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Anti-social economics – Peter Radford

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Some jumbled thoughts prompted by my recent reading of Robert Skidelsky’s book, “Money and Government”

Just how anti-social is economics?

I don’t think the question is difficult to answer: economics in its modern main- stream form is, at its heart, designed to undermine democratic government. It is, therefore, profoundly anti-social.

The genesis of this antipathy towards democracy is all the way back in the beginning moments of economics as an intellectual discipline when its earliest proponents had a specific objective, which was to build an argument for the elimination of politics from the social space we now refer to as the “market”. This effort to de-politicize commerce was driven by the perceived need to rid it of the constant interference of whimsical and debt-ridden monarchs. So the discipline’s founders built a new frame- work to denigrate or demean government, where government could be equated with an authoritarian despot.

The problem with this is that the same sentiment grips modern economics even though the presence of authoritarian despots is minimal, and many more governments are comprised of democratically elected officials who represent the very same people who are lionized as ‘rational agents’ in the economic domain. To undermine the legitimacy of democracy, economists had to construct a theory to eliminate any socially inspired action on the part of those officials and relegate them, instead, to just another group off self- serving agents incapable of acting on behalf of others.

The central premise of economics became that social issues were best resolved within the market and that government was, at best, inevitably an imposition on the pursuit of liberty, and, at worst, deleterious to, or destructive of, that same liberty. Oddly in order to prove that politics ought to be eliminated from commerce and that markets ought simply be set free, economics had to become politically committed to an ideology. Economics had to engulf politics in order to make sure it was the ‘correct’ politics of the rugged individual rather than anything tainted by social activity.

The problem for economics is that politics did not disappear. Nor was the need for it obviated by the wonders of the market. On the contrary, as individual liberty became more and more synonymous with what we now loosely call capitalism, economic theory was driven into ever increasing efforts to express that liberty in quasi-scientific terms. The early critiques of capitalism produced a counter-movement express- ed as ‘marginalism’ and eventually as general equilibrium. In each case the ideological intent was to prove that defiance of markets was futile. Markets, inevitably so the story went, provide the most social welfare, whereas governments can only muck things up.

Great efforts went into erecting proofs to support these conclusions. Maximization and optimization were seen as inevitable outcomes of individual agents interacting freely, with their interaction producing no sullying or inconvenient result dependent upon their cooperation. Indeed, cooperation disappeared altogether from theory.

Still politics refused to cooperate with economics. The steady rise of industrialized populations with their attendant problems and demands forced the extension of democratic politics into all corners of society. Despite the best efforts of economists, social organization outside of the market continued to gather strength. Society actually exist- ed beyond the borders of the market.

In the middle of the 1900s this gather- ing strength triggered a crisis in economics. The evident failures of markets around the world during the 1930s produced economic theories that incorporated or tolerated a social view. But in the eyes of ideologically commit- ed economists even the most benign of these new theories were seen as simply the beginning of a slippery slope into oblivion.

Thus there was a renewed attack on social activity in commerce.

Planning of the kind undertaken by the Soviet era governments was attacked as irretrievably flawed by dint of the cognitive incapacity of the planners to absorb all the information available in an economy. Any effort at planning was thought to be bound to produce sub-optimal results because of this cognitive incapacity. The defence of markets and the attack on democracy then became one of a least worst kind. Economists argued that we knew for certain that planners could not digest and act on all the information available and were thus condemned to fail lamentably. So we ought let the market do the digesting and acting: it could do no worse, and was surely more able since all that locally held, and centrally indigestible, information was represent- ed in the actions of individuals in the marketplace. Magically individuals in markets have super cognitive powers not available to government employees.

This cognitive argument was ultimately successful. Theorizing at a social or macro level was regarded as ineffective or counterproductive. Instead all theory had to start from the perspective of an individual. Theory went back to its anti-democratic roots in order to preserve the sanctity of individual liberty. The anti-social ideology of economics managed to squeeze out any vestiges of social action from mainstream theory. Everything became an expression of individual choice. At its most appalling yet logical extreme came the pronouncement that all unemployment is voluntary and that variations in the business cycle are simply representations of the latest rationally expressed information. Thus was useful content sacrificed in the defence of ideology and logical consistency.

The cost was that economics rapidly lost relevance, with its last claims to such evaporating after the 2008 crisis: a crisis which theory said could not occur.

A modern economy is riven through with interconnected processes that need extensive oversight and organization. Such oversight and organization lies beyond the reach of even the most committed rational individual. Hence the rise of modern corporate bureaucracy and its wholesale adoption of planning as a technology for governing product- ion, distribution, and most of the other elements of commerce. The original model of individual action upon which the anti-social attitudes of economics was based is obsolete. Explanations of modern economies inevitably require accommodation with social activity since most commerce is entirely social. Society manifestly exists even in the private sector where organization dominates activity and belies the notion that everything can be resolved back down to acts of individuals.

Yet economics doggedly plods on denying the political landscape and the social advances of the past couple of centuries. It still privileges individuals over the social. It still cannot comment usefully on organization other than that of markets. And it steadfastly looks aghast at any form of democratic governance because it cannot tell the difference between a democracy and an authoritarian despot. All government is simply lumped together in one malign bucket whether it expresses the will of the people or not. And great efforts go into ensuring that important economic decisions are moved beyond the reach of elected officials. This is even if the technocrats that economists entrust with those decisions are manifestly wrong. Apparently, it is better to deny society than to re-invent economics.

No matter what gloss economists put on their efforts, at its core economics remains anti-democratic – by design.

Source: Real World Econ Rev, 6 Mar 2019

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