Digressions&Impressions

Chicago Economics, MIT, and Monopoly Capitalism

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

Marxism predicts that left to its own devises capitalism tends toward monopoly. Let's call this the 'monopoly capitalism thesis.' I suspect the most famous articulation of this thesis was develop in the context of debates over the nature and fate of early twentieth century imperialism. For, both (recall; and here) Hobson (not a Marxist) and Lenin noticed that (militaristic) imperialism and monopoly were mutually reinforcing. For Hobson (in his 1902 Imperialism), monopoly capitalism was the effect of rent-seeking political behavior (by corrupt, imperial, financial interests). Lenin (ca 1916) didn't deny this, but while drawing on German data, especially, thought that capitalism had an inevitable tendency toward monopoly and cartels, and that imperialism (the search for monopoly markets overseas) is an effect of this tendency.

Arguably, (recall) Schumpeter (in Capitalism, Socialism, and Democracy (1942) synthesized the two positions by suggesting that in conditions of modernization, monopoly would be caused (perhaps not by an internal logic of market economies, but rather) by, the "concentration of decision-making centers of the administration and the state" who seek out social counterparts in capitalist enterprises, who in turn take advantage of rents. While Burnham (in The Managerial Revolution 1941) is not interested in exploring the dynamics of the monopoly capitalism thesis, one can find a similar conclusion in it (see also my comment about Berle & Means below).

In what follows, I don't mean to suggest that the theoretical structure of the monopoly capitalism thesis was not developed after mid-century. Arguably Joan Robinson, Paul Sweezy and Baran, and Ernest Mandel all did so in various ways, and have inspired renewed work. From the left one could mention (recall this post) Durand, Cédric Durand's (2017) Fictitious capital: How finance is appropriating our future; from the more libertarian right one could mention Eric A., Posner and E. Glen Weyl (2018) Radical Markets: Uprooting Capitalism and Democracy for a Just Society, which strongly implies our age is characterized by monopoly capitalism.

As an aside, with the revival of scholarly interest in the roots of neoliberalism, it is quite natural to come away thinking that the major point of contention between Marxists and liberals within political economy centered on the socialist calculation debate. This debate is theoretically very interesting because it brings together epistemology, social theory, political economy, and (after Oskar Lange) artificial intelligence. And because Hayek got an early Nobel (in part) for his contribution to it, and Austrian economics shaped American libertarianism, there has been impressive continued interest in it even after central planning lost its luster. But even critics of Marxism can acknowledge the soviet style central planning and administrative pricing need not be the only way really existing Marxism can be tried out. This observation made me return to the fate monopoly capitalism thesis: why did it not haunt mid twentieth century economics?

Now, a key part of the answer has to be in the success of Keynes & Keynesianism and also the very idea of a mixed economy (the genealogy of which I have not studied, but I assume involves Samuelson). But in a way this pushes the problem back a level--why think a mixed economy is stable so as to block the monopoly capitalism thesis (or road to serfdom thesis)?

Part of the answer can be found in a number of empirical, inductive studies associated with 'Chicago economics,' especially Warren Nutter’s (1951) The Extent of Enterprise Monopoly in the United States, 1899–1939, which originated in his (1949) dissertation and the fifth lecture, “Competition in the United States,” of George Stigler's (1949) Five lectures on economics problems first delivered at LSE at the behest of Robbins. (For detailed description of the material I am about to discuss see my paper, but back then I studied it through lens of paradigm building.)

I doubt I need to re-introduce Stigler (a future Nobel), who was at Columbia, to my audience. But despite the recent political and polemical focus on the Virginia School, Nutter is understudied (even his Wikipedia page is scarce), and only Daniel Kuehn has written much on him. Nutter, who during the cold war was one of the pre-eminent scholars of the Soviet economy Stateside (together with my very teacher Franklyn Holtzman), was at Yale when his dissertation work made an impact on American public life (it was featured in Fortune magazine). He later joined and co-founded the Virginia school of public choice and ended up a significant figure in the Nixon administration. In 1969, he published an extension of the dissertation with Henry Einhorn: The Extent of Enterprise Monopoly: 1899-1958. 

Now, as my comments above suggest, the 'monopoly capitalism thesis' drifted out of Marxism into mainstream-ish opinion during the Great Depression. Nutter's official target the “hypothesis that monopoly is automatically generated in a private-enterprise system” was also defended by Arthur R. Burns "in his book, The Decline of Competition.” Burns was an institutionalist economist at Columbia. (This Burns should not be confused with another economist at Columbia, Arthur F. Burns, who became more prominent as Chair of the Federal Reserve.) In his book, our Burns argues that technological developments alongside patent laws (which generate rents) made monopoly inevitable (and that anti-trust was imperfect).

Another, politically more important target (for Nutter and Stigler) is The Modern Corporation and Private Property (1932), co-authored by A.A. Berle and Gardiner Means. This was a major work that shaped the New Deal, corporate governance, and corporate law for  a generation. Berle and Means analytically (and legally) separated corporate ownership (which, under modern conditions, was diffused) from corporate control (which was concentrated). They thereby anticipate Schumpeter and Burnham's focus on a relatively narrow managerial-corporate class (albeit not to be identical simply with capital in a Marxist sense).

Nutter and Stigler have different empirical ways of tackling the underlying question, and they use different proxies to get a handle on the empirical problems (of operationalization concentrations within a industry and measuring its change over time, and of the whole economy). And their empirical findings don't always agree. But in a rather critical review (1953) article, "Is monopoly increasing?" Solomon Fabricant (an economist associated with NBER [see this portrait drawn by Lipsey]), who notes Nutter's and Stigler's partiality toward competition, and hostility to anti-trust policy, and implies they may be systematically biased,  concludes, nevertheless, “Yet, whatever the outcome, by the essential validity of their conclusion must stand. All the doubts that can be raised do not destroy, rather they support, the conclusion that there is no basis for believing that the economy of the United States is largely monopolistic and has been growing more monopolistic.” (92. Nutter himself had suggested there might have been very modest growth in monopoly, but mostly as an effect of government policy.) 

That is to say, by the early 1950s the economics profession thought the monopoly capitalism thesis was, if not empirically falsified, then at least decidedly unpromising empirically. This is especially notable because the data they covered included the impact of the Great Depression and all the New Deal activity.

In work (1951) that covered later time-series data for manufacturing through 1949, "The measurement of industrial concentration," another economist, M.A. Adelman, also decried the imperfection of the data (although he praised Nutter's measures explicitly) and diagnoses underdetermination of theory by data. (He also acknowledges that Nutter is more interested in monopoly, while he is more interested in concentration.) At the end of his survey Adelman concludes: 

"But although a given set of facts is compatible with more than one policy conclusion, this does not make it compatible with any conclusion, i.e., the facts are not simply irrelevant. Stated somewhat differently: our conclusions, if correct, should mean something for the atmosphere in which policy is formed. References to "the growth in economic concentration," or statements that "during the past I6 years [I932-48] big business has been getting bigger and little business littler," or that "the forces of concentration [are] growing stronger by the hour," or that "concentration of industry is increasing so fast that no half-measures can stop it," and many others of like tenor - these must now be dismissed as unfounded. Concentration may be a problem, but for better or worse it is not threatening to engulf the economy. The moral, therefore, is simply that there is time to stop, look, and take thought. This may detract from the color and excitement of our public life, but it may also contribute to better results."  

Adelman has, I think, attracted no scholarly attention. But he became one of pillars of the MIT economics department that Samuelson built to pre-eminence. (After his early work in anti-trust he became somewhat well known in the 1970s as a leading expert of energy economics and how to tackle the oil crisis.) And so he very much represents the middle of the road of the economics profession of the era.

I quote Adelman's passage at length because it gives a sense of how he takes the empirical results to license considerable de-politicization. (One can also find this in Fabricant's conclusion.) While economists remained highly interested in theories of monopoly and imperfect competition, and how to deal with (ant-trust) policy questions emanating from actual monopolies and economic concentration (and a whole range of potentially fascinating technical questions), the monopoly capitalism thesis was effectively dead, or at least temporarily pushed to the margins. 

As I noted in my original paper, this conclusion remained intact even if this inductive approach to the question of monopoly as pursued by Nutter and Stigler got displaced by a very different approach articulated by Harberger in “Monopoly and Resource Allocation.” (1954) And while this, in turn, was quite consequential for the shape of American anti-trust (not the least compared with the Ordoliberal approach), it was unconcerned with the monopoly capitalism thesis.

• This first appeared at: <On the controversy in the philosophical blogosphere. (substack.com)> a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

 

On Humean sovereignty with some Dicey, Schmitt,

A.V. Dicey's life (1835-1922) and work is known almost exclusively for the 'rule of law.' I have some amusing, reductive evidence for this claim: the one and only annotation by Foucault on Dicey is the definition of the rule of law (see here). Presumably the annotation was prompted by Foucault's reading and use of Hayek's Constitution of Liberty, where Dicey's Law of the Constitution is treated as a classic (as the editors of Foucault's Biopolitics lectures note in their endnotes 23-25 on p. 282 in the English translation). One of the best essays on Dicey's significance on thinking about the rule of law to political theory, "Dicey and his Legacy" (Political Theory, 1995) by Julia Stapleton, explores its impact on especially what she calls English liberal-conservative thought.

