Digressions&Impressions

On Milton Friedman and Hayek on Consensus

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

Friedman relies here on [A] a tacit distinction between basic values and not-so-basic values. When there is (fundamental) disagreement over these society returns, we can say, to the state of nature. So, not unlike one of his Chicago mentors, Henry Simons, he relies on the idea (recall) that states presuppose considerable consensus. (I have noted the somewhat disastrous afterlife of this idea in Chicago economics elsewhere; e.g.  here and here.) Another, no less consequential, distinction he relies on [B]  is that between disinterested and (ahh) self-interested citizen. Presumably the disinterested citizen advocates the public or common interest, whereas the self-interested citizen promotes a self/sinister interest. 

This means that in a functioning political unity -- i.e., one with considerable background consensus -- if we encounter public disagreement, there are for Friedman three possible sources of controversy: (i) disagreement over likely outcomes of policy; (ii) disagreement over which no-so-basic value to prioritize [in the context of major agreement]; (iii) people advocating their own interest as opposed to public interest. In principle, and this is the point of Friedman's essay, (i) can be eliminated as positive (that is empirical) economics progresses. This suggests, and again this is no surprise, that for Friedman a mature positive economics will be characterized by consensus over the relationship between policy and outcomes. In addition, in principle, (ii) can be eliminated as normative economics progresses. Friedman does not spend much time on this, and it is unclear if he agrees with Robbons who does not expect such convergence in normative economics, or with later more optimistic professional philosophers.

An important consequence of Friedman's stance is that it entails that if, one agrees with him and understands oneself as a policy-scientist (and Friedman often does), one can model public policy debates with representative agents who exhibit public spirit. For these will all agree on the common good. For those who think of 'Chicago' as a bastion of self-interest this is surprising. It is worth noting this because it makes clear that the subsequent public choice (Buchanan/Tullock) and rent-seeking (George Stigler, etc.) revolution (by his Chicago trained contemporaries) also impacts Friedman's own program. 

Another important consequence of Friedman's stance is that one cannot assume that public spirited representative agents will agree across space and time, especially as they become culturally more distant. This has obvious consequences  when one aims to do comparative policy work.

I could end here, but I want to call attention to a feature in Hayek's thought (ca 1945). Consider the closing two sentences, in particular, from the following passage from a justly famous essay:

The price system is just one of those formations which man has learned to use (though he is still very far from having learned to make the best use of it) after he had stumbled upon it without understanding it. Through it not only a division of labor but also a coordinated utilization of resources based on an equally divided knowledge has become possible. The people who like to deride any suggestion that this may be so usually distort the argument by insinuating that it asserts that by some miracle just that sort of system has spontaneously grown up which is best suited to modern civilization. It is the other way round: man has been able to develop that division of labor on which our civilization is based because he happened to stumble upon a method which made it possible. Had he not done so he might still have developed some other, altogether different, type of civilization, something like the "state" of the termite ants, or some other altogether unimaginable type. All that we can say is that nobody has yet succeeded in designing an alternative system in which certain features of the existing one can be preserved which are dear even to those who most violently assail it-such as particularly the extent to which the individual can choose his pursuits and consequently freely use his own knowledge and skill. F Hayek (1945 "The Use of Knowledge in Society," 528

In the paper, Hayek treats the price system as a natural machine with a clear purpose: "We must look at the price system as such a mechanism for communicating information if we want to understand its real function." (526) This is compatible with the thought (a) that the price system has many derivative functions and (b) that the real function can be undermined or obstructed. (For Hayek's argument, (b) is very important.) And one can easily see, that the gap between Hayek and Ordoliberalism is fairly small, if Hayek were to grant the Ordos that (c) one of the key functions of the state is not just not to interfere with, but to maintain actively the conditions that enable the proper functioning of the price system.

Now, one may well wonder, why Hayek assumes that there is one and only one "real function" of the price system. I think he helps himself to this claim without argument. But let's stipulate he is right about this, and that it's methodologically kosher to attribute functions to social systems at all. Even so, one may well wonder what function the communicating of information serves. In this paper he is rather silent about this more fundamental end. And here it is clear that whatever it is, not unlike Friedman later, Hayek relatives this more fundamental function to "our civilization."

And somewhat surprisingly, not unlike Simons and Friedman, Hayek also assumes considerable agreement over what Friedman calls basic values.  This is clear from his response tho those who reject the price system as privileged machine. To them he de facto says, 'we agree about some of these fundamental ends -- which may call in short-hand individual 'freedom' and 'autonomy' -- and any replacement of the price-system will have to secure these, too.' My interest here is not whether this is an accurate claim about either the status of these ends in our civilization nor the extent to which illiberal critics of the price-system would endorse these. (I am, it should be clear, skeptical of both.) But rather that Hayek, too, ends up suggesting that if there is any disagreement over the functioning of the price system, it will not be due to disagreement over fundamental ends. And this suggests, that if there is disagreement, the other side(s) is/are engaged in special pleading. 

Not for the first time I am struck by the lack of space for genuine pluralism over ends in twentieth century liberalism. As regular readers know I think this plays no small role in the predicament it finds itself today.

 

Philosophy of Science in The Nobel Prize (Economics) Lecture by Stigler

I propose on this occasion to address the same kinds of questions to an entirely different market: the market for new ideas in economic science. Most economists enter this market in new ideas, let me emphasize, in order to obtain ideas and methods for the applications they are making of economics to the thousand problems with which they are occupied: these economists are not the suppliers of new ideas but only demanders. Their problem is comparable to that of the automobile buyer: to find a reliable vehicle. Indeed, they usually end up by buying a used, and therefore tested, idea.--George Stigler (1982)  Nobel Lecture (Economics), Stockholm.

As regular readers know, the Nobel (Chicago-economist), George J. Stigler, had a lifelong interest in the philosophy, and sociology of science. I have remarked in the past that this interest was not entirely disinterested; it's clear that Stigler's work also aimed at influencing the discipline (for example, encouraging consensus-aiming practices that would allow one to ignore criticisms) and I have argued here that he was rather successful at doing so and so is worth paying attention to how philosophical ideas shape scientific practice.

Somewhat surprisingly and unusually Stigler chose to structure his prize lecture around his interest in the sociology/philosophy of economics. I call it unusual because he won the prize for his "seminal studies of industrial structures, functioning of markets and causes and effects of public regulation," and ordinarily the Nobel lecture is an elegant discussion of and introduction into the material that generated professional recognition often  accompanied with polite recognition of folk who did not get the prize, but paved the way to it. Stigler deviates from the precedent. It's not that he does not discuss these topics at all -- and one could argue that he is discussing the functioning of the markets in ideas -- , but they are all framed by his sociological interests in science. These interests are long-standing, and they were shaped not just by his teacher, Knight, but also his encounters with Merton (a colleague at Columbia) and Talcott Parsons (probably a colleague at Stanford), and his early readings of Kuhn. 

As an aside, Stigler was a world-class historian of economics, even long after that had become professionally non-fashionable. This lack of fashion was itself a consequence, in part, because he would (while echoing Kuhn) tell folk that a sign of scientific maturity was that disciplinary history became of little interest to the puzzle solving economists (thus providing justification for the elimination of history of economics from graduate curricula).

In fact, the previous paragraph is not really an aside. The Nobel lecture relies explicitly on [A] a distinction "between prescientific and scientific stages of a discipline." (This is quoted from the abstract.) It also relies (more implicitly) on a [B] distinction between those (the few) that supply "new ideas" -- akin to Kuhnian legislators --  and those ("most") that "demand" ideas to be applied to the determinate problems with which they are occupied (the Kuhnian worker-bees, or puzzle-solvers). (The quoted material is the second paragraph of the lecture.)

