Suppose you criticize current neoclassical teaching in introductory microeconomics. A defender might reply that it is common to teach incorrect models in introductory classes. Only when the students have that background can they go on to the more sophisticated teaching. For example, physicists teach Newtonian mechanics. They do not start with quantum dynamics and the special and general theories of relativity.
I doubt this defense. Physics can roughly state the domain of applicability of Newtonian physics - medium size dry goods. Physicists have had empirical success within that domain to an astonishing degree of precision. I doubt economists can point to a success where they can notice tiny variations from their predictions analogous to the deviation of the perihelion of the orbit of Mercury of 43 seconds of arc per century or the deflection of the location of stars observed during a solar eclipse. But I do not want to argue about the relative empirical success of simplified theories in economics and physics.
Rather, I want to point out a large difference in the status of such introductory theories in popular culture. A large body of literature exists, popular among schoolchildren and others, pointing out the limitations of Newtonian mechanics. I refer to Science Fiction. The speed limit imposed by the speed of light, for example, is a common trope in SF. It is true that some authors do not hold to it. But they often insist that when their characters violate the constraints of the theory, they utter some jargon: "tachyon nexus", "wormhole", "space warp". Furthermore, SF authors tell many stories where these limits play out, for example, with generation ships that may accelerate and decelerate and in which the crew are quite aware of the difference between their slowed-down local time and the time of the folks back on planet earth. I think that SF back in the forties and fifties may have been more prone to contain lectures about these matters. Nevertheless, I think many students of introductory physics are aware that the truths of Newtonian theory, which they can see played out in the laboratory, do not extend to all of the universe of physics.
I suggest even if you can find accounts in popular culture of, say, implications of game theory inconsistent with introductory microeconomics teaching, you cannot find something as popular and pervasive for economics as SF is for physics. The culture resists somebody preaching physics 101 as an explanation for everything physical.
Figure 1: Paul Krugman And Bill O'Reilly Talk To Tim Russert
"My problem was ... to pose the question, 'How is it that at certain moments and in certain orders of knowledge, there are these sudden take-offs, these hastenings of evolution, these transformations which fail to correspond to the calm, continuist image that is normally accredited?' But the important thing here is not that such changes can be rapid and extensive or, rather, it is that this extent and rapidity are only the sign of something else - a modification in the rules of formation of statements which are accepted as scientifically true. Thus, it is not a change of content (refutation of old errors, recovery of old truths), nor is it a change of theoretical form (renewal of a paradigm, modification of systematic ensembles). It is a question of what governs statements, and the way in which they govern each other so as to constitute a set of propositions that are scientifically acceptable and, hence, capable of being verified or falsified by scientific procedures. In short, there is a problem of the regime, the politics of the scientific statement. At this level, it's not so much a matter of knowing what external power imposes itself on science as of what effects of power circulate among scientific statements, what constitutes, as it were, their internal regime of power, and how and why at certain moments that regime undergoes a global modification.
It was these different regimes that I tried to identify in The Order of Things, all the while making it clear that I wasn't trying for the moment to explain them, and that it would be necessary to try to do this in a subsequent work. But what was lacking here was the problem of the 'discursive regime', of the effects of power peculiar to the play of statements. I confused this too much with systematicity, theoretical form, or something like a paradigm. This same central problem of power, which at that time I had not yet properly isolated, emerges in two very different aspects at the point of junction of Madness and Civilization and The Order of Things." -- Michel Foucault, "Truth and Power", reprinted in The Chomsky-Foucault Debate: On Human Nature, The New Press (2006), pp. 144-145.
I do not know that I understand Michel Foucault, and I have not read much that he wrote towards the end of his life. I had thought Foucault's discursive formations were to be grouped with Thomas Kuhn's paradigms and Imre Lakatos's scientific research program. To me, economics is like medicine, psychiatry, and penology. It fits in well with the disciplines that Foucault analyses. Superficially, the epistemic status of these disciplines is more questionable than a hard science. And they have been used to help nation states categorize, partition, and rule their subjects since, say, the eighteenth century. But I want to drop talk of science for now. I look at a concrete example to help me understand what Foucault might mean when he talks about government, power, the political economy of the sign, a discursive regime, and politics. Doubtless, I will miss many, many nuances here.
