Tuesday, February 18, 2014


DEIRDRE MCCLOSKEY posts (16 June) on “Bleeding-Heart  Libertarians” HERE http://bleedingheartlibertarians.com/2012/06/factual-free-market-fairness/
McCloskey is one of the most original thinkers in the history of political economy writing today, in my view.  Her writing is one of the reasons why I am a softer libertarian and not one of those “harder”, rightwing, sort of Libertarians who hate the very existence of states, nor or those leftwing, hard haters of markets. (A pox on both of your houses, Sir!)
I strongly recommend that you take the time to read her contribution on “Factual Free-Market Fairness” and consider her arguments and some of the 140 comments her thoughts provoked on the “Bleeding Heart Libertarian’s Blog”.
[Note: her essay is part of a symposium on John Tomasi's "Free Market Fairness". For an introduction to the symposium, HERE  for a list of all posts in the symposium, HERE ]
Deirdre writes: “To a discussion by political philosophers a mere fact woman like me, an economic historian trained in the 1960s as a transportation economist, has really only one thing to contribute.  It is, to slightly modify Cromwell’s imprecation to the Scottish Presbyterians in 1650, “I beseech you, in the bowels of Christ, think it possible that you may be [factually] mistaken.” 
[GK: Cromwell was an English Protestant; later the Scottish Presbyterians spit into fundamentalist Covenanters" and traditional "Presbyterians"; Smith was a member of the latter majority grouping.] 
"Factually.  I realize that Kant laid it down that what humans are factually like, or what their history factually was, is forbidden to play a part in ethical reflection.  We are supposed to be looking for principles that any Rational Creature would adhere to, whether a six-headed being in outer space or the man on the Clapham omnibus.  As an economist I can see the charm in assuming a character Max U, or Rational R, and then proceeding.  And I know that most social psychologists (I except among the younger generation Jonathan Haidt, for example, or, Mike Csíkszentmiháyli of my generation, or Jerome Bruner of an earlier generation) find it charming to believe that ethics starts with their own earliest experiments.  Such models and experiments are a lot simpler than reflecting in addition on art and literature and philosophy since the Rig Veda and the Epic of Gilgamesh.  But the modern cleverness after Hobbes and then Kant and Bentham and now with the fierce modernists of freakonomics and hedonic measurement seems less relevant to human experience—which is after all why we would want an ethical theory in the first place—than the virtue-talk of the ages.  We can’t, and shouldn’t, stop being humans, who were once children, and will die, and who reason and love and hope in human ways.  As Will Wilkinson puts it, if hammered into reflective equilibrium with the help of clever thought experiments and modeling assumptions” of the political philosophers since Hobbes, we nonetheless, and even (Will observes) in the very rules of our reflections, “are also going to be, to a very large extent, creatures of our environment.”  Kant’s decision to omit anthropology (which he in fact taught every Saturday in term) was a human and rhetorical choice, not written in the starry heavens.
So: I’m from economics and history, and I’m here to help you.  In the factual background assumed in the elegant contributions here by Elizabeth Anderson and Samuel Freeman there’s a very particular story (less so in Richard Arneson and not at all in Wilkinson), embodied since the late nineteenth century in what Tomasi calls High Liberalism.  The High-Liberal political philosophers such as Anderson and Freeman and Dworkin and Nussbaum rely, against Kant, on a factual story which they take to be so obvious as to not require defense.  I claim that on the contrary their master narrative is mistaken, as anthropology or economics or history.  You can hear versions of it every night on MSNBC (you can hear other mistaken master narratives on Fox News, so understand I am not recommending that)
The story is, in a few brief mottos to stand for a rich intellectual tradition since the 1880s:  Modern life is complicated, and so we need government to regulate.  Government can do so well, and will not be regularly corrupted.  Since markets fail very frequently the government should step in to fix them.  Without a big government ee cannot do certain noble things (Hoover Dam, the Interstates, NASA).  Antitrust works.  Businesses will exploit workers if government regulation and union contracts do not intervene.  Unions got us the 40-hour week.  Poor people are better off chiefly because of big government and unions.  The USA was never laissez faire.  Internal improvements were a good idea, and governmental from the start.  Profit is not a good guide.  Consumers are usually misled.  Advertising is bad.
Thus Anderson: ”Externalities, asymmetrical information, and other collective action problems are . . . pervasive in economic life.  Countless ways of conducting business reap gains for some while imposing unjust costs on others.  Create a cartel.  Stuff rat feces in sausages.”  Thus Freeman: “It is a truism to say that in order to achieve the benefits of an efficient market economy (increasing productivity, greater economic output, increasing productive capital, etc.), the basic rules of property, contract, and exchange must be structured [by government] to realize efficient market relations.”
No.  The master narrative of High Liberalism is mistaken factually.  Externalities do not imply that a government can do better.  Publicity does better than inspectors in restraining the alleged desire of businesspeople to poison their customers.  Efficiency is not the chief merit of a market economy: innovation is.  Rules arose in merchant courts and Quaker fixed prices long before governments started enforcing them.
I know such replies will be met with indignation.  But think it possible you may be mistaken, and that merely because an historical or economic premise is embedded in front page stories in the New York Times does not make them sound as social science.  It seems to me that a political philosophy based on fairy tales about what happened in history or what humans are like is going to be less than useless.  It is going to be mischievous.