It turns out however that the few are, from Stigler's perspective, unusual characters, I quote the relevant paragraph before I comment:

Those economists who seek to engage in research on the new ideas of the science to refute or confirm or develop or displace them are in a sense both buyers and sellers of new ideas. They seek to develop new ideas and persuade the science to accept them, but they also are following clues and promises and explorations in the current or preceding ideas of the science. It is very costly to enter this market: it takes a good deal of time and thought to explore a new idea far enough to discover its promise or its lack of promise. The history of economics, and I assume of every science, is strewn with costly errors: of ideas, so to speak, that wouldn't run far or carry many passengers (530)

Kuhnian legislators have two roles: being [C] developers of new ideas and, unless they have disciples willing to do the work, [D] persuaders of others to accept them. [D] means there is a need for scientific entrepreneurs and the art of rhetoric in science. It turns out that [E] there are high barriers to entry to become a Kuhnian legislator both because (i) it requires a lot of effort and time to be on top of existing science and develop new ideas, as well as (ii) the risks involved of producing ideas that do not pan out. Some of the costs involved, are (iii) investments in prior social infrastructure of science ("the machinery of intellectual exchange-journals, learned societies, and conferences"(535)) that make a "large expenditure of time, intelligence, and research resources" possible (536). Notice that such ideas may well be true, but if there is no uptake (recall [D]) and so no "prestige, reputation, and income" (530) worth having, then this, too, will be treated as failure.*

Famously, Kuhn divides the immature and mature stage of science in terms of consensus or lack thereof. Stigler had used such a measure, too, in the past. But in the Nobel lecture he offers a different criterion: the pre-scientific stage "is characterized by absence of a set of interacting practitioners who are devoting a large part of their lives to the accumulation of knowledge, and hence it is characterized by the absence of cumulative progress." (530) There are really two claims here: [F] in the scientific stage a science is progressing. More important, [G] a science is characterized by the presence of practitioners who (i) recognize each other as fellow travelers/scientists, who (ii) are professionals (in the sense that science is their main occupation), and (iii) who form a communicative community. It's not always clear if he thinks whether [G] causes [F] or [G] is a symptom of [F.]

One interesting feature of the absence of progress and lack of a scientific community in the pre-scientific stage that Stigler notes is that descriptions of it often (a) "almost totally lack a time dimension." In pre-scientific stages it makes little difference in what order doctrines are discussed. An interesting feature of the presence of a scientific community is that (b) detected errors will be refuted, and "only the detected errors of unimportant economists are spared a prompt reputation." (531)

Another criterion he offers between the pre-scientific and scientific eras, is that in the pre-scientific era the problems of a would-be-science are shaped by the (often practical needs of the) environment. While Stigler does not deny that "new circumstances" (political and technological changes) can spur interest in some questions and even innovation, but at bottom his view is that "an empirical science such as economics is to provide general understanding of events in the real world, and ultimately all of its theories and techniques must be instrumental to that task. That is very different from saying, however, that it must be responsive to the contemporaneous conditions and problems of the society in which it is situated." That is, Stigler [H] denies what in earlier work he had called “environmental theory.” And, in fact, it is accompanied by a further claim  that [I] "A science requires for its very existence a set of fundamental and durable problems." (534) One may say that these problems are part of the identity conditions of the science and the ones that Kuhnian legislators help illuminate.+ But in the moment it's very difficult to distinguish between fruitful ideas and dead-ends. And this means [J] that all sciences will be subject to fashions that after the fact prove illusory in fruitfulness.

Because Stigler treats mature science as a fairly efficient communicative community, the [K] new ideas that will prove to be fruitful must in some sense be a natural and small enough, discrete extension from existing practices ("science also progresses through time without making large jumps" with an explicit nod to Darwin's Natura non facit saltus. ) This commitment follows quite naturally from the way demand in economics is conceived. For [L] any idea to have uptake it most (and Stigler credits his Chicago colleague,  Gary Becker) be deploy-able by applied practitioners (who have specific human capital) with little extra cost and more potential reward (and who are risk averse). It also follows that given the structure  of the market of economic ideas that there is a bias against novelty from the majority because their "capital would be reduced if [their] knowledge were made obsolete by the general acceptance of a new theory. Hence, established scholars should, in their own self-interest, attack new theories." (538) That is to say, [M] there is considerable status quo bias in any scientific discipline that also (and Stigler does not point this out) helps stabilize the boundaries and the identity conditions of the discipline.

In fact, [N] often novel ideas will be subject to controversy, although Stigler points to the uptake of his own work in the economics of information as an exception (there was little controversy). Stigler thinks this was due to the fact that "no established scientific theory was being challenged by this work." (539) So there are for Stigler [O] two kinds of new ideas: those that extend a theory or apply a known tool in a new area (relatively little controversy) and those that challenge existing practices. The latter can form the basis of a true challenge to the status quo [P], "it takes a theory to beat a theory." But Stigler admits that [Q] a true test is rare because it is rare that "a theory in economics has a well-defined domain of applicability." (542) Instead theories are tested indirectly for "fertility,"  by deploying them to "explore a variety of problems." Such [R] indirect tests take time and a theory can linger for a long time before it is ultimately discarded.

Stigler explicitly recognizes that there may be more other interesting factors. But we can treat [A]-[R] as the main factors of Stigler's public choice model of science. (He credits Downs, Buchanan, and Tullock, but seems to have been unaware of Tullock's The Organization of Inquiry, which (recall) anticipates many of his own views.

Because I have gone on too long for a blog post, I will not offer critical commentary today. I just note one final feature of Stigler's philosophy of science. For, Stigler, thus [Q] a science is characterized by fundamental Knightian uncertainty about its own development ("No one can describe the precise characteristics or content of a new piece of scientific work that will find ready and eager reception from the scientists of a period." (538))** This commitment to Knight's ideas is especially notable because he rejects the thought (which he explicitly associates with his teacher Knight) that the subjects studied by economists are mistake prone and do not grasp the effects of their policy choices (recall also my treatment of his Tanner lectures).

 

Rawls, Carnap, and Quine on Explication

In his (1971) Theory of Justice, Rawls explicitly follows Quine's Word and Object on the nature of explication; he treats explication as a form of elimination: "we start with a concept the expression for which is somehow troublesome; but it serves certain ends that cannot be given up. An explication achieves these ends in other ways that are relatively free of difficulty." (95 citing Word and Object, in the original edition pp. 257-262).

Quine (1960), who treats such explication as synonymous with 'analysis,' attributes this version to Wittgenstein, and explicitly contrasts it with Carnap. Quine understands explication as a means toward dissolving problems (hence the nod to Wittgenstein); for him explication is a form of elimination. Along the way, he (Quine) makes fun  of ordinary language philosophers for failing to see that the introduction of technical vocabulary is a means  of circumventing the problematic parts of ordinary language and show that apparent problems are merely verbal ones. 

By contrast, the Carnapian notion of explication was first articulated in his 1945 "The Two Concepts of Probability" (with a nod to Langford 1942), and then elaborated in Logical Foundations of Probability (1950). I very much like (recall) Hannes Leitgeb's summary: "For Carnap, an explication is the construction of a new concept C′ that replaces a given, often pre-theoretic concept C of philosophical interest, so that the extension of C′ coincides with that of C in the clear-cut and uncontroversial cases but C′ is permitted to, and indeed ought to, improve upon C in terms of exactness, fruitfulness, and simplicity in all the unclear or fuzzy cases." My only addition to this is that for Carnap the new concept C' is constructed in an artificial language. And for Carnap the utility of this new concept C' is (at Leitgeb notes) within science (and not ordinary life; I have discussed some of the tricky issues with this here).*

It turns out, however, that early Rawls used a notion of explication that was distinct from both the Carnapian and Quine-ian version.** In fact, early Rawls explicitly contrasted his notion of explication with analysis (see 3.4 below). I quote from Rawls'(1951) "Outline of a Decision Procedure for Ethics." 

