Digressions&Impressions

On Graeber, Bubble Politics, and the bursting of the "Blair-Clinton bubble"

[A]lmost no one is asking about the concept of “unelectability” itself. How did we get to the point where the candidate of a major party was judged not by his political vision, programme or sensibilities, but by an estimation of how different classes of imagined voters were likely to respond to him?

How is it that this has become our basic standard for judging politicians? And by “we” I am referring not just to political junkies, professional or otherwise, but to the electorate as a whole....

Back in 1936, John Maynard Keynes suggested that financial markets were organised a little like a beauty contest – except, he emphasised, a beauty contest with one important twist. Imagine newspaper readers were shown a hundred portraits, then asked to judge not which face was the prettiest, but which face everyone else would think was the prettiest.

In that case, everyone would not only be trying to imagine everyone else's preference, they'd really be trying to guess what everyone else guessed everyone else's preference would be. And so on, ad infinitum. This, Keynes argued, is basically how the financial sector works. Second-guessing of this sort can lead to crazy bubbles when people bid up, say, tulip bulbs in 17^th century Amsterdam, or housing in London today, just because they think others want them.

In between Keynes and the latest general election, the financial sector itself has come to dominate the world economy – and British and American economies in particular.

This rise has been accompanied by a profound cultural shift. Starting in the Eighties, when news feeds began to provide stock quotes moving along the bottom of the screen, everyone in rich countries has, in a thousand subtle ways, been encouraged to look at the world through the eyes of an investor.

The same period saw the rise of punditocracy. Even in Keynes's day, newspapermen were notorious for their cynicism (think of the movie The Front Page). But in recent decades, that particular strain of cynicism – the assumption that politics is really just a game of personalities, showmanship and manipulation, and in no sense a battle over values or ideals – has migrated from the Fleet Street pubs to newspaper comment pages, and from there to news stories, and from there to anywhere anyone argued about politics. 

...

For the rich and powerful, popular cynicism is extraordinarily convenient. It's no longer necessary to convince people that the political or economic system is fair. All you have to do is convince them everyone else thinks it is.

......

 

All this recalls the South Sea Bubble of 1711, where “every fool aspired to be a knave”, buying up worthless financial instruments for extravagant prices hoping to pass them off to the next sucker at a profit before the inevitable collapse.

When bubbles burst, the results tend to be dramatic. Corbyn's sudden rise can be seen as another's sudden fall. What we have just witnessed can, I think, be legitimately referred to as the popping of the Blair-Clinton bubble. That is, the ending of the assumption that a tepid, compromised, market-friendly, bureaucratic centrism that nobody actually liked was the only form left-of-centre politics could take, because everyone was convinced that everyone else thought so.

The moment a credible player appeared on the scene who rejected the underlying assumption, everyone realised no one really much liked it to begin with – which is, is of course, why the entire political-journalistic class united for two years to try to convince us that the player in question was not credible.

The only remaining question is: has the bubble fully collapsed? How far will it go? Will this spell the end of the financialisation of politics? If so, what does it tell us about the ultimate fate of the financial bubbles on which it is founded?--David Graeber "The 2017 general election marked the popping of the Blair-Clinton bubble," The New Statesman.

l very much like (with qualifications noted below) Graeber's two-fold idea that (i) much recent political commentary focuses on an estimation of how different classes of imagined voters are likely to respond to a candidate, that is, it tries to imagine everyone else's preferences; and (ii) that this is akin to how financial markets operate, especially in bubble territory. This may well have displaced discussion of "political vision, programme or sensibilities" and of the extent, if any, whether the "political or economic system is fair." Underlying Graeber's two-fold idea is (iii) a kind of  ideological trickle-down (recall this post on Hume and Berkeley) image in which a way of conceiving the world moves from "Fleet Street pubs to newspaper comment pages, and from there to news stories, and from there to anywhere anyone argued about politics." This trickle down is reinforced, perhaps even driven by, a larger cultural shift in which finance and financial reporting has become extremely important (by historical standards). Inspired by Graeber, I call (i-iii) bubble-politics.

Moreover, Graeber also explains who benefits from this status quo (the two-fold idea and its trickle down): "the rich and powerful." For their privilege goes unquestioned now because the very issues of fairness go un-discussed. The previous sentence is, I think, what Graeber intends to say, although not what he says. He suggests that what happens is a kind of mass ideological manipulation in which "All you have to do is convince [the people that] everyone else thinks the political or economic world is [fair]." I am not denying that it is possible that such mass ideological manipulation takes place [plenty of rhetoric about meritocracy to go around], but (a) it does not fit the logic of his particular argument; (b) it also goes against media culture which promotes unfulfilled desire not satisfaction with the status quo.

