Capitalism Verses Collectivism, The Failed Comparison
Yet another Rand-ian rant on F#c%Book and my reaction against it has me wondering: What is so darned attractive about the extreme libertarian position currently in vogue?
I once asked my neighbor, a now-retired UW professor of psychology, if there had been any studies linking the rise in autistic spectrum disorders with libertarianism. I figured people who have trouble relating to other people would be drawn to a philosophy that clearly separates "mine" from "ours." She was unaware of any such studies, but was kind to indulge her crazy neighbor's ideas. Still, I am not alone with these crazy beliefs that fly in the face of this wave of unrestricted libertarianism. Take another voice in the choir, one I noted last summer, Mike Kimel of Angry Bear:
Many of them are misfits or eccentrics. Others simply can't reason out that there are two sides to every equation. . . . Some like to view themselves as lone wolves, in no way beholden to the rest of society. Some find they can be more successful in business if they don't pay taxes and/or find export their costs onto third parties. And of course, there are the thugs. Guess which group will take over if libertarians ever get their way.
And the philosophy embraced by these lone wolves? It's far from a new phenomenon. When one keeps more and more of one's earnings, especially if one earns quite a bit relative to others, those earnings must do something. They often become the vehicle for projecting wealth conspicuously. Baubles and trinkets, toys and past-times, all find their way to the over-earner. A good friend once noted that in order to be considered "cool," any past-time or hobby must cost at least $1,000. Seriously, I think he's on to something. Think about all the ways one may spend one's time, and the reaction you get to those more frugal passers-of-time when you bring them up. Reading, gardening, long walks; they just aren't cool. Get yourself a wind-surfing board, a scuba outfit, some rappelling gear . . . eyes perk up. That stuff costs money, and spending money means dedication.
The term "conspicuous consumption," in fact, was coined by Thorstein Veblen in 1899 in his book The Theory of the Leisure Class. He didn't like this Leisure Class one bit. Why was traced and noted by Oren Harmon:
The eighteenth century Scottish economist Adam Smith had a simple message to convey: Under certain conditions free economic competition will lead to the best allocation of society's resources. It sounded like a paradox, but it was unequivocally true: Unfettered contest will by an "invisible hand" maximize society's benefits. The more ruthless the competition, the greater the social good; individual selfishness leads to collective benefit and plenty.
By the time Thorstein Veblen arrived as a professor at the University of Chicago when it opened its gates in 1892, this economic worldview was referred to as "classical." Welded now more strongly to the political theory of laisez-faire, Adam Smith's legacy beckoned a new name. Veblen called it "neoclassical economics" and didn't shy away from expressing his view: he absolutely hated it.
. . . .The basic assumption that individuals pursuing their own self-interest necessarily promote the good of society was to him both insipid and false. Capitalism was leading to "conspicuous consumption" and "conspicuous leisure." Not only did this bring waste and inefficiency, it suppressed fundamental human instincts: acquisitiveness, workmanship, parenthood, and idle curiosity. Forms of social control could be used to reawaken them, but this could only be accomplished with the help of a broad science of human behavior. With its exclusive dependence on price theory, neoclassical economics was nothing but a narrow "hedonistic calculus." Based on "immutable premises," it had little to do with reality.
(Oren Harman, The Price of Altruism, W.W. Norton & Co., 2010, pp. 110-111.)
Though I haven't yet read Veblen's book, I do like Harmon's synopsis of the effects Veblen noted. This suppression of "acquisitiveness, workmanship, parenthood, and idle curiosity" is why I started looking in to how our brains work (somewhat managed under the tag Swarms & Brains). Heck, Daniel Pink's book Drive is an indictment of just about all the neoclassical economists declare. Even better, Pink's book (unlike Milton Friedman's, for one example) is based on empirical science. He introduces one researcher interviewed for Drive:
[Edward Deci] revealed that human motivation seemed to operate by laws that ran counter to what most scientists and citizens believed. From the office to the playing field, we knew what got people going. Rewards - especially cold, hard cash - intensified interest and enhanced performance. What Deci found, and then confirmed in two additional studies he conducted shortly thereafter, was almost the opposite. "When money is used as an external reward for some activity, the subjects lose intrinsic interest for the activity," he wrote. Rewards can deliver a short-term boost - just as a jolt of caffeine can keep you cranking for a few more hours. But the effect wears off - and, worse, can reduce a person's longer-term motivation to continue he project. . . .
