The post on amending our social order by enclosing the commons generated by the universal franchise provoked an animated discussion, not just at the Orthosphere but in the comments thread of a post devoted to the proposal over at Nick Steve’s site, The Reactivity Place. I also had some interesting email exchanges with Orthosphere readers on the proposal. Out of these various threads, there are four topics that I think merit further discussion.
Category Archives: Economics
A Modest Proposal: Enclose the Commons
In a previous post, I asked:
… what if the current positive feedback circuit [now operative in our politics] could be re-wired so that it was a negative feedback circuit, like that of the steam engine and its governor? What if the penalties for vicious and imprudent political decisions were immediate and severe, while the rewards for virtuous, prudent political decisions were both explicit and compelling?
This in reference to the pervasive moral corruption of our lawgivers, and by extension of everyone involved in politics; for:
As things now stand, the people charged with the reformation of society – chiefly our legislators, but by extension everyone who participates in politics, from executives and bureaucrats to lobbyists and electors, both the regulators and the regulated, and especially the media – are rewarded for increasing the noise of our social system. Where there is a problem, especially of the sort caused by the brakes they have already installed, they are encouraged to apply further brakes to the brakes, and brakes to the brakes to the brakes, and so on ad infinitum. This is why our code of laws has metastasized, so that laws proliferate without let or hindrance, and so that they more and more pervade every aspect of our lives, no matter how humble.
And this is due to the fact that:
… the basic feedback circuit of a democracy characterized by universal suffrage is positive, a vicious cycle: the electorate is strongly motivated to vote themselves more benefits and lower taxes, more liberty to act out with fewer limits or constraints, or costs, for doing so. The more people see they can get from the state, the more they vote to get from the state. Nothing signals to them that they are demanding too much, that they are eating cultural seed corn. In the circumstances, any other behavior on their part would be irrational. So the bankruptcy of the system – economic, moral, and intellectual – is hardwired in.
Something must be done, or we are headed for a systemic crash. Indeed, we may be headed for such a crash no matter what is done. If so, so be it; the instability of evil is the morality of the universe; let God arise.
But whether we are headed for a systemic crash or not, it behooves us nonetheless, as at any time, to do our best to stave it off. It behooves us always, as our plain duty, to do our best.
How might we arrange things so that the success or failure of policy fed back to the development thereof, so that the present vicious cycle of wickedness had at least a shot at a phase change into virtuosity?
The Metastasy of Wickedness
The basic operation of every society is maintaining its essential order – the order that makes it the society that it is – in the face of adversity. It is the work of tradition: of transferring to rising generations the essential order of their forefathers, amended at the margin, or accidentally, so as to cope with changes in the environment.
This interminable project of social reproduction requires practical wisdom. And practical wisdom is possible only to the virtuous man, and then only to the extent of his virtue. Societies live or die, then, depending upon their preponderant degree of virtue. This is just as true for societies of multi-celled organisms – i.e., for men themselves – as it is for societies of men. It is true for any social organism: for the family, for the tribe, clan or people, for the church, for the guild or business enterprise, for the town or for the nation.
Thus the basic task of social existence, the quotidian moral housekeeping that is the sine qua non of successful social life, is the attainment and maintenance of virtue. The first and most basic product of society then, is righteousness. All other economic production is founded upon it. Worldly success – survival, vigor, prosperity, strength – is the fruit of practical wisdom, of applied virtue. Prosperity, then, is a fairly good indication of virtue.
There are to be sure in this Fallen world many ways to get rich by wickedness. Thus the fact that a man is rich is no sure indication that he is mostly righteous. But even ill-gotten wealth, such as that of the thief or gangster, is the product of a kind of virtue – a corrupted and ill-directed excellence, yes, but an excellence nonetheless (the competition among gangsters is keen, and ruthless; only the best survive). Likewise for the wealth of the corrupt executive or politician. The excellence of these sorts of men lies in their ability to game the system: to exploit the niches created by defects of the social order.
