Occupy the Mind with Economics

|Peter Boettke|

Karl Marx was an intellectual radical.  What that means is that he sought to get at the root cause of social ills with his analysis.  Despite my extreme disagreement with Marx on his diagnosis, I have always been attracted to intellectual radicalism.  Not the fashionable radical chic of rock stars, etc., but the nerdy radicalism of scholars and public intellectuals.  Not a radicalism evident where the cool-kids party while skipping school, but a radicalism born in the library and in reading dusty old books and studying long and hard to try and figure things out.  Think hard, read widely, think even harder, then attempt to write clearly --- that is the intellectual radicalism that I find exciting.

I am not that sympathetic to mindless radicalism --- never have been, expect I never will be, though I do often admit that anger can be a very useful muse.  So do I consider the Occupy Wall Street movement an example of mindless radicalism or an example of intellectual radicalism?  Clearly the folks have passion, and are disturbed over the present state of the world.  And they are not without good reasons for their frustration. But are they seeking out the root cause of our social ills, or just voicing their frustration?

At the Becker-Posner Blog, they have respectively taken up an examination of the OWS movement.  Read Becker, then Posner.  Also Chris Coyne does a very good job addressing some of the confusion between capitalism and crony capitalism that is evident in the movement.

 

What do you think of these reflections/responses on OWS?

Can you provide links to other economists responses to the OWS movement? E.g., do you known anyone who has taken on claims from Adbusters? 

Comments

[Daniel Kuehn]

My experience with the OWS crowd is that they are very diverse. My brother keeps me apprised of a lot that goes on with the movement in Chicago, and I disagree with him on a lot of it but he is certainly not a mindless radical. Clearly, though, as in any mass movement there are mindless radicals. It's silly to deny they're out there. And it's also silly to deny that intellectual radicals slip into mindless moments at times. That's OK, I think.

I think the exposure that the OWS movement has given to other understandings of "crony capitalism" has been good. Crony capitalism is a failed institution - we can all agree on that. Left of the center, we generally think crony capitalism comes about when a non-robust libertarian ethic inevitably fails to succeed. Libertarians will say that it's the other side that is non-robust and that crony capitalism is an instance of their institutional failure. The arguments are actually quite symmetric, and I would hope OWS would bring attention to that symmetry. Chris's video offers the usual libertarian argument about crony capitalism, but it doesn't seem to appreciate the arguments of the other side.

Part of my frustration in talking about "crony capitalism" with people is that when you try to get them to justify the robustness of libertarianism, all they ultimately end up doing is presenting a case for the robustness of a constitutional market democracy - ideally a federal one. That's all well and good. That's the system I support, after all - so I'm certainly not going to register any disagreements with those arguments. But they often think in making that case they've demonstrated that libertarianism is robust, and thus that left-of-center advocates of constitutional market democracy are missing the point on crony capitalism.

There's a lot of talking past each other, in other words. Not exactly uplifting - but not surprising either.

[Daniel Kuehn]

Speaking of Marx - I've been reading a lot of him for my thought class, and have wandered into some other work of his too. I recently read his open letter to Arnold Ruge, often given the title "For a Ruthless Criticism of Everything Existing".

Are you familiar with it at all.

It's fantastic and it captures exactly what you're saying here about "intellectual radicals". The fourth paragraph is especially a good. Here's a nice selection:

"Apart from the general anarchy which has erupted among the reformers, each is compelled to confess to himself that he has no clear conception of what the future should be. That, however, is just the advantage of the new trend: that we do not attempt dogmatically to prefigure the future, but want to find the new world only through criticism of the old. Up to now the philosophers had the solution of all the riddles lying in their lectern, and the stupid uninitiated world had only to open its jaws to let the roast partridges of absolute science fly into its mouth. Now philosophy has become worldly, and the most incontrovertible evidence of this is that the philosophical consciousness has been drawn, not only externally but also internally, into the stress of battle. But if the designing of the future and the ready-made solutions for all time is not our affair, then we realize all the more clearly what we have to accomplish - I am speaking of a ruthless criticism of everything existing, ruthless in two senses: The criticism must not be afraid of its own conclusions, nor of conflict with the powers that be."