Thus began what for Deci became a lifelong quest to rethink why we do what we do - a pursuit that sometimes put him at odds with fellow psychologists, got him fired from a business school, and challenged the operating assumptions of organizations everywhere.
(Daniel H. Pink, Drive: The Surprising Truth About What Motivates Us, Riverhead Books, 2009, pp. 8-9, I emboldened for emphasis.)
Another researcher Pink interviewed, Mihaly Csikszentimihalyi ("Mike" works for him) did extensive work on a concept he calls "flow", that feeling that time disappears when doing something one finds truly rewarding. Flow is the very thing that Deci found monetary rewards can impede, despite all the ink spilled by neoclassical and neoliberal economists declaring the contrary. In a rare moment of vindication, Csikszentimihalyi found himself in the catbird seat, as it were:
Several years ago - he can't recall exactly when - Csikszentimihalyi was invited to Davos, Switzerland, by Klaus Schwab, who runs an annual conclave of the global power elite in that city. Joining him on the trip were three other University of Chicago faculty members - Gary Becker, George Stigler, and Milton Friedman - all of the economists, all of them winners of the Nobel Prize. The five men gathered for dinner one night and at the end of the meal, Schwab asked the academics what they considered the most important issue in modern economics.
"To my incredulous surprise," Csikszentimihalyi recounted, "Becker, Stigler, and Friedman all ended up saying a variation of 'There's still something missing,'" that for all its explanatory power, economics failed to offer a rich enough account of behavior, even in business settings.
Csikszentimihalyi smiled and complimented his colleagues on their perspicacity. The concept of flow, which he introduced in the mid-1970s, was not an immediate game-changer.
(Pink, ibid, pp. 115-116, I emphasized.)
So, with these and myriad other examples disputing the neoclassical claim arguing that monetary rewards are of tantamount importance, why are we still listening to neoclassical economists at all? Why, in fact, have these economists grown in prominence while Veblen has faded?
Why?
Though empirical evidence is against the neos, the money is all for them. Think of business schools as promoters not just of sound business practice, but of theory. What theories get spread? That's actually a very good question. Theorists who formulate ideas of money and economy are everywhere. Only a select few are taught, and many are taught to students as a cautionary example only. "Here are some of Marx's ideas; watch out for them!" Many more still are so complex that the teachers have trouble with them. From Yves Smith, this observation about one of those complex theorists, John Maynard Keynes:
Samuelson is widely seen as the father of Keynesianism in America, but it is key to understand that "Keynesianism" is not Keynes. Samuelson put a second important imprint on the discipline through his 1948 introductory economics textbook (Economics: An Introductory Analysis), which sold several million copies in sixteen editions, the latest in 1997, nearly fifty years after its initial release. And it was this work that defined what Keynes came to mean not just to students, but also, along with John Hick's work, to most people in the profession.
How could that be? Keynes's work was hardly a secret. Why would economists rely on an interpretation rather than the source? Even shortly after its release, [Keynes'] General Theory developed a reputation of being difficult and, arguably, confusing (well, if you were steeped in neoclassical economics, that would certainly be the case). And it became perversely normal to go on about Keynes's General Theory without having read it. For instance, Robert Bryce, a student who had attended some of Keynes's lectures, wrote an essay on Keynes's ideas. That article, along with Bryces' participation in an informal group that met at Harvard, became the foundation for what most economists at Harvard in the late 1930s thought Keynes was about.
(Yves Smith, Econned: How Unenlightened Self Interest Undermined Democracy and Corrupted Captialism, St. Martin's Press, 2010, pp. 34-39, emphasis again mine.)