You can see many commentators and supposed experts in the media, although, for many, I am none too clear in what area they are expert. (I have in mind such people as Rush Limbaugh, Bill O'Reilly, and even Wolf Blitzer and Thomas Friedman.) Many write best-selling books. A book store will classify them, when they come out, in a section labeled "current events". I suppose libraries will put them somewhere in social sciences. People with the sort of media presence I have in mind can be said to benefit from a sort of power for their statements. From an analytical point of view, you might know a drunk at the end of your local bar who is more worth listening to. Yet these commentators react to one another, take each other seriously, and end up having effects on laws that are passed. At least one kind of power circulates among their statements, a power that is not easily available to those taking their own way at your local.
Foucault also writes about power being productive, not solely a matter of prohibitions. How does the above clip illustrate this theme? Those who have power circulating their statements can sometimes dismiss others as living in a "fantasy world". But I think the power we see in right wing commentators in America extends to individuals in communities across the country. You can find many who think they keep informed by watching TV news. And they will have conversations with one another, maybe conversations that you could not participate in without being seen as rude, dismissive, and condescending. Some of these people might even participate in governing your community by participating in, say, the school board, the city council, or state government. Within such groups, you might find an intellectual who has read, for example, Hayek's Road to Serfdom on Glenn Beck's recommendation. So this power I am vaguely pointing at helps form local communities, as well as national discourse.
I consider Krugman to be at a different level of seriousness than the other two people in the above clip. Still these questions arise for him. What power gets his statements listened to and to circulate widely? It would be a mistake to classify his statements solely as part of the academic discipline of economics. For example, his newspaper columns about the Iraq war do not have much to do with economics. And a regime in which he occupies the acceptable left wing of the public face of economics seems quite limiting to me. When Krugman debates Keen through their blogs, it seems clear who is doing the other more of a favor to acknowledge the existence of the other's work, whatever you make think of the outcome of that debate.
I trust that one can see that in merely acknowledging the existence of political power that allows Krugman's statements to circulate, I am not thereby criticizing their content or what Krugman does with this non-personal power. In fact, I think Krugman has quite often acknowledged the power of his platforms and talked about how that influences his topics. As far as I know, he does not read Foucault. (Has not Brad DeLong written a bit on Foucault?) I am not sure what Krugman has said about his willingness to participate in the sort of hurlyburly babble seen in the above clip, other than that he sometimes has a book to promote. I suppose the bit where he leans back and rolls his eyes at the ceiling is comment enough on his particular antagonist there. I think Krugman would even be receptive to claims about the lack of agency of the author. He is rarely as forthright as in the above clip about calling a lie, "a lie". And he knows that his conventions do not allow him to comment on nonsense spouted by his fellow columnists, except very elliptically.
By the way, the video clip above is not directly from a major network. Apparently, it was put on YouTube with annotations added by Jim Gilliam. And, of course, I do not claim the power of those you might see babbling on your television.
This paper reports a pilot study on the political views of the wealthiest Americans. The authors gathered data in interviews with residents drawn from a sample of the very wealthy in Chicago. Page et al. motivate their interest in the policy preferences of wealthy Americans by noting recent research demonstrating that the vast majority of the country has little to no influence on policy decisions made in the Federal government. They hope to expand their research to a national
sample in the future.
They report views on many areas of public policy. Generally, our rulers are reactionary and the opposite of benevolent. Business backgrounds in finance or industry, inherited wealth or "earned" wealth, were not correlated with differences in views. The sample size might be too small to provide enough power to distinguish, among the wealthy, effects of where they sit on where they stand. Professionals, mainly lawyers and doctors, tended to be slightly less reactionary.
Above, I reproduce Table 3 from this paper. Those surveyed "think" government budget deficits are the biggest problem facing the United States. One might suggest that lowering such deficits could be only an intermediate, instrumental goal. But towards what end? Page et al. note that they do not seem worried about deficits leading to high rates of inflation; notice how low inflation is as a worry. Page et al. suggest that the wealthy have bought into the "crowding out" argument. Of course, theoretically, supply and demand for savings does not determine interest rates. Empirically, the crowding out argument makes no sense in the current conjuncture either.
