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Hédoin Nails It … But What is It?

Cyril Hédoin is absolutely correct.  Go read his Substack.

His point is simply that liberalism is a vague mess and needs clarification if it is to carry weight in our current conversations.

I agree.

Which is why I keep asking us all to stop using phrases like “liberal democracy”.  What on earth is that?  What makes democracy “liberal”?  What, for that matter, makes liberalism “democratic”?  It has become common to speak of “illiberal democracy” as well.  As institutions crumble, decay, are shown to be corrupted from within, or simply illusory, we are struggling to locate the necessary language to frame a new conversation and the recapture of the moral purpose behind our politics.  We are within a period of great change and turmoil.  It is time to speak clearly.

It seems to me, as I have argued endlessly over the years, is that the two concepts — liberalism and democracy — need a great deal of sorting out before we carelessly tie them together in one magical package.  

Liberalism has become so worn down by over-use that it no longer specifies anything in particular.  Or, possibly, it specifies rather too many things.  It’s heritage shows through, but only dimly.  We need to cut out the underbrush and allow it to blossom once more.

Perhaps our historians can help.

Liberalism is associated with individualism.  It is associated with personal freedoms of various sorts.  It is associated, in particular, with freedom from arbitrary thuggery dispensed by those in power — whomever they are.  The roots of modern liberalism, therefore, are deep within the struggles to overthrow the religious, military, and aristocratic elites that had dominated society by brute force for centuries.  Those struggles reached fever pitch in the 1600s and carried on well through the 1800s.

But the origins matter.

And that is where things get complicated.

Who was it, exactly “struggling to be free”?  It was, history suggests, not the average person.  Those folks were still firmly under the thumb one way or another.  No.  It was a group wanting recognition. It was a group newly conscious of its potential. It wanted a secure seat at the table of power. It was the merchant and propertied class outside of the traditional aristocratic and religious centers of power. It was this group leading the fight because of what it saw as unending demands placed on it by those more traditional elites.  The emerging religious and colonial struggles that began to characterize western history needed funding.  The traditional state structures pre-existing this period were too weak and ineffective to provide sufficient funds.  So they needed better organization.  And better organization implied greater intrusion into the affairs of those who could provide the funding.  Taxes were at the heart of the emergence of liberalism.  

So the origins of liberalism are about the distribution of wealth and its dispensation.  As landowners cleared common land of the lower classes in order to increase their profits from ownership of property, they needed simultaneously to establish their rights to that property, and then to protect those new rights against the whims of the state.  They were fighting on two fronts.  

Recognizing the weakness of such a fight they reached an accord with the elites above them.  If the elites — in the shape of the aristocratic state — would acknowledge the sanctity of private property, the landowning class would, reluctantly, acquiesce to forking over funds that could be used for the glory of the state, or its protection against revanchist religious counter attacks.  Out of this accord comes modern liberalism.  Based upon private property and laden with various limitations on the ability of the state to intrude into affairs of the “individual”.

The predilection of the elites to disregard this accord periodically required the constant attention of the newly “free”.  The state had to be bent, and then controlled, so it became indistinguishable from the newly free.  The interests of those with the funds became the interests of the state.  

So, as opportunities arose to increase profit from various sources, the state was directed too support efforts to pursue such profit.  It was a symbiotic relationship.  Wealth flowed to the newly free.  That enabled an expansion of the tax base.  Which funded expanded state power to support further profit seeking activity.  

The pillars of this system were a very clear recognition of individual property rights, conjoined with the conflation of what became business activity and state affairs.  This was liberalism in its first instance.  It is clearly recognizable in 1800s Britain.  There is a clear connection between political and economic freedom of the individual and the subsequent emergence of the capitalist colonial state.  Is, therefore, post-colonialism also post-liberalism?

Nowhere in this highly simplified story does “democracy” exist.  The mass of ordinary people is missing.  Indeed, liberalism as it developed was resistant to any form of democratic expression.

Why?

Precisely because democracy introduces a new partner into conversations about the generation and distribution of wealth.  And that is a complication too far for many traditional liberals who wanted to preserve their privileges and status as long and as profitably as possible.

The problem, though, is that once unleashed, individualism consumes any system designed to contain it.  The conservative desire to stop history at some point most comfortable to a specific group’s tastes and status always fails.  The urge to recreate the stasis of pre-liberal days is undeniable to those who have most benefitted from progress.  So it was with liberalism.  That initial surge in individualism had unleashed a process that could not be denied.

This came most apparent as industrialization took hold and offered even greater opportunities for profit.  How could that next wave of profit be foreclosed upon?  An inevitability to the advantages of liberalism had emerged.  

Those first tentative steps towards liberalism had involved the establishment of property rights and the wholesale uprooting of long-established social norms.  Society had been rebuilt to accommodate the search for profit.  

A contradiction had emerged, however.

The search for profit is ongoing and disruptive — as in the establishment of private ownership of formerly common land.  The desire for wealth is conservative.  Once accrued wealth needs to be protected and nurtured.  It is wealth that underwrites political power and status, not profit, which is transitory and uncertain.  Once that first wave of liberalism had re-sorted the distribution of wealth and consequently changed the social hierarchy, the newly free — or their descendants — were reluctant to lose either wealth or power.  So the redefinition of liberalism as a conservative force became attractive.  Liberal values were deployed to justify the status quo rather than its disruption.  Freedom from the whims of the state, in particular, meant freedom from any renewed attempt at socially motivated redistribution of wealth.  The specter of the “social” had to be demonized before it had time to root.

The urgency of redefining liberalism as a conservative, rather than progressive, value was made most vital as industrialization created a larger social class searching for profit.  

The continued social upheaval inherent in the industrial process steadily engulfed more and more of the regular folk.  Concentrated in settings that a less industrial process had never produced, they became a factor in politics.  The search for profit was at risk of extending liberal values more deeply throughout society as it encompassed more and more activity.  And, in contrast to wealth, profit is dynamic.  It uproots everything around it in order to locate and exploit opportunities.  Worse, it knows no boundaries within society.  Even average folk can aspire to profit, however modest.  So social forces that try to keep in place older distributions of wealth can become obstacles to social harmony and peace.

The original liberals were thus confronted by a new generation of liberals.  

And the newer generation talked not of liberalism but of democracy.  Which was the notion of redistribution made explicit — more fairly — across society.  It was the notion of inclusion in politics to ensure that the elite shared and did not hoard.  It was the notion of equality and fairness.  It took the concept of individualism and incorporated it into a collective perspective.  Power over the state was now to change hands once more, and the newly powerful wanted both the continuation of profit and access to its largesse.  