It gets worse. Confusing and complex are one problem; promoting theories that attack what many see as their right to keep government from interfering with business, that is another can of worms. Smith continues:
But there was a second, powerful reason to change Keynes for American consumption. A Canadian student of Keynes, Lorie Tarshis, published an economics textbook in 1947, The Elements of Economics, which included his interpretation of Keynes. It also suggested that markets required government support to attain full employment. It was engaging and well-written, and sold well initially, but fell off quickly, the victim of an organized campaign by conservative groups to have the textbook removed. The book, and by implication Keynes, was inaccurately charged with calling for government ownership of enterprise.
(Smith, ibid, p. 40, emboldenation mine yet again.)
So, as more and more business schools sought money for their improvement from alumni donors, the message those donors thought important became more and more important. Business schools that emphasized Veblen and Keynes, those guys maybe didn't get as much in donations. Though shown part of the error of his ways personally by Csikszentimihalyi, Milton Friedman and his ilk gets more popular in the curriculum. After all:
In his most famous work, Capitalism and Freedom, Friedman argued (as its title suggests) that capitalism and freedom go hand in hand - that there can be no freedom without capitalism and no capitalism without freedom. So defense of one was the defense of the other. It was as simple - and as fundamental - as that.
(Naomi Oreskes and Erik M. Conway, The Merchants of Doubt, Bloomsbury Press, 2010, pp. 64-65.)
Friedman gets quoted - or, more likely, paraphrased - far out of proportion with his wisdom, it seems to me. After all, this is the man who said decades after taxpayers funded a defeat of Hitler, the construction of the interstate highway system, and just five years before the taxpayer-funded Apollo program put a man on the moon, ". . . the great advances of civilization, in industry or agriculture, have never come from centralized government." (Friedman, 1962.) But nevermind that, good Friedman-ites will say.
As money is made, it flows to places that teach it is good to make money. Money as a marker of success becomes a self-reinforcing phenomenon. And really, this is old news. Almost two years ago, I outlined the contents of the The Powell Memorandum, a 1971 letter soon-to-be Supreme Court Justice Lewis Powell wrote to his friend and neighbor - and US Chamber of Commerce Director - Eugene B. Sydnor, Jr. Just about everything Powell outlines has come to fruition, most especially the pressure monied individuals can exert on educational institutions. He opens his memo with the simple statement: "No thoughtful person can question that the American economic system is under broad attack." While I would disagree, he continues:
One of the bewildering paradoxes of our time is the extent to which the enterprise system tolerates, if not participates in, its own destruction.
The campuses from which much of the criticism emanates are supported by (i) tax funds generated largely from American business, and (ii) contributions from capital funds controlled or generated by American business. The boards of trustees of our universities overwhelmingly are composed of men and women who are leaders in the system.
He goes on, noting of the graduates taught the essentials of revolutionary, anti-capitalist politics:
As these "bright young men," from campuses across the country, seek opportunities to change a system which they have been taught to distrust - if not, indeed "despise" - they seek employment in the centers of the real power and influence in our country, namely: (i) with the news media, especially television; (ii) in government, as "staffers" and consultants at various levels; (iii) in elective politics; (iv) as lecturers and writers, and (v) on the faculties at various levels of education.
I encourage you to read the solutions he proposes. Each and every one of his steps has been undertaken with fervor. A logical continuation of these steps can be seen going far beyond Mr. Powell's suggestions, such as the 2008 Charles Koch move to fund an economics school with millions . . . provided he gets to select the faculty.
As more and more of these examples of money being used to affect education are unearthed, it should come as no surprise to anyone that the policies of one of the more famous economists, John Maynard Keynes, are so poorly understood so as to become largely unwieldy distortions inappropriate to forming sound policy, and that the coiner of a still popular term, conspicuous consumption, is now largely forgotten. Veblen, in fact, is perhaps the deepest cut of all. Harmon notes of Veblen, "Gradually, a worldview almost directly opposed to his own became dominant." (Harmon, ibid.) And the most prominent bulwark of that worldview has been, once again, Friedman's Chicago School of Economics . . . one Veblen help to found.
Crazy or not, I don't have the money to promote what I see are logical antidotes to libertarian spew. And thus, no matter how much I may spew myself, I find my voice one of the small and dissenting in a well-funded and over-amplified chorus of crazy.
