Keith Rankin

Reference: Rankin, Keith (1997) "Demonic Calculations", New Zealand Political Review 6(3):12-15.

Editor's Introduction:

• A predictable universe in which reason reigns supreme and from which superstition and passion have been excluded has long been the dream of would-be philosopher kings. But when the ideal overrules the real the results are not always pretty. In economics especially the Procrustian spirit of 'one size fits all' distorts and disfigures our social institutions. Though claiming the liberal mantle for their own, the 'economic rationalists' of the New Right continue to demonstrate an affinity for totalitarian 'solutions' which is truly disturbing.

SCIENCE: A CANDLE IN THE DARK?

In a review of the last book (The Demon Haunted World: Science as a Candle in the Dark) by Carl Sagan, renowned for his proselytisation of science to the masses, Richard Lewontin (New York Review of Books, 9/1/97) describes a debate in Arkansas in the 1960s. He and Sagan defended Darwinism against creationist opponents, one of whom had a PhD in evolutionary biology. Perhaps lacking the rhetorical skills of David Lange in his Oxford triumph over Jerry Fulwell, the good guys of scientific rationalism lost the debate, as adjudicated by the Little Rock audience. Fearing for their lives, they got out of town as quickly as they could. Lewontin came to understand that non-rational knowledge, mythology, faith and superstition have important roles in people's lives. And he came to understand that science cannot answer all our questions.

For Sagan, however, the audience's resistance to scientific truth and his educated opponent's rejection of evolution were tantamount to the work of demonic forces. Perhaps economic rationalists of the 'new right' see their opponents in the same way as Sagan did: as ignorant, stupid, malicious? If so, it would be natural for them, enlightened by what they see as the certain truths of economic science, to believe that the world would be a better place if it could contain the stupid, bring light to the ignorant, and suppress if not eliminate the malicious.

I am a fan of science, and I would agree with Sagan's views on any particular topic more often than not. Yet scientific knowledge itself rests on unprovable assumptions, and scientific practice features selective blindness. Lewontin notes that "no serious student of epistemology any longer takes [seriously] the naive view of science as a process of Baconian induction from theoretically unorganised observations.... Before sense experiences become 'observations' we need a theoretical question, and what counts as a relevant observation depends upon a theoretical frame into which it is to be placed. Repeatable observations that do not fit into an existing frame have a way of disappearing from view." Scientists and economists should be tolerant of knowledge selected using frameworks or methodologies different to their own. That is the essence of liberalism.

The project of western 'Baconian' science is to learn about nature in order to control, harness or improve it. Man, in lieu of God, intervenes in constructive - indeed creative - ways because the world is not perfect, and indeed cannot even be conceived to be perfect. Every state can be bettered. The science of Francis Bacon and Isaac Newton falls into this Aristotelian or materialist tradition, the progressive tradition of science which has dominated most of the twentieth century, the tradition of unlimited growth. Indeed, much of Sagan's science falls into this tradition in which our world can be improved, through positive science, by adding good things to it.

The alternative Platonic or idealist tradition sees the world we inhabit as an imperfect copy of a perfect abstract world. Newton's legacy - an image of an harmonious law-abiding mechanical universe - did much to raise the profile of this 'nature knows best' idealism. Demons are the imperfections of our world, arising from human fallibility. In this tradition, the scientific project is to reveal the underlying world, not to change it. Knowledge is valued for its own sake, and the highest form of knowledge is to know not the 'headline' but the 'underlying' truth. Improvement comes from convergence with nature's perfect blueprint, and that means ridding the world of the demons which spoil the picture. The Platonic project is essentially negative, removing the bad rather than adding the good.

100 years after Newton (who believed in astrology), Simon Laplace made God (and astrology) redundant. His astronomy reflected and reinforced the spirit of natural harmony that pervaded the 'enlightenment' world of western Europe and its American colonies in the late eighteenth century. The ideal world, as revealed to us through our studying the heavens, was fully self-correcting.