So what had begun as an attempt by a few generate and protect wealth for themselves, became a collective social attempt to spread that wealth more broadly.  Both efforts are liberal.  But within each, liberalism has different meanings.

The first wave became steadily more conservative and resistant to change.  The second became more progressive and open to change.  Both cannot be liberal.  Both cannot be democratic.  And neither can be “liberal democracy”.

This has become most obvious in our neoliberal world.  The entire thrust of neoliberalism was to resist the steady encroachment of collective activity in politics.  It was an effort funded by the wealthy to protect their power.  Or, rather, to recapture that part of their power they had lost as part of the democratic experiment called the New Deal.  It was the denial that democracy could be liberal.  It was the admission that liberalism was the conservative preservation of a particular form of distribution of wealth, power, and social status.  

Most of all, it was the admission that pursuit of individual freedom had reached a limit beyond which the wealthy did not want society to go.  Because free individuals can, periodically, cooperate and act as a collective in order to protect and attain their individual aspirations.  Individuality can become collectivity.  And that, the neoliberals were determined to fight.  

So, I agree with Hédoin: we need new nomenclature and new definitions so we can carry on the conversation with clarity.  

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The Point of the Pencil

The visible hand of ideology or the hidden hand of magic?  The oligarchs are clear which they want you to believe in.  Keep the faith and they keep their power.  That’s the way they prefer things.  But sometimes things get awkward …

PART ONE:

In the aftermath of the recent New York City mayoral primary election the Financial Times said this:

“Leftwinger’s bid to be New York Mayor spurs Wall St. hunt for a moderate rival”

It seems that the oligarchs are upset  because the locals are restless.   The relentless attacks of the rentier class have so frayed the fabric of society that the proverbial pitchforks are out.  Worse: the left-winger the FT is referring to is charismatic, engaging, young, and likely to win.  The preferred candidate of the grandees of the Democratic Party was a throwback to the good old days when the ugly mob was of no concern to the elites.  How dare they intrude into matters of high state?  They simply don’t have the education or perspective to understand the necessities of sacrifice embedded in all policy.  Or, perhaps, they feel that they’ve sacrificed enough.  

The coddled and heavily subsidized denizens of Wall Street are in a tizzy because the winner of the Democratic Party primary isn’t the usual dull, so-called “mainstream” or “centrist” candidate.  He is, the devious devil, more connected with voters rather than with business.  That makes him radical.   It make him dangerous.  Moneyed folk will have to mobilize to stop this democratic uprising before it undoes the carefully erected support system that enables rentiers to make their rents.  Bill Ackman, one of our more outspoken anti-social oligarchs, is quite clear when he vows to stop the upstart.  Ominously for the rich people, though, one of the upstart’s supporters — someone who has observed him first hand — says “There’s not enough money to stop him.”

Oh dear, what are the oligarchs to do?

And who knew that the simple concept of “affordability” could be such a potent rallying cry?  More than all the social justice siloes added together, affordability appears to provide the foundation upon which a winning coalition can be built.  It’s as if the peons aren’t happy with the lot assigned them by the bigger people.  

Oh dear oh dear, what are the oligarchs to do?

A modest translation illuminates the conundrum now facing them.  Just one word change is all we need.  Out goes the word “moderate”.  In comes the word “compliant”.  Now we see the true extent of the problem: this guy is not for sale.  It’s an ugly moment for democracy when a politician cannot be bought.  Whatever next?

Wasn’t the entire purpose of the business seizure of power during the 1980s ands 1990s under the rubric of neoliberalism supposed to be that democracy was purchased and bent to the benefit of profit?  After all the flood of money into elections and the pockets of Supreme Court justices was not an act of charity or simple minded generosity.  This is business.  It was meant to buy something.  Power.  Power to make profit and avoid the pettiness of the whims of ordinary people.  

That sounds a little raw doesn’t it?  It must be unpalatable to many of you who still cling to sentimental ideas of democratic “values” and so on.   But then most of you aren’t aware of the Powell memorandum that energized business and propelled it into political action back in the late 1970s.  And many more of you simply want to pretend that the money that flowed into various university economics departments back in the postwar years was just good-hearted giving by people who had no interest in the outcome of the research supported by their money.  

Stop being naive.  Let me explain:

For the oligarch elite hiding the visible hand of ideology is vital.  Whatever we do, they must keep up the pretense that there is an economic order of things that follows laws of nature, and, as we all know well, you can’t muck around with the laws of nature.  Business is just business.  Rotten outcomes are normal everyday byproducts of nature.  Everything that business does is just, well, natural.  If bad things happen for the lesser folk that’s too bad.  Fighting against those outcomes is pointless.  So, voting for someone who claims otherwise of simply a fool’s errand.

The legendary concoction called “hidden hand” has been given its mythic status precisely because it looks like a force of nature and seems to exempt business from any intention that might affect the way in which the results of economic activity are shared amongst us all.  We can all debate whether Adam Smith would agree with how his metaphor has taken on such iconic status — Glory Liu certainly suggests he would be fairly disgusted at its modern usage — but we can all agree that it has been really helpful as a disguise or distraction in allowing business to carry on as if innocent.  

The purpose of the “hidden hand” is to distract us from the visible hand of business ideology that is the real power shaping the economy and society as a whole.

Puncturing this illusion is too big a risk.  Hence the search by the oligarchs for a more compliant political alternative.  As I said: what’s the point of democracy if it can’t be bought and bent to the benefit of oligarchs like Ackman?

PART TWO:

I ruminate on this because three times within a few days I have come across references to the embarrassing and obviously ideological essay “I, Pencil”.  You can get your own copy of it at the Foundation for Economic Education.  As propaganda it is priceless.  As a description of a real world economy it is simply weird.  The goal is not to educate but to indoctrinate.  Its lack of realism is awe inspiring.  Its eloquence undoubted.  Its goal simply to make sure that young minds do not err onto intellectual territory less amiable for the oligarchs.

That New York City election makes quite clear why such indoctrination is so necessary.

This conclusion is reinforced by the essay’s use by no lesser an ideologue than Milton Friedman in a famous televised appearance, during which he waxes lyrical about the capacity of “the market” to bring together a pencil as if by magic.  Friedman was no shrinking violet in his role as front man for the visible hand of ideology.  “I, Pencil” was the perfect script for his mission.  Indeed,  in an afterword appended to the essay he says this:

“It is even more astounding that the pencil was ever produced. No one sitting in a central office gave orders to these thousands of people. No military police enforced the orders that were not given. These people live in many lands, speak different languages, practice different religions, may even hate one another—yet none of these differences prevented them from cooperating to produce a pencil. How did it happen? Adam Smith gave us the answer two hundred years ago.”

