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Introduction To New Series: The Public And Its Problems by John Dewey

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In my first post at this site, I said I’d write about neoiberalism. I have held to that for the most part, as you can see from my archive. I’d say that first post held up pretty well substantively (please ignore the ugly typos). My first big step was to read Thomas Kuhn’s The Structure of Scientific Revolutions, which I applied to a number of economic textbooks and papers. Then I looked at the history of the rise of neoliberal economics, mainly through books by Hannah Arendt, Karl Polanyi, and Thorstein Veblen, Eventually I shifted to a somewhat broader viewpoint, looking at books about the ideas of the sociologist Pierre Bourdieu and the Frankfort School, and ultimately read a book by a contemporary Marxist and a student of capitalism.

Along the way I looked at the work of William Stanley Jevons, the inventor of marginal utility theory. Jevons was a follower of Jeremy Bentham, and his work was explicitly intended to produce a calculus of utility for human beings. He invented marginal utility as a way to implement Utilitarianis. Marginal utility is a building block of neoclassical economics. Over time, economists and the rest of us forgot Jevon’s intention, and Bentham’s philosophy was buried under a dome of math and amusing little word pictures in textbooks. Much of economics works this way. People notice some correlation and turn it into a law. For a typical example, look at my posts on the Phillips Curve.

One idea I have repeated many times came from Philip Mirowski’s book, Never Let A Serious Crisis go To Waste: neoliberalism has a specific view of the nature of the person. Human beings are isolated utility maximizers, and nothing more. This view the logical extreme of utilitarianism. We get a good look at this view of the person when economists pitch Pareto optimality and Kaldor-Hicks optimality as justifications for market allocation of resources. Eventually I concluded that neoliberalism is simply the logical culmination of capitalism. Capitalism no longer serves society, society serves capitalism.

Along the way I suggested that we need a different economic theory, and a new political theory, I suggested the possibility of using FDR’s Four Freedoms as a starting place for a theory of political economy, and Modern Monetary Theory as a plausible form of economic theory. I turned to discussions of freedom and equality focusing on the work of Elizabeth Anderson. Most recently I read another current thinker, Bruno Latour. I gave a short primer on Pragmatism, on the ground that Elizabeth Anderson identifies as a Pragmatist. I see Latour as a pragmatist too, though I doubt he does. For what it’s worth, I also identify as a pragmatist. It’s the framework I use to evaluate these texts: do they offer useful tools for thinking about the human condition.

The Current Situation

In this election cycle, two of the Democratic Candidates stated their explanations of the causes of the problems facing this nation. Sanders blames the violently rich, the .1%, for the bulk of our problems. Warren blames corruption, using the term in the way Zephyr Teachout used it in her book Corruption In America. Warren meant that too many of us see leadership as an opportunity for personal gain, either directly, as with Trump, or indirectly, as with John Bolton’s “book” or some other grift. For me, it includes corporate officials who work against corrective legislation to maintain their profits, and who condone or ignore violations of law by the corporations they lead, knowing they won’t be punished personally. These central assertions explain the policies of the two candidates. These explanations are distinguishable, but certainly they don’t conflict.

Their explanations did not penetrate the fog of media coverage of the horse race and the 24-hour news cycle, even though both repeated their theory in every debate, every stump speech, every TV appearance, and every press conference. It’s as if the reporters and talking heads couldn’t conceive of a coherent discussion of causes of problems, or why certain issues were important, and why the candidates propose the policies they endorse. It’s no wonder the average voter couldn’t tell you what either stood for.

I think the deep problem is that people believe things that aren’t true. The government is not like a household. Taxes are not necessary for revenue. The market does not pay people what they are worth. There is no trickle-down. Balanced budgets are not an ideal. The economy does not tend towards equilibrium in the short or long term. There is no separation of the economy from politics. I suggested that part of the problem is that these are all ideas that are drummed into us by teachers, mentors, parents and politicians. These ideas form a barrier preventing most people from understanding the way things actually work.

Once upon a time we thought the internet would give people a platform on which we could as a group address our problems seriously, discuss the issues they raised, and come up with possible solutions. You can find some flashes of discussion among the voters on social media, but for the most part, that’s gone. Worse yet, the idea that good ideas might float up from the voters is gone. Warren and Sanders centered the experience of actual voters in their stump speeches; but those stories never penetrate the fog either. None of this is a reason to give up.

Coming Attractions

I plan to address parts of this problem. I’m going to start with a discussion of a seminal work by John Dewey, perhaps the most well-known Pragmatist. The book, The Public And Its Problems, is available online here. Here’s the Wikipedia entry, which will help explain the context.

Here’s a link to an important paper by Elizabeth Anderson, What Is the Point of Equality, which I discussed in several posts. In one way, this paper helps us see our way to a different future, and I’ll rely on it in future posts.

Personal Note

The pressing issues of this moment, COVID-19 and its repercussions in the economy and our personal lives, are a harsh reminder of our fragility. They drain a good bit of the pleasure out of life. I have had trouble focusing on the kinds of books I usually enjoy, and have been thinking of switching to beach reading even though Spring has yet to reach Chicago. The insane incompetence of this administration is getting to me, and seriously hurting millions of us. There’s no point in writing rage posts, or yelling at the kids to get out of the bars and into Netflix and vitamin C. I hope that having promised to take up this book, I will get past the 12 pages I’ve read so far.

The Dialectical Imagination by Martin Jay: Truth and Facts

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Until the Enlightenment, everyone thought that there were Absolute Truths. It was the only way to understand the physical, social and psychological state in which humans existed. God spoke to humans and established the Absolute Truth. Those who trespassed against that Truth were burned at the stake, as Giordano Bruno, or exiled. That was true of all religions and all philosophers too.

That view has never died out. It’s the root of fundamentalisms of all denominations, and even among quasi-believers it is widely held. I think is is a core principle of conservatism, at least in practice. For example they all seem to believe in the Absolute Truth that tax cuts are always the solution to any perceived problem. And neoliberals assert it too, at least in their public statements; who knows what, if anything they actually believe or if there is an authentic neoliberal self that has a principle that doesn’t involve money or power.

It’s important to note that not all religions today teach that they are in possession of Absolute Truth. From its beginning, for example, the Jews did not name or describe the Almighty. They knew they were not like the Almighty, and thus could not expect to understand the nature of the Almighty. In the same way, Catholics who accept the teachings of Vatican II know that even the moral guidance of the Pope is subject to the considered judgment of the People of God. Catholics do not surrender their moral agency. Instead, dogma is guided by the lived experience of the faithful believer.

It seems odd that anyone would claim to speak for the Almighty, but people always have and still do. Some claim to know the will of the Almighty from an ancient text or because they heard it from someone who they believe speaks for the Almighty in our time. Still others claim the authority to interpret those texts as a guide to living in a society vastly different from that in which they were first written down.

