Lambert here: Those wishing to conceptualize “public purpose” might be better served by appealing to the discipline of ethics, rather than economics (let alone accounting).
In a previous post, I outlined how leaders in positions of political power, especially at the national level, are chosen to fulfill a unique ethical role that differs from that which is appropriate for private individuals and business leaders. Because of the power that accrues to political leaders and the hopes attached to them by their constituents, politicians’ actions in office have much greater repercussions than, for the most part, the actions of individuals and individual businesses in the private sector. Once elected or appointed, political leaders have choices to make, often with room for their own discretion, which draw upon values they hold, values that are in part conditioned by, though not entirely reducible to their political and political-economic ideology. These decisions most often are concerned with policymaking, budgeting, and legislation that impact an entire nation or the international system of nations.
Effective political leadership and government action are realized often via the fiscal policy of government, the spending decisions of government and the resulting activities of government and non-government sectors via that spending. I have called the process by which political leaders budget and justify their budgeting decisions and overall economic policy “macroeconomic accounting”, a name which indicates that while some of the conventional business accounting rules apply to government finance, most do not. A formalization of this activity into a new practical discipline “macroeconomic accounting”, would provide a means by which the popular will (between elections), professed allegiances to various ethical ideals, as well as the findings of social and natural scientists could feed formally into government decision making, at least in best-case scenarios. Most importantly to introduce such a set of norms via this discipline would make it less likely that politicians would ignore, in addition to the popular will, the data of macroeconomics, or at least some future version of economics that is relevant to statecraft, and just as importantly the social and natural sciences overall. Ultimately each regime or government would compose its own version of macroeconomic accounting but the pre-existence of such a discipline would increase the likelihood that lawmakers would pay attention to a richer set of the relevant facts in making decisions and be held accountable to stated popular ideals.
To give a sense of the scope of what macroeconomic accounting for the 21st Century might look like, it helps to outline what would be the parameters which national-level politicians will use to guide policy decisions on the broad socioeconomic issues that they must face. Below is a preliminary list of the decision parameters:
1) Appropriate accounting (nomenclature and numerical representations) of monetary operations of (monetarily sovereign) governments (making clear the similarities and differences with business and household accounting) e.g. can true “deficits” within its own national currency exist for the fiat-currency issuer? Is a balance sheet the correct accounting format?
2) Ranking/list of priorities of government according to popular opinion
3) Ranking/list of priorities of government according to technical and scientific opinion
4) “Size of government” – i.e. what functions should be public services, what functions should be publicly funded but privately administered, and what goods and services should not be funded and delivered publicly.
6) Income Distribution/Poverty Rate
7) Effective Tax Rates
9) Exchange Rate Regime
10) Balance of trade/Management of trading relationships
11) Sovereign Bond Issuance and Management
12) GDP and Alternatives to GDP (measurement of overall economic performance of both private and public sectors combined)
13) Carbon Footprint and Carbon Intensity
14) Ecological Footprint
15) Energy Intensity and Fossil Fuel Dependence
16) Material Sustainability (Water, Food Production, Waste Management)
17) Measures of Health and Well-being
18) Cultural, Scientific and Educational Goals
It would seem these factors (and more) would all be worth considering in the formulation of government’s fiscal and regulatory policy. Still, even an elaborate “formula” based on these variables would require a great deal of choice in construction, discretion in inputting data, care in maintaining and judgment in interpreting the output and finally judgment and energy in executing the resulting policies. Such is the complexity of human societies and economies that no model of them constructed out of these or other parameters could ever be considered complete or optimal without the application of human judgment.
As the harrowing political and economic incompetence of the last few years has shown, better analytic and technical solutions are required in the areas of the policy-relevant social and natural sciences and their consideration must be made mandatory in political-economic decision-making. The idea of a macroeconomic accounting provides the outline of such a set of technical solutions.
