Friday, August 10, 2012

When Should We Reject a Theory? Communism versus Expansionary Austerity

-- Posted by Neil H. Buchanan

In a Dorf on Law post a few months ago, and in a related Verdict column, I discussed the difficult question of when enough evidence has accumulated to allow us to reject a theory. The specific examples that I discussed were "expansionary austerity" and Keynesian stimulus. I argued that there was more than enough evidence to conclude that The Austerions are all wet, whereas I rejected the idea that Keynesian economics had been proved wrong -- specifically rejecting the claim that "the stimulus didn't work."

These two examples were easy pickings, of course. There is simply no evidence supporting the idea that government spending cuts (especially in an already depressed economy) will lead businesses and consumers to feel such confidence that they will more than offset the government's drag on the economy. As I have discussed at length, the supposed examples supporting expansionary austerity do not actually demonstrate the claims that the theory's partisans are making. Meanwhile, it is child's play to defeat the "stimulus didn't work" claim, because all the evidence (even studies by stimulus opponents) supports the conclusion that it worked as well as it could, given how little stimulus was actually enacted (under pressure from both Republicans and some misguided Democrats). The 2009-10 stimulus program worked by preventing the unemployment rate from rising even further, which is no mean feat.

As I noted in that Dorf on Law post in May, there is a deeper issue at play here. Theories (especially in the social sciences) are very difficult to test definitively, making it difficult-to-impossible ever to convince diehard fans to give up the ghost. Even so, reasonable people with open minds need to have some way to draw some rough lines, neither holding on too long (for example, waiting for one more study to come in, before concluding that smoking causes cancer) nor jumping the gun (for example, giving up on the idea that a coin is fair when it comes up "heads" twice in a row). There is no clear answer to this difficult question, but it is so important that it deserves to be explored, even when we can only add a few more examples to the discussion.

The stakes in these debates can be quite high -- so high, in fact, that the nature of our economic and political systems can lie in the balance. In my post, I noted: "On a grander scale, Professor Dorf mentioned to me (after reading my new Verdict column) that this 'never tested' meme also captures the attitude of believers in Communism. They argue, quite plausibly, that Marx's writings simply are not the basis for so-called Communist regimes in the 20th Century. They thus claim (perhaps not as plausibly) that Stalinism, Maoism, and other real-world regimes that have been labeled Communist are wrongly used to smear an idea that has never been given a chance to succeed or fail."

In response, a reader wrote: "Professor's Dorf's comparison between austerity and Stalinism is unfair ... to Stalinism. Stalinism has had its failures, but at least it's had success as well: industrializing Russia so it could withstand Hitler's onslaught and now, industrializing China faster than any other third-world country."

We potentially have, in short, a much more difficult test case here, more difficult than the question of whether there is enough evidence to reject expansionary austerity (yes, obviously) or to reject Keynesian stimulus (no, just as obviously). If Communism lies between those two cases, however, that would mean that Communism is actually more difficult to reject, on the evidence available, than expansionary austerity. Can that possibly be true? Should the rejection of Communism not be at least as easy as the obvious case against expansionary austerity? Surprisingly, no. Even Communism has more to be said for it than Austerionism.

This analysis becomes even more complicated, of course, because defining Communism is itself so difficult. But if one wants to give the defenders of some reasonable notion of what constitutes Communism a fair shake, the definition should involve two things: (1) the idea that Communism can be based on a political apparatus that is non-totalitarian, and (2) the core economic requirement that the government directly operates the means of production, including accumulating capital through non-competitive means. If such a government were to try to honor "From those who have the ability, to those who have the need" in some meaningful sense, then we would have at least the basis for asking whether such a system could succeed.

The most common argument against the success of Communism, of course, rejects my first premise. That is, Communism is said to be marked definitively by a totalitarian (or, at least, strongly authoritarian) political system, along with a centralized economic system. We then hear the usual list -- the Soviet Union, Cuba, North Korea -- and are told that this cannot work. (Usually, this is accompanied by some triumphalist chest-beating, along with broad and conclusory comments about the importance of capitalist incentives and Marxists' supposed naivete about "human nature.")

As the comment above noted, however, an extremely authoritarian modern Chinese government has done an astonishingly effective job of bringing 300 million of its citizens up to a modern middle-class standard of living (just as a brutal totalitarian government brought the Soviet Union out of pre-capitalist poverty in no time at all). And as one of my hosts during my visit to Hong Kong earlier this year (an Anglo-Australian by birth) pointed out, China's huge progress in reducing poverty among its citizens looks especially impressive compared to the next-largest country in the world, India. With more than a third of the world's population living in those two countries combined, that comparison is fairly difficult to dismiss. We can at least conclude that material economic progress is possible under non-democratic political regimes that control the means of production.

