and finally, the provisional, localized tendency to increased profit, either through a decisive and massive reduction of prices, or by an improvement in production. These are the three tendencies that regulation of the market, that regulatory action must take into account, inasmuch as
they are themselves tendencies of the regulation of the market.
In clear terms this means first of all that the main objective of regulatory action will necessarily be price stability, understood not as fixed prices but as control of inflation. Consequently all other objectives apart from price stability can only be secondary and, so to speak, adjuncts. At any rate, they can never be the primary objective. In particular, the primary objectives must not be the maintenance purchasing power, the maintenance of full employment, or even balancing the balance of payments.
Second, what does this mean for the instruments to be used? It means first of all using the policy of credit, that is to say, establishing the discount rate. It means using foreign trade by reducing the credit balance when you want to contain the rise in foreign prices. Shifts in taxation will also be employed, but always moderate ones, when seeking to act on saving or investment. But none of the kind of instruments used by planning will be resorted to, namely: price control, support for a particular sector of the market, systematic job creation, or public investment. All these forms of intervention must be rigorously banished and replaced by the pure market instruments I have just mentioned. The neo-liberal policy with regard to unemployment in particular is perfectly clear. Whatever the rate of unemployment, in a situation of unemployment you absolutely must not intervene directly or in the first place on the unemployment, as if full employment should be a political idea and an economic principle to be saved at any cost. What is to be saved, first of all and above all, is the stability of prices. Price stability will in fact allow, subsequently no doubt, both the maintenance of purchasing power and the existence of a higher level of employment than in an unemployment crisis, but full employment is not an objective and it may be that a reserve of unemployment is absolutely necessary for the economy. As, I think it was Röpke said, what is an unemployed person? He is not someone suffering from an economic disability; he is not a social victim. He is a worker in transit. He is a worker in transit between an unprofitable activity and a more profitable activity. These then, are the regulatory actions.
Organizing actions are more interesting, however, because they bring us closer to the specific object. What are organizing actions? Well, [they are] actions with the function of intervening on conditions of the market, but on more fundamental, structural, and general conditions of the market than those I have just been talking about.  Michel Foucault, 14 February 1979,  translated by Graham Burchell, Lecture 6, The Birth of Biopolitics.137-139

After inscriping German neo-liberalism into the history of philosophy by way of Eucken's connection to Husserl (recall this post on the fifth lecture of 7 february 1979), and the dueling (recall) receptions of Max Weber, Foucault now has a bit of more fun and treats Eucken as a neo-Kantian.* Perhaps this means Foucault thinks of Husserl, not implausibly, as a species of Kantianism. The underlying conceptual point, that for the ORDOs markets need to constructed, is, thereby, reinforced. They are to be contrasted with earlier liberalism(s) and, perhaps, what he tends to call American-anarcho liberalism (p. 117--sometimes he speaks of American anarcho-capitalism), for whom the market is taken to be natural or spontaneous. 

While Foucault treats organizing actions as more interesting in virtue, I  think, of their closer connection to biopolitics, today I focus on the regulatory actions.  I do so, in part, because in many way the ORDOs have been so influential on this score that their significance may be worth pausing over, despite the seeming banality (to Foucault and us) of them. 

First, the (constructed) proper functioning market has three tendencies: "(i) the tendency to the reduction of costs, (ii) the tendency to the reduction of the profit of the enterprise, and finally, (iii) the provisional, localized tendency to increased profit, either through a decisive and massive reduction of prices, or by an improvement in production." The first tendency is good for consumers who over time can buy more for less. So, while Foucault is right to note that the primary aim is not purchasing power, it falls out, as it were, for free in proper functioning markets. In fact, the first natural tendency also means that deflation is a natural and expected byproduct of competitive market. And that inflation is, temporary  shocks excepted, itself the product of monopoly enhancing, juridical-political interventions in the market. 

The previous comment is a reminder that on the constructive perspective, monopoly is not just an economic but also, and primarily, a political problem that functions to undermine the Ordo's political purpose for the market: a domain where, for all its inequity, bad luck, and perhaps exploitation, no group can be too powerful (recall this post on Mestmäcker.) 

Strikingly, Foucault does not mention the Weimar experience. But if price stability is the primary aim, and markets naturally tend toward lower prices, then in ideal circumstances, when markets are competitive, policy must offer some countervailing inflationary measures.  I would have to go back to Eucken to see if this is so. What this tells us is that in the constructive framework, there are regulatory policies apt for when markets are competitive and different kinds of regulatory policies that are apt when markets are less competitive. If you look that the policies mentioned -- "the policy of credit, that is to say, establishing the discount rate;... using foreign trade... to contain the rise in foreign prices; [modest] shifts in taxation..., when seeking to act on saving or investment" -- these can all be adjusted to stimulate or reduce inflation. 

Second, this approach also provides one with epistemic access to knowing when a market is less than fully competitive; that is, when a corporation is capable of more than occasional, but structurally high profits. This also signals concentrated power, which is dangerous politically and economically. This is why anti-cartel policy is so important to ORDOs from the start. (Foucault has insightful things to say about this in the same lecture.)

As an aside, Foucault is silent on another, distinctive (Kantian) feature of the Ordo regulatory policies: that these, in turn, must be rule-following. This has the good-making consequence of being predictable to agents in the market-place, and so reduce uncertainty. It also has the good-making consequence to an ORDO of creating conditions that minimize the possibility of political rent-seeking (which violate the rules).  (I must check whether Foucault notes this in future lectures.)

Third, this regulatory framework incentivizes open-ended technological productivity enhancing innovation because that's the main way corporations can capture extra profits. Interestingly enough, Foucault notes this: social policy can develop "organizing actions" that create the social pre-conditions for such technological improvements in generating a productive workforce capable of adapting to open-ended changing circumstances. This spirit of adaptation is a key feature neoliberals inherit of Lippmann. In the future I return to this.

Finally, Foucault has no time for the tendency among lazy critics of ORDO-liberalism to read them as applied Schmittians. (This is by now a trope of scholarship.)+ That ordinary markets give "risk giving rise to exceptional situations" is not an invitation to a state of emergency.  Rather it is an invitation to develop a rule based response or to constitute circumstances that prevent it from recurring. This means that for the ORDOs the business of regulatory policy (at both the level of regulatory actions and organizing actions) is always unfinished, it's perpetually vigilant and active.