It’s a small step from believing that one knows the will of the Almighty to believing that some social practice is ordained by the Almighty. It’s another small step to believe some theory of society or economics or politics reflects the will of the Almighty. It’s easy to see how this practice infects and affects vast numbers of people.

The struggle among these people is for dominance in the definitions of Absolute Truth. It isn’t just preachers and religious leaders who try to create Absolute Truths, there are plenty of politicians and others whose interests are served by linking their projects to Absolute Truth. Obviously this struggle doesn’t take place in the realm of reason, because absolutes are not subject to reason, or to argument, or to persuasion of any external kind. The truth is a whole, and the believers hold that whole. As an example, the Nazis tried to root out “Jewish Physics”, embodied by Albert Einstein, as anti-Aryan. Einstein was a theorist, not an experimenter, and the guy driving this absurd idea was an Aryan experimenter.

In contrast to the absolutists, a lot of people began to lose that certainty at the time of the Enlightenment. By the early 1900s, most thinking people were trying to come to grips with the absence of certainty. The members of the Frankfurt School certainly did not believe in Absolute Truth. Here’s Martin Jay:

… Dialectics probed the “force-field,” to use an expression of Adorno’s, between consciousness and being, subject and object. It did not, indeed could not, pretend to have discovered ontological first principles. It rejected the extremes of nominalism and realism and remained willing to operate in a perpetual state of suspended judgment.

Hence the crucial importance of mediation (Vermittlung) for a correct theory of society. No facet of social reality could be understood by the observer as final or complete in itself. There were no social “facts,” as the positivists believed, which were the substratum of a social theory. Instead, there was a constant interplay of particular and universal, of “moment”* and totality.
P. 54, emphasis added..

One way to think about this point of view is to recognize that scientific theories are subject to massive revision. That’s the point of Thomas Kuhn’s The Structure of Scientific Revolutions. It’s a painful process, but necessary for science. If that’s true for our best and most focused practical thinking, it’s impossible to imagine that there are Absolute Truths about human beings and their intricate social relations and their personal projects and desires. Dialectics, mediation, neither will uncover universal truths.

This general view has been common for some time among academics. Here’s a nice example provided by Andrew Bacevich. It’s a speech given by Carl Becker in his capacity as president of the American Historical Association in 1931. Becker defines history as “… the memory of things said and done.” Those memories may include things witnessed or said or done by a person, and it may include other people’s memories passed along in writing or otherwise, and it may include true, false and mixed memories. He explains that “For all practical purposes history is, for us and for the time being, what we know it to be.”

Throughout the speech, he compares the professional historian to Mr. Everyman, the average person in the street.

In constructing this more remote and far-flung pattern of remembered things, Mr. Everyman works with something of the freedom of a creative artist; the history which he imaginatively recreates as an artificial extension of his personal experience will inevitably be an engaging blend of fact and fancy, a mythical adaptation of that which actually happened.

We can see this process when we look at how the myths of slavery and the Confederacy were generated purposefully by those with something to gain, as Ibram Kendi shows in Stamped From The Beginning. The process continues today as the true believers on the Texas School Board work to erase from our collective memory the vicious brutality of slavery and to replace it with the absurd view that slaves were happy under the whip of their white owners.

The Frankfort School teaches that all our ideas and theories should be tested by what Jay calls the tribunal of reason. According to Jay, they didn’t have a clear definition of “reason” or of “truth”. As he explains, the dialectic is great for attacking existing ideas, but it won’t establish any truths itself.

Jay says that the Frankfurt School “…remained willing to operate in a perpetual state of suspended judgment.” That’s fine for analysis, but at some point, you have to act. It seems to me he is saying that the role of reason is to make sure that when you act you are making the best possible choice about the act, and about the goal of the act. And that is a good description of praxis.

I won’t go further, because the contributions of the Frankfurt School in understanding society and working towards a better society do not depend on it. One such contribution, the concept of the Authoritarian Personality, deals directly with the true believers.

Security, Territory and Population Part 1: Introduction

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Security, Territory and Population is a collection of lectures given by the French thinker Michel Foucault at the College of France in 1977-8. Foucault describes the lectures as a work of philosophy, defined as “the politics of truth” (p. 3), a term which itself seems to require a definition. This creates two difficult problems for the reader. First, philosophy is hard. It involves carefully picking things apart, examining each element, putting the pieces back together, and then picking them apart from some other perspective, examining the new set of pieces and reassembling. It’s hard work, and it makes for difficult reading.

Second, these are lectures, not a polished work prepared for publication with the aid of editors and the time it takes to smooth out analysis. Foucault says that these lectures are part of a long program of study, of which other books and sets of lectures are parts. The earlier books include Discipline and Punish and The History of Sexuality for certain, and others as well. These are polished works, and they give an idea of the general program.

In this book, Foucault wants to talk about what he calls “bio-power” which he describes as “… the set of mechanisms through which the basic biological features of the human species became the object ofa political strategy, of a general strategy of power….” Note that I did not use the word “define”, but the word describe. We should understand this book and The Birth of Bio-Power which I plan to take up next, as tentative explorations, and not as a formal philosophical explication.

I haven’t written about Discipline and Punish or The History of Sexuality (except briefly), but I don’t think that will be a problem. The last three books I’ve written about, The Great Transformation, The Origins of Totalitarianism and The Theory of Business Enterprise, raise a similar set of issues. In each one of these books, we saw a massive change in the lives of the working people in Western Europe and the US beginning with the Industrial Revolution. These changes have produced amazing wealth for a few people, and have completely revamped the day-to-day lives of the vast group of working people. How exactly did these changes happen? Was there some great clamor for 12 hour work days in deep-pit mines? Did working people spontaneously decide to put their children to work in spinning mills at the age of 8? Was the demand for coal and cheap shirts so great that these things seemed like fair exchanges to the people whose lives were affected?

Polanyi seems to suggest that the changes were driven by economic duress both from the early capitalists and from the government. Arendt talks about the collapse of earlier social structure, and a combination of economic insecurity and random violence coupled with an appeal to nationalism and scape-goating of the Jews. Veblen doesn’t directly discuss the mechanisms of change but he does say that the industrial age demanded new structures to achieve maximum efficiency. Polanyi says that society resists these massive changes, and Veblen seems to agree. Arendt says that the people can be changed by a combination of force and rhetoric. I realize these are gross simplifications, but they are offered to show that these writers lead us to the problem Foucault wants to talk about. Foucault says that he is not interested in a theory of power, but that his investigations have the potential to expand into a discussion of major social trends.

Third, the analysis of these power relations may, of course, open onto or initiate something like the overall analysis of a society. The analysis of mechanisms of power may also join up with the history of economic transformations, for example. P. 2.