Even so, I think that it is essential to return to my first premise, that we should want to see a test of a regime that is non-totalitarian, even as the government controls the means of production. The debate, after all, resonates in the United States (if at all) only if the pro-Communist position can promise that the economic gains that we saw in Stalin's Soviet Union and modern China could be achieved in a constitutional democracy marked by the rule of law. If that is not possible, then it does little good to point to China's growth. The price of such economic growth -- even if it can be attributed to central control of the means of production -- is simply unacceptable.

All of which brings us to an even more difficult question: What do we do when there are no examples, either way, to test a theory? One answer, of course, is to say that it is no mistake that we have seen no national-scale constitutional democracies with Communist economic systems. Under this view, centralized economic power is too easily abused, and the political regime thus becomes corrupted nearly immediately. Maybe, but that explanation suggests a time sequence that real-world regimes have simply not followed: under this view, a democratic regime adopts communist economic principles (or, a new regime simultaneously adopts democratic politics and communist economics at its founding), only to see the political regime become overwhelmed by the economic centralization. Notwithstanding the rhetoric of "people's movements," I do not think that any real-world country that has been given the label "Communist" has followed that pattern. Usually, the political regime begins as a non-democracy, with promises of moving in the other direction ... soon.

The claim that "it was never given a fair test," therefore, is at least a plausible one coming from those who wish to continue to believe that democratic Communism has some potential to improve people's lives. I am not one of those people, because I do think -- even as a supposed "big government tax-and-spend liberal," by American standards -- that the default position should be for the government to set rules, while private actors live and engage in economic transactions under those rules. By comparison to the claims from the American right that fiscal austerity was never fairly tested, however, the diehard Communists at least are not burdened with the record of unmitigated failure that the Austerions simply cannot explain away.

23 comments:

Patrick S. O'Donnell said...

(My comment, owing to its lenght, will be in several parts)

Re: “…Marx’s writings simply are not the basis for so-called Communist regimes in the 20th Century.”

That is in most significant respects true, even if what Marx wrote, and the social movements and political parties associated with his name were an inspiration for the parties and groups that established these regimes. First and foremost, Marx was a critic of capitalism, not an architect of socialism and he had precious little to say about communism as such. Marx in relation to the theory and praxis of communist Party-State regimes is not at all equivalent to the relation, in theory and practice, of Keynes to capitalist democratic Welfare State regimes. And yet as Rawls himself noted, were we to infer from the collapse of the former regimes that “Marx’s socialist philosophy and economics are of no significance today” as many have in fact concluded, “[it] would be a serious mistake.” So, Marx still has something to say to us about socialism (as Elster has made clear in his essay on the Marxist conceptions of the good life and self-realization), but a full-fledged economic and political theory of socialism will need to go beyond Marx, as the late Michael Harrington well understood, perhaps in the same way those of us who desire to see an ecologically sustainable society not wedded to the imperatives of conspicuous consumption and the corresponding belief that the satisfaction of the preferences associated with consumption (understood to include aesthetic pleasures and entertainment as well as consumption of goods in the ordinary sense) are the essence of the good life, the oars that steer us to the happiness on yonder shore, believe that we need at some point to venture beyond the premises of Keynesian economics, neo- or otherwise.

In other words, we need to strive beyond an economics which allows or sanctions the perpetual multiplication of needs and wants (with the latter often taking on the character of the former, as occurs with the notion of relative deprivation) in which the masses feel an overwhelming need to be psychologically indemnified by the possession and consumption of as many goods and services as possible. We need to transcend the “demand constraint” of capitalist democracy that canalizes the articulation of the interests of working people into the exclusive pursuit of economic advantage, in part owing to the ubiquitous conditions of “material uncertainty” for all but the wealthy classes: “There is a characteristic economic rationality to the actions of workers encouraged by capitalism. In the face of material uncertainties arising from continual dependence on the labor market under conditions of the private control of investment, it makes sense for workers to struggle to increase their wages.” (Joshua Cohen and Joel Rogers) As Ian Shapiro writes in The Evolution of Rights in Liberal Theory (1986), “The ambiguous moral status of Keynesianism and welfare economics has always inhered in the fact that they appeal to the short-term interests of the disadvantaged (such as unemployed workers and firms on the verge of bankruptcy during recessions) by ensuring subsistence, creating employment, and expanding credit, yet these policies are geared in the medium term to sustaining the system which generates those very disadvantages—hence the ironic force of Joan Robinson’s quip that the one thing worse than being exploited is not being exploited at all.” So while neo-Keynesianism may be a short-term solution to what ails us, or, put differently, while it has proven effective in cushioning the more deleterious effects of the “manias, crashes, and panics endemic to capitalist cycles” (Meghnad Desai), the global consolidation of capitalism, together with the effects of environmental degradation, may be a sign that such short term solutions are running their course, rendering obsolete render calcified models of neo-classical economic growth, capital accumulation, and mass conspicuous consumption.

