The horizon is not so far as we can see, but as far as we can imagine

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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Your Theory of Human Nature Predicts Your Policies


  1. Jon

    Which Dawkins are you talking about? The guy who wrote about altruism at the individual level in nature being combatible with a gene being selfish? A selfish gene is one that seeks to get replicated. Being altruistic helps the gene get replicated. Sometimes that means “nice guys finish first”, other times it means “fall on your sword so your kin survive.”

  2. Thatcher and Reagan and intellectuals like Dawkins made being greed and taking whatever you could get, screw the hindmost, acceptable.

    Which Dawkins does this refer to? I can’t find any reference to an economist named Dawkins, and the biologist hasn’t written anything of the sort that I’ve read.

  3. BTW, could you ask whoever designs your website to define the text color in this form? Only defining the background color leads to a situation where I’m typing blind.

  4. Ian Welsh

    “The Selfish Gene”. I’ve read it recently, and while there are caveats in the text, I stand behind it substantially saying human nature is selfish:

    “To a survival machine, another survival machine (which is not its own child or another close relative) is part of its environment, like a rock or a river or a lump of food. It is something that gets in the way, or something that can be exploited. It differs from a rock or a river in one important respect: it is inclined to hit back. — Richard Dawkins, “The Selfish Gene”, pg 66 (30th ann. edition)”

  5. Jon

    A couple things. First, the quote doesn’t directly say anything related to your statement that Dawkins says human nature is selfish.

    Gene’s are selfish, they tell the Survival Machine (us!) to do what it needs to in order to make copies of itself. But your quote reveals where Dawkins would say the kindness of human nature comes from. It comes from the fact that other survival machines hit back. It’s from this that we had to consider other options than “Quick, club it to death.” We learned altruism, and “nice to a point” became an optimal strategy for passing on genes.

    I think Selfish Gene is also where he talks about how “Tit for two tats” is a good strategy for survival. If someone is nice to you, be nice back. If someone is mean to you, give them one last shot. If they’re mean again, club ’em.

    Also, the dodo might have something negative to say about human nature. They sadly could not hit back.

    Don’t do to Dawkins what social darwinists did to Darwin.

  6. Do not post far left bullshit and then pretend that is is science. Ronald Reagan and Margaret Thatcher did not invent greed. Greed goes back to the beginning. It is a primal urge akin to breathing, eating, and pro-creation. So Lenin and Stalin were not greedy. Or for that matter, how about Xerxes, or Ramsies. Take a look at their houses Jackass.

  7. erichwwk

    The opening quote in Samuel Bowles and Herbert Gintis “A Co-operative Species”:

    “How selfish soever man may be supposed, there are evidently some principals in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it. – Adam Smith “The Theory of Moral Sentiments (2000[1759]) p. 3

    Chapter 1 continues:

    “In the pages that follow we advance two propositions.

    First, people cooperate not only for self-interested reasons but because they are genuinely concerned about the well being of others, care about social norms, and wish to act ethically. People punish those who exploit the cooperation of others for the same reason. Contributing to the success of a joint project for the benefit of one’s group, even at a personal cost, evokes feelings of satisfaction, pride, even elation. Failing to do so is often a source of shame or guilt.

    Second, we came to have these “moral sentiments” because our ancestors lives in environments, both natural and socially constructed, in which groups of individuals who are predisposed to cooperate and uphold ethical norms tended to survive and expand relative to other groups, thereby proliferating these pro-social motivations. The first proposition concerns proximate motivations for pro-social behavior, the second addresses the distant evolutionary origins and ongoing perpetuation of these cooperative dispositions.” and

  8. “Greed goes back to the beginning. It is a primal urge akin to breathing, eating, and pro-creation.”

    Bullshit. Spoken like a true Spencerian corporate thinker. Greed is a neurological disorder for humans and most mammals. You are mistaking greed for the primal emotion of fear. Show me a study that validates any society evolving from greed rather than as a collective effort and I’ll eat my BVDs.