3.2 The term "explication" is given meaning somewhat graphically as follows: Consider a group of competent judges making considered judgments in review of a set of cases which would be likely to arise in ordinary life. Then an explication of these judgments is defined to be a set of principles, such that, if any competent man were to apply them intelligently and consistently to the same cases under review, his judgments, made systematically nonintuitive by the explicit and conscious use of the principles, would be, nevertheless, identical, case by case, with the considered judgments of the group of competent judges. The range of an explication is specified by stating precisely those judgments which it is designed to explicate, and any given explication which successfully explicates its specified range is satisfactory.

3.3 The next objective, then, in the development of the present method is to discover and formulate an explication which is satisfactory, by and large, over the total range of the considered judgments of competent moral judges as they are made from day to day in ordinary life, and as they are found embodied in the many dictates of common-sense morality, in various aspects of legal procedure, and so on. If reasonable principles exist for deciding moral questions, there is a presumption that the principles of a satisfactory explication of the total range of the considered judgments of competent judges will at least approximate them. On the basis of this presumption the explication of these judgments is designed to be a heuristic device for discovering reasonable principles. Therefore, while explication is an empirical inquiry, it is felt that it is likely to be a way of finding reasonable and justifiable principles in view of the nature of the class of judgments which make up its range.

3.4 Since the concept of an explication may not be clear, I shall try to clarify it by stating some of the things that an explication is not. First, an explication is not an analysis of the meaning of the ethical terms used in the judgments constituting its range. An explication attempts to do nothing more than that explicitly stated above, and in no way concerns itself with the sense of ethical expressions or with their linguistic meaning. Second, an explication is not concerned with what people intend to assert when they use ethical expressions or make moral judgments in particular cases....Finally, there is only one way of showing an explication to be unsatisfactory, and that is to show that there exist considered judgments of competent judges on specifiable cases for which it either fails to yield any judgments at all or leads one to make judgments inconsistent with them. Conversely, the only way to show that an explication is satisfactory is to evidence that its explicit and conscious application can be, or could be, a cause of the judgments in its range.

3.5 Having noted some of the things that an explication is not, I consider some positive features thereof. First, an explication must be such that it can be applied intelligently by a competent judge; and since a competent judge is not required to have a special training in logic and mathematics, an explication either must be formulated or formulatable in ordinary language and its principles must be capable of an interpretation which the average competent man can grasp. Second, an explication must be stated in the form of principles, the reason for this demand lying in the use of explication as a heuristic device. The typical form of a considered judgment is as follows: since A, B, C,..., and M, N, 0,...., are the facts of the case and the interests in conflict, M is to be given preference over N., O . .. A considered judgment does not provide any reasons for the decision. It simply states the felt preference in view of the facts of the case and the interests competing therein. The principles of an explication must be general directives, expressible in ordinary language, such that, when applied to specific cases, they yield the preferences expressed in considered judgments. Finally, an explication, to be completely successful, must be comprehensive; that is, it must explicate, in view of the explication itself... all considered judgments; and it is expected to do this with the greatest possible simplicity and elegance. The requirement of simplicity means that, other things being equal, an explication is more or less satisfactory according to the number of principles which it uses; and although this demand is difficult to state precisely, it is clear that nothing is gained if we require a separate principle for each case or for each class of cases. Rawls, 1951, 184-186.

In context (3.1; see also 3.3), Rawls is clear that explication is a "heuristic device" to generating "reasonable and justifiable principles" from considered judgments of competent judges. (This is different from the 1971 procedure; see here for some inchoate reflections on it.) Crucially, explication itself is an "empirical enquiry" (3.3). Another striking contrast of the early Rawlsian form of explication with the Carnapian and Quine-ean notions of explication is that it must be "formulated or fumulatable in ordinary language;" it is not a species of language engineering at all. And, in fact, Rawls adds for good measure that its principles "must be capable of an interpretation which the average  competent man can grasp" (3.5)

Explication is, thus, the generation of reasonable principles which deliver judgments of cases alike to those of the intuitive judgments of competent judges making considered judgments. The point, to put it informally, is to create an objective realm grounded in principles that can deliver judgments and, thereby, eliminate a subjective element in ethics. 

This is not the place to explore the uses of such a heuristic and Rawls's decision procedure and how it was transformed in his later work in slightly different decision procedures. (It is interesting though -- see 3.6*** -- already in 1951 Rawls is inching his way toward (recall) a representative agent approach that instantiates at least an ideal of consensus.) It should be clear, however, that early Rawlsian explication is a different beast than the competing Carnapian and Quine-ian (and TJ Rawlsian) notions of explication. Even though, and this is the main point, the early Rawlsian version of explication shares with its rivals the aim of displacing and eliminating an element of ordinary experience that prevents as it were automated or algorithmic judgments

For, early Rawls' explication  is part of a piecemeal approach (and so shares some sensibility with  Carnap's): "We should expect satisfactory explications of but delimited areas of the considered judgments. Ethics must, like any other discipline, work its way piece by piece." (4.4) And, in fact, Rawls suggests his method of finding reasonable ethical principles "is" (as Delaney emphasized) analogous to the method used to establish the reasonableness of the criteria of inductive logic." The comparison is not accidental because for early Rawls "succesful explication" can be thought of as "representing the invariant in the considered judgments of competent judges."+

 

 

On Tariffs and Speaking to the Public

We economists have traditionally made innumerable criticisms of the inefficiency of various policies, criticisms which have often been to their own (and my own) utter satisfaction. The meager success of these criticisms in changing these policies, I am convinced, stems from the fact that more than narrow efficiency has been involved in almost every case- that inexplicit or incomprehensible goals were served by these policies and served tolerably efficiently. Tariffs were redistributing income to groups with substantial political power, not simply expressing the deficient public understanding of the theory of comparative costs. We live in a world that is full of mistaken policies, but they are not mistaken for their supporters.--GJ Stigler (1980) Economics or Ethics, The Tanner Lectures on Human Values, p. 155.

A few months ago, an open letter (organized by the national taxpayer union) with 1100 signatures by economists and 15 Nobel laureates (maybe more now) was released. Most of the letter consists of a block quote from (yet) another letter dating from 1930,when "1,028 economists urged Congress to reject the protectionist Smoot-Hawley Tariff Act." It is a tempting occasion to start lamenting the folly of the world and the eternal return of the lack of respect for the wise and virtuous or expert opinion. The temptation is strong to lecture readers on the truism that our own times are less distinctive than we, who are living it, may well imagine. 

Even so, I won't succumb to temptation today, because I was struck by two questions: (i) why repeat a speech act that failed miserably the first time? (ii) Had economics (or the consensus within it) not advanced such that no new arguments could be articulated at all?* The central claim of the new letter is "not to repeat" the "mistake" of the past.  Below I re-print the bits copied of the 1930 letter.

The idea that economists are doomed to live in "mistake-prone world" is deeply ingrained in the DNA of the profession; it is useful to my present purposes that it was already mocked relentlessly in Stigler's (1980) Tanner lectures. (Stigler, a Nobel laureate, was one of the leading Chicago economists of the previous century.) He makes two arguments: first, the claim presupposes that the economists and the politicians (and their supporters) share the same goals/values (that is, efficient use of resources, etc.); second, that politicians (and supporters) do not grasp the consequences of their actions.  Drawin on ideas developed in public choice (and his own work on regulatory capture), Stigler makes mince meat of the second claim. It is notable that he does not pause the reader to inform them he had defended the first claim (recall that  a consensus of ends among economists and society is presupposed in economics). 

