Yanis Varoufakis — Utopian science fictions legitimising our current dystopia – 2019 Taylor Lecture, Oxford University

Big! We really need to be talking about this and examining assumptions and presuppositions that act as hidden assumptions. Yanis is a systems thinker.

The Faculty of Medieval and Modern Languages, Oxford University, kindly invited me to deliver the 2019 Taylor Lecture on 12th February 2019. I chose the topic of Realistic Utopias versus Dystopic Realities – my aim being to highlight the manner in which really-existing capitalism is marketed as a utopian science fiction that has nothing to do with… really-existing capitalism. Behind this elegant utopian mathematical the powers-that-be hide a dismal dystopia that is failing humanity in a variety of ways.…

The emperor has no clothes.

Pure capitalism and pure socialism are both based on utopian thinking. They are ideal rather than real, based on models whose stipulated assumptions are not achievable in the real world given existing conditions. It is questionable whether those conditions could ever be met. 

This doesn't imply, however, that more ideal society as a functional utopia is not achievable by getting from here to closer to there, that is, getting from where we are now to where would like like to be and doing so realistically through iteration and incrementation. This is an evolutionary process in a complex adaptive system characterized by reflexivity and emergence, hence, affected by synergy with the implication of uncertainty. Conversely, trying to impose an ideal structural system constructed from assumptions is folly.

Utopian science fictions legitimising our current dystopia – 2019 Taylor Lecture, Oxford UniversityYanis Varoufakis

Tyler Cowen — *Adam Smith: Systematic Philosopher and Public Thinker *

That is the new, excellent, and detailed book by Eric Schliesser, a political scientist at Amsterdam. I would say that Schliesser is a very learned “left Smithian,” and that you should take the subtitle very very seriously.

Should be aware of. Schliesser contradicts the neoclassical and Samuelson views of Smith.

Marginal Revolution

*Adam Smith: Systematic Philosopher and Public Thinker *

Tyler Cowen | Holbert C. Harris Chair of Economics at George Mason University and serves as chairman and general director of the Mercatus Center

Brad DeLong — What Thinkers Will Define Our Future?

Brad DeLong cuts to the chase and asks some key questions that involve updating the enduring issue of social and political thought, first raised in the West by the ancient Greeks, and then the subject of much of the Western intellectual tradition:  What does it mean to live a good life in a good society and what does this involve contemporaneously in light of lessons learned historically, present conditions, and future opportunities and challenges?

Another question is what non-Western traditions have thought about this. This is important as the world shrinks and different culture influence each other. One tradition trying to impose its methods, history and ideas on other will inevitably meet with resistance.

Finally, is there some overarching paradigm that allows for the peaceful resolution of different points of view and the testing of different alternatives.

Grasping Reality
What Thinkers Will Define Our Future?: No Longer Fresh at Project Syndicate
Brad DeLong | Professor of Economics, UCAL Berkeley

Andrew Batson — What is nationalism anyway, and why is it so powerful?

I would say that looking for a definition in terms of an essence is the wrong approach since terms that are not defined technically or operationally often have different senses dependent on their use in a context that gives them their meaning in that context.

However, Professor Gellner brings out an important meaning of "nationalism" in relation to national sovereignty, which is key in popular sovereignty as the basis of the modern concept of liberal democracy. Andrew riffs off that.

The historical development of nations from clans and tribes adds the element of kinship, which connects the concept of a nation with evolutionary theory in addition to political theory, anthropology, sociology, and history.

We are going to be hearing a lot more about this as the historical dialectic between the opposing forces of nationalism and internationalism deepens.

Andrew Batson's Blog 

What is nationalism anyway, and why is it so powerful?
Andrew

Lord Keynes — Karl Popper on the Paradox of Tolerance

Can liberalism be illiberal in self-defense?

The 21St Century: Social Democracy For Post Keynesian Perspective
Karl Popper on the Paradox of Tolerance
Lord Keynes

This drama is presently being played out in Europe.

