Thursday, March 29, 2012

The Invisible Hand ...of God!

Maybe because we're soaking in it, free market economics can be a satisfying thing to make fun of, or you know, at least mockery is healthier than drinking heavily. I've had several problems with the whole discussion these last couple years I've been trying to think about it very independently, starting with the basic premises. The "free market," for one obvious thing, is a whopping misnomer. It's not a spontaneous human enterprise, but rather a carefully-drawn set of rules and proscriptions established by the authorities (if that's somehow not the dreaded state, then it's the church, the mafia, Mom and Dad, or the fuckheads running the company store). Nor has it ever seemed right to me that assessing and swapping goods a fundamental human concern that is separate from the authority-defined marketplace. Economic-minded people are weird about glorifying that hustle and bustle. (I mean, is that how you interact with your social group? In the book I am currently reading--Debt, the First 5,000 Years, which is great--David Graeber makes a convincing case that this behavior only arose in human history when the hierarchy got sufficiently centralized, large, powerful, and impersonal. Spontaneous pre-monetary barter is a myth.) Considering that the practice of economics is intended as the reduction of a huge set of human behavior to quasi-scientific principles, it seems important to get the relevant aspects of human behavior right.

Perhaps the most annoying free market trick of all is a little bit more derived, though. The Libertarian-style question-begging argument is something that drives me batshit. You've probably seen it: the tendency to discuss hypotheticals and gedanken experiments instead of evidence and data, discussions where some desired outcome is defined (for today's example, let's posit that the highway system should work (via)), the method is given (the highway system should be private, because free markets!), and the rest is figuring out how the known solution will lead to the desired outcome, often using a lot of circular reasoning and, to throw 'em off the trail, a really big thesaurus.

[In other news, I'm really glad they didn't have blogs when I nineteen.]

There is a disturbing tinge of theology to that, something resembling Intelligent Design. We know God did it, and let's demonstrate how. Since it's God, then it's clear that everything is made just-so, and to bring us even closer to the near-perfect state, we must make less contribution. It's the same kind of reasoning you get in climate denial, which, coincidentally, is yet another conservative darling. It's optimism in the old sense: nature produces the best possible result. And evidently, it's explicitly central to the field of economics. I guess I didn't quite realize it went so deep.

Recall here what Smith was trying to do when he wrote The Wealth of Nations. Above all, the book was an attempt to establish the newfound discipline of economics as a science. [...] Smith was trying to make a similar, Newtonian argument. God--or Divine Providence, as he put it--had arranged matters in such a way that our pursuit of self-interest would nonetheless, given an unfettered market, be guided "as if by an invisible hand" to promote the general welfare. Smith's famous invisible hand was, as he says in his Theory of Moral Sentiments, the agent of Divine Providence. It was literally the hand of God."
--from Debt: The First 5,000 Years

As I've probably said before, I respect greatly the urge to quantify and rationalize things. I don't really have any problem working with the best intellectual tools of the times, nor is there any issue when the analogies that lead to improved understanding later turn out to be bad ones. If some of the central assumptions of economics are flawed, they can be revised if the theories still work. Adam Smith was by all accounts a great thinker, more nuanced and decent-minded than his dumber followers two centuries later, and Isaac Newton was a wonderful man to emulate.

But the problem is, there seems to have been little impetus to revise or question these central thoughts. Smith wrote a century after Newton, and that kind of optimism was already getting colorfully leveled by his contemporaries. (Poor Liebniz: a brilliant man who got stuck with a pair of the best antagonists in history.) Secular philosophy has reduced the anthropic principle to the level of fallacy. And even if it remains a matter of faith or motivation to some scientists, the modern pursuit of science no longer torques itself up to include "god did it" in its explanations of the universe. And we can argue that economics, similarly, abandoned this approach as well, but as far as I can tell, it's never much had much of a conversation about it.

The idea of economics as a field independent of other human behavior, that is only connected to authority in the sense of a bargain among equals, originated, according to Graeber, with Adam Smith himself, that it's in fact his major contribution. It's pretty far down the chain, but here we reliably have libertarian, erm, thinkers today, perpetually arguing, as a matter of faith, that things will be great, spontaneously, if this system is somehow made more true. Even though it is never true. This bothers me.


Keifus said...

Also, the economist's tendency to not think in terms of conservation of matter and energy--about as basic a scientific principle as you'll get--drives me absolutely nuts. I've written a whole lot about that stuff though.

Ben There said...

The theory behind "free-market" economics depends on a set of assumptions, two of which are demonstrably unadulterated bullshit: 1) People always act rationally and in their own self-interest, and 2) They have ALL available information and make their decisions based on that information.

No need to elaborate on how silly those assumptions are. I think it's pretty self-evident to anyone who can walk and chew a toothpick at the same time.

Keifus said...

Trust him folks, he's Ben There, and lived to tell about it.

Yeah, I was kind of taken aback reading the passage though. I had always thought that there was good-faith reasoning leading from the dubious and simplified assumptions--they do try to make it like a science--and that the illness of massive question-begging belonged to people who were, for various reasons, disinclined to look closely at the assumptions or the reasoning. (Libertarian economics seems to belong mostly to the semi-bright. Almost literally sophomoric.) But no, the assumption that it leads to teh best of all worlds was right there in the foundations too.

Well, at least according to this guy. I do want to be a little careful about that.