The idea that we live in a mistake-prone is relentlessly promoted by those that see President Trump as a dangerous fool (or worse). I have no doubt that he is badly informed on lots of things, but he is also a very shrewd politician. Tariffs have foreseeable income effects, and the President is making a calculated bet that these will help those he wishes to help among his well-organized supporters and friends. (The previous sentence is compatible with the further thought, which I have relentlessly emphasized (recall here and here), that he thinks of the world in zero-sum terms.) 

Unsurprisingly, the letter by this generation's economists has had little more influence than their esteemed (but Nobel-free) predecessors. What is most remarkable about both these letters is that they refuse to name the fact that there are political winners from tariffs and, more important, to name who these may be. (That's most remarkable because the economists are the experts who can tell us this!) I mention this because that's the politically salient fact that gets ignored by both letters.** 

I am not suggesting that the economists would be more effective if they told us what we needed to know to understand our own political situation better. But they can hardly be less effective than they are now.

 

We are convinced that increased protective duties would be a mistake. They would operate, in general, to increase the prices which domestic consumers would have to pay. A higher level of protection would raise the cost of living and injure the great majority of our citizens.

Few people could hope to gain from such a change. Construction, transportation and public utility workers, professional people and those employed in banks, hotels, newspaper offices, in the wholesale and retail trades, and scores of other occupations would clearly lose, since they produce no products which could be protected by tariff barriers.

The vast majority of farmers, also, would lose through increased duties, and in a double fashion. First, as consumers they would have to pay still higher prices for the products, made of textiles, chemicals, iron, and steel, which they buy. Second, as producers, their ability to sell their products would be further restricted by barriers placed in the way of foreigners who wished to sell goods to us.

Our export trade, in general, would suffer. Countries cannot permanently buy from us unless they are permitted to sell to us, and the more we restrict the importation of goods from them by means of ever higher tariffs the more we reduce the possibility of our exporting to them. Such action would inevitably provoke other countries to pay us back in kind by levying retaliatory duties against our goods.

Finally, we would urge our Government to consider the bitterness which a policy of higher tariffs would inevitably inject into our international relations. A tariff war does not furnish good soil for the growth of world peace.

 

On David Graeber Against Adam Smith

[1] Adam Smith…was determined to overturn the conventional wisdom of his day. Above all, [2] he objected to the notion that money was a creation of government. [3] In this, Smith was the intellectual heir of the Liberal tradition of philosophers like John Locke, who had argued that government begins in the need to protect private property and operated best when it tried to limit itself to that function. Smith expanded on the argument, insisting that [4] property, money and markets not only existed before political institutions but [4*] were the very foundation of human society. [5] It followed that insofar as government should play any role in monetary affairs, it should limit itself to guaranteeing the soundness of the currency. [6] It was only by making such an argument that he could insist that economics is itself a field of human inquiry with its own principles and laws-that is, as distinct from, say ethics or politics. Smith's argument is worth laying out in detail because it is, as I say, [7] the great founding myth of the discipline of economics.—David Graeber Debt: The first 5000 Years, 24-25 [numbers added for ease of discussion--ES]

Regular readers know I am an admirer of Graeber's Debt (recall here, here, and here). The book offers a bold vision in which geographically and temporally distant evidence is brought to bear on central issues in political economy. In addition, it alerted me to the significance of the revival of interest among anthropologists in what we may call culturally embedded and shaped human universals, and a willingness to avoid the easy relativism characteristic of much ethnography (and history). Today's post is a bit more nit-picky than my previous ones on Graeber and focuses on a subsidiary issue in the work. It's not an irrelevant issue, however, because Graeber's criticism of Smith frame the work.+ Okay, with that out of the way, let me get started.

The core of Graeber’s argument turns on an extended fictional description, we may call it a thought experiment, of the origin of currency out of the inconveniences of barter. The description of a tribe of “hunters or shepherds” (WN 1.2.3) is introduced at the start of the Wealth of Nations, by Smith to explain the origin and benefits of the division of labor. Graeber has good fun showing that this “faraway fantasy” seems “to be an amalgam of North American Indians and Central Asian pastoral nomads;” (25) the example exhibits “a tendency to slip from imaginary savages to small-town shopkeepers.” (26) As Graeber correctly notes, according the thought experiment, “everyone will inevitably start stockpiling something they figure that everyone else is likely to want. This has a paradoxical effect, because at a certain point, rather than making that commodity less valuable (since everyone already has some) it becomes more valuable (because it becomes, effectively, currency).” (26) After quoting Smith extensively, Graeber helpfully summarizes the upshot of  Smith’s narrative, “Using irregular metal ingots is easier than barter, but wouldn't standardizing the units-say, stamping pieces of metal with uniform designations guaranteeing weight and fineness, in different denominations-make things easier still? Clearly it would, and so was coinage born.” (27) Before we accuse Graeber of being unfair to Smith, he explicitly recognizes that Smith quickly turns to how standardized coinage into an instance of abuses of state power, which with its control over  the mind can defraud other creditors easily. So, there is ample evidence for Graeber’s claims [1-7] in Smith’s text.*

Now, an alert reader may well be suspicious of the fact that I am calling Smith’s treatment of the origin of money a “thought experiment.” My point in doing so is, indeed, to discount Smith’s commitment to the “faraway fantasy” as articulating the (hypothetical) origin of money and property. There are three mutually supporting reasons for this that draw on significant commitments of Smith articulated later in Wealth of Nations.

First, the whole set up of the thought experiment contradicts Smith’s four-stage stadial theory of the development of civilizations. In it, there is a natural progression from (i) a savage stage  of hunter-gathering-fishing; (ii) shepherding by nomadic tribes; (iii) sedentary agriculture; to (iv) commercial society characterized by trading. (WN 5.1.a.3–8) These stages are akin to Weberian ideal types in which the whole order and practices of a society are characterized by its predominant economic organization. To be sure, the four stages do not necessarily follow each other and they can succeed each other out of sequence. Smith also allows that in the territory of a large state the stages coincide. As Graeber notes, it is a very peculiar that Smith seems to mix many different kinds of societies in his example.  And a critic of Smith may see in the contradiction outlined in this paragraph as a problem for Smith; my talk of 'a thought experiment' may seem overly charitable using later passages of Wealth of Nations to interpret earlier ones. But it is worth nothing that Smith had already called attention to his embrace of something like a stadial theory in the Introduction of his work (where he draws a prominent contrast between the misery of "savage nations" of fishers and hunters and the "abundance" of commercial society) and (less prominently) in chapter 1 ("progress of society.")

Now Smith does claim that some medium of exchange is adopted by "every prudent man in every period of society, after the first establishment of the division of labor." (WN. 1.4.2) Of course, not  everybody is prudent, but even so Smith is here committed to the claim that some medium(s) of exchange is likely to exist in every society. This matters because Smith can be read as claiming that government originates in the (second) shepherding stage where the rich cattle/herd owners institute government in order to defend themselves against the poor as a kind of a protection racket. (WN 5.1.a.15) ISo, that Smith would agree with Locke that there is property and money prior to the formation of government. While Smith is not a contractarian, in this sense he is a Lockean (as I have also argued). And Graeber is surely right in thinking that for much of human history government is really an instrument of the rich and powerful to subjugate the poor and powerless.

