Image credit. Have a little rest and take pleasure in the little appreciated fact that politics helps us live peaceful and productive lives, even though our ignorance is so vast that instead of holding the same views, we differ widely and passionately in our convictions.
Those impatient with politicians tend to have good grounds for their discontent; however, there are also bad reasons to complain about politics, and we are prone to falling victim to these preconceptions once we lose sight of the full range of difficult functions that politics has evolved to serve.
Ignorance and the symbolic function of politics
When ignorance is a path the rational person should or simply must choose (as trade-offs in a persons's life demand, such as between earning a living and becoming knowledgeable about a political issue), and when ignorance is even insurmountable and constitutive as is the case regarding the unmanageable amount of information on all political issues considered important, we must find, or hope to chance upon special ways to interact that shield us from intolerably divisive or otherwise severely detrimental effects of the vast ignorance that affects all of us.
I begin to believe that politics has a crucial role to play in organising peaceful forms of negotiations, competition, and ritual reassurance that flow together to build
trust among strangers, and people of significantly differing views,
a sense of orientation in an extensive society comprised of hundreds of millions of people, and
the security of a common narrative frame, i.e. a common view of how to make sense of and cope with the world we live in.
This may range from rituals of peaceful condemnation (as between partisan groups) to rituals of peaceful subordination ("okay, this time you guys won the election") or power splitting ("next time we'll prevail" and "the law you intend to issue must pass committees on which we too sit").
Data Mining, Number Crunching, and Our Old Friend Chaos
I find the below article interesting, as it demonstrates just how difficult it is to authenticate offerings of conjectural knowledge so as to shift information from the status of "uncertain credibility" to "credible conjecture" or even "fact" and "truth".
So, in any complex system, such as a football game involving complex aspects such as humans and weather, a significant component is simply not predictable and never will be, no matter how much data we collect. [...]
The unarguable truth is the answer is not always in the data. There is a general tendency at present to believe the data will magically yield the answer if you try hard enough – that is wrong. It is vital that we understand the limitations of analytics as well as their seductive, beautiful, irresistible, elegant and undoubted power.
4. So I have a PSST model for unemployment [see my post here, G.T.], and my “weak” model[s] for inflation. I think it is fair to criticize them as “just-so stories.” But I would say the same thing about the sorts of models preferred by Blanchard or Krugman. Just-so stories, dressed up in pretty math.
To which I replied:
Your concession as to the role of just-so theories in economics strikes me as significant, and even surprising. As I regard you as a serious thinker, I must rule out the conclusion that economics is idle prattle to you. But what is it?
To the extent that economics is based on story telling, what is it in the nature of that narrative habit that sustains economics as a worthwhile form of thinking about human interaction?
I hope, in writing this, I don't sound cynical or facetious. Increasingly, I get interested in the role of (rational) ignorance, which all conceivable societies are inevitably affected by in very considerable measure; and I wonder, how do we manage the vastness of our (rational) ignorance so well - in countries such as the US or Germany, where life is quite bearable?
The consideration that (rational) ignorance is a virtually invariant phenomenon in all modern societies including all conceivable improved versions (such as, say, a significantly more libertarian society), has led me to become a lot more respectful of politics and the state (as a functional necessity that, of course, may fail) than I used to be, their tremendous dangers and deficiencies notwithstanding.
Politics and the state seem to be (a) the result and (b) the instrumental basis of more or less successful story telling. For politics seems to be involved in seeking out procedures indispensable in dealing with large amounts of irreducible (rational) ignorance.
We need to tell us reassuring stories to sustain sufficient levels of trust while living in a largely anonymous society.
Politics is a spontaneous order - a hugely important aspect of spontaneous order totally disregarded by Hayek - that serves as a discovery procedure whose (functionally desirable) end product is at least a minimal level of trust etc. needed to support social order. A highly narrative enterprise, full of just-so stories.
If there is something to this view, what role does economics play in it with its just-so stories?
Arnold Kling replied:
I limit the scope of “just-so stories” to macroeconomics. Microeconomics often generates predictions that are falsifiable.