Yes, it gets me down.
Ah, well.
I once asked my neighbor, a now-retired UW professor of psychology, if there had been any studies linking the rise in autistic spectrum disorders with libertarianism. I figured people who have trouble relating to other people would be drawn to a philosophy that clearly separates "mine" from "ours." She was unaware of any such studies, but was kind to indulge her crazy neighbor's ideas. Still, I am not alone with these crazy beliefs that fly in the face of this wave of unrestricted libertarianism. Take another voice in the choir, one I noted last summer, Mike Kimel of Angry Bear:
Many of them are misfits or eccentrics. Others simply can't reason out that there are two sides to every equation. . . . Some like to view themselves as lone wolves, in no way beholden to the rest of society. Some find they can be more successful in business if they don't pay taxes and/or find export their costs onto third parties. And of course, there are the thugs. Guess which group will take over if libertarians ever get their way.
And the philosophy embraced by these lone wolves? It's far from a new phenomenon. When one keeps more and more of one's earnings, especially if one earns quite a bit relative to others, those earnings must do something. They often become the vehicle for projecting wealth conspicuously. Baubles and trinkets, toys and past-times, all find their way to the over-earner. A good friend once noted that in order to be considered "cool," any past-time or hobby must cost at least $1,000. Seriously, I think he's on to something. Think about all the ways one may spend one's time, and the reaction you get to those more frugal passers-of-time when you bring them up. Reading, gardening, long walks; they just aren't cool. Get yourself a wind-surfing board, a scuba outfit, some rappelling gear . . . eyes perk up. That stuff costs money, and spending money means dedication.
The term "conspicuous consumption," in fact, was coined by Thorstein Veblen in 1899 in his book The Theory of the Leisure Class. He didn't like this Leisure Class one bit. Why was traced and noted by Oren Harmon:
The eighteenth century Scottish economist Adam Smith had a simple message to convey: Under certain conditions free economic competition will lead to the best allocation of society's resources. It sounded like a paradox, but it was unequivocally true: Unfettered contest will by an "invisible hand" maximize society's benefits. The more ruthless the competition, the greater the social good; individual selfishness leads to collective benefit and plenty.
By the time Thorstein Veblen arrived as a professor at the University of Chicago when it opened its gates in 1892, this economic worldview was referred to as "classical." Welded now more strongly to the political theory of laisez-faire, Adam Smith's legacy beckoned a new name. Veblen called it "neoclassical economics" and didn't shy away from expressing his view: he absolutely hated it.
. . . .The basic assumption that individuals pursuing their own self-interest necessarily promote the good of society was to him both insipid and false. Capitalism was leading to "conspicuous consumption" and "conspicuous leisure." Not only did this bring waste and inefficiency, it suppressed fundamental human instincts: acquisitiveness, workmanship, parenthood, and idle curiosity. Forms of social control could be used to reawaken them, but this could only be accomplished with the help of a broad science of human behavior. With its exclusive dependence on price theory, neoclassical economics was nothing but a narrow "hedonistic calculus." Based on "immutable premises," it had little to do with reality.
(Oren Harman, The Price of Altruism, W.W. Norton & Co., 2010, pp. 110-111.)
Though I haven't yet read Veblen's book, I do like Harmon's synopsis of the effects Veblen noted. This suppression of "acquisitiveness, workmanship, parenthood, and idle curiosity" is why I started looking in to how our brains work (somewhat managed under the tag Swarms & Brains). Heck, Daniel Pink's book Drive is an indictment of just about all the neoclassical economists declare. Even better, Pink's book (unlike Milton Friedman's, for one example) is based on empirical science. He introduces one researcher interviewed for Drive:
[Edward Deci] revealed that human motivation seemed to operate by laws that ran counter to what most scientists and citizens believed. From the office to the playing field, we knew what got people going. Rewards - especially cold, hard cash - intensified interest and enhanced performance. What Deci found, and then confirmed in two additional studies he conducted shortly thereafter, was almost the opposite. "When money is used as an external reward for some activity, the subjects lose intrinsic interest for the activity," he wrote. Rewards can deliver a short-term boost - just as a jolt of caffeine can keep you cranking for a few more hours. But the effect wears off - and, worse, can reduce a person's longer-term motivation to continue he project. . . .
