Economic Theories are Prescriptive, not Descriptive
One of the advantages of studying anthropology, sociology and archeology is that you know that while there’s probably such a thing as “human nature” it has a vast range of expression. Some societies are cooperative, sharing and kind, with virtually no hierarchy. Others are hierarchical, cruel, domineering and full of people who ruthlessly compete with each other, and screw the hindmost. And still others are in-between, with a vast spectrum of possibilities.
These societies have different ways of distributing goods. In many hunter-gatherer societies, for example, they decide who gets the animal killed by looking at whose arrow killed it. Seems very “screw the hindmost” until you find out that the hunters freely share the arrows they make. The arrow that killed the animal probably didn’t come from the person who made the arrow. And, in any case, they share much of the kill.
Every economic system, every way of distributing goods and services, requires a different ethic and it elevates a different ethic. While merchants might have been wealthy, in many agricultural societies, including China and Japan through much of their history, they were considered parasites: they created nothing, after all. Peasants might be poorer, but they were given higher status, including legally, than merchants. In the European Middle Ages money made from trade was considered dirty, and strictly speaking, if a noble engaged in mercantile activities or took up a trade, they would lose their noble status. Perhaps this honored more often in the breach, but history is full of nobles who did lose their status through working with their hands, or engaging in trade too openly. (This was also true of Roman Patricians, by the way.) Honorable wealth came from land, war or gifts from other nobles for service.
Modern economics is famous for believing in the rational economic actor, almost entirely concerned with his or her own utility. (In normal parlance, a selfish bastard). This is a model of how people behave, but it’s an oversimplification of human nature so severe as to be wrong. Most people don’t behave like that most of the time: they cooperate, and they share and most of them don’t free ride.
There is an exception, however: economics students. Multiple studies have found that economics students act as economic theory would predict far more than people not trained in economics.
Economics is, thus, prescriptive. It tells people how they should behave.
Who else behaves that way? Senior executives in large corporations and rich people. The people who control the economy, act as economic theory says they should.
Be clear, all elites in all places and times have not acted this way: chieftains in status societies do not act like this. Potlach giving native Americans did not act this way. The elders of hunter-gatherer tribes do not act this way. Roman Patricians, Chinese Mandarins, and Medieval European nobles did not act this way—at least, not nearly as much as our modern economic leaders do.
It is not even the case that executives in the 50s and 60s acted this way. When John Kenneth Galbraith investigated why executives back then didn’t pay themselves more, he came to the conclusion that they didn’t because they believed, as a group, that doing so would be wrong, and they took out anyone who tried to pay themselves more than they considered appropriate.
So why do executives act that way now?
Ideas lead culture and policy produces the outcomes one would expect. Thatcher and Reagan and intellectuals like Dawkins made being greed and taking whatever you could get, screw the hindmost, acceptable. “Greed was good” in the 80s, and has become better since. We were told this is how humans are; and this is how humans should be; and that doing this would produce better outcomes for everyone. This was legislated into law: the removal of protections from financial abuse put in place in the 30s, the lowering of top tax rates; the emphasis on consumption taxes over wealth taxes, the dropping of corporate tax rates; the “free trade” movement which allowed elites to avoid taxes and make goods in sweatshop nations.
The previous generation, those who experienced the Great Depression as adults, and who remembered the 20s and what the last great unregulated economy had wrought, were old, and out of power. Those who believed; who knew; that economic success had nothing to do with any sort of virtue, were gone. The new generations accepted a premise they desperately wanted to believe: that they could be selfish assholes, acting in their own interest and not caring about other people, and that it would all work out for the best.
This was twofold: it was the result of a concerted intellectual effort by people like Dawkins and Milton Friedman, pushed by business interests; and it was the result of a population who wanted to believe it; who wanted to be ethically lazy and stop helping other people and still feel good about themselves.
Ethics are socially bound, and are created and recreated by each generation. To be sure, they are related to the means of production and the incentive system; but we create the incentive system. The executives of the 50s and 60s, by and large, chose something different than the executives of the 80s through today.
What has been chosen, can be changed. If we want an economy which works for everyone, we can have it.
But we have to choose it, and we have convince or crush those who would chose otherwise. And for those who wince at the word crush, remember, inequality means death and illness for many people. The crushing has already happened, the class war occurred, and the rich won. And the casualties are piling up.
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