My goodness!  The magic is breathtaking.

No one.  Not a single person.  Ever.  Sat in a central office and gave orders.  Never.  Not at all.  It was all simply happy cooperation.  As Cyril Hedoin recently reminds us it was vital to the anti-democratic views of the neoliberals that any form of central planning be dismissed as not just economically impossible, but as morally impermissible also.  These were the Cold War years after all.  Ideology mattered more than empiricism.

So “I, Pencil” is an excellent example of Cold War economics, which is the sort of economics developed in America in the 1950s and 1960s and designed specifically to play an ideological role.  Economists like  Friedman, and Hayek before him, deliberately blurred the lines between economics and politics because they saw themselves on the front lines of “freedom’” defending us from the predations of the state and the evils of central planning.  “I, Pencil” is a prime example of the product they used to sell their politics to a public needing re-orientation away from the evils of the New Deal and its sundry state interferences into the wonders of “the market”.

Friedman was happy to recapitulate the political message of an essay that uses the following words — coming from the mouth of the pencil no less:

“Simple? Yet, not a single person on the face of this earth knows how to make me. This sounds fantastic, doesn’t it? Especially when it is realized that there are about one and one-half billion of my kind produced in the U.S.A. each year.”

I challenge you to watch “the market” to assemble a pencil.  You will be waiting a while.

And the news that “not a single person on the face of this earth knows how to make me”  is probably quite upsetting to the good folks who manufacture pencils at Ticonderoga and at all the other businesses dedicated to pencil making.  

The essay talks blithely about all the components of pencil making as if they happened magically without any coordination other than the magic of “the market”.  There are glib references to mining, milling, and transport, but there is no mention of the management involved in those activities.  Then there are casual mentions of various groups of people whose hands touch the necessary bits and pieces needed to manufacture a pencil.  But there is a remarkable lack of description of the organization needed at each waypoint to ensure that all these intermediary steps can be merged into a final product.  “The market” is, apparently, inhabited only by a horde of individuals who have minimal contact with one another, do not engage in design, do not engage in coordination, do not think about supply chains, and absolutely have no idea of what’s going on.  They just act alone.  They are mere automatons and are limited parts of a greater machine.  Crucially, they are all passive.  Only “the market” plays an active role.

Organization, we are left to believe, is what “the market” does.  And, the glory is that it does it all comes together via the magic of the invisible hand:

There is a fact still more astounding: The absence of a master mind, of anyone dictating or forcibly directing these countless actions which bring me into being. No trace of such a person can be found. Instead, we find the Invisible Hand at work

Again, this must surprise the management at the pencil factory.  Apparently the activity we call business recedes into the background leaving only “the market”in the foreground to awe onlookers with its magic.  A magic sufficient to mislead generations of economists let alone the unknowing public.  

That erasure of the role of business was no accident though.  It was deliberate.  Cold War economics had a bifurcated objective: it both created the anti-state intellectual framework needed to defeat central planning whilst it also hid the reality of business as a political force.  The dis-embedding of economics from the pre-existing theories of political economy was essential if the role of power, and the role of business in politics, was to be expunged from consideration.  

All those donations poured into elite university economics departments paid off:  economics was diverted from discussing actual economies and shunted into irrelevance as it discussed itself, its various models, and its methods.  Safely neutralized it was no longer interested in actual economic activity, and so business and its surrounding cast of wealthy individuals had successfully foreclosed on a potential source of criticism. 

Fairy tales such as “I,Pencil” were the consequence of the desire rich people, who deeply regretted their loss of status and control during the New Deal years, to re-establish their control over society.  The neoliberal takeover of power in the 1980s and 1990s was too prolonged to call a “coup”, but the net effect was the same.  By the end of the twentieth century business was back on the perch it had occupied throughout American history.  And democracy had been hollowed out — perhaps destroyed — along the way.

Which is why the hint of democracy in the recent election is of such concern to our oligarchs.

PART THREE

Hence  Wall Street ’s reaction to New York’s election.  Back in the Cold War business had the same issue.  They needed compliant politicians who could be relied upon to restore the supremacy of business interests in the legislative process.  All that postwar New Deal democracy had cost a lot.  The rich folk were hurting.  Social programs limit profits.  Obviously things had to change.

Which is where economics stepped up.  What better a way to re-establish business and to diminish the state than to proselytize “the market”, which as “I, Pencil” makes clear has nothing to do with business.  It’s just that invisible hand magic.  And all sorts of people self-organizing and, quite by chance, cutting down logs, mining stuff, and shipping it all over the place.  At the end of which a pencil pops out.  No business involved.  Not at all.  Just “the market”.  The essay actually refers to “millions of tiny know-hows configurating naturally and spontaneously in response to human necessity”.

Configurating?  

Absolutely.  One morning a bunch of people randomly bumped into each other in a forest.  Naturally.  And they configured spontaneously and cut down some lumber.  It happens all the time.  People just cohere suddenly into these configurations.  No one has any intent.  It just seems to happen that way.

So not only was there no intent, design, or invention of a pencil, there was no manufacturing process, ordering of supplies, identification of consumers, marketing, hiring of workers, purchase of machinery, acquisition of cash, or any other aspects of business.  

It was all so … natural.  

Thus we are saved from the predations of the big “know-hows” we call the state.

And so it goes.  The imperative of denigrating the state overcomes any attempt at realism.  Descriptions of the economy become caricatures.  The choices of economists of what to leave out tell us all we need to know.  The process of abstraction allows reality to leak away until we are left with a few suggestive strokes on the page — just enough for us to conjure up an image of “liberty” when nudged suitably by a professional ideological hack like Friedman.  With liberty carefully defined as the absence of the state.

Such is Cold War economics.  The invisible hand of economics is the visible hand of business.  Power relations are eliminated on one hand so they can be preserved on the other.  Business disappears from the machinery of “the market” in textbooks so as to continue to dominate in reality.  It takes a great deal of skill to abstract away the right things so as to arrive at the right answer.  Economists have developed and honed those skills.  They cover the intellectual flanks of business with all sorts of natural laws.

PART FOUR

The essay derives its own inspiration from Hayek’s equally iconic paper “The Use of Knowledge in Society”, which deserves fame as a contribution to the identification of evolution and complexity as cornerstones of any realistic enquiry into real world economies.  Sam Bowles sums up Hayek’s importance in this regard when he says that it was this paper above all else that established the notion of “the market” as being an information processing system.  Note the word “processing”.  Not simply communicating.  It’s a subtle difference.  The existence of processes suggests that information plays many roles.  Indeed it is fundamental to all economic activity.  