But it is not impossible that Foucault also read Dicey's Lectures on the Relation between Law and Public Opinion for the very passage in his lecture that elicited the editors' comment is this: "the Rule of law is clearly defined as a state in which the state itself does not organize administrative courts which arbitrate between citizens and the public authorities; the Rule of law is a state in which citizens can appeal to ordinary justice against the public authorities. The English say: If there are administrative courts, then we are not living under the Rule of law." (p. 170, 21 February 1979). This echoes the introduction to the second edition of Lectures on the Relation between Law and Public Opinion (hereafter LRLPO):

But administrative law has two defects which have till very recent years forbidden its existence in England. Administrative tribunals always tend to exclude the jurisdiction of the ordinary law Courts. Administrative Courts are always more or less connected with the Government of the day. Their decisions are apt to be influenced by political considerations. Governmental officials cannot have the thorough independence of judges....An administrative Court is never a completely independent tribunal. (p. 373 in the Libertyfund edition)

Anyway, as I have noted before (recall; here), Dicey's LRLPO (sorry) had a significant impact on mid-twentieth century neo-Liberal thought (including Lippmann, Milton Friedman, and Hayek (see also this paper by Nathanaël Colin-Jaeger).* But to the best of my knowledge there has been no real attempt to explore LRPLO's political theory in light of some of their theoretical concerns, and the viability of liberalism.

At the very start (pp. 4-5) of LRLPO, while drawing on the opening lines of Hume's "Of the First Principles of Government," Dicey notes that "Hume’s doctrine holds good, and the opinion of the governed is the real foundation of all government." (This Humean stance has been explored in my own scholarship, and also in book-length works by Andy Sabl and Paul Sagar.) Dicey then turns this into a Humean theory of sovereignty that is, as it were, neutral among constitutional forms:

the public opinion which governs a country is the opinion of the sovereign, whether the sovereign be a monarch, an aristocracy, or the mass of the people.

This conclusion, however, though roughly true, cannot be accepted without considerable reservation. The sovereign power may hold that a certain kind of legislation is in itself expedient, but may at the same time be unwilling, or even unable, to carry this conviction into effect, and this from the dread of offending the feelings of subjects who, though they in general take no active share in public affairs, may raise an insuperable opposition to laws which disturb their habits or shock their moral sentiment; it is well indeed, thus early in these lectures, to note that the public opinion which finds expression in legislation is a very complex phenomenon, and often takes the form of a compromise resulting from a conflict between the ideas of the government and the feelings or habits of the governed. This holds good in all countries, whatever be their form of government,--Albert Venn Dicey Lectures on the Relation between Law and Public Opinion, p. 10 (libertyfund edition)

So, if I understand Dicey correctly, sovereignty is constituted by the effectual public opinion that governs the country (which we might call 'conventional wisdom') but this opinion is self-limited by considerations of practical wisdom or prudence. I set aside the non-trivial challenges in measuring effectual public opinion in ways that would meet contemporary standards of rigor in political science. Dicey's lectures are a game attempt at exhibiting its existence, but does often flirt with the 'post hoc ergo propter hoc' fallacy.+

Now, as is well known, in the preface to the (1934) second edition of Political Theology, Schmitt presented his account of sovereignty as a polemic with 'liberal normativism and its kind of "constitutional state.'  And certain radical-chic scholars with contempt for liberalism have been all too willing to echo Schmitt's three-fold typology: among (i) "the pure normativist [who] thinks in terms of impersonal rules, and [(ii)] the decisionist [who] implements the good law of the correctly recognized political situation by means of a personal decision, and [iii)] institutional legal thinking unfolds in institutions and organizations that transcend the personal sphere" and then associate liberalism exclusively with the proceduralist-normativist (by taking Rawlsian intellectual hegemony as a kind of natural outgrowth of liberalism or the only liberalism left standing).

Now, I would argue that Dicey's Humean approach to sovereignty formally anticipates the Schmittian decisionist, but without Schmitt's focus on the decisive individual leader (or Führerprinzip) because, to put it classically, Dicey's approach also allows for complex, collective forms of (aristocratic and democratic) leadership. So, to put this as a serious joke: Schmitt's approach is a subset of Dicey's analytically purer approach.

In fact, from a liberal perspective, Dicey anticipates the main problem in Schmitt's analysis of sovereignty, the absence of accountability (a word and its cognates wholly absent in Schmitt's Political Theology and Dicey's LRLPO). By contrast, Hume would also emphasize the role of accountability (recall this post inspired by Lazar's States of Emergency in Liberal Democracies; and this earlier post). [I don't mean to suggest Dicey ignores accountability of government officials.]

Now, it's important that in LRLPO, Dicey recognizes that the actions of the sovereign can be balanced and frustrated by the "checks imposed on such opinion by the existence of counter-currents and cross-currents of opinion." Elsewhere in his theorizing Dicey explored other, institutional checks (like referenda) on sovereignty (especially that effected by parliament).* But without mechanisms of accountability (be it symbolic, formal, political, or juridical) Dicey's Humeanism slides into illiberalism. For, it is not sufficient that there are checks and balances or fractured sovereignty even when the form of the law is obeyed; accountability is required from a liberal perspective. Interestingly enough (in light of efforts to claim that Hayek, who is very influenced by Dicey, is a neo-Schmittian), Hayek does emphasize the significance of accountability to the rule of law by quoting this passage in “Declaration of Parliament Assembled at Westminster” approvingly: “There being nothing more essential to the freedom of a state, than that the people should be governed by the laws, and that justice be administered by such only as are accountable for mal-administration." (chapter on the Origins of the rule of law" Constitution of Liberty, p. 251 in Volume XVII of the Collected Works. n.)

These digressions are all very theoretical, I recognize. And perhaps it would help if we put it in more concrete form if we think of a concrete example: President, Donald Trump's attempted usurpation (starting, roughly, with the phone call to Brad Raffensperger, the Georgia Secretary of State, and culminating in the events of Jan 6, 2021). His actions generated a hasty (second) impeachment on january 13, 2021, by a 232–197 vote. There is no doubt that this conviction had the support of conventional wisdom. But it lacked sufficient votes in the Senate for conviction, primarily, I think, because too many Republican Senators feared the governed, especially their own primary voters' wrath. (Of the seven Republicans who voted to convict only one had to face her voters within two years.) 

The dangerously slow investigation of and legal procedures against Trump's efforts to overturn the Georgia results have undermined accountability and, thereby, help undermine the constitutional order (and risks shifting toward forms of  plebescite despotism). I would be amazed if the delay isn't caused by a general unease felt by prosecutors over the prosecution of a vindictive politician who could return to power and whose supporters are feared. (The perceived odds of his winning again are better than the perceived odds ahead of his first primary run.)

Unfortunately, the conventional wisdom already reflects this shift to some degree by its tendency to deplore the fact that Trump is being prosecuted for mere hush money payments (in a different jurisdiction) without a willingness to urge on prosecution for actions surrounding his attempted usurpation. Noticeably, and in striking contrast, in living memory the French were willing to prosecute (and covinct) former President Sarkozy thereby also derailing any attemp at re-election.

Now, in closing, before you accuse me of Trump derangement syndrome, I don't mean to suggest that lack of accountability is unique to our era or Trump among US presidents. As I have noted in my blogging (recall here; here), since, say, 1940, plenty of US Presidents have committed egregious war crimes (or worse) abroad, including internment of innocent US citizens and assassination of US Citizens on foreign soil, without (symbolic, legal, political,  etc.) accountability. To what degree this gap in American political practice reflects a tacit approval of the American people I leave to the reader.

• This post was first published at my substack account here. Digressionsimpressions’s Substack is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber there.

 

Some Pre-History on the History and Sociology of Multiple Discovery: Merton, Dicey, Stigler- (etc.)

It may very well, owing to the condition of the world, and especially to the progress of knowledge, present itself at the same time to two or more persons who have had no intercommunication. Bentham and Paley formed nearly at the same date a utilitarian system of morals. Darwin and Wallace, while each ignorant of the other’s labours, thought out substantially the same theory as to the origin of species.--A.V. Dicey [2008] (1905) Lectures on the Relation between Law & Public Opinion in England during the Nineteenth Century, Indianapolis: Liberty Fund, p. 18 n. 6 (based on the 1917 reprint of the second edition).

As regular readers know (recall), I was sent to Dicey because he clearly shaped Milton Friedman's thought at key junctures in the 1940s and 50s. So, I was a bit surprised to encounter the passage quoted above. For, I tend to associate interest in the question of simultaneous invention or multiple discovery with Friedman's friend, George J Stigler (an influential economist) and his son Steven Stigler (a noted historian of statistics). In fairness, the Stiglers are more interested in the law of eponymy. In his (1980) article on that topic, Steven Stigler cites Robert K. Merton's classic and comic (1957) "Priorities in Scientific Discovery: A Chapter in the Sociology of Science." (Merton project was revived in Liam Kofi Bright's well known "On fraud.")

When Merton presented (and first published it) he was a colleague of George Stigler at Columbia University (and also Ernest Nagel). In his (1980) exploration of the law of eponymy, Steven Stigler even attributes to Merton the claim that “all scientific discoveries are in principle multiple." (147) Stigler cites here p. 356 of Merton's 1973 book, The Sociology of Science: Theoretical and Empirical Investigations, which is supposed to be the chapter that reprints the 1957 article. I put it like that because I was unable to find the quoted phrase in the 1957 original (although the idea can certainly be discerned in it, but I don't have the book available to check that page).