Before I got to my modest criticisms of Graeber a non-trivial aside. Modern financial markets are a peculiar kind of markets in a way that Keynes could not appreciate. (I would argue that Keynes's model is basically inspired by Adam Smith's treatment of bubbles in financial products, but that's for another time.) The prices of many financial instruments (especially derivatives) follow not so much the law of supply and demand, but rather rational pricing formulas* (most famously associated with names like Black, Merton, Scholes) and which rely at their core, on the idea that there is no-arbitrage. (The formulas presuppose, in practice that some traders instantaneously take advantage of arbitrage opportunities in the market-place.)** So, in financial markets people can imagine everyone else's preferences -- all other things being equal, and of course that's not always the case -- because everybody is using pretty much the same formulas (this gets discussed in the sociology of finance literature as an element of 'performativity').

No such pricing formula exists in politics. But everyone else's preferences are measured by way of opinion polls. It is no surprise, then, that the Bayesian aggregation models of opinion polls have provided a means at systematically imagining everyone else's preferences. (Recall my analysis of the weaknesses of these models here.) And so these have reinforced the mechanisms that Graeber is sketching.

So far so good. It is worth noting, however, that there are structural, institutional reasons why the United States and the United Kingdom, are especially susceptible to bubble politics. For in a first-past-the-post-system [FPTPS] it really matters what everyone else's preferences in one's district are, and so it matters how everyone else's preferences are imagined to be. Strategic and tactical voting in light of such imaginings is, in fact, quite rational whereas in a reasonably functioning proportional representation system one can rationally vote one's preferences without, on the whole, much concern to tactics. (Even small parties can have leverage in a coalition.) While I do not claim that bubble politics is intrinsic to a FPTPS, it is a non-accidental feature of it. That is to say, even even when one political bubble is burst one can expect another to develop in a FPTPS. In fairness to Graeber his focus is resolutely on the UK/USA because he speaks of the "Blair-Clinton bubble" and ignores other places where what he describes as tepid centrism seems to thrive (e.g., Macron, Trudeau Jr. etc.).

There is a further reason for this last point that one can expect another political bubble to develop in a FPTPS. As Jason Brennan never tires of saying, many markets generate direct and focused feedback mechanisms (through the price system; profits/losses, etc.) at fairly rapid time scales. (The collapse of Long-Term Capital twenty yeas ago is a nice case in point.) By contrast elections do not occur very often and the feedback mechanism are rather diffuse, slow, and coarse-grained. Meanwhile, participation in opinion polls has almost no feedback at all--this is a nice instance of cheap talk. Because of the lack of regular feedback the bubbles can, once developed, thrive for a long time (the term of a parliament, a US President, etc.).

 I said I had some modest criticism of Graeber. That's because I am struck by the fact that his post can be read as trying -- forgive  the language -- to call the top of the market ["Corbyn's sudden rise can be seen as another's sudden fall... the popping of the Blair-Clinton bubble"] in a bubble polity rather than discussing a "political vision, programme or sensibilities."+ That is, Graeber contributes to the genre of punditry that is most apt for a bubble politics: prophecy. Now he does so quite elegantly by simultaneously and artfully deconstructing -- like a magician who shows his tricks while performing them -- the practice he is, if I am right, contributing to. ***

 

 

On the Essence of Graeber's Debt: Modal Economics Meets Hierarchy and Ideology

It seems to me that this agreement between equals to no longer be equal (at least for a time) is critically important. It is the very essence of what we call "debt."…

Debt is a very specific thing, and it arises from very specific situations. It first requires a relationship between two people who do not consider each other fundamentally different sorts of being, who are at least potential equals, who are equals in those ways that are really important, and who are not currently in a state of equality — but for whom there is some way to set matters straight….

During the time that the debt remains unpaid, the logic of hierarchy takes hold. There is no reciprocity. As anyone who has ever been in jail knows, the first thing the jailors communicate is that nothing that happens in jail has anything to do with justice. Similarly, debtor and creditor confront each other like a peasant before a feudal lord. The law of precedent takes hold. If you bring your creditor tomatoes from the garden, it never occurs to you that he would give something back. He might expect you to do it again, though. But always there is the assumption that the situation is somewhat unnatural, because the debt really ought to be paid….

This is what makes situations of effectively unpayable debt so difficult and so painful. Since creditor and debtor are ultimately equals, if the debtor cannot do what it takes to restore herself to equality, there is obviously something wrong with her; it must be her fault.…

A debt, then, is just an exchange that has not been brought to completion. David Graeber Debt: The First 5000 years, pp. 120-1. [This is the third post on Graeber's Debt; recall here and here.]

According to David Graeber, debt is inter alia a cause of hierarchy. In particular, debt generates (further) hierarchy among those that are (at least tacitly) recognized as equals in some formal sense.  For, according to Graeber those that are not even potentially equal cannot be indebted to each other; this is why slaves, animals, and children cannot (legally) be supplied with credit.