A product design is information.  So is a production line.  So is a marketing campaign.  So is a supply chain.  So is … everything.

It brings to mind Archibald Wheeler’s “it from bit”, or Cesar Hidalgo’s “information grows”.   Economists still stumble over information.  Their ideas have roots that predate the information age, so they are stuck with communication as the pre-eminent description of information.  They fail to see it as, along with energy, the basic input to economic activity.

Businesses are also information processors — more so than “the market” because business uses information as input as well as communication device.  But — I forget — business is not part of economics.  Which opens the space for Friedman to wax lyrical about magic.  

Hayek’s attack is on central planning at the level of the state.  In other words it is an attack on Soviet era economic management.  Hayek is adamant: it’s just too much to ask for a single “person” or “authority” to gather all the information “needed” to coordinate an economy.  They are far too complex.  Information often contradicts.  And, in any case, there’s just too much.  Its a computational impossibility.  So central planning is impossible.

Tell that to the central planners at Apple et al.

But Hayek creates a paradox:

It is this computational conundrum that undermines any subsequent claim economists might make about the relative efficacy or efficiency of “the market” — how would they know?  They cannot compute all that information to draw a conclusion.  By claiming that central planning is computationally impossible they have blocked their own ability to identify any systemic superiority.  After that it’s all ideology.  If an economy is computationally opaque and obscure in one analysis it must be in all analyses.  Inscrutability is not optional.  It is.  Or it isn’t.   

As Hayek says: the information exists.  There’s just too much.  So no one knows what economic organization is “best” or “optimal” in the real world.  But to admit that economics is all just a construct designed as an ideological counterpoint to the Soviet Union is a step too far.  So we keep on pretending.  And we keep reverting to two-dimensional charts in a hyper dimensional world to explain what’s going on.  

Which reinforces the larger ideological point:  it is one thing to ignore reality in an attempt to theorize about an economy, it is quite another to ignore business, unless, of course, you want to downplay its role in politics.  

For the followers of Hayek, the dictatorial consequences of central planners is such an anathema to “liberty” that it needs eradicating root and branch.  Except, that businesses are precisely centrally planned economies.  Not at the state level obviously, but there is an abundance of central planning throughout the economy.  Which rather suggests that “the market:” cannot get the job done without a lot of help.  Planning, it seems, is essential to getting stuff done.  Which is why economists ignore business.

Any subsequent re-introduction of business organization — as Coase famously attempted — presents a major problem.  Once you have climbed your fitness peak built on the superiority of “the market” over and above central planning, it’s hard to climb down and start over.  So you don’t.  You go all in.  You invent explanations like transaction costs that preserve “the market” as the preferred and superior coordinator and which allow you to ignore the firm as anything but a “nexus of contracts” embedded in a wider sea of contacts.

Who negotiates those contracts, and why, we ought not ask.  Because central planners do.  Whoops.

Hopefully this act of obfuscation blurs our vision sufficiently to take our mind off the still remaining question that Coase posed: if “the market” has all those super powers, why do firms exist at all?  Stuck as we are at the top of the wrong fitness peak we simply pretend to have resolved the problem and we move on.  Which is what propaganda like “I, Pencil” seeks to do simply by ignoring business in the first place.

It is this remarkable absence of business organization in the story that is one of the tell-tales of Cold War economics.  Clearly, the ideological goal is to proclaim the supremacy of “the market”, not to describe the real world.  And “the market” is left as an ill-defined amorphous collection of individuals who, periodically, “configure spontaneously”.

Really.

And the Ford Motor Corporation does not exist.  Really.  Or GM.  Or Google.  Or … 

And, just like that, with the active agents we know as businesses swept off the stage, Cold War economics brings us “liberty”.  How convenient.  Liberty!

For whom?

Check who donates and supports the Foundation for Economic Education.  Or the University of Chicago economics department for that matter.   

The visible hand of business?

Meanwhile, about that mayoral election.  We need someone more compliant  moderate.  Someone who, for instance, will take into account “business interests” rather than listening to the masses of mere “people”.

Obviously. 

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We the People? Nah!

I promise this will be short.

As an addendum to everything I have been pondering lately …

Don’t you find it odd that every time someone is elected who sits politically a little to the left of what is tolerated by the “sensible” or “centrist” folk the mumblings begin about just how impractical all those crazy “leftist” ideas are.

Worse still: such politicians are then advised to go talk to the wise elders of the business community because business interests have to be taken into account in any policy discussion.

And you all thought this was a democracy!

You thought the voice of the “people” mattered!

Nonsense.

This is about practicality.  It is about accommodation.  It is about understanding the “way things are”.  And it is about submitting the voice of the people to the veto of business interests.

There was a day, many decades ago — perhaps even centuries ago — that corporations received a charter that enabled them to go about their business only because said business was considered to be in the public interest.    Corporations were extensions of the state doing things that the state could not do, or didn’t want to do, or didn’t want to afford to do.  In return for undertaking such business a corporation received privileges like legal personhood and limited liability for the speculators who provided the financing.  

But business being business, along the way the public interest faded from the forefront.  Corporations kept the privileges but walked away from the bargain.  They captured the state.  Re-wrote the rules.  And then secured control of the legislative agenda.  Whenever their power slipped, even a fraction, they fought back to re-assert themselves.

This is the tale told by Schlesinger in his history of Jacksonian democracy.  He wrote back in 1945 so he had no inkling of the ferocity of the corporate attack on democracy executed since 1980.  The lobbying, political donations, corruption of the courts and academia, and the establishment and funding of a bevy of far right think tanks are all testimony to the intensity of political involvement of business interests.   The result being the almost total domination of legislation in favor of business over the past few decades.  Public interest be damned.  All that matters is profit.

And so here we are.

Every time a leftish sounding politician wins an election they are urged to bend the knee to business.

Why?

“We the people”?

Rubbish.

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Ctrl Alt Democracy — Long Rough Cut

This represents my draft summary of where we are.  It picks up on my recent themes.

It is based on my simplified notion of democracy as an action and not as a set of ideas, a structure, norms, or any such thing.  Democracy is something that happens.   It is not a form of government.  It is a consequence — an action — of government.  Specifically it is the action of enforcing a fair, or more equal, sharing of the spoils of production.  It is about equal access to consumption.  It is, therefore, distributive, confrontational, and hostile to elitist control of wealth.  It is what economics ought to be about, but is not. 