Yet technical and analytic solutions alone will not take the place of better choices on the part of leaders and their technical staff, as well as the choice in the first place to adopt rational assumptions and rigorous data analysis as fundamentals of good policy. Ultimately a public discussion of what is “the good” and what are better means to achieve the good is required to choose and structure technical solutions to our society’s massive challenges. These operations and activities fall under the broad category of “ethics”.
What is Ethics?
According to the (peer-reviewed) Internet Encyclopedia of Philosophy, ethics “involves systematizing, defending, and recommending concepts of right and wrong behavior”. The philosophical discipline of ethics comprises the study of ethical systems from the point of view of their construction, argumentation and logic, describing ethical systems as they exist in the world (e.g. an anthropology of ethics), and also putting forward normative principles and judgments of right and wrong, good and bad. The latter is the “public face” of ethics, as it encompasses the activities of various “ethics committees” as well as the sense that people have that ethics and morality are about judgment of oneself and others according to some standards of proper conduct. More importantly, the law and jurisprudence can be thought of as a subdivision of normative ethics.
To assume that ethical impulses exist and have social and economic weight, contradicts the assumption of amorality embedded within neoclassical economics which shears off the notion of human ethical impulses or institutions premised on ethical principles having a productive or positive effect on economic activity. There are people who don’t seem to have consciences, whom we now call “sociopaths (or psychopaths)”, that make up perhaps 2% of the population. For them, ethical impulses are either incomprehensible or are viewed coolly as merely a tool to manipulate others and social institutions to get what they desire. Conventional neoclassical economics has normalized sociopathy in economic life by assuming the “utility maximizing individual” at every turn, which aids sociopaths in gaining positions of power and influence in our contemporary society. In the political science derivative of neoclassical economics, James Buchanan’s “public choice theory”, politicians are assumed to be as fundamentally amoral as neoclassical economics’ model of the person, which has the effect of excusing or making invisible political corruption. To its great credit, the recent Modern Money Theory school of economics, assumes that there exists a “public purpose” which economic policy serves, providing a respite from the atomistic and non-moral view of humanity promoted by mainstream economics.
Macroethics and Microethics
Recently, the term macroethics has been applied by engineering ethicist Joseph Herkert to describe collective action problems in engineering ethics: how local technical solutions can make situations worse if systemic issues are not addressed. In my view, the term “macroethics” and its contrast with “microethics” solves a classification problem we have in understanding the different scopes and scales of ethical action more generally, as well as qualitative differences in normative ethical principles. The ethical analogue in the distinction between macroeconomics and microeconomics is important and highlights the role of different discrete perspectives in social phenomena: one can look at society from a large-scale aggregate view or from a more granular view and come up with different and sometimes conflicting information and prescriptions for ethical behavior.
Macroethics could be construed itself to be a broad category but two main defining concepts can immediately be called out:
1) Macroethics is the broadly shared ethical framework of a “people” or nation as applied to group and national behavior: what is correct or right behavior for the group, what is the broad social contract or norms for communities and larger groups of people.
2) Macroethics is specific sets of ethical rules that apply to people interacting with supra-individual systems, like the national or international economy, the polity, the climate system, the biosphere etc. Macroethics is the ethics of constructing, maintaining, changing and disrupting systems.
By contrast, microethics is a more recognizable and traditional concept in our society: microethics is the study of, recommendation and promotion of standards of right behavior for individuals and simple social groups and organizations that may be treated as individuals.
Within microethics as opposed to macroethics, individuals are more “empowered” and commensurately there are higher expectations for the individual to have control over (micro-) social outcomes. By constrast in macroethics, the degrees of freedom of ethical action are constrained by the affordances and tolerances of the relevant social systems, which are by their nature larger than the individual. In addition to the rigidities of large systems constraining the individual will to do good, “good” or “better” actions in macroethics are often beset by collective action problems where individuals need to persuade others of the recommended course in order to act in a more effective ethical manner. While individuals may be less empowered in macroethics, the effects of successful, coordinated action guided by macroethics can be longer lasting and have more profound and wide-reaching effects.
