Matthew Taylor, Chief Executive to the Royal Society of Arts and a former adviser to Tony Blair, recently wrote an article in the magazine, Prospect, on the political potential of new developments in behaviourial economics, neuroscience and related disciplines. Such an enterprise is always difficult, in so far as new research is often part of an expanding research programme and questions are not fully answered. Therefore, one should be careful in the enthusiastic application of such results to the political arena.
Taylor’s article marries the politics and selected research results, with section headings such as the Social Democratic brain and the Conservative brain. Without citing too much detail, the aim of the article is to describe and promote this research as a source of justification for policy and power:
Much of this research makes good reading for social democrats. By highlighting our psychological frailties and the way these contribute to market epidemics, behavioural economics makes a powerful case for regulation, paternalism and measures to promote feelings of security. Nor is this the only encouragement for the traditional left.
Homo oeconomicus is circumscribed by the explorations of rationality undertaken by neuroscience and social Darwinism, but the disciplinary failure of the social sciences, the tabula rasa, is erased from the historical backdrop, as this draws attention to their total failure. A neoliberal dominance in our understanding of the human is conjured up to allow the entry of this new legitimation. The vision that Taylor pictures is of mankind as a social being, who requires constraints and direction through social institutions and norms. Such a general vision that marries up with your philosophy is the danger that the contemporary amateur interpretation of scientific results will conclude.
Given that there is no consensus on human nature, merely a greater understanding of our predispositions and controversy over how they relate to the social sphere, is it not arrogant to presume that existing political ideas have the key to unlock the controversial interplay of the social and the inherited. Such interventions in the past have proved disastrous, as the race science of the twentieth century demonstrates. Caution is a watchword here.
The byproduct of this article is the realisation that neither the Tories or Labour can articulate moral arguments and are reduced to tagging their miserable ideas on to the emergent exploration of human nature for the sheen of scientific authority. Economists and intellectuals working in these disciplines are seduced by the consultation of those in power and turn towards the exercise of application in a political sphere.
This article is a useful reminder of what both parties share. Supping from the same well via ‘libertarian paternalism’ or behaviourial economics, we begin to see the outlines of a commonality in approach, though there are differences in institutional and political implementation. Neither approach from Labour or the Tories is a friend to freedom.
Reading the passage selected, Sir Francis Galton came to mind…
Jeezus! I never expected to see such waste of letters in Samizdata. Or is this some kind of test?
“Such a general vision that marries up with your philosophy is the danger that the contemporary amateur interpretation of scientific results will conclude.”
Wtf is this?
All belief is subjective. Yes, Galton.
Control requires predictability.
Same thing hit me when I read it… this is the meta-context that underpins technocratic eugenics on show.
This shows that “economics matters” and that economic history does.
Matthew Taylor just ASSUMES that “market epidemics” cause such things as the Great Depression or the present crises – therefore he looks to the cause in the irational nature of human minds and how the goverment (supposedly made up of nonhumans – angels perhaps) should control things.
“Even if he was correct Paul this would not justify the mind control that this evil man supports”.
Quite so – but he is NOT correct.
For the true causes of both the crash of 1929 and the Great Depression that followed see Murry Rothbard’s “America’s Great Depression”.
As for the present crises.
For the general cause (the increase in the money supply by the Federal Reserve – which was followed by the Bank of England and so on, by the way) see Thomas Wood’s “Meltdown”.
And for the specific GOVERNMENT (not “market epidemic”) policies that pushed that extra credit money into the housing market see Thomas Sowell’s “Housing: Boom and Bust”.
So even if one shared Matthew Taylor’s morality (that defects in the human mind causeing civil interaction “the market” to create X horrors, justifies control of “the market” by government aliens from the planet Zog) one would should still reject his conculsions. As defects in the free human interaction “the market” were NOT the cause of the present crises.
And yet more statism will make the situation WORSE – as will be seen over the next few years.
Behavioural economics according to socialists:
1. Peoples’ actions are flawed when they act freely.
2. Peoples’ actions are perfect when they are telling others what to do.
Logic doesn’t really enter into this as far as I can see. The conclusion that flawed human behaviour means a small group of people should be given vast powers over their fellows does not follow at all: it is a preconceived conclusion.