Patrick S. O'Donnell said...

Is it possible to achieve a globally egalitarian (neo-) Keynesian Golden Age (anything less will not do)? Poverty remains recalcitrant in several regions of the world while regional and global inequality is increasing, economic facts we might grant without in any way diminishing the historic significance of capitalism for wealth creation (and thus betterment of standards of living if not quality of life indices). Are we, at last, reaching the structural limits of capitalist economic logic? Have we exhausted the economic—and, yes, moral—virtues of the neo-classical economic worldview? Or, are we merely at the lowest ebb of an economic cycle that will be cured by some fortuitous combination of conventional and creative politico-economic policies crafted by prudent democratic leaders of countries North and South? Is this a propitious time for seriously contemplating the imminent dissolution of the “aristocracy of capital” and the “economization of social relations?” Is the time ripe for (re)articulation of the authority of the Good by way of abandoning the capitalist criteria for market success? Are we prepared to break, once and for all, the structural socio-economic and political constraints of “capitalist democracy?” Must the welfare of the many and their generalizable interests remain subordinate to the welfare of capitalists and their particular or special interests? Are the interests of working people fated to be canalized into the exclusive pursuit of economic advantage? Must labor markets remain plagued by the material uncertainties and insecurities intrinsic to the private control of investment within the terms of finance capitalism?

Capitalist democracy remains committed to the aristocracy of Capital, meaning that, in the end, the special interests of capitalists trump generalizable interests tied to the common good, while economic insecurity compels workers to canalize their interests in the struggle for higher wages or short-term material gain. The aristocracy of Capital finds workers dehumanized insofar as they’re indemnified by the false promises of conspicuous consumption and irresponsible affluence, utterly distorting the pursuit of happiness and the potential of individuals for uniquely realizing values and manifesting virtues.

Can we, instead, accord socio-economic primacy to creating the necessary (and thus not necessarily sufficient) conditions for generalizing psychological and moral individuation or self-realization? Assuming the capacity to meet basic material human needs, can we resort to criteria associated with the recognition and fulfillment of our moral and spiritual needs by way of the regulation of economic life and therefore the subordination of economic life to the goals of establishing the conditions necessary for generalizing the pursuit of self-actualization or self-realization in a psychological, moral and spiritual sense, for generalizing the innate incentive toward worthy living, for generalizing, within the constraints of dignity and self-respect (as Dworkin says), the capacity for realization of what it means to live worthy lives? As John Dewey said, “Democracy has many meanings, but if it has a moral meaning, it is found in resolving that the supreme test of all political institutions and industrial arrangements shall be the contribution they make to the all-around growth of every member of society.”

Patrick S. O'Donnell said...

In the words of Daniel M. Haybron:

“The United States is by a wide margin, among the most affluent nations in human history, and many Americans enjoy unprecedented freedom to shape their lives—for those individuals, a great success in moral and economic terms. Yet no one ever accused us of ‘knowing how to live.’ This is perhaps because, arguably, we don’t. Surveys find an overwhelming majority of Americans reporting that Americans have badly placed priorities. And there is no evidence that Americans grew any happier over the recent decades that witnessed astonishing growth in material standards of living. Self-reported happiness has remained essentially flat, while rates of suicide, depression, and other pathologies have soared. [….]

The modern era’s overriding preoccupation, arguably, has been the betterment of the human condition, inarguably, a noble aim. Yet the real focus has been on our material conditions, with far less attention paid to the question of how we are living and what our way of life does for us, or to us. Once it has well enough satisfied the basic constraints of morality, the chief question facing any civilization is: do its members enjoy a reasonable level of well-being? We probably won’t get much of an answer to this question if we simply ask what they have got. For human well-being mostly depends not on what people have but, among other things, on what they do with what they’ve got. A better question, arguably, is this: do they live in a sensible manner? A decent response to this question will require us to understand whether their way of life suits their natures. And central to that project, surely, will be seeing whether their way of life conduces to their flourishing psychologically. If a civilization cannot muster a reasonably affirmative answer to this question, then we might reconsider whether it is properly called ‘civilized.’ For if people do not flourish psychologically, they do not flourish. Period. It is with the psychology, I would suggest, that the really interesting story about the flourishing of these creatures lies.

