(Permission to reprint is expressly granted!) LUNATIC POLITICS
by Jay Hanson, June 6, 1998
What the scientist's and the lunatic's theories have in
common is that both belong to conjectural knowledge. But
some conjectures are much better than others...
-- Sir Karl Popper, THE PROBLEM OF INDUCTION
Once one gets the scorecard straight, then it will become
apparent that twentieth-century neoclassical theory
resembles nothing so much as the child's game of Mr. Potatohead --
the fun comes in mixing and matching components with little or
no concern for the coherence of the final profile.
-- Mirowski, MORE HEAT THAN LIGHT
When it comes to public policy, lunatics have a clear advantage over
scientists for two fundamental reasons: (1) lunatic knowledge is always
certain, but the scientists' epistemology (theory of knowledge) is
inherently uncertain; (2) lunatic cosmology (worldview) is always
normative (i.e. "political"), but the scientists' cosmology leads to moral and
political ambiguity.
I divide knowledge into two categories: "scientific" and "lunatic." The
differences between the two categories concern the methods used to
obtain the knowledge.
THE SCIENTIFIC METHOD: WORK TO FALSIFY
Scientific knowledge is "empirical" (based on observation or
experiment) and is not inherently normative. Scientists formulate statements that can be
tested (hypotheses), and then try to "falsify" them by experiment. If a
statement can't be tested, then it's not scientific. Moreover, all
scientific knowledge is "provisional" -- scientists assume that
subsequent experiments may disprove any hypothesis.
Scientific knowledge is that knowledge which can be disproved, but has
not yet been disproved. Thus, scientific knowledge is inherently uncertain.
THE LUNATIC METHOD: FAITH AND DECEPTION
Lunatic knowledge is based on a certain "faith" and is inherently
"political." Milton Friedman is probably the best known and most widely
respected free-market economist in the world. Friedman won the Nobel
Prize for economics in 1976. In 1989, Friedman's FREE TO CHOOSE
was the best selling nonfiction book in the United States and it was
translated into most major languages.
Here Friedman identifies the origin of his free-market political
crusade:
"Adam Smith's key insight was that both parties to an exchange can
benefit and that, so long as cooperation is strictly voluntary, no
exchange will take place unless both parties do benefit." [1]
Since economists do not explicitly define "benefit" -- let alone measure
it -- one might ask how Friedman could possibly know? In fact, he
doesn't -- Friedman is imposing his personal values on others.
Here George Brockway compares the vocabulary of physics with
that of value-laden economics:
"The vocabulary of physics is amoral -- not antimoral, but amoral. Mass,
force, and velocity have no moral implications because the laws
describing them have no alternatives. The vocabulary of economics,
in contrast, abounds in ethical terms. It is impossible to define
'good,' 'service,' or even 'utility' without making ethical judgments.
Every object has mass, but not every object has utility.
Moreover, some people may consider a certain object a good
while others do not, but there can be no disagreement
about the equivalence and direction of action and reaction.
There is no other or better way for a body to fall in a vacuum
than s=˝gt2; this is not because physicists don't happen to be
interested in making this a better world. There is no unchanging
price for a bushel of wheat; and this is not because
economists don't happen to be interested in a stable universe. The
price of wheat depends upon what people do, but bodies fall as they do
regardless of what people do or think.
"Economics is not value free, and no amount of abstraction can make it
value free. The econometricians' search for equations that will explain the
economy is forever doomed to frustration. It is often said that their
models don't work, because, on the one hand, the variables are
too many and, on the other, the statistical data are too sparse.
But the physical universe is as various as the economic universe
(they are, to repeat, both infinite), and Newton had fewer data
and less powerful means of calculation than are at the
disposal of Jan Tinbergen and his econometrician followers. The
difference is fundamental, and the failure to understand it reduces
much of modern economics to a game that unfortunately has
serious consequences." [2]
Upon closer examination, one discovers that the economist's crusade has
nothing to do with science, it's a religious crusade! Adam Smith
believed that God's divine plan was revealed in a free market: "the divine
being, ... contrived and conducted the immense machine of the
universe, so as to at all times to produce the greatest possible
quantity of happiness."
Economic historian Deborah Redman explains: "Because the order of
nature is providential, the free market that reflects natural order also reflects
the workings of providence. In this way the spheres of morality, theology,
jurisprudence, and economics become hostages to nature, so to speak."
