Each of the past two years I have written about the economics Nobel Prize. The 1991 prize to Ronald Coase and the 1992 prize to Gary Becker drove me up the wall. Had I been paying attention, the 1990 award to Merton Miller would have done likewise. These recipients all claim free market exchange is the best way to organize economic life--an assertion they offer despite the poverty, alienation, crime, profiteering, war production, and environmental degradation found in all market economies.
This year the Economics Prize went to Robert Fogel and Douglass North. Commentators celebrate this as a break with the recent past because Fogel and North focus on history rather than solely "free market" equilibrium. The new winners employ facts, not solely self-serving assumptions. They even avail themselves of extra-market forces, as when North, according to the Wall Street Journal, finds that "political, economic, and social factors must be taken into account if we are to understand the institutions that have played so large a role in economic development." What progress.
So, for the mainstream media the 1993 award was a turn from good to better. Worthy folks were again getting the prize, and this time the recipients were not rarefied mathematicians. Of course, as in 1991 and 1992 many radicals were critical. However, in 1993 some serious leftists agreed with the mainstream that Fogel and North were a step in the right direction and even argued that the mainstream economics profession should be taken more seriously, particularly given the growing influence of its more innovative practitioners and the lack of shared left alternatives. Perhaps I can clarify this disagreement with an analogy.
Imagine a famous international institution gives a huge cash prize each year for worthy contributions to culinary knowledge. For decades the prize goes to practitioners of varied (though not too varied) culinary talents, but then for years on end it goes exclusively to people who determine, refine, or otherwise advocate the hamburger menu at MacDonalds--most of whom, in addition, are employed there. Despite some jealousy from Burger King and Wendys, reputable commentators offer widespread support for the MacDonalds awards. The few cooks who understand food vis-a-vis human health are of course critical. And most people only wonder how the winner will spend the award.
Then, in the new year, the prize goes to a twosome whose work focuses on saads instead of hamburgers, but who are still of the MacDonalds school, having largely applied what they "learned" from cooking hamburger to preparing salads. The response is more or less as in past years. MacDonalds devotees are again ecstatic. Other partisans of fast food are supportive. Most people ignore the outcome, job listings being more relevant to their immediate prospects. And again, some dissidents criticize all concerned. However this time, unlike past years, there is a significant break in the dissidents' ranks. Some previously critical folks now defend the recipient's salad insights, and even the broader fast food industry.
What makes the parable relevant? MacDonalds is the University of Chicago. Its core hamburger menu is free Ideology. The fast food industry, perhaps up through Dennys, is the Neoclassical school of economics. Fogel and North are the salad practitioners. The dissidents of 1991 and 1992 are the outspoken critics of the Chicago free market ideology and the economic mainstream as well. The 1993 break in ranks is a letter from Sam Bowles and Nancy Folbre that appeared in the <I> Nation <D>of December 13.
What letter? On November 1 an unsigned Nation editorial pointed out that Fogel's first book speculated how the U.S. economy would have developed without railroads, and therefore could not be countered by evidence. The editorial next said, Fogel's "most famous work, Time on the Cross, written with Stanley Engerman and published in 1974, was counterfactual in a different sense--no recent book has had its main conclusions so thoroughly discredited by scholars." The editorial concluded with the claims that "one can learn far more about slavery from Morrison's Beloved [she won the 1993 literature prize] than from Fogel's statistics" and "the purpose of the Nobel Prize in economics seems not to be to foster innovative thinking about the world's economic woes but to reinforce market ideology."
The editorial's sentiment was quite consistent with the lesson of our food analogy, if a bit hyperbolic in some claims about Fogel. Sam Bowles and Nancy Folbre, however, two central figures in U.S. radical economic thought, saw fit to respond with a letter to the Nation. Bowles and Folbre denounce the editorial's "invective" and urge, instead, that Fogel and North "have done pioneering work in using state-of-the-art economic theory and quantitative methods to illuminate the past." They urge that "we all stand to benefit by debating rather than diminishing what they have done." And Bowles and Folbre take the salad/hamburger distinction further, saying that neither recent winner, nor many others that came before for that matter, evidences a Nobel desire to "reinforce market ideology." But Bowles and Folbre don't stop there. They continue: "Today's economic theory is far from the apologia for capitalism that it has been taken to be by many on the left. Recent developments have stressed the importance of altruistic behavior, cooperative solutions to problems, and the costliness of conflict and unregulated pursuit of self-interest, and have sought to understand the institutions most conducive to the growth of productivity." (Let's not even bother trying to figure out what is so positive about looking at the economy from the perspective of "productivity" even if it isn't for Bowles and Folbre--which it generally is for others--another word for "profitability.") Finally, Bowles and Folbre's concluding paragraph reads: "The dismal science still has its problems, not the least of which is the fact that left economists--among whom we count ourselves--have thus far failed to come up with a convincing alternative to capitalism. Why not focus on this, rather than rain on Fogel's and North's parade?"
The proximate ground of the debate is of course the work of Fogel and North, and the recent history of Nobel Prize choices. My own take is that Fogel is no more deserving than his three predecessors. The Nation's brief summary of his work was fair, and the idea that transferring "state of the art economic theory and quantitative methods" to historical analysis is a major step forward is a sad joke. I'm told that another instance of Fogel's brilliant use of methodology was to study the height of members of the British Royal family and of members of the British army over a period of decades, to show how different their circumstances must have been. Quite a revelation.
