Scottish-born economist - Angus Deaton - recently published his new book - An Immigrant Economist…
Over the course of my academic career and even outside of that I have often been regaled with the claim (as if it is science) that capitalism is the ‘natural’ system for humans because our nature biases us to competitiveness and selfishness. So Marx’s famous epithet in his Critique of the Gotha program (1875) – “from each according to their ability to each according to their need” – was dismissed as being against our natural tendencies – a denial of basic human nature. It then followed that planned economies and economies where governments intervened strongly to ensure equitable distribution of opportunities and outcomes, was in some way contrived and would surely fail because our human nature would find ways to thwart such interference. This has been a compelling and dominant narrative over the last several decades as neo-liberal think tanks, biased media outlets, and politicians from both sides of politics (homogenised into a common economic mantra) reinforced it continuously in print, spoken word and policy. We shifted from living in societies where collective will and equity was deemed important organising principles to living in economies where every outcome was in the hands of the individual – including mass unemployment – and the concept of systemic failure that could be ameliorated by state intervention was rejected. State intervention was cast as the devil. It is no surprise that economic outcomes for a rising proportion of the population deteriorated as we shifted from society to economy – from collectivism to individualism. It turns out that the research into human nature, motivation, decision-making etc largely rejects the ‘competitive selfish individual’ narrative. We are intrinsically cooperative and care about equity. Our basic propensities appear to be collective and cooperative. Funny about that.
When you think about it, what I am writing about today should come as no surprise to anyone. But the entire edifice of neo-liberal economic policy is built on the notion that competition is a superior way of dealing with human interaction than collective (cooperative) strategies.
There have been many studies which demonstrate how ‘costly’ competition is in many applications. Think back to the early studies of the development of railways in the US to verify how long we have known this.
There is also a long established literature in behavioural psychology that demonstrates how bereft the way mainstream economics – the type that students are indoctrinated with in university courses in economics – depicts human motivation, choice, decision-making etc.
The one-dimensional human is assumed to be grasping, selfish and always rational, assumed requirements that are essential to establish the a priori results that depict the free market as the most superior form of economic organisation, are sadly missing in the real human race.
While people, in general, do not behave remotely like the Homo economicus (the classic self-seeking economics person), it seems that studying this body of economics does open the student to become morally bankrupt. After all, the IMF and other sociopathic organisations have to recruit from somewhere.
Research has clearly shown that economics students by their later undergraduate years become less cooperative with fellow students relative to students in other disciplines.
Psychologist Adam Grant wrote in his Op Ed (October 22, 2013) – Does Studying Economics Breed Greed? – that:
… studying economics pushes people further toward the selfish extreme. Along with directly learning about self-interest in the classroom, because selfish people are attracted to economics, students end up surrounded by people who believe in and act on the principle of self-interest. Extensive research shows that when people gather in groups, they develop even more extreme beliefs than where they started. Social psychologists call this group polarization. By spending time with like-minded people, economics students may become convinced that selfishness is widespread and rational―or at least that giving is rare and foolish.
The only issue in dispute is the direction of causality. Does studying economics change people or is it self-selection? Probably both if the credible research is to be believed.
In their 1993 article – Does Studying Economics Inhibit Cooperation? – Economist Robert Frank and psychologists Thomas Gilovich and Dennis Regan summarised the extant literature and conducted a series of their own experiments to explore whether there are significant differences between “economists and noneconomists” in relation to whether they exhibit sociopathological tendencies.
They conclude that:
1. “that economists are more likely than others to free-ride”.
2. “economics training may inhibit cooperation …”
3. And, interestingly, that “the ultimate victims of noncooperative behavior may be the very people who practice it”.
4. And students in economics classses are more likely to lie when confronted with experiments about generosity – that is, claiming to be more generous than they were.
But at any rate, while economists might lean towards acting like the humans they assume, the rest of us (I hope to have escaped the economics curse (-:) act out our lives in a very different way.
One of the great casualties of this neo-liberal dark age that we are living through at present and which began in the 1980s (if not a little earlier) is that society has been subjugated to economy.
In the 1980s, we began to live in economies rather than societies or communities.
I have written about this previously. Please read my blog – How to discuss Modern Monetary Theory – for more discussion on this point.
Another way of saying that is the pursuit of collective will which was the glue that bound society together in the Post World War 2 period up to the mid-1970s succumbed to the conservative assault.
The conservatives relentlessly promoted the idea that humans are selfish and rational and experience outcomes that they choose based on all the information that is available to them.
So the distribution of individual outcomes is not the result of the pattern or distribution of circumstances and opportunities, but rather is the result of maximising choices taken by consenting and rational adults.
In that context, attempts by government to interfere with this pattern of outcomes was promoted as problematic.