Human beings are a species, and in large groups can be understood and manipulated by those who have studied the species. In Discipline and Punish, Foucault gives us an early example:

[T]he ideas of crime and punishment must be strongly linked and ‘… follow one another without interruption…. When you have thus formed the chain of ideas in the heads of your citizens, you will then be able to pride yourselves on guiding them and being their masters.’ Foucault, Discipline and Punish, at 102, quoting J. M. Servan, Discours sur l’administration de la justice criminelle, 1767.

It reads just like Ivan Pavlov’s theory of classical conditioning. We are much more refined than that now, of course. Almost every day we read a new theory about ourselves as a species. These insights are used by business to boost sales, by politicians to gain their own ends, and by each of us for our own purposes. For some of us, it is enough to know that. For Foucault, it was a signal that we need to think more clearly about power.

One good question might be, how did neoliberalism become the dominant discourse, not just of general societal power but of control over the self. Freedom is the most important thing in neoliberal rhetoric, but if we have to work to live, how free are we? If we have to take whatever is on offer as wages and employment, how free are we? People have internalized neoliberalism as a tool of self-discipline, and at such a deep level that they cannot even recognize it as an ideology. They think it is the natural way life should be, and anyone who questions it is anathema. This leads us to think about governmentality, which I discussed very briefly here, and which Foucault discusses in some detail in this book.

I believe that theory is important. The right wing is winning because so many people believe in neoliberalism, including a large number of Democrats. Kuhn points out that scientists can’t even do analysis without a theory with which to understand the observations they are making. I don’t think theories about societies or individual human behavior can ever have the kind of certainty we can get in the physical sciences, because as humans, any theory becomes an object of study and then of change. Even so, we can’t understand our society without some kind of theory. Foucault says that philosophy is about the politics of truth. Is neoliberalism a truth? What are the points about it where we can push back against the idea that it is a truth? Identifying those points is one of the goals of this series of lectures and of the next set, collected as The Birth of Bio-Politics.

In this post, I suggested the beginnings of a theory for the left. The same kind of analysis can and should be applied to that proposal. But that’s for the future. As I work my way through these books, I will try to remember that every proposal has points of struggle, as Foucault calls them, points that are contested. Let’s start with the recognition that for many people, neoliberalism has successfully concealed the points of struggle from the people whose minds it has colonized.

Revolutionary Changes in Economics

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In this series, I tried to learn what Thomas Kuhn’s The Structure of Scientific Revolutions meant for economics. In this post, I suggested a possible paradigm for neoliberal economic theory. It uses the Ten Principles of Economics preached by N. Gregory Mankiw in his best-selling economics textbook, the general principle of maximization of economic efficiency, and a method suggested by David Andolfatto of the St. Louis Fed. Let’s assume the goals of neoliberalism fit the parameters described by Philip Mirowski in this article. I think my proposed paradigm can be used to generate the economic theory those parameters require, and I think that suits the goals of the people who fund academic neoliberalism just fine.

As Kuhn describes them, scientific revolutions take the form of a wholly new way to look at things, like an optical illusion. Where once our eyes told us that the sun revolves around the earth, now we know that it’s just the opposite. Not just is the earth not the center of the universe, we are on a small planet on the outskirts of a small galaxy, whirling around in a monstrously large physical space until entropy ends it. Since publication of Kuhn’s essay in 1962, there has been some discussion of such paradigm changes in economics, but as the series shows, I think old ideas do not die, but come back to haunt us, just as John Maynard Keynes said:

… the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil. Chap. 24 Sect. 5, The General Theory of Employment, Interest and Money.

I don’t know where Keynes got the optimism in the second half of that quote, any more than his seeming optimism about the end of laissez-faire theories. The ideas of Hayek and Friedman and their laissez-faire government-hating chest-beating right wing capitalism-worshipping true believers are still dominant nearly a century later. It just goes to show that if you capture the minds of the young, especially the young elites with textbooks like Mankiw’s, it’s mostly impossible to change their minds with mere facts and natural experiments from the real world.

Still, I think it’s quite possible to change some minds, or I wouldn’t bother with this. And there are new ideas, ideas just as revolutionary as any that Kuhn describes. One example is taxation. For centuries, people believed that the function of taxes was to provide the revenues to run the government. That may have been true in an age of gold. But in an age of fiat money, it’s just not true. Here’s a 1946 discussion by Beardsley Ruml, head of the New York Fed, explicitly stating this truth, and then offering justifications for taxation:

1. As an instrument of fiscal policy to help stabilize the purchasing power of the dollar;
2. To express public policy in the distribution of wealth and of income, as in the case of the progressive income and estate taxes;
3. To express public policy in subsidizing or in penalizing various industries and economic groups;
4. To isolate and assess directly the costs of certain national benefits, such as highways and social security.

This, of course, is the basis of Modern Money Theory. Here’s a quote from a readable and cogent explanation from L. Randall Wray:

But in the case of a government that issues its own sovereign currency without a promise to convert at a fixed value to gold or foreign currency (that is, the government “floats” its currency), we need to think about the role of taxes in an entirely different way. Taxes are not needed to “pay for” government spending. Further, the logic is reversed: government must spend (or lend) the currency into the economy before taxpayers can pay taxes in the form of the currency. Spend first, tax later is the logical sequence.

In the same way, most of us were taught that banks and other savings institutions were intermediaries between savers/depositors, and borrowers/investors. The role of the banks was to direct the accumulated assets of a society into their most profitable uses. No. Banks don’t need deposits to make loans. That idea, which I remember learning in Econ 101 at Notre Dame a very long time ago, is false. The bank merely makes book entries, one set to loans receivable, and one to deposits. This model is called finance and money creation in this 2014 paper by Zoltan jakab and Michael Kuhof of the IMF. Here’s the abstract:

In the loanable funds model of banking, banks accept deposits of resources from savers and then lend them to borrowers. In the real world, banks provide financing, that is they create deposits of new money through lending, and in doing so are mainly constrained by expectations of profitability and solvency. This paper presents and contrasts simple loanable funds and financing models of banking. Compared to otherwise identical loanable funds models, and following identical shocks, financing models predict changes in bank lending that are far larger, happen much faster, and have much larger effects on the real economy.

I remember learning about bank multiplier effects and the importance of reserves in determining the amount of money in circulation. It was one of those bizarre things that seemed logical until you realized that there was no particular reason to think any bank could or would actually lend all that money sensibly. Yet, as Jakob and Kuhof say, that is the theory incorporated into standard models of the economy. They create a new model using the financing theory, and get completely different predictions. These graphs are from the paper. The dotted lines are the predictions under the loanable funds model, and the solid lines are from the financing and money creation model.

graphs for post

At one level, this is just another reason to distrust economic models, because their basic assumptions are simply wrong. At another, it demonstrates that the standard paradigm is useless, because it treats the finance sector are irrelevant. And at another level, the new model demolishes the idea that the role of the bank is to intermediate savings. Savings are irrelevant to the main role of the bank, which is not to insure that savings are rewarded, but to make sure banks are rewarded.