Such men are always with us. And indeed, they are not altogether useless, or they would never have succeeded at what they do. The corrupt politician succeeds by pleasing his constituents and his customers; the thief succeeds by pleasing his fences with the goods he offers; the Mafioso succeeds by pleasing the customers of his drug distribution system. The social utility of such men derives quite directly from their gaming of the system. In effect, their exploitation of defects in the system design corrects for those defects, or at least compensates for them.[1] Their gaming activities are similar in some ways to arbitrage. Like the arbitrageur, the wicked exploiter restores some equilibrium or other, and compensates for a defect of society.[2]
Can the system be gamed? It will be. Indeed, it ought to be.
The Rich are Always With Us
No matter how you set up your society, there are going to be some sorts of people who are better at running their lives in such a society, and they will naturally prosper more than those who do not possess their talents. There’s no way out of this reality; it’s like gravity.
Nor is it a problem that some people are bound to do better than others, and thus to wield more social power than others, any more than gravity is a problem. Indeed, it is one of the bases of social order, as gravity is a basis of causal order.
While differentials of prosperity are not inherently problematic, the way that people are sorted into greater or lesser prosperity may well be. The justice and goodness of the distribution of wealth in society depends crucially on how prosperity is generally achieved in the sort of society you have set up. If you set up your society so that the way to prosperity is by being a brutal gangster, you are going to have a lot of really expert brutal gangsters, and a lot of people trying their best to be brutal gangsters. If on the other hand you set things up so that the best way to be prosperous is to be beautiful and athletically talented, then you are going to have a lot of rich beautiful athletes around, and a lot of people trying to be beautiful athletes. If you make it so that prosperity is achieved by personal rectitude and enterprise, then you’ll have a lot of people trying to be virtuous and enterprising. And so forth.
High priest of cheap chalupas
A guest post by commenter Bill:
Economists form the high priesthood of the Liberal social order. Policy analysis is normally carried out in the language of economics. Almost always, policy analysis just is cost-benefit analysis. Even arguments about inequality are really just arguments about how the cost-benefit ratios should weigh the costs and benefits of policies to particular people.
The courtier whispering in the Prince’s ear is often an economist. If a federal or state agency has a substantial policy analytic capability, then it has many economists. The government’s demand for Ph.D. economists is so vast that these good-paying, easy, benefit-laden, research-friendly jobs are considered a failure mode for a newly minted Ph.D. on the job market. A worse failure mode is to be paid even more by a firm specializing in litigation consulting (economists’ blessings are so powerful that, in significant areas of litigation, it is effectively mandatory to hire one to make the appropriate incantations in court). Worse even than that is to become a beltway bandit: to work for one of the dizzying array of firms which sell economists’ blessings to federal agencies and others lobbying Congress. Cushy jobs as talking heads for think tanks or industry research groups or (horrors) state government bureaucrats are almost beneath consideration.
The Production of Righteousness
In the middle of the night I awoke with a brainstorm about economics. The basic problem at every moment is simple: what is the right thing to do now, the best thing to do?
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Life is not therefore about the production of goods, but the production of goodness. Likewise, ergo, and a fortiori, for a society and its political economy. The Platonic society will produce a great many holy lives; and those that are not quite holy will be often righteous, or at least predominantly excellent. Mere goods are secondary factors, instruments or by-products of righteousness and virtuous behavior. It is only righteousness that can result in true human flourishing, no matter how many goods there may be scattered about the landscape; for righteousness constitutes the proper approach to reality, and the enaction of policies really fitted to the truth of things. Is it not obvious that only such policies are likely to succeed, mutatis mutandis?
Usury versus Reality
To take usury for money lent is unjust in itself because this is to sell what does not exist.
This is not to rule out lending per se, but to rule out usurious lending. It is not to rule out interest per se, but usurious interest. These distinctions obtain, even granted that money can operate as a store of value (although I would point out in respect thereto that money’s capacity to function as a store of value depends entirely upon its general acceptance as a medium of exchange; “stored value” is just a way of saying “deferred exchange”).
