The Story of Economics

The BBC is running a three-part documentary, The Story of Economics
It started well with a routine by a Greek Professor explaining Aristotle’s distinction between use value and exchange value, a distinction that Marx was to adapt to his critique of political economy.
Apparently Aristotle saw the activities of those who engaged in exchange based trade as morally suspect. This provided the programme's cue  to fast forward a few thousand years to deliver a familiar ‘credit-crunch-as-morality-tale ’ of today’s  crisis of capitalism. I was disappointed the documentary unfolded this way. I wanted to hear a discussion of what Marx has in mind in his account of use vs exchange value and how this differs from Aristotle's. The moral critique of the credit crunch has been played out time and time again.

Okay, such an approach illuminates interesting arguments, eg – whether the axiom‘greed is good’ became (remains) normalised and the dileterious effect of normalised greed on liberalism’s own moral aims (justice, equality etc). But it tells only a partial story.
One characteristic of the post-metaphysical world is morality’s absence, morality’s power to prevent inhumanity is limited, it is also constantly eroded by, for example, instrumental forms of technical knowledge.
Humans do share a capacity for mutual recognition that supports ethical self understanding. And normativity plays a role that is both funcitonal in its capacity to bind people and critical in that it enables the adoption of strong justificatory positions against those who seek to mistreat or dominate. I’m with Habermas on this. But morality is limited in its capacity to prevent cunts from doing shitty things to people. Morality fails, it breaks down
http://www.youtube.com/watch?v=9azEQ31ILaY&feature=related
A further example of the type of task to which the moral category has been applied (and is not sufficient) is the credit crunch.
This crisis is not only financial but also a crisis of bourgoeise democracy. Exorbitant wages do have an impact on equality and liberals ought to thrash this out.  The normalised rent seeking behaviour of individuals working in the financial system ought to be open to moral critique. If there was such a thing as economic democracy then bankers would be forced to justify their behaviour. Laws might be put in place, or at least retained, regardless of what financiers or the CBI think in order to prevent further harms.  There are aspects of the financial crisis that lend themselves to moral critique.
I will be tuning in to the following episodes to see if the BBC addresses the other ways it might be possible to critique this present crisis of capitalism.

Threads

http://www.moviesfoundonline.com/threads.php
A review from Wikipedia http://en.wikipedia.org/wiki/Threads
Threads is a British television drama produced by the BBC in 1984. Written by Barry Hines and directed by Mick Jackson, it is a documentary-style account of a nuclear war and its effects on the city of Sheffield in northern England.
Filmed in late 1983 and early 1984, the primary plot centres on two families: the Kemps and the Becketts — as an international crisis between the United States and the Soviet Union erupts and escalates. As the United Kingdom prepares for war, the members of each family deal with their own personal crises. Meanwhile, a secondary plot centered upon Clive J. Sutton, the Chief Executive of Sheffield City Council serves to illustrate for the viewer the United Kingdom government's then-current continuity of government arrangements. As open warfare between NATO and the USSR-ledWarsaw Pact begins, the harrowing details of the characters' struggle to survive the attacks is dramatically depicted. The balance of the film details the fate of each family as the characters face the medical, economic, social, and environmental consequences of a nuclear war. Both the plot and the atmosphere of the film are extremely bleak.

'One strikes a blow at the sack, intending the donkey'

I want to make a confession.
I confess that I find the speeches of Adair Turner, chairman of the Financial Services Authority, interesting.
Turner appeared in the public imagination in 2009 when, during a roundtable discussion chaired by the liberal Prospectmagazine, he floated the idea of a Toibin tax on the ‘socially useless’ transactions of investment banks.
The howls of anguish this prompted led then Chancellor of the Exchequor, Alastair Darling, to slap down his mouthy regulator for voicing publicly, what amounted to a mere reform.
According to Turner we got into an economic mess becasuse the Masters of the Universe got the theory wrong... because they vulgarized. The problem is not with neo-liberal economic theory itself, but with the second rank minds who's job it was to apply asset price nous to concrete trading floor activity. Their failure being mirrored by the equally mediocre minds regulatng this activity.
In a speech at the Institute for New Economic Thinking during 2010 he quoted Keynes to illustrate this point:

‘Keynes, of course, famously wrote that “the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than commonly understood. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.”