Second, however, when Smith address the question of the origin of government and property, Smith does not claim that money and property must proceed government. Rather he claims that "Among nations of hunters," [the first stage], "as there is scarce any property, or at least none that exceeds the value of two or three days’ labour, so there is seldom any established magistrate or any regular administration of justice." (WN 5.1.b.2) So, while Smith thinks it is likely that property will precede the existence of government, he does not think property must precede government. Rather, he thinks that most of the time people in the hunting stage are so poor and relatively equal, there is little reason to expect the rise of a regular government in it. (That is, he allows the existence of some authority and hierarchy, but not full blooded government.) He makes the exact same point at the end of the very long paragraph (which articulates his narrative of the origins of government): "The acquisition of valuable and extensive property [in a shepherding stage], therefore, necessarily requires the establishment of civil government. Where there is no property, or at least none that exceeds the value of two or three days labour, civil government is not so necessary."

So, Smith's position is that in the conditions akin to the Lockean state of nature, government is possible. But this means that for Smith it is explicitly and entirely possible that government can precede the existence of property and the development of a medium of exchange. Rather than seeing a contradiction in two strands of Wealth of Nations, it makes a lot more sense to see that by Smith's lights, the thought experiment does not entail anything about the origin of the institution of adopting a medium of exchange and (later) an official government approved currency. Rather the thought experiment is meant to illustrate  why such institutions (medium of exchange/currency, etc.) would be (to speak informally) more welfare enhancing (Graeber uses 'efficient' in his summary of Smith--that's fine, too, if one recognizes it is an informal notion). This is why it shows up in all societies. Of course, Graeber may legitimately claim that Smith's stadial theory is out of date. But that does not touch upon their present debate.

I promised three reasons. For the third, we need to move back to the very first chapter of Wealth of Nations, which precedes the thought example that Graeber criticizes and may, thus, be naively presupposed in its  interpretation. I have in mind this famous passage:

Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow citizens. (WN 1.2.2)

Now, the main point here is that trade presupposes mutual interest. And nothing I'll say will undercut that. In addition, as Sam Fleischacker has emphasized, Smith is emphasizing here the significance  of mutual persuasion in any trade. It is worth asking what happens to Smith's framework when markets become anonymous, but that's for another time.** However, for present purposes the key point is the final claim--that exchange and begging take place among citizens and so within a political framework. The significance of Smith's point may be missed if one forgets that in the eighteenth century there was an extremely limited (male) franchise based on wealth. So, while Smith does not reduce market and begging relations to their political context, he does not ignore these either.

Let me sum up because I have gone on long enough. Where does this leave Graeber's seven theses? Leaving aside [1], which is irrelevant for present purposes, we have undermined [1],[4] and [6]. I think Graeber is right about [2]; it's clear Smith thinks that money need not be the creation of government. But I don't think Graeber can show that Smith thinks money is never the creation of government.

With regard to [3], I have shown that Graeber is right that government generally (! begins in the need to protect private property (and in this sense is a Lockean). But it does not follow that Smith thinks government should limit itself to this task. As the one-time Chicago economists, Jacob Viner and George Stigler already showed, Smith's task for government are rather expansive, including  (inter alia) the maintenance of a standing arm and the martial spirit of nation (WN 5.1.f.60) the seting up of roads, tolls, canals (WN 5.1.d.5) primarily to be paid for by progressive taxes on wealthy; the maintenance of public health (WN 5.1.f.60); provide for public education for the poor (WN 5.1.f.55); and even imposition of prudential building codes to prevent spread of fire (WN 2.2.94, while defending his financial regulation).

With regard to [5], it is possible that Graeber is right that for Smith "government should play any role in monetary affairs, it should limit itself to guaranteeing the soundness of the currency." I don't think this is right. If anything, much of Book 2 of Wealth of Nations is a critical treatment of the financial sector--Smith thought it should be regulated carefully including the details of money creation by banks (but about that see my book). It is also possible, of course, that Graeber is right about [7]; that regardless of Smith's own views, Smith is the source of a myth that became constitutive of the way economics ended up understanding itself and its object of study and the nature of its knowledge. I leave  that question for another day.++

 

The end of Liberalism; or the coming age of unreasonable views

David Held and Pietro Maffettone collect essays exploring the global dimensions -- and arguing for the necessarily global character -- of contemporary political theorizing...In addition to the familiar topics of human rights and global distributive justice, it includes contributions on the legitimacy of international law and transnational political institutions; on just war theory; and on a cluster of issues including territoriality, the global economy, and humans' relations to the natural environment and to future generations.

This integrated approach is welcome, and the book as a whole is a valuable resource for readers seeking to acquaint themselves with the state of the art in global political theory. The editors' introduction makes two agenda-setting points. First, they claim, political theory has reached a "cosmopolitan plateau," where acceptance of the equal moral status of all individuals (regardless of birthplace or location) defines the boundaries of reasonable disagreement in normative theorizing. Of course, different authors draw significantly different conclusions from the assumption of equal moral status; many theorists accept it without understanding themselves to be thereby committed to radically revisionist conclusions about global distributive justice or about the entitlements of states to control their own borders.--Emma Saunders-Hastings @NDPR Reviewing David Held and Pietro Maffettone (eds.), Global Political Theory, Polity, 2016.

When I started reading the review of Global Political Theory, I naively assumed that it would be an eclectic -- in the traditional sense of choosing the best from different stuff -- book trying to canvass what different intellectual traditions, necessarily partially interpreted and constituted, from different parts of the globe can contribute to political theory today. As the reviewer and the introduction of the volume make clear that's not what the volume is about. Global political theory (hereafter GPT) develops the implications of a certain class of moral egalitarianisms to ethical issues that have a global reach. It does so, as the editors of the volume under review note in their introduction (pp. 8-9), by quoting and accepting Thomas Pogge's (1992) framework of cosmopolitanism, which entails that (i) individuals are the units of ultimate moral concern (individualism); (ii) it applies to all humans (universality); (iii) such moral concern (ought) to have moral force for everyone (generality).

As an illuminating aside (in order to bring out the intellectual parochialism of GPT), something weird happens in the quote from Pogge's widely reprinted and influential 1992 essay, which self-consciously was written to fill the moral gap made available by "a new world order." The essay's general ambition is to make "moral progress" possible and it hopes that with the "gradual institutional reform" it proposes, "borders could be redrawn to accord more easily with the aspirations of" -- peculiarly enough not individuals, but -- "peoples and communities." (48) In Pogge's essay the second feature, universality, is contrasted with moral concern for a "subset" of humans, for example, "men, aristocrats, Aryans, whites, or Muslims." This happens to be one of two mentions of Muslims in the book (or, as it happens, Pogge's essay). (In the volume, the other is a reference to Muslim Brotherhood.) While it is no doubt true that Muslims have done immoral things to non-Muslims (as well as, countless Muslims) in the name of Islam, Islam is a religion that is especially hospitable to a variety of cosmopolitanism;* and it is no surprise that in it, self-consciously cosmopolitan perspectives have been embraced. One could argue, as William Gallois does, that this legacy is the source of continued revival of cosmopolitanism in later European thought and (perhaps more speculatively) one reason why asylum seekers are welcomed with comparative generosity in some Muslim majority states.

In his 1992 paper, Pogge contrasts his concrete inspiration with the ways "politicians are speaking of a new world order." In historical context this is a nod to President Bush's first Gulf war to restore the border between Iraq and Kuwait and restore a (protected) sovereignty to Kuwait sanctioned by international law and global institutions. In that context, a new world order referred to American supremacy within the constraints of, and channeled  by, international law and institutions. The complex entanglement of contemporary ethics with American hegemony (in the way Mill's or Green's thought was intertwined with imperial power) demands to be better understood and, I would argue, questioned (recall Khan on Singer). Be that as it may, Pogge's willingness to revisit borders is prescient, although as we've learned since, the actual process of redrawing of borders tends to be (a few notable exceptions granted) violent. 