Thus began what for Deci became a lifelong quest to rethink why we do what we do - a pursuit that sometimes put him at odds with fellow psychologists, got him fired from a business school, and challenged the operating assumptions of organizations everywhere.
(Daniel H. Pink, Drive: The Surprising Truth About What Motivates Us, Riverhead Books, 2009, pp. 8-9, I emboldened for emphasis.)
Another researcher Pink interviewed, Mihaly Csikszentimihalyi ("Mike" works for him) did extensive work on a concept he calls "flow", that feeling that time disappears when doing something one finds truly rewarding. Flow is the very thing that Deci found monetary rewards can impede, despite all the ink spilled by neoclassical and neoliberal economists declaring the contrary. In a rare moment of vindication, Csikszentimihalyi found himself in the catbird seat, as it were:
Several years ago - he can't recall exactly when - Csikszentimihalyi was invited to Davos, Switzerland, by Klaus Schwab, who runs an annual conclave of the global power elite in that city. Joining him on the trip were three other University of Chicago faculty members - Gary Becker, George Stigler, and Milton Friedman - all of the economists, all of them winners of the Nobel Prize. The five men gathered for dinner one night and at the end of the meal, Schwab asked the academics what they considered the most important issue in modern economics.
"To my incredulous surprise," Csikszentimihalyi recounted, "Becker, Stigler, and Friedman all ended up saying a variation of 'There's still something missing,'" that for all its explanatory power, economics failed to offer a rich enough account of behavior, even in business settings.
Csikszentimihalyi smiled and complimented his colleagues on their perspicacity. The concept of flow, which he introduced in the mid-1970s, was not an immediate game-changer.
(Pink, ibid, pp. 115-116, I emphasized.)
So, with these and myriad other examples disputing the neoclassical claim arguing that monetary rewards are of tantamount importance, why are we still listening to neoclassical economists at all? Why, in fact, have these economists grown in prominence while Veblen has faded?
Why?
Though empirical evidence is against the neos, the money is all for them. Think of business schools as promoters not just of sound business practice, but of theory. What theories get spread? That's actually a very good question. Theorists who formulate ideas of money and economy are everywhere. Only a select few are taught, and many are taught to students as a cautionary example only. "Here are some of Marx's ideas; watch out for them!" Many more still are so complex that the teachers have trouble with them. From Yves Smith, this observation about one of those complex theorists, John Maynard Keynes:
Samuelson is widely seen as the father of Keynesianism in America, but it is key to understand that "Keynesianism" is not Keynes. Samuelson put a second important imprint on the discipline through his 1948 introductory economics textbook (Economics: An Introductory Analysis), which sold several million copies in sixteen editions, the latest in 1997, nearly fifty years after its initial release. And it was this work that defined what Keynes came to mean not just to students, but also, along with John Hick's work, to most people in the profession.
How could that be? Keynes's work was hardly a secret. Why would economists rely on an interpretation rather than the source? Even shortly after its release, [Keynes'] General Theory developed a reputation of being difficult and, arguably, confusing (well, if you were steeped in neoclassical economics, that would certainly be the case). And it became perversely normal to go on about Keynes's General Theory without having read it. For instance, Robert Bryce, a student who had attended some of Keynes's lectures, wrote an essay on Keynes's ideas. That article, along with Bryces' participation in an informal group that met at Harvard, became the foundation for what most economists at Harvard in the late 1930s thought Keynes was about.
(Yves Smith, Econned: How Unenlightened Self Interest Undermined Democracy and Corrupted Captialism, St. Martin's Press, 2010, pp. 34-39, emphasis again mine.)