Platonism continued to dominate western thought until around 1850, but in an increasingly pessimistic form. From the 1790s, enlightenment rationalism and Christian fundamentalism conflated into a Malthusian fatalism - described by Boyd Hilton in The Age of Atonement. Modern economics emerged, in Britain, as the 'dismal science'. It emerged out of conditions of strict intellectual censorship, a British legacy of the French Revolution. Thomas Paine and many other libertarians of the left and the right had no real choice but to leave Britain.

ECONOMIC RATIONALISM

Laplace introduced a second kind of demon, an abstract demon who knows everything and can fully predict the future. Such a demon had no pejorative connotations to an atheist such as Laplace, but would of course be interpreted negatively by both religious idealists and the opponents of scientific rationalism. The post-Laplacean project known as 'economic rationalism' or 'new right ideology' is to realise a world in which we can all become calculating demons (alias 'economic man'), planning our lives, discounting our pleasures, mapping our futures, providing for our old age. For such demons, calculable risk does exist but uncertainty does not.

Laplacean demons are 'knowing' beings. Brian Easton warns of the dangers of philosophically correct 'knowing' economists within government, exerting a negative form of control over their profession:

Until the idealist project is realised - and even idealists accept that it can never be fully realised - the closest real approximations to Laplacean demons are Easton's "philosopher kings". Scientists in Laplace's time were indeed known as 'natural philosophers'. Laplace's 'demon' metaphor is particularly apt, because people who see themselves as more knowing than the rest of us, and who are placed in positions of influence, easily become demons to those of us who are discomforted by philosophical correctness. To the people of Arkansas in 1964, threatened by scientific rationalism, Carl Sagan was Carl Satan. The demon-hunters were themselves demonised.

The rise of social science parallels that of natural science. From the 1850s' heyday of John Stuart Mill's political economy, through economics' professionalisation phase under the dominant influence of Alfred Marshall, to the macroeconomics of John Maynard Keynes, economics conformed with the Aristotelian tradition. It sought prescriptions to create a better world; a more prosperous and a more just world. By and large, those prescriptions, while not unsuccessful - my colleague Tim Hazledine sees the 1960s' experience as the basis of a blueprint for the twenty-first century (NZ Herald, 18/3/97) - failed to live up to their promise. We became disappointed, even disillusioned, as Albert Hirschman eloquently explains in his 1982 book Shifting Involvements: Private Interest and Public Action.

The 1970s and 1980s brought change however (as noted by Terence Hutchison in Changing Aims in Economics), reflecting both an emergent idealism in academic economics in the 1960s - especially in the USA which was founded in the enlightenment era, and which still clings to its Jeffersonian myth - and an increased disquiet about the potential of Hamiltonian intervention to improve our lives. (The ideological clash between Thomas Jefferson and Alexander Hamilton in the 1790s still pervades American intellectual life in the 1990s.)

Economic science in even its applied forms became idealist, abstract, virtually reducible to mathematical formulation. Ideals of private virtues and private acquisitiveness as the foundations of the public good were reinstated as the core axioms of economics, creating a utopian picture of an ideal self-regulating economy working much like Laplace's solar system. The policy agenda came to be to create an economy without 'distortions'; in short, to create heaven on earth. Treasury's heaven. Plato's heaven.
In the heaven of Charles Murray, co-author of The Bell Curve:

Both western economic rationalism - premised on the primacy of the individual - and Confucian economic thought, premised on the primacy of the family, reflect an underlying Platonic conservatism. Mandarins of both West and East tend to be intolerant of dissenters - stirrers, agitators, whistle blowers and other demonic influences - who are working towards different visions and ideals. Societies dominated by such intellectual conservatism become both adversarial and resigned. Each adversary has a stronger sense of what it is against than what it is for. Pessimism strengthens on one side when the demons of the other side become more influential. The natural urge is to attack the threatening demons rather than to try to understand them. Rationalism breeds negativity, and worse.