That there are many who wish to turn political theory (and international law) into a branch of a certain flavor of ethics is familiar enough. As it happens, this past year I have conducted three job searches in political theory (including comparative), and so have  seen about (by a conservative estimate) 300 job dossiers of candidates with PhDs fairly recently minted in North America and Western Europe. The vast majority of these projects buy into some version of such moral egalitarianism and a good many apply it in the manner of GPT.

What I had not truly grasped before is that within GPT deviation from such cosmopolitan egalitarianism marks one as unreasonable (in the way predicted by Carl Schmitt). Again, I had naively assumed that being reasonable would consist in something like the disposition of treating disagreement even conflict with others by way of discussion in which reasons are (sincerely) offered, analyzed, and jointly evaluated. But in GPT to be reasonable means that one cannot enter the conversation unless one accepts certain moral commitments (in professional terms, a certain "consensus"). In their introduction, Held and Maffetono do not explain where such views about the boundary of legitimacy originate and who polices the boundary of who is let into the conversation (presumably that dirty job is farmed out to anonymous referees who -- like the marines -- do their work outside the scope of publicity).

One thing one learns from Thomas Kuhn (or George Stigler) is that where we find a professional consensus absent science, there are other forces that produce uniformity. In fact, Kuhn teaches that if one wants the appearance of intellectual progress one does well to create such uniformity of background commitments. The previous paragraph suggests, then, that the avalanche of work on GPT is the collective considered wisdom of our young scholars that the primary road to professional advancement and (for the more idealistic among them) improvement of humanity requires one to work within some version of GPT. 

We know from history that intellectual mono-culture are great at problem-solving (and this can generate great creativity), but otherwise not very robust. They are incapable of adapting to changing circumstances and unable to confront, truly, the most urgent questions in which one must come to terms with arguments of the deviants from orthodoxy. (For this would require it to be self-critical about its own commitments.)+ So, a moment of reckoning is due. If history were ironic, then the professional triumph of GPT is also the moment it becomes obsolete.** After all, the political and democratic resurgence of views that reject versions of GPT's normative cosmopolitanism is the striking feature of our time. So, it is tempting to preach the end of liberal cosmopolitanism and become a prophet for a new order.

But history is probably not ironic. So, while some of us, outside the professional boundaries, search for alternative political theories, GPT may well continue to thrive even if the political conditions that gave rise to it, and that allow it to shape the political order, have long passed. After all, some of the greatest philosophical scholastics lived in the twentieth century and have enriched our intellectual universe.

 

 

On the Politics of Academic freedom. Or Honour among Chicago Economists (Stigler's Appendix to the Kalven report)

Jacob Levy's recent post got me (recall) to take a fresh look at the (November 1967) Kalven report (named after the jurist). I was startled to learn that both John Hope Franklin and George Stigler (the Chicago economist, who figures in a lot of my blog posts and scholarship) were also on this committee. The report treats the university as a special kind of community. It is special not just because it is a "community of scholars" for the "limited [albeit noble] purpose" of "teaching and research." Rather, it is special for two reasons: (i) it exists for the "long term." That is to say it exists, in part, in order to reproduce students and scholars (recall my post). The significance of (i) is, in part, revealed by (ii) because it "cannot take collective action on the issues of the day without endangering the conditions of its existence and effectiveness."

The reason for (ii) is because each member of the community -- the report only recognizes faculty and students -- cannot be compelled at all (neither by a procedure, argument (!), nor force) to conform to other people's views. (It is no surprise that the report does not argue its case; it merely reaffirms "a few old truths and a cherished condition"--that is, it deliberately presents itself as conservative.)* That is to say, the Kalven report embraces the idea that there is no decision mechanism at all that will not inhibit "the full freedom of dissent on which it will thrive." (So no proceduralism.)

I ignore here the objections to this idea of freedom such that even a lone, irrational dissent has to be respected. The report's notion of freedom is one that respects minimal unity, but no more--the individuals that make up the unity remain, as it were, fully sovereign in the unity. The report does not defend this notion of freedom nor does it fully explain it. But it seems to presuppose the anthropological view that in optimal conditions of freedom human disagreement is inevitable (and a good thing). This go well beyond the standard Weberianism of the day, which thought that agreement over the facts was possible. In fact, the report is adamant that the university is to be constituted by the widest possible epistemic and moral diversity. This is the central "faith" of the Kalven Report about the nature of "intellectual inquiry." The university should promote this diversity as much as possible ("widest diversity of views").

As an aside, it is notable that Stigler signed up to this because when it came to the role of consensus and dissent within disciplines, he was an eager student of Merton and an early Kuhnian and thought that expert, paradigm-driven communities could safely ignore dissenters and could aim and establish consensus.

The epistemic and moral diversity has three intended consequences: first, it entails that the university produces "discontent with existing social arrangements and proposes new ones;" second, it fosters "the development of social and political values in society;" third, it generates "power" for the university--this power ("prestige and influence" ) follows from the university's "integrity and intellectual competence." The report does not explore to what degree a society will permit these three consequences, but as I note below it does address the circumstances when society challenges its independence and existence. It is quite notable that the Kalven report does not claim that there is an indirect utility in technological applications. (There is no engineering school at Chicago.) This goes back to Hutchins's oft-quoted (1929) statement:

My view of university training is to unsettle the minds of young men,+ to  widen their horizons, to inflame their intellects. It is not a  hardening, or settling process. Education is not to teach men facts,  theories, or laws; it is not to reform them, or amuse them, or to make  them expert technicians in any field; it is to teach them to think, to  think straight if possible; but to think always for themselves.

Despite the fact that the report celebrates cognitive diversity, it proudly notes a "deep consensus," [and here I'll resist making fun of that 'deep'] among itself. Even so, George Stigler appended a "special comment:"

I agree with the report as drafted, except for the statements in the fifth paragraph from the end as to the the role of the university when it is acting in its corporate capacity. As to this matter, I would prefer the statement in the following form:

The university when it acts in its corporate capacity as employer and property owner should, of course, conduct its affairs with honor. The university should not use these corporate activities to foster any moral or political values because use of its facilities will impair its integrity as the home of intellectual freedom.

For those unfamiliar with the complex evolution of thought of Chicago economics, it is somewhat surprising to see one of the two leaders of the school (the other being Stigler's close friend, Milton Friedman), of all people, to appeal to honour. It's less surprising when one realizes that in 1967 Stigler was not yet the economist, who penned (with Gary Becker) "De gustibus non est disputandum." Rather he is the (by then accomplished) student of Frank Knight, who taught that considerations of honor were ineliminable from modern society, even a socialist one.**

Stigler's main point is that the university as a corporate body should maintain a kind of strict neutrality about moral and political values. This Weberianism came naturally to him. (Knight was an early translator of Weber, and Stigler was a keen reader of (early) Talcott Parsons in his scholarly youth.) In fact, on this point Stigler does not depart from the majority of the Kalven report. The report treats the university's neutrality as a (partial?) condition of possibility of its members to engage in political action and social protests" as individuals."

So, what's Stigler opposing?

In that fifth paragraph from below, the Kalven report first explains how the university must act in cases of 'crisis' when its survival is threatened by outsiders. The consensus (including Stigler's) is that then the university must act (it is an 'obligation') to "defend its interests" as a corporate body. Obviously, this opens the door to abuse (not everybody will agree that the state of emergency or the state of necessity is upon us); and so we can safely assume that the Kalven report also quietly presupposes views about judicious leadership.