Of course, this equality is merely formal. For, in conditions of general equality the very institution of debt -- not unlike the institution of property -- would not arise. Some material difference is required to generate debt in the first place: the would-be-creditor is in some financial sense superior to the would-be-debtor. So, the institution of debt presupposes considerable formal equality alongside some non-trivial material inequality.

According to Graeber debt makes those formerly recognized as equal de facto unequal (at least for the duration of the debt). For the debtor owes the creditor. Here we leave aside the nature of this obligation (is it properly moral, merely legal, or something else altogether?) The de facto superiority of the creditor is also revealed in the fact that she can decide to forgive the debt, or not.

As an aside, in his logic (not in his history, however) Graeber tends to ignore cases where unpaid debts ruin the creditor. There is an old capitalist joke (attributed to J. M. Keynes, but worth reviving in the age of Donald Trump) Owe your banker £1000 and you are at his mercy; owe him £1 million and the position is reversed. [Obviously, the joke needs to be adjusted to inflation.] But that's because on the whole Graeber assumes+ that debts are backed up by the threat of violence that can force repayment. 

It is central to Graeber's argument that the very idea of a debt presupposes that it can, in principle, be repaid in some form or another (sometimes in kind, or by a life, a symbol, etc.)--and so equality can be restored.  We may say, then, that in Graeber's analysis it is the foreseeable consequence of the institution of debt that it generates further, temporary hierarchy among those that are recognized as equals in some formal sense while aiming at returning to considerable equality.

In fact, given the necessary logic of compound interest, it is a foreseeable consequence of much debt that while debt formally aims at a return to equality, it can be expected that the hierarchy -- which is intended to be merely temporary -- only gets further entrenched and, thereby, eventually undermine even formal equality because the indebted are reduced to real slavery, imprisoned, or deemed the unworthy. This much is all in Graeber.

From a modal (economics) perspective, we can say, then, that [A] debt takes us from worlds in which equality is presupposed and at least thought possible in the future, to worlds in which equality becomes thought impossible. In this new world, relations are not governed by formal reciprocity, but by precedent that is inscribed in some kind of institutional memory (the law, custom, etc.).* So, Graeber's analysis of debt is a kind of foreseeable, unintended consequence explanation. It is unintended in the sense that the the very intelligibility of the institution of debt presupposes aiming at some form of equality (that's the would-be-repayment part).** The outcome is foreseeable because Graeber models his agents -- and this is the main virtue of his theorizing -- as not deceived about this; they understand their own world-all-too-well. 

It would be sufficient to stop here (in order to re-think Liberalism). But it is worth noting that for Graeber [A] is inherently unstable in its modern, capitalist form. It is not unstable because hierarchy is intrinsically unstable. (Graeber analyzes hierarchical societies and finds them remarkably stable over very long periods.) Rather, it is unstable because the moment one thinks and acts that [A] is an eternal, stable equilibrium, that is one thinks it "really will be around forever, everything goes haywire." (p. 358) That is, as long as the agents that inhabit [A] consider it fragile, [A]=[A]. But the moment that the agents that inhabit [A] endorse [A] as occurred during, say, 'the great moderation,' it becomes self-undermining (that is, [A]-->[-A]). That is to say, for [A] to work, it may not be perceived to be true, or, a ruling ideology.

 

 

 

On Not being a Pundit or Activist (On Harman on Truth In Politics)

But my lack of interest in this new orientation [Accelerationism--ES] stems primarily from the authors’ excessive certitude about contemporary politics. They write more like activists than philosophers, and unfortunately we are starting to forget the important difference between these two professions— one person might do both, such as Sartre or Foucault, but they are two very different hats. The authors seem confident in what the problems are with ‘neo-liberalism’, ‘capitalism’, ‘climate’, and so forth, and they also speak in terms of ‘cataclysms’ and ‘annihilations’. The philosophical element missing from this picture is any sense of Socratic ignorance... politics is not primarily about truth and not primarily about power, but about uncertainty. By contrast, the Accelerationists continue in the basically idealist line of the modern Left start out by assuming that the political truth is basically known and it’s time to strategize about how to implement it in some suitably radical way. The general assumption on the Left is that there are certain corrupt, greedy, ignorant, alienated, or evil interest groups that are preventing an already known ideal political order from being implemented, and hence there is no time to waste on piddling, fruitless, navel-gazing speculation. There are crisis moments when this attitude makes sense, and perhaps we’re in one now. Yet this is still the attitude of the activist, not of the philosopher, who deals with much longer stretches of time than the modern period of philosophical idealism in which the Left was born and raised. Another way of saying it is that the Left misreads politics as being primarily about the implementation of justice, when politics is really about the conflict over what justice is. This is not simply a class struggle or any kind of power struggle (though it’s partly that) because humans are genuinely mystified about what truth and justice are. You can’t make a science out of these; rationalism is even more dead as a political doctrine than it is as an ontological one. Politics is neither primarily about truth and justice (Rousseau, Marx) nor primarily about conflict and victory (Hobbes, Schmitt). ...As philosophers, we're not supposed to be swept along with the Zeitgeist, we’re supposed to be resisting it. Even if ‘neoliberalism’ has the political Zeitgeist in Western countries since Thatcher and Reagan, the Zeitgeist among intellectuals has been something quite different, and that’s a bigger danger for us.--Graham Harman [discussing his book Bruno Latour: Reassembling the Political] [HT Cogburn]

