If there is one thing that I have learned from anthropology, it's the importance of studying things that might be easily dismissed as commonsense, everyday, or completely "normal." What we see as normal or commonsense actually says quite a lot about the cultural systems that surround us. There is, for instance, no reason why many people in the U.S. have a habit of eating three times a day. There's no biological rule that makes eating three times a day "better" than, say, five times a day. It's a common practice, and many people don't really think about it, but there are histories and meanings behind those practices. But that's how culture works - we're all in our own little fishbowls, and we rarely notice the water (cultural norms) that surrounds us. However, sometimes it's a good idea to take a closer look at the little enclosures that surround us, just for good measure.
This is definitely the case when it comes to commonsense beliefs about the relationship between the "free-market" and political freedom. For some, the "invisible hand" of the free market is such a powerful force that it eliminates many of the political problems inherent in human societies, thereby eliminating the need for any sort of government intervention in economic systems. That's the prevailing logic--the water in the fishbowl--in some social circles these days. But the water might not be as clean and sparkly as old Milt Friedman and Fred Hayek once proclaimed.
In many ways, modern western economics is based upon certain assumptions about human nature. One of the primary starting points is the idea that all humans are "rational", self-serving actors who seek to get the most out of every social and economic transaction. That's the "rational-actor" or "economic man" hypothesis in a nutshell. Coming from a philosophical system that is steeped in beliefs about the relationship between individuality and freedom, this foundational starting point isn't all that surprising. The upshot of this theoretical assumption about human nature is that, in the grand scheme, when individuals go about acting in their own interest, this automatically benefits society as a whole. Therefore, the argument goes, the role of government should be limited so that the open market can allow individuals to make rational choices that suit their interests and therefore create a better society on the whole. Yes, this is an oversimplification, but that's the basic framework of the argument, and it's a tune that has been repeatedly played by many, many people. And it all sounds so reasonable, simple, and, well, rational, doesn't it?
The only problem? It's a ridiculously oversimplified calculus of human nature at best, and completely wrong at worst. But that doesn't stop many people from accepting this story about human nature--and political systems--without much afterthought. One of the primary problems with these foundations of some versions of modern economic theory is that they are based upon suppositions, assumptions, and models rather than any sort of empirical (ie tested) reality. You can keep telling a story about human nature for decades, apparently, if you don't actually go check your assumptions with actual people. And this is where anthropology comes into the picture--a discipline that has a long-running battle with the discipline of economics. It might be worth asking, at this point, why economics is more well-known (and to be honest, respected) among politicians, pundits, and businessmen. Is it because economics provides a more plausible account of human behavior, or because it provides more politically useful theories, models, and frameworks? You tell me.
As the anthropologists James Carrier and Daniel Miller argue,
For much of the twentieth century the social sciences, including anthropology, have seen themselves engaged in a fight with economics over the academic representation of social relations. So far, this has been a losing battle. In the mass media, the rhetoric, discourse and models of economists stand in apparently unassailable dominance in defining what is important in the contemporary world (Carrier and Miller 1999).
The part where they write "so far" is critical. Since the financial crisis of 2008, some of the beliefs about many of the assumptions of modern economics have been questioned...and that's an understatement. This, in my view, is exactly what needs to happen, since there is a lot riding on those assumptions about human nature, rationality, markets, the supposed power of the "invisible hand", and the foundations of political power. One of the critical cracks in these foundational assumptions lies in the very notion of "rationality" itself, which is, ultimately, a concept that requires numerous judgments.
As anthropologists from Malinowski onward have shown, with actual empirical ethnographic studies, is that an understanding of supposedly rational behavior requires a much deeper understanding of the histories, contexts, and meanings that surround human decision-making processes. In short, a choice or behavior that seems rational from one perspective may appear completely irrational from another. This puts an empirical damper on the common assumption that humans are all making decisions based upon a kind of singular, built-in, self-interested drive. This may be the case in some instance, but certain not in all instances. This argument applies equally to the supposed "west" as it does the rest of the world, since many people make decisions that are based upon much more than just economic value.
