Uh Oh ... Boring 2

Explain What?

If capitalist theories fail to apply meaningfully to bottom level economic activities, and if they are merely window dressing for the top layer, what theory does explain those economies?

Noting that neo-classical theories do explain some economic activities, must an economic theory explain (almost) everything?

What does a general economic theory look like?

Now, I admit to having prejudiced the discussion of these questions, as I believe in certain answers to these questions. Nonetheless, at the heart of an economic theory must be a reasonable fidelity to reality, where "reality" is scientifically determined. The theory must be testable, which means it cannot apply to everything in the manner of a tautology or other "universal explanation." Scientific theories apply to some things and not other things; they are delimited. Economics is always tentative, as are all scientific theories: it is true until a counter-instance is found. So, economic theories should be hard-headed, if they would be scientific, in relying on facts and experiment.

The supposed difficulty for any scientific theory of economics is that it is involved with choice. Choice occurs not only in humans, but in other species as well. We like to think of humans - ourselves - as the only voluntary animal, but that is probably wrong. When the African lion attacks a wildebeest or zebra, it does not do so solely out of instinct. Even very young lions have to be trained in the hunt. Watching lions and other hunting animals reveals that they choose to give up the hunt, or not to take on a certain target, and do a thousand other little things which are the results of experience and training. The hundreds of films I've seen about Africa all tell the same tale: at least the dominant species make choices, little choices, but still choices.

This observation deflates the much vaunted status of our species, as our economic choices may be seen as the present results of long evolutionary improvement. I do not require an economic theory to explain lion behavior, but it should take into account the evolution, the adaptation, of human behavior. "Economics" is, in this respect, a specialized branch of ethology, defined as:

"1 : a branch of knowledge dealing with human character and with its formation and evolution
"2 : the scientific and objective study of animal behavior especially under natural conditions"

Merriam-Webster's 11th Collegiate Dictionary

Since humans communicate with each other more extensively and intensively than (most) other animals, and make rules about their own behavior, our behavior is essentially social and political. The political part is rule making, which depends on the human ability to communicate "social intentions". (Here I have introduced a tricky phrase which I may later regret, but defend it for the moment.) Our rules are "general," in the sense that they are intended to be applied at later times by anyone in the situation to which the rule applies.

Circumstances

Now, this gets me into a very deep philosophical tangle. I am following Immanuel Kant in his formulation of the Categorical Imperative, but not defending his claim. One of the quarrels is, as always, what is "similar circumstances?" How do we know when to apply the rule?

My answer is empirical: we don't know except by trial and error. We teach others our rules, and then we expect everyone to follow them. But, each of us probably has a slightly different "concept" of the rule. Teaching is imperfect, and each of our brains is different. Despite that, we expect others to behave according to our individual learning; that is, we suppose that our expectations are the same as everyone else's. While I think that supposition is an everyday act of hubris, it is convenient in evaluating the world of our experience. It is not that most people consciously think, 'we are all of the same species and similarly constructed, therefore Joe Blow, Sis, Bro and auntie have the same idea as me and behave accordingly.' Instead, most people take that as a tacit assumption based on their lifelong direct observation of behavior.

Some thinking is not required in the application of "similar circumstances;" it is a matter of instinctual (programmed) or learned behavior. When we get burned by a hot plate often enough, most of us learn not to put our hands on one or anything that looks like one. The learning or programming is not exact, but it is sufficient to allow the survival of the species. We do not need an exact and formally justifiable method as the basis for economic judgements; our choices only need to be approximate and "good enough." (I believe all of our choices are actually like this; but that is another story.)

Looking at other species, the common understanding of rules is not confined to humans. Many species train their offspring and others in acceptable behavior. Lionesses teach their cubs to hunt wildebeest, while wildebeest calves quickly learn to run with the herd. Chimpanzee tribes have learned different methods of food gathering which they pass on within their clans. There is even inter-species learning, because the methods used by hunters are eventually discerned (at some level) by prey and transformed into defensive strategies. So, behavior is social and interactive, not uniquely individual, especially among humans. This fact also disperses the problem of "similar circumstances," because it is not each individual who makes some sort of concerted effort to evaluate the patterns as to what is similar. Rather, the problem is solved piecemeal, by analogy, in the trials of many players.

We do exactly this same sort of thing in our Courts, where we have trials which eventually form a precedent. Sometimes these precedents become part of the law, or even principles of law. Trials are the means by which ideas rise slowly from the mud of everyday experience to form the tallest structures. Is there some rule, some instinct, by which we can evaluate all circumstantial evidence at once, thereby arriving at a universal judgement? I don't think so. I think this is a matter of experience; it is what evolution is all about.

I believe an proper economic theory must account for, and incorporate, this sort of case by case growth: this works, that doesn't. One consequence of my view is that the Chicago school's mathematical models might tell us something about some cases, but they are unlikely to tell us important things about most, certainly not all, economic activity. This also implies that most of the pedantic conformity that passes for Eco 101 has very limited use. Students need to learn to investigate the history and the cases, and apply tools, including mathematical tools, to find out what is going on. They also need to learn when to stop generalizing; to delimit a rule.

Cultural, Social Dependencies

So far, I suggest political economics is about behavior, particularly human behavior. It is about evolution, thus about adaptation. It is historical in researching and presenting cases as examples (precedents) that may apply to a current situation.

Because 'man is a social animal,' as Aristotle said a long time ago (probably quoting some even more ancient philosopher), human behavior is often not individual, unique. Most of us do what most of the rest do, every minute, every day. We are much more like bees and ants than we prefer to suppose. It is the common nature of human experience and our nearly universal tendency to attach ourselves to a social group that makes economics "political." Politics, after all, is the art of making policy - rules - by which society lives. Were we like nematodes or grizzlies, we wouldn't have any politics: each individual would do whatever it wanted, living and dying apart.

