More Than One Principle
I have been reading two interesting books on the evolution of 20th century American economics in the late 20th century that have confirmed some of my worst suspicions of the harm that has been done by my profession. One was Democracy in Chains by Nancy McLean, a history of the growth of the anti-government public choice school. The other is The Economists’ Hour by Binyamin Applebaum, a history of the growing influence of monetarism and market-worship and its influence on public policy. It would be a shame if these books were read only by economists, because their critiques are very discouraging about the future of our democracy, our society, and our economy.
As an economist, I was assured by my mentors and colleagues that our profession was value-free, merely a set of tools for making decisions. We told our students in lectures and textbooks that there were six measures of a well-functioning economy: efficiency, equity, and freedom for microeconomics and growth, price stability, and full employment for macroeconomics. But when push came to shove, the pursuit of some of these indicators trumped the others, suggesting that they were not neutral measures of performance but in fact values that should guide our economic policies.
Efficiency and freedom trumped equity, price stability and growth trumped full employment. Over time, those priorities have resulted in low inflation, and growing inequality. Growth, supposedly, would resolve that conflict. In the Kennedy years, the favorite saying was “A rising tide lifts all boats.” And one dissident remarked, “but not those already under water.” One might reasonably ask whose interests were served by that rank ordering. The law is on the side of the rich. Or, ,as Anatole France wryly observed, “The law, in its majestic equality, forbids rich and poor alike to sleep under bridges, to beg in the streets, and to steal their bread.”
Who gains from freedom? Those who have the most control over resources, who want to be able to use them as they see fit. Who gains from efficiency? Those who control the increased profits resulting from greater efficiency. Who gains from equity? The rest of us. Who gains from growth? Despite trickle-down and supply-side theories, there is no mechanism that ensures that the gains from economic growth will be widely shared across all sectors of society. Price stability is highly prized by those who are lenders or owners of other financial assets, but a bit of inflation reduces the burden on debtors. Full employment empowers workers, but a “reserve army of the unemployed” (to borrow a phrase from Karl Marx) ensures that the labor market will favor the owners over the workers. What happens when unemployment is low? Well, for one thing, Amazon loses a union election! And wages rise, as we have observed in the last six months, as employers have to compete for a dwindling supply of workers.
Who loses from creating mistrust in government, promotion of individualism rather than community, demonizing the poor and undermining democracy? Ultimately, all of us. Economics has become a very short-sighted profession whose cost-benefit analysis does not lend itself to the promotion of peace, equality, democracy, environmental sustainability, and trust in one another, our institutions, and even our survival.
It was not always so. As late as the 1960s, economics affirmed all six of those goals as qualified positives along with a need to find a balance in tradeoffs among them. The government was seen, not as a power-hungry monster but rather as the check on the excesses of capitalism, a balancing mechanism that guaranteed access to the basic necessities of life and opportunity for all who were willing to work. No, it was not a golden age by any means, particularly in is failings of racism and sexism. But it was an era when the best minds went into science, engineer, medicine, teaching and other helping professions, not into finance. As poet William Wordsworth observed, “Getting and spending, we lay waste our powers.” Perhaps it is time to reclaim our society from the economists and restore the pursuit of material wealth to its proper sphere as a means to an end rather than an end in itself.