Paul:
Are market and government failures so similar that they are not only comparable, but rankable?
Is the answer always one or the other but never both? Do markets ever fail in significant ways that justify intervention? If so, when?
What types of markets fail in ways that are similar but less costly than government failures–oligopolies, monopsonies, competitive import markets, Walrasian commodity auctions, etc–or does it not matter?
Do the behavioural relationships dosumented in the empirical work cited in the Prospect article actually exist (for example, prospect theory)?
Why isn’t Somalia rich?
mdc:
Can we tell what a sub-optimal outcome from market processes is?
If yes, does this mean that people acting freely are always wrong?
Because its a tribal pre-extended society. Duh.
vimothy: All real phenomena are overwhelmingly likely to be sub-optimal. This doesn’t at all mean that “people acting freely are always wrong”. I don’t follow your line of reasoning.
Mdc:
My line of reasoning is that your characterisation of behavioural economics is wrong. I want to know if we can identify sub-optimal outcomes. If we can, we can potentially improve them. (For example, based on our analysis, we could decide to float or fix exchange rates). At no point do we need to say “peoples’ actions are flawed when they act freely… [and] perfect when they tell others what to do”.
Sanjay Parthasarathi:
You have merely answered my question by restating it. But okay then: why is Somalia a “tribal pre-extended society” and not the richest nation in Africa? Don’t you think it’s strange that no rich industrialised counties look like the Samizdata ideal? Is this a failure of the market for states?
The reason vimothy is not worth arguing with is that he bases his contention on what people have not said and do not actually think.
Clearly he has little idea what that “the samizdata ideal” is… let me give him some clues: it is several and extended, not tribal/group-identity-based and collective. In other words, Sanjay Parthasarathi knows what we are talking about and thus states the bleedin’ obvious that Somalia is poor because it is a primitive superstitious tribal society which lacks the social infrastructure to enable meaningful several choice (and therefore markets) to work well (social development is the prerequisite for political and legal development), i.e. it is a place at a comparable level of development to parts of dark ages Europe.
Western societies are now strong enough to produce wealth in spite of the deadening hand of the state and its propensity to debase the measure of that wealth, a bit like reducing a centimetre by statute to nine millimetres and then claiming the ‘credit’ for producing a taller generation of people. Western economies are like a strong body with a disease (regulatory statism)… it works in spite of the disease, not because of it.
“Do markets ever fail in significant ways that justify intervention?”
No. Markets do not “fail”. There is no “market”; that’s merely a metaphor for the combined decisions of all economic actors within the relevant society. And if market processes lead to “sub-optimal” results*, that’s not a “failure”, it’s merely a reflection of the collective judgments (note that I did not say “widsom”) of the participants at that moment in time, who as human beings are prone to factual error or miscalculation. So be it. The judgments of a small cadre of self-appointed “experts” can never be any better.
* By whose definition? Furthermore, even if one could accurately define “optimal” I would posit that because the “market” is always seeking, but never quite attaining, equilibrium, in that sense it is always, and must inevitably be, “sub-optimal”.
Laird:
Er, I realise that “market” is a metaphor. All words are metaphors. When we say “market failure”, we mean that there are inefficiencies in the use or production of goods and services by participants. Markets obviously do fail in significant ways. If you can draw a distinction between competitive and uncompetitive markets then you agree that markets can fail.
And seemingly, you agree anyway, since in addition to claiming that markets can never fail, you state that markets are composed of individuals who make mistakes. However, you assert, these mistakes cannot be improved on by a small cadre of experts. So let’s review:
1, Markets fail. Of course they fail; if they did not, we would not need markets.
2, Market outcomes can be improved upon. This merely restates point 1. Of course they can be improved upon; if they could not, they would not fail.
The question, therefore, is really about political economy. It is silly to say a priori that markets cannot fail, and even if they do, they can’t be improved upon. Governments and markets interact all the time. Institutions are of prime importance to markets, economies and economic growth. It all goes wrong, improves, gets worse, and on and on. As long as you are able to distinguish between different types of market, your position is not that far away from mine.