But I suspect the greater danger lies not with entirely practical men or women exempt from any intellectual influence, but with the reasonably intellectual men and women who are employed in the policy making functions of central banks, regulators and governments and in the risk management departments of banks, who are aware of intellectual influences, but who tend to gravitate to simplified versions of the dominant beliefs of economists who are not yet defunct but still very much alive.[i]’

There is much of interest to consider in this quote: the conditions of knowing that an argument is 'wrong', whether the assumed criteria of 'wrongness' employed by Turner is useful at all (might it not be possible for an argument to remain a good argument, regardless of how things turn out?)
Turner is an exponent of the ‘shit sandwich’ approach to berating financial capitalism.  You can tell he is about to say horrid things  in the prefatory moment of his speeches. It’s a routine most liberal economists perform effectively (it reminds me of the ‘I’m not a racist but…’ prefatory so beloved of the bigot). For example in a 2010 Mansion House speech, Turner said:

'…it is important to understand, amid the public suspicion of traders and trading rooms, that market making and liquidity provision in key markets is an important economic function, delivering important indirect economic benefits – even when the traders involved are focused day by day simply on making money, even though their activities look to some people like pure speculation, even though they do indeed entail position taking for speculative gain.  Adam Smith’s insight that good economic results can flow from the private pursuit of profit remains valid and vital.’[ii]

Generalised selfishness repackaged as 'englightened self-interest'.
Turner thinks that recent applied economic wisdom  is based on a vulgar mis-understanding of economic theory and applied as ideology. This again from his speech to the Institute for New Economic Thinking.

‘…while academic economics included many strains, in the translation of ideas into ideology, andideology into policy and business practice, it was one oversimplified strain which dominated in the pre-crisis years…’

For someone apparently so intellectually curious it appears, to me at least, an act of repression to stop here, to fail to enquire any further. It’s all the more disappointing since Turner qua economist is actually on to something interesting  although he eventually ends up getting into a confused muddle. His speech to the Institute for New Economic Thinking continues…

‘…Market efficiency and market completion theories can help reassure the top executives of major financial institutions that they must in some subtle way be doing God’s work even when it looks at first sight as if some of their trading is simply speculation. Regulators need to hire industry experts to regulate effectively; but industry experts are almost bound to share the industry’s implicit assumptions. Understanding these social and cultural processes which straddle the interest to ideology divide could itself be an important focus of new research. But we should also not underplay the importance of an ideology in itself – of a set of ideas complex and internally consistent enough to haveintellectual credibility, but simple enough to provide a workable basis for day to day decision-making. Complex human institutions – such as those which together form the policymaking and regulatory system – are difficult to manage without guiding philosophies – and guidingphilosophies are most compelling when they provide clear answers. And a philosophy which asserts that financial innovation, market completion and increased market liquidity are always and axiomatically beneficial, provides a clearer basis for the decentralisation of regulatory decision, making one which teaches that innovation is sometimes valuable and sometimes not, depending on the market and depending on the circumstances.’

In Turner’s mind, ‘economics’ mutates into ‘philosophy’ and philosophy into ‘ideology’ as if ideology and philosophy were synonymous. As if philosophy and economics were invovled in the same business. How frail the human mind which seeks reassurance that it is doing superstitious ‘God’s work’. How philosophy works best when distilled for fools.
Capitalists used to justify their grind via  the general good of englightened self-interest (legitimated general selfishness).  Apparently they lost their way and needed an ideology to justify their 'god's work' whatever that means.

I don’t know Adair. I understand philosophy as being about good arguments. Have you considered that perhaps  the ‘philosophy’

‘which asserts that financial innovation, market completion and increased market liquidity are always and axiomatically beneficial’

Might not be a philosophy at all?