[Roger Koppl]

It is confusing to contrast "capitalism" with "crony capitalism." The first term has no qualifier, which makes it seem like crony capitalism is a kind of capitalism. How about "free capitalism" or "competitive capitalism"?

[FC]

There is a need for a minimal case for capitalism. Even the "crony capitalism" that offends both libertarians and OWS is better than any brand of socialism/communitarianism/progressivism. I'd write that monograph myself if I were remotely qualified to do so.

[Daniel Kuehn]

re: "I'd write that monograph myself if I were remotely qualified to do so."

I don't mean to sound condescending - I'm asking an honest question... if you're not qualified to write a monograph defending such a claim, how do you know the claim is true? Isn't the only real qualification for writing a monograph that you can construct a sensible argument? Isn't construction of a sensible argument also the only real prerequisite for embracing a claim in the first place?

[Becky Hargrove]

Who among the OWS followers (or Tea Party followers for that matter) are asking for real, honest to goodness economic access at the level of the individual. Those are the voices I am straining to hear.

[Niko]

@Kuehn:

No need to try to look smart. A person knows a car is good for him or in general, but he is not qualified to drive it (no driving license, poor eye sight etc.)

A reader knows when he has a good book in his hands, subjectively, but this doesn't mean he would write it himself, for whatever reason.

The list can go on and on and on and on ... and on ...

[FC]

Daniel,

No offense taken. My knowledge of the relevant evidence and theory is cursory but sufficient to convince myself. However, I cannot devote the time to master the last two centuries' literature and data in order to make a general and comprehensive argument. A PhD in economics is not on my career path.

This line of investigation will probably show up in much more specific applications in my future work. I appreciate the encouragement.

[Daniel Kuehn]

FC -

Wait a minute - I have to master two centuries of literature and data? Crap! I was counting on half a century or so doing the trick.

:)

[Roger Koppl]

Becky Hargrove: I'm not OWS or Tea Party, but maybe you would like the following? http://www.ncpa.org/pub/enterprise-programs

[Daniel Kuehn]

Calm down, Niko - I was trying to encourage him that he's probably got a good sense of what he thinks. If he has an argument that he's convinced himself of, he probably has the capacity to write it up. I know writing's not easy. GRANTED, the other side is true too - if you waver about making the case to others you've gotta wonder if you've made the case to yourself.

[Chaffy]

"UH UH UH UH. WE NEED TO LIKE UM... END THE FED MAN CUZ THAT"S LIKE WHAT THIS CAPIATLISM IS AND ITS NO GOOD AND DO SOMETHING ABOUT IT... Yeah, PASS ME THAT DOOBIE BRAH."

Wow, Kuehn was right. These scholars have given serious thought on the nature and role of social institutions. I hereby declare that libertarians need to reexamine the arguments of their ideological opponents.

[Becky Hargrove]

Roger Koppl,
I've been working on ideas for the past seven years (after losing the ability to remain employed or self employed) and this is the first thing I've come across that is even close to my own musings - thanks.

[Daniel Kuehn]

Chaffy, you aren't doing libertarians any favors and for their sake I'm not going to take that doozy of a response as representative.

[Peter Boettke]

Daniel,

First, I owe you a book send me an email with best address.

Second, in your response are thinking of arguments associated with John Roemer (author of Free to Loose, and several papers relating to the inevitable corruption of democratic processes by markets). If so, I agree that market oriented economists haven't dealt with his work as carefully as it deserved. I think there are some historical quirks more than intellectual evasion reasons for that. But perhaps now would be the time to re-engage.

Third, the Marx quote is great but it also what gets him in trouble later on in regard to his benchmark against which his critique is forged. Lavoie in Rivalry and Central Planning is brilliant on this.

Pete

[geoih]

Stop calling it "crony capitalism". There is no capitalism in "crony capitalism". If the government is involved, then it isn't capitalism. It's cronyism. It's fascism. It's some kind of adulterated socialism, but it isn't any kind of capitalism.

[Daniel Kuehn]

Oh, for Einaudi thing? I saw one of his books in the library the other day and was wondering about that - I just figured none of our answers were up to snuff :) I'll email that.

