Friday, December 3, 2010

Political Economy

An interesting post over at Duck of Minerva, given recent discussions here and over at LOG, entitled "In political economy, politics comes first."

A social science that proceeds inductively from a limited wealth of experience will likely be unable to grapple with really important shifts in political behavior. Generalizing from the international arrangements that governed the world economy over the past sixty years to the actions we can expect influential actors to take in the next decade is wrong-headed. It is time, instead, to begin preparing both scholars and policymakers or a world in which debt defaults are once again policy tools, states reassert their primacy over economics, and protectionism and capital controls are put back on the table.

FLG still maintains that politics can only assert its primacy temporarily. Eventually protectionism and capital controls will yield. And so in the long run, economics is the primary driver. For example, the author of that post writes "I expect the eurozone to do what everyone believed was impossible as recently as seven or eight months ago: to shrink to the point where it is an actual optimal currency area, which is to say that it will probably be Germany, France, Benelux, and some German quasi-possessions on its borders (Austria, the Czech Republic, and Slovakia)."

Sounds like economics, optimal currency area, wins over politics, currency as a means toward European political integration, to me. So, to the extent that the author is criticizing existing IPE, he's criticizing it for assuming that politics, which is more short-term, has been assumed to be long-term.

9 comments:

Tim Kowal said...

The observation that "politics can only assert its primacy temporarily" is a very important one. I recently wrote something along those lines about values and politics---that "society precedes government. That is, not only are the two distinct, but the latter is inferior to the former in its representation of the values and beliefs of its constituent members. Law and government reflect only a very narrow subset of the important values and beliefs of the society out of which it arises. And where law and government fail to represent the society’s important beliefs and values—and particularly, where it misrepresents them—their authority is greatly injured."

I think it is true that this analysis is not limited to values, but instead applies broadly to most of society's institutions. Economics, markets, science, technology, these are fundamentally expressions of society, as opposed to politics/law/government. It is the job of politics/law/government to express those things to the extent necessary for the orderly continuation of civic life. But things like economics, markets, science, technology, and moral values all become progressively more bastardized when we take them to be fundamentally expressions of politics/law/government, and divorced from the underlying expressions and choices of society.

FLG said...

Tim:

I read your original post, and I've been trying to determine how it intersects with my time horizons theory. Maybe it doesn't. Maybe, as I think it was Seine over at Athens & Jerusalem who said, it's all about values and not time horizons.

In any case, agreed.

nadezhda said...

Well, an empiricist like me (she says with a grin) would have said at the outset (as I strongly suspected at the time) that the political and politico-economic and financial institutions of the EU simply weren't congruent with the economic program. So they should have been more cautious about the perils of wishful thinking, dug a bit deeper in that optimum currency area literature, and adjusted their ambitions accordingly.

Stupidly designed and implemented policies don't tell us anything particularly profound about the "primacy" of either politics or economics, other than The Primacy of the Will and a buck won't buy you an espresso at Starbucks. It would be like blaming Tinker Bell for our failure to clap hard enough. In this case, one could make a similarly strong case for the primacy of politics.

If the economic activities we want to encourage will predictably depend on particular institutional capacity in order to work, and if we nonetheless have a broken political system that predictably can't manage to create or provide for that capacity, we can't expect either the economics or the politics to work out so well, can we?

I think you're working a bit too hard to find evidence of your theory. I don't mean to sound snarky. But unless you want to devote your time to assembling irrefutable proof that economic policy is fruitless against the invisible hand or Providence or the wheel of fate, how about devoting your energy to thinking about policies that wouldn't collapse on the shoals of either economic fundamentals or the irreconcilable conflicts of political interest groups or incompatible ideologies.

I'm fundamentally a cynical optimist (or if you prefer, an idealistic pessimist), so I don't think it's entirely beyond the capacity of human ingenuity.

nadezhda said...

FLG -- Since no one at the League seems interested in pursuing our conversation I thought I'd bring my comments on your "time horizon" theory over here.

Ah! Your Plato confession finally explains a great deal. And in turn, I confess I'm an old-fashioned, sceptically eclectic, Lockean empiricist with an allergy to Plato, who lost me decades ago in the cave.

Since the US political spectrum is so confused as to be devoid of meaning, it's easier to place myself somewhere between (European) center-right and center-left depending on the topic -- "wet" in the vocabulary of Margaret Thatcher, who certainly had a sense of the "fierce urgency of now". Philosophically, an Andrew Sullivan who doesn't worship at the altar of Burkean tradition, if you will. At heart, I'm a principled Trimmer. But in Glenn Beck's America I discover I've been relegated to the far reaches of inter-galactic space. Seriously disorienting!