Merton himself makes clear that reflection on multiple discovery is co-extensive with modern science because priority disputes are endemic in it. In fact, his paper is, of course, a reflection on why the institution of science generates such disputes. Merton illustrates his points with choice quotes from scientific luminaries on the mores and incentives of science that generate such controversies, many of which are studies in psychological and social acuity and would not be out of place in Rochefoucauld's Maximes. Merton himself places his own analysis in the ambit of the social theory of Talcott Parsons (another important influence on George Stigler) and Durkheim. 

The passage quoted from Dicey's comment is a mere footnote, which occurs in a broader passage on the role of public opinion in shaping development of the law. And, in particular, that many developments are the effect of changes in prevaling public opinion, which are the effect of in the inventiveness of "some single thinker or school of thinkers." (p. 17) The quoted footnote is attached to the first sentence of remarkably long paragraph (which I reproduce at the bottom of this post).* The first sentence is this: "The course of events in England may often at least be thus described: A new and, let us assume, a true idea presents itself to some one man of originality or genius; the discoverer of the new conception, or some follower who has embraced it with enthusiasm, preaches it to his friends or disciples, they in their turn become impressed with its importance and its truth, and gradually a whole school accept the new creed." And the note is attached to 'genius.'

Now, often when one reads about multiple discovery (or simultaneous invention) it is often immediately contrasted to a 'traditional' heroic or genius model (see Wikipedia for an example, but I have found more in a literature survey often influenced by Wikipedia). But Dicey's footnote recognizes that in the progress of knowledge, and presumably division of labor with (a perhaps imperfect) flow of ideas, multiple discovery should become the norm (and the traditional lone genius model out of date).

In fact, Dicey's implicit model of the invention and dissemination of new views is explicitly indebted to Mill's and Taylor's account of originality in chapter 3 of On Liberty. (Dicey only mentions Mill.) Dicey quotes Mill's and Taylor's text: "The initiation of all wise or noble things, comes and must come from individuals; generally at first from some one individual." (Dicey adds that this is also true of  folly or a new form of baseness.)   

The implicit model is still very popular. MacAskill's account (recall) of Benjamin Lay's role in Quaker abolitionism (and itself a model for social movement building among contemporary effective altruists) is quite clearly modelled on Mill and Taylor's model. I don't mean to suggest Mill and Taylor invent the model; it can be discerned in Jesus and his Apostles and his been quite nicely theorized by Ibn Khaldun in his account of prophetic leadership. Dicey's language suggests he recognizes the religious origin of the model because he goes on (in the very next sentence of the long paragraph) as follows: "These apostles of a new faith are either persons endowed with special ability or, what is quite as likely, they are persons who, owing to their peculiar position, are freed from a bias, whether moral or intellectual, in favour of prevalent errors. At last the preachers of truth make an impression, either directly upon the general public or upon some person of eminence, say a leading statesman, who stands in a position to impress ordinary people and thus to win the support of the nation."

So far so good. But Dicey goes on to deny that acceptance of a new idea depends "on the strength of the reasoning" by which it is advocated or "even on the enthusiasm of its adherents." He ascribes uptake of new doctrines to skillful opportunism in particular by a class of political entrepreneurs or statesmanship (or Machiavellian Virtu) in the context of "accidental conditions." (This anticipates Schumpeter, of course, and echoes the elite theorists of the age like Mosca and Michels.) Dicey's main example is the way Bright and Cobden made free trade popular in England. There is space for new directions only after older ideas have been generally discredited and the political circumstances allow for a new orientation. 

It's easy to see that Dicey's informal model (or should I say Mill and Taylor's model?) lends itself to a lot of Post hoc ergo propter hoc reasoning. So I am by no means endorsing it. But the wide circulation of some version of the model helps explain the kind of relentless repetition of much of public criticism (of woke-ism, neoliberalism, capitalism, etc.) that has no other goal than to discredit some way of doing things. If the model is right these are functional part of a strategy of preparing the public for a dramatic change of course. As I have noted Milton Friedman was very interested in this feature of Dicey's argument [Recall:  (1951) “Neo-Liberalism and its Prospects” Farmand, 17 February 1951, pp. 89-93 [recall this post] and his (1962) "Is a Free Society Stable?" New Individualist Review [recall here]].

I admit we have drifted off from multiple discovery. But obviously, after the fact, multiple discovery in social theory or morals can play a functional role in the model as a signpost that the world is getting ready to hear a new gospel. By the end of the eighteenth century, utilitarianism was being re-discovered or invented along multiple dimensions (one may also mention Godwin, and some continental thinkers) as a reformist even radical enterprise. It was responding to visible problems of the age, although its uptake was not a foregone conclusion. (And the model does not imply such uptake.)

It is tempting to claim that this suggests a dis-analogy with multiple discovery in science. But all this suggestion shows is that our culture mistakenly expects or (as I have argued)  tacitly posits an efficient market in ideas in science with near instantaneous uptake of the good ideas; in modern scientific metrics the expectation is that these are assimilated within two to five years on research frontier. But I resist the temptation to go into an extended diatribe why this efficient market in ideas assumption is so dangerous.

On Foucault's Discipline and Punishment & Chicago/Public Choice Economics (II)

But perhaps one should reverse the problem and ask oneself what is served by the failure of the prison; what is the use of these different phenomena that are continually being criticized; the maintenance of delinquency, the encouragement of recidivism, the transformation of the occasional offender into a habitual delinquent, the organization of a closed milieu of delinquency. Perhaps one should look for what is hidden beneath the apparent cynicism of the penal institution, which, after purging the convicts by means of their sentence, continues to follow them by a whole series of 'brandings' (a surveillance that was once de jure and which is today de facto; the police record that has taken the place of the convic's passport) and which thus pursues as a 'delinquent' someone who has acquitted himself of his punishment as an offender. Can we not see here a consequence rather than a contradiction? If so, one would be forced to suppose that the prison, and no doubt punishment in general, is not intended to eliminate offences, but rather to distinguish them, to distribute them, to use th!m; that it is not so much that they render docile those who are liable to transgress the law, but that they tend to assimilate the transgression of the laws in a general tactics of subiection.--Michel Foucault (1975) Discipline and Punish: The Birth of the Prison [Surveiller et punir: Naissance de la prison] translated by Alan Sheridan, pp. 272.

The passage quoted above occurs in the section where Foucault steps back from his account of the 'birth' of a prison and reminds his reader that he is researching and writing his book during "prisoners' revolts of recent weeks." (p. 268) And some readers, then and now, will be familiar with Foucault's activism on behalf of those prisoners. Foucault goes on to note that such revolts elicit a predictable response from (what one might call) enlightened, bien pensant public opinion: "the prisoners' revolts...have been attributed to the fact that the reforms proposed in 1945 never really took effect; that one must therefore return to the fundamental principles of the prison." (p. 268) And Foucault goes on to note that the (seven) principles that entered into the 1945 reform and the predictable response to their failure are a return of the same with a history of "150 years," (p. 269): "Word for word, from one century to the other, the same fundamental propositions are repeated. They reappear in each new, hard-won, finally accepted formulation of a reform that has hitherto always been lacking." (p. 270).*

A certain kind of economist -- often associated with public choice theory and/or Stigler's account of rent-seeking [hereafter the fusion of Chicago and Virginia] --, when confronted by a persistent and enduring failure of a social institution, will ask Cui bono? And what will follow is a story about persistent rents, and rent-seeking. That is, while it is often presented in terms of methodological individualism of utility maximizing agents, the Chicago-Virginia fusion offers a functionalist account of the persistence of social institutions in virtue of the functions they serve to some socially powerful agents or classes of agents. (I put it like that to pay due hommage to the Smithian and Marxist (recall) roots of the emphasis on rent-seeking in the Chicago-Virginia fusion (recall this post on Stigler and recall here on Buchanan and Tullock.) If you don't like the word 'class' use 'representative agent' instead.

Now, before I say anything else, it is worth noting that in the subsequent pages of the material I quote, Foucault offers the rent-seeking answer familiar from Chicago and Virginia fusion. In particular, he identifies three kinds of rents: first, and this is central to the argument of the whole book, members of the human sciences -- medicine, psychology, crimonology, pedagogy, social work, statistics, sociology etc. -- directly gain employment and status from the fact that modern prisons are not just places to lock people away, but also to reform and discipline them. They also gain an easily acessible study object and data (e.g. p. 277 & p. 281).  Second, the criminalization of, say, brothels and the simultaneous regulation of the health of the prostitutes create "enormous profits" that are partially captured by members of the political classes, partially captured by police forces, and again  medicine (see, especially, pp. 279-280). Third, prisons are themselves producers of delinquincy, and so that generates one might call 'second order rents' because it reinforces all the primary rents discussed just mentioned.