Of course, such revolutionary changes won’t affect anyone not exposed to them and to their basis. And the wrong ideas will stay in textbooks for decades, insuring that generations will have them imprinted. No wonder nothing changes.

The proposed paradigm is set out here. In future posts in this series, I’ll attempt to show how each element contributes to the neoliberal economic theory that dominates the national discourse, and see whether I can find an optical illusion in each, leading to a better although not revolutionary understanding.

Kuhn and Economics: A Summary

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In a series of posts which you can find here, I have been trying to formulate an answer to the question why has neoliberal economics not been tossed out in the wake of its total failure as demonstrated by the Great Crash. I’ve used as a lens Thomas Kuhn’s seminal essay: The Structure of Scientific Revolutions. I am totally dissatisfied with the usual progressive explanations of bad faith, whether in the form of the ubiquitous quote from Upton Sinclair: “It is difficult to get a man to understand something, when his salary depends on his not understanding it;” or direct or indirect accusations of intellectual dishonesty or corruption. The world is more complex, and we need to think more deeply, especially if we want to change things. Here is a list of the most important things I think I learned from the exercise.

1. Kuhn argues that science cannot proceed without a paradigm. That seems true in the hard sciences, but it seems inadequate as a description of the social sciences. Even so, there it remains an important insight. This series offered insights because I used the paradigm paradigm to examine a specific problem.

2. Following Mark Blyth, it seems that there are a number of schools of economics. These include neoliberals, post-Keynesians, Austrians, rational expectations theorists, and real business cycle theorists; to which we can add Modern Money Theorists, Marxians, and perhaps Piketty and his colleagues. Each of these has a paradigm through which it tries to organize the vast amount of data and theory we have accumulated over the centuries. Each has its own incommensurate ideas about what counts as data and about how to interpret the data. In other words, they each have a definition of truth, and their truth claims cannot be settled inside their paradigms, as Kuhn tells us is true about the hard sciences.

That means that the decisions about which, if any, of these schools dominates at any point in time has nothing to do with some transcendent truth, but rather with a struggle over politics.

3. This view was reinforced by a reading of Keynes’ delightful essay The Death of Laissez-Faire, which actually didn’t die despite Keynes best efforts, but lives on in the grifter stylings of Grover Norquist and the rest of the zombie right wing. If Keynes caouldn’t kill it, it is permanent.

4. It is further reinforced by Bronfenbrenner’s suggestion that paradigms in the social sciences are not replaced outright as Kuhn argues, but are met by an antithesis, and eventually fall into a new synthesis. I suggest that Paul Samuelson follows this approach in his textbook, based on the back inside cover. In a Hegelian or Marxian world, this is supposed to represent progress, but I’ve always thought of it a just something different that might or might not be useful in a specific social situation.

5. I laid out the seeds of a paradigm for neoliberal economics in this post. In passing I pointed out that Mankiw’s principles are couched in bland language, but they can easily be interpreted to carry out the neoliberal program. See 8. below. Again in passing, I note that tweaking them, and setting up a slightly different paradigm can produce a better solution to the problems our economy faces. That is an exercise for another day.

6. One crucial problem that arises from the existence of many schools of economics is that each can claim that there are no tests that disprove it. As Kuhn and others point out, that’s because the meaning of facts and truth is determined by the paradigm, and neither facts nor truths are commensurate across paradigms. That’s why the likes of Gary Becker and N. Gregory Mankiw can claim that the Great Crash was not a problem for neoliberal economics. What looks like a failure to a person who got hammered looks like the normal course of events to an ideologue married to a paradigm.

7. The neoliberals recognized the importance of politics in economics long before the liberals. They wrote their views into textbooks, which have a thin veneer of science and a thick veneer of authority, and used them to indoctrinate generations of college grads who only took one or two economics classes. They also arranged to have the basic tenets taught in high school classes mandated in many states on the wonders of capitalism. As Kuhn explains, the textbook is the authoritative teaching tool for creating new scientists and presumably new followers of the dominant school of economics. The tenets of neoliberal economics are taught as if they were the only way to understand capitalism, and any other set of ideas are communist or socialist, by which we are to understand they are evil.

8. One factor Blyth doesn’t discuss is why neoliberal economics has such a hold on the populace. Certainly a big part of that is the domination of authoritative discourse through the textbook process in point 7. Another crucial point is that without quite saying so, Mankiw’s principles of economics play directly to the prejudices of the a large segment of the voting public. Take the first one as an example: People face trade-offs. Some people face the trade-off between summering in the Hamptons or on Martha’s Vineyard. Others face trade-offs between rent and food. These are the same thing to neoliberals, who sneak in a bunch of outmoded Benthamite utility. And these are also the same for a huge number of conservatives. Suck it up and pick. It’s your fault for not being rich.

The rich people who dominate elections and the public discourse in general can rely on those principles in anodyne form to pacify the liberals while dog-whistling to their base of conservatives.

9. As a result, the voices of authority on economic matters don’t have to listen to anyone who disagrees with them. They have a base of voters who think it’s great to screw the poor and don’t even necessarily want to accept anything that comes from the government.

10. We need to focus attention on the political nature of economic paradigms. Neoliberal economics failed. We need to hammer home the failure, to undermine the authority of neoliberals on economic matters.

UPDATE
Here are links to the posts in this series with a note about each.

1. The Two Prongs of the Neoliberal Project. This is a justification of the inclusion of economics at this blog. It is also a general introduction to neoliberal economic theory.

2. Paradigms in Economics. This is an introduction to Kuhn’s theory of scientific revolutions and an introduction to a theory of paradigms in economics.

4. Paradigm Change in Science and Economics. This is a discussion of Kuhn’s explanation for paradigm change in science, and begins the discussion of the comparable problem in economics.

5. A Possible Paradigm for Neoliberal Economics. N. Gregory Mankiw’s textbook lists 10 principles of economics. This post takes those and a simple methodology as a possible paradigm for neoliberal economics. In passing, I discuss an actual paradigm change that seems to meet the requirements of Kuhn’s analysis.

6. Pragmatic Aspects of Paradigm Change According to Kuhn. This addresses Kuhn’s argument that even in the hard sciences, paradigm change requires persuasion, because the superiority of an alternative paradigm cannot be tested inside a different paradigm. This idea is applied to economics, and specifically to textbooks.

7. Keynes on Paradigm Change. John Maynard Keynes calls for the death of laissez-faire, especially in its virulent form of demanding that government do nothing. Economic ideas don’t die.

8. Paradigm Change Through Authority and Arguments about Truth. This is a discussion of a more sophisticated approach to changes in economics paradigms through a paper by Mark Blyth. Blyth offers a grounded approach to the problem of change as a result of authority and persuasion.