Sputnik
Erdogan Dreaming to 'Revive New Ottoman Caliphate'… in Europe

Robert Kuttner — Karl Polanyi Explains It All

Robert Kuttner provides an excellent summary of Karl Polanyi's The Great Transformation (download).

In the 1944 catalog of publisher Farrar & Rinehart, the entry for The Great Transformation appropriately compares it to Keynes’s succinct 1919 classic, The Economic Consequences of the Peace. But while Keynes’s book was a best-seller, turning its author into a celebrity, The Great Transformation sold just 1,701 copies in 1944 and 1945.

The New York Times reviewer, John Chamberlain, was savage: “This beautifully written essay in the revaluation of a hundred and fifty years of history adds up to a subtle appeal for a new feudalism, a new slavery, a new status of economy that will tie men to their places of abode and their jobs.” If that sounds just like Polanyi’s nemesis, Hayek, it was for good reason. Chamberlain had just written the foreword to Hayek’s The Road to Serfdom, also published in 1944. While Hayek’s book was adapted in Reader’s Digest and became a best-seller, Polanyi’s languished.

By 1946, however, Polanyi had been reviewed, mostly favorably, in major newspapers and social-science journals, and he was slowly attracting a following. At 61, Polanyi was offered his first real academic job in 1947 at Columbia, where he taught until 1953. But in the Cold War chill, the State Department refused to give a permanent visa to Ilona, and she relocated to Canada. After attempting to commute from Toronto, Polanyi spent his final years settled there, returning to an early scholarly interest in economic anthropology.

Comparison of The Great Transformation with The Road to Serfdom is in a sense the story of what would lead in Anglo-American economics to the conflict between Keynes and Friedman, mediated by Paul Samuelson. The first textbook of Keynesianism was Lorie Tarshis's The Elements of Economics (1947), which was pilloried as "pink" if not "red." Samuelson published his textbook that would become the standard in 1948. Eventually, even Samuelson's "bastard Keynesian," the purported synthesis of Keynes and neoclassical economics was over turned, which was largely attributed to the Chicago School and Milton Friedman. Karl Polanyi's The Great Transformation was relegated to a footnote whereas the economic liberalism of Hayek and Friedman became dominant. As result, few are familiar with Polanyi's work and fewer still read him.

Now, with economic liberalism in retreat and the moral economy and the good society reentering the debate forcefully, Polanyi's work is also experiencing a resurrection in social and political theory and political economy. Polanyi favored managed capitalism (social democracy) over laissez-faire capitalism based on free market fundamentalism (economic liberalism).

Karl Polanyi is not to be confused with his brother Michael, a chemist and libertarian social and political philosopher. Friedrich Hayek got the concept of spontaneous order from Michael Polanyi. In fairness to Michael, he was, like Hayek, no Murray Rothbard either. Michael made contributions to chemistry for which he is better known than as a political philosopher, and Michael's son John was awarded a Nobel in chemistry. Talented family.

Both Michael and Karl reacted the extremes of Marxism. But Karl rejected Michael's assumption that free market fundamentalism results in spontaneous order that is socially beneficial. Karl attempted to navigate between the free market fundamentalism that conflated economic liberalism with social and political liberalism, and the Marxism that had resulted in totalitarian communism. 

Like Marx, Karl Polanyi's approach was historical, but unlike Marx he did not postulate "iron laws," which he criticized liberal economist for doing also in seeking to model "the market" with purportedly universal laws of a natural system like 18th and 19th century classical physics. Being unnatural such attempts at universalization would naturally lead not only misunderstanding theoretically but also to economic crisis and social discord if applied rigidly. In fact, it led to domestic conflict and war historically.

Looking backward from 1944 to the 18th century, Polanyi saw the catastrophe of the interwar period, the Great Depression, fascism, and World War II as the logical culmination of laissez-faire taken to an extreme. “The origins of the cataclysm,” he wrote, “lay in the Utopian endeavor of economic liberalism to set up a self-regulating market system.”