Perhaps the distinction might be made clearer by tracing the aetymology of “usury,” which derives from the Vulgate usare, “to use.” A usurious loan is one in which the lender expects to continue to enjoy the value of the use of his money, *in addition* to his enjoyment of the value of his equity interest in the project for which his money has been lent.
Usury
Zippy Catholic has been interested in usury for some time now, and I have learned a lot about it from talking to him about it over the last few years. We’ve been having a colloquy over the last few days about whether government bonds constitute usury, which he has put up over at his site (here).
The basic thing to understand about usury, at least as St. Thomas approaches it, is that usury is selling what doesn’t actually exist. Zippy tried to explain this notion to me in a horribly long thread last year over at What’s Wrong with the World. The example that finally drove it into my understanding was this:
Zippy sells Lydia a $10K bond he has written, secured only by his promise to pay principal and interest (and not by any actual assets). Lydia in turn sells Kristor a similar $10K bond that she has written, again secured only by her promise to pay. Kristor then sells Zippy an exactly similar $10K bond that he has written. Note that no change has occurred in the real wealth – the real productive capacity, the causal power – of any of the three. If any one of them defaulted, they’d all default, and they’d all be in the same situation they had been in before any of the notes were sold.
This is more or less what happened in the Crash of 08.
When the Treasury sells you a bond that is backed only by its own promise to pay, does that constitute usury? Those of you who are into this kind of thing might want to check out what Zippy has to say on the subject. I’m not quite sure he’s convinced me, but neither am I sure I yet know exactly why I feel that way. Working on it!
A test-case for the tenacity of liberalism
A point of contention among the Orthosphere crowd is how long liberalism can hold up as the world crumbles around it (and, in many ways, because of it). Is it a fever dream from which we will soon awaken, or a malignant tumor which no surgery can safely remove?
Europe is increasingly furnishing an interesting test-case for the tenacity of liberalism. How long will they continue to sacrifice their own livelihood and well-being for the sake of the fantastical pipe dream of a united Europe? Every day that passes without the dissolution of the monetary union is a vindication of the latter camp’s claims: that the sway liberalism has over the minds of its adherents transcends all rational considerations, and that the gnostic vision of a perfected man liberated from all the bonds of history, morality, and economic reality, will be pursued until the West is metaphorically discovered dangling from the ceiling fan of its bedroom.
Phase Change
There are a number of different cults in the financial world where I earn my bread and butter. One is the school of technical analysis, whose sectarians are called “Chartists” on the Street. The Chartists try to discern patterns in the curves of recent market indices that resemble other such patterns evident in economic history, and then predict what will happen next on the basis of what followed a previous instance of the recent shape. This is exquisitely bass-ackward, because the recent shape of the curve of a broad market index like the S&P 500 is a derivate of the recent changes in investor expectations about the future course of corporate profits, which are a proxy for changes in overall economic wealth, which are derivates of changes in general economic activity, which are in turn derivates of trillions of discrete economic decisions by actual human agents, that result in physical work. What moves the economy is the work triggered by those decisions; like your decision about whether to enjoy the marginal beer as you read this fascinating blog, or not. For everyone but the Chartists themselves, the patterns in the recent shape of the curve of an index don’t factor into their quotidian decisions. What do thus factor, for most people, are quite concrete moral and aesthetic considerations – like, “Boy, I sure could use a beer; but, these pants are too tight, lately, so …” The Goodness and Beauty, the Economic Value, of society, are produced by the moral and aesthetic decisions of human agents.
Technical analysis, then, is not only risibly reductionist, but it reduces economic activity, not in the wrong way, but in a wrongheaded way, a way that can’t even be wrong; as if physicists were to attribute the behavior of the physical systems under their study to their tables of measurements of such systems.
Sheesh.