    Greed may motivate personal survival but it can put others at risk and when individuals within groups feel threatened they don’t instill a sense of security necessary for survival. We didn’t evolve as a species that pits individuals against each other. We will ultimately destroy ourselves however as we adopt this flawed notion.

  9. I’ll try to explain the Dawkins issue here.
    A Dawkinsian/Darwinian (D/D) ethics stems from the behaviour we observe in nature. Well, in the nature, any thing is either good, bad or neutral, and one decides one’s actions based on a cost/benefit (c/b) analysis. This is true both on the ontogenetical and phylogenetical level.
    Whether anything is good, bad, or neutral gets decided based on experience and results, and this assessment gets recorded (in historical order) first into dna, then into higher (meta-)levels like instinct, emotion and culture.
    D/D methods easily show that the mothers instinct is beneficial for the survival of the dna. Emotion is not far away from there. But the funny thing is, all of emotion does not necessarily fit into the survival/reproduction (s/r) pattern. Where for example is the s/r benefit of feeling miserable? Just as any other technical measure, emotion, once invented, takes on a life of its own.
    The games really begin once we get into the territory of culture. Witness some parrots getting wasted on fermented fruit. All of them get wasted, fall to the ground and get randomly eaten by passing predators. The culturally aquired c/b analysis of getting drunk renders moot the dna based s/r.
    Then come along the primates. Many of them spend a lot of time lolligagging around, some of them having wild random sex all day long, some trolling tigers and whatnot. Their advanced brains hunger for more interesting stuff to do than just eating, shitting and calculating the best father available for their kids. Their advanced personalities are very capable of feeling boredom, and as a result they spend a lot of time doing things that are no longer tied to the darwinian processes.
    The final puzzle piece comes with the emergence abstract thought. It is abstract thought that makes it possible for us to imagine concepts like altruism – doing something just because it is a good thing, not because of a c/b dynamics. Altruism, the idea that our reasons must not necessarily be darwinian, might thus be the real pinnacle of evolution.
    And this is where the D/D ethics falls apart – it is incapable of imagining a true altruistic scenario, nor any other like it. It feels the need to explain everything with the same c/b reasons. Altruism then pretty much becomes the antimatter to the D/D ethics.
    D/D cannot take it of course, and tries to show us that altruism, a type of behavior that is by definition characterised by nondarwinistic reasons, is caused by darwinistic reasons. Go figure that out… Once you have a good hammer, everything is made to look like a nail, or better, ignored, buried, forgotten.
    The problem is that the d/d ethics takes the base of what it observes in nature and turns this descriptive discourse into a prescriptive one. The wile beasts do it, therefore we should do the same! Well, if we imitate nature, we get nature – a dog eat dog world on steroids. Have we forgotten, real nature really is not a nice place to live in?
    Which brings us back to Ians point: as long as we keep pushing this twisted sociopathical D/D ethics, we will get a pahtological society in return. We need to remind ourselves that choosing this bad ethics was a deliberate choice. Now that we are wiser, we can and we should and we must choose again.

  10. Ian Welsh

    Sorry folks, Dawkins does indeed posit that human nature is selfish, driven by the selfish gene. To argue otherwise is special pleading. I’m not inclined to get into a long argument in comments about it, and I doubt I’ll write a long article on it, because, frankly, I don’t have enough respect for Dawkins’ ideas to waste my time that way.

    Evolution involves natural selection and sexual selection. Dawkins spends far too much time on the second, and not nearly enough on the first.

    If you have a theory of human nature, then it makes sense to organize your society along those lines. If humans are innately selfish and greedy, concerned only about their kin, then you should take advantage of that by creating a system which operates along those lines.

    Humans are, however, not only concerned with their close relations. Shit: humans have died for their goddamn dogs. Humans put themselves at risk to save dolphins and whales they didn’t even meet till they day they try to save their lives.

    The mechanisms more bonding, for caring, and so on are vastly more complex than “make sure my genes continue”.

    As for selfishness, of course it’s part of human nature, just as is cooperation and altruism. How much it is expressed, and in what ways it is expressed, however, is a social decision: a choice.