As to whether the empiricist/rationalist divide explains different policy-preference time horizons and variations in discount rates, I'd like to see you flesh it out more. I expect there's likely something to it. Though you must admit that empiricists don't necessarily make the best radical revolutionaries.

That's the thesis, as I understand, of Gertrude Himmelfarb's new comparative study of the British, French and American Enlightenments -- the British and Americans of the Moderate Enlightenment were nice little Lockean empiricists, not like those big ol' nasty French worshipers of Reason of the Radical Enlightenment. (I have a certain sympathy for that explanation despite its over-simplification and my general bias against Himmelfarb's geopolitics. Although I also must confess that, though I love Locke, I really detest a great many of the Whig politicians from the Exclusion Crisis through the Whig Ascendancy of the first two Georges. They display many of the less savory characteristics of Himmelfarb's own neocon fellow travelers.)

I'm also curious how you fit the past few decades of right-wing idealist policy preferences, impervious to empirics, like the Laffer Curve or "drowning the government in the bathtub", which are as focused on the purported benefits of radical near-term change as anything on the empiricist left. It's part of why the "left-right" spectrum is so confused in the US -- I find myself far more "conservative" than the Heritage Foundation or the editorial pages of the Wall Street Journal.

con'td below

nadezhda said...

Part 2


While you're playing with your theory, you might want to think about whether your empiricist/rationalist division may parallel tensions that emerged over the centuries between "this world" and "other world" notions of sacred and profane time in Christian politico-theology (though it often flipped at the extremes -- the more immediate the prospects of the eschaton, the more "this-worldly" the intensely other-worldly folks tend to get). In the century Locke was writing, the differences in beliefs in an active Providence, as well as in the significance of the Fall, were particularly powerful philosophically, producing different degrees of fatalism vs belief in the efficacy of action and radically different variations in "time horizons". So looking from that angle, Locke's empiricism and political preferences match up rather nicely with his heterodox theological orientations.

Your approach also bears a resemblance to Macaulay's "Whig interpretation of history," which divided the world into parties of progress and parties of conservation, both necessary, with the former more willing to punt on the future and the latter more concerned with the world we may be losing. So their differential discount rates would reflect both how they measure, and the relative values they place on, "prospect of gain" versus "risk of loss". Of course in Macaulay's telling, Locke the empiricist is also the prophet of Whig progress.

Shifting from high-level theory to policymaking, I think your theory also needs to reflect that a bias against taking action is just as much "politics" as a bias in favor of action. Deciding not to act (or failing to agree on a course of action) produces policy by default, but it's still policy arrived at by political means. I think that was part of what sent me ballistic re the initial rather smug formulation of (short-term) "politics" and (long-term) "economics." Major norm lurking in what looks superficially like neutral description.

In discussing specific policies, I think we need a good deal more clarity re the terms we're using (I would, wouldn't I, but I do think murky terms are the source of a lot of ships passing in the night.) I also think we need a variety of analytical tools available which we can select from, based on what's more suited for the specific things we want to examine, over what time frame, and at what level of analysis. So even if we're going to rely on right reason to search for the Truth, seems to me we need a few empirics to check whether our concepts and tools appear to cast a shadow of reality onto the specific matter at hand.

Otherwise we're going to be engaged in a dialogue des sourds or screaming matches in which this "progressive" feels compelled to point to the real world and explain for the umpteenth time why she is neither "pro-government" nor "anti-market" nor "pro-regulation", yadda yadda.

I am glad that we seem to have reached agreement that your approach isn't purely descriptive and has some pretty powerful norms buried in its premises. But then again, I accept that my approach is also not simply descriptive.

I don't expect us to agree on norms -- we see the world somewhat differently (I don't believe in Platonic fundamental economic equilibrium values, for starters, from which much else flows) and we seem to have different political and cultural value sets. What I would, however, suggest is that one set of universals does not fit all. So as long as you plan to stick with Plato, I think you'd benefit from rethinking how you're defining and applying your universals.

Tim Kowal said...

I think it is mostly about values, but there is some overlap with the time horizons theory. I think I probably failed to complete the argument to tie my argument in with your statement that "politics can only assert its primacy temporarily." Once we understand that society precedes politics/law/government, it follows that all values and policies are ill-fated that have their roots in the shallow topsoil of politics/law/government rather than the deep soil of society. Yet, it is often much easier to temporarily change, invent, and advance values and policies through politics/law/government than through society proper. Forced school desegregation comes immediately to mind as an example. Rooting out evil racist motives in school administration is certainly a worthy goal. But attempts to cover over with legislation and court orders the multitude of culturally/socially entrenched problems causing the poor performance of certain groups of people is certainly not going to have any payout beyond the initial runs of beneficent-sounding press releases.