To which I replied:
Politics is what happens when we have to tell people:
“Sorry, serious economics cannot handle conclusively issues like unemployment or the nature of an advisable monetary regime.”
And macroeconomics is what happens when economists participate in politics.
Seriously, if there are vital topics of an economic nature that cannot be covered in a scientifically sound way, then there must inevitably develop a part of economics that deals in and is based on rhetoric and techniques of persuasion – not necessarily as something to be maligned, but possibly as a cultural pattern of mutual reassurance, just like free speech may work very well in maintaining peace (social order) even though what is being exchanged is partly of an acrimonious and a generally nonsensical nature, as the case may be.
I believe, this has very serious implications for liberty. If vital social issues of an economic kind cannot be resolved conclusively in support of a certain vision of society, say a classical liberal society, then the case for classical liberalism is incomplete, inconclusive in vital regards, and thus open to severe contestation not only among classical liberals but all citizens, parties, and factions of a free society.
The value of freedom lies in her ability to embrace and cope with the uncertainties and disunity underlying a community inevitably entertaining rhetorically constituted views of society.
No less than free markets, politics ought to be conceived of in terms of a spontaneous order.
Political structures evolve to seek out ways of attenuating the risks inherent in vast and widespread ignorance of the conditions giving rise to successful human coexistence.
Freedom produces these risks, while at the same time providing an excellent laboratory in which to test insurance and abortive products to defend against the dangers of inevitable ignorance.
Small advances in freedom - small compared to the freedom we are taking for granted - can make a huge difference in the living conditions and outlook of people, and ultimately, in their political ambitions.
The world barely noticed a remarkable achievement last year: For the first time in nearly three decades, North Korean farmers managed to produce enough food to meet the population's basic survival needs. In spite of a drought this spring, preliminary reports indicate that this year's harvest is likely to be good, too.
This success, such as it is, arose out of necessity. In the 1990s, industrial output in North Korea halved and an agricultural collapse led to famine. The vast majority of North Koreans survived by establishing an underground market economy. They had little choice: With the shelves of state-run shops empty of food, rationing coupons suddenly became worthless pieces of paper.
Most of these private enterprises started small. Farmers started growing their own food on mountainside plots. Workers began to use (or steal) equipment from state-owned factories to make their own products, which they then sold. Some people opened secret restaurants, others did informal tailoring. Markets, which the regime had barely tolerated, moved into the open.
As one might expect, some elements of North Korea’s emerging entrepreneurial class became relatively rich and began to look for more lucrative opportunities. Private workshops, inns and eateries began to spring up.
seldom start when people are desperate; they are more likely to erupt when citizens have [attained a certain level of material advancement, G.T., and therefore] come to believe that life could be significantly better under different leadership. Economic growth brings more knowledge of the (more successful) outside world. The changes also make people less fearful of the government, since they are no longer as dependent on the state for their livelihoods. A brighter future for North Koreans could well mean a darker one for the regime.
I like the discernment in Arnold Kling's three-pronged argument according to which:
(1) economy-wide wage growth is too highly aggregated a performance figure for analysing the economy,
(2) the Fed is trailing the real economy,
(3) the economy can be and presently is segmented so that certain layers of it experience vibrant economic activity, while others are mired in recession.
On (1), I would note that a few years ago wage growth was violating the Phillips Curve on the high side [meaning, I suppose: too high employment relative to the level of inflation, with strong demand for labour and correspondingly high wage growth, G.T.], and now it is violating the Phillips Curve on the low side [employment is too low given the level of inflation, with insufficient demand for labour and correspondingly weak wage growth, G.T.]. And yet mainstream macroeconomists stick to the Phillips Curve like white on rice. I would emphasize that the very concept of “the” wage rate is a snare and a delusion. Yes, the Bureau of Labor Statistics measures such a thing.
Instead, think of our economy as consisting of multiple labor market segments, not tightly connected to one another. There are many different types of workers and many different types of jobs, and the mix keeps shifting. I would bet that in recent years the official statistics on “the” wage rate have been affected more by mix shifts than by a systematic relationship between “the” wage rate and “the” unemployment rate.