Let me begin [with apologies for repetitions etc as yet unedited]:

Ctrl.

Alt.

Democracy.

How we begin is crucial.  The start is when we establish the path ahead.  So that first step, however tentative, determines everything that follows.  We must make it count.

Our advantage is that most people around us are preoccupied.  They are in shock.  Or they are in a frenzy of activity and distracted by the chaos of our moment.  In any case they are too concerned with the present to care much about the future.

So we must make it ours.

Beginning now.

PROLOGUE

Really existing democracy — that is a form of democracy that is built by action and not simply words — is a method of distribution.  It focuses intensely on the way in which our collective resources are shared.  It asks questions of those in power.  It demands that they share.  Not necessarily equally.  But more equally.  Fairly.  

This form of democracy has not existed in America for a long time.  Perhaps as long as forty or fifty years.

The historic problem that prevented democracy from being acceptable throughout the ages was that, in simple terms, rich people do not like sharing.  Far from it.  This is hardly a novel observation, but it is crucial.  We have embellished our political thinking with all sorts of intellectual finery.  There is a long and noble tradition of discussion, debate, and consideration.  Such finery is a distraction though, for the issue at hand can always be resolved down to that simple truth: rich people do not like sharing.

Instead they will contrive all sorts of ideas and theories to justify their special access to wealth, and they will defend that access ferociously. 

History is clear they have been remarkably successful.  For millennia they have constructed defensive moats around their privileges.  They have dug them both deep and wide.  They have regaled themselves with self-invested virtues that gleam in the surrounding gloom.  They have very carefully reduced the ground around them to a very low level.  They have flattened it the better to control and exploit it.  They oppress in order to flourish.  It is a timeless and ongoing process.  It has a permanence that belies theories that suggest otherwise.  The goal is control.  The target is asymmetry in distribution.  It is acquisitive.  And it stands on the recognition of the equivalence of wealth and power.  Those with power are those with wealth.  Those with wealth are those with power.  Or, to adapt somewhat to Jonathan Levy’s version: the history of profit is the history of power.

This simplicity cuts through all the fanciful theorizing produced during our eons of political discussion.

It is a simplicity that generations of royalty, aristocracy, religious orders, military groups, business leadership and other oppressive elites have understood.   They know to viscerally.  Their privilege rests precariously on their ability to justify their own existence.  Brute force will do.  So will endless elegant intellectual discourse.  As long as the distribution is suitable biased, the rich will shift and bend accordingly.  What they will not do is share.

And it is because of such simplicity that really existing democracy must also be simple.  Clarity is essential.  The rich must be forced to share.  The power of the elite must be met by force.  Really existing democracy exists only within the context of ongoing — permanent — conflict.  When we stop fighting, we begin losing.

When we settle into complacency and reduce our threat we begin our retreat towards the unequal domination by the rich of the long millennia before democracy.  Therefore, constant vigilance is a necessary condition for the maintenance of really existing democracy.  

OUR MOMENT

There are two tropes presently extant in our political discussion: 

One is that the world is about to brighten as we eliminate layers of government waste, left wing zealotry about genders and so on, and as we extricate America from the burden of its exploitation by nefarious trading partners or free-riding erstwhile allies.  That is making America great again.

The second is that the world is ending and that American values are being trampled underfoot as a heathen and undereducated dictator fastens his grip on the levers of power to stifle democracy and toss the nation back into some foggy and dangerous version os a distant past.  The 1890s is the most popular guess for our destination.  Imperial and almost fascist this America is unrecognizable when viewed through the complacent rosy lens of recent decades.

Neither are correct.

The reality is far more complex and takes some explanation.  Here’s my attempt.  Yes, I know, it’s one of many.

First,  As I have tried to explain before: American democracy has been in a state of disrepair for decades.  Really existing democracy (RED?) is a very basic concept.  It is the struggle for a fair distribution of the collective fruits of our industry.  It is thus class conflict.  It is the constant threat of the majority to upend the lifestyles of the governing elite unless they share their riches.  Democracy, viewed in this raw form is easy to understand and is based on a very simple basic principle.  It has none of the fancy trimmings that intellectuals love to lather it with as they indulge in endless clever discussions.  The appeal, to me, of that basic idea is that it explains why we want democracy in the first place.  And it helps, also, explain why democracy is usually both fleeting and fragile.  Rich people don’t like sharing.  They never have.  So they are adept at tricking the masses into obedience in order to preserve their privileges.

And trickery we have had in abundance.

The latest bout began in earnest back in the late 1970s and early 1980s and has been going full throttle ever since.  The Carter/Reagan turn to neoliberalism is the true beginning of the end of democracy in its RED form.  The resurgence of elitist power asserted through the corporate takeover of politics and the heights of the economy is the narrative most often told for this period.  The mechanics of the takeover are well known: the denigration of social action through government, the absurdity of shareholder priority in business, and the steady undoing, or neglect of, the machinery of the New Deal have been discussed endlessly.  They have not, though, been reversed.

Why?

Because we fell for the conflation of liberalism and democracy — we became lazy in mixing the two.  The phrase “liberal democracy” displaced the simpler single word “democracy”.  

Liberalism is a form of politics that denies, or ignores, the need for distributive conflict.  At its heart it is based on the long narrative begun back in the first tremors of freedom during the 1600’s.  And that narrative was one designed to extricate a newly rising mercantile class from the grip of autocratic, religious, and military tradition.  The new class needed space to thrive and saw an opening in the autocrat’s need to finance their various religious wars.  In simple terms: the monarchs needed cash to pay for their armies as they rampaged around Europe and fought over interpretations of Christianity.  The people who had that cash wanted something in return.  What they really wanted was enhanced political status so they could guarantee both the recognition of their ownership of, and then the protection of, their property.  In particular they wanted protection from arbitrary seizure and taxation.  

Since wars over religion had been so exhausting the awakenings of liberalism were also targeted at removing it as something important to the state. No state sponsored religion implied no wars between states on its behalf.   So, religion, henceforth, was to be a personal matter.  Thus began the march towards modern secularism.  But, it was quickly realized that the same resolution applied to property.  After all, more quiet implied less likelihood of the state needing to tax.

So “liberty” was launched into the political conversation as a property based and secular idea.  People were sick of religion as a basis for endless war.  People were frightened of autocrats and armies.  Liberty was an idea that was designed to justify the limitation of the mayhem everyone wanted to escape from.  It was never meant to extend beyond the protection of private property.   This history explains why distribution is not a concept within the liberal realm: liberalism is intensely individual.  Deliberately.  Ideas of distribution do not fall within its ambit.  Indeed, they are hostile to it because issues of distribution are social not individual.