I'm not personally familiar with John Roemer. I simply don't think it's clear that a libertarian polity (I suppose what you call "market oriented", although I would probably use that term differently) isn't going to degenerate into the same problems. The simple historical absence of libertarian polities raises genuine concerns about their robustness. I think a lot of people worry about this, and many libertarians make the mistake of thinking that because crony capitalism is incompatible with libertarian principles, it's primarily a problem with the degeneration of non-libertarian polities.

Honestly while my thinking on institutional robustness comes from a lot of places, the articulation of it comes from Mark Pennington. He presents what I consider to be a strong case for the robustness of federalized states, constitutionally limited states, and market economies. I think it's often taken as a case for the robustness of libertarianism.

I think a lot of the barrier isn't evasion - it's simply a difference in the way that these issues are discussed. Non-libertarians don't often use the language of robustness, emergent order, dispersed knowledge, etc. - so it's hard to communicate thinking along these or similar lines to people who do. So libertarians (and perhaps it's an issue with libertarians more generally) often just assume that they haven't considered these concerns. One of the things I try to make a point of on my blog is using a lot of the language and constructions that libertarians use, which I hope helps in getting ideas across. You could think of Bleeding Heart Libertarians as doing the same thing in the opposite direction.

[Daniel Kuehn]

Gene Callahan said it emphatically - but successfully got the point across - in my comment section:

"If you tell most libertarians that you think what their policies would really achieve is crony capitalism, they will be shocked, because... *that's not in their plans*! You can look all through their plans, and their plans don't include any crony capitalism, any rule by gang violence, any oligarchy... for people so attuned to the unintended consequences of government action, they are tone deaf to the possibility of unintended consequences of dismantling-the-government action."

I don't think this is an ace-in-the-hole argument - after all very similar arguments are leveled against non-libertarians. For that reason alone it shouldn't be difficult for libertarians to appreciate the symmetry of concerns here.

One advantage I think non-libertarians have is that we are still in the liberal tradition, so the government failure arguments are not lost on us. I know you think a lot of the guys I like are out of the "mainline", but all the guys you mention in that mainline are people who have influenced me a great deal. I and people that think like me think of ourselves as "market oriented", so arguments about unintended consequences of government are quite familiar and compelling for us - more so, perhaps than what Gene calls "unintended consequences of dismantling-the-government" may be to some libertarians.

[Daniel Kuehn]

Sorry - one last point. I'm also never quite as apprehensive about any of this as the OWS crowd is anyway. I don't like crony capitalism, but it's hard to see how it's not inevitable, so I don't lose my shirt over it. We deal with it as each successive travesty unfolds and hope the travesties get smaller. An undiscriminating deregulatory approach seems to me to risk a considerable increase in crony capitalism. A best-attempt regulatory approach will have crony capitalism too and it will have crises, because of regulatory capture, everything we know about public choice, and simple ignorance. The emergence of crony capitalism is less of a concern to me because I'm resigned to the fact that it will always be around. The task is to generate institutions that minimize it, not lose faith in our institutions because the inevitable actually ends up happening.

[McKinney]

Posner: “Their incomes do appear to be excessive, in the following senses. These incomes are generated to a significant extent by speculation…”

The work appears to be mere speculation because Posner doesn’t understand what they do and doesn’t have a grasp of monetary theory. If he understood how money works, he would grasp that the financial services industry benefits from inflationary monetary policy by getting the new money first. That is why incomes and wealth in financial services has grown so rapidly while everyone else stood still.

Posner: “Banking moreover has never been popular. The main reason I think is that banking is one of the few industries that simply refuse to sell to many of their most willing, even desperately willing, customers.”

This was good. And banks are the visible part of bad monetary policy. People hated banks in the Great D because they foreclosed on farms. That’s why bank robbers were popular heroes.

Lasn & White: “The movement’s true origins, however, go back to the revolutions in Tunisia and Egypt. That was when the world witnessed how intransigent regimes can be toppled by leaderless democratic crowds…” from Posner’s link to “Why Occupy Wall Street will keep up the fight”.