I agree with Graham Harman that even the public philosopher should, qua philosopher,* try to restrain herself from being a pundit or a citizen-activist. The technical reason for this is that modern philosophers are (in the scheme of things) rather narrow specialists, whose methods teach them (a) to abstract away from lots of messy and irrelevant details; we are taught (b) to be suspicious of polysemy and vagueness, and (c) we have little tolerance of conflicting (partial) lexical orderings. Because politics requires different attitudes than those exhibited in (a-c), when we speak in public we tend to come across as partisans or casuistrists joining sides in the great (and a few petty) debates of the day (recall this post on Gaza; this is controversial, see more below). From the trial of Socrates we learn that this can harm the institution of philosophy, especially if others think we're on the side of immorality (or exhibit lack of patriotism, etc.); the name Heidegger is a salutary reminder of what is at stake in these matters (recall and here, here, etc.). Even in lower stakes circumstances, philosophical skills are not innocent; Anil Gomes (Oxford) recently revived [HT Dailynous & Leiterreports] Aristophanes' charge against philosophy, viz., that the capacity to make careful distinctions does not ensure that they will be put to good uses.

Of course, sometimes the times demand, that some of us embrace our fate as philosophically trained activists. The pundit and the activist can legitimately avail themselves of philosophical arguments and other insights, while even the purest philosophers avail themselves of philosophical politics within the profession (recall this post on David Lewis). It is, of course, not always easy to figure out where one activity (philosophy) slides into another (activism). Harman suggests one useful heuristic echoing Seneca: the philosopher focuses on the long term, by influencing (through books, lectures, TED-talks, etc.) the minds and habits of a 'public,' while the activist tries to influence immediate public, political decisions. (This presupposes there are no philosopher-kings.) Of course, the activist would like thereby to secure long-term aims, so the distinction is not a neat one. (And, obviously in a 24hrs news-cycle, next month may seem long away!) That's okay because there are going to be lots of trading-zones where philosophers and activists meet and overlap. 

To accept the distinction between philosophy and activism entails a certain kind of self-command and judgment on behalf of the philosopher. (Undoubtedly some non-philosophers might think good riddance, too.) But the position does not entail being silent in public. Conceiving the long-term is compatible with putting issues on the agenda and calling attention to long-term trade-offs or dilemma's as a public philosopher. (Harman calls attention to the dangerous political situation over Nile water-rights/treaties.)  

Some impatient readers will reject a more fundamental (as opposed to technical) assumption I share with Harman: that politics is not wholly aimed at either pre-existing truth or the battle over power. This assumption entails that one ought to be very careful switching from philosophy to activism even with fully worked out philosophical theories. Harman captures the insight by insisting that public politics is about uncertainty (he attributes it to late-ish Latour; I would mention Knight or Keynes here). [A note on terminology: I think politics is present in philosophy and in public life, so this is why I sometimes use 'public politics' to refer to familiar political activity (by presidents, activists, lobbyists, parliamentarians, voters, etc.)]. That is, it is a site where justice and power are, in part, constituted (through discussion, negotiation, legislation, bargaining, bribing, voting, public opinion, etc.) and, in part, discovered. This means they (justice/power) lack a certain permanence (recall this post on the Conservative's dilemma). 

This lack of permanence is also true (grin) to some extent for truth, although obviously the story is not exactly the same.  When Senators vote to deny the existence of man-made climate change they just look ridiculous. But it is also a fact that political legislation has some influence on non-trivial social truths that will occur, say, in the future.

Harman recommends a certain kind of public caution that he (mistakenly, I think) associates with Socratic ignorance. Now, such caution can quickly sound conservative and generate a status quo bias. To be clear: it is important to distinguish such caution with a kind of reliance on precautionary principles, which have become a justification for quite a bit of government action (and overreach)--these days anti-terrorism practices rely on precautionary principles in order to justify preemptive practices that do away with long standing legal procedures (see this excellent book by my new colleague Marieke de Goede). But embracing such philosophical caution for oneself does not prevent activism by others.