Liberalism, to this day, carries forward its deep roots in property.  It is why our explanations of the economy are mostly based upon things like “free markets” which are the conceptual embodiment of that same 1600s idea.  This is why, when those opposed to the re-emergence of the state as a social force wanted to give themselves a name, they described themselves as “neoliberal”.  Their problem being that the word “liberal’ had been co-opted, so they thought, by the advocates of the very New Deal policies that they saw as abhorrent intrusions into “liberty”.

That the New Dealers and their ilk could also see themselves as liberal was based on a second definition of “liberty” that emerged a century or so after the original propertied version.  This second version was very different.  Indeed in some ways it was contradictory to the first.  It put the emphasis on collective and not private political action.  Its roots were also very different:  it sprang from resistance and opposition to the radical change in lifestyles and standards of living being created by industrialization.  It was not a reaction to autocracy or religion.  It was a reaction to capitalism, which itself was a creation of the first version of liberty.  More particularly, it was a claim for a more fair or equal distribution of the wealth being generated by industrialization.  Central to this sort of liberty was the notion that the cost of the complete overhaul of traditional lifestyles by the onset of industrialization ought be offset somehow by a share in power being given to those affected most: the workers who now found themselves moved wholesale from the land to the factory, and from the countryside to the cities.

I think it is useful to insert at this point a comment on consumption.  The inequality inherent in rampant capitalism — it is a feature of unleashed private enterprise that some will end up with a lot more than others —  resists most powerfully as inequality of wealth not of income.  It is the stock and not the flow that matters.  Why?  Because the Great Enrichment, to use Deidre McCloskey’s phrase, created an abundance of consumable stuff.  So it access to all that stuff that matters.  Equality of consumption, or of access to the goods and services made available by the process of capitalism, is what we are interested in.   Wealth is simply a measure of that access.

It is this second version of liberty that we now call democracy.  It is why democracy is, at its heart, a class based idea and not an individual based idea.  It is an expression of the collective and is meant to deny the ability of any individuals accumulating a disproportionate share of the national wealth.  Democracy is designed from its origins as a mitigant against excessive liberalism.  

In theory the two versions of liberty can co-exist.  But we need constantly to recognize that they are in tension and are very different, with very different purposes and values.  Their conflation into “liberal democracy” is therefore likely to lead us to lose sight of the difference.  Worse, it opens up the opportunity for elite exploitation and the degradation of one or the other.

In our case, as I mentioned above, since the Carter/Reagan turn to neoliberalism the heavy emphasis has been on the individual.  Democracy has been sidelined or forgotten.  The use of the phrase “liberal democracy” has hidden the loss of the latter and the privilege given to the former.

The ease with which democracy was lost speaks to the difficulty in articulating its value in a society that has become complacent in its ongoing ability to generate prosperity for the masses.  The delusion that the collective is unimportant is an easy one to sell when rising standards of living look as if they are a historical fact and not something that needs constant work.  Once the delusion is well established it becomes an easy next step for a rent and asset-hungry elite to establish itself: it can hide behind the veil of protecting the individual against the predations of the state all whilst it builds itself privileges by capturing the operations of the very state it is denigrating.

Trickery indeed.

Critical in the creation of the delusion is to cast the state , not as the engine of collective action and thus the protector of the masses, but as the embodiment of the ancient monarchs and autocrats the the liberals originally fought so hard against.  In this false version the masses can be turned against the very protector they need in order to flourish and benefit from the collective production of wealth.  

It is much to my dismay that the economics profession played a key role in nurturing this delusion.  The version of economics popularized in America since World War II, which some refer to as “Cold War Economics”, is designed to demonize the collective and overemphasize the individual.  It is, consequently, profoundly anti-democratic.  

But how does this all play back into the current chaos roiling America?

That is not as complicated as many observers imagine.

The neoliberal era was simultaneously the era of technocracy.  Our economies had become so complex, with the divisions of labor and knowledge so rife, that its interdependencies produced endless niches for specialist skills.  Lawyers, consultants, academics, accountants and so on proliferated.  The engine of the economy needed this array of specialists scattered within it to connect it and make sense of its complexity.  The problem being that the very presence of specialists added new complexity.  And it alienated its operation from the basic theories we used to describe what was going on.  The surge in numbers of such technocrats during the neoliberal era speaks to the difficulty of keeping the whole together.

It was, perhaps inevitable, that this new class of people would be co-opted by the elite.  So it turned out.  The professional class became the route through which pernicious ideas such as shareholder value were propagated.  The professionals enriched themselves as a reward for doing the bidding of those above them.  They became a barrier between the masses and the more traditional privileged few who have always populated the top of society.

As society was gradually made more liberal and less democratic the economic consequences piled up.  The steady erosion of earning power owned by the masses began to act as a brake on the ability of the whole to keep growing at a pace quick enough to spread prosperity widely throughout society.  The rent seeking of the elite, now unencumbered from the baggage of democracy, and thus without accountability to the masses, also began to slow growth down.  The loss of consumption power caused by the unequal distribution of incomes depressed returns on the assets owned by the elite, who, in response, looked for opportunities overseas.  

Thus dawned the age of outsourcing, foreign investment, and extended supply chains we now know as globalization.  Or rather this latest incarnation of globalization.  And, as during the colonial era in the late 1800s, extensive deployment of capital out of the homeland put pressure on the state to protect it via entangling trade agreements.  The beneficiaries of those agreements were not the masses whose work and wages were affected by the mobility of capital, but the owners of that capital.  This era of globalization produced an even greater inequality within America, even though it reduced inequality globally.  

A more balanced ideology — one that included democracy as well as liberalism — would have made adjustments domestically for the consequences of the steady impact of globalization.  Without democracy, though, such adjustments never rose to an appropriate level.  A radical divergence in domestic opportunity, prosperity, and aspiration arose.  The body politic was deeply divided.  Empathy evaporated.  Hostility increased.  

So a political crisis became inevitable.  

But when the crisis came it was within the economy and a consequence of elite greed and technocratic incompetence.  Elite greed because it had stripped away the guardrails from the financial sector despite its well known volatility.  Incompetence because of the complacency that the technocrats had in their ability to manage what had become the most complex economy in history.  Simple ideas and outdated theories crumbled under the weight of this combination.  The response was even worse: it helped the perpetrators but not the victims.  The absence of democracy was never more acutely experienced.  The elite’s lack of regard for the masses drove home the message of division.  The inadequacy of the economic recovery and its focus on elite interests simply magnified the anger brewing below.  