That shows a sad lack of understanding of what happened in Egypts and Tunisia. Those were military coups. The crowds were just a convenient excuse. Libya was much more difficult because it didn’t have much of a military. Syria is much more difficult because the military supports Asad.
Lasn & White: “Occupy was born because we the people feel that our country and our economy are moving precipitously in the wrong direction; that America has evolved into a kind of corporate oligarchic state, a “corporatocracy”; and yes, that what is needed is a regime change — a Tahrir moment of truth in America.”
They have their public choice theory right, at least. I wonder if they know that tahrir is Arabic for freedom?

Lasn & White: “And we will see clearly articulated demands emerging, among them a “Robin Hood tax” on all financial transactions and currency trades; a ban on high-frequency “flash” trading; the reinstatement of the Glass-Steagall Act to again separate investment banking from commercial banking; a constitutional amendment to revoke corporate personhood and overrule Citizens United ; a move toward a “true cost” market regime in which the price of every product reflects the ecological cost of its production, distribution and use; and with a bit of luck, perhaps even the birth of a new, left-right hybrid political party that moves America beyond the Coke vs. Pepsi choices of the past.”

They have clearly identified a main problem, but their solutions don’t follow.

OWS solutions reflect the decline of McCloskey’s bourgeois values and the resurrection of pre-modern anti-commerce attitudes.

Becker: “The most effective way for the US to reduce overall inequality that will help the largest number of young persons is by finding ways to bring American high school and college graduation rates up to the levels achieved by the other nations…”

That’s lame! Students with degrees in engineering or medicine aren’t having difficulties finding jobs, but most of the OWS crowd has degrees in humanities and social sciences. Get a clue!

We can help more by correctly identifying the type of economy the US has. OWS thinks we live under capitalism. Of course, that is what public education and the media teach.
The US economy is closer to fascism (a flavor of socialism) than any kind of capitalism and we should point that out instead of adding modifiers to the term capitalism.

[Troy Camplin]

I"m not sure how crony capitalism is able to come about at all absent of government interference in the economy creating opportunities for businesses to seek economic advantage through political advantage. This is like saying that if we have a separation of church and state, we'll have far more religious involvement in politics and we would have fewer and fewer, larger and larger churches. But we don't see that. Instead, what we see is decentralization in religion, resulting in a proliferation of kinds of religions and churches, with a dissipation of power. As a consequence, no single religion is able to influence policy, and the disparate interests prevent any religion-specific legislation from passing. Which is what we would expect from a separation of economy and state. I could make the same argument about the arts as well, since they constitute their own spontaneous order as well. And when science becomes cronyist, we all recognize the problem is with government and not with science. And that such government involvement is the corrupting force (we aren't that surprised that when scientists are told by the people with the most money and guns to reach a certain conclusion that they do). Again, it seems clear to me at least that robust "libertarian" spontaneous orders in religion and the arts, where there is a clear separation of church and state and of art and state that religion and the arts don't turn cronyist.

The argument that there has never been a separation of economy and state is no argument at all. Are we really surprised that governments have been loathe to separate themselves from a source of money and, therefore, power? Hardly. Economic control is power in the modern day. Of course, there was a time when religion and politics were inseparable. I am sure the 12th century version of Daniel Kuehn would have been vociferously arguing that in no time in history has there ever been a separation of church and state, so this means it can never, and should never, happen. After all, if there is a separation of church and state, we will end up in the same situation as we are now in, with religion controlling government in a cronyist fashion, etc. Of course, from our vantage point, we can see that Medieval Kuehn was utterly wrong about this. Just as postmodern Kuehn is utterly wrong about the separation of economy and state.

[McKinney]

Daniel, I think you’re right about the lack of robustness in libertarianism, but for different reasons. As Mises used to say, even dictators can’t rule contrary to the will of the majority for very long.
I think Deirdre McCloskey’s works on bourgeois values are among the most important to come along in a while. Libertarianism assumes that the majority have libertarian or bourgeois values. But libertarianism falls apart once the majority loses those values. No amount of institutional change will matter.

[Daniel Kuehn]

Troy -

re: "I"m not sure how crony capitalism is able to come about at all absent of government interference in the economy creating opportunities for businesses to seek economic advantage through political advantage."