On (2), I view this as evidence for my minority view that the Fed is not a big factor in the bond market. Instead, the Fed is mostly just following the bond markets. When it actually tries to affect the bond market, what you get are “anomalies,” i.e., the failure of the bond market to do as expected by the Fed.
On (3), I think that we are seeing a Charles Murray economy. In Murray’s Belmont, where the affluent, high-skilled workers live, I am hearing stories of young people quitting jobs for better jobs. On the basis of anecdotes, I would say that for young graduates of top-200 colleges, the recession is finally over. The machinery of finding sustainable patterns of specialization and trade is finally cranking again.
In Murray’s Fishtown, on the other hand, the recession is not over. I would suggest that we are seeing the cumulative effects of regulations, taxes, and means-tested benefits that reduce the incentive for firms to hire low-skilled workers as well as the incentive for those workers to take jobs. As Sumner points out, President Obama’s policies have moved in the direction of making these incentives worse.
Read the whole post on Arnold Kling's theory of the segmented wealth of nations.
For a broader context of Kling's take, consider his intriguing account of contemporary economic change:
I am inclined to treat the financial crisis as a blip, one whose apparent macroeconomic impact was made somewhat worse by the very policies that mainstream economists claim were successful.
This blip took place in the context of key multi-decade trends:
–the transition away from goods-producing sectors and toward the New Commanding Heights of education and health care
–the transition of successful men away from marrying housekeepers and toward marrying successful women
–the integration of workers in other nations, most notably China and India, into the U.S. production system
–the increasing power of computer technology that is more complementary to some workers than others
These trends are what explain the patterns of employment and relative wages that we observe. The financial crisis, and the government panic in response, pushed the impact of some of these developments forward in time.
One of the biggest problems worldwide is the absence of state structures capable of protecting economic liberty. Hernando de Soto claims that about 2/3 of the world population are affected by this bad state of affairs. It is incumbent upon those who are conscious of the value of liberty to promote the liberal state in the Third World - and, of course, as the below article shows, at home as well. Free markets do not just happen, they must be politically fought for and defended. Once again: the state is important for liberty, and so is politics.
Writes Mark J. Perry:
In today’s WSJ, Hernando de Soto argues that the cure for terrorism in the Middle East is capitalism, economic empowerment, and private property rights to help rescue “extralegal entrepreneurs” who have become trapped in their own countries as “economic refugees” by cronyism and burdensome over-regulation of market activity. Here’s an excerpt of “The Capitalist Cure for Terrorism” (emphasis mine):
It is widely known that the Arab Spring was sparked by the self-immolation in 2011 of Mohamed Bouazizi, a 26-year-old Tunisian street merchant. But few have asked why Bouazizi felt driven to kill himself—or why, within 60 days, at least 63 more men and women in Tunisia, Algeria, Morocco, Yemen, Saudi Arabia and Egypt also set themselves on fire, sending millions into the streets, toppling four regimes and leading us to today’s turmoil in the Arab world.
These suicides, we found, weren’t pleas for political or religious rights or for higher wage subsidies. Bouazizi and the others who burned themselves were extralegal entrepreneurs: builders, contractors, caterers, small vendors and the like. In their dying statements, none referred to religion or politics. Most of those who survived their burns spoke to us of “economic exclusion.”
In an interesting complement to de Soto, George Will makes a similar argument in today’s Washington Post that America’s “teeth-whitening entrepreneurs” are being denied the right to earn a living, and have become “economic refugees” in North Carolina because of cronyism capitalism, protectionist rent-seeking, and the burdensome over-regulation of market activity. Here’s an excerpt of “Supreme Court Has a Chance to Bring Liberty to Teeth Whitening” (emphasis mine):
On Tuesday, the national pastime will be the subject of oral arguments in a portentous Supreme Court case. This pastime is not baseball but rent-seeking — the unseemly yet uninhibited scramble of private interests to bend government power for their benefit. If the court directs a judicial scowl at North Carolina’s State Board of Dental Examiners, the court will thereby advance a basic liberty — the right of Americans to earn a living without unreasonable government interference.