    Anyone who thinks otherwise, as with the fool spewing above, is an idiot who hasn’t done the most basic of anthropological reading: most early societies, from the evidence we have, are brutally egalitarian, and the enforce sharing with social rules which if you violate them, will get you ostracized, which will mean your death. Those are, most likely, the societies that humans lived in for the vast majority of pre-history, which is to say, the vast majority of human existence. If evolutionary pressures affect human nature, then the affect should have been towards cooperation and sharing, not away from it.

    Now you can make an argument that those groups, were effectively kin groups, but it’s also true that they often spread for hundreds to thousands of miles, and within those areas, while there was certainly violence, there was also plenty of cooperation. Common structures set up artificial kin groups, cults spread obligations to people who were entirely strangers, trade was widespread thousands of years ago, and so on.

    Humans are capable of selfishness, greed, cooperation, competition, sharing, altruism, genocide and far, far more.

    The question is under what circumstances they express each of those different options: some societies are more or less violent; more or less sharing; more or less cooperative, etc…

    Why? When? How can we create societies where we express more of the kinder side of human nature and less of the brutal side of human nature?

    Those are the questions that matter. And you start by not glorifying or rewarding the behaviour you don’t want to see expressed, while admitting that the possibility for those expressions will always be there.

  11. someofparts

    … and here I was thinking that post is so spot-on I was considering printing it …

    “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.”

    Looks like you hit a nerve with that one.

    Thanks for having the stones to speak truth to power so effectively.

    Whatever we pay you, it isn’t nearly enough.

  12. Celsius 233

    @ someofparts
    March 11, 2014

    Whatever we pay you, it isn’t nearly enough.
    Hammer to nail, yes!

  13. Do not post far left bullshit and then pretend that is is science. Ronald Reagan and Margaret Thatcher did not invent greed. Greed goes back to the beginning. It is a primal urge akin to breathing, eating, and pro-creation. So Lenin and Stalin were not greedy. Or for that matter, how about Xerxes, or Ramsies. Take a look at their houses Jackass.

    This is like the most awesome comment ever written on this blog. The argumentum ab aulis!

  14. nihil obstet

    Two comments:

    The first, minor one is on Dawkins. Dawkins was Simonyi Professor for the Public Understanding of Science at Oxford, a post specifically designed, as its title says, to advance public understanding of science. He’s either incompetent or he knows that his phrasing about the selfish gene says to the general public that science has proven that we are innately selfish. This is a polemical choice.

    The second comment concerns how the post-Depression generation came to want desperately to believe in the greed canon. We always have in our mental framework multiple, sometimes contradictory beliefs. A big one that was common throughout the society was that your life would keep getting better if you made a fair contribution to your society, whether in a paid job or as a housewife doing domestic/emotional labor. The cost of middle-class needs rose in the 60s (larger families with baby boomer children, geographic housing patterns that demanded multiple cars, need for children to have advanced credentialing through college, and the like) while average compensation stopped improving. That left people vulnerable to exploitative explanations and prescriptions, especially those that buttressed the self-respect lost as flat income no longer met rising needs. It’s not pretty or uplifting, but I worry about calls for political and social action that start from the premise that those who make up the society are morally too weak.

  15. EmilianoZ

    There are 2 types of change. Those that are reversible and those that are irreversible.

    Has anybody heard of a capitalist society going back to cooperation? Good luck with that.

    Capitalism is where all modern societies go to die. It’s the terminal disease of human civilization. It’s as inevitable as the growth of entropy.

  16. RJMeyers

    Hi Ian,

    You compare and contrast the 60s and the 80s at some length above, and I’m used to reading (and agreeing) with your arguments on them. However, I just came across two posts by Matt Stoller where he reviews Greta Krippner’s book “Capitalizing on Crisis: The Political Origins of the Rise of Finance.”

