Pre-existence
One of the mysteries of economics is its contemporary willingness to ignore everything around it. Economists act as if the economy they study is easily isolated from its surroundings and thus immune to the trends, problems, and changes that go on in those surroundings. Indeed this isolationism is a key component of economics because it allows the profession to preserve and bolster its pretense to being scientific. It allows economists to chat away blithely without concern for the web of entanglement within which actual economies reside. Instead they can pretend to have discovered timeless regularities that allow the ‘system’ to glide smoothly and effortlessly towards a singularity, unsullied by the nastiness of the self-same system’s attachment to other social realities.
It is thus that economists indulge in their fantasies of social physics, and consign anything that interrupts the aforementioned smooth glide to the horrible non-economic netherworld known as ‘exogenous’ forces.
A netherworld which you and I refer to as ‘life’.
It is as if the economy was plopped pristine into a pre-existing reality, with the shape of that pre-existence fitted perfectly to conform with the analytical demands of economics.
Then, given this happy circumstance, economists sally forth armed with what they regard as superior social knowledge and freely advise those who are daft enough to listen, or, worse, to impose their designs on society in order to maintain and improve the fit between their fantasy and that pre-existence.
This ignorance of pre-existence results in some of the more infuriating abilities we note in economists. Such as the sublime ability to ignore the contradictions in their theories.
On the one hand we are told that the world is just too complicated for central planning ever to produce an efficient solution; yet on the other we are taught that just such a solution is possible through decentralized planning. Efficiency, it seems, can be wrung from complexity despite itself. This miracle is the result, not of some amazing force of society, but of careful theorizing. Whereas central planners are inept at computation and have cognitive overload in the face of torrents of information, decentralized markets suffer no such failure. They digest information easily and precisely. They compute at prodigious speed. They never err. They always excel.
How come?
By assumption.
That is to say the pre-existing messiness of society is neatly swept away and replaced by an imaginary order tailor-made to fit the needs of a system that must portray its allocative superiority in order to be taken seriously.
Central planners, it seems, are always mired in their pre-existing muck and murk. Decentralized markets are pristine, crystal clear, and shorn of attachment to anything that might muddy things up.
By assumption.
This is not an advantage based upon observation of real economies. It is an artifact of need. Economists needed to eke out a win for decentralization back in the dark days when capitalist economies looked a little shaky, and central planners looked a tad more successful. Since that would not do – it didn’t conform with the ideological roots of modern economics – something had to give. And in the case of economic theory it was reality that gave way.
All those pre-existing institutional constraints, all that culture, all those power relationships, all that path dependent behavior, all that ugly uncertainty, all that geographical and social diversity, all those socially constructed relationships and personal networks, all that patchy opportunity, all those various biases and prejudices, all that discrimination, all those technological convulsions, and all that accumulated knowledge had to be swept aside. It had to be assumed away and made to be of no importance. Heck with it all.
No, economics need not delve into such ugly matters. Economists could leave that stuff to lesser social theorists. They could abstract the economy up, up, and away, from anything that might taint the relentless pursuit of rational choices, optimization, and, most of all, the happy arc towards the stasis of equilibrium.
It has never worried economists that the denizens of their model economies, the ‘units’ or the ‘agents’ who do the exchanging in their test tube markets, are the self-same idiots who vote for redistributive government policies, who blithely ignore incentives and undertake all sorts of irrational activities, who constantly change their minds, muddle up their priorities, mismanage their budgets, and generally screw up their financial lives. Yet those dunderheads then are able to become paragons of rationality and automatons of decision making when they pop up in a market.
This extraordinary leap from one extreme to another on the part of the actors at the center of their so-called science seems not to concern economists. It’s a psychological gyration of epic interest to anyone interested in humanity, but of no interest at all to economists. When you unmoor yourself from reality such make-believe behavior can become normal.
I suppose its one of those pre-existing conditions we hear so much about when we discuss health insurance. And just like the health insurance industry, in order to arrive at the result they want, economists ignore such conditions.
After all, that ugliness pre-exists economics. So it’s not part of the subject matter.
How convenient.