In my youth, like many Germans, notwithstanding my admiration for the great country, to me America was a chaos of billboards. You must understand that - certainly in the 1960s, 1970s and 1980s - "Werbung" (advertisement) was almost a dirty word in Germany - something from the commercial world, yuck! A capitalist intrusion into your brain and soul. Billboard-plastered America was a symbol of how capitalism will run roughshod over decent citizens, if you let it.
I still like a landscape free of ugly billboards, but is it right to ban advertisements?
I am a great believer in capitalism. It should be possible for capitalism to advertise its products in pleasing and welcome manner, as indeed it already does in countless ways - see Freedom and Art.
While relatively uncluttered by billboards, Germany must have been the world champion in awful TV ads, with patronizing scientists in white gowns admonishing the viewers to buy this, that, or the other. The idea being, I suppose - advertising is evil, so let's try symbols of respectable advice.
In Britain in the 1980s, I learned that watching TV ads could be tremendous fun and that it was quite possible to draw crowds to "the telly" by entertaining them with funny advertisements.
So how might capitalism cope with the billboard issue?
In 1968 the state of Vermont passed a landmark anti-billboard law and the landscape has been billboard-free ever since. The law was the result of the extraordinary efforts of one man, Ted Riehle (1924 – 2007), who was determined to preserve the natural beauty of Vermont.
According to John Kessler, chair of the Travel Information Council, the law’s original goals remain the same today:
“We need to provide information to the traveler, but do not want to compromise our natural scenery. Tourism is the number one industry in the state. And the lack of advertising is one of the most commonly reported things that visitors appreciate about Vermont.” [source]
“Businesses may display an on-premise sign up to 150 square feet… Off-premise signs — the official name for billboards — are not allowed, unless TIC grants an exemption. Exemptions are typically granted for reasons of public safety and convenience.” [source]
“The best way to get Keystone XL built is to make it irrelevant ...”
From the Canadian perspective, Keystone has become a tractor mired in an interminably muddy field.
In this period of national gloom comes an idea -- a crazy-sounding notion, or maybe, actually, an epiphany. How about an all-Canadian route to liberate that oil sands crude from Alberta’s isolation and America’s fickleness? Canada’s own environmental and aboriginal politics are holding up a shorter and cheaper pipeline to the Pacific that would supply a shipping portal to oil-thirsty Asia.
Instead, go east, all the way to the Atlantic.
The source, including a useful synoptic map of the new pipeline project.
For more vintage pics from Lincoln, Nebraska, consult the image credit.
My libertarian development
Of a radical libertarian leaning until about two years ago, I have repositioned myself on many core issues. In particular, I have come to regret the shallow and dismissive handling of democracy in much of the libertarian discourse.
I used to be strongly influenced by the Ludwig von Mises Institute (LvMI). Initially, I was much attracted to its message thanks to the vast and valuable stock of downloadable literature, and, of course, a coherent narrative of freedom and capitalism offered by the institute's exponents. Owing to a sense of friendly tolerance, I made rather light of two points of disagreement that would eventually manifest themselves as the cracks of a deep rupture:
I always opposed
(a) anarchism, and
(b) aprioristic reasoning in the social sciences, and indeed, in any science whose subject matter is to be found in the empirical world.
As for (a), structures of maximal power, i.e. the state in a modern context, are an irreducible feature of human interaction, especially in larger human communities.
The whole point of a regime of liberty is to promote structures of maximal power that support an open society, where every citizen is reasonably free from arbitrary interference by other humans, private and public organizations, and most notably the state. The state is a precondition of liberty. Denying the indispensability of the state is to refuse giving attention to one of the most fundamental cornerstones of freedom. Anarcho-capitalism is, therefore, a distraction from freedom.
Concerning (b), true science is by definition free science, it is based on recognising that no one has privileged access to (advances in our asymptotic convergence toward) truth. Apriorism makes the claim of having access to absolute, ultimate, and incontrovertible truth. It is contrary to freedom, which is, like science, based on the presumption that no one has privileged access to truth.
