¶ 13-19: Introduction: My Grand Narrative: Slouching Towards Utopia: Notes & Long Notes

I am starting to go through the manuscript of my forthcoming book, paragraph-by-paragraph, adding in the full notes that could not make it into the print version...

<https://bit.ly/3pP3Krk>

¶ 13-19: Suppose we could go back in time to 1870, and tell people then how rich, relative to them, humanity would become by 2010. How would they have reacted? They would almost surely have thought that the world of 2010 would be a paradise, a utopia. People would have 8.8 times the wealth? Surely that would mean enough power to manipulate nature and organize humans that all but the most trivial of problems and obstacles hobbling humanity could be resolved.[r]

But not so. By 2010 it had been 150 years. We did not run to the trail’s end and reach utopia. We are still on the trail—maybe, for we can no longer see clearly to the end of the trail, or even to wherever the trail we are on is going to lead.

What has gone wrong?

Well, Hayek may have been a genius, but only the Dr. Jekyll-side of him was a genius. He and his followers were extraordinary idiots as well. They also thought the market alone could do the whole job—or at least all the job that could be done—and commanded humanity to believe in the workings of a system with a logic of its own that mere humans could never fully understand: “The market giveth, the market taketh away; blessed be the name of the market.” They thought that what salvation was possible for humanity would come not through St. Paul of Tarsus’s solo fide but through Hayek’s solo mercato.[8][s]

But humanity objected. The market economy solved the problems that it set itself, but then society did not want those solutions—it wanted solutions to other problems, problems that the market economy did not set itself, and for which the crowdsourced solutions it offered were inadequate.

It was, perhaps, Hungarian-Jewish-Torontonian moral philosopher Karl Polanyi who best described the issue. The market economy recognizes property rights. It sets itself the problem of giving those who own property—or, rather, the pieces of property that it decides are valuable—what they think they want. If you have no property, you have no rights. And if the property you have is not valuable, the rights you have are very thin.[t]

But people think they have other rights—they think that those who do not own valuable property should have the social power to be listened to, and that societies should take their needs and desires into account.[9][u] Now the market economy might in fact satisfy their needs and desires. But if it did so, it did so only by accident: only if satisfying them happens to conform to a maximum-profitability test performed by a market economy that is solving the problem of getting the owners of valuable pieces of property as much of what the rich want as possible.[10][v]

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Printed Endnotes:

[8] Friedrich A. von Hayek, “The Pretence of Knowledge,” Nobel Prize Lecture, 1974, <https://www.nobelprize.org/prizes/economic-sciences/1974/hayek/lecture/>

[9] Karl Polanyi, The Great Transformation, New York: Farrar and Rinehart, 1944 <http://books.google.com/?id=IfeMAAAAIAAJ>

[10] Takashi Negishi, “Welfare Economics and Existence of an Equilibrium for a Competitive Economy,” Metroeconomica 12, no. 2–3 (June 1960): 92–97 <https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-999X.1960.tb00275.x>.

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Longer Notes:

[r] Remember: as much proportional increase in technological prowess over 1870 to 2010 as was seen over -4000 to 1870. And essentially all the potential benefits over the earlier period were eaten up by population growth and the relative resource scarcity that it generated. Nearly 6000 years of historical progress crammed into a century. What would our predecessors back in 1870 have rationally thought would be the result? It is indeed the case that they would almost surely have thought that the world of today would be a paradise, a utopia.

People in 1870, after all, thought that humanity had outgrown fighting over God. They did still fight—in one way or another and for one reason or another—over resources. They would have thought that in the world of 2010, with 20x the technological resources of 1870, jostling and fighting to get even more resources would have a much lower priority relative to turning your skill and energy to doing what you ultimately wanted to do with those resources. Consider Lenin's State and Revolution <https://www.marxists.org/archive/lenin/works/1917/staterev/>. Lenin’s core belief is that in a capitalist future society of material abundance, scarcity must be artificially and brutally created:

The state in the proper sense of the word, that is, a special machine for the suppression of one class by another, and, what is more, of the majority by the minority. Naturally, to be successful, such an undertaking as the systematic suppression of the exploited majority by the exploiting minority calls for the utmost ferocity and savagery in the matter of suppressing, it calls for seas of blood, through which mankind is actually wading its way in slavery, serfdom and wage labor....