Politics only occurs when co-ordination of individual efforts and activities is required, for whatever reason. "Reason" should not be construed as something the actors perceive; rather, it is the "cause" intelligent observers attribute to the pattern of behavior. This is an important point, because one of the most common mistakes is moving from imputation of "reason" or "cause" to the assertion that such a reason is apprehended by the actors or the cause is imminent in nature. Social creatures may just respond to "outside forces" in making their "choices," not think about the alternatives and then pick an action.

Of course, politics is not just about reaction; it is the social interaction that matters. This still does not require any conscious effort, or the overt consideration of "reasons." Members of societies notice what others do, and respond to that, based on instinct, learning, reasoning, or any number of other possible inputs. (For example, a disease could inadvertently produce a desired result.) How the group behaves is usually not the result of any simple rule, or the imposition of authority, but the integration of many individual responses to stimulus. Societies behave like neural networks. I wouldn't be surprised if a neural network could be programmed to "model" zebra or gazelle behavior. The result is technically a convolution of the inputs.

So, political economy is about social behavior. This behavior need not be conscious, selected by reason. It only needs to be behavior that members of the society demonstrate based on some sort of interaction. In turn, the society must benefit from its common modes, for otherwise it would perish. Socializing is an adaptation that promotes survival of herds or tribes and, indirectly, of the species.

This consideration implies that there are different political economies for different tribes and species. Maybe there is one, overarching theory that governs all of them. Such a theory would be like Darwinian evolution in its generality. But, like evolution, maybe such a theory would be more a guideline suggestive of 'thought experiments,' than a hard and fast method for determining outcomes. Such a general theory of political economy would necessarily be structural and suggestive, not specific and determinative.

I think political economy, as it applies to humans, is specific to cultural and social assumptions. It seems unreasonable to assume, a priori, that ideas that work among the English can be transferred to the Maori, Chinese and Japanese without modification. Perhaps there are some central attributes that do pass from one culture to another, and these may be candidates for elements of a general economic theory. If so, ideas that transfer cannot be accidental common elements, but must be integrating notions. For example, Adam Smith awards a central place to greed in his scheme of things, and he is correct in saying greed is a common human condition. But, does greed always work the same way in all societies? In Scotland, perhaps greed was transformed into ambition, and into avarice further south in London. By the time it reached America, it was rationalized into grabbing a whole continent, so that many Americans feel justified in ruling the world.

Is greed good? Does it organize all societies in the same way? It is surely present everywhere in the world. But, I do not believe it is always harnessed the way Smith suggests. What greed does depends on a myriad of factors that constitute the local culture. Without specifying a social framework for controlling greed, Adam Smith's greed by itself cannot be a central, economic factor. Similar problems occur with the peculiar English notion of property, which is not shared in much of the rest of the world. Most native Americans rejected the notion that land could be bought and sold, or exclusively held, which led to many Anglo-Indian wars. Such problems make neo-classical economics at best an Anglo-American pre-occupation, not a universal economic theory.

I don't know what a general theory of economics would "look" like. At our current state of knowledge, it seems more plausible that there are economic theories about this, that and the other thing. They would all be "economic" theories in the loosely held sense that they are about making a living. I think feasible theories have to be grounded in social and cultural conditions that vary, so there are different theories for different societies. One size does not fit all.

Policy Implications, So Far

Out of my foregoing considerations, there are several immediate criteria for making policy. Here, I take it that "policy" is the practical application of theoretical constructs.

First, it is questionable whether the economics that works in one place will work in another. We should be very cautious about exporting our methods of making a living. One's economic models may work elsewhere, if basic assumptions are agreed and "elsewhere" is sufficiently similar to "here." Otherwise, disaster may result.

For me, this is only a simple application of my views about cultural relativity. Assuming other people are just like me is gross projection. I don't know that we are alike until I have evidence of it. Rock climbing in the American Southwest is not the same as mountain climbing in Tibet; the local climate and size of rock piles creates a qualitative difference.

The United States, in its arrogance, has caused endless pain and suffering throughout the world by imposing American economic ideas on people unprepared for them. An example are the austerity programs imposed on Asian countries during the 1997-8 currency crises. The US, acting through the International Monetary Fund (IMF), caused lengthy, hurtful recessions in Thailand and South Korea. Billions of dollars in investment, and millions of jobs, were lost. At least thousands of people died, and many more were pushed into the drug trade, prostitution and the other desperate acts of the poor and starving.

Was this necessary? Probably not. The United States and its agents denounce countries like Chile and China that impose currency and capital controls. Yet, Singapore and China survived the Asian currency crisis without major damage exactly because of those controls. The main effect of U.S. controlled IMF policies has been that politically influential American investors (wealthy individuals and corporations) are protected, even guaranteed, against loss. The British government maintained similar policies in the management of the Empire's colonies.

Second, everything depends upon a careful examination of existing conditions; i.e., circumstances. Just as high-handed American financial "experts" have succeeded in ruining many a country, sophomoric ignorance destroys industries, people and resources. Do the sorts of programs that work in Detroit get similar results in Des Moines or Calcutta?

Third, we must ask, who does it benefit? Who pays and who gets? After all, economics is all about making a living. It is also about not making a living. If someone puts a software development campus in the middle of the Serengeti Plain, how many qualified applicants would one to expect to live within commuting distance? How many native ecological guides would lose their jobs because the pristine wildness of the place would be destroyed by such a development?

All of this is to urge, especially in America, that people should be less assuming about themselves and what works for others.