[3]
Smith's free market commandment: "Every man, as long as he does not
violate the laws of justice, is left perfectly free to pursue his own interests
in his own way, and to bring both his industry and capital into competition
with those of any other man, or order of men." (Did Smith know that
these "laws of justice" would be authored by the same monsters we need to be
protected from?)
One of the pioneers of modern economics, Hermann Gossen, argues for free
markets by not only telling us that the maximization of individual
pleasure is God's will, it is "life's ultimate purpose." Gossen maintains that
any moral restraint would inhibit God's master plan. As Gossen puts it, "It
would only frustrate totally or in part the purpose of the Creator were
we to attempt to neutralize this force in total or in part, as is the
intention of some moral codes promulgated by men." And he asks with moral
indignation: "How can a creature be so arrogant as to frustrate totally or partly the
purpose of his creator?" [4]
These days, disciples of the free market God rarely invoke His name in
public debate. These days, His disciples disguise their religious and
political agendas in circular (logically meaningless) argument. Robert
Kuttner describes the economist's basic premise:
"Those who believe society can best be understood as a series of markets
begin by positing a rational, calculating individual whose goal is to
maximize 'utility.' This premise says everything and nothing, since it
is true by definition in all cases. But it is a key aspect of the market
model, since it is the behavioral part of the logical argument that whatever
the market decides must be optimal." [5]
Economists assume people that people make "rational" [6] decisions but
abstain from testing that assumption. Instead of testing, economists
invoke "revealed preferences theory" which states that choices are rational
because they are based on preferences that are known through the choices that
are made [7]. In other words, economists resort to meaningless, circular
arguments and mathematical conjuring tricks to justify their normative
claims.
If one accepts the first circular argument, then one is conditioned to
accept all the rest of the economist's circular arguments:
"There is at the core of the celebration of markets a relentless
tautology.
If we begin, by assumption, with the premise that nearly everything can
be understood as a market and that markets optimize outcomes, then
everything else leads back to the same conclusion -- marketize! If, in the event, a
particular market doesn't optimize, there is only one possible
inference: it must be insufficiently marketlike. This epistemological sleight of hand
is an astonishing blend that blurs the descriptive with the normative. It
is a no-fail system for guaranteeing that theory trumps evidence. Should some
human activity not, in fact, behave like an efficient market, it must
be the result of some interference that should be removed or a stubborn human
refusal to appreciate markets. It cannot possibly be that the theory
fails to specify accurately how human behavior works." [8]
Researchers who actuality observe humans making decisions, find that
economists are wrong. Humans give undue importance to recently presented
information.
What does this mean? Simply put, people are manipulated by information
providers -- the last commercial has the most influence. Change the
order of the messages, and one changes the choices made (no need to change the
prices -- or the content).
What are the implications? If people are not "rational", the economist's
normative claim for market outcomes can not be defended -- can not be
used to rationalize the ongoing destruction of the planet. Unfortunately,
formal education seems to immunize economists against logic.
Knowledge derived from "revelation" and circular argument certainly
belongs in the lunatic category. Moreover, economics students rarely detect the
deception and usually leave school with lifelong political missions --
probably incurable.
SCIENTIFIC COSMOLOGY
In BEYOND GROWTH, Herman Daly notes that the scientific cosmology is
"mechanical" (amoral):
"... that Sagan, Wilson, and Gould proclaim the cosmology of scientific
materialism, which considers the cosmos an absurd accident, and life
within it to be no more than another accident ultimately reducible to dead
matter in motion. In their view there is no such thing as value in any
objective sense, or purpose, beyond short-term survival and reproduction, which
are purely instinctual and thus ultimately mechanical."
Someone with a scientific cosmology is morally ambiguous:
"Calling for a moral compass in such a world is as absurd as calling
for a magnetic compass in a world in which you proclaim that there is no such
thing as magnetic north. A sensitive compass needle is worthless if
there is no external lure toward which it is pulled. A morally sensitive person
in a world in which there is no lure of objective value to pull and persuade
this sensitized person toward itself is like the compass needle with no
external magnetic force to act on it." [9]
Burdened with uncertainty and a world without purpose, scientists
simply can not compete with lunatics in matters of public policy.