During the transition from capitalism to communism suppression is still necessary, but it is now the suppression of the exploiting minority by the exploited majority.... It is no longer a state in the proper sense of the word; for the suppression of the minority of exploiters by the majority of the wage slaves of yesterday is comparatively so easy, simple and natural a task that it will entail far less bloodshed than the suppression of the risings of slaves, serfs or wage-laborers....

And it is compatible with the extension of democracy to such an overwhelming majority of the population that the need for a special machine of suppression will begin to disappear.... The exploiters are unable to suppress the people without a highly complex machine... but the people can suppress the exploiters even with a very simple “machine”....

Communism makes the state absolutely unnecessary, for there is nobody to be suppressed—“nobody” in the sense of a class.... We are not utopians, and do not in the least deny the possibility and inevitability of excesses on the part of individual persons, or the need to stop such excesses.... [But] this will be done... as simply and as readily as any crowd of civilized people... interferes to put a stop to a scuffle or to prevent a woman from being assaulted.... We know that the fundamental social cause of excesses... [of] violation[s] of the rules of social intercourse, is the exploitation of the people, their want and their poverty. With the removal of this chief cause, excesses will inevitably begin to "wither away". We do not know how quickly and in what succession, but we do know they will wither away. With their withering away the state will also wither away.

Compare to Robert A. Heinlein's libertarian utopia of The Moon Is a Harsh Mistress <https://archive.org/details/1965-12_IF>, in which the ungoverned convicts" of the Lunar ice-mining settlement deal with crimes by grabbing somebody to serve as a judge, having him hear the case, and then putting the guilty party out of the airlock into the vacuum.

The answer at the end of the long 20th century to the questions: Where moon? Where Lambo? Where Utopia? was: Not here, and not now.

Let me ask you to note how remarkable this disappointment is. All previous this-world utopias—starting from Thomasso Campanella's 1602 La città del Sole <https://archive.org/details/thecityofthesun02816gut…> or Francis Bacon's New Atlantis <https://archive.org/details/fnewatlantis00baco…> on up through Lenin's State and Revolution <https://marxists.org/ebooks/lenin/state-and-revolution.pdf…> had managed to construct, in their imagination, more-than-satisfactory utopias with only a small amount of the technological power to manipulate nature and to organize humans in our highly, highly-productive 8 billion-strong division of labor that we have today. Considered as an anthology intelligence, humanity is inept, and not sane.

This is, perhaps, the place to tell the story Plutarch tells, of King Pyrrhus and his advisor Cineas: Plutarch <http://classics.mit.edu/Plutarch/pyrrhus.html>:

[Cineas:] 'When all [kingdoms] are in our power what shall we do then?' Said Pyrrhus, smiling, 'We will live at our ease, my dear friend, and drink all day, and divert ourselves with pleasant conversation.' When Cineas had led Pyrrhus with his argument to this point: 'And what hinders us now, sir, if we have a mind to be merry, and entertain one another, since we have at hand without trouble all those necessary things, to which through much blood and great labour, and infinite hazards and mischief done to ourselves and to others, we design at last to arrive?' Such reasonings rather troubled Pyrrhus with the thought of the happiness he was quitting, than any way altered his purpose, being unable to abandon the hopes of what he so much desired.

For an entire anthology-intelligence species to properly set and balance ends and means in order to successfully accomplish what its best self truly desires is, of course, much harder considered as a coordination problem than for an individual brain controlling a single animal organism to do so. Nevertheless, the second key to the history of the 20th century, just behind the key that is the understanding of the enormous unprecedented leap forward in our technological prowess, is the recognition of how unintelligently humanity has chosen and is choosing the goals it is devoting its anthology-intelligence focus to pursuing.