    His review takes a pretty good shot at half of your critique–that the 80s (led by Reagan and Thatcher) were when things took a turn. Instead, Krippner points to the 60s and 70s as the time of real change, with Reagan and Thatcher simply cementing and popularizing changes that had been happening for almost two decades. The TLDR version of Krippner’s thesis, as explained by Stoller:

    A simple way to state Krippner’s thesis is follows. In the 1970s, politicians got tired of fighting over who would get what, and just turned those decisions over to the depoliticized market. This is known as ‘financialization’. Then political leaders didn’t have to say “no” anymore to any constituency group, they could just say “blame the market”. It’s very much akin to the rationalization for inequality one hears from elites these days, that it’s globalization and technology, as if those are just natural trends with no human agency or decision-making involved.

    To state her thesis in a less glib manner, it is as follows. The state, in the 1960s, was confronted with three interrelated problems – social, fiscal, and legitimacy crises – and that financialization provided an inadvertent mechanism to deal with them. After World War II, the United States was the only industrial base standing, so its corporations had pricing power and could pass on labor costs to the rest of the world. Social problems could be solved with the standard American lubricant of growth and then dividing the spoils among the groups grasping for them. But as American competitiveness declined in the 1950s and 1960s, and due to the “guns and butter” strategy of LBJ’s financing of the Vietnam War, this growth model began failing. The result was that inflation kicked up, and inflation provided the means by which the state could effectively deny resources to constituency groups without explicitly doing so. In other words, dealing with fewer resources created severe pressure on the New Deal liberal architecture of decision-making, which first revealed itself as inflation.

    Relevant links to his posts:

  17. someofparts

    “Capitalism is where all modern societies go to die.”

    This will be my next bumper sticker.

  18. EmilianoZ

    David Graeber also has some interesting things to say about Richard Dawkins:

  19. GlenO

    I like your writings, but I have to say this one misses the mark. Here is Dawkins’ response when accused by others in a similar fashion:

    .Now, to the matter of Darwin. The first thing to say is that natural selection is a scientific theory about the way evolution works in fact. It is either true or it is not, and whether or not we like it politically or morally is irrelevant. Scientific theories are not prescriptions for how we should behave. I have many times written (for example in the first chapter of A Devil’s Chaplain) that I am a passionate Darwinian when it comes to the science of how life has actually evolved, but a passionate ANTI-Darwinian when it comes to the politics of how humans ought to behave. I have several times said that a society based on Darwinian principles would be a very unpleasant society in which to live. I have several times said, starting at the beginning of my very first book, The Selfish Gene, that we should learn to understand natural selection, so that we can oppose any tendency to apply it to human politics. Darwin himself said the same thing, in various different ways. So did his great friend and champion Thomas Henry Huxley.

  20. S Brennan


    Theory of Moral Sentiments is a favorite of mine and your quote is highly representitive of Adam Smith’s thinking. Adam Smith…perhaps the misquoted man in history.

    Celsius 233 permalink
    March 11, 2014
    March 11, 2014

    Whatever we pay you, it isn’t nearly enough.
    Hammer to nail, yes!


  21. GlenO


    I loved Graeber’s book, “Debt, the First 5000 Years” so I immediately followed your link to see what he had to say about Dawkins. I was disappointed to find some creative writing but little of substance – with an apparent assumption that both he and Thomas Huxley were ardent social Darwinists (ironic, since both were exactly the opposite). Just try Googling either name with Social Darwinism, and draw your own conclusions

  22. Has anybody heard of a capitalist society going back to cooperation? Good luck with that.

    Have we run the experiment long enough to know?

  23. Jessica

    @ EmilianoZ
    Thank you for that link to Graeber’s article.

    It is a well-written engagement with the question of how the capitalist mentality of accumulation for accumulation’s sake as more important than any other human activity pervades not just economics (as Ian well describes) but even the natural sciences. He takes a playful look at the role play might have in a more humane way of relating to our physical and social worlds.
    He even solves a Zen koan.

  24. jcapan

    Surprised googly-eyed Any Rand hasn’t come up in this talk of selfishness—after all, she deemed it our highest virtue and god knows her ideas are fundamentally entwined with the free-market pathologies of Friedman and Greenspan. From a review of Adam Curtis’ “All Watched by Machines of Loving Grace”:

    “Rand’s Objectivism, we’re told, has given birth to a culture of selfishness among the world’s most powerful. For the uninitiated it discourages altruism and pushes for every man and woman to become solely selfish beings, driving their own interests to the bitter end. There is no time for weakness, religion or irrationality and each person should make their priority their own happiness….