Paradigm Change Through Authority and Arguments about Truth

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So far in this series, we have encountered a number of answers to my central questions: why hasn’t neoliberal economic theory been thrown out as a result of its horrifying failure? Why hasn’t the paradigm change theory of Thomas Kuhn’s The Structure of Scientific Revolution worked? If Kuhn were right, then the utter failure of the neoliberals would lead to its rejection and replacement by a new paradigm.

Most of the people who followed Kuhn pointed to differences between the natural sciences and the social sciences as part of the reason. That led to explanations like the dialectic, in which an idea is met with an antithesis and eventually a synthesis emerges which solves the tension, but it then attracts its own antithesis, and so on. Another possibility is that bad ideas don’t ever die. We saw that with Keynes’ discussion of the end of the silly ideas of laissez-faire; he points to a number of reasons for its long life.

We might next look at the pendulum idea of intellectual history. There’s an excellent example of this in a paper by Ravi Kanbur of Cornell, The End Of Laissez-Faire, The End Of History, And The Structure Of Scientific Revolutions I’m going to skip that one, though, because I don’t think much of pendulum theories. They don’t help us see the forces that drive the swings. Instead, I’ll look at this paper by Mark Blyth, Paradigms and Paradox: The Politics of Economic Ideas in Two Moments of Crisis. Unfortunately, this excellent paper was published by Wiley, which is trying to screw money out of people, so perhaps you could find it through your library. Here’s the abstract.

This article argues that there is a paradox at the heart of Hall’s “Policy Paradigms” framework stemming from the desire to see both state and society as generative of social learning while employing two different logics to explain how such learning takes place: what I term the “Bayesian” and “constructivist” versions of the policy paradigms causal story. This creates a paradox as both logics cannot be simultaneously true. However, it is a generative paradox insofar as the power of the policy paradigms framework emerges, in part, from this attempt to straddle these distinct positions, producing an argument that is greater than the sum of its parts. In the second part of the article, I discuss the recent global financial crisis, an area where we should see third-order change, but we do no not. That we do not strengthens the case for the constructivist causal story.

This article starts as a discussion of a paper by Peter Hall on the shift of ecocnomic paradigm by the Thatcher government from Keynesian to neoliberal. The “Bayesian” story mentioned in the abstract is the standard version of Kuhn’s theory. It says that the normal process of change in institutional governance is cumulative: “an additive function of policy errors that begin with settings, moves to instruments, and then leads to goals as a function of environmental pressures.” Suppose a policy and a paradigm are accepted by the institutions of government and the private sector as controlling in a certain area. As things change and evolve, the institutions first change the settings, hiking or lowering interest rates or taxes, for example. Then they add or delete the instruments through which the policy is put into practice, perhaps adding a new tax or a new deduction. Only if these fail do questions about the paradigm itself come to the fore. These are the three orders of change in this discussion. Paradigm change only comes in the third order.

The alternative is the “constructivist” view. Blyth isn’t as direct in the definition of this idea, but here’s the general idea. The Bayesian view is that there are “transcendent, objective, and empirical standards through which observations of events and other ‘facts’ can be judged.” In the constructivist view, “Truth is a series of intersubjectively held conventions regarding “the way the world works” among a given community at a given moment.” The Bayesian view is probably eventually true in the natural sciences, even if new data or events can be interpreted in several ways under different paradigms that might exist at some point in time. It is much less true in the social sciences. There, different paradigms produce different facts. As an example, Blyth points to the claim of the monetarists (the sheep’s clothing of the neoliberals) that Keynesianism failed in the 1970s in a way that monetarism didn’t. Within the Keynesian paradigm, that wasn’t so, but the monetarists seized control of the narrative, and the bad performance of the economy was taken as evidence of failure of Keynesianism. Blyth says that the key step was the construction of the evidence of the performance of the economy by the monetarists as failure.

Blyth claims that the 70s did not constitute a natural test of Keynesianism, for reasons he discusses in footnote 8 and are beyond my power to assess. I’ll add that the solution of the monetarists was to hike interest rates and hike unemployment to ridiculous levels to stamp out inflation. The result was a catastrophe for the middle class and the working class, and it made life even more miserable for the poor. There was no reason to stomp on workers to end inflation, but there was a determination to protect the interests of the rich. This, I think, is the direct opposite of any policy Keynes would support.

In the constructivist view, then, truth is a matter for contest among the people allowed to participate in the discourse. Blyth quotes Hall:

Politicians, officials, the spokesmen for social interests, and policy experts all operate within the terms of political discourse that are operative within the nation at a given time, and the terms of political discourse generally have a specific configuration that lends representative legitimacy to some social interests more than others . . . and defines the context in which many issues will be understood (Hall 1993, 289).

This analysis focuses our attention on the actual decision-makers, not just the economists themselves, but the group with authority in any given setting to determine the bounds of discourse. Blyth points out that each of the schools of economics, rational expectations theorists, real business cycle theorists, post-Keynesians and Austrians, along with the neoliberals and the outright laissez-faire school of political economics, have explanations for the Great Crash, but they are all incommensurate, totally different paradigms. The argument, the social argument, is over which will dominate the discourse. That is a sociological problem, not a problem of economics.

Blyth uses this framework to analyze the persistence of neoliberal economics. I’ll summarize them

1. It takes time to work out a new system.

2. After Kuhn, people expect an all or nothing change. It’s quite possible that we have a failure of a paradigm, but no new paradigm to replace it.

3. Economics professors have tenure, and a huge stake in preserving their status.

4. Institutions like the World Bank, the IMF, the European Community Bank and others are slow to change for the same reasons economics professors won’t change.

5. The neoliberal consensus had taken such deep root and its adherents were in control of so many institutions that there was no way to get the public involved in demanding change. The few prominent economists calling the neoliberals out had to spread their attacks over such a huge area that there was insufficient firepower.

Blyth concludes:

… the singular lesson of the recent crisis for the policy paradigms model is that the sociological can trump the scientific precisely because the locus [of] authority did not shift despite the facts. Mere facts will (sometimes) not be allowed to get in the way of a good ideology. Being seen to fail, Obama’s stimulus, for example, can trump actual failure, such as Eurozone austerity packages. In such a world, the “truth” about the crisis and the ideas that made it possible really does depend upon what the most powerful members of a group (or society) consent to believe.

This explains why nothing changed: the people who define the policy also define the evidence and the tests that might question the policy. But there’s more, for another day.