Even so, I was struck by Harman's claim that the greater danger comes from groupthink among philosophers rather than from bad politics. This is not an evident position. I have to admit that I had his attitude during Bush vs Gore, but the Bush administration set in motion a set of responses to 9/11 that have (and continue to have) far-reaching consequences some of which may, in fact, delimit the space of future philosophy Stateside and in the Middle East. So, I worry that there is a tendency to underestimate the significance of public politics. Even so, in an other context he puts his point as follows (and more instructively):

There is a lazy tendency in our era to moralize every political issue, as if politics were merely the implementation of an already understood justice, rather than –as Latour holds– the place where the nature of justice is determined. Someone is always held to be morally at fault whenever a political situation goes wrong; politics becomes an actual knowledge of the morally right, whose truth is opposed only by those corrupted through inferior character or vested interests.....’--Graham Harman.

Contemorary philosophers (influenced by Rawls) prioritize the right over other values. But the tendency is not only exhibited on the Left, but also on the (Libertarian and Conservative) Right where a fondness for epistemocracy, lotteries, and betting markets is rising (often also in the service of some right). By treating politics as a site where morality is implemented, we philosophers treat politicians as technicians rather than as crafty agents that need to weave together (and sometimes trade-off) different values and interests into compelling narratives that allow us to cope without violence.   

 

Wisdom in economics...Keynes, Savage, and Friedman

The maximization of such an expected value may also be regarded as a maxim for behavior. As such, it promises to have important implications for statistical theory. Cf. L. J. Savage, "The Theory of Statistical Decision," Journal of the American Statistical Association, XLVI (March, 1951), 55-67. Success of the maxim in this domain, as in any other area of decisions involving uncertainty, depends, not on its empirical verification for the economic behavior of men at large, but on its acceptability, to individuals who are particularly concerned with such decisions, as a rule guiding "wise" behavior in the face of uncertainty.--Milton Friedman & L. J. Savage (1952) The Expected-Utility Hypothesis and the Measurability of Utility (463).

Yesterday, at a workshop I co-hosted with Rogier de Langhe in Ghent, David Teira called attention to the quoted passage in a  paper (co-authored with Rasmus Winther) he presented. The passage occurs in the first substantial footnote of the Friedman/Savage paper (which by building on work by Von Neaumann & Morgernstern, together with their earlier 1948 paper, generated the canonical treatment of the axioms of expected utility theory).* Hereafter I will call their joint 1952 paper: 'F&S1952.' Teira astutely noted that the quote puts a normative ("wise") interpretation on expected utility theory. This is surprising because standard historiography suggests that the normative interpretation was a much later consequence, the result of criticism (see, for example, this fine paper by Hands.) In fact, the standard story can base itself on F&S1952:

Two quite different classes of objections are made to this particular convention for assigning a "measure" to utility:... (2) that any convention that would treat utility as measurable is undesirable or unnecessary... The second objection, on the other hand, cannot be accepted. It would deny economics a mode of speaking and expressing theories that has been found useful if not indispensable in other sciences. It expresses a viewpoint that its proponents would find impossible to apply consistently; they would have to deny themselves the privilege of speaking of money income, or stock of money, or size of population as measurable. If this viewpoint seems persuasive for utility, it is, we think, partly because some hypotheses that would, if verified, have implied convenient measures of utility were actually flagrantly contradicted by experience, and partly because of a widespread confusion between positive economics and normative economics, a widespread tendency to use the same word---utility- to stand for two quite different things: on the one hand, a quantity that it is useful to regard an individual as maximizing in interpreting his behavior and predicting his reactions to changed circumstances, and, on the other hand, a quantity that he "should" maximize or that society "should" maximize or help him maximize. The identification of these two conceptually different magnitudes is a maxim for wise behavior or an ethical precept, not a scientific proposition, and is in no way required by the adoption of a particular convention for "measuring" utility. (474)

This is the closing paragraph of F&S1952. Here wise behavior is in the domain of normative not positive (or empirical/scientific) economics. As is well known, for Friedman the distinction between normative and positive economics is central to his methodology of economics (which he was working on at the time and which he published in 1953). And, his ''as if" methodoloy is fully present in the first sentence of F&S1952: "individuals choose in such circumstances as if they were seeking to maximize the expected value of some quantity." Now, Teira offered an interesting explanation for the presence of a normative conception in F&S1952, and here I don't want to steal his thunder.

Before I get to what I take to be the significance of the footnote, I should note that, I think the footnote reflects the influence of Savage. For three reasons: (i) it fits uneasily with Friedman's larger methodology at the time; (ii) in the note they explicitly appeal to Savage's work, and (iii) Savage thought that one could treat uncertainty as a species of risk: one treated the probabilities as subjective (see his Foundations of Satistics), although Savage was quick to note that “we must be prepared to find reasoning inadequate to bring about complete agreement.” (1954 [1972]:7; see also 3, 67ff.) So, Savage did not endorse the ideal that there could be full consensus about wisdom. By claiming that this line of thought reflects Savage's influence, I do not mean to deny the significance of it to Friedman's thinking.