Rather, Stigler disagrees with the 'deep consensus' only when the majority of the Kalven report go on to argue that in cases when the university comes into conflict with existing social values when it acts as a corporate entity (involving property, income, its awarding of honors, and its membership in other bodies) over and beyond the intellectual activity of its members, that then the situation requires "careful assessment of the consequences." That is to say, the majority of the Kalven report is allowing that the university may adjust its corporate course when it comes into conflict with the rest of society over its corporate activities. It may even adjust its principles and avoid granting honors to socially controversial agents. (The implied contrast is that the university is not supposed to compromise on the intellectual freedom of the students and faculty to research, teach, invite speakers, etc.) 

Stigler, by contrast, is not allowing the possibility of a conflict between the university as a corporate body and social values because he thinks it is possible and desirable for the university as a corporate body to maintain a strict neutrality. Leaving aside if such strict neutrality is genuinely possible (and desirable), it is worth noting that it's this notion of corporate neutrality, (with extreme partiality of its members), that allows him to think that a university as a corporate body can avoidthe possibility of tragic choices. That's to say, Stigler thinks one can avoid politics (or judgment) by a certain institutional posture--here Stigler flirts with a technocratic conception of the corporate body. Even so he is aware -- he helped pioneer the arguments in modern economics -- that officers of the corporate body and its members may well have incentives to pursue otherwise (than neutrality). In his dissent, Stigler, thus, presuppose public spirited university administrators who know how to maintain the stance of neutrality, while the majority of the Kalven committee recognizes that if one wishes to ensure the survival of the academy, politics cannot be eliminated.

 

On De-Romanticizing The University of Chicago

Protecting that community of inquiry means keeping any number of intrusions at bay. And the university is constituted as a system of safe spaces: around here we discuss as economists in order to make progress on our research agenda without constantly having to re-argue our premisses against philosophers pointing out how inadequate they are. In that classroom professors teach and students learn biology, in a discussion that is insulated from anti-scientific anti-vaccine ranting and creationist ranting alike. The students in the Black Students’ Association get together to explore questions of culture and identity, discuss shared experiences of life in a majority-white society or university, or just relax, insulated from the “but affirmative action should be abolished and people should be judged on their merits!” hectoring from each conservative white student who thinks they’re the first to communicate this radical idea. Each of those insulated environments is a part of the larger university whole; each of those debates can happen in other university settings. But in order to make intellectual progress, we create a system of nested and overlapping safe spaces within which we can say to the boring and disruptive critic endlessly repeating first-order objections: “Go away. Hush up. We have work to do.”...My own arguments about this grow out of ideas developed n Rationalism, Pluralism, and Freedom, chapter 11. And see the University of Chicago statement on freedom of expression and the Kalven Report, which are much better statements of governing academic principle than is last week’s letter from Chicago, more concerned with the university itself and less concerned with extramural culture war signalling.--Jacob Levy @BHL.

I have written on the controversy over safe spaces and trigger warnings before, see here and here. [See also Phoebe Maltz.]

It is very hard to convey to folk who have not been there the ways in which The University of Chicago is a distinctive place of higher learning. (Disclosure: I was awarded my PhD there in 2002.) This is due to its location on the South Side of Chicago, its monastic buildings, Chicago's weather, the university's record in research excellence, its orientation toward graduate education -- despite housing a fantastic college with a famous 'core' --, its bureaucratic-administrative maze, and its corporate sense of self.   It's not for all, and it takes a certain personality to survive and thrive there.  There are other places with great research excellence and a distinctive sense of self, but few that combine it.

To get a sense of what this corporate sense of self is about, look at the (January 2015) faculty "Report of the Committee on Freedom of Expression" [HT Michael Kremer]. This report invokes and quotes several of the most prominent former presidents of The University of Chicago: Harper, Hutchins, Levi, Gray. It then adds, "The words of Harper, Hutchins, Levi, and Gray capture both the spirit and the promise of the University of Chicago." [The report is also notable because it is clear about the abuses of invocations of civility: "concerns about civility and mutual respect can never be used as a justification for closing off discussion of ideas," (emphasis added).*] The real oddity to an outsider is that these names are familiar to me, and that if given the chance, I can also hold forth on ways in which they shaped the university, local housing policy, and discussions about the life of the mind Stateside. (To be sure, each one of them is controversial in interesting ways.)

I mention this because when I read Dean Ellison's letter to the incoming students of the class of 2020, my first reaction was, "This guy must be new to The University of Chicago"** and my second thought was, "OMG The Corporates have taken over The UofC." [On this second point, see this piece by Malloy Owen in the American Conservative!] That is, the Dean's letter does not invoke the corporate spirit that is characteristic of The University of Chicago (in fact it violates it) and it fails to convey the complexity of the issues involved. It is, as Jacob Levy suggests, more charitably read as a form of signalling in the culture wars.

Here are two examples: (i) Dean Ellison invokes civility as a virtue without qualification, despite the known problems with it as a means to control speech; (ii) his letter pretends as if the education of a young mind is not a matter of careful cultivation; (again to quote the faculty report) "the fostering the ability of members of the University community to engage in such debate and deliberation in an effective and responsible manner is an essential part of the University’s educational mission," (emphasis added). The fostering of such an ability requires lots of careful pedagogical and disciplinary choices by instructors, curricula committees, and students alike. These choices will entail, due to constraints on, not to mention opportunity costs of, time and attention that not all objections, that not all viewpoints, and not all possible conversations will occur. (Jacob puts it nicely above, they are partially "insulated environments.")

Rather, Dean Ellison writes as if students arrive on campus fully formed and once there, engage in an "intellectual journey" where they will be asked to respect and participate in "freedom of expression" (which is taken to be a "defining characteristic" of the university). On their journey the students are expected, and I quote, to "explore."

Now, by all means encourage intellectual exploration in one's curriculum or one's pedagogical choices (in residence halls, in the class-room, in reading lists, etc.), but what we're seeing here is how a college student is being conceived as a (perhaps sophisticated) tourist. Even if they are not meant to be signalling in the culture wars, Dean Ellison's words are marketing-speak. They are unworthy of the great history of the University of Chicago. The University's 1967 Kalven report, (which is mentioned in Dean Ellison's letter as is the faculty report I quoted above), explains how as part of its research and educational mission a university "creates discontent with the existing social arrangements and proposes new ones." (I hope to return to the Kalven report soon.]

Dean Ellison's letter explains how members of the incoming class should expect some "discomfort" on their journey. Perhaps the worst form of discomfort is to recognize that you are in on the dirty secret that you are part of an institution that will merely replicate the existing social arrangements.

 

 

Neo-Liberalism and Regulatory Capture (from irony to tragedy)

Let's distinguish between crony capitalism and regulatory capture. An exemplary case of the former is the way in which campaign donations can be linked to financial support during the 2008 bail-out, the so-called 2008 Troubled Asset Relief Program, (as I learned from Diane Weinert Thomas): "firms that lobbied or had other types of political connections were not only more likely to receive TARP funds, they also received a greater amount of support earlier than firms that were not politically involved through lobbying or direct political connections. For every dollar spent on lobbying during the five years prior to the TARP bailout, firms received between $485.77 and $585.65 in TARP support." This is an unremarkable (albeit harmful), legal form of corruption.* Such trading of political favors is also an endemic, even inherent feature of democracy, as the ninth century political philosopher Al-Farabi noted in his Political Regime (section 114) [recall; and here].

