April 27, 2015
Suffering? Well, You Deserve It
Posted on Mar 2, 2014
By Chris Hedges
Offer argued that “a silent revolution” took place in economics in the 1970s. “Economists,” he said of the 1970s, “discovered opportunism—a polite term for cheating. Before that, economics had been a just-world defense of the status quo. But when the status quo became the welfare state, suddenly economics became all about cheating. Game theory was about cheating. Public-choice theory was about cheating. Asymmetric information was about cheating. The invisible-hand doctrine tells us there is only one outcome, and that outcome is the best. But once you enter a world of cheating there is no longer one outcome. It is what economists call multiple equilibria, which means there is not a deterministic outcome. The outcome depends on how successful the cheating is. And one of the consequences of this is that economists are not in a strong position to tell society what to do.”
The problem, he said, is that the old norms of economics continue to inform our policy norms, as if the cheating norm had never been introduced.
“Let’s take the doctrine of optimal taxation,” he said. “If you assume a world of perfect competition, where every person gets their marginal products, then you can deduce a tax distribution where high progressive taxation is inefficient. This doctrine has been one of the drivers to reduce progressive taxation. But looking at the historical record this has not been accompanied by any great surge in productivity; rather, it has produced a great surge in inequality. So once again, there is a gap between what the model tells us should happen and what actually happens. In this case the model works, but only in the model, only if all the assumptions are satisfied. Reality is more complicated.”
“The standard in modern society is that government allocates between 40 to 50 percent of output,” he said. “This anomaly is not explained by economic theory. If people are making democratic choices in their self-interest, why have these large government structures been built up?”
Square, Site wide
“There is very little analytical argument in economics in support of government, but its benefits are so overwhelming it continues to hang on,” he said.
“One of the issues here is when those in authority, whether political, academic or civic, are expounding their doctrines through Enlightenment idioms and we must ask, is this being done in good faith?” he said. “And here I think the genuine insight provided by the economics of opportunism is that we cannot assume it is being done in good faith.”
“When I hear Republicans in the United States say that taking away people’s food stamps will do them good I ask, what do you know that allows you to say this? This rhetoric invokes the Enlightenment model. We all use it. It is improvement by means of reason. But Enlightenment discourse should not be taken at face value. We have to again ask whether it is being carried out in good faith.”
“Economics, political science and even philosophy, ever since rational choice swept through the American social sciences, have embraced the idea that an individual has no responsibility towards anyone except himself or herself,” he said. “A responsibility to anyone else is optional. The public discourse, for this reason, has become a hall of mirrors. Nothing anymore is what it seems to be.”
Our current economic model, he said, will be of little use to us in an age of ecological deterioration and growing scarcities. Energy shortages, global warming, population increases and increasing scarcity of water and food create an urgent need for new models of distribution. Our two options, he said, will be “hanging together or falling apart.” Offer argues that we cannot be certain that growth will continue. If standards of living stagnate or decline, he said, we must consider other models for the economy. Given the wealth and resources of industrialized nations, he said, a drop in living standards to what they were one or two generations ago would still permit a good quality of life.
Offer has studied closely the economies of World War I. Amid this catastrophe, he notes, civilian economies adapted. He holds up these war economies, with their heavy rationing, as a possible model for collective action in a contracting economy.
“What you had was a very sudden transition to a serious scarcity economy that was underpinned by the necessity for sharing,” he said. “Ordinary people were required to sacrifice their lives. They needed some guarantee for those they left at home. These war economies were relatively egalitarian. These economics were based on the safety net principle. If continued growth in the medium run is not feasible, and that is a contingency we need to think about, then these rationing societies provide quite a successful model. On the Allied side, people did not starve, society held together.”
However, if we cling to our current economic model—which Offer labels “every man for himself”—then, he said, “it will require serious repression.”
“There is not a free market solution to a peaceful decline,” he said.
“The state of current political economy in the West is similar to the state of communism in the Soviet Union around 1970,” he went on. “It is studied widely in the university. Everyone knows the formula. Everyone mouths it in discourse. But no one believes it.” The gap between the model and reality is now vast. Those in power seek “to bring reality into alignment with the model, and that usually involves coercion.”
“The amount of violence that is inflicted is an indicator of how well the model is aligned with reality,” he said. “That doesn’t mean imminent collapse. Incorrect models can endure for long periods of time. The Soviet model shows this.”
Violence, however, is ultimately an inefficient form of control. Consent, he said, is a more effective form of social control. He argued, citing John Kenneth Galbraith, that in affluent societies the relative contentment of the majorities has permitted, through free market ideology, the abandonment, impoverishment and repression of minorities, especially African-Americans. As larger and larger segments of society are forced because of declining economies to become outsiders, the use of coercion, under our current model, will probably become more widespread.
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