Keynes on Paradigm Change

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John Maynard Keynes wrote about paradigm change long before Thomas Kuhn’s The Structure of Scientific Revolutions. In a 1926 essay, The End of Laissez-Faire Keynes discusses the lingering doctrines of Laissez-Faire economics well into the period economists were for the most part persuaded by the examples of Alfred Marshall, and the proponents of the marginal utility school that the main ideas of laissez-faire were wrong. Keynes was a brilliant writer, witty and insightful, but he was also a fine scholar. This isn’t a long essay, and it is certainly worth reading, for the giraffe analysis if nothing else. I am going to pick out a few points that show why Keynes thought old and strange ideas cannot be rooted out of economics. Here’s the laissez-faire he is talking about:

Finally, in the works of Bastiat we reach the most extravagant and rhapsodical expression of the political economist’s religion. In his Harmonies Économiques, [he writes]

I undertake [he says] to demonstrate the Harmony of those laws of Providence which govern human society. What makes these laws harmonious and not discordant is, that all principles, all motives, all springs of action, all interests, co-operate towards a grand final result … And that result is, the indefinite approximation of all classes towards a level, which is always rising; in other words, the equalisation of individuals in the general amelioration.

That sure sounds like any Republican or corporatist Democrat, any TV economist or any person who plays economist on TV, and it’s just a shade riper than the average commenter on an article in which Bernie Sanders is identified as a Social Democrat.

Keynes identifies several social and political issues which led to this florid statement. There was struggle against monarchy, which led Locke and others to fetishize private property and the freedom to do as one will with that property. There was a philosophical basis in the Social Contract ideas and the theories of the Utilitarians. There was Darwin and his scientific colleagues who seemed to argue for the necessity of competition for evolution. There was the “corruption and incompetence of eighteenth-century government”, coupled with the successes of the early industrialists. There was the support of the economists of that time, a new group, but once seemingly versed in science, saying that government interference with private property would be bad.

He explains that although economists of the day generally supported laissez-faire, it wasn’t they who preached the gospel as laid out by Bastiat. Instead, it was the “popularisers and the vulgarisers”, who pushed the doctrine into the public mind, and it was the philosophers, not the economists, whose views it fit best. He quotes the popularisers, including the fabulous Mrs. Marcet, and I can’t resist:

CAROLINE. The more I learn upon this subject, the more I feel convinced that the interests of nations, as well as those of individuals, so far from being opposed to each other, are in the most perfect unison.

MRS B. Liberal and enlarged views will always lead to similar conclusions, and teach us to cherish sentiments of universal benevolence towards each other; hence the superiority of science over mere practical knowledge.

The economists turned away from this stuff immediately, Keynes says, treating it as a useful idea but hardly one with evidentiary or theoretical support. But the idea remains fixed in the public mind. To be clear, Keynes agrees that government should be limited, but he firmly believes that limits on the use of private property of various kinds and a sensible government are both crucial to controlling the practice of capitalism. The idea that the government could do nothing useful, which underlies laissez-faire as taught by the likes of Mrs. Marcet, is foreign to Keynes, as he shows in Part IV of the essay.

In Part III, Keynes dismantles this analysis. Here’s a taste:

This assumption, however, of conditions where unhindered natural selection leads to progress, is only one of the two provisional assumptions which, taken as literal truth, have become the twin buttresses of laissez-faire. The other one is the efficacy, and indeed the necessity, of the opportunity for unlimited private money-making as an incentive to maximum effort. Profit accrues, under laissez-faire, to the individual who, whether by skill or good fortune, is found with his productive resources in the right place at the right time. A system which allows the skilful or fortunate individual to reap the whole fruits of this conjuncture evidently offers an immense incentive to the practice of the art of being in the right place at the right time. Thus one of the most powerful of human motives, namely the love of money, is harnessed to the task of distributing economic resources in the way best calculated to increase wealth.

Shades of Thomas Piketty. Keynes’ primary target is professors of economics who teach the the simplest and most reductive assumptions as the norm, with all of the messy complications of reality excised. “They regard the simplified hypothesis as health, and the further complications as disease.” He says that the alternatives, Marxian socialism and protectionism, are terrible themselves. Third, there’s this:

Finally, individualism and laissez-faire could not, in spite of their deep roots in the political and moral philosophies of the late eighteenth and early nineteenth centuries, have secured their lasting hold over the conduct of public affairs, if it had not been for their conformity with the needs and wishes of the business world of the day.

And in conclusion to that analysis, he writes in Part IV:

Let us clear from the ground the metaphysical or general principles upon which, from time to time, laissez-faire has been founded. It is not true that individuals possess a prescriptive ‘natural liberty’ in their economic activities. There is no ‘compact’ conferring perpetual rights on those who Have or on those who Acquire. The world is not so governed from above that private and social interest always coincide. It is not so managed here below that in practice they coincide. It is not a correct deduction from the principles of economics that enlightened self-interest always operates in the public interest. Nor is it true that self-interest generally is enlightened; more often individuals acting separately to promote their own ends are too ignorant or too weak to attain even these. Experience does not show that individuals, when they make up a social unit, are always less clear-sighted than when they act separately.

Keynes believed that a capitalist economy could be made to work better through government actions as the situation demanded. “Our problem is to work out a social organization which shall be as efficient as possible without offending our notions of a satisfactory way of life.” I would have written that we should have a satisfactory way of life, made as efficient as possible, but maybe that’s what Keynes meant.

Given these forces, it’s hard to see the basis for Keynes’ hope that the principles of laissez-faire might be eradicated, and, of course, they weren’t. They govern the economic thinking of the Republicans and the corporatist Democrats even today, as the vote on the TPP indicates. They are people who ignorantly repeat the tropes of laissez-faire without reading their original proponents: “… we should consider their arguments preposterous if they were to fall into our hands.“

That’s certainly true, more so today than ever. It points to the central reason why stupid economic ideas cannot be vanquished:

To suggest social action for the public good to the City of London is like discussing the Origin of Species with a bishop sixty years ago. The first reaction is not intellectual, but moral. An orthodoxy is in question, and the more persuasive the arguments the graver the offence.

A Possible Paradigm of Neoliberal Economics

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In this post I ask what the paradigm of economics might be, and if there is one. I did not address the question of the exact nature of the paradigm as discussed by Kuhn, leaving it at the broadest possible level: the theories, instruments, methods, prejudices and so on common to a community of scholars working in a fairly specific area of human knowledge. The general question of the nature of the paradigm is the subject of a number of papers, most concluding that the concept is too unclear to support careful analysis. That’s the position taken by George Stigler in a remarkable paper, Does Economics Have a Useful Past? 1 Hist. of Pol. Econ. 225 (1969). Stigler dismisses Kuhn because he can’t find an example of a paradigm that completely defeats a prior paradigm.

To be concrete, the marginal utility revolution of the 1870s replaced the individual economic agent as a sociological or historical datum by the utility-maximizing individual. The essential elements of the classical theory were affected in no respect. (A possible, but uncertain, aftereffect in twenty years was the development of the marginal productivity theory.) Until Kuhn gives us criteria of a revolution (or a paradigm) which have direct empirical content, it will not be possible to submit his fascinating hypotheses to test.