Well of course Troy - if we assume the best of all possible worlds, the world looks pretty good. I don't see how crony capitalism can emerge in my neoliberal Keynesian market democracy either - a vision which EXPLICITLY excludes the possibility of crony capitalism... until I recognize that things don't always turn out how I want them to.

I'm not even going to try to parse what you're talking about with "medieval Kuehn" or why you think that has anything to do with the argument I'm making.

McKinney -
Agree strongly on McCloskey. Your point - simply that there are cultural underpinnings to stable institutions of any variety - is well taken. But on a slightly different point, I'd stress the same thing with McCloskey that I'd stress with Mark Pennington's arguments about robustness and libertarianism: be careful not to confuse an argument for liberalism with an argument for libertarianism. There is a harder left out there, to be sure - but I think most of the critics of libertarianism out there that are more like me don't need to be convinced about market-oriented institutions, don't need to be convince about decentralized power, and don't need to be convinced on constitutionally limiting the state. A lot of the bourgeois virtues and robust institutions that libertarians read as "libertarianism" are things that we've already signed on to and don't see as being quite as closely identified with libertarianism.

[Troy Camplin]

Except, Daniel, that public choice makes rather explicit that your Keynesian market democracy necessarily leads to cronyism. Of course, you *should* know that.

I recommend you try to understand what I was saying with the Medieval Keuhn.

[Daniel Kuehn]

Troy what are you talking about? Those are exactly the sort of arguments that are used against libertarianism too. That's not some advantage to your position.

[McKinney]

The problem with comparing the economy with religion and art is that people don't consider the latter to be important. And because they don't consider art and religion important, they don't care that the government stays out of them.

Because most people consider the economy very important for personal and national reasons they want the government to control it.

Compare the relationship of government and healch care, which is highly controlled by the state.

And that's the weakness in libertarianism. Because people consider the economy very important, the majority want the state to control it. If the majority thinks like libertarians, then they won't want the government to control the economy.

[Troy Camplin]

But people used to consider the arts of central importance. And many still do. One does not put a fatwa on Salman Rushdie if one does not consider literature to be extremely powerful and important to people's lives, for example. The arts were tightly controlled by the Catholic Church for a very long time because it was understood to be extremely important. Nevertheless, even though it was considered to be so important -- perhaps even more important than mere economic/materialistic concerns -- it did become separated from the church and from the state.

Also, just because you don't consider religion important, that hardly means most people don't. Most people do. Many think it is so important that we should have a theocracy; others think it is so important that we need to maintain a separation of church and state. Outside the walls of academia, religion is one of the most important, if not the most important, aspect of people's lives. Yet, we value its separation from the state.

[Daniel Kuehn]

re: "One does not put a fatwa on Salman Rushdie if one does not consider literature to be extremely powerful and important to people's lives, for example."

True, but those guys bitch about everybody.

[Troy Camplin]

LOL! Nevertheless! :-)

[McKinney]

All true, Troy, but the arts and religion didn't achieve separation until they lost enough importance to enough people.

The Arab "Springs" are all turning toward radical Islam with Sharia law because religion is still important to enough people in those countries that they want the state to enforce it.

It's a shame that people can't value religion and keep it out of the hands of the state, but I have never seen a case in history where that happened.

[Troy Camplin]

My point is that people's attitudes change. The argument for separation of church and state has typically been that religion is too important for government to interfere with it. Compare the importance of religion in the U.S. to Europe. It is in the latter that governments support the church. We have to come to realize the economy is far too important for the government to control it any longer. I certainly think the arts, literature, and culture are. If you want to destroy them, have the government control them. The same with the economy.

[Vince Le]

Chris have done a great job in visualizing the difference between capitalism and crony capitalism. In my opinion, there is no such things as capitalism if the government is involved in it.
The OWS are people who gets frustrated with the private corporation since there is a mutual inequality in the market. "It's tough because in capitalism there is a winner and a loser; the thing is the loser don't have to be losing that badly..." The OWS crowd is angrily since most of the large corporate are taking all the profits and advantage therefore they want the government to involve. But they hadn't think of the consequence when the government put their hands in. Because once the government involves, all the big companies and political well-known parties will again take the upper hand. Therefore the OWS crow is voicing their frustration without a good reasonable cause.

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