Contrary to libertarian economists from Adam Smith to Hayek, Polanyi argued, there was nothing “natural” about the free market. Primitive economies were built on social obligations. Modern commercial society depended on “deliberate State action” by and for elites. “Laissez-faire” he writes, savoring the oxymoron, “was planned.”…

Libertarian economists, who treat the market as universal—disengaged from local cultures and historic time—are fanatics whose ideas end in tragedy. Their prescription means “no less than the running of society as an adjunct to the market. Instead of economy being embedded in social relations, social relations are embedded in the economic system.”…

Longish but detailed and a good read. If you don't have time to get to it now, save it for the weekend. We are going to hearing a lot more about Polanyi, Keynes, Lerner, and Minsky, etc. as the debate shifts and people wake up to the facts that history rhymes and many of the issues of today have already been analyzed in the past to good effect. There are shoulders of giants to stand on.

The American Prospect
Karl Polanyi Explains It All

Robert Kuttner | co-founder and co-editor of The American Prospect, and Meyer and Ida Kirstein Visiting Professor in Social Planning and Administration at Brandeis University's Heller School for Social Policy and Management

ht Dan Lynch in the comments

Richard Bourke — Burke was no conservative

Edmund Burke, one of the great statesmen and philosophers of the 18th century, is the founder of modern conservatism. Or so it is commonly held: authorities, from Corey Robin on the left to Niall Ferguson on the right, agree that conservative ideology can be traced to this original source. The view has in fact been commonplace in the United States since the 1950s and has steadily been gaining currency across the globe. Admirers of Burke’s ‘traditionalism’ can be found in numerous countries, as different as the Netherlands and Japan. Yet there is something deeply misleading about this view of conservatism’s origins. Burke was a reforming Whig of the 18th-century British parliament whose ideas were not developed with modern politics in mind.

Even if we imagine Burke as our contemporary, his commitments are not in any way compatible with conservatism. For example, he was a defender of colonial rights against the British Empire during the period of the American Revolution. In lending his support to American defiance, he opposed the reigning tenets of British imperial policy and took a stand against successive ministries at Westminster. His defence of colonial rights included support for insurrection, for violent resistance against established authority. It is hard to reconcile this endorsement of revolt with what are usually regarded as conservative ideals.…

Conservatives have either ignored Burke’s support for colonial rebellion, or maintained that his career was split between two phases: an early period of support for the ‘liberal’ cause of America and a later ‘conservative’ reaction to the Revolution in France. Burke certainly changed his opinions over the course of his career, but these shifts cannot be captured by presuming a contradiction between his support for American resistance and his aversion to the revolution in France. Representations of Burke as a renegade from early idealism are based on the dogmatic assumption that the American and French revolutions were fundamentally ‘the same’. Yet for Burke these two events were absolutely different, and in fact he had good reasons for insisting on their difference.…

For anyone concerned to focus on what matters in politics, they would be better off evaluating the substance of particular issues than reaching to enlist canonical thinkers in contemporary causes by branding them with complacent and misleading categories.

Aeon
Burke was no conservative

Richard Bourke

Interesting tidbit of contemporary relevance:

Burke’s view was that Westminster confused its authority with its power. In being affronted by the audacity of the Americans, the British ministry began to fear for its own dignity. Instead of bolstering its standing by public acts of goodwill, the government resorted to shows of strength. As a result, each time Westminster tried to demonstrate its potency, it compromised its standing in the eyes of the colonists. The underlying irony was that the more the metropole opted to display its might, the more it undermined its moral authority. Imperial militancy thus led to imperial impotence.

Eric Schliesser — The Failure of Human Rights and Democratic Faith

To understand the political background of the refugee crisis, we must turn our gaze elsewhere; in fact, in the opposite direction. The crisis at hand confronts us with a predicament of modern political thought — modern liberalism even. It is a problem that we have successfully repressed but that now returns with a vengeance, namely the inadequacy of the lingo of human rights.…

Foundations of liberal social and political theory.