But in the aftermath of the financial crisis, it's so-called regulatory capture that captured the imagination not just of academics, but also of insiders within the financial industry. I first saw it linked to the financial crisis by the Dutch banker-economist, Willem Buiter, who coined the term cognitive regulatory capture to describe the intellectual bubble that forms among central bankers, financial industry, and certain economists (recall this post on the roots of the idea in Chicago economics). A shared intellectual framework had corrupted regulators so that they did not pursue options that could have served the public interest rather than the partial interests of the financial sector (and privileged agents within it).

But, in the (ongoing) aftermath of the financial crisis, it also became a trope to see the flawed oversight that preceded it and the monetary and fiscal policies that followed it as evidence of regulatory capture in the technical sense: it "occurs because groups or individuals with a high-stakes interest in the outcome of policy or regulatory decisions can be expected to focus their resources and energies in attempting to gain the policy outcomes they prefer, while members of the public, each with only a tiny individual stake in the outcome, will ignore it altogether." As the regulated issues become complex and technical the opportunities for regulatory capture only increases. This has become a core intellectual commitment in the literature on so-called international political economy (IPE). (Full disclosure: my department has two leading figures in that field, Geoffrey Underhill and Daniel Mügge.)

I return to regulatory capture (of the cognitive and the straightforward lobbying side) in future posts. But here I want to note a historical irony. These days regulatory capture is entrenched within the critique of neoLiberalism. But the idea of regulatory capture was developed by the Chicago economist (and Nobel laureate), George Stigler (see this classic 1962 paper and also his Presidential Address to the AEA) [recall this post, too], and is also strongly associated with the so-called public choice literature associated with the Virginia school of (other Chicago trained economists) Buchanan and Tullock and law economics (see this classic article by Coase). That is to say, the intellectual framework of regulatory capture was developed to help understand and criticize the effects of the New Deal and became influential in the aftermath of understanding the successes and limitations of the Great Society by market-friendly economists.**

The issue is not just ironic. If the proper functioning of markets (let's stipulate that's desirable) requires the right sort of legal and regulatory framework (whatever that may be) then the theory of regulatory capture tells us that it will be nearly impossible for the political and regulatory process to achieve that desired outcome. To put the point more tragically: it's often thought that economists presuppose a tacit theodicy (and it is true that much bread and butter economics can be traced back to the mathematics and tacit metaphysics of Leibniz, Euler, and the Bernoullis); but the theory of regulatory capture teaches otherwise: we should expect not to live in the best possible world.

Mathematical Economics > Sociology

Those concerned with general problems of philosophy of science and its methodology may find modern economics of considerable interest....Economics is by its nature a softer and less exact science than, say, conventional physics. Now in a hard, exact science a practitioner does not really have to know much about methodology. Indeed, even if he is definitely a misguided methodologist, the subject itself has a self-cleaning property which renders harmless his aberrations. By contrast, a scholar in economics who is fundamentally confused concerning the relationship of definition, tautology, logical implication, empirical hypothesis, and factual refutation may spend a lifetime shadow-boxing with reality. In a sense, therefore, in order to earn his daily bread as a fruitful contributor to knowledge, the practitioner of an intermediately hard science like economics must come to terms with methodological problems. I stress the importance of intermediate hardness because when one descends lower still, say to certain areas of sociology that are almost completely without substantive content, it may not matter much one way or the other what truths or errors about scientific method are involved—for the reason that nothing matters.”--Paul Samuelson (1964) (new) Foreword to Foundations of Economic Analysis, ix

We philosophers are known to look down (mistakenly) on English literature professors (you can count on Alex Rosenberg to express what others think), so I am going to be restrained in what follows. Recent sociological work has explored the sense of superiority of economists.* Even so, I was unaware that Samuelson had expressed his contempt for (bits of) sociology in the paradigm-setting text of mathematical economics. (Serves me right for only looking at the first, 1947 edition.)

Later in Foundations, Samuelson mentions (without comment) that "many economists, well within the academic fold, would separate economics from sociology upon the basis of rational [homo economicus] or irrational behavior, where terms are defined in the penumbra of utility theory," (91; introducing Chapter V 'the pure theory of consumer's behavior.') While the study of irrational behavior may be significant, it does not have high status (then and now).

One might think that the Samuelson's put-down of (bits of) sociology is evidence of a kind of professional rivalry on what discipline gets to be the pre-eminent policy science. Now, it's true that folk like Parsons were promoting sociology and systems theory as the most general social (and even management) science, but by the mid sixties the context had already been decided. Economics was the paradigmatic social science. (In fact, Samuelson's forward is very triumphant: "serious economics has become mathematical and technical" (xii), which produced a "renaissance in economic theory" (xii) while coming close to comparing himself to Newton (xi). Don't trust me; here is Thomas Kuhn's judgment in Structure (1960):

“To a very great extent the ‘term’ science is reserved for fields that do progress in obvious ways. Nowhere does this show more clearly than in the recurrent debates about where one or another of the contemporary social sciences is really science….they will cease to be source of concern not when a definition is found, when the groups that now doubt their own status achieve consensus about their past and present accomplishments. It may, for example, be significant that economists argue less about whether their field is a science than do practitioners of some other fields of social science. (160-1)

So why is Samuelson dissing sociology? And, moreover, why do so in context of stressing that even the practitioner of economics (and not just the philosopher of science) should be concerned with methodology of economics?

As it happens in 1952 Samuelson addressed himself explicitly to methodology and philosophy of science (those were the days!) in the pages of the American Economic Review, happily reporting that "mathematical economics is flying high" (56).** Along the way he remarks, "I find Max Weber or Talcott Parsons difficult to understand in any  tongue." (62) There is little evidence, I think, that Samuelson was much interested in either Weber or Parsons (although I would be surprised if he never bumped into Parsons while writing his dissertation at Harvard).  Neither Weber nor Parsons is mentioned in the Foundations.

Even so, Samuelson's (1952) remark is a helpful clue. In the period, the Chicago economist, Frank Knight, was the great advocate of Weber, while his student, George Stigler, was the great advocate of Parsons (himself an important Weber scholar). In fact, Stigler had a tendency to introduce Parsons in the context of his own methodological musings (in his textbook and in his high profile, 1948 LSE lectures) that, in turn, set the stage of Friedman's still famous methodological reflections (I have traced some of the details here; this is part of a larger story about debates over economic imperialism and general sociology of knowledgein the 1930s). One such instance was his blistering attack on Samuelson and the so-called new welfare economics in the American Economic Review; Samuelson responded in kind (recall here and here for details on the debate between the two future Nobel laureates).

And, in fact, Samuelson's only mention of Stigler in Foundations is near the very end of his long treatment (and history) of welfare economics (chapter viii), where he reminds his reader of the debate: "Whether Kaldor and Hicks are open to the criticism along the lines which Stigler has recently advanced, the reader must decide." (252) As is well known, Samuelson's readers, the next generation of the economics profession, decided to agree with him (but see here and here).

So, the moral of my story is that sociology got dissed in the front pages of the most influential work of professional economics of the twentieth century because important rival economists that had to be discredited*** were appealing to sociological insights in criticizing central achievements of the new mathematical economics. These Samuelson understands as "internal problems of economic research" (viii), that is, immune from external criticism. If I am right about this, then there is a further historical irony lurking here. As I have recounted Stigler appealed, while drawing on Parsons and Merton, to that very internal/external distinction to let Thomas Kuhn know in a series of letters that economists (like Samuelson and himself) had anticipated most of Kuhn's philosophy of science because they had been engaged with the sociology of knowledge and methodology for much of the previous generation(s).