There is a further, more important, convergence with Chicago-Virginia fusion lurking here. Foucault treats prisons and the penal system as producers of delinquincy. (This is, in fact, one of the central insights of most prison reform programs that reappear.) And, in fact, it is quite natural to read Becker and Stigler as providing a framework to think about what (in the 1970s already) was called "the crime production function" (as even critics acknowledged). As Becker (1968) put it one can articulate a "function relating the number of offenses by any person to his probability of conviction, to his punishment if convicted, and to other variables, such as the income available to him in legal and other illegal activities, the frequency of nuisance arrests, and his willingness to commit an illegal act." (Crime and Punishment: An Economic Approach, p. 177) From his annotations, we know Foucault read this essay (even though we don't know when exactly).  That is to say, what Foucault recognizes is that the production of delinquincy is itself a source of possible rents or what Foucault calls "usable...illegality." (p. 277) And in (1979) Birth of Biopolitics, Foucault explicitly links his discussion of the "cost of delinquency" to Becker, Stigler, and Ehrlich.  (21 March 1979, Lecture 10, p. 248) And in many ways the tenth lecture can be read as a restatement of Foucault's Discipline & Punish in the vernacular of Chicago.

So, again, as I noted last week, this kind of convergence between Foucault and the Chicago-Virginia fusion suggests either that Foucault was familiar with Stigler's and Becker's work before he published Discipline and Punish and before he encountered Lepage's (1978) Tomorrow, Capitalism: The Economics of Economic Freedom or that there was a kind of convergence between Foucault and Chicago already during his prison activism phase (when Foucault was associated with Maoist and far left groups).

I could stop here, but I don't mean to suggest that for Foucault the enduring functionality of prison as a producer of delinquincy is exclusively or primarily in financial (and scientific) rents. He also thinks that it has other enduring political benefits to ruling elites in direct and indirect ways. Whether one agrees with this or not, Foucault's answer here is no different in kind than the one articulated just now in terms of rents. (Even if the utility involved would be more difficult to measure directly.) And somewhat remarkably, in his classic study (Sour Grapes) Jon Elster singled out Foucault's question and answer as an especially bad consequence explanations--ones that lack a mechanism, a feedback mechanism, and even an intentional agent.  I responded to that charge in press here before I developed my interest in the Birth of Biopolitics and Foucault's thought. And while I would be the last person to suggest that Foucault's work could pass peer review at JPE, good chunks of the enduring substance of Discipline & Punish is not fundamentally different from work that did at the time.

 

On Foucault's Discipline and Punishment & Chicago Economics

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

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

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

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

A good law is necessary and almost sufficient, was nothing other than the desire for what could be called, in economic terms, a reduction in the transaction cost. The law is the most economical solution for punishing people adequately and for this punishment to be effective. First, the crime must be defined as an infraction of a formulated law, so that in the absence of a law there is no crime and an action cannot be incriminated. Second, penalties must be fixed once and for all by the law. Third, penalties must be fixed in law according to the degree of seriousness of the crime. Fourth, henceforth the criminal court will only have one thing to do, which is to apply to an established and proven crime a law which determines in advance what penalty the criminal must suffer according to the seriousness of his crime. An absolutely simple, apparently completely obvious mechanics constitutes the most economic form, that is to say, the least costly and most effective form for obtaining punishment and the elimination of conducts deemed harmful to society. (p. 249)

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

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

That a "penal system must be conceived as a mechanism intended to administer illegalities differentially, not to eliminate them all" is, thus, a key insight of Stigler (1970), and Foucault makes a point of emphasizing this in his 1979 lecture where he treats it as a return to the reformist sensibility of the late 18th century (before it was, as it were, corrupted by criminology's search for the anthropology of the criminal). Foucault thinks this is highly significant because, looking forward, "On the horizon of this analysis we see instead the image, idea, or theme-program of a society in which there is an optimization of systems of difference, in which the field is left open to fluctuating processes, in which minority individuals and practices are tolerated, in which action is brought to bear on the rules of the game rather than on the players, and finally in which there is an environmental type of intervention instead of the internal subjugation of individuals." (259-260, emphasis added on the Hayekian, 'rules of the game'). While I would not go so far as claiming that Foucault endorses this horizon in normative fashion, I do think he is intrigued by the opportunities this affords.

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

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

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

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

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

 

Foucault on Hume on Interest and (Adaptive) Preference

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

Second, this type of choice is non-transferable. I do not mean that it is non-transferable in the sense that one choice could not be replaced by another. You could perfectly well say that if you prefer health to illness, you may also prefer illness to health, and then choose illness. It is also clear that you may perfectly well say: I prefer to be ill and that someone else is not. But, in any case, on what basis will this substitution of one choice for another be made? It will be made on the basis of my own preference and on the basis of the fact that I would find someone else being ill more painful, for example, than being ill myself. In the end the principle of my choice really will be my own feeling of painful or not painful, of pain and pleasure. There is Hume’s famous aphorism which says: If I am given the choice between cutting my little finger and the death of someone else, even if I am forced to cut my little finger, nothing can force me to think that cutting my little finger is preferable to the death of someone else.
So, these are irreducible choices which are non-transferable in relation to the subject. This principle of an irreducible, non-transferable, atomistic individual choice which is unconditionally referred to the subject himself is what is called interest.--Michel Foucault, 28 March 1979, The Birth of Biopolitics, pp. 271-272. 

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

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

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

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

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

What I think is fundamental in English empiricist philosophy— which I am treating completely superficially—is that it reveals something
which absolutely did not exist before. This is the idea of a subject of interest, by which I mean a subject as the source of interest, the starting point of an interest, or the site of a mechanism of interests. For sure, there is a series of discussions on the mechanism of interest itself and what may activate it: is it self-preservation, is it the body or the soul, or is it sympathy? But this is not what is important. What is important is the appearance of interest for the first time as a form of both immediately and absolutely subjective will.
I think the problem and that which gets the problematic of homo oeconomicus underway is whether this subject of interest or form of will called interest can be considered as the same type of will as the juridical will or as capable of being connected to the juridical will. (273)

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

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

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

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

On Wendy Brown's Undoing the Demos and the Homo Politicus of (Foucault's representation of) Ordoliberalism

The economization of the state and of social policy. The virtue of competition is that it generates economic growth, the promotion of which is “the only one and true fundamental social policy.” Foucault elaborates: In neoliberalism, “social policy must not be something that works against economic policy and compensates for it” or that “follows strong economic growth by becoming more generous.” Instead, economic growth by itself should enable individuals to prosper and to protect themselves against risk, so economic growth is the state’s social policy. Competition is a means facilitating an end; the state primes this means so that the economy can generate the end.
Neoliberal states thus depart from liberal ones as they become radically economic in a triple sense: The state secures, advances, and props the economy; the state’s purpose is to facilitate the economy, and the state’s legitimacy is linked to the growth of the economy — as an overt actor on behalf of the economy, the state also becomes responsible for the economy. State action, state purpose, and state legitimacy: each is economized by neoliberalism. The Ordoliberals carried this even further: the market economy should also be the principle of the state’s internal regulation and organization. Reversing the liberal formulation in which a free market is defined and supervised by the state, for them, the state should be defined and supervised by the market. In short, the state itself should be economized.
Competition replaces exchange; inequality replaces equality. In neoliberalism, competition replaces the liberal economic emphasis on exchange as the fundamental principle and dynamic of the market. This is another of those seemingly trivial replacements that is a tectonic shift, affecting a range of other principles and venues. Most importantly, equivalence is both the premise and the norm of exchange, while inequality is the premise and outcome of competition. Consequently, when the political rationality of neoliberalism is fully realized, when market principles are extended to every sphere.--Wendy Brown (2015) Undoing the Demos: Neliberalism's Stealth Revolution, pp. 63-64 (emphasis in original)

It is fair to state that Brown's Undoing the Demos is the most influential treatment of neoliberalism that simultaneously draws on Foucault's Birth of Biopolitics.  Brown is not uncritical of Foucault. In particular, in her third chapter she argues that in articulating "the novel dimensions of the contemporary neoliberal subject," he fails to register "its specific eclipse of homo politicus...[S/he] is not a character in Foucault's story." (85-86). This matters because the homo politicus "forms the substance and legitimacy of whatever democracy might mean beyond securing the individual provisioning of individual ends; this "beyond" includes political equality and freedom, representation, popular sovereignty, and deliberation and judgment about the public good and the common." (87) The underlying claim is that Foucault has (what the Anthropologists call) 'gone native' and that his analysis recapitulates some of the flaws of the neoliberal authors and movements he analyzes.

Now, in the passages I quoted from pp. 63-64, Brown is quoting from Foucault's lecture(s) of 7 and 14 February 1979, that is, lectures five and six, both primarily devoted, as Brown explicitly recognizes, to German Ordo-liberalism (or the ORDOs). And as a summary of their views, Brown's account is misleading in two very important ways: first, she misrepresents the 'virtue' of competition in their thought. Second, she misrepresents what it means for the ORDOs to suggest that the market economy should be the principle of the state’s internal regulation and organization. 

First, for the ORDOs the market's main virtue is that it, if it is properly regulated, it is a mechanism against (what Samuel Bagg calls) 'concentrated power.' This is absolutely explicit in Eucken's central work, The Foundations of Economics, where the "main task" is to find a "system" that is "effective" and does “justice to the dignity of man.” (p. 314) For Eucken “economic history is [full] of brutal struggles for power.” (264) In the context of perfect competition we are least likely to be dominated (and when some agent tries to do so we can safely exit). By contrast communism and Nazism are characterized by concentrated power (128) and "loss of independence." (p. 268). The ORDO embrace of markets and their suspicion of cartels and (in the hands of Röpke, especially) very large corporations (as well as unions) is motivated by their aversion to concentrated power. (See also  Wilhelm Röpke (1960) A humane economy: the social framework of the free market, p. 32.)