I assume Stigler means that Kuhn’s ideas aren’t applicable to economics. Certainly the book is full of examples from physics and chemistry of theories that completely replace older theories, leaving the old to as nothing more than objects of interest. Let me propose one such idea for economics. It is a certainty of economics that taxes exist for the purpose of raising revenue for the government. That was probably true before the advent of fiat money. When nations left the gold standard, it became untrue, as the Chairman of the Federal Reserve Bank of New York, Beardsley Ruml, wrote in 1946 in a paper titled Taxes For Revenue Are Obsolete. This idea is as revolutionary as the Copernican Revolution. It forms the basis of Modern Money Theory, and both the idea and the elaboration into a coherent theory are fiercely ignored or fiercely fought by the dominant economists. As it happens, this idea is leaking into public discussion despite their best efforts.

I have little else to add to this discussion about the nature of paradigms. I’ll follow Stigler in accepting that there are communities of scholars engaged in the same general areas of study, and in these communities, there is a mutual agreement on theories, instruments, methods, measurements, and even prejudices, and these guide the thinkers in their day to day efforts. Stigler considers this a good picture of economics, and for my purposes, it serves to connect Kuhn’s ideas to economics.

The neoclassical school dominates economic discourse and is widely taught as authoritative at every level in the US. N. Gregory Mankiw, Harvard professor and author of the leading economics textbook, wrote this in a New York Times column in May 2009:

Despite the enormity of recent events [meaning the Great Crash], the principles of economics are largely unchanged. Students still need to learn about the gains from trade, supply and demand, the efficiency properties of market outcomes, and so on. These topics will remain the bread-and-butter of introductory courses.

Let’s try to tease out the paradigmatic points of the neoliberal school. Mankiw’s best-selling economics textbook contains these 10 principles of economics:

  1. People face tradeoffs
  2. The cost of something is what you give up to get it
  3. Rational people think at the margin
  4. People respond to incentives
  5. Trade can make everyone better off
  6. Markets are usually a good way to organize economic activity
  7. Governments can sometimes improve market outcomes
  8. A country’s standard of living depends on its ability to produce goods and services
  9. Prices rise when the government prints too much money
  10. Society faces a short-run tradeoff between Inflation and unemployment

The primary method of this school is mathematical modeling, which adds at least two covert assumptions, that collective and individual human behavior is continuous enough so that it’s reasonable to use college calculus, and that aggregate behavior is nothing but the sum of individual behaviors which exist independently of each other at all times. The theory is premised on the idea that the motivation of all people is efficiency, and that economic efficiency is the most prized value in a society, with all other goals held as secondary. The models are used to give normative policy advice.

This school of thought, to follow Stigler, replaced Keynesianism. P. 228. Why? Stigler suggests that a school of thought cannot survive the life of its leader. That seems very odd, because many of the ideas of the neoliberals are taken from the past. As Stigler says:

The young theorist, working with an increasingly formal, abstract, and systematic corpus of knowledge, will seldom find it necessary to consult even a late-nineteenth-century economist. He will assume, just as the mathematician or chemist assumes, that all that is useful and valid in earlier work is present — in purer and more elegant form — in the modern theory. P. 217-8

I won’t belabor the obvious point that every element of the neoliberal school is contested. Instead, I continue to focus on this question. The canonical explanation of the rise of neoliberalism is that Keynesianism failed in the 1970s, and was replaced by neoliberal economics which offered a better solution to the problem that Keynesianism stumbled over. That explanation leaves a bunch of questions. Not the least is exactly why the events of the 1970s were somehow a failure of economic theory. The solution offered by neoliberalism was the traditional conservative solution: hammer the workers and coddle the capitalists. Why is that a better solution? Remember, Keynes believed that the goal of economic recovery was to give people useful work to do [see paragraph 5], not to help the rich. And why isn’t neoliberalism facing extinction in the wake of its disastrous failure? Both Kuhn and Keynes have something to offer on this question, and I’ll take that up next.

Paradigm Change in Science and Economics

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In this post, I discussed normal science, a term used by Thomas Kuhn in The Structure of Scientific Revolutions to describe the day to day work of scientists, focusing on the example of my brother’s work on transmission of pain in the body. In normal science, Kuhn explains, people expect the puzzles they choose to work on will have solutions that can be worked out using the paradigm, and if the first try doesn’t get the solution, scientists just keep plugging away, sharpening their instruments, their theories, their rules of engagement and trying to eliminate prejudices until they get a solution. And mostly, they do. That’s a good description of my brother’s work.

If not, generally they assume they failed, not that the answer doesn’t have a solution inside the paradigm’s limits. They put that problem to the side, and work on a related problem or maybe just move on to something different. Frequently the problem disappears as more and better techniques are created, measurements become better, theories evolve and prejudices are conquered. But if unsolved puzzles accumulate, there is growing pressure on the paradigm, and growing unease among the scientists working in the area. Kuhn gives examples:

The state of Ptolemaic astronomy was a scandal before Copernicus’ announcement. Galileo’s contributions to the study of motion depended closely upon difficulties discovered in Aristotle’s theory by scholastic critics. Newton’s new theory of light and color originated in the discovery that none of the existing pre-paradigm theories would account for the length of the spectrum, and the wave theory that replaced Newton’s was announced in the midst of growing concern about anomalies in the relation of diffraction and polarization effects to Newton’s theory. P. 67, fn omitted.

This is the crisis state. It is a necessary, but not sufficient, condition for a change in the paradigm. Kuhn analogizes the situation to political revolutions:

Political revolutions are inaugurated by a growing sense, often restricted to a segment of the political community, that existing institutions have ceased adequately to meet the problems posed by an environment that they have in part created. In much the same way, scientific revolutions are inaugurated by a growing sense, again often restricted to a narrow subdivision of the scientific community, that an existing paradigm has ceased to function adequately in the exploration of an aspect of nature to which that paradigm itself had previously led the way. P. 92

Another necessary condition for a paradigm shift is the existence of a new paradigm. Scientists cannot work without a paradigm, so until a new one obtains a concensus, they struggle on under the old one. New paradigms are suggested and tested, but Kuhn points out that there isn’t any way to prove that one is better than the other, because proofs only exist inside paradigms. The new paradigm has to satisfy the relevant scientific community that it will solve the old problems, and open the way to new problems. But this is a matter of persuasion, not of scientific proof, because the standards of proof are connected to a paradigm; they do not exist in some Platonic state above it all.

One final point. Kuhn says that in scientific revolutions, the new paradigm completely replaces the old one, and he gives plenty of examples.