How do I know that my narrative is better than yours?  The experiments of the 20th century told me so.  It would have been hard to know the wisdom of Friedrich Hayek or Milton Friedman or Matt Ridley or Deirdre McCloskey in August of 1914, before the experiments in large government were well begun.  But anyone who after the 20th century still thinks that thoroughgoing socialism, nationalism, imperialism, mobilization, central planning, regulation, zoning, price controls, tax policy, labor unions, business cartels, government spending, intrusive policing, adventurism in foreign policy, faith in entangling religion and politics, or most of the other thoroughgoing 19th-century proposals for governmental action are still neat, harmless ideas for improving our lives is not paying attention.
In the 19th and 20th centuries ordinary Europeans were hurt, not helped, by their colonial empires.  Economic growth in Russia was slowed, not accelerated, by Soviet central planning.  American Progressive regulation and its European anticipations protected monopolies of transportation like railways and protected monopolies of retailing like High-Street shops and protected monopolies of professional services like medicine, not the consumers.  “Protective” legislation in the United States and “family-wage” legislation in Europe subordinated women.  State-armed psychiatrists in America jailed homosexuals, and in Russia jailed democrats.  Some of the New Deal prevented rather than aided America’s recovery from the Great Depression.
Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized.  Minimum wages protected union jobs but made the poor unemployable.  Building codes sometimes kept buildings from falling or burning down but always gave steady work to well-connected carpenters and electricians and made housing more expensive for the poor.  Zoning and planning permission has protected rich landlords rather than helping the poor.  Rent control makes the poor and the mentally ill unhousable, because no one will build inexpensive housing when it is forced by law to be expensive.  The sane and the already-rich get the rent-controlled apartments and the fancy townhouses in once-poor neighborhoods.
Regulation of electricity hurt householders by raising electricity costs, as did the ban on nuclear power.  The Securities Exchange Commission did not help small investors.  Federal deposit insurance made banks careless with depositors’ money.  The conservation movement in the Western U. S. enriched ranchers who used federal lands for grazing and enriched lumber companies who used federal lands for clear cutting.  American and other attempts at prohibiting trade in recreational drugs resulted in higher drug consumption and the destruction of inner cities and the incarcerations of millions of young men.  Governments have outlawed needle exchanges and condom advertising, and denied the existence of AIDS.
Germany’s economic Lebensraum was obtained in the end by the private arts of peace, not by the public arts of war.  The lasting East Asian Co-prosperity Sphere was built by Japanese men in business suits, not in dive bombers.  Europe recovered after its two 20th-century civil wars mainly through its own efforts of labor and investment, not mainly through government-to-government charity such as Herbert Hoover’s Commission or George Marshall’s Plan.  Government-to-government foreign aid to the Third World has enriched tyrants, not helped the poor.
The importation of socialism into the Third World, even in the relatively non-violent form of Congress-Party Fabian-Gandhism, unintentionally stifled growth, enriched large industrialists, and kept the people poor.  Malthusian theories hatched in the West were put into practice by India and especially China, resulting in millions of missing girls.  The capitalist-sponsored Green Revolution of dwarf hybrids was opposed by green politicians the world around, but has made places like India self-sufficient in grains.  State power in many parts of sub-Saharan Africa has been used to tax the majority of farmers in aid of the president’s cousins and a minority of urban bureaucrats.  State power in many parts of Latin America has prevented land reform and sponsored disappearances.  State ownership of oil in Nigeria and Mexico and Iraq was used to support the party in power, benefiting the people not at all.  Arab men have been kept poor, not bettered, by using state power to deny education and driver’s licenses to Arab women.  The seizure of governments by the clergy has corrupted religions and ruined economies.  The seizure of governments by the military has corrupted armies and ruined economies.
Industrial policy, from Japan to France, has propped up failing industries such as agriculture and small-scale retailing, instead of choosing winners.  Regulation of dismissal has led to high unemployment in Germany and Denmark, and especially in Spain and South Africa.  In the 1960s the public-housing high-rises in the West inspired by Le Courbusier condemned the poor in Rome and Paris and Chicago to holding pens.  In the 1970s, the full-scale socialism of the East ruined the environment.  In the 2000s, the “millennial collectivists,” Red, Green, or Communitarian, oppose a globalization that helps the poor but threatens trade union officials, crony capitalists, and the careers of people in Western non-governmental organizations.
Yes, I know, you want to reject all these factual findings because they are “right-wing” or “libertarian.”  All I ask you to do is, once in a while, consider.  Don’t believe everything you read in the papers."
You can read more by Deirdre McCloskey in her major studies of the emergence of and early acceptance of the new bourgeois social class in the age of commerce: "The Bourgeois Virtues: ethics in the age of commerce", University of Chicago Press, 2007, and Bourgeois Dignity: why economics can't explain the modern world", University of Chicago Press, 2010.
They will open your minds ...