Digressions&Impressions
The Failure of Human Rights and Democratic Faith
Eric Schliesser | Professor of Political Science, University of Amsterdam’s (UvA) Faculty of Social and Behavioural Sciences

Eric Schliesser — Al-Farabi On Treating People as Ends or Means (with nods to Spinoza, Rousseau, and Kant)

Only of interest to those into history of social and political thought. Al-Farabi aka Alpharabius is not well known in the West other than specialist circles, although he is renown in Islamic philosophy.

The quoted passage entails (animal rights' activists will not like this) that mankind has dominion over (most) other animals because they lack a rational faculty. But it also implies that by nature humans may not be treated by each other as a means because they have -- to use poetic language -- the spark of rationality. Let's call this Al-Farabi's rational humanism. It is compatible with his assumption that mankind is naturally hierarchically differentiated in many different ways and, in turn, cultivated and educated in ways that increase multiplicity.

"Rationality" in ancient and medieval thought signifies the ability to know and use universals and relate them through reasoning. This enables making a distinction between the rational appetite that human and shared with separate intelligences and sense appetite that is shared with animals. A good person and a good society are based on rationality, whereas a bad person and a bad society are devoted to sense gratification, which modern economics calls "utility" after Jeremy Bentham.

Digressions&Impressions
Al-Farabi On Treating People as Ends or Means (with nods to Spinoza, Rousseau, and Kant)
Eric Schliesser | Professor of Political Science, University of Amsterdam’s (UvA) Faculty of Social and Behavioural Sciences

Diane Coyle — The weirdness of economists

I open at random to an essay by Daniel Hausman and Michael McPherson, which sets out the (usually implicit) framework of normative economics: economics appraises outcomes (not processes), using a single appraisal perspective, looking at the consequences for individuals (not groups or ‘society’) in terms of their welfare (not freedom or rights), welfare being defined as the satisfaction of preferences and assessed in terms of market outcomes and the Pareto criterion. We economists are early socialized into this approach and forget how weird it seems to others.

Bonkers in the eyes of many philosopher. 

This is especially true of traditional social and political philosophers that accept the fundamental issue of social and political debate as the meaning of living a good life in a good society and approach this not only as a speculative question but also as a social and political objective that promotes optimal unfolding of the potential of human nature inherent in all, along with expressing individual uniqueness and diversity.

Of course, this issue is approached differently by various economists and the above characterization is of the conventional approach. However, it is this approach that is dominant in the profession and is largely taken for granted in teaching economics. That's what's weird, especially when it is claimed that there is no alternative worth discussing since the matter is now settled.

The Enlightened Economist
The weirdness of economists
Diane Coyle | freelance economist and a former advisor to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation

Brian Beutler — The Rehabilitationists

How a small band of determined legal academics set out to persuade the Supreme Court to undo the New Deal—and have almost won.

In case anyone was wondering why philosophy — or call it foundational studies if you think the term "philosophy" is outdated — is important.

As the article observes, Libertarianism is a form of conservatism. However, it is based on an assumption of self-sovereignty that is actually an extreme form of liberalism in that it prioitizes prioritizes individual freedom.

But how can a conservative position be liberal?

The answer lies in the paradoxes of liberalism. Economic liberalism leads to disparity of wealth and income and the de facto institution of social class and political power through economic means. This is anti-democratic, which Libertarian dismisses as the tyranny of the majority over the individual.

So Libertarianism leads to neo-feudalism of "capital" under economics liberalism unrestrained by social and political liberalism through democratic governance based on government of the people, by the people and for the people under popular sovereignty, a pillar of political liberalism.

Conservatism is about rule by most qualified, that is, the privileged few who rise to the top, on the assumption that this is chiefly due to merit when violence is taken off the table under the rule of law in which the basic law is self-autonomy and an absolute right to private property. Sociologists beg to differ.

Libertarians are correct however in arguing that America was founded as conservative country rather than a liberal one as the founding documents and the controversy around their composition and adoption reveal. Slavery was enshrined in the constitution, which is illiberal as it gets.

The American government is that of a republic rather than a popular democracy, which early debate reveals was designed to favor those who able to amass political power, which is typically a matter of wealth in societies in which violence is ruled out as a political tool. The design is to preclude "the rule of the rabble."