    What he reveals is the dangers of human beings at their most selfish and self-satisfying. Showing no compassion or consideration for your fellow human beings creates a chasm between those able to walk over others and those too considerate – or too short-sighted – to do so.”

    You can see all 3 parts of the documentary here (the 3rd part addresses Dawkins as well:

  25. Celsius 233

    Have we run the experiment long enough to know?
    That’s either an astute question or a failure of understanding the present, IMO. I vote with the latter.

  26. Celsius 233

    @ jcapan
    March 12, 2014
    Thanks for the link. Definitely much food for thought.
    Not sure where I fall in this, but one thing is for sure; we’re having an effect.
    The question is; is it within the nature of what is? I think, yes.
    We cannot possibly act outside of our nature; whatever manifestation that takes…

  27. Agree with GlenO’s assessment. I think Dawkins’s argument is more nuanced than the way Ian is presenting it. All due respect, Ian; I still find more food for thought here than most anywhere else in the blogosphere.

    Mandos, I think you mean argumentum ab annis, not “argumentum ab aulis.”

  28. Declan

    Quibbles about Dawkins aside, I think you’re generally on the money with this one, Ian.

    One example that comes to my mind is the grocery stores that charge, say, a nickel, for plastic bags. My observation is that the rate of conversion of people from taking bags to bringing their own that this policy brings about far exceeds what could be explained by the added cost, even if we make heroic assumptions about people’s inability to process how small a payment that really is.

    What I think, in part from examining what goes through my own mind, is that people prefer to be / feel virtuous by bringing their own bags and cutting down on the waste, but the nickel charge liberates them to do so because they can then justify their decision as being consistent with the dominant social meme of following self-interest, rather than having to justify their decision on the basis of ‘doing the right thing’, which is generally mocked in our society.

  29. astrid

    I never understood why some on the left decided to single out Dawkins as a Randian villan. If you read his writing, especially his recent writing, it’s pretty clear that he does not advocate human selfishness at all. He has pretty consistently advocated for a humanist and scientifically rigorous world view that respects all our fellow Earthicans.

    Does Dawkins have blind spots? Absolutely. I happen to think that his view of evolutionary biology is wrong and that E. O. Wilson’s work is much more interesting and closer to the *truth* (though both are a heck of a lot closer than that hack Stephen Jay Gould). But I never read anything by Dawkins that suggests he is a libertarian or condones man’s cruelty to others.

  30. cripes

    How has it come to pass that we (USA in paticular) are re-litigating and arguing competing philosophies on questions that largely were settled issues in advanced societies, including our own, until the past couple of decades?
    Seriously, reproductive choice, evolution (remember Scopes trial?), right to unionize, universal medical care, hell, we’re barely discussing living wage or guaranteed leave/vacation. On and on.
    Isn’t this all of a peice with the altruism/greed binary? Of course it’s infantile and attempting to reason with those under the thrall of Randism is like trying to reason with cargo cultists, but there it is.
    What gives this idiocy such power, besides the constant drone of media saturation?

  31. Marconi's Decoherer

    Dawkins has been pretty consistenly disingenuous about the public reception of The Selfish Gene.

    The first edition, the only relevant one where the rise of Thatcher is concerned, didn’t have the two chapters he tacked on in the late ’80s that backpedal substantially from the selfishness angle. And while even the first edition didn’t entirely leave out such qualifications, a quick glance over its chapter headings can leave little doubt about the impression he was trying to leave with the reader.

    (To say nothing of the very unsubtle digs at Labour, and trade unionism in general, peppered liberally throughout the text.)

  32. Mandos, I think you mean argumentum ab annis, not “argumentum ab aulis.”

    No, I meant “aulis”. Plural ablative of “aula” (palace), unless I used the wrong word for palace (Latin a bit rusty). The “argument from palaces”—a fallacy title I invented for people who think that ancient emperors’ palaces are dispositive arguments about human nature.