Take the case of mass unemployment. If unemployment is the result of voluntary, maximising choice – as is the representation in the mainstream economics literature – then it is not a problem. It is the expression of freedom.
So to try to reduce unemployment impinges on this expression of freedom.
That is the mantra that the conservative think tanks, media outlets funded by these think tanks, and many economists have pushed since the 1980s at least.
The idea that a systematic failure to produce enough jobs ultimately constrained the ability of individuals, no matter how hard they might desire and search for work, to get work was denied and forgotten.
After all, if the individual is powerless in the face of systemic constraints then there is a case for government intervention to improve welfare – and that was a major insight of policy behaviour in the immediate Post War period of full employment.
Governments chose the unemployment rate because they could always use fiscal policy to generate employment either directly or indirectly by stimulating the non-government sector.
The period that collective will was subjugated to the individualistic conception of economy was also the period that unemployment persisted at high levels in most OECD countries. The two points are not unrelated. Unemployment, ultimately, arises because there is a lack of collective will.
It does not arise because real wages are too high or aggregate demand too low. These are only proximate causes, if causes at all.
That might surprise people who have read regularly on this blog that when there is mass unemployment you know at least one other thing – that the fiscal deficit is too small.
Doesn’t that imply that mass unemployment is a consequence of deficient aggregate spending (demand)?
When I have written that the only way cutting real wages might lead to a decline in unemployment is if it somehow reduces the saving desire in the private domestic sector and total spending thus increases, isn’t that also a statement to affirm that mass unemployment is a consequence of deficient aggregate spending?
The answer is yes, but the link between spending and job creation though direct is what I consider to be a proximate cause.
The question that is begged when we note that there is deficient aggregate spending, when we know the currency-issuing government can always use its fiscal capacity to maintain full employment, is why isn’t the government allowing its deficit to move to allow full employment.
Mass unemployment is always avoidable given the government can always buy the labour services of those who are idle.
So the underlying cause – the causa causans – the fundamental cause of mass unemployment in a monetary economy relates to why we would allow our government to abandon its responsibilities.
It is in that sense that I say that mass unemployment is the result of a collapse of collective will.
The collapse of collective will has been the principal casualty of the rise of neo-liberalism and the faux competition that has been the hallmark of this shift.
We pretend that competition is superior when, in fact, research shows that cooperation is the best way to organise complex decision making. And, cooperation is a defining characteristic of collective will.
The underlying reason that collective will has lapsed as a organising principle for society is that the reemerging free market ideology convinced us, wrongly, that government involvement in the economy imposes costs on us and we have thus supported governments who have significantly reduced their involvement in economic activity via spending and tax cuts and widespread deregulation and privatisation.
The only way we will return to full employment, with everyone sharing in the benefits, is if the public sector increases its role in the economy.
In his 1994 book, The Death of Economics, British economist Paul Ormerod argued that the Post-World War II period of strong GDP growth, relative balance of payments stability, and high investment rates could have occurred without the accompanying low unemployment.
The sole difference would have been that those in employment would have become even better off than they did, at the expense of the unemployed.
The higher tax rates and buoyant government sectors allowed the flux and uncertainty of aggregate demand to be shared.
While the bulk of the OECD has abandoned this method of sharing, some economies have maintained high levels of employment into the current period.
Ormerod suggests that Japan, Austria, Norway, and Switzerland, among others have (in their own ways):
… exhibited a high degree of shared social values, of what may be termed social cohesion, a characteristic of almost all societies in which unemployment has remained low for long periods of time … the countries which have continued to maintain low unemployment have maintained a sector of the economy which effectively functions as an employer of the last resort, which absorbs the shocks which occur from time to time, and more generally makes employment available to the less skilled, the less qualified.
Collective will is tied in with the concept societal trust that the government will pursue a common well-being rather than serve one particular group (especially itself!) over another, or, more importantly, all others.
While policy has shifted in the neo-liberal period to encourage us to behave more venally towards each other – a classic divide and conquer strategy to maintain the power of capital – it cannot be said to have delivered superior outcomes.
The point is that the assault on collective will – from Ayn Rand to Milton Friedman to Richard Dawkins and their neo-liberal acolytes in the economics professions – is not based on any scientific basis.
It was a strategic attack designed to undermine government intervention so as to tilt the playing field back towards capital after several decades of social democracy (based on collective will) had seen income inequalities drop and workers enjoy greater job security and working conditions.
Social democracy was too successful in its pursuit of general well-being and it had to be undermined. How better than to conclude that it was anti-human – in the sense that it was working against our human nature.
And by oppressing our human nature – our innovation and choice was subjugated and outcomes were thus diminished. It was a powerful narrative and, as we know, has penetrated deep into our ‘mass consumption-easy credit addled’ psyches.