The New Republic
The Rehabilitationists
Brian Beutler

John Quiggin — John Locke, an enemy of freedom

A proper treatment of Locke would have to explain how

• His theory of natural rights in property was designed to justify the expropriation of indigenous populations
• His advocacy of freedom included support for slavery
• His theory of religious toleration excluded atheists and Catholics
• His theory of political freedom did not extend to freedom of speech.

How then did Locke get such a high reputation? The answer isn’t all that mysterious. Locke was closely involved in the British colonisation of North America, both as an investor and as a participant in political activity such as the drafting of the Constitution of the Carolinas, which ratified the expropriation of the indigenous population and enshrined the absolute power of slave-owners....

John Quiggin

John Locke, an enemy of freedom

Paul Goble — Russia Needs a Civil Society But Not a Liberal One, Rostov Analysts Argue

The Interpreter is ultra-liberal. This post presents an opposition view, and while the author concludes on a liberal note, it pretty well summarizes the thinking of a great many Russians. Liberalism is blip on the screen in Russia since the failed experiment of the Nineties almost collapsed the country and turned it into a mafia state in which "oligarchs" (euphemism for Mafia dons) enriched themselves by selling Russian natural resources to the West and appropriating ownership formerly state owned enterprises through privatization schemes. 

As a result, Russia will likely be lost to liberalization for a long time to come, although Vladimir Putin leans liberal himself. However, he is a politician that understands Russia and acted swiftly when he realized that liberalism was taking Russia in the wrong direction. Putin is playing his role quite skillfully by balancing opposing social, political and economic interests in Russia quite even-handedly, which means no interest is entirely satisfied. But if Russia were governed as the majority of Russians would like to see, it would be far more conservative and illiberal.

Western liberals are under the illusion that the difference between totalitarian Communism and Western liberalism is black and white with no middle ground. So Western liberals erroneously assumed that Russians and Eastern Europeans would become Westernized liberals. Whether this is due to ideology or naïveté, it's fantasy. Now they are surprised to find that Russian and some Eastern Europeans are choosing other alternatives as the best fit for them. Which is what liberalism is about isn't it?

The Interpreter
Russia Needs a Civil Society But Not a Liberal One, Rostov Analysts Argue
Paul Goble

Matt Bruenig — Desert-Sacrifice-Utility Whack-a-Mole

Earlier, I explained the common argumentative strategy I call Capitalism Whack-a-Mole. People who utilize this strategy claim that they support capitalism for a specific normative reason (e.g. that it gives to each what they produce), but then, when you show that normative reason is actually inconsistent with capitalism, they shift to a totally new normative framework. For those who use the whack-a-mole, their preference for laissez-faire capitalism never changes, but their justification for it shifts rapidly from moment to moment.

Previously, I wrote about a whack-a-mole experience I had on Twitter with some fellow named Adam Blackstone. Here, I write about another whack-a-mole experience I had with on Twitter with a fellow named William Freeland. This twitter back-and-forth was very long, so I will just summarize it (you can try to work through it here though if you want).

Desert-Sacrifice-Utility Whack-a-Mole
Matt Bruenig

Peter Radford — Equality

Peter Radford investigates equality and comes up with some economic insights. But in my view his analysis underplays the key point that equality is essentially a legal concept based on liberal political theory, namely, absence of power-based privilege guaranteed by a single standard of justice in which the rule of law is determined by all those subject to the law having a voice of the same weight.

To my knowledge the only political theory to put forward a concept of economic equality is Marxism, and that is not mathematically determined but rather determine by potential and need:  "From each according to ability and to each according to need."

Social liberalism, developed in reaction to the economic liberalism characteristic of Dickensian times, emphasizes social justice rather than economic equality. It's concern is with adjusting for the failure of markets to distribute goods and services adequately for the needs of all to be met. The objective here, however, is not economic equality. Economic inequality is accepted as part and parcel of  investment-driven production and market-driven distribution.