  33. steve

    Conservative voters prefer Economists over Scientists. An Economist predicts the cost of things and has endless and purely political ideas about the value. A Scientist can irrefutably prove the value of things, and knows that in the big picture the cost of human progress is irrelevant. Angela Merkel is a scientist, Stephen Harper and Tim Hudak are Economists.

    There is a link to the illustration, but I think its in your spam folder or cache.

  34. Tony Wikrent

    The negative reaction in some of the comments is interesting, in a clinical sort of way. They suggest to me people who are desperately looking for some piddling difference to argue over, to save themselves from having to deal with the implications of the need to “crush” the plutocrats and their apologists.

    Of course Reagan and Thatcher did not “invent greed.” That hardly disproves the point Mr. Welsh is making. By dragging in this smelly red herring, the commenter is obscuring the real issue raised by Mr. Welsh: How does a society create a system of incentives and punishments that steer individual desires and actions in a direction that comports with the general welfare?

    The genius of the USA Constitution, in my considered opinion, was that it began with an understanding that human nature is deeply flawed, but tried to create a framework of national government in which those flaws were checked and balanced, and in which the promotion, protection, and furtherance of the general welfare was one of three preeminent goals. And to make sure the point was not missed, “general welfare” is mentioned twice: in the Preamble, and in Article 1, the great and famous “General Welfare Clause.”

    Unfortunately, this is also the glittering allure of capitalism and its most basic premise: that the individual pursuit of self-interest will, through the magic of the market – and if left alone by the “damn gubmint” – will omnisciently effect the best allocation of society’s resources and provide the greatest pleasure to the greatest number of people.

    Where capitalism and its glittering promise fail, of course, is that “the market” has no mechanism to restrain, punish, or prevent some of the worst predatory behavior by some individuals who are – let us be brutally honest – sociopaths. There is nothing in “the market” that is malum in se. Milton Friedman followed his own logic to its ultimate conclusion, and argued for removing legal prohibitions against all drugs, even heroin, and even prostitution. Only by the imposition of intrusive government laws and regulations do you get market restraint. And this is strictly malum prohibitum: something is wrong only because it is against the law. Wall Street and big corporations spend a lot of money [mis]employing some very bright and talented people to limit or skirt malum prohibitum as much as possible.

    Only by conceiving of society and its economy as an interdependent system – as political economy – can you begin to identify and attack economic problems of misbehavior; and, begin to understand the depth of the hostility and enmity of conservative thinking to the USA form of government. Because conservatives and libertarians openly argue that the very idea of the general welfare is the slippery slope to statist totalitarianism.

    You know, we call the period leading to the American Revolution the Enlightenment. And reading the works of such as Franklin, and Adams, and Hamilton is pure joy. What they write is enlightening, and it is uplifting. But to read Friedman, von Hayek, von Mises, and, yes, Ayn Rand, is depressing, horribly depressing. There is no nobility of the human spirit in their world view. There is no concern for the welfare of other people. There is only base and disgusting selfishness, made slightly more presentable by renaming it self-interest. Madison, in his classic Federalist discussion of factions, argues forthrightly that factions arise from selfish economic interests, and the most important role of government is to regulate and restrain those interests. The conservative insistence that the markets must have priority over the state is a direct frontal attack on the American system of government, and its constitutional enthronement of the general welfare.

    Markets simply do not function for the common good without the state imposing incentives and punishments. Economics will thus always be a flawed way to look at society and how society uses and allocates resources. Political economy is superior to economics exactly because the role of the state is a central concern of political economy.

    So, Reagan and Thatcher did not “invent greed.” That still leaves the question of the system of incentives and punishments society must impose to ensure that the impulses of human greed do not overwhelm and gain ascendancy over the impulses of our better natures. Mr. Welsh generally allude to a turning point in the period between the 60s and the 80s. Which immediately brought to mind one of the most powerful, and most important, passages from Ron Suskind’s book, Confidence Men: Wall Street, Washington, and the Education of a President. Suskind discusses the hearings by Massachusetts Congressman Ed Markey, into the Wall Street scandals of the time, the late 1980s:

    As for the “type of behavior” that “led us to our crisis,” Markey could cite the moment he saw the culture shift, like some geological event.