It is worth noting that while Foucault does not use the phrase 'concentrated power,' it is still odd that Brown misses the significance of the neo-Kantian themes in Foucault's treatment of the ordoliberals and the republican concern with combatting domination. For, Foucault frames his discussion of modern variants of neoliberalism with a distinction between what he calls, at the end of the second lecture, "the fundamental axiomatic of the rights of man and the utilitarian calculus of the independence of the governed." (17 January 1979, p. 43) The former is associated with Rousseau and Kant, and the latter with Benthamite radicalism, and he is explicit there is a complex dynamic between them. And the most natural way to read his subsequent discussion is that Chicago economics is in the tradition of Benthamite radicalism (a point he explicitly makes), and the ORDOs in the former (a point he makes by implication by treating them as neo-Kantians). I return to the significance below.

Second, to think that for the ORDOs "the state should be supervised by the market" is not altogether strange in light of some of Foucault's expressions.* But even in Foucault, it is completely clear that for the ORDOs the state must have independent capacity and knowledge to be an umpire over the market (in terms of anti-trust), and to create the pre-conditions (in terms of rule of law, and social skills) to make markets function properly. (See, especially, lectures 6- 7.) So, what's going on here?

Now, it's important to recognize that that in Brown's presentation above, 'competition' becomes synonymous with 'market economy.' And so when Foucault represents the ORDOs as emphasizing competition, even treating it as a principle of regulation of the state, it is quite natural to read this as suggesting a kind of total displacement of the state's political functions with principles of the market. And this natural reading is by no means odd, if we look at the rhetoric (and some of the practice) of New Public Management in subsequent decades. Brown herself recognizes that in some respects this is much closer to the Chicago school than the ORDOs (see, especially, p. 60).

Even so, at the political level, 'competition' does not have to be identified with 'market economy.' It is quite natural to treat elections as competitive mechanisms. In fact, in ordo-liberalism one will find defenses and legitimations of the market economy or the price system in terms of a referenda. In 1951 Röpke writes "The process of the market economy is like an uninterrupted referendum on what use should be made (at every minute) of the productive resources of the community." ("The Problem of Economic Order" (Third lecture), published in Two Essays by Wilhelm Ropke, edited by Johannes Overbeek, Lanham: University of America Press, 1987, p. 26) Even Hayek, who allows himself plenty of skeptical comments about democracy, thought that judicial review of the sort practiced Stateside ought to be complemented by a referendum (see The Constitution of Liberty, p. 286, a work that Foucault read carefully). Röpke, especially, held up Switzerland as a model to be emulated by a wider European Union.

Now, at this point one may object that Ordoliberalism also has considerable suspicion of pure democracy or what Brown tends to call the popular sovereignty of the demos. While I think this tends to get emphasized too much in critical discussions of the ORDOs -- they are fully committed to democratic politics of the Bonn and Berlin republics (and as Foucault notes their political allies tend to win elections in it, and German social democracy had to change character/ideology if it wanted to win elections!) --, it is undeniably true that the ORDOs have some suspicion of the rent-seeking that takes place through political life and the (collectivist) temptation to use state power to plan and direct the economy. This, too, is emphasized in Foucault through the significance of the road to serfdom thesis in his analysis of them.

But the ORDOs respond to this (and this echoes Lippmann's analysis) not just by emphasizing markets and the rule of law, or even the countervailing powers of civil society, but rather by what one may call the fragmentation of the polity by way of federalism and de-centralization. (This is also quite present in Chicago economics starting with Simons.) Foucault is absolutely explicit on this:

Such a Gesellschaftspolitik was therefore orientated towards the formation of a market. It was a policy that had to take charge of social processes and take them into account in order to make room for a market mechanism within them. But what did this policy of society, this Gesellschaftspolitik have to consist in for it to succeed in constituting a market space in which competitive mechanisms could really function despite their intrinsic fragility? It consisted in a number of objectives which I have talked about, such as, for example, avoiding centralization, encouraging medium sized enterprises, support for what they call non-proletarian enterprises...(Lecture 10, 21 March 1979, pp. 240-241--emphasis added)

In addition, Foucault treats the ORDOs as the heir of Kant's federal plan for perpetual peace, and he inscribes this idea into the ORDO significance to the construction of the European Union. (In fact, he is quite prescient about this.) So, on their view of politics it should be polycentric with federalism at the national and European level. Now, admittedly Foucault doesn't use the term (despite quoting Michael Polanyi), but unless one assumes that neoliberalism is committed to creating economic markets at all levels, the fact that 'competition' has a political significance is very hard to miss in Focault's treatment of the ORDOs.

So, rather than rejecting homo politicus, as Brown ascribes to Foucault and the ORDOs, the ordoliberals ask of her to participate in political life at different federal levels and with elections at different times. And to do so in a position of sufficient independence (and dignity) so that her political voice can express her interests and even her vision of the common good. Especially in Erhard (who Foucault discusses at length in lecture four) this also involves a defense of basic rights. 

Now, obviously, it is possible that the homo politicus of the ORDOs is too thin and too liberal for the more substantive conception that Brown adheres to. Gesellschaft can mean 'enterprise'/'corporation,' but also 'society.' And a politics that defends and organizes society may be too bourgeois for Brown. There is no doubt that the ORDOs are comfortable with the existence of considerable economic inequality, although not so much inequality that this can be organized to extract rents or to become a source of concentrated power.

And while it is true that economic growth is very significant to the ORDOs. In Foucault's analysis this is so because it can create (what since has come to be called) 'output legitimacy.' And this legitimacy is explicitly treated as a form of representativeness. For, the output legitimacy (which involves economic growth is the effect of respecting "the basic freedoms, the essential rights of citizens" and thereby be "representative of its citizens." (31 January, 1979, p. 81, discussing Erhard.) As Foucault puts it "it is simply a matter of saying that a state which abuses its power in the economic realm, and more generally in the realm of political life, violates basic rights, impairs essential freedoms, and thereby forfeits its own rights." (p. 80) In reading Brown on ordoliberalism, and her account of Foucault's treatment of it, one would simply miss this tight connection between respecting homo politicus and advancing (a new conception of) homo economicus.+ 

 

Milton Friedman (Schumpeter, Foucault, Dicey, and Hayek) on the Possibility of a Free Society

THERE IS A STRONG TENDENCY for all of us to regard what is as if it were the “natural” or “normal” state of affairs, to lack perspective because of the tyranny of the status quo. It is, therefore, well, from time to time, to make a deliberate effort to look at things in a broader context. In such a context anything approaching a free society is an exceedingly rare event. Only during short intervals in man’s recorded history has there been anything approaching what we would call a free society in existence over any appreciable part of the globe. And even during such intervals, as at the moment, the greater part of mankind has lived under regimes that could by no stretch of the imagination be called free.

This casual empirical observation raises the question whether a free society may not be a system in unstable equilibrium. If one were to take a purely historical point of view, one would have to say that the “normal,” in the sense of average, state of mankind is a state of tyranny and despotism. Perhaps this is the equilibrium state of society that tends to arise in the relation of man to his fellows. Perhaps highly special circumstances must exist to render a free society possible. And perhaps these special circumstances, the existence of which account for the rare episodes of freedom, are themselves by their nature transitory, so that the kind of society we all of us believe in is highly unlikely to be maintained, even if once attained.--Milton Friedman (1962) "Is a Free Society Stable?" New Individualist Review.

In yesterday's post, I said something about the intellectual significance of New Individualist Review to the political development of what came to be known as 'fusionism' Stateside and its Hayekian context (and so the mainstreaming of neoliberal ideas, 'neoliberal' in its historical sense, that is). I also suggested that Friedman's essay (I quoted the first two paragraphs above) should be understood in context of the surprisingly critical reception of the Road to Serfdom thesis in this context. (Friedman's friend and colleague, Stigler, savages it.)

I wish I had read Friedman's essay before I blogged on Graeber and Wengrow's recent Dawn of Everything because one way to understand the significance of their book is that it challenges the idea that a genuinely free society is rare. Now, obviously Friedman and Graeber/Wengrow don't mean the exact same thing with a 'free society.' While Friedman is a right or 'individualist' libertarian he is clearly not an anarchist, so it's not the case that Graeber/Wengrow refute Friedman's claim here. (And it's pretty clear that Graeber & Wengrow would not accept Friedman's claim that we're living in a free society.) But since Graeber/Wengrow and Friedman agree that legally sanctioned coercion is itself generally problematic (in ways that mainstream liberals often think not, alas), my suggestion is not altogether farfetched. Because it's pretty clear that the many urban polities that Graeber and Wengrow admire are open to commerce while rejecting state organized/sanctioned/rent-seeking (etc.) capitalism (which is what draws Friedman's ire, too).