Some of us purchase particular products, for example, not because they were the most economically rational choice (most cost efficient), but because they're popular, or cool, or whatever. Rather than being economic machines, many people take a whole series of social considerations into account when they make decisions. We buy things because they might enhance social prestige, because they remind us of some memory, or simply because we like them for some inexplicable reason (and these sorts of things are pretty difficult to measure in strictly numerical terms).
So what does this mean? It means that if some of the underlying foundations of modern economic thought have some...issues...then it might be a good idea to take a closer look at the rest of the concepts and assumptions that remain, for the most part, unquestioned. This is exactly the argument that anthropologist Gillian Tett makes in her powerful anthropological explorations of the culture of bankers. She worked at the Financial Times during the buildup of the financial bubble that eventually exploded in 2008, and she studied bankers just as she would any other "culture."
Her work, which questions the accepted norms and assumptions of the bankers themselves, provides some incredibly valuable insight into the financial crisis, and, probably more importantly, how it was able to happen in the first place. Part of Tett's argument is that only the smallest fragment of the western financial system was actually reported in the media--the tip of the iceberg--and the rest remained "submerged from sight, widely ignored" (Tett, Anthropology News, 2009 - scroll down for the PDF). Tett's ultimate point is that what mattered most was not what journalists and members of the media actually talked about, but instead what they chose to ignore:
After all, as Pierre Bourdieu once noted, elites exist in most societies, and invariably try to hang onto power--not so much by controlling the physical means of production, but by also dominating the cognitive map, or social discourse. And as Bourdieu also noted, what really matters in terms of controlling a cognitive map is not what is publicly discussed, but what is not discussed. Social silences, in other words, are crucial.
If you look at contemporary political discourse and debate, it's pretty clear that beliefs and assumptions about economics are not only pervasive, but incredibly critical in shaping political realities. Think about the debates over health care. Think about arguments over free trade, globalization, and privatization. Look at the ways in which political parties couch their understandings of economics (and human behavior) in particular narratives and stories about governance and politics. One of the most common arguments is that the free market is THE key to political freedom, and that government is the primary problem that stands in the way of achieving this freedom. Milton Friedman argued that "the greatest threat to our freedom is the concentration of power" (see Friedman 2002:2). He saw government as the primary problem, and the market as the primary solution for freeing up all of the individual self-interested actors to lead the way to true freedom. But Friedman's argument falls short. The concentration of power is indeed the problem, as the late Alison Snow Jones (aka Maxine Udall, Girl Economist, who was one of my all-time favorite writers on economics) once argued, but there's much more to it:
Regular readers know that one recurring theme in this blog is that concentrated economic and political power in the private sector is as much a "problem" as an ineffective, inefficient guvment especially one that has been deprived of the funds needed to regulate a complex capitalist society based on commercial exchange and characterized in some sectors (like health and finance) by several types of market failure. Regular readers also know that as someone who grew up in a private sector family business, I expect private sector employees and their managers to behave better than caricatures of mindless guvmint bureaucrats that populate cautionary tales about totalitarian guvmints.
What she adds that Friedman (conveniently) missed the fact that the concentration of power--whether in the hands of government or the private sector--is a serious problem. This was made all too clear in 2008, that's for sure (read Tett's 2009 book "Fool's Gold," or the ethnography "Liquidated" by Karen Ho for more insight into the cultural assumptions of people working in the financial sector). The terrible irony, of course, is that it was the self-interested decisions of a relatively few "rational economic actors" who contributed heavily to a massive financial meltdown--and they still haven't really paid much of a price, all things considered. This point came home quite clearly in a film that I just saw called "Inside Job," which ultimately brings up the question of whether or not academic economists should have a code of ethics, considering their close personal and political ties with many politicians. That's a good question. And the more we all start looking around the cultural fishbowl we call "modern economics," the more questions we should start asking.*
*I know! This is way late again...but I made on time for "Sunday" according to west coast time, so there. Besides, it was my turn to make dinner tonight and the chicken and mashed potatoes were well worth the delay in writing this.
UPDATE: There is a technical problem with the poll: I managed to put Paul Krugman in there twice!!! Now that was either mere human error or an egregious, self-interested attempt to stack the deck against Hayek and Friedman. You decide what explanation makes the most sense! Anyway, feel free to vote for either Krugman #1 or Krugman #2, since there's no difference.