I have an old explanation of this puzzle.
Paul Krugman recently cited Michal Kalecki's explanation of why capitalists dislike increased government spending in depressions, even though such fiscal policy successfully dampens downswings in business activity. Krugman is not just depending on the capability of Kalecki's explanation to make sense of history long post-dating Kalecki's contribution. Krugman is also aware of the quantitative survey data I cite above.
I think many people, without too much thought, naturally intuit:
The system under which they live works fairly well.
Somehow, they are being exploited.
The first idea might come partly from modifying your ideas to fit your constraints. You aren't likely to drastically change the world, so you might as well accept it as it is. Another source of the first idea is the ruling ideas of society, which as the man said, are the ideas of the ruling class. Maybe the second idea comes partly from how your success isn't as much as that of others around you.
I suggest a third element, other than the above two contradictory ideas, contributes to the formation of monetary cranks. That is a surprising revelation about some details about how some institution that you interact with every day actually works. What do you mean that banks don't have money for my deposit immediately on hand? Doesn't this paper, accepted as money, represent a quantity of gold that the government is obligated to pay out? People naturally look for a concrete foundation for their practices and are left in the air when it isn't to be found.
I suggest some combine some such mishmash of ideas to conclude that the system can be set right if one particular thing is changed. And something about money is often taken to be the thing to be changed. Others might look at rent on land. I find it suggestive that Henry George's popularity is almost contemporary with closing of the American frontier.
For purposes of this discussion, I deliberately do not identify which ideas are crankish, whether it be advocacy for stamped money, social credit, or a belief that interest rates reflect the interaction of supply and demand for loanable funds. Nor, of course, does labeling an idea with an insult show why it is wrong, if it is.
Marx may or may not be correct in these passages. But these, and expansions of these passages, certainly contain claims worth thinking about:
"Let us take England. Its political economy belongs to the period in which the class-struggle was as yet undeveloped. Its last great representative, Ricardo, in the end, consciously makes the antagonism of class-interests, of wages and profits, of profits and rent, the starting point for his investigations, naively taking this antagonism for a social law of nature. But by this start the science of bourgeois economy had reached the limits beyond which it could not pass. Already in the lifetime of Ricardo, and in opposition to him, it was met by the criticism, in the person of Sismondi.
The succeeding period, from 1820 to 1830, was notable in England for scientific activity in the domain of Political Economy. It was the time as well of the vulgarizing and extending of Ricardo's theory, as of the contest of that theory with the old school. Splendid tournaments were held... The literature of Political Economy in England at this time calls to mind the stormy forward movement in France after Dr. Quesnay's death, but only as a Saint Martin's summer reminds us of spring. With the year 1830 came the decisive crisis.
In France and in England the bourgeoise had conquered political power. Thenceforth, the class-struggle, practically as well as theoretically, took on more and more outspoken and threatening forms. It sounded the death knell of scientific bourgeois economy. It was no longer a question, whether this theorem or that was true, but whether it was useful to capital or harmful, expedient or inexpedient, politically dangerous or not. In place of disinterested enquirers, there were hired prize-fighters; in place of genuine scientific research, the bad consequence and the evil intent of apologetic..." -- K. Marx, Capital, Volume 1, Author's Preface to the Second Edition
"A commodity is therefore a mysterious thing, simply because in it the social character of men's labour appears to them as an objective character stamped upon the product of that labour; because the relation of the producers to the sum total of their own labour is presented to them as a social relation, existing not between themselves, but between the products of their labour. This is the reason why the products of labour become commodities, social things whose qualities are at the same time perceptible and imperceptible by the senses... With commodities... the existence of the things qua commodities, and the value relation between products of labour which stamps them as commodities, have absolutely no connection with their physical properties and with the material relations arising therefrom. There it is a definite social relation between men, that assumes, in their eyes, the fantastic form of a relation between things. In order, therefore, to find an analogy, we must have recourse to the mist-enveloped regions of the religious world. In that world the productions of the human brain appear as independent beings endowed with life, and entering into relation both with one another and the human race. So it is in the world of commodities with products of men's hands. This I call the Fetishism which attaches itself to the products of labour, so soon as they are produced as commodities, and which is therefore inseperable from the production of commodities." -- K. Marx, Capital, Volume 1, Chapter 1, Section 4: The Fetishism of Commodities and the Secret Thereof
"Capital - profit (profit of enterprise plus interest), land - ground-rent, labour - wages, this is the trinity formula which comprises all the secrets of the social production process.