I'm not as prepared with examples from economics, but I think the general time horizons view holds. Economics and markets are an outgrowth of the values and choices of society. Politics/law/government can temporarily move the needle with subsidies, or even hurry along the inevitable. But if the policies are out of step with underlying market forces, they will eventually crumble. A rowboat can't head upstream indefinitely.

FLG said...

nadezhda:

"I think you're working a bit too hard to find evidence of your theory. I don't mean to sound snarky. But unless you want to devote your time to assembling irrefutable proof that economic policy is fruitless against the invisible hand or Providence or the wheel of fate, how about devoting your energy to thinking about policies that wouldn't collapse on the shoals of either economic fundamentals or the irreconcilable conflicts of political interest groups or incompatible ideologies."

Truth be told, I don't really hold that my time horizons theory has perfect, universal explanatory power. I find it useful construct for understanding a lot of cases. Consequently, I don't think irrefutable proof is possible, but nor do I think that economic policy is futile. It works for a time, but not forever.

I'm not really interested in specific policies either. Well, to the extent that I am it is more to recognize that policies need to take dynamic circumstances into account. So, to continue the flood analogy, it's better to divert water than to try and stop it cold. If one is going to build a damn, then make it out strong, but flexible material to the extent that one can.

Continuing on to your time horizons responses:
"As to whether the empiricist/rationalist divide explains different policy-preference time horizons and variations in discount rates, I'd like to see you flesh it out more. I expect there's likely something to it. Though you must admit that empiricists don't necessarily make the best radical revolutionaries."

To the extent that radical revolutionaries are motivated strongly by present circumstances, by which I mean not their existence but their direct, immediate causes, and want to enact change ASAP, I'd say they are both empirical, or at least materialist, and have short time horizons.


For some reason, blogger doesn't like your second comment. I even tried to repost it for you to no avail. But...

"While you're playing with your theory, you might want to think about whether your empiricist/rationalist division may parallel tensions that emerged over the centuries between "this world" and "other world" notions of sacred and profane time in Christian politico-theology (though it often flipped at the extremes -- the more immediate the prospects of the eschaton, the more "this-worldly" the intensely other-worldly folks tend to get). In the century Locke was writing, the differences in beliefs in an active Providence, as well as in the significance of the Fall, were particularly powerful philosophically, producing different degrees of fatalism vs belief in the efficacy of action and radically different variations in "time horizons". So looking from that angle, Locke's empiricism and political preferences match up rather nicely with his heterodox theological orientations."

That's actually something I have been thinking about. I even tried to apply it to al-Qaeda, which I beleive, contrary to popular opinion, is based upon thoroughly modern assumptions, particularly materialist ones. But that's a discussion for another day.

FLG said...

"Your approach also bears a resemblance to Macaulay's "Whig interpretation of history," which divided the world into parties of progress and parties of conservation, both necessary, with the former more willing to punt on the future and the latter more concerned with the world we may be losing. So their differential discount rates would reflect both how they measure, and the relative values they place on, "prospect of gain" versus "risk of loss". Of course in Macaulay's telling, Locke the empiricist is also the prophet of Whig progress."

Actually, what I think that conservatives, especially in the economic sphere, are concerned about potential future economic losses, by which I mean that conservatives are concerned about small economic disincentives, through taxes, etc, that will inhibit growth and through compounding greatly reduce future economic output. Of course, there's also the short-term analysis that rich people simply don't want to pay taxes or be burdened by regulations, but I don't think that's the whole story.

An example I use a lot is the death panels. Progressives said they're no death panels in the legislation. Therefore, opponents who say that are crazy. On the other hand, it's possible, I'd even say probable, that the health reform law puts us on a path to something like death panels, if not now then in the future. That kind of explains the short-term versus long-term analysis. Worry about what we know exists. Worrying about what could exist, even if you think it's probable is irrational fear of bogeyman.

All that being said, I'm not arguing that all self-described politicians are pure conservatives. Many of politicians, on both sides, are a bunch of hacks with no serious ideological approach to the world. They've picked a side, maybe they even believed it at one point, but now generally just fight for their team.

Speaking of which,

"I'm also curious how you fit the past few decades of right-wing idealist policy preferences, impervious to empirics, like the Laffer Curve or "drowning the government in the bathtub", which are as focused on the purported benefits of radical near-term change as anything on the empiricist left."

Well, the full quotation is "My goal is to cut government in half in twenty-five years, to get it down to the size where we can drown it in the bathtub." That sounds more like a long-term, than a near-term plan to me.

FLG said...

And I'd like to add a quarter century is a really long term plan for a radical nutjob like Norquist.

 
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