Perry, almost every comment in every post at Samizdata is an example of bad faith. Look at the post above mine, by mdc at November 2, 2009 11:37 AM. Nobody thinks like that; it is an obvious straw man. An eye bleedingly obvious straw man, at that. But of course, no one is going to argue with mdc because he is reproducing the party line, even if he makes the party sound like cranks. Just as, of course, you will argue with me—while simultaneously stating how pointless such an argument is—because you want to regulate your echo chamber and keep it on point. Ensure that Samizdata’s market for ideas remains a monopoly. Keep the barriers to entry high. God forbid a bit of real debate occurs.
On Somalia, you have simply reproduced Sanjay’s error. I know it’s a mess. But why is it a mess? Why, given her lack of government constraints on the growth of the private sector, is Somalia poor? Why is she a “primitive superstitious society”? (BTW, this is, at best, a tendentious description of Somalia, which, in addition to being circular—India is poorer than the UK because it is a primitive superstitious tribal society?—seems largely ignorant of its history.) And if a lack of regulatory statism is neither necessary (e.g., China) nor sufficient (e.g., Somalia) for wealth generation, why should anyone care?
Why is there a statistically significant positive correlation coefficient (1.5) between per capita GDP and size of the public sector? (I can provide links). Don’t you find that strange?
Finally, I find the generic attack on the data pretty lame. At Samizdata—though this is hardly an uncommon trait amongst internet libertarians—it seems that whenever research disagrees, the data is wrong or the researchers are ideologically suspect. Samizdata is pretty anti-intellectual at times. Nevertheless, I’m reasonably sure that my standard of living is higher than my parents’, and I’m reasonably sure that their standard of living is higher than my grandparents’.
This is why I am not sure it is worth debating with you. Asked and answered. Societies can develop over time and are at different levels of development. Somalia is primitive and tribal and thus far from exerting less control over several action than a centralised government, it actually exerts more controls. The Somali ‘model’ has more in common with the idea of local soviets without the top tier of central control (ironically the ‘withered away state’ of Marxism with a mutant Islamic version of New Soviet Man, hehe).
But the real howler is this and demonstrates the fact correlation does not equal causation, at least in the sense you think.
Strange that parasitic institutions which feed on privately generated wealth are larger when there is a large ‘food source’ to prey on? That would be strange why exactly?
PdH:
Because correlation is causation, damn it! You just don’t understand statistics, do you?
vimothy
can the market (i.e. human beings engaged in civil interaction) ever fail so badly that government intervention (i.e. the use of force and fear) not make the situation worse.
No.
Human beings are not angels – they mess up lots.
But terror (“government intervention”) always makes the economy worse. And almost always the problems blamed on “market forces” (i.e. voluntary human interaction – choice) turn out to be have been created by government anyway.
“On Somalia, you have simply reproduced Sanjay’s error. I know it’s a mess. But why is it a mess? Why, given her lack of government constraints on the growth of the private sector, is Somalia poor?”
Private sector only exists if there is private property, and investments can only happens if it is not a risk of being robbed. Taxes have similar practical result similar so we are heading to Somalia sooner or later.
They value other things. They have other ideology/knowledge. And different ideologies have different consequences.
There are lots of governments in Somalia.
Governments being groups of people who take resources by violence (or the threat of it) and order people around with threats of violence.
Indeed I suspect that most of Somalia is more statist than the United States.
Paul: what? Suspect away, but… Somalia has been without government for almost two decades. You might like to read, “Somalia: Economy without State” by Peter Little.
On the other hand, it is interesting to hear you disagree so fundamentally with Perry. Why do you think that the Somali state is so extensive when Somalia is so poor?
Luckylucky: i.e. governments are necessary to create an environment where markets can flourish…?
ever worked in Dorking?
vimothy.
Did you bother to read my comment?
Those areas of what was Somalia that you claim “are without government” in fact have lots of government. Groups of people who take stuff by the threat of violence and order people about.
To claim that any area of what was Somalia has anarchocapitalism is simply false.
If you wish to refute me – then simply go to one of these areas of Somalia and prove to me that there are no groups (no governments) that will violate your possessions or body.
After you have been cut up, we will be free of your stupidity.