For, the idea that wisdom in the face of genuine uncertainty could still be a species of (mathematical) rule-following is an important rupture with earlier modes of thought which understood wisdom in terms of judgment. For example, at the hight of the financial crisis, Keynes had argued, reflecting widely held belief, that in the face of genuine (computational) complexity, that is uncertainty, central bankers should be given considerable "discretionary power" (to manage its reserves): he denied that “the rules of wise behavior by a central bank could be conveniently laid down -- having regard to the immense complexity of its problems and their varying character and varying circumstances." (Quoted from Bibow.) Of course, Keynes insisted that the discretionary power should not be absolute; as Bibow notes, Keynes thought that the economic and moral aims of the central bankers should be set by government.

Friedman, by contrast, in reflecting on the experience of monetary policy during the financial crisis in his great work with Anna Schwartz came to think that much of monetary policy ought to be rule-based (see, for example, here, and here). Whether we think of these rules as robust heuristics (to be ignored in some future emergencies) or as a species of optimizing rationality is a further question that lay in the future. Sadly, whether it's wise to think of wise behavior in conditions of uncertainty as an instance of utility maximization was not debated in full when introduced into the literature, perhaps because it was treated as pertaining to 'individuals' (who are free to do what they wish) rather than social institutions; or, perhaps because sometimes footnotes fly under the radar screen.

 

Virginia Woolf's Unmasking of Professional Philosophy

He began to search among the infinite series of impressions which time had laid down, leaf upon leaf, fold upon fold softly, incessantly upon his brain; among scents, sounds; voices, harsh, hollow, sweet; and lights passing, and brooms tapping; and the wash and hush of the sea, how a man had marched up and down and stopped dead, upright, over them.--from Virginia Woolf's To the Lighthouse.

The number of books in the world is infinite, and one is forced to glimpse and nod and move on after a moment of talk, a flash of understanding, as, in the street outside, one catches a word in passing and from a chance phrase fabricates a lifetime.— from Virginia Woolf (1930) Street Haunting: A London Adventure

I assume most of my regular readers will have registered the allusion to Hume in the title of D&I. In doing so I imitate Virginia Woolf’s example, whose To the Lighthouse is, in part, an extended meditation not just on the connections and gaps among impressions but also on the nature of philosophy worth having. In particular, in reinvigorating the “old quarrel between philosophy and poetry” (Plato Republic), her novel indicts professional philosophy; our ilk is, we might say, too often ‘brave in thought, timid in life.’ The key passage in the novel is Mr. Ramsay’s soliloquy:

It was true; he was for the most part happy; he had his wife; he had his children; he had promised in six weeks' time to talk "some nonsense" to the young men of Cardiff about Locke, Hume, Berkeley, and the causes of the French Revolution. But this and his pleasure in it, his glory in the phrases he made, in the ardour of youth, in his wife's beauty, in the tributes that reached him from Swansea, Cardiff, Exeter, Southampton, Kidderminster, Oxford, Cambridge--all had to be deprecated and concealed under the phrase "talking nonsense," because, in effect, he had not done the thing he might have done. It was a disguise; it was the refuge of a man afraid to own his own feelings, who could not say, This is what I like--this is what I am; and rather pitiable and distasteful to William Bankes and Lily Briscoe, who wondered why such concealments should be necessary; why he needed always praise; why so brave a man in thought should be so timid in life; how strangely he was venerable and laughable at one and the same time.--from Virginia Woolf's To the Lighthouse.

Some readers, possibly distracted by the intellectual challenge, may accept the invitation and construct the lecture advertised about “Locke, Hume, Berkeley, and the causes of the French Revolution.” Fictions are quite capable of motivating actions, after all. Perhaps those readers ought to keep in mind, that many of the counterfactual “young men of Cardiff” will die in the trenches in France before long. Would that change the content of their imagined lecture?

But we must now allow ourselves be distracted into ignoring that Mr. Ramsay is a deformed human being. It’s not just his excessive love of praise, his excessive social conformity, and his excessive fondness for his own speech, that are signs of deformation. The central failing is his timidity; he lacks courage to embrace his own feelings and thereby becomes cruel toward others’—he is unreceptive because if he were receptive he would have to make space for the contrary feelings to be found within.

We don’t learn if it is his training that has deformed him or if it is deformed human beings that become professional philosophers. (The novel offers evidence for both views.) The novel strongly suggests, however, that the deformation gets replicated in the next generation of philosophers. (Recall this post inspired by Ruth Chang’s analysis of the deformation of intellectual reflexes in contemporary professional philosophy.) To Ramsay’s modest credit, there are evidently lucid moments when he is not self-deceived about his self-deformation(s), but he is not capable, and unwilling, to change ways.

