Too many economists? There is an ongoing debate these days about the role of economists in government. Many think they exercise too much power because economists, like bankers, supposedly only value numbers and, by implication, money and that is seen as synonymous with power. It is a story about capture where political power is a sort of object that can be grabbed by different interests. Both sides of the political spectrum maintain the story, but I think that the libertarian argument, which is very influential particularly in the United States (see link below), lurks dominantly in the background. In this post I want to explain why that story is a problem. Imagine a society based on the division of labour and where labour is the only means of sustenance, so that the economy limits the size of the population. This was essentially the argument put forward by Thomas Malthus more than 200 hundred years ago. Such a society will by definition have to be organised along trade lines and commerce because all members of society would need the produce of others in order to exist. Nobody can exist by themselves only. Thus, the individual would be a social construct, and the organisation of such a society a matter of economics. If you then look at every decision in such a society (even concerning the most basic meal) they would all be a matter of administering some resource with the object of survival. There would basically be two ways of doing this. Social choice would either be exercised through an exchange where something is given for something else, or through a contract where something is taken in exchange for nothing – a sort of stealing that in the society imagined here actually amounts to killing. The first method is inherently peaceful; the exchange follows its own accord, it has a return. The second method has no return; its purpose lies elsewhere; it is inherently violent. The real social world would be some combination of these two basic forms. Karl Marx claimed in his theory of exploitation that stealing was mostly the case in capitalism. Surplus value came from not paying workers the full value of their labour. It was essentially a statement about government. In Marx’ story power is not captured but springs from the way society is organised in every decision made. And clearly, social decision-making is not a neutral arbiter but reflects the powers that be in society. So he had an important point here, but he overlooked Malthus’ point that the economy emerges out of the satisfaction of human needs. Marx ignored this. He did not analyse the demand side of the economy. The other classical economists made the same mistake. It was firstly corrected in the late 19th century by the so-called marginalist revolution’s introduction of demand and supply equilibrium analysis. But Marx’ statement about government is still relevant. Government is a sort of organised stealing to the extent that the taxation on which it is based essentially is a deal with no return. There’s no return to government; it administers; it’s not an exchange. The public goods implied by this (or: economic rent) will then have to be distributed as optimally as possible, and the power to do this can be exercised in basically two ways: either peacefully or by means of violence. One way would be to administer according to a means-to-ends scheme. That is the point of consequentialist ethics and economic utilitarianism where the exchange has a return. The other way would basically try to do as it wants according to some preconceived deontological principles. Thus, two ideal types in the sense of Max Weber’s proposal from the early 20th century would exercise capitalist government: economists or military personnel. One would be based on the respect for the conditions of a trade, the other would – as always – allow for just one last time of stealing and/or killing and then everything will be as desired. The libertarian argument basically amounts to abandoning the economic role of government, getting government off people’s backs. However, according to the very basic social model sketched out above, government would then be left to military personnel. This will happen because political power cannot be eliminated or brought under control. It rather emerges from the manner society is organised. In the capture story of libertarianism there is instead the idea that power can be controlled, but this is basically just a new version of the attempt to enforce a set of preconceived values upon everybody. I don’t think that model is desirable, and its economics is deficient. It’s a right-wing political ideology. So, bankers and economists are the epitome of capitalism, yes indeed, but not necessarily. I would say that the more economists, the better. Why? Try a look at the following indicator on the quality of government according to economist or military personnel ideal types (I take full responsibility for the empirical validity of this!): • Europe: mostly economists. • Eurasia/Russia: the military increases in importance from an already high level. • Egypt: nearly almost military. • Middle East: no economists at all. • China: military but incipient economists; Japan: all economists. • US: economists but too much military. • Latin America: military, but on the decline, and emerging economists. • Africa: military. That’s libertarianism for you: too few economists, too much military! So much for Ayn Rand, Rand Paul, Paul Ryan, and the Koch brothers!
Posted on: Sun, 10 Aug 2014 23:55:35 +0000
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