How Little Wisdom: maxims from economics

"Do you not know, my son, with how little wisdom the world is governed?"
- Axel Oxenstierna

"Did you ever think that making a speech on economics is a lot like pissing down your leg? It seems hot to you, but it never does to anyone else."
- Lyndon B Johnson, supposedly

Some insights derived from economics. Together they form an open worldview nowhere near as sterile and dismal as that which the field is usually thought to instil. Note that few actual economists absorb these - but then, few have any philosophy at all, beyond the third-hand naive positivist-utilitarianism which stands in for a party-line in the Main Stream. There is humanity and honesty available in economics: so I cite the heterodox economics movement - those of us who think of people as people, economies as economies, and economics as one day becoming a real science.

1. It is hard to change people.

"All that moves us without violence, then, is persuasion, the realm of rhetoric."
- Deirdre McCloskey.

People change all the time, but trying to direct that change is notoriously technical and intensive work (see maxim 2). This is why some people say, mistakenly, that incentives are the core of economics: they're the easiest way to get folk to shift. (Take the environmental policy brouhaha - even when reasonable doubt is ruled out, we, the world, keep dumping. Appeals to reason have convinced only a very few of us to make significant changes. Hence, all the proposals involve increasing emission costs one way or other, and letting people reallocate around that.) Whether this is because we're hardwired for certain myopic behaviour by biology, habit or culture, or just because we're lazy and stubborn is besides the point up at this level of abstraction. Note that this maxim does not preclude social engineering, i.e. progressive politics. But along with #2, 3 & 7, it gives us an idea of the sheer effort and risk it will take.

Giant-ass thesis: Non-political factors are more powerful than political factors.
Countermanding thesis: But economics is only one of the non-political factors.

HETERODOX ECONOMICS BRAG: Too many economists just give in in the face of this. The remainder of us risk making what Adrian Leftwich calls the "technicist fallacy": the dubious assumption that all governance problems have a policy solution.

2. It always depends.

Economies are complex in the hardest sense: analysis takes place with such gross uncertainty and such limited experimentation that unconditional answers are usually dishonest. Certainly anyone forecasting economic trends is doing so out of quackery or theory-blinded ignorance. Admittedly the third thing you learn in basic ec is the phrase In ceteris paribus - "all things remaining equal" - i.e. "it doesn't depend!" - but at least that means they admit there's a problem. A further gaping gap in the old theories has been sighted (that modernism will eat itself and shit the future). Soon we'll get our chance to fail to fill it. I'm talking postmodern economics, a seemingly unlikely creature, but one which actually follows easily from good economics' obsession with contingency, (post-structuralist!), and anarchic nature of economies.

HETERODOX ECONOMICS BRAG: This is not to say that scepticism is a virtue in much of economics; regrettably it is not. (Excepting, of course, radical scepticism about moral or collective action, which they're mad for.)

3. Things fall apart, but sometimes they fall into place too.

The ghost of Kant gums up arguments on political economy: many people have a (vague) intuition that the amoral intentions trump any accidental good of markets: I have heard things like "capitalists don't care about social outcomes - all social outcomes determined by capitalists will be to their advantage". Well, yes, if they're doing their job and are lucky, it will. A less unreasonable question is whether it is only to their advantage. This mindset holds exploitation to be any case in which people are used as a means. (Stronger definition: the act of using labour without offering adequate compensation.) (Broader definition: any relationship of unequal benefit.) Under each of these definitions, every employer* is an exploiter, since they wouldn't employ you if they couldn't milk more value out. (*Every "rational" employer - see #4.)

"The only thing worse than being exploited by capitalism is not being exploited by capitalism."
— Joan Robinson

But I no longer think this inherently wrong: there is joy, capability and existential relief in job creation, regardless of what the employer intended. I refuse to use people - except that my participation in this economy and history have made that move for me. So my conception of what is moral is larger now: sadly aposteriori as well as tritely virtuous.