While the novel leaves no doubt that much professional philosophy is a species of escapism from living, finding "consolation in trifles," the novel as such is not anti-philosophical, however. For it raises a profound philosophical question: must one necessarily “pursue truth with such astonishing lack of consideration for other people's feelings,” or is a more humane academic philosophy possible? In addition, the novel offers impressions, glimpses really, that nod toward a fuller vision of life: the vision, which celebrates chance and felt beauty, is, thus, not entirely Platonic because this “vision must be perpetually remade” by each of us in this possible experiment called 'life.'

The Technocratic Conception of Politics (The Economists and Rawls redux)

By a 'technocratic conception of politics,' (recall) I mean to capture the following three features of an enduring image of politics present in (social) science: first, it is characterized by the ideal that with social knowledge and its progress, substantial political disagreement can be eliminated. Here is a very striking instance of the claim from Milton Friedman's (1976) Nobel lecture: "Many countries around the world are today experiencing socially destructive inflation, abnormally high unemployment, misuse of economic resources, and, in some cases, the suppression of human freedom not because evil men deliberately sought to achieve these results, nor because of differences in values among their citizens, but because of erroneous judgments about the consequences of government measures: errors that at least in principle are capable of being corrected by the progress of positive economic science." The context of the passage is the furor surrounding his association with the so-called 'Chicago Boys' in Chile and the assassination of his Chilean critic Orlando Letelier (recall).

In particular, second, this ideal of conflict-free politics presupposes (as is clear from the quoted passage in Friedman's Nobel lecture) considerable value-unanimity in society. So, for example, in a famous article, the Chicago-school economists, Stigler and Becker write, "one may usefully treat tastes as stable over time and similar among people;" establishing this point "is the central task of this essay." When value-unanimity is granted then ordinary welfare economics is possible as a kind of (social) engineering science (recall).

Third, the conception requires an image of science in which one of the central aims of policy scientists is to achieve consensus (or lack of disagreement). In modern economics this idea goes back at least to Sidgwick's (1887) Principles of Political Economy (recall; for some prehistory on Hume). It was a central feature of Lionel Robbins's influential methodological restatement (1932) of what economics is: "Surely, for the sake of securing what agreement we can in a world in which avoidable differences of opinion are all too common, it is worth while carefully delimiting those fields of enquiry where this kind of settlement is possible from those where it is not to be hoped for —it is worth while delimiting the neutral area of science from the more disputable area of moral and political philosophy." This image of science was made widely popular by Thomas Kuhn in Structure (1960), but via Talcott Parsons's Weberianism and others it was already well known in mid-twentieth century social science.

It is worth emphasizing that the expectation of consensus was by no means universal. Friedman's sometime co-author, Savage, insists in The Foundations of Statistics, that "we must be prepared to find reasoning inadequate to bring about complete agreement." (1954 [1972]:7; see also 3, 67ff.) But this view became a minority position (cf. Aumann).

Predicting the Future of the Economy; On Rosenberg on Krugman on Reflexivity and Uncertainty

When combined uncertainty and reflexivity greatly limit the power of maximizing and equilibrium to do useful economics. Reflexive relations between future expectations and outcomes are constantly breaking down at times and in ways that no one can predict—about which there is complete uncertainty. Between them, they make the economy a moving target for the economist. Models get into people’s heads and change their behavior, usually in ways that undermine the model’s usefulness to predict. Which models do this and how they work is not a matter of quantifiable risk, but radical uncertainty. Of course it’s not just economist’s models that get into people’s heads, lots of other models—“metaphors” Krugman calls them—do so and at rates and with reflexive effects that are radically uncertain. And that’s what makes the economy, and human affairs generally, a target moving too fast for anything more than simple models, whether its [sic] in economics, political science, sociology, etc. Between them reflexivity and uncertainty make economics into a retrospective, historical science, one whose models—simple or complex—are continually made obsolete by events, and so cannot be improved in the direction of greater predictive power, even by more complication. The way expectations reflexively drive future economic events, and are driven by past ones, is constantly being changed by the intervention of unexpected, uncertain, exogenous ones. No bubble ever repeats, because people remember them. Regulators engaged in preventing their recurrence are just setting the stage for new and different ones. Dodd-Frank is just an incentive to figure out new ways to exploit regulations. There is room for both uncertainty and reflexiveness in Krugman’s philosophy of economics. For he recognizes that economics has to be a historical science ‘History provides “the real issues and the real experiences that need explaining.” Indeed, his best examples of why history matters incorporate both uncertainty and reflexiveness: “In macro, in particular, you need to know about drastic events”–the German hyperinflation for example….Drastic events, ones no one could see coming—uncertain ones–punctuate economic life. All too often they break up a comfortable predictable reflexive relationship between expectations and reality. They make economics the discipline Krugman thinks it is, like history, one we may look to for lessons but not predictions.’—Alex Rosenberg, “Paul Krugman’s Philosophy of Economics, and What It Should Be”

I very much agree with Rosenberg’s observations on the tensions in Krugman’s (evolving) philosophy of economics, and I also agree with much of Rosenberg’s emphasis on reflexivity and uncertainty. (No surprise, I have published on both and also done a lot of blogging on them.) But I do offer two (friendly) qualifications on Rosenberg’s analysis. First, I note a lacuna in Rosenberg’s analysis. What Rosenberg calls “radical uncertainty” (or “complete uncertainty”) used to be called “Knightian uncertainty.” It’s typically understood as the doctrine that prevents us assigning probabilities or measures on the likelihood of future outcomes. Rosenberg notes in his piece that Knight and Keynes both embraced versions of radical uncertainty. In Rosenberg’s hands this is an epistemic doctrine. (I mention this because Keynes also recognized a metaphysical version of uncertainty.)