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[s] Truth be told, I actually think Hayek was about 1/4 genius and 3/4 idiot. Is macroeconomics was completely stupid, and enormously at variance with his microeconomic insights as well. That the extremely clever market economy could not find a way to respond to a monetary injection (whether coming from a gold discovery or a central bank expansion) other than by grossly over-investing in excessively roundabout and long-term unsustainable production processes? That having so over-invested, it had no way to unwedge itself than to shift huge numbers of workers from now low-productivity investment-goods production to zero-productivity unemployment? Come on! Be serious! His respect for the time-honored wisdom of the of the ages in human social organization combined with his contempt for such and for all countervailing-power institutions in the economy? Ludicrous. ‘And then there is the dodging-and-weaving Hayek: complaining to Paul Samuelson about the "malicious distortion" Samuelson committed by summarizing Hayek's position as "government modification of market laissez-faire must lead inevitably to political serfdom", yet in his 1956 forward to The Road to Serfdom we find:

Six years of [Labour Party] government in England have not produced anything resembling a totalitarian state. But those who argue that this has disproved the thesis of The Road to Serfdom have really missed... that the most important change which extensive government control produces is a psychological change... over... generations.... The change undergone by the character of the British people... can hardly be mistaken... The British experience convinces me... is that the unforeseen but inevitable consequences of socialist planning create a state of affairs in which... totalitarian forces will get the upper hand.

Macro, society-economy, rhetorical honesty—against those three faces of the Bad Hayek we have the Good information-theoretic Hayek, who is very good indeed: https://delong.typepad.com/sdj/2014/08/over-at-equitable-growth-yet-another-note-on-mont-pelerin-thinking-some-more-about-bob-solows-view.html… You can quibble that Michael Polanyi saw further and deeper, and that Polanyi's distinction between "mercenary" and "fiduciary" modes of human activity is of decisive importance for understanding the proper place of the market in society, and you would be right. But Hayek got to the mountaintop to see what was on the other side first. >

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[t] Karl Polanyi wrote that the Hayekian project, in which humanity is made rich as a byproduct of profit-motivated economic agents responding to the price signals sent by the rich was a:

stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness. Inevitably, society took measures to protect itself, but whatever measures it took impaired the self-regulation of the market, disorganized industrial life, and thus endangered society in yet another way. It was this dilemma which forced the development of the market system into a definite groove and finally disrupted the social organization based upon it

Think of it: Your community and its associated land-use and sociability patterns ("land"), your occupations and its remuneration on a scale appropriate to your status and to your desert resulting from your applying yourself ("labor"), and the very stability of and your ability to be paid for performing your job at all (“finance”)—all of these melt into air if they do not satisfy some maximum-profitability-use-of-resources test (“fictitious commodities”) imposed by some rootless cosmopolite thousands of miles away. Furthermore, it is a maximum-profitability test that is applied, not a societal-wellbeing test The (competitive, externality-free, in-equilbrium) market system definitely and certainly maximizes something. But what it maximizes is not any idea of the well-being of society, but rather the wealth-weighted satisfaction of the rich.

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[u] So society responded: people believe that they have other rights rather than property rights (which are valuable only if your particular piece of property is useful for producing things for which the rich have a serious jones). And so they strove to organize society to vindicate those other Polanyian rights. And so society did so by attacking the market, and by attacking all of those it saw as its internal and external enemies that the global market system was empowering to oppress them.

Polanyi, writing in 1943 and thereabouts as Rotmistrov threw his 5th Guards Tank Army T-34s into the abattoir at Prokhorovka in an insanely one-sided loss ratio to keep the Nazi SS tank divisions "Adolf Hitler's Bodyguards", "The Empire", and "Death's Head" from breaking through in the one operation that might have won the Battle of Kursk for the Nazis, the most striking thing about this double movement—the market attempts to destroy society in the interest of creative-destruction and satisfying the desires of the rich, society strikes back—was the extraordinary size and violence of the cataclysm that, from 1914 to 1945, destroyed human progress that had, during the 1870 to 1914 Belle Époque, seemed a marvelous and unmerited miraculous and stable gift to humanity. "Economic El Dorado", in Keynes's words in 1919. Polanyi:

No explanation can satisfy which does not account for the suddenness of the cataclysm. As if the forces of change had been pent up for a century, a torrent of events is pouring down on mankind. A social transformation of planetary range is being topped by wars of an unprecedented type in which a score of states crashed, and the contours of new empires are emerging out of a sea of blood. But this fact of demoniac violence is merely superimposed on a swift, silent current of change which swallows up the past often without so much as a ripple on the surface! A reasoned analysis of the catastrophe must account both for the tempestuous action and the quiet dissolution.