---

[i]Turner, A,
[ii] Turner, A, Mansion House Speech, Sep 2009, http://www.fsa.gov.uk/pages/Library/Communication/Speeches/2009/0922_at.shtml

Gerry Cohen: Against Capitalsim

A TV monologue by Marxist philosopher Gerry Cohen, brilliant stuff.

Part 1 here



Part 2 here

Gerry Cohen: Against Capitalsim

A TV monologue by Marxist philosopher Gerry Cohen, brilliant stuff.

Part 1 here http://www.youtube.com/watch?v=yA9WPQeow9c

Part 2 here http://www.youtube.com/watch?v=oD1YEzd6QzQ

Things I enjoy about the Financial Times

I love the weekend FT. Its 'how tos' about organising un-ostentatious hedge fund charity parties;
Its good practice guides for tax avoiding family trust fund administrators.
Tim 'austere' Harford's 'Undercover Economist'
Counting the number of  times the words 'non' and 'dom'  appear per page
And, of course, the unmissable problem page where agony aunt Adam Smith puts his hidden hand (see what I did there?) to solving readers' problems via the medium of political economy.
The letters are not quite as good as the Mail's, but still a marvel.
My favourite 'Am I alone in thinking' from this week's green inker is here:

Gearge Soros: A Marxist?

George Soros has had an epiphany about Marx, Eric Hobsbawm tells us.
In an interview with the Observer the hostorian includes Soros among those capitalists who think Marx might have been on to something afterall.
Soros is not alone in re-positioning himself in this way; in deciding that there must be ‘something about this Marx guy.’
Apparently Nicolas Sarkozy allowed himself to be snapped carrying a copy of Capital at the height of the Credit Crunch. And I recall an anecdote about Tony Blair devouring the Quran during a bout of shuttle diplomacy post 9-11.
I think it unlikely that either Sarkozy or Soros actually read Marx, much less understand his work.
Check this interview with Bill Moyers.
http://www.youtube.com/watch?v=Ngbj_vjqdus
BILL MOYERS: One of the British newspapers this morning had a headline, "Welcome to Socialism." It's not going that way, is it?
GEORGE SOROS: Well, you know, it's very interesting. Actually, these market fundamentalists are making the same mistake as Marx did. You see, socialism would have worked very well if the rulers had the interests of the people really at heart. But they were pursuing their self-interests. Now, in the housing market, the people who originated the houses earned the fee.
And the people who then owned the mortgages their interests were not actually looked after by the agents that were selling them the mortgages. So you have a, what is called an agent principle problem in socialism. And you have the same agent principle problem in this free market fundamentalism.
BILL MOYERS: The agent is concerned only with his own interests.
GEORGE SOROS:That's right.
BILL MOYERS:Not with...
GEORGE SOROS:That's right.
BILL MOYERS:The interest of...
GEORGE SOROS:Of the people who they're supposed to represent.
BILL MOYERS: But in both socialism and capitalism, you get the rhetoric of empathy for people. [????]
GEORGE SOROS: And it's a false ideology. Both Marxism and market fundamentalism are false ideologies.
BILL MOYERS:Is there an ideology that...
GEORGE SOROS:Is not false?
BILL MOYERS:Yeah.
GEORGE SOROS: I think the only one is the one that I'm proposing; namely, the recognition that all our ideas, all our human constructs have a flaw in it. And perfection is not attainable. And we must engage in critical thinking and correct our mistakes.
BILL MOYERS: And that's one...
GEORGE SOROS: That's my ideology. As a child, I experienced Fascism, the Nazi occupation and then Communism, two false ideologies. And I learned that both of those ideologies are false. And now I was shocked when I found that even in a democracy people can be misled to the extent that we've been misled in the last few years.
BILL MOYERS: The book is "The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means". George Soros, thank you for being with me.
GEORGE SOROS: Pleasure.