    It was in 1988, after the 1987 stock market crash, and the prosecution of insider trading and various securities frauds was well underway. “Something very basic, very fundamental, had changed on the Street, and we on the subcommittee couldn’t put our finger on what was different,” Markey recalled. So they decided to bring in an expert. Dennis Levine, one of the major Wall Streeters convicted of securities fraud, was serving time in New Jersey. Markey’s staff got in touch with the Bureau of Prisons and arranged to have him transported for an afternoon to a sub-committee conference room. Levine, who couldn’t be forced to cooperate, was asked what the subcommittee could do to persuade him to come. He said he’d do it for a McDonald’s Big Mac, fries, and a chocolate shake. Once a self-proclaimed “Master of the Universe,” those were the things he’d found he missed the most. Soon enough, Levine, in prison blues, was eating his Big Mac and describing how the rewards on Wall Street had suddenly grown so large, and the opportunities for self-dealing and misuse of insider information—so-called informational advantage—so widespread, that it would only get worse. “He said, we were ‘just at the very start,”‘ Markey recalled, “and that they’d figured out how to turn the investing of others people’s money into a kind of game, where they were constantly changing the rules in a way that was subtly fraudulent, against the basic principles of fairness or fiduciary duty. He said that with this much money to be made for doing very little, it was worth the risk of getting caught doing what you had to do, but that they were working on lowering that risk as well, with lawyers working overtime to make sure many of these activities were legal, or at least hard to prosecute.”

    After an hour, Markey said that he and the committee members had heard enough and asked the felon what might be done. Levine, sucking on his shake, thought this over for a minute or two and then said, “You need to send out a slew of indictments, all at once, and at three p.m. on a sunny day, have Federal Marshals perp-walk three hundred Wall Street executives out of their offices in handcuffs and out on the street, with lots of cameras rolling. Everyone else would say, ‘If that happened to me, my mother would be so ashamed.’

    “Levine was saying we should take a dramatic stand on principle to reverse the direction we were moving in . . . before things progressed any further and the problems got even bigger,” Markey said. “Culture is destiny and the only way you create real change is by acting in a way that changes the culture.”

    Suskind then recalls the difference in how President Obama treated Wall Street executives, and Rick Wagioner, CEO of General Motors, and makes what I consider the most trenchant criticism of Obama’s Presidency. And it is extremely interesting in the context of Mr. Welsh’s discussion of belief systems and their cultural manifestations.

    Presidents are among the few mortals who are sometimes graced with chances to change a culture. Throughout a windswept March [2009], the country had been working to dislodge some of the era’s prevailing certainties about markets being efficient, about people—economically, at least—getting what they deserve, along with the concomitant belief that financial barons are brilliant and indispensable, and manufacturing executives are dinosaurs.

    With the eyes of the country on him, Barack Obama ended the month by shielding Wall Street executives against these winds of cultural change, while he fired a man who had effectively managed four hundred thousand workers in their making of seven million cars a year—without ever bothering to meet him.

  35. Celsius 233

    @ Tony Wikrent
    March 14, 2014

    One of the best posts ever. Spot on!

  36. Formerly T-Bear

    Was refraining from commenting until Tony Wikrent’s remarks, Celsius 233’s remark re quality is faultless.

    Would add that economic theories are neither prescriptive nor descriptive, those terms lead only to playing word-games leading nowhere; economic theory attempts to intellectually reflect the complex dynamics of a complex species on a complex world as a model. Anything else is something else, a myth, a dream, a deception, a belief or whatever – it is not economic theory. Economic theory is measured by its clarity in understanding as well as the fidelity it reflects what exists and how that works, the dynamics of reality. Precious few perceptions remain that are distortion free for the species, political economics because of its association with the workings of power and wealth is among of the most distorted subjects, however, by defining terms used some advancement towards a distortion free lens can be obtained, maybe not perfect but improved perception none-the-less. With clarity of perception, clarity of understanding follows as well as clarity in communication. John Maynard Keynes in his ròle as editor of an economic journal wrote a number of biographies, among which he noted the number and variety of characteristics that comprised an actual economist and noted the absolute rarity of that species. Those things have not changed since.