Social liberalism is opposed by economic liberalism, called Libertarianism, and a scaled-down form of social liberalism, now called neoliberalism.

The issue of equality as to do with political liberalism rather than economics, and economics enters largely as a source of power asymmetry leading to political and legal privilege, a double standard of justice, and asymmetrical social, political and economic power leading to a hierarchical class structure of wide disparity in distributional effects.

The Radford Free Press
Equality
Peter Radford

Matt Bruenig — Property and Conflict

This is a theoretical study that is ostensibly about contemporary Libertarianism but is actually about classical liberalism. Contra propertarian Libertarianism and classical liberalism, it argues that private property violates fundamental tenets of liberalism and gives rise to conflict.

Interesting read if you are interested in philosophical liberalism, which everyone needs to be to participate in a liberal democracy. What are the boundaries of liberalism as a social, political and economic theory?


Property and Conflict
Matt Bruenig

Econolosophy — Mankiw the Political Philosopher

Greb Mankiw discusses the intersection of economics with social and political philosophy. I would add that social and political thought is based on ontology, epistemology, ethics and aesthetics.

Aesthetics, you ask? Yes, one area of criteria lies in the direction of symmetry, simplicity, elegance, and economy. In fact, the chief criteria of conventional economics are aesthetic rather than ontological (causal), epistemological (descriptive), or ethical (right). If a model is elegant in its construction and economical (efficient) in operation, then it is to be preferred normatively.


Moreover, as Mankiw observes, the assumptions of economics models, being social in that they involve relationships of individuals and groups in society, and political in that they involve government, are based on assumptions that are derived from a particular social and political philosophy.

Points to Professor Mankiw for coming clean on this essential point. He recognizes the obvious, namely, that economists of different political persuasions generally agree with the economics of those sharing their persuasion and differ from those with opposing social and political views. This cannot be merely coincidental. It's rooted in the assumption, which are inherently normative, making different approaches to political economy performative rather than purely descriptive, as they are often represented. Most often, facts are marshaled to prove normative points without disclosing the normativity of assumptions and the performativity of intent underlying the arguments for policy based on "economic science."

However, his own stance is highly questionable from the philosophical (rational) standpoint. Nevertheless, he has put his finger on what the debate in political economy needs to be about.

Greg Mankiw, the chair of the economics department at Harvard, has an instructive article in the New York Times. He tells us that behind all of the models that economists routinely use to sway public policy in one direction or another lies a particularly political philosophy, held and encouraged by the modeler herself.

I couldn’t agree more. Economists study social phenomena, which are created and understood by humans. As such, these phenomena are always being manipulated and swayed by new ideas and beliefs. There is thus an inherent feedback between the ideas that social scientists come up with and how those ideas end up affecting and propagating through the very social world these scientists claim to be studying objectively.

Most economists do not understand this important feedback. They literally think they are doing positive science, when in fact the ontology of the social world mandates that their endeavor is a normative one.

So kudos to Greg Mankiw for understanding the inherent normativity of economic theory. When it comes to the rest of his article, however, issues abound.

Mankiw the Political Philosopher
Econolosophy

Liberalism and Egalitarianism

This post is cobbled together from comments I've made recently here and elsewhere that have been fleshed out a bit.

The fundamental issue politically is between the opposing views of liberalism set forth in the words of the first Chief Justice of the Supreme Court John Jay and President Abraham Lincoln.

  “No power on earth has a right to take our property from us without our consent.” ~John Jay

“Those who own the country ought to govern it.” ~John Jay (American History Central)

"It is rather for us to be here dedicated to the great task remaining before us -- that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion -- that we here highly resolve that these dead shall not have died in vain -- that this nation, under God, shall have a new birth of freedom -- and that government of the people, by the people, for the people, shall not perish from the earth." ~Abraham Lincoln, The Gettysburg Address

These are expressions of mutually exclusive principles of social and political philosophy that define the difference between the left and right — economic liberalism based on republican propertarianism and elitism and democratic social liberalism based on egalitarianism and human rights.