America has struggled in a polarized state ever since.   As the cost of carrying a rent-seeking class accumulated, and as the loss of a democratic capacity to rein it in gathered, ever more obvious consequences and political reaction was inevitable.

Populism has its roots in this course of events, but to describe our politics as “populist” is to misinterpret events.  We are living through a battle for ascendancy within the elite whose long standing divisions have now burst into the open in a vitriolic and ill tempered fight.  Neither side of the division is truly committed to democracy.  Not, at least in its RED form.  

On the contrary, this is not a battle to re-establish democracy.  It is a struggle to define the post-democratic landscape and to establish one side or the other of the elite as ascendant.

This needs clarifying.

Start with this statement:

“I no longer believe that freedom and democracy are compatible … [the fate of the world] … may depend on the effort of a single person.”

That’s Peter Thiel, one of the world’s richest men defining himself as anti-democracy and steadfastly pro-dictatorship.  He is also someone who pours great amounts of money into America’s political system to tilt elections towards the achievement of his post-democratic vision.

He added the purpose that would motivate that dictator: making the world “safe for capitalism”.

Thiel is a close associate of Elon Musk who shares the same philosophy.  

There could not be a more clear articulation of the goal of that part of the elite.  The oligarchs are unburdened by attachment to democracy.  They see it as I do: a class struggle.  They see it as an infringement on their “right” to amass fortunes unworried by issues of distribution.  In their eyes democracy is an impediment to “freedom” where freedom is defined strictly through the lens of capitalism.  Which makes sense in within the confines of the history of liberty I have given here.  The objective of this self-described “neo-reactionary” movement is to eliminate that part of our history within which the middling and lower classes extracted a more fair distribution of the collective creation of wealth.  For Thiel and his ilk there is no such collective action.  Everything is individual.  With individuality driven towards an such an extreme definition that it excludes any and all social activities.

Including almost all government.  Which is why another acolyte of this philosophy, Steve Bannon, speaks of the massive downsizing of government and the ultimate deconstruction of the “administrative state”. 

In many ways the views held by the likes of Thiel are an echo of those held by America’s first generation of oligarchs.  Obsessed as they were by driving down costs and thus amassing their fortunes that first generation rode roughshod over any resistance ton what they called “improvements” —or,  in our modern language, innovations.  The biggest impediment to the uptake of such improvements was usually the workforce whose lives and livelihoods were constantly threatened by such things.   Thus people like Carnegie fought ferociously to implement cost saving improvements.  Dismantling collective resistance of workers via their unions being a glaring instance of this.  Capitalist oligarchs throughout the modern era have seen it as both their right and duty to impose their improvements on society regardless of the human cost.  

In this vein, whilst Musk and Bannon might throw vile epithets at each other, that is simply a bruising and personal fight for the ear of Trump.  Philosophically they are united in their aim: the destruction of democracy and the installation of authoritarian rule.  Their words and their actions are reactionary.  Their goal is clear.  And they are in power.

The defeated elite faction is that of the now deposed establishment: the neoliberal corporatists.  This faction was also anti-democratic but more subtle in its opposition.  It preferred slow degradation rather than full-on assault.  It harbored sub-groups within it and those sub-groups occasionally fell into what appeared to be ideological conflict.  But that was always an illusion.  Those internal arguments were expressed in relatively minor ways and the threat of democracy was always sufficient to unify and overcome such arguments rising towards a total split within the faction.

Neoliberalism, as we all know, was designed to re-assert the power and status of the old wealthy and corporate elite against the policies of the New Deal.  It was enormously successful and managed to degrade New Deal democracy to such an extent that the inequality it sought roared back to life over the past few decades.

But excessive inequality is ultimately self-limiting.  The over concentration of wealth starves the economy of shared consumption and over inflates the store of financial assets.  That combination always produces instability.  Left unattended and deregulated such instability slides into crisis.  So it happened in 2008, leaving the credibility of the neoliberal faction of the elite reduced in status and with its competence in deep disregard.

This disrepute has haunted the establishment elite ever since.  Exposed as deeply incompetent it has struggled to justify its presence ever since.  Its inability or unwillingness to include the masses in the rescue efforts post-2008 undermined its most significant claim to power:  despite its antipathy toward democracy it had presented itself as technocratically capable of generating wealth.  It was professional.  It was credentialed.  Its leadership hailed from the best schools.  It could be trusted to enrich the nation, even if it began to extract excessively for itself.  

Its failure and then collapse in the face of the popular realization of its incompetence set in motion the struggle for supremacy we are witnessing at present.

That struggle is for the definition and control of the post-neoliberal world.  Both the neoliberals and the neo-reactionaries share a deep demonstrated disrespect for democracy.  That much is certain.  Both also share a determined attachment to capitalism, which is, after all, the engine that permits them to establish and protect their rents.   

So, from the perspective of someone committed to democracy, we can expect neither faction, despite their constant appeal to the masses for the necessary votes in elections, to repair the damage that produced the anger and frustration accumulated since 2008.  So neither popularly espoused explanation for our future holds water.  We are not in the midst of a battle to defend or recover democracy.  That is long lost.  We are, instead witnessing a duel within our fractured elite.  It is a civil war.  The protagonists are elitists.  The result will be to the advantage of the rich.  Right now the oligarchs are winning.  Authoritarianism looks as if it will displace liberal democracy.

Which, as I have argued, was never democracy anyway.

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DeLong Steps In It

This is second stab at a question that vexes me …

I have been reading too many historians lately.  So when I read the usually very smart Brad DeLong say something that seems straight from Hayek I get a greater jolt than I used to.  And that’s saying something.  This is what he wrote that caught my attention:

“The true genius of the market system lies in its capacity to decentralize decision-making, to push choices and authority out to the periphery—out to the individuals and enterprises who are closest to the ground, who possess the granular, local knowledge that no distant central planner or bureaucratic committee could ever hope to match. In this way, the market harnesses and aggregates the dispersed intelligence of society, transforming millions of individual judgments, preferences, and bits of information into a coherent pattern of production and allocation.”

Pure Hayek.

Notice the enthusiastic use of words like “genius”.  Notice too the typical comparison between decentralized decision making based upon “granular, local knowledge” and the implied plodding foolishness of “distant central planners”.  Apparently “the market” harnesses dispersed intelligence and so on, thus transforming it all into a wonder of coherence of production and allocation.

Mercifully DeLong does not then go on and argue that “the market” solution arrived at by all that genius is in any way “efficient”.  That would have been too much.