Blogger rickstersherpa@msn.com said...

Although Professor McCloskey speaks of "facts," I found many of her statements to be dubious. First, although I am use to Libertarians and other Conservatives conflating "Communism," "Socialism," and even democratic socialism with Modern or New Deal Liberalism, they are not, as factual matter the same at all. First, the New Deal, and policies in the spirit of the New Deal are experimental and pragmatic and market oriented. Only when there is an obvious breakdown, say something like 25% unemployment in March 1933 (when Roosevelt took over), does the Government do things like create a WPA and CCC to take millions of unemployed workers and put them to work. And yes, NRA, which reflected the thinking 1920s management revolution in American corporations, probably did not do much speed recovery, especially compared with Roosevelt's decision to leave the Gold standard and devalue the dollar. But I doubt it hurt very much given the very rapid growth from 1933-37. Roosevelt discarded the NRA without much protest when the Supreme Court voided part of the law in 1935. (His reaction to other court decisions involving the AAA led to his confrontation with the Supreme Court).

I pick this one point because it is where I know "facts," and facts don't fit McCloskey's story.

Similarly, New Deal Liberalism was still dominant in 1970 America when the Clean Air Act was passed, something I doubt that could be passed in the face of libertarian opposition today. Yet it dealt with a real "externality" that the "market" provided no incentive to individual firms to fix. Yet the economic as well as social benefits of this law appear to justify it. http://www.voxeu.org/article/long-term-consequences-1970-clean-air-act. Yet this is another piece of legislation Professor McCloskey deplores.

3:11 a.m.  
Blogger Talby said...

I love this blog, though I abhor your wretched understanding of the political economy and the fact that modern society has handed over ever aspect of governance to an economic royalty, devils possessed by a monopolizing spirit. That men for whom life is merely about how much they can gain for themselves lack all virtue and it is one of the most depressing aspects of our age that we have elevated the entrepreneur to that of "visionary". (as if only viewing one's own greed and lust with sharp instinct is "vision") Look at texts from Cicero, to the Reg Veda, to Homer, merchants have long occupied a place in society often below mongrels and dogs for a damn good reason (a sentiment that Smith possessed I may add) they belong no where near power. That we have elected successful businessmen, dirty beasts every last one, into public office is but a symptom oof our problems. Never trust a salesman, believe me I was one, though this strange character Professor McCloskey seems to be suggesting we should hand over everything to private unaccountable dogs because the people are too stupid to wipe their own asses. The fact that you give the slightest credence to this character is depressing.

At any rate your failure to understand the complex current political aside you're passion and clarity in dealing with this marvelous man Adam Smith is delightful and provides no end of insight.

6:56 p.m.  

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