Furthermore, since as previously demonstrated interest appears as the specific characteristic product of capital and profit of enterprise on the contrary appears as wages independent of capital, the above trinity formula reduces itself more specifically to the following: Capital - interest, land - ground-rent, labour - wages, where profit, the specific characteristic form of surplus-value belonging to the capitalist mode of production, is fortunately eliminated.
On closer examination of this economic trinity, we find the following: First, the alleged sources of the annually available wealth belong to widely dissimilar spheres and are not at all analogous with one another. They have about the same relation to each other as lawyer's fees, red beets and music.
Capital, land, labour! However, capital is not a thing, but rather a definite social production relation, belonging to a definite historical formation of society, which is manifested in a thing and lends this thing a specific social character. Capital is not the sum of the material and produced means of production. Capital is rather the means of production transformed into capital, which in themselves are no more capital than gold or silver in itself is money. It is the means of production monopolised by a certain section of society, confronting living labour-power as products and working conditions rendered independent of this very labour-power, which are personified through this antithesis in capital. It is not merely the products of labourers turned into independent powers, products as rulers and buyers of their producers, but rather also the social forces and the future [? illegible] [A later collation with the manuscript showed that the text reads as follows: "die Gesellschaftlichen Kräfte und Zusammenhängende Form dieser Arbeit" (the social forces of their labour and socialised form of this labour). - Ed.] form of this labour, which confront the labourers as properties of their products. Here, then, we have a definite and, at first glance, very mystical, social form, of one of the factors in a historically produced social production process.
And now alongside of this we have the land, inorganic nature as such, rudis indigestaque moles, [Ovid, Metamorphoses, Book I, 7. - Ed] in all its primeval wildness. Value is labour. Therefore surplus-value cannot be earth. Absolute fertility of the soil effects nothing more than the following: a certain quantity of labour produces a certain product - in accordance with the natural fertility of the soil. The difference in soil fertility causes the same quantities of labour and capital, hence the same value, to be manifested in different quantities of agricultural products; that is, causes these products to have different individual values. The equalisation of these individual values into market-values is responsible for the fact that the 'advantages of fertile over inferior soil ... are transferred from the cultivator or consumer to the landlord'. (Ricardo, Principles, London, 1821, p.62.)
And finally, as third party in this union, a mere ghost - 'the' Labour, which is no more than an abstraction and taken by itself does not exist at all, or, if we take... [illegible], the productive activity of human beings in general, by which they promote the interchange with Nature, divested not only of every social form and well-defined character, but even in its bare natural existence, independent of society, removed from all societies, and as an expression and confirmation of life which the still non-social man in general has in common with the one who is in any way social." -- K. Marx, Capital, Volume 3, Part Seven, "Revenue and Theirs Sources", Chapter 48: The Trinity Formula
"The form of revenue and the sources of revenue are the most fetishistic expression of the relations of capitalist production. It is their form of existence as it appears on the surface, divorced from the hidden connections and the intermediate connecting links. Thus the land becomes the source of rent, capital is the source of profit, and labour the source of wages. The distorted form in which the real inversion is expressed is naturally reproduced in the views of the agents of this mode of production. It is a kind of fiction without fantasy, a religion of the vulgar. In fact, the vulgar economists - by no means to be confused with the economic investigators we have been criticizing - translate the concepts, motives, etc., of the representatives of the capitalist mode of production who are held in thrall to this mode of production and in whose consciousness only its superficial appearance is reflected. They translate them into a doctrinaire language, but they do so from the standpoint of the ruling section, i.e., the capitalists, and their treatment is therefore not naive and objective, but apologetic. The narrow and pedantic expression of vulgar conceptions which are bound to arise among those who are the representatives of this mode of production is very different from the urge of political economists like the Physiocrats, Adam Smith and Ricardo to grasp the inner connection of the phenomena." -- K. Marx, Theories of Surplus Value, Part III, Addenda, "Revenue and Its Sources. Vulgar Political Economy", 1.
