Thinking Like an Economist Undermines Community

Says Stephen A Marglin

Economists celebrate the market as a device for regulating human interaction without acknowledging that their enthusiasm depends on a set of half-truths: that individuals are autonomous, self-interested, and rational calculators with unlimited wants and that the only community that matters is the nation-state.

Stephen Marglin argues, market relationships erode community. In the past, for example, when a farm family experienced a setback--say the barn burned down--neighbors pitched in. Now a farmer whose barn burns down turns, not to his neighbors, but to his insurance company. Insurance may be a more efficient way to organize resources than a community barn raising, but the deep social and human ties that are constitutive of community are weakened by the shift from reciprocity to market relations.

Writes the Harvard University Press

Interesting. A review of the book says that Marglin

sees in the behavioural approach a missed opportunity for a "trenchant critique" of the "assumptions about people that form the core of economics".

Marglin argues that to think about people as always rationally calculating their self-interest is at odds with the way non-economists think about people. Non-economists know that people can sometimes be virtuously motivated to do things that benefit others. But mainstream economics applies what Hume, nearly 300 years ago, called the "knaves principle", according to which "every man ought to be supposed a knave, and to have no other end in all his actions than private interest". And you don't have to agree with Marglin that the way of life of the Amish people of Pennsylvania is the best counter-example to that to think there's something drastically wrong with it.

Eric Beinhocker also wrote an interesting book called the Origin of Wealth According to Beinhocker, economics is in the midst of a revolution – its biggest in over a century – and recent work by economists and other scientists provides us with a radically new perspective on the workings of the economy. “Complexity Economics,” as Beinhocker calls the new paradigm, views the economy as a highly dynamic, constantly evolving system, more akin to the brain, the Internet, or an ecosystem than to the static, equilibrium picture presented by traditional theory.

And this is of importance when we consider we are in a world where communities dominate brands, where we are busy building the network society - I suggest we are having a big collective discussion about society, culture and economics.

Marglin asks

what is lost in ... economic development ... when markets become a sphere unto themselves

What we lose is community. Why? In large part, Marglin says, because economists and calculators have told us that greed is good. says the Times Higher Education Review

He realises, as many of his allies on the Left do not, that just now, in 2008, the ability of ordinary people (well, Chinese and Indian people, but there are quite a lot of those) to get the food and housing and education they want is increasing faster than at any time in world history. A few more decades like this and we all, from Mumbai to Manchester, will have gas barbecues and degrees in Eng Lit and life expectancies into the eighties.

But in the already rich countries, Marglin asserts, "we've had enough"

And I agree we have reached a crisis in consumerism - and our western industrialised world is exhausted in its mission.

Marglin's belief that the history of all hitherto existing societies is the history of class struggle fits uneasily with his criticism of lack of community. When will we cease from strife? Marglin's philosophical criticism of economists is that since Jeremy Bentham (1748-1832) and especially since Paul Samuelson (born in 1915) they have worshipped "algorithmic knowledge" such as the man Max U who populates economics. Strife rules.

But "experiential knowledge", called "tacit knowledge" by Michael Polanyi - michael polanyi and tacit knowledge Marglin argues, bulks more in our lives.

And that's true. It takes a community to raise a child to be more than a three-year-old, and it takes stories and metaphors told in communities to make a social science.

Comments

[amino]

Marglin is partly right in saying that in simple EC101 economics, the individual is a rational calculator, a self-interested calculator. And, of course, this stripped-down model is not a truthful representation of society. So are economists just trying to make society look like their models?

Economics has long moved from this paradigm to more elaborate models that incorporate social norms, peer effects and peer pressure, conventions, and so forth.

Individual rationality -- the cornerstone of economics -- is not inconsistent with group thinking, fads, insurance, risk sharing, ideology. See works by Roland Benabou (Princeton) for instance.

So this book just says half truths. This is just an author who does not really read cutting-edge economic theory, sorry for that.

[Alan Moore]

Dear Amino,

Thank you for the heads up. I shall go and check out Roland Benabou

Thanks for posting

Alan