Now, mathematical economists displaced epistemic uncertainty in the post WWII era (the start of which we can conveniently mark with Samuelson’s Foundations). But they did not just pretend it did not exist as a problem. Rather one way they tamed epistemic uncertainty is by treating (or operationalizing) it as a species of randomness. They could then design decision procedures that would allow for, say, the best of the worst outcomes, or (another example) a rational option price, in a stochastic environment—the environment is treated as uninformative and one places so-called ‘bets against nature.’ (The previous sentence is, of course, a gross simplification.) This is not the only way economists displaced epistemic uncertainty; elsewhere I have discussed how Arrow Commodities did so in a general equilibrium framework (see also).

Undoubtedly, Rosenberg, who pioneered the philosophy of economics, knows all of this. But one reason to mention this taming of uncertainty strategy is that the problems associated with it do not turn on reflexivity. Rather, it turns on (to use philosophical jargon) hidden modal features of the mathematical treatment of randomness. For the mathematical tools that operationalize randomness all make assumptions about possible distributions (that are and are not allowed). There are other subtle (defeasible) assumptions about the way the world might built into these mathematical tricks. The point is that if we focus on reflexivity we might miss some of the non-trivial ways that make it so hard to have a predictive social sciences.

Second, it’s not true that reflexivity prevents predictability. We know, for example, that the existence of opinion polling does not necessarily prevent their predictions from coming true. Even if this is due to them being self-fulfilling or self-reinforcing prophecies, the point still stands. We need not be too in awe of Nate Silver’s successes in predicting electoral outcomes; more than half a century ago, Herbert Simon (among others) had offered an analysis that had explained how this could be possible (see also). But we need to be clear about what made this success possible: it requires a data-rich environment, institutional stability, a slow evolution of demographics, and limited alternatives in one’s choice (there are a lot of explicit and implicit barriers to entry in elections). One reason I could make fun of Silver’s World Cup predictions is that it is a data poor environment and the demographics (the players/teams) evolve rather rapidly. So, we should expect that in some circumstances economists should continue to make reasonably fine-grained predictions in relatively controlled environments (say, rent-control in a city with stable demographics and limited new supply of housing).

In  conclusion, my two qualifications do not undercut Rosenberg’s general thrust. But they also generate some chilling possibilities. Computer power is becoming cheap and we are starting to drown in easily available data. This allows, as Oskar Lange foresaw, for massive simulations and modelling. If governments or corporations could limit our options as consumers to the option generated in simulations then barring natural disasters and war, the economy would be predictable. This is not just science fiction tempting to future rulers of Singapore. Whole chunks of the economy are funny hybrids of public/private entanglements (health, education, defense, construction, etc.) or attempts at generating closed corporate networks (cf, Google, Apple, Facebook, etc.).

Herodotus and the Economists

Artabanus, you define these matters reasonably. But do not fear everything, nor take account of all alike; If you wanted to take everything equally into account on every occasion that happens, you would never do anything; it is better to do everything boldly and suffer half of what you dread than to fear all chances and so never suffer anything. But if you quarrel with whatever is said yet cannot put forth a secure position, you must be proved as wrong on your part as he who holds the contrary opinion. In this both are alike: how can someone who is only human know where there is security? I think it is impossible. You see what power Persia has attained. Now if those kings who came before me had held such opinions as yours, or if they had not held them but had had advisers like you, you would never have seen our fortunes at their present height; but as it is those kings ran the risks and advanced them to this height. Great successes are not won except by great risks. So we will do as they did; (Herodotus, The Histories, Book 7, 50.2-4)

Modern economics teaches that great returns are the reward for taking greater risks. So, at first glance it seems that the Persian King, Xerxes, speaks like a modern economist. Given that he has an appetite for glory, he is willing to place bold bets and forgo the relative security of diversification (as suggested by modern portfolio theory). 

Xerxes anticipates the now standard criticism of standard decision theory; in real life, information is costly and we don't have time to gather it all. More important, in human affairs perfect information is an illusion. In context, Xerxes does not explain why he embraces fundamental uncertainty. Rather than seeing such uncertainty as undermining the very possibility of a decision, it is the grounds for a kind of bold decisionism.