In the view of the right, distribution is exclusively an economic matter to be determined in the competitive marketplace in which all compete equally and the most meritorious reap the greatest success from their own superior qualities.

In the view of the left, distribution is a social and political matter as well as an economic one, and perfect competition does not exist under capitalism in a monetary production economy that is influenced not only by market-based exchanged but also cultural and institutional factors that result in asymmetries that direct outcomes with respect to status, power, and accumulation.

The argument is over the balance between liberty and law and order, which is the distinction between libertarianism at one extreme and authoritarianism at the other, and between personal freedom and cultural convention expressed as custom and tradition, which is the distinction between social liberalism and social conservatism, with radicals at one extreme and reactionaries at the other. The tension among these poles modulates historical change dialectically.

A fundamental issue is the degree to which economic liberalism is compatible with political liberalism, and other is the degree to which social liberalism is compatible with cultural continuity. This implies a critique of the feasibility of alternatives.

Different people fall into different quadrants and different positions within the quadrants, so it is impossible to find outcomes that please everyone. Therefore, the need to address the "tyranny of the majority" in a popular democracy.

The way we do that now is through asymmetrical status, power, and wealth, tilting the playing field toward an elite.

If the desire is to change this, the questions then become, what are the options, and what are the advantages and disadvantages of the anticipated outcomes.

Neoclassical economists assumes a market with no government, no banks, and no intruding social, political or economic institutional arrangements that supervene or strongly influence, in which there is near perfect symmetry among individuals with respect to all relevant information and bargaining power. It's not even correct to call the model built on such assumptions simplistic. It's a fantasy world.

This issue, like most, is much more complex that most narratives make it out to be. There is no such thing as an economy that is the subject of study of the discipline of economics. "The economy" is a conceptual construct that is built on assumptions that characterize one methodological approach among many other existing approaches and many more possible approaches.

The conventional approach that starts with the problem of scarcity rather than the distribution of a surplus defines the problem and therefore constructs the subject of study based on a set of assumptions that assume certain things as relevant and assume away other things as irrelevant. Conventional economics assumes a cycle of production, distribution, and consumption in which distribution is handled by the invisible hand of the market, which is presumed to be optimally efficient to the degree that it cannot be improved upon.

Only those institutional arrangements are appropriate that advance market efficiency or economic efficiency more broadly considered. For example, intellectual property like patents, copyright and trademarks, are considered to advance economic efficiency through creating incentive — even though they also create asymmetric market power. The corporation as a legal person capable of owing property in perpetuity is another. There are many more. The proof of their efficiency and effectiveness is in the innovation that they bring and growth they produce.

Opponents object that this disregards negative externalities that are socialized, ecological, environmental, social and political, in addition to economic. The so-called free market as a mechanism of price discovery and efficient distribution is a myth. Actual practice, such as administered pricing that now predominates, and legal and institutional arrangements that dictate winners and losers reveal that markets are not as represented.

They cannot be made free either, any more than friction can be eliminated from physical systems owing to the construction of modern society and its institutions. "Liberalization" simply increases the market power of factions in that social, political and economic asymmetry cannot be eliminated from individual relationships any more than friction can from the physical world. The idea of a market in which all participants are symmetrical in information, power, and influence is a fantasy.

Once this is recognized and acknowledged then that problem of allocating scarce resource comes to be seen in a different light, where the surplus a society creates is social rather than an aggregate of the contributions of individuals competing equally on a level playing field. Just it was a social and political issue initially about what institutional arrangements to create to produce results that are effective and efficient according to defined criteria; so too, is it a social and political issue to distribute those results in a way that takes into account that certain participants were favored in order to produce the optimal results.

The notion of redistribution is a matter of responsibility where there is a right to use private property for economic gain in addition to subsistence. Since individuals characteristically do not rise to the responsibility, it becomes necessary to undertake it institutionally.

Economically, the issue may be seen as addressing scarcity in the optimal way to achieve efficiency and effectiveness in accordance with defined criteria (norms). However, in the larger context of a society social, political, legal, institutional factors must be considered along with the economic factors.