So, one way to react to Friedman's set-up of his argument is that he is (tacitly) working with a biased sample or a historically limited data-set (something Friedman may well appreciate given his kind of research in monetary history) because, and this is the interesting part, he is drawing on a literature (shared by Marxists and certain classical liberals alike) that presupposes something like an idea of progress (that has already occurred) and that is distinctly Eurocentric/Western. This can be checked because Friedman's main source is Lectures on Law and Public Opinion in the Nineteenth Century (1905) by A. V. Dicey. Dicey clearly impressed Friedman because he also frames Friedman's argument in his important earlier (1952) essay "Neo-Liberalism and its Prospects” that I have discussed here.

What makes Friedman's "Is a Free Society Stable?" interesting are  two important observations. First, and this one (I am pretty sure) he has repeated elsewhere but here clearly credits Dicey with noticing, is that the consequentialist arguments that tend to support classical liberalism all violate what we might call 'naïve empiricism' or 'lived experience' because they require a kind of statistical or aggregate perspective:

The argument for a free society, he goes on to say, is a very subtle and sophisticated argument. At every point, it depends on the indirect rather than the direct effect of the policy followed. If one is concerned to remedy clear evils in a society, as everyone is, the natural reaction is to say, “let’s do something about it,” and the “us” in this statement will in a large number of cases be translated into the “government,” so the natural reaction is to pass a law. The argument that maybe the attempt to correct this particular evil by extending the hand of the government will have indirect effects whose aggregate consequences may be far worse than any direct benefits that flow from the action taken is, after all, a rather sophisticated argument. And yet, this is the kind of argument that underlies a belief in a free or laisser-faire society.

So, that also means (and this is Dicey's initial observation) that arguments for a free society have a kind of utopian quality ahead of their existence. And even while such societies exist, given the abstracted/philosophical nature of the argument it is "says Dicey...really amazing and surprising...that for so long a period as a few decades, sufficiently widespread public opinion developed in Britain in favor of the general principle of non-intervention and laisser-faire as to overcome the natural tendency to pass a law for the particular cases." (The natural tendency is, thus, rooted in what I called the naïve empiricist assumption which is attributed to ordinary life.) Obviously, as an aside, Marxists would take Dicey's argument, if they cared to take it seriously, and suggest that it is violence (and then ideology) that has to do the job to get people to accept a free society.

I don't mean to suggest such utopianism is required. For, as Friedman notes there is another route that is at least partially ground in experience:

one of the factors that led Bentham and the Utilitarians toward laisser-faire, and this is a view that is also expressed by Dicey, was the self-evident truth that if you wanted to get evils corrected, you could not expect to do so through the government of the time. The government was corrupt and inefficient. It was clearly oppressive. It was something that had to be gotten out of the way as a first step to reform. The fundamental philosophy of the Utilitarians, or any philosophy that puts its emphasis on some kind of a sum of utilities, however loose may be the expression, does not lead to laisser-faire in principle. It leads to whatever kind of organization of economic activity is thought to produce results which are regarded as good in the sense of adding to the sum total of utilities. I think the major reason why the Utilitarians tended to be in favor of laisser-faire was the obvious fact that government was incompetent to perform any of the tasks they wanted to see performed.

So, you might say that on Friedman's view Bentham and the radicals that followed backed themselves into laisser-faire as a kind of second best (or n-th) best option. What's undoubtedly correct here is that there is no intrinsic connection between free society and Utilitarianism. But Friedman ignores how important Adam Smith (and Hume) is to Bentham's intellectual development and the more important political radicals.

The second really interesting observation by Friedman is set up by him noting that "Dicey’s argument is enormously strengthened by an asymmetry between a shift toward individualism and a shift away from it." (For all his admiration, Friedman doesn't mince words about a kind of Victorian complacency in Dicey.) By contrast, in virtue of accepting the rarity of a free society (and a kind of explanatory parsimony), Friedman treats the mechanisms one might posit in a road to serfdom thesis as symmetrical (even potentially identical) with those that lead to a free society. Friedman is motivated to do so, also, by his reflection on Schumpeter's acceptance of the Marxist idea that capitalism is doomed to failure (but with this twist that "[W]hereas Marx’s view was that capitalism would destroy itself by its failure, Schumpeter’s view was that capitalism would destroy itself by its success."). 

As an aside, if you accept my claim that Hayek is Friedman's real target in his 1962 article (which I claim is plausible on contextual grounds), what's neat about this is that he inscribes the road to serfdom thesis in a larger debate, inspired by Marxism, about the historical necessity of capitalism, and its subsequent demise. And in Friedman (recall here and here) not unlike Foucault in Lecture 7, The Birth of Biopolitics, 21 February 1979. Birth of Biopolitics, Schumpeter is crucial for linking the debates about monopoly capitalism and the road to serfdom thesis. (And unlike Foucault, Friedman, in turn, treats Schumpeter as a variation on Veblen and Burnham as a variation on Schumpeter--it is really a virtuoso performance by Friedman.) Some other time I will address Friedman's criticism of Schumpeter's thesis.

The mechanism, which has some unacknowledged roots in Marx's analysis, is as follows:

the development of laisser-faire laid the groundwork for a widespread respect for the law, on the one hand, and a relatively incorrupt, honest, and efficient civil service on the other, both of which are essential preconditions for the operation of a collectivist society. In order for a collectivist society to operate, the people must obey the laws and there must be a civil service that can and will carry out the laws. The success of capitalism established these preconditions for a movement in the direction of much greater state intervention.

But then Friedman adds:

The process I have described obviously runs both ways. A movement in the direction of a collectivist society involves increased governmental intervention into the daily lives of people and the conversion into crimes of actions that are regarded by the ordinary person as entirely proper. These tend in turn to undermine respect for the law and to give incentives to corrupt state officials....the erosion of the capital stock of willingness to obey the law reduces the capacity of a society to run a centralized state, to move away from freedom. This effect on law obedience is thus one that is reversible and runs in both directions. It is another major factor that needs to be taken into account in judging the likely stability of a free system in the long run.

And this argument is directed against both Marxist necessity and the road the serfdom. Because countervailing forces are naturally developed as one goes down the road to serfdom: "Once government embarks on intervention into and regulation of private activities, this establishes an incentive for large numbers of individuals to use their ingenuity to find ways to get around the government regulations." (And this, in turn, starts to swallow up time of the more earnest government officials, etc.) Friedman recognizes his claims are speculative (much more historical work is needed), but a reader of Friedman comes away thinking that free societies are rarely stable, if one means by that, in equilibrium; that is, they are always in some kind of crisis (again this anticipates Foucault's idea that liberalism is co-constituted with crisis); but these crises of a free society have, on the whole also a self-correcting quality over the medium term.

It's easy to mock Friedman's position as I have reconstructed it as a kind of providential optimism. But perhaps such providentialism is required within political life; the great danger of it is that encourages complacency about the possibility of a crisis that fatally undermines a free society.

 

 

Stigler (and Milton Friedman) on Hayek's Road to Serfdom Thesis with a nod to Condorcet and even Rawls at the end

The conservative, or the traditional liberal-or libertarian, or whatever we may call him-will surely concede this proposition in the large. He will say that this is precisely the problem of our times: to educate the typical American to the dangers of gradual loss of liberty. One would think that if liberty is so important that a statue is erected to her, then the demonstration that a moderate decline of personal freedom leads with high probability to tyranny would be available in paperback at every drugstore. Such a book is not so easy to find. In fact, it may not exist. 

    No one will dispute that there have been many tyrannies, and indeed it is at least as easy to find them in the twentieth century as in any other. Moreover, the loss of vital liberties does not take place in a single step, so one can truly say that a tyranny is entered by degrees. But one cannot easily reverse this truism and assert that some decrease in liberties will always lead to more, until basic liberties are lost. Alcoholics presumably increased their drinking gradually, but it is not true that everyone who drinks becomes an alcoholic.
    An approach to a demonstration that there exists a tendency of state controls to increase beyond the limits consistent with liberty is found in Hayek's Road to Serfdom. But Hayek makes no attempt to prove that such a tendency exists, although there are allegations to this effect. This profound study has two very different purposes: (1) A demonstration that comprehensive political control of economic life will reduce personal liberty (political and intellectual as well as economic) to a pathetic minimum. (I may observe, in passing, that this argument seems to me irresistible, and I know of no serious attempt to refute it. It will be accepted by almost every one who realizes the import of comprehensive controls.) (2) If the expansion of control of economic life which has been under way in Britain, the United States, and other democratic western countries should continue long enough and far enough, the totalitarian system of Nazi Germany and Fascist Italy will eventually be reached. This second theme is not a historical proposition-and no historical evidence was given: it is the analytical proposition that totali­tarian systems are an extreme form of, not a different type from, the democratic "welfare" states to which the book was addressed. Hayek was telling gentlemen drinkers, and especially some Englishmen-who were becoming heavy drinkers-not to become alcoholics.
    The thirty-five years that have passed since the outbreak of World War II have seen further expansions of political control over economic life in the United States, and in most western European nations except Germany. Yet no serious diminution of liberties deemed important by the mass of educated (or unedu­cated) opinion has taken place. Another hundred years of governmental expansion at the pace of these recent decades would surely destroy our basic liberties, but what evidence is there that such an expansion will continue? Quite clearly, no such evidence has been assembled. But it is one thing to deny that evidence exists for the persistence of present trends to the point where they will endanger our liberties, and quite another to deny that such a momentum exists. Or, differently put, where is the evidence that we won't carry these political controls over eco­nomic life to a liberty-destroying stage?
    This may be an impeccable debating point, but it will carry much less conviction than an empirical demonstration of the difficulty of stopping a trend. When men have projected the tendency of a society to a distant terminus, they have invariably committed two errors. The tendency develops in a larger number of directions than the prophet has discerned: no tendency is as single-minded as its observer believes it to be. And the tendency encounters in the society other and contradictory forces which eventually give the course of events a wholly different tum. We have no reason to believe that the current prophets are any wiser.
    So I conclude: we should fish or cut bait. On the subject of liberty the conservative should either become silent or find something useful to say. I think there is something useful to say, and here is what it is.--G.J. Stigler (1975) The Citizen and the State, pp. 17-18

