(This is for my friend, Obey, in partial fulfillment of his request.)
I think we can lay some of
the blame for the excision of economics from the body of moral philosophy at
the feet of Lionel
Robbins (may he rest in peace), who asserted that “economics is fundamentally distinct from Ethics” in his Essay on the Nature and Significance of
Economic Science published in 1935.
Economics is neutral
between ends. Economics cannot pronounce on the ultimate validity of judgment
between ends....[Economics] is incapable of deciding as between the
desirability of different ends.
It was a position taken
earlier by John Neville Keynes (Maynard’s father) and by Pigou, but Robbins
influence may have been greater because of the timing. The book was republished
in 1948 just as mathematical momentum was building. It is probably also
significant that Robbins’ pronouncement about the impossibility of
interpersonal comparisons of utility gained widespread and rather uncritical
acceptance among most economists even today. But that is a technical point
better left to another blog.
Of course, all of this was
unfolding in a world that had come to view science and the scientific method as
the sole road to Truth and Beauty. Mathematization elevated economics above the
other social sciences because it rested on magical mathematical foundations. Scientific
rigor was ours!
The effect of this was to
relegate discussions of economic welfare to narrow corners of discourse
grounded in desolate Edgeworth
boxes where the emphasis was on relative prices, trades to zero sum optima,
and convex preferences with little or no attention paid to why person A started
with so few resources relative to person B. The joys of being in the “core of
the economy” were celebrated even if being situated at that efficient bliss
point left person A holding only a few percentage points of total output while
person B held all the rest.
Within the ever-popular
Paretian framework, there was no possibility that person B might care about person
A’s relative lack of resources, that B might be willing to give up something,
transfer it to A to make A materially better off, while allowing B to become
(at least in moral utility space) much better off. Or that B might be willing
to tolerate some inefficiency in order to make A better off. Kaldor-Hicks
introduced even more profound and possibly unjust principles, but that is
another blog, too.
Back to my somewhat
simplified story: economics was mathematized and divorced from moral
philosophy, but it was the timing that mattered. The Great Depression had concentrated
both policy and political interest on distributional aspects of allegedly
efficient allocations. The events leading up to the Depression demonstrated the
lie of market efficiency, at least in financial markets. And it showed that
what happened at the top of the economic and social pyramid had dire
consequences for the bottom of the pyramid and for the wealth of the nation as
a whole (something that apparently would not have surprised Adam
Smith). The Great Depression caused many to doubt the value of capitalism,
except, of course, investment bankers who knew that speculation (as opposed to
long-term investment) was quite lucrative as long as they got out before the crash
or, as they have recently learned, as long as they can induce the taxpayers of
the US to provide single-payer credit default insurance.
Because of the Depression,
John Maynard Keynes’ (at the time) rather radical thoughts on employment,
money, and interest increasingly gained acceptance. World War II provided the massive
Keynesian stimulus needed to haul us out of depression and to cement Keynes
ideas about the roles that government could and should play both during
economic downturns and to prevent them. Of course, the increased
regulation and taxation that accompanies such policies represented a major
threat to business as usual particularly in financial markets where the lure of
speculative gains is always irresistible.
Keynes, who advocated that
government play a role in moderating the effects of peaks and troughs in the business cycle through
regulation of investment banking and automatic demand stabilizers (for example,
unemployment compensation and jobs creation through public works) became conflated
(perhaps intentionally) with “socialism” and “communism.” When Lauri Tarshis
tried to write about Keynesian economics in his 1947 textbook, he was effectively
silenced
in much the same way and by many of the same people who
were so effective at silencing Samuelson on military spending. Samuelson’s text
“contained
no more than a few words on American defense spending, and none on its size in
relation to the federal budget or its effect on the economy.” The Right would paint
them as “red” and the Board of Regents of their universities would bring
pressure to bear for writing subversive textbooks.
Economics, mathematized
and divorced from moral philosophy, was effectively neutered after WW II, at
the point when its relevance to “serious economic argument” might have been
established and developed. The outcome was perfectly aligned with market forces
that would continue to shift the national narrative in ways that would finally succeed
in convincing people that “government
is the problem”. It culminated in repeal of Great Depression era regulation,
thereby freeing investment bankers for unfettered speculative gains supported
by a seemingly unfettered single-payer credit default safety net.
Now add to this the
promotion and tenure policies at even second rate economics departments that
require and only reward publication in journals that favor morally vacant,
mathematically rigorous, theoretically obtuse existence proofs that more often
than not bear no relation to reality as we know it. One is then left with an
economics literature that few people, including some who have majored in
economics as undergrads, can truly understand, either in its content or in its
relevance to the important moral and economic issues that confront us today.
It is no wonder that many
people cannot “tell the difference
between cynical posturing and serious economic argument.” This is a
resounding indictment of economists and the economics profession. The market
supported and promoted it. We as a profession benefited from it with higher
salaries and consulting fees. Meanwhile, the “tragic consequences” of our
failure include a country that
inefficiently spends twice as much as any other developed country on health
while leaving roughly 20% of the population with no cover, a 10% unemployment
rate, and a growing
home mortgage foreclosure rate, all while providing single-payer credit default
insurance, financed by low and middle income taxpayers, to the richest portion
of the population, the guys who ran us into the ditch; the guys who cannot be
taxed for fear they will cease to provide us with the dubious benefits of their
financial expertise and acumen.
We appear to be at a
political impasse because the idea that “government is the problem” has become
entrenched. A moral philosophy pretending to be a science devoid of normative judgment
has aided and abetted that idea by elevating efficiency above any other
possible moral or even economic consideration. The result is that many in the
US and in the world who lack the math acumen to appreciate the subtleties of
economic theory stand enthralled by sound bites derived from a handful of dead
economists and one dead president.
Economics provided the
theory and language that supported the drive to the ditch we find ourselves in.
We did it by allowing economics to become divorced from moral philosophy. Now the economy is on life support and most people in this
democracy can’t tell the “difference between cynical posturing and serious
economic argument,” but they can and will vote.
If economists were
physicians, we would be sued for malpractice.