A famous author; a coiner of phrases that have become common currency among educated Americans; a shaper of the way those educated Americans viewed society, including the economy, for at least a generation; in charge of setting prices throughout the United States during World War II; a major contributer to the United States Strategic Bombing Survey; an inspiration for Kennedy/Johnson anti-poverty schemes; an Ambassador to India; a president of the American Economic Association; a president of the American Academy of Arts and Letters; a Harvard professor with an endowed chair; a recipient of many honorary degrees - Galbraith overtowered almost any other economist in the United States in the last fifty years.
In directing his countrymen and women's attention to - or persuading them of - the coexistence of private affluence and public squalor, Galbraith attempted to both describe an aspect of the world and to improve matters. This coexistence has something to do with such distinctions as between goods tending to be invididually consumed and those collectively consumed, between those goods which are easily sold on markets and those which are not. Here is a well-known passage from Galbraith's pen:
"The family which takes its mauve and cerise, air-conditioned, power-steered, and power-braked automobile out for a tour passes through cities that are badly paved, made hideous by litter, blighted buildings, billboards, and posts for wires that should long since have been put underground. They pass on into a countryside that has been rendered largely invisible by commercial art. (The goods which the latter advertise have an absolute priority in our value system. Such aesthetic considerations as a view of the countryside accordingly come second. On such matters we are consistent.) They picnic on exquisitely packaged food from a portable icebox by a polluted stream and go on to spend the night at a park which is a menace to public health and morals. Just before dozing off on an air mattress, beneath a nylon tent, amid the stench of decaying refuse, they may reflect vaguely on the curious unevenness of their blessings. Is this, indeed, the American genius?" -- John Kenneth Galbraith (1958). The Affluent Society
This problem of social balance fits into a larger Galbraithian thesis. Galbraith argued that certain habits of thought were adapted to a period when goods were primary necessities, when the importance of production was in the output. Nowdays in, say, the United States, he argued, production is of importance more for providing employment, the income to purchase goods, feelings of self-worth of the producers, etc. When he propounded this thesis, and perhaps even today, conventional wisdom still reflects the former situation.
Galbraith's concept of the "Conventional wisdom" parallels, in some sense, Gramsci's concept of hegemony. Galbraith looked at whose needs economists serve:
"The most commonplace features of neo-classical and neo-Keynesian economics are the assumptions by which power, and therewith political content, is removed from the subject. The business firm is subordinate to the instruction of the market and, thereby, to the individual or household. The state is subordinate to the instruction of the citizen...
The decisive weakness in neoclassical and neo-Keynesian economics is not the error in the assumptions by which it elides the problem of power. The capacity for erroneous belief is very great, especially where it coincides with convenience. Rather, in eliding power - in making economics a nonpolitical subject - neoclassical theory by the same process destroys its relation with the real world...In consequence neoclassical and neo-Keynesian economics is relegating its players to the social sidelines where they either call no plays or urge the wrong ones...
This is what economics now does. It tells the young and susceptible and the old and vulnerable that economic life has no content of power and politics...Such an economics is not neutral. It is the influential and invaluable ally of those whose exercise of power depends on an acquiescent public. If the state is the executive committee of the great corporation and the planning system, it is partly because neoclassical economics is its instrument for neutralizing the suspicion that this is so. I have spoken of the emancipation of the state from economic interest. For the economist there can be no doubt as to where this task begins. It is with the emancipation of economic belief." -- J. K. Galbraith (1973). "Power and the Useful Economist", American Economic Review. V. LXIII, 1, (March).
In studying corporate power, Galbraith built on the work of a diverse set of economists, including Gardiner and Means, Michel Kalecki, John Maynard Keynes, Robin Marris, Edith Penrose, and Thorstein Veblen. One can see in Galbraith theories of dual markets and administered prices, theories that correspond to the realities of modern industrial economies.
Some of Galbraith's work, like Veblen's, is important to Feminist Economics.
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