North is a slightly more complex case. He, along with the more technical Oliver Williamson, are leading a break of sorts from the traditional economic discipline via establishing a new institutionalist school. So far so good. But looking at North's own work, it seems to emphasize how various political forms--particularly private ownership, patent law, and contract law--provide a context of incentives conducive to market operations. This may explain why Jeffrey Sachs, of the slash and burn school of economic progress, said of North, his work "has profound implications for developing economies. He showed you have to foster the legal and economic institutions of capitalism as opposed to just modernizing a particular sector of industry."
As to the Nobel prize itself, the absence of winners who decry markets, or even step outside the narrow bounds of acceptable economic wisdom, plus the conferral of award after award for undistinguished accomplishments by "free marketeers" makes the Nation editorial's claim that Nobel "reinforces free market ideology" at least plausible. As to the profession as a whole, the fact that Bowles and Folbre feel that it needs their support at a time when it is arguably the most reactionary it have been in the past 75 years is hard to comprehend. As the most recent, graphic evidence of the beliefs of the broader profession we have the November signing of an intellectually bankrupt (and morally decrepit) petition in support of NAFTA by nearly every living economics Nobel prize winner. Neoclassical economics is an intellectual travesty insofar as it purports make predictions about modern economic systems. However, despite this scientific vacuity, the field does have a logic. It is the logic of propaganda--that is, the profession glorifies institutions and practices benefiting elites who, among other things, sustain the profession for the legitimacy it lends their piracy.
More specifically, does the institutional school of North and Williamson represent a real break from this prostituted discipline? Could it provide haven for serious economic thought that questions cherished, profitable, beliefs? I think this breakaway is at best more like the Democratic party as compared to the (Friedmanite) Republican party, but on this point Bowles and Folbre at least have some credible grounds for their view. It is hard to see, however, why hopes for a largely peripheral and still problematic development cause them to want to criticize economic theory's critics. In short: Are there dissidents at the edges of economic theory doing interesting things? Of course. Should leftists learn from those dissidents? Sure, when possible. But does that diminish the need to criticize the profession as a whole much less justify defending it? Not at all.
Bowles and Folbre conclude by claiming that the biggest problem with economic theory is the lack of a convincing alternative to capitalism. I tend to agree with this, but I find the point more than a bit disingenuous coming in this context. For example, does Bowles and Folbre's university program, arguably the most radical in the country, give this problem top billing with a raft of courses and seminars devoted to developing an alternative model? Has it done so during the twenty years or so of its existence? Even during one year? To use their own type of argument, rather than "rain on the parade" of those left economists who have devoted themselves to this issue, why don't Bowles and Folbre, and their department, pitch in with this task. That would undoubtedly be much more productive than defending moribund theory which, in any case, and even without their support, already occupies all the high ground.
The Reagan/Bush Legacy
In the struggle for human rights and dignity, plateaus of new insight are occasionally attained. These are sometimes retained, marking a change in relations, and sometimes lost, marking a return to old views. For example, there comes a point in the struggle over women's rights when it is generally recognized that women are people with full capacities and no special proclivity for serving men. After this gain, many may still cling to old sexist beliefs, but to voice such views openly becomes uncivil. Similarly, there comes a time when recognition that Blacks are equal actors in history, with equal claim on society, gains hegemony. To publicly claim otherwise is thereafter uncivilized. It isn't that all is well when ideological common sense is raised a notch. Relations may certainly lag behind, as with the condition of both women and blacks. But at least there is a new level of human understanding that one's children, for example, will likely adopt as their own.
In the 1960s there was a largely unrecorded but nonetheless remarkable ideological leap in the realm of economic affairs and class struggle. In short, the idea that simply by virtue of being alive all people were entitled to a fair share of society's product and a fair place in society's economic activity, became widely held. You had to justify economic inequality, much less wide income differentials. You had to justify why some people had rewarding daily work conditions while others did not, much less why some ruled and others obeyed. Economic hierarchy was no longer a positive thing. You couldn't praise it. The insight didn't spread through all of society, but it held a pretty wide lead over other views among young people. It was a product of hip culture plus new left activism. And it was very very healthy.
In economics this new recognition nourished a rebirth of "radical economics," a dissident branch (becoming the Union of Radical Political Economy or URPE) which took such ideas as comprehensive equity and fairness as a foundation for serious discussion. In a radical economist's classroom, and there were plenty of these, it wasn't the person claiming that people deserved a fair share and that no one should have a monopoly on better job conditions who was deemed strange and simple-minded. Instead, those claiming that we all ought to fend for ourselves and to the winners should go the spoils were the odd students out who seemed to others to be out-of-touch with the moral and intellectual underpinning of economic life.
But Reagan/Bush and the mainstream cultural apparatus have put at least a temporary end to the threat these trends embodied. Now, again, greed is the mighty motivator. People should strive to excel. Those who do better should get more. There is no point in even thinking about trying to have fair and comparable circumstances for all. This is the current intellectual fashion. This is what today's students have as their bedrock attitude. This is the pool of "values" that is undercutting the basic principles required to generate a serious economic alternative, and thus propelling a decline of radical economic commitment.
Is there hope? I think maybe yes. For most of this backsliding is occurring in elite institutions, among students who think (often quite naively) that they are to be society's victors and among professors who already are. Out in the real world, among working people, and particularly working class youth, there may be a bit more receptivity for radical economic ideas and values. The big problem is finding a megaphone loud enough for such ideas to get a hearing and develop a constituency.