September 25, 2010

Inefficient Assumptions

Maxine Udall is my favorite economics writer these days, hands down. Her latest post talks about one subject that often confounds me: how can so many people assume that government is the main source of all economic problems? How do so many economists explain away our current economic issues as the result of government intervention, while dismissing the culpability of the private sector.

In some circles, while the government is the source of all evil, the private sector, led by that wonderfully benevolent invisible hand, is almost angelic. I have a really difficult time with analytical frameworks that result in automatic responses, period. For example, some neo-marxists will tell you, almost invariably, that the source of all of our problems is capitalism. Never mind the various contexts in which capitalism exists, or the various forms that it takes, or the multitude of ways in which capitalism plays out (positive and negative)--the problem, in the eyes of some, is always "capitalism". Ok, great. For me this kind of thinking is insufficient. And it's cut from the same cloth as the free-market ideologists who always frame "the state" or "government" as the main culprit in almost any economic disaster.

Udall consistently argues, instead, that the true problem that we need to address is the concentration of power--no matter where it exists (government or private sector). Rather than focusing on the same old ideological responses, maybe we should consider how power, corruption, and coercion can infiltrate many different economic and political systems. Read this:
Regular readers know that one recurring theme in this blog is that concentrated economic and political power in the private sector is as much a "problem" as an ineffective, inefficient guvment especially one that has been deprived of the funds needed to regulate a complex capitalist society based on commercial exchange and characterized in some sectors (like health and finance) by several types of market failure. Regular readers also know that as someone who grew up in a private sector family business, I expect private sector employees and their managers to behave better than caricatures of mindless guvmint bureaucrats that populate cautionary tales about totalitarian guvmints.
Read the rest here. Udall's discussions over on her site illustrate quite well why economics is a social science. The "market" is not some magical, predictable force that has a mind of its own--it's populated and shaped by humans with a varying degree of ethical constraints, desires, and motivations. That means that any economic analysis is going to have to take account of political factors, one way or another. Some economic and social theorists attribute certain predictable traits to particular systems or institutions--"capitalism" and "socialism" being two of the main terms that often get completely reduced to useless ideological caricatures. And while the anti-capitalists and the anti-socialists keep yelling at one another from their respective sides, power continues to accumulate and be deployed in ways that cut across these ridiculously simple divisions.


Douglas La Rose said...

Pandora's box. Once you begin to look into what economics is, "it's turtles all the way down." The rain is economics, the wind is economics, the coffee in the morning is economics - every time you take a step and burn a calorie is economics. The weird thing about economics as a field is that the term is too simple. To make sense, people need to get more specific: economic anthropology, econometrics, etc. To say "I study economics" is meaningless. That could simply mean that you like to watch football.

RE: Capitalism versus socialism. Seems like everyone except for academics realizes that these things are complex, ironically. When social scientists throw around "Marxism" and "Keynesian economics" in seminars, they are probably thinking of those things like ideas with foot soldiers when in fact they are just lose metaphors for how economies operate.

And, whoops, I've probably written more than the original post by now.


Ryan Anderson said...

Exactly: when a lot of people talk about economics, they act as if it's this select category that SOMEHOW isn't embedded in all matters of social and political life. That's why I think it's funny to hear someone talk about fixing "the economy" as if there's some machine out back that just needs a tuneup.

"...they are probably thinking of those things like ideas with foot soldiers when in fact they are just lose metaphors for how economies operate."

Ya...and I love it when people treat those loose metaphors as unquestionable truths!

Douglas La Rose said...

"as if there's some machine out back that just needs a tuneup."