    Again kudos to Tony Wikrent for clarity and Celsius 233 for recognition of the quality.

  37. Celsius 233

    Formerly T-Bear PERMALINK
    March 14, 2014

    Was refraining from commenting until Tony Wikrent’s remarks, Celsius 233′s remark re quality is faultless.
    Well that’s nice of you to acknowledge; but I remember a time you posted an awesome comment that I also lauded (about economics); and it got elevated to a front page post here by Ian.
    You have a lot to offer and I’d like to see more of you.

  38. Kia

    I have always hated the use of the natural selection and survival of the fittest arguments as the authority for cut-throat capitalism. It first of all looks like another instance of our inability to recognize things that don’t fit with our belief: the abundant evidence of animals’ far more complicated emotional lives, for one thing. But for another it doesn’t acknowledge that selection occurs in the context of tremendous prodigality: frogs and fish laying bazillions of eggs; plants putting out more pollen than they can possibly use, for instance, and more broadly the diversity of survival and reproductive strategies. The way nature acts is like “Let’s have lots and lots of really crazy ideas!” This is provision for competition but it is also provision against contingency–shit that happens. And it is also, at last, provision for more adaptation, because in abundance is the possibility for even newer accidentally discovered ways of thriving and evolving. Even mere apparently random movement, like the movements of a sea anemone’s tentacles, can serve this end in some completely unexpected and contingent way. Humans live in a state of continuous mental activity, much more than can be applied to any practical purpose; and yet out of that noodling comes the built structures of imagination, good and bad, in which we live. And then to top it all off, pleasure. So the most evolved thing in nature overall may be something religious people might call grace; everything is more beautiful and abundant than it needs to be. And that’s what somehow keeps it going. Late-stage capitalism is most striking for its intellectual and practical penury. It is increasingly intolerant of anything from which rents or profits cannot be extracted. (Come to think of it it’s not that late: Hugh Smollet’s narrator in Humphrey Clinker, touring England and Scotland, looks at the unenclosed fields of some landowner and concludes that he is an idle wasteful fellow. He can’t connect the enclosed fields with the increase in the number of poor people in the cities, or with the stories of farmers’ sons having to go to sea, to mostly die on ships or in the colonies, because the families have lost their livelihoods.) The mere existence of something unexploited comes to be considered as a waste of what might be made out of it, and mostly what is to be made out of anything is just more money, whatever price can be commanded for whatever can be stripped out of it. All public goods are to be handed over to grifters, and dead elephants are worth more than live ones, and we submit to feed the riches of nature and of our imaginations to people who are incapable of understanding their value.

  39. Celsius 233

    @ Kia
    March 15, 2014
    Nicely penned and well spoken.

    I liked this comment from another thread here: “Capitalism is where all modern societies go to die. It’s the terminal disease of human civilization. It’s as inevitable as the growth of entropy.”

  40. Jagger

    I am really curious what role mass media is and has played in this acceptance of greed as good? Media competes even with the best parents in raising children since probably the 70s-80s. And IMO, all forms of mass media, from entertainment to news to commercials, is shameless, emotional manipulation of the populace in the pursuit of a variety of goals but primarily money.

    So what role is and has mass media played in shaping the acceptance of a dysfunctional vision of society?

  41. Formerly T-Bear

    @ Jagger

    What rôle media played in accepting ‘greed is good’, you ask?

    Have you ever noticed how in conversation, how often some media presentation, either from a motion picture or television production forms the basis of how some real world event is perceived, described, remembered, conceived, spoken of or about?

    The answer may be that the rôle media plays increasingly is that of vocabulary for complexity as the ability to effectively use words is lost. A part and parcel of replacing rationality with emotion and belief may likely be the underlying process at work.

    YMMV – Thank you for asking.

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