By James Kwak
Economism—the simplistic, unreflecting application of Economics 101 models to complex, real-world issues—is particularly influential in the law, including both legal academia and actual court opinions that decide important questions.
Noah Smith, for example, points to a paper by a law professor arguing that forced prison labor deters crime because it effectively raises the price of crime in a supply-and-demand model. The problem with this model is that it doesn’t accurately describe criminal behavior. Smith quotes economist Alex Tabarrok on what happened when the United States dramatically increased the harshness of punishments:
In theory, this should have reduced crime, reduced the costs of crime control and led to fewer people in prison. In practice … the experiment with greater punishment led to more spending on crime control and many more people in prison.
By James Kwak
There was one moment, when I was finishing up the manuscript of Economism, that I thought someone had already said what I was trying to say in the book. This is what I read:
“The beauty and the simplicity of such a theory are so great that it is easy to forget that it follows not from the actual facts, but from an incomplete hypothesis introduced for the sake of simplicity. … The conclusion that individuals acting independently for their own advantage will produce the greatest aggregate of wealth, depends on a variety of unreal assumptions …
“Individualism and laissez-faire could not, in spite of their deep roots in the political and moral philosophies of the late eighteenth and early nineteenth centuries, have secured their lasting hold over the conduct of public affairs, if it had not been for their conformity with the needs and wishes of the business world of the day. …
“These many elements have contributed to the current intellectual bias, the mental make-up, the orthodoxy of the day.”
By James Kwak
Updated based on feedback from Matt Stoller. See bottom.
Mike Konczal wrote an article a few days back arguing that various progressive policies aimed at helping poor people would not be able to pry the “white working class” away from Donald Trump and Trumpism. I think the article was insightful and intelligently argued. This was my quick response:
In other words, it’s the long term that matters. We need policies that create broadly shared prosperity not because they will peel away Trump supporters in the short term, but because they are the right thing to do. And in the long term, if progressives prove that they can deliver the goods—a society with less inequality and less economic insecurity—that will change the political landscape.
Dani Rodrik wrote a longer, better response to Konczal. Rodrik’s perspective, which he’s presented in greater depth in the Journal of Economic Perspectives and a recent paper with Sharun Mukand, is that political outcomes result from the interaction of interests and ideas. As he writes in his recent post, “The politics of ideas is about activating identities that may otherwise remain silent, altering perceptions about how the world works, and enlarging the space of what is politically feasible.” Politicians appeal in part to voters’ interests, but also attempt to make salient identities that they share (or pretend to share) with particular segments of the electorate.
By James Kwak
Noah Smith begins his latest Bloomberg column this way:
Stanford historian Ian Morris is fond of saying that “each age gets the thought it needs.” According to this maxim, ideas like the Enlightenment, communism or even Christianity are a product of the economic and political circumstances of their times.
This is something I’ve long believed, dating back before my days as a graduate student in intellectual history. It’s also pure Marx. In the “Contribution to the Critique of Political Economy,” the great bearded one wrote:
With the change of the economic foundation the entire immense superstructure is more or less rapidly transformed. In considering such transformations a distinction should always be made between the material transformation of the economic conditions of production . . . and the legal, political, religious, aesthetic or philosophic—in short, ideological forms in which men become conscious of this conflict and fight it out.
When I was a junior in college, I underlined that passage in my bright red copy of The Marx-Engels Reader. (As I’ve often said, Harvard social studies majors will probably be the last people on the planet still reading Marx.)
By James Kwak
“This is a Hillary Clinton, Elizabeth Warren, Bernie Sanders party. Our party has moved right, their party has moved really left.”
That’s Paul Ryan on the Democratic Party. In Vox, Matt Yglesias points out that Ryan is being disingenuous, but only “in part.” Yglesias goes on to say this:
“In a fundamental way, Ryan is correct — in 2016, the center of gravity in the Democratic Party is much closer to Bernie Sanders than it was in 2006 or 1996.”
Except, that just isn’t true.
By James Kwak
You know that famous Time cover featuring Rubin, Greenspan, and Summers, calling them “The Committee to Save the World”? I was reading the accompanying article, which I had never read before, and it’s an absolutely precious example of the nonsense people said at the time. Like this:
Rubin, Greenspan and Summers have outgrown ideology. Their faith is in the markets and in their own ability to analyze them. … This pragmatism is a faith that recalls nothing so much as the objectivist philosophy of the novelist and social critic Ayn Rand (The Fountainhead, Atlas Shrugged), which Greenspan has studied intently. During long nights at Rand’s apartment and through her articles and letters, Greenspan found in objectivism a sense that markets are an expression of the deepest truths about human nature and that, as a result, they will ultimately be correct. … They all agree that trying to defy global market forces is in the end futile. That imposes a limit on how much they will permit ideology to intrude on their actions.
I realize this is written by a journalist, not by one of the three men themselves. But could you come up with a better example of an ideology?
By James Kwak
A friend pointed me toward an op-ed in The Guardian by George Monbiot titled “Neoliberalism—The Ideology at the Root of All Our Problems.” The basic argument is that there is an ideology that has had a pervasive influence on the shaping of the contemporary world. Its policy program includes “massive tax cuts for the rich, the crushing of trade unions, deregulation, privatisation, outsourcing and competition in public services.” Monbiot calls this cocktail “neoliberalism” (more on the name later).
There’s a lot in the article that I agree with. The political and economic takeover of the Western world by the super-wealthy was not accomplished by force, nor by rich people simply demanding a larger slice of the proverbial pie. Instead, it happened because many people—particularly in the media, the think tank intelligentsia, and the political community—internalized the idea that competitive markets provided the solution to all problems. (The idea that unfettered capital markets and financial innovation would be good for everyone, which helped produce the financial crisis, is only a special case of this larger phenomenon.)
I like Monbiot’s framing of how this works:
So pervasive has neoliberalism become that we seldom even recognise it as an ideology. We appear to accept the proposition that this utopian, millenarian faith describes a neutral force; a kind of biological law, like Darwin’s theory of evolution.
Sometimes it does seem like evolutionary biology and the simply model of supply and demand are the two most common models that people turn to when trying to explain things they don’t really understand.