Science, free markets and a free society are perfectly analogous in that they rely on advancement by trial and error, by conjecture and refutation, by respect for the constructive force of human fallibility. All three of them are constitutively open systems, producing in large measure unpredictable outcomes that feed back into the development of the overall system. While there is a firm structure to science, to markets, and to the system of freedom, their scaffoldings form a semi-circle, as it were, opening up to a vast frontier of indeterminacy.
About two years ago, certain encounters with exponents of anarcho-capitalism and apriorism spurred me on to look very carefully at the moot issues between us.
In the meantime, I have discovered that anarcho-capitalism is a great pointer to weaknesses in (classical) liberalism, as the former tends to radicalise the errors or fuzzy ends contained more or less pronouncedly in the latter, as well as ignoring its strengths.
Liberty, democracy, and trust
Anarcho-capitalism, and to a considerable extent (classical) liberalism as defended by Ludwig von Mises or Friedrich Hayek, offer at best a shallow theory of the embeddedness of markets, political institutions, and the state in modern civil society.
The state is largely seen as the (1) adversary and saboteur of (a) personal autonomy and (b) the natural spread and viability of free markets, and (2) an agent of illegitimately dominant persons and groups (special interests).
Politics and democracy as spontaneous order
This conception of the state as an agent of evil is related to a truncated view of spontanenous order, which disregards the deeper level and still more comprehensive spontaneous order of conditions enabling, historically and presently, the development of relatively free markets and the open societies in which they thrive.
A modern democracy is a web of complex negotiations functionally aiming to fit different, diverging, and adverse views and interests.
A free society depends on democracy as an arsenal of tools to balance interests many of which can never be perfectly reconciled; it is the political bazaar that admits any comer among free citizens, ensures the permanent contestability of incumbents, as well as a constant flow of new entrants both in term of interest groups, ideas, and cultural preferences.
Reconciliation among the ignorant
One of the key insights of classical liberalism is that all of us are rationally ignorant of countless important issues - we do not have the resources to understand all the issues in the air with reasonable accuracy. Also, there are many issue that represent political scarcity (reconciliation cannot be established by market-type transactions), and there may be issues that are either for the time being or even in principle unresolvable, as we simply may never know enough to penetrate the subject matter fully.
Just as the market helps us cope successfully with a plethora of information that we can not possibly ever fully absorb and comprehend, so is a political system a means to come to grips with forms and consequences of human interaction whose full information content we can never collect and assess. Like markets, a good political system is a think-tool, a means of orientation in a world that contains more information than we can ever hope to use for our personal orientation. At some point, good orientation, mutual respect, tolerance, and trust, become more important that exact and non-contradictory results.
Ultimately, the political system has the task of generating enough trust among human beings such that even in a population of 300 million most people are able to spend most of their life time without fearing destructive or even deadly distrust from their fellow citizens.
Democracy is a complicated web of institutions and practices signalling that (a) we can trust each other by and large, or that (b) we are able do something about it if our expectations of trust are seriously challenged.
Democratic politics is the way in which we keep our values and concerns in touch with those of others, so as to keep a balance between our differing convictions. The strong adversarial taste that politics often leaves us with is a sign that we are on track in confronting the potentially dangerous differences between us.
When it works, democratic politics shares the formeost merit of competition in science - where scientists let their theories be killed instead of themselves.
Democratic dialogue and dissent is a way of bashing other people's ideas in lieu of their bearers.
But, to repeat, democracy is a lot more. It is a complicated game of reassurance in the face of a world that hankers after perfect partisan solutions, but where perfect partisan solutions are impossible.
The US economy has a competitive intensity problem, and [a] decline in startups is at its core. Startups are the straw that stirs the drink. They generate new innovation (and new jobs) and force incumbents to improve or die. They change everything, creating a healthier, more vibrant economy in the process.
In the US economic ecosystem, startups are wolves. And we need more of them, and the creative destruction they bring, to transform our stagnating economy.