The elites no longer needed religion to render the masses mute – supermarkets and liberal credit did the trick and returned a neat return to capital, something that religion could not do very effectively.
The only problem is that unfettered capitalism does not seem to be very closely aligned with our human nature.
Developments in evolutionary science and behavioural economics have demonstrated categorically that far from being selfish, rational beings humanity is marked by a propensity to cooperate and seek equity and fairness.
Ruy Teixeira’s Op Ed (March 12, 2013) – The Good News About Human Nature: Most People Aren’t Jerks – expresses it this way:
New thinking and research in evolutionary science showed that the “selfishness is all” camp was completely missing the mark on what makes humanity distinctive. It is not competition for individual reproductive success but rather cooperation for group reproductive success, facilitated by our capacities for symbolic thought (language) and transmission of learned information (culture), that has led to our success as a species.
In short, the key to understanding human nature is not the selfish gene, bur rather the “selfless gene”. The selfless gene allowed our ancestors to think and act as a group, thereby outcompeting other chimp-like species - literally leaving them in the dust. Moreover, our cooperative nature allowed us to build ever more complex ways of interacting with one another, which led to further evolution in the traits that facilitate cooperation (referred to as “gene-culture coevolution”). The end result of this dynamic was civilization and, eventually, the global interconnected society we live in today.
In other words, the pursuit of collective will is more aligned with our human nature than the neo-liberal competitive individualism.
Think about sport. It is a major aspect of our collective lives. Millions of people watch it, play it and obsess about it every week.
We talk about competition – one team outcompeted another! That competitiveness is the secret to good sporting outcomes.
But that perception is fraught. We organise and regulate sport to suppress competition or at least harness it so as to elevate equity to ensure it remains interesting and exciting.
The ‘free market’ doesn’t exist in sport.
Even in the so-called heartland of market competition – the US – the US sporting teams revenue share to ensure their is evenness. Draft systems, salary caps, constraints on engine specifications, sizes of golf clubs etc are all designed to keep the playing field level – or at least interesting.
Our basic propensities appear to be collective and cooperative.
We are defined by our sense of fairness, adherence to group norms, willingness to punish those who violate such norms, willingness to share, and willingness to work for the good of the group, along with the high-level cognitive and cultural traits that enable us to be that way. We are not a species of seven billion selfish individuals, uninterested in anything save our own welfare and willing to cheerfully break any rule and hurt any other individual to secure it. Indeed, we think of such people as sociopaths and if their tendencies actually dominated humanity we would still be back on the savannah with the rest of the chimp-like species.
So the former consensus view on human nature is just plain wrong. It’s not the case that societies must rely exclusively on self-interest or die. In fact, societies have only prospered by transcending self-interest and harnessing the group-oriented instincts that make us human.
Progressive political movements that do not work to promote and appeal to these basic instincts but rather go along with the ‘incentives’ ‘selfish’ type neo-liberal narrative are bound to wither on the vine – and the evidence for that is now very clear.
After several decades of trying to out-neo-liberal the neo-liberals, traditional progressive parties (say the French Socialists) are being wiped out. And for good reason.
I was thinking about this issue recently when I read the work of Sarah Brosnan, who is a US academic specialising in psychology, philosophy and neuroscience.
She “studies the mechanisms underlying cooperation, reciprocity, inequity, and other economic decisions in nonhuman primates from an evolutionary perspective.”
She studies monkeys and analyses the “decisions individuals make and how they make them, how their social or ecological environments affect their decisions and interactions, and under what circumstances they can alter their behaviors depending on these conditions.”
She has shown (in 2003) that Monkeys reject unequal pay – as part of a natural cooperative process.
Many other interesting results can be gleaned from her research into cooperation.
She has also analysed – The Evolution of Fairness – and concluded:
… the evolution of fairness involves two steps. In first order fairness, species evolve to respond negatively to inequity as a way for individuals to recognize the value of their cooperative partners, and therefore increase their payoffs from cooperation. In second order fairness, species evolve to recognize when they receive more than a cooperative partner, and act to ameliorate this inequity in order to maintain a beneficial cooperative relationship. Humans, with our advanced abilities at foresight and our ability to delay gratification for a long-term gain, then developed the full-blown sense of fairness that we see today.
Try fitting that into the neo-classical model of human behaviour.
What all this means is that not only is the mainstream economics debate conducted using deeply flawed – make that totally inapplicable assertions about how modern monetary systems operate – but also, the underpinning behavioural assumptions about the way humans behaviour in these monetary systems and society in general are flawed at the most elemental level.
In other words it is a crock of the proverbial!
That is enough for today!
(c) Copyright 2017 William Mitchell. All Rights Reserved.