Limiting the debate

Mainstream thought has failed. But that doesn’t stop mainstream thinkers from attempting to limit the terms of debate.

It doesn’t take much in the way of argument or evidence to demonstrate that mainstream thinking has failed. Mainstream economics has failed—in not being able to predict the current crises, in creating the conditions for these crises to occur, and in not knowing what to do once the crises did occur. Similarly, mainstream political thought has failed—in celebrating a set of protocols and conventions whereby democracy is limited to a particular set of political institutions and decisions, and is excluded from other areas such as the enterprises in which people spend their working lives.

These ideas have failed but then Paul Krugman and Timothy Snyder step forward to demonstrate they’re the only game in town. There is no alternative.

In Krugman’s view, economics is limited to a set of models defined by maximization with equilibrium (with perhaps a bit of agent-based economics thrown in).

We imagine an economy consisting of rational, self-interested players, and suppose that economic outcomes reflect a situation in which each player is doing the best he, she, or it can given the actions of all the other players. If nobody has market power, this comes down to the textbook picture of perfectly competitive markets with all the marginal whatevers equal.

Some economists really really believe that life is like this — and they have a significant impact on our discourse. But the rest of us are well aware that this is nothing but a metaphor; nonetheless, most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point or baseline, which is then modified — but not too much — in the direction of realism.

This is, not to put too fine a point on it, very much true of Keynesian economics as practiced (leave aside discussions of What Keynes Really Meant and whether we’re all apostates). New Keynesian models are intertemporal maximization modified with sticky prices and a few other deviations (such as balance-sheet constraints). Even IS-LM loosely appeals to maximization arguments to derive the slopes of the curves, while analyzing outcomes by comparing equilibria.

Why do things this way? Simplicity and clarity. In the real world, people are fairly rational and more or less self-interested; the qualifiers are complicated to model, so it makes sense to see what you can learn by dropping them. And dynamics are hard, whereas looking at the presumed end state of a dynamic process — an equilibrium — may tell you much of what you want to know.

Those are the limits of economic science—maximization and equilibrium—with perhaps some tinkering around the edges, to introduce additional details about individual economic agents and some kind of mechanism to move from one equilibrium to another. Everything else is economic non-science, which of course if you say it quickly really means nonsense.

Snyder adopts a slightly different approach, trying to show that contemporary right-wing libertarian thought (Ayn Rand plus Friedrich von Hayek) and Marxism are two sides of the same coin.

The irony of today is that these two thinkers, in their struggle against the Marxist left of the mid-twentieth century, relied on some of the same underlying assumptions as Marxism itself: that politics is a matter of one simple truth, that the state will eventually cease to matter, and that a vanguard of intellectuals is needed to bring about a utopia that can be known in advance. The paradoxical result is a Republican Party ticket that embraces outdated ideology, taking some of the worst from the twentieth century and presenting it as a plan for the twenty-first.

And the alternative?

The way to national prosperity in the twenty-first century is surely to think non-ideologically, to recognize that politics is a choice among constraints and goods rather than a story about a single good that would triumph if only evil people would allow it to function without constraints. The market works very well for some things, the government is desperately needed for others, and stories that dismiss either one are nothing more than ideology.

Radical thinkers might enjoy the criticisms of right-wing libertarian thought penned by Krugman and Snyder. But they do so at their peril, because the way those criticisms are formulated limit the terms of debate to mainstream economics and politics—to a narrow set of ways of doing economics, defined by maximization and equilibrium, and to a narrow set of debates, defined by the appropriate mix of markets and government intervention.

 

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