It gets worse. Confusing and complex are one problem; promoting theories that attack what many see as their right to keep government from interfering with business, that is another can of worms. Smith continues:
But there was a second, powerful reason to change Keynes for American consumption. A Canadian student of Keynes, Lorie Tarshis, published an economics textbook in 1947, The Elements of Economics, which included his interpretation of Keynes. It also suggested that markets required government support to attain full employment. It was engaging and well-written, and sold well initially, but fell off quickly, the victim of an organized campaign by conservative groups to have the textbook removed. The book, and by implication Keynes, was inaccurately charged with calling for government ownership of enterprise.
(Smith, ibid, p. 40, emboldenation mine yet again.)
So, as more and more business schools sought money for their improvement from alumni donors, the message those donors thought important became more and more important. Business schools that emphasized Veblen and Keynes, those guys maybe didn't get as much in donations. Though shown part of the error of his ways personally by Csikszentimihalyi, Milton Friedman and his ilk gets more popular in the curriculum. After all:
In his most famous work, Capitalism and Freedom, Friedman argued (as its title suggests) that capitalism and freedom go hand in hand - that there can be no freedom without capitalism and no capitalism without freedom. So defense of one was the defense of the other. It was as simple - and as fundamental - as that.
(Naomi Oreskes and Erik M. Conway, The Merchants of Doubt, Bloomsbury Press, 2010, pp. 64-65.)
Friedman gets quoted - or, more likely, paraphrased - far out of proportion with his wisdom, it seems to me. After all, this is the man who said decades after taxpayers funded a defeat of Hitler, the construction of the interstate highway system, and just five years before the taxpayer-funded Apollo program put a man on the moon, ". . . the great advances of civilization, in industry or agriculture, have never come from centralized government." (Friedman, 1962.) But nevermind that, good Friedman-ites will say.
As money is made, it flows to places that teach it is good to make money. Money as a marker of success becomes a self-reinforcing phenomenon. And really, this is old news. Almost two years ago, I outlined the contents of the The Powell Memorandum, a 1971 letter soon-to-be Supreme Court Justice Lewis Powell wrote to his friend and neighbor - and US Chamber of Commerce Director - Eugene B. Sydnor, Jr. Just about everything Powell outlines has come to fruition, most especially the pressure monied individuals can exert on educational institutions. He opens his memo with the simple statement: "No thoughtful person can question that the American economic system is under broad attack." While I would disagree, he continues:
One of the bewildering paradoxes of our time is the extent to which the enterprise system tolerates, if not participates in, its own destruction.
The campuses from which much of the criticism emanates are supported by (i) tax funds generated largely from American business, and (ii) contributions from capital funds controlled or generated by American business. The boards of trustees of our universities overwhelmingly are composed of men and women who are leaders in the system.
He goes on, noting of the graduates taught the essentials of revolutionary, anti-capitalist politics:
As these "bright young men," from campuses across the country, seek opportunities to change a system which they have been taught to distrust - if not, indeed "despise" - they seek employment in the centers of the real power and influence in our country, namely: (i) with the news media, especially television; (ii) in government, as "staffers" and consultants at various levels; (iii) in elective politics; (iv) as lecturers and writers, and (v) on the faculties at various levels of education.
I encourage you to read the solutions he proposes. Each and every one of his steps has been undertaken with fervor. A logical continuation of these steps can be seen going far beyond Mr. Powell's suggestions, such as the 2008 Charles Koch move to fund an economics school with millions . . . provided he gets to select the faculty.
As more and more of these examples of money being used to affect education are unearthed, it should come as no surprise to anyone that the policies of one of the more famous economists, John Maynard Keynes, are so poorly understood so as to become largely unwieldy distortions inappropriate to forming sound policy, and that the coiner of a still popular term, conspicuous consumption, is now largely forgotten. Veblen, in fact, is perhaps the deepest cut of all. Harmon notes of Veblen, "Gradually, a worldview almost directly opposed to his own became dominant." (Harmon, ibid.) And the most prominent bulwark of that worldview has been, once again, Friedman's Chicago School of Economics . . . one Veblen help to found.
Crazy or not, I don't have the money to promote what I see are logical antidotes to libertarian spew. And thus, no matter how much I may spew myself, I find my voice one of the small and dissenting in a well-funded and over-amplified chorus of crazy.
Yes, it gets me down.
Ah, well.