There’s more to be said about the process of paradigm change, but this will suffice for this post. In the wake of Kuhn’s work, several papers were published trying to identify paradigm shifts on the order of the Copernican Revolution in the history of economics. One such is The “Structure of Revolutions” in Economic Thought, a 1971 article by Martin Bronfenbrenner. He thinks the history of economics is more like the Hegelian dialectic, thesis, antithesis and synthesis, than the catastrophic destruction of the previous paradigm.

Bronfenbrenner identifies three revolutions in economics as

1. The classical school, based on Adam Smith’s Wealth of Nations and David Hume’s Political Discourses.
2. The marginal utility revolution, dating to about 1870, led by John Stuart Mill and David Ricardo.
3. The Keynesian revolution, about 1936.

He adds the response of the Chicago school as a possible fourth, and time has proved his suggestion correct.

It should be obvious that none of these revolutions destroyed the older view. Instead, they sit side-by-side, if uneasily and with some overlap. Bronfenbrenner doesn’t see a problem with the survival of the natural law as a partial explanation of 20st Century capitalism, and assumes that the future will include some of those ideas as well. This is clear from his approval of Paul Samuelson’s textbook. I point out the problems with that view in several posts here and at Naked Capitalism, including this one.

Like others, Bronfenbrenner points out that Kuhn’s definition of the term “paradigm” is loose at best. For purposes of this post, it’s sufficient to regard it as the entire set of theories, understandings, prejudices, instruments, and interpretations of the measurements of instruments that guide the scientist in the course of normal science. It is, however, important to note that neither Bronfenbrenner nor any of the other writers I’ve seen so far try to explain the sense in which the Classical School, the Marginal Utility School, the Keynesians or the Chicago School, or, for that matter, any of the other schools, constitute a paradigm in a way similar to the way General Relativity acts as a paradigm for physicists and astronomers.

That offers two more or less neutral explanations of why economists aren’t all freaked out by the failure of their theories demonstrated by the Great Crash. First, they may well assume that events like the Great Crash are just anomalies that future work will solve. That would explain the response of Gary Becker, “You need a theory to beat a theory.” Link here. Becker couldn’t imagine an alternative theory, so he just continued to work inside his old one, as if his Chicago School were a paradigm.

Second, Bronfenbrenner is right that old economic theories never die. They cannot die. Instead, in his view, they will be assumed into the heaven of some synthesis, hopefully with the favorite views of each economist on top.

As a road map for the rest of this series, what does all this say about the claims of authority of economists?

Paradigms in Economics

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I am fascinated by the fact that economists do not seem fazed by the failure of their almost unanimous policy recommendations of deregulation and tax cuts, as I discuss here and here. Almost in unison, they chanted for decades that reducing taxes and regulation would spur growth for the benefit of all of us. The Great Crash didn’t faze them, as these posts show. So why not?

One plausible explanation is that these people are acting in bad faith in the sense Sartre uses this term. They are free to change their minds about their theories, but they are not willing act on, or even to face, that freedom because it might cost them something. This explanation seems to be behind several of Paul Krugman’s recent columns and blog posts, asking how people can have a claim to expertise when they give the same advice no matter the circumstances, and when the evidence and even the structure of their explanations contradict their advice. I think there are plenty of intellectually dishonest economists, but surely there are plenty of intellectually honest economists too.

After my previous posts a correspondent suggested I take a look at Thomas Kuhn’s The Structure of Scientific Revolutions. In the wake of Kuhn’s book, a number of scholars attempted to apply the theory to economics. I think it’s helpful to look at the failures of economics through this lens.

Kuhn starts by describing what he calls normal science: the day to day practice of scientists. Their work is based on an infrastructure consisting of theories of various strengths, instruments, and techniques that together make up a paradigm. This paradigm organizes their thinking so that they have an idea of what they are doing when they do physical and thought experiments. Kuhn says that normal science uses the paradigm to solve puzzles. The puzzles themselves are set up by the paradigm, and the scientist expects to be able to solve them using the rules and equipment of the paradigm.

Here’s an example. One of my brothers was a scientist with a deep interest in the transmission of pain through the nervous system to the brain, and in analgesics, pain-killers. In the 80s, he began to wonder about the pain-killing effect of marijuana. Here’s a reasonably comprehensible paper he co-wrote in 2001, discussing the state of work on cannabinoids.

In the paper he talks about single-cell studies. We talked about this a couple of times while he was doing this work. He told me that his lab had worked out a technique for inserting a tiny filament into a brain cell of an anesthetized rat and counting how many times and how often it fired, and some other things about it. He explained how he thought that happened, and what it meant physically. He described the instruments he used in general terms, and some of the interesting ways he was using computer chips to monitor the results. I asked why. I thought it might be useful, he said.

For him, neurotransmission of pain was a huge puzzle. He wormed away at it most of his adult life. Each little step he took seemed likely to advance a detailed understanding of the puzzle, or create an instrument that might help him and his colleagues take another step. A giant puzzle. A game. The same things were going on in other labs, as the footnotes show. One of the researchers he cites wondered if the body generates substances like cannabinoids. That guy found an endocannabinoid, a naturally occurring cannabinoid, which he named anandamide, from the Sanskrit word for internal bliss. Not only a puzzle, but an opportunity for cool puns.

Kuhn’s examples are older, and from physics and chemistry, but they exhibit the same pattern. In both cases, normal science depends on a collegial understanding of the instruments, the things being measured and a shared general understanding of the way the thing being studied works.

Kuhn offers three foci of normal science: learning about the facts that the paradigm suggests are most revealing about the nature of things; facts that can be used to check the paradigm; and empirical work to articulate the paradigm in the greatest possible detail, clearing up ambiguities and reaching for further problems suggested by the paradigm.

How does economics fit into this picture? What is the paradigm? What are the problems economists are trying to solve? What is “normal economics”?

Here’s one explanation from David Andolfatto of the St. Louis Fed:

But seriously, the delivery of precise time-dated forecasts of events is a mug’s game. If this is your goal, then you probably can’t beat theory-free statistical forecasting techniques. But this is not what economics is about. The goal, instead, is to develop theories that can be used to organize our thinking about various aspects of the way an economy functions. Most of these theories are “partial” in nature, designed to address a specific set of phenomena (there is no “grand unifying theory” so many theories coexist). These theories can also be used to make conditional forecasts: IF a set of circumstances hold, THEN a number of events are likely to follow. The models based on these theories can be used as laboratories to test and measure the effect, and desirability, of alternative hypothetical policy interventions (something not possible with purely statistical forecasting models).

In previous posts I note that recommendations arising from models that do not and cannot predict crashes is worse than useless, it’s downright dangerous. Another kind of problem is that there are big disagreements about the models: whether the assumptions are correct, what they actually model, how they do it, why and whether they work and under what circumstances. Further, there are a number of schools of economics each with its own models and its own set of assumptions, overt and covert. In fact, it isn’t quite clear what the economics paradigm is, or are. These and other issues are for another day.