Among Hayek scholars it is a well known fact that the Chicago economist (and self-described 'conservative'), G.J. Stigler, was rather critical of Hayek's road to serfdom thesis. (See especially the rather intense exchanges between Bruce Caldwell, one side, and Andrew Farrant with Edward McPhail, on the other.) But I haven't seen the point discussed in wider scholarship on the nature of neoliberalism, so it can't hurt to amplify its existence. In addition, to the best of my knowledge Caldwell, Farrant and McPhail rely on Stigler's (1988) autobiography, Memoirs of an Unregulated Economist, and on his earlier essay (1961) "Reflections on the loss of Liberty." This early essay was reprinted with modifications as "reflections on Liberty" as chapter 2 in The Citizen and the State. The passage quoted above is pretty much identical in substance to the earlier essay. But in virtue of its context -- it's now part of a larger argument in a book -- it is worth revisiting in its incarnation in the Citizen and the State, which is Stigler's contribution to the liberal art of government (and art of economics). 

When Stigler's essay first appeared in 1961 in New Individualist Review, which originated at The University of Chicago and had strong connections  to its faculty, he had just returned to The University of Chicago where Hayek was still in the Committee on Social Thought. The Review was a central vector in the intellectual revitalization of the anti-New Deal forces on the Right, and in fact Hayek and his students played a central role in it. Interestingly enough, the Review published major criticisms of Hayek. In addition to Stigler, Hamowy's "Hayek’s Concept of Freedom: A Critique" also originated in it. Sometimes Hayek is not named, but the critical thrust of the argument is clear enough (see, for example, Milton Friedman's "Is a Free Society Stable?"). This original context also helps to explain Stigler's emphasis on educating 'typical Americans.' (In those days conservatives could not take their own typicality for granted.)

Recall that a road to serfdom thesis holds that an outcome unintended to political decisionmakers is foreseeable to the right kind of observer and that in addition the outcome leads to a loss of political and economic freedom over the medium term. I use ‘medium’ here because the consequences tend to follow in a time-frame within an ordinary human life, but generally longer than one or two years (which is the short-run), and shorter than the centuries’ long process covered by (say) the rise and fall of civilization. Crucially for a road to serfdom thesis, along the way, in order to ward off some unintended and undesirable consequences, decisions are taken that tend to lock in a worse than intended and de facto bad political unintended outcome. It is pretty clear that Stigler attributes a road to serfdom thesis in this sense to Hayek. (A lot of the debate in Hayek studies is whether Hayek thought the welfare state must lead to serfdom.)

Now, Stigler's overall point is to try to turn the road to serfdom thesis from prophecy to a theory that can be tested empirically, which is treated as useful speech. Part of its utility is to "frighten" modern man "with [empirical] evidence." (18) But it is worth noting that lurking in Stigler's argument is a hypothesis that social tendencies naturally encounter and, perhaps even trigger, "other and contradictory forces which eventually give the course of events a wholly different turn." So Stigler's account presupposes, in fact, a commitment to a certain kind of pluralism as a social reality which can counterbalance serfdom inducing forces. (At the very end of this long post I return to characterize this pluralism.) To put it politically: there is a clear commitment to the proposition that New Deal Coalition can be defeated.

As an aside, Stigler's point about the plurality of social forces that may be a countervailing internal balance seems to anticipate Milton Friedman's ideas on the matter. In 1962, Friedman writes, "I HAVE BEEN EMPHASIZING forces and approaches that are mostly pessimistic in terms of our values in the sense that most of them are reasons why a free society is likely to be unstable and to change into a collectivist system. I should like therefore to turn to some of the tendencies that may operate in the other direction." ("Is a Free Society Stable?"). And Friedman thinks this is also an effect of the fact that (the side-effects of) tendencies in one direction become visible and become grounds for mobilization. (Since the two were close colleagues it's possible Friedman is the source of Stigler's point despite publishing later.) Friedman's essay is worth reading because he puts the road to serfdom thesis in the context of Dicey's arguments and a general awareness that liberal societies are historically rare.

The evidence of loss of liberty Stigler will point to are primarily economic, but some of them (media monopolies/oligarchies, land-management) clearly do have an effect on political issues. Yet, it's worth noting that when Stigler first published the piece, Jim Crowe had not been defeated even formally in the South. So, this, and the claim just before the passage I quoted above that "our franchise is broad...we have the political system we want" (16) suggests remarkable complacency about the state of civil rights (this is no surprise (recall) after Brad de Long called attention to his racist and condescending essay directed at students and civil rights leaders a few years later).

In fact, in The Citizen and the State, "The Loss of Liberty" follows a chapter called, "The Unjoined Debate." It seems to have gone unnoted that there, too, he address the Road to Serfdom thesis:

Let us begin with the most fundamental issue posed by the increasing direction of economic life by the state: the preservation of the individual's liberty-liberty of speech, of occupation, of choice of home, of education.
The situation is presently this: everyone agrees that liberty is important and desirable; hardly anyone believes that any basic liberties are seriously infringed today. The conservatives believe that a continuation of the trend toward increasing political control over economic life will inevitably lead to a larger diminu­tion of liberty. The liberals believe that this contingency is remote and avoidable. The more mischievous of the liberals point out that the conservatives have been talking of the planting of the seeds of destruction of liberty for decades-perhaps the seeds are infertile. Liberty is thus not a viable subject of controversy; neither side takes the issue seriously.
The lack of any sense of loss of liberty during the last two generations of rapidly increasing political control over economic life is of course not conclusive proof that we have preserved all our traditional liberty. Man has an astonishing ability to adjust to evil circumstances.
It is not possible for an observant man to deny that the restrictions on the actions of individuals have been increasing with the expansion of public control over our lives. I cannot build a house that displeases the building inspector. I cannot teach in the schools of the fifty states because I lack a license, although I can teach in their universities.

This list of controls over men can be multiplied many-fold, but it will not persuade the liberal that essential freedoms are declining. The liberal will point out that restrictions on one man may mean freedom for another. (5-6)

What's notable about this passage is that the veracity of the road to serfdom thesis has been elevated to it being "the most fundamental issue" in the modern administrative state. But simultaneously he thinks the conservative has engaged in "indolence parading as prophecy" with his "seeds-of-destruction talk." (6) That is to say on the acknowledged key question -- can liberalism [in its wider sense] survive? -- Stigler thinks Hayek's case is underwhelming. 

What's also notable, and I realize I am testing your patience, is that Stigler clearly resists the idea that liberty is merely freedom of contract and simultaneously elevates freedom of speech beyond the other (unmentioned) political liberties. This is, in fact, no surprise because the chapter/essay is framed by the idea that "the controversy between conservatives and liberals in the United States is so ineffective that is serving the purposes of controversy. The quality of controversy is not only but in fact declining, and what was once a meaningful debate is becoming completely unjoined."  (4). This passage was first written in 1966 (in the middle of the Vietnam War and Civil Rights debates). And even if you reject much of Stigler's political stance in the age (as I do), the fact that this idea is conventional wisdom of our own age (about the recent past) should give us pause. There is a sense in which liberal democracy is co-extensive with the further thought 'that the quality of controversy has declined.' Foucault (recall) picks up on this and treats liberal democracy as co-constituted with a sense of crisis.

Somewhat surprisingly, I think, the proper purpose of debate according to Stigler is announced on the following page, "the believer in democracy, or even more basically a believer in the dignity of man, has a moral obligation to seek to remove differences of opinion among groups by honest argument." (4) And this will also make "progress into our policies" possible. (13) We are not far removed from Rawls' idea that conceptual engineering will make overlapping consensus possible. And the reason for this position in Stigler is ground in a kind of negative Condorcet-ian insight (Condorcet goes unmentioned) that "the larger the group, the more certain we can be that is not insane in the sense of being divorced from apparent fact and plausible reasoning." (4, emphasis in original) And so their common position reflects "common factual beliefs and the same causal processes." (4) If large groups disagree, Stigler implies, they are both latching onto something fundamental in social reality. 

Now, Stigler recognizes that eliminating "differences of opinion on public policy" is not likely because there are "unresolved factual and theoretical questions" and so "alternative policies" may well be equally reasonable. (13) This passage echoes Friedman's views in 1953 (which in turn echo Stigler's own views from the 1940s). But he also allows genuine value disagreement: "we shall still have men [sic] disagreeing on the comparative roles of individual responsibility and social benevolence." (13) That is, when confronted by the social tensions of the 1960s, at least one leading Chicago economists became receptive to the reality of value pluralism. And thought it important enough to repeat it in his major book on liberal, political statecraft.