Consider this (if it makes you angry then you have the ghost of Kant in you) "the dastardly and amoral oil cartel OPEC have done more to slow global warming than all activist efforts combined." (The argument is that by distorting the oil price upwards for forty years, they made people economise and incentivised the development of cleaner energy. Shoddy discussion here. Entirely accidentally - a thing fallen in place.)

2+3. Protection is sometimes unsafe.

Moral judgments are one-step:

"People are poor? Oh. Give em money."

"People pollute? Oh. Make em stop."

"Landlords charge too much? So make em stop."

But the world is anything but one-step! The analysis of behaviour in terms of incentives - for all that it's often used for self-congratulatory cynicism - is at least capable of looking ahead, a little way beyond the second domino. Properly moral action demands it.

4. People aren't stupid

Huh?! Hold on, hold on: let me set up my easel and astrolabe.

a. I mean the assumption of economic rationality. This "rationality" is quite different from the real thing, note - it corresponds to the will to more stuff and the rarer derived will to efficiency.) The assumption has come under fire, being as it is a ridiculous caricature of human inner life. However. Traditionally there's two ways for theory to succeed: either it's true, or it'd be good if it was. Since rational choice is neither, it is rejected and despised.

The kicker comes when we consider the alternative assumption: that people are often irrational. How do we shape policy around this? What kind of road do we build? How do we design insurance schemes or benefits? It turns out that it is punishingly hard to do without: #4 is the behavioural version of Donald Davidson's principle of interpretative charity. Rational choice "theory", reconstructed this way, is not a substantive theory at all but a provisional methodological principle.
Now, the behavioural economists - actual scientists! - will inherit the earth one day soon. But policy prescription won't easily follow from their discoveries regarding our unpredictability and perversity, because while there's only one way to be economically rational*, there are thousands of ways to be irrational. (*This is not technically true. But how can rational choice can accomodate macro events like the 2008 disaster? Surely that really was just animal spirits - the lord of the flies set loose in stock exchanges? In part, yes. The good choicist's answer is to decouple rationality from efficiency; it is here that we can boot the neoclassicals for their intellectual malfeasance. Crises can thus be explained in terms of rational but revoltingly inefficient collective action problems, rather than mass hysteria.

""All models are wrong but some are useful."
— George Box

b. #4 also means that economists do not take false consciousness seriously. "Metapreferences" (i.e. our inescapable and omnipresent social conditioning) are invisible to them. This has a positive aspect: economists are able to respect people's choices in a flawed world. This is also a kind of courtesy: "You're prudent until proven otherwise". Unlike Marxism and the new economics of happiness, even the nastiest neoclassical theory does not presume that it knows better than you what is good for you. This presumption is not a dealbreaker for me, because ideology is too powerful and illiberal to ignore, but I recognise that calling people brainwashed has a cost.

HETERODOX ECONOMICS BRAG: Groundwork for an economics which includes metapreferences (and virtues other than shrewdness) is hot off the press.

5. Efficiency is humane.

Somewhere along the way rejecting the Victorian era's hypocritical bullshit, the idea arose that being efficient is inimical to some basic human will. (The will to piss about, perhaps.) This might be so, and is certainly agreeably Romantic. But as well as losing its social prominence, efficiency lost its moral connotation: the word "economy" originally meant good household management, "thrift" meant . This is a mistake: economy is ecological! And, in a world of scarcity, it can be deeply moral too. If you ain't using it, someone will; if you don't need it or particularly want it, don't use it; therefore thrift.

6. Sometimes there is no right answer.

""The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."
— Friedrich von Hayek

Read normatively, this is a fairly common idea. Read epistemically - as causal nihilism - well, I'm just mad, lulled by inches to madness by the music of reason. (Which is fine.) Capitalism sucks. But it really probably sucks less than the other current options, and doesn't have to stifle future ones. Remember #3: it accidentally clothes and feeds us, it accidentally enables state spending on education and health and law. It accidentally created surplus time in which to think. For all else that it accidentally or callously does, do not deny this.

7. Most things fail.

(Even before considering De Beauvoir's more fatal sense.) So: things don't work: and worse, most fail silently, creating a false sense of security. This is the least mainstream insight, but watch its space.