The problem I have with such gushing and broad-brush praise of “the market” is that no one seems to be able to tell me what this “market” is.  Or where it is.  Or who participates in it.  Or how it operates.  Or …

Let’s just start with basics.

This miraculous creature economists call “the market” seems to be entirely co-terminus with society at large.  So why distinguish between them?  Why not just call it “the community”, or “the polity”, or “the society”.  After all the market as imagined by economists is simply a process of harnessing and aggregating society’s intelligence.  It is an intensely social activity.  So why not simply discuss society’s ability to do social stuff.  Why create a special thing called “the market”?

Hayek’s influence just overwhelms such sense.  The glitter of the ideological preference  for decentralization distracts from the impossibility of the computation of anything aggregate from all that dispersed and granular knowledge.  So whilst a bureaucratic committee might be utterly incapable of handling all that dispersed knowledge, nor can anyone else.  Including economists trying to work out if any outcome from all that effort is remotely close to being something they call efficient.

They just don’t know.  They cannot know.  By their own admission.  The solution is incalculable.  

So economists become magicians.  They set up the problem in typical Hayekian style:  there’s just too much information for those dumb central planners to coordinate everything.  So the real world of computational impossibility is used to bash bureaucrats.  But then something miraculous happens:  the supposedly decentralized alternative is seen as “genius”.  It coordinates where no one else can.  It produces coherent patterns of production and allocation.  Apparently the accumulation of lots of local pockets of “mini-solutions” produces — hey presto! — something that we are supposed to believe is an aggregated “coherent” pattern.

Huh? 

Why?  How?  More to the point: how do we know it is coherent?  And coherent in what sense?

No one has any idea.  It might be completely stupid. It might be arbitrary.  It might be corrupt.  It might be suffused with distortions produced by asymmetries of power.  Goodness knows what might be going on in all those distant corners as “the market” does its harnessing and so on.  So, I repeat, how does anyone know if what “the market” produces is remotely coherent?  Or that there is a pattern?  And what can anyone possibly say about the ultimate allocation?  

What is that saying about “the eye of the beholder”?

It is.  That’s about it.  All we can say is that the allocation just is.  Whether it is good, bad, or indifferent, we have no idea.  Why?  Because no one can gather the necessary information to calculate anything.  Except locally.  And that gives us zero insight into the global solution.  If central planners, dumb fools that they are, cannot gather sufficient information and do the calculations, nor can economists, no matter how good they are at math. Or statistics.  It is computationally impossible.  

So economists cannot make any worthwhile claims about the efficiency, or otherwise, of “the market”.  Which means that when they do — as when DeLong gushes about the market’s genius. — they are either utterly foolish or that they are actually referring not to the real world, but to some conceptualized version of the world, aka a “model”, that produces results they like.  That’s an ideological stance.  It is not a scientific stance.

Once we embrace Hayek’s insights into the problems of knowledge and society we realize that we are no longer capable of making sense of something like a society-sized pile of information.  All we can do is make assertions.  And such assertions will usually rest on political preferences.   As in: central planners are just dumb.  We can congratulate Hayek for his contribution to complexity science.  And recognize that he also blew up the foundations of economics in so doing.

Why my reference above to historians?

Because there seems to be an effort underway to challenge the complacency of economists.  Why should anyone pay any attention to a discipline that appears unable to give any precise definition of its target of investigation?  

What is “the economy”?  Some historians, noticing the gap, have set out to discover for themselves.  Jonathan Levy is one such historian, and he points out on page four of his excellent new book “The Real Economy”, that economists often slide past precision and serve up pablum when defining an economy.  He quotes this passage from Greg Mankiw’s textbook:

“There is no mystery to what an economy is.  Whether we are talking about the economy of Los Angeles, the United States, or the whole world, an economy is just a group of people dealing with one another as they go about their lives.”

In which case, as Levy asks, why not just refer to such a group as society?  Or humankind?  “Just a group of people”?  Really?  So economics is the study of “groups of people dealing with each other”?  So is sociology.  So is business organization.  So are other social sciences or the law for that matter. 

This is unfair of me.  I apologize.  Economists have narrow vision.  They are only concerned with those groups of people when they are not simply “dealing with each other” but are interacting for very specific reasons.  

Besides, as Levy says earlier, economics is really not about “groups of people”, no matter where they are.  It has become obsessed with the mechanics of the interaction of those people.  It is no longer concerned with people as a group, but with the nature of individual interactions within the group.  So features of the group that exist only at the group level are diminished in importance, while economics specializes on individual behavior.  Put alternatively, any so-called solution that we observe at the group level is emergent from the behavior below, but not attributable to it directly.  There’s just too much interaction and thus information for us to aggregate upwards and predict the group.  

There is no macro from micro.  But there might be micro from macro.  Who knows?

So economics is about models of individual behavior, the creation of those models, and their mathematics.  It is about the method associated with such modeling.  So references to “the market” or “the economy”, which are groups, are simply side comments meant to create the illusion that economics is discussing some aspect of the social real world, when, in fact, it is not.  It is, in essence, discussing itself.

And in this context Delong makes perfect sense.

His reference to “genius” is not to an attribute of the real world, it is a reference to attributes of models of decentralized decision making under certain constraints.  It is reference to economics not to reality.

So the trick played by economists goes something like this:

Step 1: make a statement about reality, observing the impossibility of computation because of its vastness and complexity — this rules out central planning which is your ideological target

Step 2: switch quickly to make observations about a model or highly stylized reality where you have eliminated all that vastness and complexity — this establishes the theoretical, but unprovable, superiority of decentralization

Step 3: switch back to reality and repeat the claim made about the model as if it is about the real world — your purpose being to double down on the hopelessness of central planning [no matter how well-intentioned it may be! — you can afford to be generous here to those lesser folk who see things through a more social lens, after all they are deluded and naive]

Step 4: hope that no one notices the switch and that they fail to see your substitution of a model for reality — your success often depends upon the level of enthusiasm you express for decentralization and the amount of gushing praise you heap on “the market” and its “genius”

But people have noticed.  People are noticing.  

It is odd, is it not, that economists gleefully dismiss the possibility of central planning whilst ignoring that, by so doing, they have erased their own ability to make claims about the economy.  Yet they carry on.  Hoping that no one notices.  

But people have noticed.  Anyone used to dealing with complexity will appreciate the problem economists have given themselves.  Through their relentless focus on simplification they have cut themselves off from reality.

Perhaps the historians can bail them out.

You will learn a lot by reading Levy’s book.  More about “the economy” at least.

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