The pursuit of happiness is not easy. Given that the basic conditions of our lives, and the way we live, are so heavily dependent on our social environment, we may want to look more closely at the societal dimensions of the question. [….] Even if we are suspicious of using policy instruments to promote happiness, we might at least consider the limits of individual effort, and the importance of context, in shaping how happy we are. Take, for example, recent initiatives to develop and teach methods by which people can make themselves happier. Such efforts can produce very real benefits, and in fact many of the ancients were in a version of same business. While there are legitimate worries about such techniques sometimes reducing to cheap spiritual analgesics, I see no reason why this cannot be avoided. A more interesting question, it seems to me, is how far individual efforts like this are likely to improve human well-being on a broad scale. If the problem lies chiefly in the way you live, and this in turn depends heavily on the kind of society you inhabit, then positive thinking techniques and the like are only going to get you so far.

Patrick S. O'Donnell said...

…[H]uman flourishing depends substantially on the verdicts of our emotional natures, to a significant extent independently of what we think about our lives. There is a large part of well-being, in short, that hinges on matters of sentiment, needing no stamp of approval from reason. Of course I have not denied an important role for reason in a fuller account of well-being, so that a complete view would likely have both sentimentalist and rationalist elements (in contrast, say, to hedonism, which in its canonical forms is a wholly sentimentalist approach). Nor have I suggested that reason and sentiment can be wholly separated; perhaps sentiment always has some rational element and vice versa. But it does appear that our reflective judgments do not bear the sort of authority regarding our welfare that many of us take them to.” [….]

While moderns have been right to place psychological states like happiness at the center of well-being, the character and value of these states is surprisingly elusive. We should not assume that matters of personal welfare are at all transparent to the individual. The potential for error is great. Indeed, it should by now be easy at least to imagine people settling, en masse, for unfulfilling lives. The question now is whether, given the facts of human nature, such a result is anything more than a bare possibility. [….]

…[The spirit of the modern age appear to be] a spirit of optimism about the individual pursuit of well-being, founded in Enlightenment trust of the individual and her powers of reason. Since ‘Enlightenment optimism’ is vague, additionally encompassing epistemological and historical views, and since the optimism in question concerns the effects of certain freedoms associated with liberalism on well-being, I [earlier] called it liberal optimism. Liberals need not be optimists in the present sense; besides weakened forms of liberal optimism there is room for liberal pessimism as well as, in between, what we might call liberal sobriety. Yet one does not often hear it suggested that the ideal of empowered and unfettered living is, from a prudential standpoint, a bad thing, or merely the least bad option of a sorry lot. You certainly won’t hear it from many economists.

Liberal optimism is clearly appealing, but it rests on some non-trivial assumptions. Here I want to consider the plausibility of liberal optimism’s chief psychological doctrine, which I will the Aptitude assumption. Roughly, Aptitude maintains that human psychology is well-adapted to environments offering individuals a high degree of freedom to shape their lives as they wish. We have the psychological endowments needed to do well, indeed best, in such environments by choosing lives for ourselves that meet our needs. [….] [R]ecent work in empirical psychology…raises significant doubts about Aptitude. This research challenges Aptitude via a Systematic Imprudence thesis:

‘Human beings are systematically prone to make a wide range of serious errors in matters of personal welfare. These errors are weighty enough to substantially compromise the expected lifetime well-being for individuals possessing a high degree of freedom to shape their lives as they wish, even under reasonably favorable conditions (education, etc.).’ [….]

Patrick S. O'Donnell said...

…[T]he individualized pursuit of well-being is probably substantially undercut by systematic tendencies toward imprudence: the Systematic Imprudence thesis is very likely true. This in turns suggests that a key assumption of liberal optimism, Aptitude, may well prove to be false. I will not be claiming that the Aptitude assumption is in fact false or unwarranted. The point is rather that we should take this possibility seriously. The truth of Aptitude should be considered an open question. A secondary aim is to sharpen our grasp of the remarkably bold psychological assumptions underlying much modern thought about human nature, the good life, and the good society. [….]

Perhaps liberal optimism’s psychological assumptions will turn out not only to be wrong, but really wrong. We may, in the fullness of time, conclude that our civilization is founded on a fundamentally mistaken view of human nature and what we need to flourish. As if a misguided zoo established a habitat for tigers with the idea that they were dealing with dingoes. The correct response to such a discovery would not, in the first instance, be to pore over our tax and regulatory schemes in the hopes of correcting for this or that cognitive bias. We should want, rather, to rethink how it makes sense for creatures like us to live.”

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