 

 

Foucault, Stigler, Weber, and some pre-history going back to Thomas More, Mandeville, Grouchy and even Spinoza

The cost limitation upon the enforcement of laws would prevent the society from forestalling, detecting, and punishing all offenders, but it would appear that punishments which would be meted out to the guilty could often be increased without using additional resources. The offender is deterred by the expected punishment, which is (as a first approximation) the probability of punishment times the punishment-$100 if the probability of conviction is 1/10 and the fine $1,000. Hence, increasing the punishment would seem always to increase the deterrence. Capital punishment is cheaper than long term imprisonment; and seizure of all the offender's property may not be much more expensive than collecting a more moderate fine.

To escape from this conclusion, Becker introduces as a different limitation on punishment the "social value of the gain to offenders" from the offense. The determination of this social value is not explained, and one is entitled to doubt its usefulness as an explanatory concept: what evidence is there that society sets a positive value upon the utility derived from a murder, rape, or arson? In fact the society has branded the utility derived from such activities as illicit. It may be that in a few offenses some gain to the offender is viewed as a gain to society,' but such social gains seem too infrequent, small, and capricious to put an effective limitation upon the size of punishments.

Instead we take account of another source of limitation of punishment, which arises out of the nature of the supply of offenses. It is no doubt true that the larger the punishment, the smaller will be the expected net utility to the prospective offender from the commission of a given offense. But marginal decisions are made here as in the remainder of life, and the marginal deterrence of heavy punishments could be very small or even negative. If the offender will be executed for a minor assault and for a murder, there is no marginal deterrence to murder. If the thief has his hand cut off for taking five dollars, he had just as well take $5,000. Marginal costs are necessary to marginal deterrence.2 The marginal deterrence to committing small crimes is also distorted if an otherwise appropriate schedule of penalties is doubled or halved. One special aspect of this cost limitation upon enforcement is the need to avoid overenforcement. The enforcement agency could easily apprehend most guilty people of we placed no limits upon the charging and frequent conviction of innocent people. In any real enforcement system, there will in fact be conviction and punishment of some innocent parties, and these miscarriages of justice impose costs of both resources and loss of confidence in the enforcement machinery. The costs of defense of innocent parties, whether borne by themselves or by the state, are part of the costs of enforcement from the social viewpoint. The conviction of innocent persons encourages the crime because it reduces the marginal deterrence to its commission.--Stigler, George J. "The optimum enforcement of laws." Journal of Political Economy 78.3 (1970): 527-528.

Foucault quotes the Stigler (1970) article in the tenth lecture of 21 March 1979 (Birth of Biopolitics, p. 256.) It is quite natural, if you read the editorial apparatus of the Birth of Biopolitics, to think that Foucault may not have read the original source, but that he is relying entirely on Jenny, F. "La théorie économique du crime: une revue de la littérature." Vie et sciences économique 73 (1977): 7-20. The wording of the editorial footnote (18) -- "(Foucault draws on information provided in this article.)" -- is sufficiently ambiguous to give the editors plausible deniability here. But the editors go on to imply it in a later footnote (25) when they tell the readers that "This phrase is not found in Becker’s article. Foucault relies on the synthesis of Becker’s and Stigler’s works provided by Jenny." Foucault's vexed relationship to underlying sources came up in discussion over lunch with Bruce Caldwell and Joel Isaac yesterday.

So, I was pleasantly surprised yesterday when during a hallway conversation Vincent Carret -- yes I am visiting Duke's Center for the history of political economy [hence all the name-dropping] -- informed me that there is a project, Le projet Foucault Fiches de Lecture (FFL), that is collecting and making digitally available many of Foucault's annotations on his readings which he did to prepare his lectures and books. So, when I went to check it out, I thought it made sense to use it as my first foray to see what annotations he had left on Becker and Stigler. While zero annotations would not be decisive -- after all notes get lost and re-used, maybe he relied on others for summaries and checked them against original sources -- it would naturally be taken to reinforce the editors' point.

To give a non-trivial example that a false negative is not decisive: as far as I can tell, there are no annotations on Jenny's article (or the underlying book in which it appeared). Since there are Foucault annotations on papers by Becker (here) and Stigler, that would have made a nice punchline for this digression, but I have other fish to fry!  In addition, the annotations do not seem to be dated, and as far as I can tell [after a few hours of poking around on the website] the project has not yet tried to date the manuscripts. So, I am not going to try to connect Foucault's scribbling to particular passages in the lecture course. (I will leave that to a different kind of scholar.) Foucault read and made a few annotations (see here) on Stigler's "The Optimum Enforcement of Laws." That should be no surprise because Foucault had a deep interest in criminology, and its history, and Becker's and Stigler's work were creating important waves in the field. (I would be amazed if these annotations were written after the Birth of Biopolitics lectures.)

When Stigler wrote the passage I have quoted, Becker may well still have been at Columbia. (Becker returned to Chicago in 1970.) And, at first sight the passage has the aura of a senior scholar setting the young upstart straight on marginal analysis (then exactly a century old), although the real disagreement is to explain the absence of widespread and enormous numbers of capital punishment. For, while Stigler's (and Becker's) project has a normative component (Stigler is explicit about this), it's also meant to do a decent job with the empirical world.

And, in fact, Stigler's analysis ("If the thief has his hand cut off for taking five dollars, he had just as well take $5,000.") echoes pre-marginalist thinking going back to Thomas More (in part I of Utopia [recall this NewAPPS post]), and, as Foucault explicitly notes (repeatedly in the lecture), in the writings of Beccaria and Bentham (and (recall this digression on) Sophie Grouchy). This is why Foucault treats Stigler and Becker as an updated version of Benthamite utilitarianism (although as the reference to More suggests cost-benefit analysis of criminal decision making and how to create rational punishment in light of it precedes Benthamite utilitarianism). 

Now, I want to close with more substantive observations. Foucault himself makes an important point in a passage (which I have quoted in passing before (recall here) in which he explicitly quotes Stigler (1970):

The regulatory principle of penal policy is a simple intervention in the market for crime and in relation to the supply of crime. It is an intervention which will limit the supply of crime solely by a negative demand, the cost of which must obviously never exceed the cost of the supply of the criminality in question. This is the definition that Stigler gives of the objective of a penal policy: “The goal of law enforcement,” he says, “is to achieve a degree of compliance with the rule of prescribed behavior that society believes it can procure while taking account of the fact that enforcement is costly.” This is in the Journal of Political Economy in 1970.30--Foucault 21 March, 1979,  translated by Graham Burchell, Lecture 10, The Birth of Biopolitics, p. 256.*

The 'definition that Stigler gives' is from the first section of the essay labeled 'The Goal of Enforcement.' Stigler returns to the regulatory principle in the final (third) section labeled 'The Enforcement Agency: A Normative Approach.' Some other time I want to discuss how we should think about the normativity involved in Stigler's analysis. Foucault does not remark on it. It's worth nothing that 'Chicago' is by no means the first to think about the role of enforcement costs in law enforcement: Spinoza (in the Theological Political Treatise) and Mandeville (in the Fable) recognize that Amsterdam's practice of tolerating brothels is explicitly shaped by consideration of enforcement costs.

Now, 'the art of government' is the major theme of Birth of Biopolitics. And the phrase (and its cognates) are used repeatedly throughout the lectures. But one peculiarity of the lectures is that the phrase does not occur in the lectures on Chicago economics ('governmentality' does in case you want to play gotcha with me). And this has let commentators, I think, to miss that Chicago school does have an account of the art of government: in Friedman it's called the 'art of economics' (which is recall here and here the phrase he inherits from J.S. Mill and J.N. Keynes) and Stigler with less flair, calls it "advice on policy...[in light of] understanding of the regulatory process" in the introduction to his (1975) Citizen and the State. Now, in Friedman (and Mill, and even Adam Smith) the content of the art of government is articulated in terms of maxims or principles. Foucault echoes this language when he describes Stigler's 1970 in terms of 'regulatory principles.'** 

To put my first important point simply: in the context of the modern administrative state, the liberal art of government, as understood at 'Chicago' is partially codified in terms of regulatory principles that constrain how one should think about the relationship between policy aims and fundamental liberal principles (and constitutional constraints, etc.) in light of experience with the ordinary workings of the democratic political process which is often also a market in political regulation. 

The second point is that Foucault uses 'regulatory principle' as the content of the art of government in the context of the modern administrative state. This is actually confirmed or illustrated in an interview held with him (by folk who are actually confused on this) in a passage that has attracted quite a bit of critical attention (because it involves Foucault's attitude toward consensus politics), where Foucault corrects his interviewers' terminology by saying that 'X is a regulatory principle' always presupposes that X is subject to "governance" and to "be organized." (The Foucault Reader, p. 378)

And lurking here is the most important point often lost in twentieth century debates over markets vs states is that much of neoliberalism, that, as Foucault correctly recognizes, is about -- and Becker and Stigler are explicit about this -- a process of rationalization of the administrative state on liberal principles not its abolition. And so while Foucault repeatedly ties the ORDO liberal approach to Max Weber's shadow, he could have also done so with Chicago (even if Stigler got his Weber through Knight and Talcott Parsons).