Shall we pretend events like globalisation and the feeding of billions are the clear result of the actions of some brilliant men, and that’s it? Shall we produce a Marvel comics version of the free market, that instead of focusing on the invisible (indeed) interactions of many, praises just the courage and intelligence of few?
Read the whole thing. I believe that the issue of agency is indeed very important.
1. As individuals, we are inclined to view our successes as due to our own efforts and choices and our failures as outside of our control.
So, if you have some good things in life, you tend to overstate how much you earned them and understate the extent to which you were fortunate. When you look at others, you tend to see a more appropriate mix of earned success and luck. As a result, to most people, the economy looks unfair. We can see the element of luck in the success of those doing better than us. We don’t see the element of luck in our own success.
One wise piece of advice I got from a co-worker is that they way to be happy is to compare your salary and work effort to that of colleagues who work harder and earn less. Instead, most people do the opposite, and it makes them unhappy. It is a very difficult trick to see your own salary as being lucky in comparison with someone else’s.
2. We are more inclined to think of economic outcomes as determined by deliberate agency than by emergent phenomena.
Thus, we attribute the state of the economy to policy. In my view, we much over-rate the control that the Fed has over the stock market and the economy.
The politician who promises to “fix” the economy can take advantage of both of these inclinations. He can appeal to people’s bias toward seeing the system as unfair by saying that the system is broken. And he can take advantage of people’s bias to over-rate his ability to control economic outcomes by saying that he can fix the system. Of course, after he has been in office a while, unless he has gotten lucky, these inclinations will work against him and in favor of a challenger.
“Viewed from Mars, capitalism has been a huge success. Free enterprise has generated wealth and removed hundreds of millions of people from poverty. But viewed from Earth, what often stands out is how many have been left behind by the march of globalization and technology, while others have gotten ahead by methods more foul than fair”.
Yes, and there are other ways this same basic points can be looked at: viewed from the last 5-10 years, capitalism has been a disaster; viewed from the last 5-10 centuries, it’s been a miracle. Viewed from the perspective of United Steelworkers Union employees, trade liberalization has been a kick in the teeth; viewed at the national level, it’s been a big victory. Average people do not at all understand the big picture, nor do they understand abstract concepts like absolute vs. relative losses, but most people will get it once it’s explained.
But has it really been a disaster? Relative to expectations and over-reaction, yes, but those expectations were probably part of the problem. They made people take too much debt, buy too much house, not recognize the impacts of globalization, etc.
If economists could have properly and effectively warned people we weren’t as rich as we thought we were I wonder how much of the real disaster could have been avoided.
@ Jeff R:
Yes, fortunately, all of the American electorate is above average and can **understand,** but may not readily accept, those explanations.
True. My gut feeling, though, is that a lot more horses would drink if someone actually led them to the water for once, if you follow my meaning. The point Dixon was making which I quoted above is something most people, I suspect, have simply have never been exposed to.
Maybe crony capitalism is a good thing. A few politicians and lobbyists get rich railing against the cronies, but the cronies pay just enough to keep the politicians from cooking the golden goose.
The risk is periodically the economy stagnates by 10% or so and the rhetoric threatens going backwards on the order of 90%.
Inferred in that bit of Mingardi quoted, and embellished by the discussion of “Agency,” is (Mingardi’s word) the RESULT. We are looking at a “Resulting Condition,” not the operating effects of a **system**.
The following is from the comments to the Mingardi piece:
Economic “journalism,” as well as studies of the deterministic aspects of evolution might be greatly enhanced in their observations of our current forms of “Capitalism” (and their social structure results), by recognizing and always explaining that what is referred to as “Capitalism” is not a system.
While the word may be used (as in “Crony Capitalism”) to describe political relationships that have economic consequences is still does not define a system.
The conditions resulting from particular (and varying) relationships occurring in specific (but varying) circumstances constitute are what we observe as the current forms of “Capitalism.”
North,Wallis & Weingass have opened studies into Limited Access Orders and Open Access Orders . Their studies indicate that the movement of social orders from Limited Access to Open Access is accompanied by increases in the dominance of impersonal relationships which replace the more common interpersonal relationships of Limited Access Orders.
Other scholars (Coase, e.g.) have observed some of the effects of those changes to the “impersonal” as “externalities.” But little attention has been given to how the impacts of the “impersonal” have taken the place of “adverse fate” and other explanations or justifications.
It is possible that the effects of the “impersonal,” which form is largely essential to the relationships and circumstances that create our current resulting conditions are really at the root of general dismay at adverse personal or social results.
It is doubtful that the effects of the “impersonal” can be made more palatable (despite its nutritional values). However it might be made more acceptable when constantly compared to the effects (with their extensive histories) of the determinations of relationships and circumstances as interpersonal within Limited Access Orders, such as family, clan and tribe.
Studies so far indicate that mature Open Access Orders have been with us for perhaps not much more than 150 years, almost entirely in what are today the “developed societies.” It has probably been only in the last 60 to 75 years that observations have been made and considerations taken of the “side effects” of “Open Access.” Differing cultures have already made differing responses to those “side effects.”
So far, there is no evidence that developed societies should abandon the advantages of Open Access simply because they have not yet found adequate [?] Responses to the “side effects.”
To the contrary all other social orders and actual “socio-economic” systems (usually designed) produce effects that may begin as “side effects” but come to dominate the resulting conditions, as has been demonstrated in most totalitarian and other positivist schemes.
Anyone who cares must stop using the word capitalism, a slur coined by Karl Marx. He should use instead “individual freedom to earn and choose”. (I’m open to better wording.)
About “crony capitalism”. The average person interprets this as a flavor of capitalism. Instead, we should speak of government corruption and and a system designed by politicians for taking bribes. The government is a socialist institution.
Freedom to work, own, and choose is incompatible with politicians taking bribes and handing out favors under the color of law. That is not part of individual freedom of association and trade, and personal liberty.
Every discussion of “crony capitalism” convinces some people that individual freedom (capitalism) is a corrupt lie. People should be reminded that political bribes are a construct of government.
We could eliminate bribes and favors. It should be illegal for a politician to accept a bribe, but not punishable to offer/deliver one. Politicians would not accept bribes for fear of being outed. Current practice is usually to protect the politician and prosecute the offerer. This keeps corrupt politicians safe.
I don’t earn a fortune, but people pay me to come into my home to sing for me and have me critique and help them. When I look at it this way, this is not a bad gig.