Polanyi wrote at the midpoint of the 1870-2010 Long 20th Century. After 1945 things were put back together, and there was another age, a Super-Belle Époch, the Thirty Glorious Years of social democracy, during which the great and good of humanity, at least in the North Atlantic plus Japan, could think that they had finally gotten it right. It was attained not by returning to a more purified and ruthless version of the pseudo-classical semi-liberal Hayekian system, not by building the New Man in the New Order of market-free Socialism, and not by recognizing that good societies are unified communities for which their charismatic leaders serve as the thongs that bind the bundle of sticks together, and so make the Fascist people strong.

It was attained, rather, by compromises cobbled-together. John Maynard Keynes with a shotgun blessing the hasty wedding-under-duress of Friedrich A. von Hayek and Karl Polanyi. But that social-democratic order did not pass its own sustainability test, and gave way to neoliberalism, which repeatedly failed to deliver the goods, and now here we are.

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[v] As I wrote back then: I remember back in the… spring of 1981, I think it was. I asked my professor, William Thomson, visiting from Rochester, roughly this: "The utilitarian social welfare function is Ωu = U(1) + U(2) + U(3)… The competitive market economy maximizes a market social welfare function Ωm = ω(1)U(1) + ω(2)U(2) + ω(3)U(3)…, where the ω(i)s are Negishi weights that are increasing functions of your lifetime wealth W(i)—indeed, if lifetime utility is log wealth, then ω(i)=W(i). Market failures drive wedges between what the economy achieves and what it could achieve. There are massive, massive differences between the Ωu that is the true social welfare function and the function Ωm that the well-working market maximizes. Why isn’t the unequal distribution of ex ante expected lifetime income—inequality of opportunity—conceptualized by US economists as the greatest of all market failures?" Thomson did not have a good answer.

My other teacher Joe Kalt, however did—an answer that old Freddie from Barmen and Charlie from Trier would have endorsed. People who talk about the Pareto-optimality of the market rather than about the divergence between the market's and the real Societal-Wellbeing Function are in the business of justifying that wealth—however acquired—should be the source of social power, and they are not in the business of working for the public interest. Most are in this business because it is relatively lucrative.

Others have a somewhat deeper rationale. Friedrich von Hayek, for example, was convinced to his dying day and beyond that no better political-economic system than the market and private property could be devised, and that attempts to do so inevitably put us on the road to, well, serfdom. Thus justifications of the "optimality" of the market perform the same function in Hayek's Republic as the claim that those chosen to be guardians have souls of gold perform's in Plato's. But Plato never claims that the purveyors of the noble lie that beguiles the citizens of his Republic were philosophers.

The idea that the market economy is a societal machine for satisfying the desires not of the people, but rather of the people with disposable income—that is an old one, dating back to the mid-1700s and to Richard Cantillon's "Essay on the General Nature of Commerce". But it is not one that is highlighted in most economics courses—that the market listens to you more-or-less in proportion to your disposable wealth. That is instead hidden beneath the statement that the market considers your wishes according to your willingness-to-pay—as if it were purely a matter of individual will, rather than at least as much a matter of the social power your wealth assigns to you.

When I teach Econ 1, I replace "willingness to pay" with "intensity of desire times wealth." In general, in a market economy, if you have property or skills both useful for producing things for which the rich have a serious Jones and scarce, he will do OK. Otherwise not so much. Moreover, even if you are doing okay now, the creative destruction of the market system, especially in the long 20th century in which human technological capabilities are doubling and thus the economy is being revolutionized every generation creates great instability: if the particular value chain in which you are enmeshed shifts, or if your particular bargaining power within it changes up, whatever economic position and social power you have may will vanish overnight as the fabric of your life fails to pass some maximum-profitability test inflicted by some rootless cosmopolite financier thousands of miles away.

THIS IS NOT HOW PEOPLE THINK THEIR SOCIETY SHOULD WORK!!

As Karl Polanyi put it, the market system attempts to create a "stark utopia" by destroying all sources of social power and all societal bonds except those mediated by wealth. And society—which has very different ideas about who should have social power and who should be listened to—reacts, by trying to damage the market system and damage those whom it decides are the rootless cosmopolites and their allies who are misusing it to the detriment of the people, the real, essential, worthy people. This has a long history. When Karl Marx began writing, the word he used for the concept he later labelled "bourgeois" was "Jewishness".