The demons of current New Zealand politics are readily identifiable. Demons of the right include inflation, protection, benefit dependency, government debt, fiscal risk, universal pensions, minimum wages, and the University of Auckland Economics Department. Demons the right fear include financial transactions taxes, budget deficits, higher income taxes, and universal basic income. Demons of the left include economists, GDP statistics, men, Jenny Shipley, anyone called Roger or Rod or Rodney, the Business Roundtable, Standard and Poors,
and one-eyed nuns^* from Chicago.

Inflation is a typical example of a demon; an imperfection. It probably is 'bad', at least some of the time. But getting rid of it is often worse. In Hirschman's Strategy of Economic Development it can be good, not simply because it lowers the real interest rate, but also because it is a problem, and because problems can be 'good'. We cannot have solutions without problems. Genuine problems, properly identified, energise an economy. Creative solutions follow. Imperfection is a source of enrichment:

The world is a better place for creatures of higher intelligence because they make more mistakes, have unrealistic expectations and experience disappointments. The real world is a 'second-best' world, an imperfect world, by any definition. But eliminating mistakes cannot make it less imperfect, because the human world is an evolving place, creating new problems, imperfections, demons, as part of the process of change. The real world is better than the simple 'first-best' ideal world of economists' core abstractions. For example, evolution depends on mistakes (mutations). A first-best world could not have emerged from the primeval slime. Sexual reproduction makes no sense in a Platonic world, but plenty of sense in a "demon-haunted" world characterised by diversity, uncertainty and vulnerability. A world with sexuality is certainly a better world than one without.

For Hirschman - a highly esteemed economist, certainly eccentric by the conformist standards of the profession as a whole (his work is the subject of a 1995 book Discovering the Possible; the Surprising World of Albert O. Hirschman, by Luca Meldolesi) - a world without mistakes and disappointments might not be bearable. The "costs" associated with being less than 'ideal' are less than the "benefits" arising from mistakes. Hirschman is a playful economist, who shows many ways in which reality confounds rationality while still remaining amenable to investigation. His "surprising world" is full of paradoxes, and all the better for it.

Hirschman is by no means the only believer in the virtues of imperfection. By and large, economists, especially mathematical economists, love paradoxes. More academic economists are fascinated by the nuances of economic behaviour than by the virtues of ideal systems as political blueprints. Paul Segerstrom, in a 1988 article called "Demons and Repentance" (Journal of Economic Theory), quotes pop singer Deborah Harry: "Accidents never happen in a perfect world…. I never lie. I never cry." Segerstrom notes that "The presence of demons leads to Pareto superior … payoffs", meaning that, in the kinds of real world situations he is contemplating, occasional irrational behaviour leads to superior outcomes for all parties. Economics should be a source of fun, not fear.

ECONOPHOBIA

The achievements of economics are, no doubt, disappointing. That is both a reflection of our expectations, our attitudes, and the attitudes of those economists who see the core abstractions of social science as a blueprint for utopia. As Lewontin says, "Biologists are not the only scientists who, having made extravagant claims about their merchandise, deliver the goods in bite-size packages. Nor are they the only manufacturers of knowledge who cannot be bothered to pick up a return package when the product turns out to be faulty."

Neither Laplacean nor Saganic demons need divert us from our search for well-being. Fear of economics is a problem, not a solution, for the left. Economic literacy by no means makes a person into a conservative. Economics does not constitute a single project: it can both investigate the world for what it is, using a variety of theoretical and historical approaches, and investigate abstract systems for what they are - simplifications rather than ideals - generating new insights.

The right should engage in debate with the left, rather than seeking to purge it. And people on the left while engaging constructively with the right, should focus on formulating their own visions of social progress and devising practical democratic means to bring their visions to fruition. Econophobia is a barrier to social progress. Economics is neither as good nor as bad as it is made out to be.

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