June 24, 2005


Ariel, our economist in training, is a pretty big fan of the hit book Freakonomics. I read half of the book one day and I appreciated it as quirky, fascinating, powerful microeconomics done well. That said, I had similar qualms with it as I have with a great deal of more classically-oriented economics: the axioms about human nature on which it's based. That basically all human beings are the same, that they share some innate rationality, that we as agents use this mystical rationality to optimize our happiness, and that, to some extent, we're all made happy by similar things. I understand that this kind of economics leaves room for differing individual conceptions of happiness, so that people will take different paths towards optimizing their well-being, but in the worldview of someone like Steven Levitt the difference is more a variegation than a real variety, with all human beings essentially pursuing certain well-defined, and highly normative, types of happiness.

For me, the problem is a pretty serious epistemological one about the nature and domain of economics as a discipline. It occupies shifty ground as a science whose subject is human behavior. Although it shares with psychology an empirical method, it's more like mathematics in its underpinnings because it starts with such well-defined axioms and definitions about human behavior, namely all that facile assignation of "agency" and "rationality" to human beings, on which all its empirical explanations rest. Or so it seems to me, who cannot at all claim to know much economics but who am interested in the philosophies of mathematics, of science, etc. I'd be curious to know about any really serious treatments of the philosophy of economics which might address what I'm talking about.

I understand that not all economics works on such narrow premises, and that a lot of really great and innovative work has expanded economists' concepts of costs, benefits, and rationality. But I was also dismayed when I asked Ariel whether she knew of any economics studying decidedly non-capitalist economies such as many of the old Native American ones and those of smaller, isolated, tribal or communal societies, where ideas of agency, costs, and benefits were or are often alien. She said no she had not studied any such work and did not know of any.

How would economics describe these equally functional economies? It is certainly possible that the concepts of costs, benefits, and incentives--concepts proven to have great explanatory power--would rise to the challenge, be adapted and revised, and make sense of these systems without a massive overhaul of all economics. I would like to hear about some work in economics challenging itself to describe systems both existent and potential of social arrangements different from the capitalist one we know so well. It might be enlightening for everyone, and might even help us improve on our own capitalist society.

But getting back to Freakonomics, I offer you a provocative critique of the book on grounds similar to mine. The magazine is called N+1, the author one Meghan Falvey, and the article "Weakonomics." If you haven't read the book the article's still worth reading. Here's an excerpt from the conclusion, which suggests some immediate political consequences to this whole debate:
In this the Freakonomist is only a symptom of a pervasive metaphorical creep that has been underway for some time now. The trend toward understanding human beings as maximizers of gain and avoiders of loss has a longer history than Freakonomics'’ eight-week residency on the Times'’ bestseller list. Indeed, it is difficult to think otherwise of ourselves these days. How naturally we grasp ourselves as rational navigators of various markets: markets for friends and lovers, for career advancement, for our weekend leisure time, our political commitments. We budget and invest our time, our effort, our sympathies and pleasures. It's true that this perspective is substantially inflected with that other popular theory of self, Freudianism. But since the explosion of market exchange, seeing ourselves and others as market players has become irresistibly, sensibly alluring.

+ + +

Why does this matter? Metaphors abound. But this metaphor matters because it underpins political transformations making them seem either more palatable; or, when it runs unopposed, natural and inevitable. Our description of the rational self supports the real-world conditions under which some futures seem more attainable than others. It coaxes us into wholehearted, personally felt participation with capitalist regulation.

Levitt's calculating individual is the ideal subject of contemporary neoliberal economic reform, in particular the expansion of the market into all possible areas of life. Blair's "“stakeholder society"” and Bush's "“ownership society"” are based in just such a fictitious understanding of the individual as Levitt offers. Bush and Blair naturally take their slogans from shareholder prospectuses. Their programs involve predictable amendments to federal pension plans and tax codes. And both initiatives hail an entrepreneurial subject who is willing to negotiate various markets in the course of providing for their needs and wants. If Bush promises to make it easier for you to own a home, then what does it matter if you or anyone else has a right to shelter?

1 comment:

  1. Modern economics is not merely about "capitalist economies"--it is about figuring out testable implications from two simple assumptions: that people know what they want (ie, have preferences), and that they will try their best to do it (ie, they will rationally/economically pursue their goals given the contraints they face or perceive).

    Obviuosly, these assumptions are not always correct--but the only way of identifying such cases is by actually testing their empirical predictions.

    So, unless you believe that individuals in small tribes do not have preferences and that they do not understand the consequences of their choices--economic reasoning can work just as good in any social context.