LUNATIC COSMOLOGY
In the 1870s, William Stanley Jevons explicitly defined the cosmology of
economics as normative (moral):
"... the mechanics of utility and self-interest ... to satisfy our
wants to the utmost with the least effort -- to procure the greatest amount of
what is desirable at the expense of the least desirable -- in other words, to
maximize pleasure, is the problem of economics." [10]
In THE ECONOMIC WAY OF THINKING, economist Paul Heyne tells us that we
really don't "need" things like clean water, because there are no
"needs." There are only "wants", and these are backed up by purchasing power, or
"demand." Demand can always find substitutes, says Heyne, for there are
"substitutes everywhere." [11]
In his 1974 lecture to the American Economic Association, Robert Solow
defended his illusion of unlimited economic growth: "the world can, in
effect, get along without natural resources." Like an alchemist who
claims that he can change lead into gold, Solow is claiming that he can change
money into any exhaustible resource: "at some finite cost, production
can be freed of dependence on exhaustible resources altogether." [12] (In 1987,
Solow won the Nobel Prize for economics.)
How would a Nobel Prize-winning economist solve our global environmental
crisis? Friedman:
"Ecological values can find their natural space in the market, like any
other consumer demand. The problems of the environment, like any other
problem, can be resolved through price mechanisms, through transactions
between producer and consumer, each with his own interests." [13]
So with a boundless faith in the market founded on "revelation" and
circular argument, promises of endless material growth, and a product endorsed
by God himself, lunatics lead humanity into a new Dark Age from which it will
never emerge...
No other discipline attempts to make the world act as it
thinks the world should act. But of course what Homo
sapiens does and what Homo oeconomicus should do are
often quite different. That, however, does not make the
basic model wrong, as it would in every other discipline. It
just means that actions must be taken to bend Homo
sapiens into conformity with Homo economicus. So, instead
of adjusting theory to reality, reality is adjusted to theory.
-- Lester Thurow
We must stop crying to the growing economy, "Deliver
me, for thou are my god!" Instead, we must have the courage
to ask with Isaiah, "Is there not a lie in my right
hand?"
-- Herman Daly
References:
[1] pp. 1-2, FREE TO CHOOSE, Milton and Rose Friedman; Harvest, 1980
http://www.amazon.com/exec/obidos/ASIN/0156334607
[2] pp. 38-39, THE END OF ECONOMIC MAN, George Brockway; Norton, 1995
http://www.amazon.com/exec/obidos/ASIN/0393313522
[3] p. 237, THE RISE OF POLITICAL ECONOMY AS A SCIENCE, Deborah Redman;
MIT,
1997 http://www.amazon.com/exec/obidos/ASIN/0262181797
[4] p. 45, HUMANIST ECONOMICS, Mark Lutz and Kenneth Lux; Bootstrap
Press,
1988
[5] p. 41, EVERYTHING FOR SALE, Robert Kuttner; Knopf, 1997
http://www.amazon.com/exec/obidos/ASIN/0394583922
[6] "The social sciences have a long, rich history of writings on
rationality. In the tradition of neoclassical economic science, as in
the writings of Pareto (1935), an action is rational when it corresponds
with the ends or goals sought. Rationality means the adaptation of means to
ends. The more congruent the means to the ends, the more efficient the
decision and, therefore, the more rational the organization (Weber 1947).
Economists abstain from applying the test of rationality to ends." [p.16, DECISION
MAKING: ALTERNATIVES TO RATIONAL CHOICE MODELS, Mary Zey; Sage,
1992] http://www.amazon.com/exec/obidos/ASIN/0803947518
[7] p. 31, RATIONAL CHOICE THEORY AND ORGANIZATIONAL THEORY: A
CRITIQUE,
Zey; Sage, 1998 http://www.amazon.com/exec/obidos/ASIN/0803951361
[8] p. 6, Kuttner.
[9] p. 20, BEYOND GROWTH, Herman Daly; Beacon, 1996
http://www.amazon.com/exec/obidos/ASIN/0807047090
[10] p. 25, ADAM SMITH'S MISTAKE, Kenneth Lux; Shambhala, 1990
http://www.amazon.com/exec/obidos/ASIN/087773593X
[11] pp. 84-85, Ibid.
[12] p. 117, STEADY-STATE ECONOMICS, Herman Daly; Island Press, 1991
http://www.amazon.com/exec/obidos/ASIN/1559630728
[13] p. 32, ECONOMISTS AND THE ENVIRONMENT, Carla Ravaioli; Zed, 1995
http://www.amazon.com/exec/obidos/ASIN/1856492788
None.