In addition, open national economies must be considered relative to a closed world economy. Given that modern economies are interdependent, e.g. with respect to resources, and humans inhabit the same global ecology in which externalities play a fundamental role socio-economically, addressing scarcity and abundance becomes a human issue, involving human rights, and a global issue with respect to context.

These opposing views are based on conflicting ideologies. Paradigms provide the context for the development of ideas within the bounds of a universe of discourse. All ideologies are paradigms of a sort in that they define a universe of discourse through a framework of methodological rules in which assumptions are included as ideological norms. Theorems are deduced from these starting points as defining norms. Any conceptual system that privileges its assumptions from error or question is dogmatic rather than scientific. Dogmatic ideologies characterize phenomena like religions and they can persist with little change over long periods of time. Science, however, is developmental and reacts to changing circumstances like new knowledge and changing context.

Moderns generally agree that the scientific approach is superior to a dogmatic one. However, all discourse takes place in terms of "webs of belief" (W.V.O. Quine) that are defined by assumptions that function as norms. Key assumptions functioning as norms are considered first principles and taken to be self-evident and non-negotiable. Being privileged from error or even question, they are non-empirical and non-scientific. Almost everyone is dogmatic about key fundamentals.

Once a debate argues down to opposing first principles the parties either agree to disagree, or they come into conflict unless they can compromise. Compromise is of the essence of the democratic process of governing as the only way to accommodate the range of views is a complex society. This is an ongoing process in that context is ever-changing and it is an unfolding process owing to discovery, invention, and innovation.

The two views of liberalism, which might be characterized as economic liberalism and social liberalism, have been in conflict since the dawn of liberalism in the Enlightenment. The road since then has been rocky and it is no less so now. Much ink has been spilled over this, but now it is Thomas Piketty's work that is the contemporary catalyst for a debate that is getting underway.

Are economic liberalism based on property rights and social liberalism that includes egalitarianism and human rights possible to achieve simultaneously through a political process given the institutional arrangements in place? If yes, what are the obstacles to achieving this? If not, what needs to change if this is a desirable goal? Can political compromise achieve it without conflict?

Chris Bertram — Teaching Rawls after Piketty

Weekend Reading:

I’ll permit myself to share a few thoughts that I had about the way in which reading Piketty might impact on teaching political philosophy, and, specifically, teaching Rawls and the difference principle.

A Theory of Justice came out in 1971 and was composed during the period the French call the trente glorieuses . During that period it was easy to believe that the power of inherited wealth had melted away and that we were living in a new era of more equal opportunity, with careers open to talents and income inequalities largely explained by the differences in talent and ability that the parties in the original position were denied knowledge of. To be sure, 1960s America (like 1960s Europe) hadn’t accomplished that social-democratic meritocratic ideal, but it was kind of visible in embryo, waiting to be born. Rawls’s book took us way beyond that, challenging the glib assumptions about desert that the winners flattered themselves with, but in its toleration of some inequality for the greater good (and particularly for the benefit of the least advantaged), Rawls’s view was recognizably connected to a then-emerging social reality.

Today things look very different. What we thought would be normal—widely spread prosperity, reduced income inequality, and constant growth—has been replaced by the world of the 1 per cent (indeed of the 1 per cent of the 1 per cent). Accumulated wealth and capital ownership in the hands of the few, which never completely went away but retreated into the shadows, is back and (if Piketty is right), threatens to subject us all to the dominance of a new rentier class if we don’t do something pretty drastic fairly soon.

I suspect, though, that the teaching of Rawls hasn’t really moved on in the light of the new social reality.

Crooked Timber

Teaching Rawls after Piketty
Chris Bertram

Joshua Holland — Elizabeth Warren, Third Way and the Battle Over American Liberalism (via Moyers & Company)

Elizabeth Warren, Third Way and the Battle Over American Liberalism (via Moyers & Company)

Since Barack Obama’s election, Democrats have been united by an increasingly reactionary oppposition. But beneath that veneer of tranquility, longstanding  political and philosophical differences over the role the government should play in our economy…

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