The domain of ethical action and thinking that is appropriate to political leaders, particularly at the national level, is essentially macroethical. Individual and interpersonal ethical actions are, in some sense, not the specialty of a politician, who is supposed to act as the avatar of his or her constituency. Politicians are chosen to act within the political and political-economic system for the benefit of this constituency, persuading other politicians to follow a particular course that he or she believes are correct. Furthermore, a purely ‘interest-based’ view of political power and bargaining overlooks the universalizing potential of politics and human interaction more generally: politics and policy-making have at least the potential to be more than “horse-trading” between interest groups, even though the exchange of political favors is almost inevitable. The more fully grounded in a widely shared macroethics, the more likely a politician can have profound and long-lasting effects for the good of the region or nation, especially as regards the interests of those in the future and the non-human environment, as yet unrepresented in the polity.
The contrast between microethics and macroethics is highlighted by effective or principled politicians and activists who lead less than exemplary private lives. Eliot Spitzer is a recent example of a politician of high principle in the area of macroethics (a zealous prosecutor of Wall Street crimes among others) but who made some poor decisions in his personal life and marriage. Franklin Roosevelt, a President who acted effectively in the national and international arenas with an apparent passion for his macroethical duties, had a number of affairs in his personal life. While there are individuals who may be considered to be ethically scrupulous in both micro- and macroethical realms, the contrast in some individual cases points to different human capacities in these two areas of ethical life.
Outline of an Effective Macroethics
As macroethics is concerned with large scale systems there are three important boundary conditions to assess whether one’s macroethics has the potential to be an effective guide to ethical action.
1) Emotional investment in the welfare of a greater-than-self, inclusive social group – An effective macroethics requires that individuals be emotionally invested in the welfare of a large and inclusive social group; macroethics is the mental and social-discursive space to better guide collective action or leadership of a larger-than-self grouping. The concepts of “the people” or “humanity” are some of the most valuable anchors for a macroethics, though these are often difficult to represent and operationalize. Efforts to marginalize or exclude groups from the group to which macroethics is attached, make one’s macroethics less relevant to a world which is increasingly internationalized and multi-ethnic. Despite a movement and bias towards inclusivity, some groups or individuals may act in a way that is antagonistic to the general interest and they may need to be fought against in order to achieve what most have determined to be “the good” for society or humanity as a whole.
2) Deontological commitment to truthful representation – As large scale systems are often difficult to perceive via sense-data and are also more or less changing, one needs to know the state and trajectory of the system in which one is participating in, in order to effectively act in it. To assume that one can via intuition or introspection alone arrive at a correct course of action can lead to an egocentric bias which will in many situations lead to erroneous conclusions and damaging outcomes. Therefore as a potential actor one needs to have a deontological (duty-bound, rule-based) commitment to truthful representation and one is, as well, dependent upon other people likewise committed to truthful representation. Not all ethical actions can be derived from data or data analysis but without truthful data one is most often disconnected from the field of action.
3) Locating the critical system of focus in hierarchy of natural/social systems – In dealing with “larger-than-self” phenomena it is crucially important to know where one is located in relationship to natural and social systems that may or may not be in a critical state, therefore requiring action. There are probably two meaningful ways to locate the relevant system, starting either from the macroscopic or the microscopic. As we are discussing economics, economic systems are mostly macrosocial systems that are based on smaller systems studied by psychology and anthropology and bigger systems like the biosphere, the climate system, geological systems and astronomical systems. On the same level of economics in terms of size of system are social systems studied by sociology and by political science. Economics in some future form could be meaningfully integrated with either the study of politics or the study of society more generally.
4) Search for and timely application of best available or soon-to-be-available solutions – Good intentions and fine plans are not enough for an effective macroethics: an effective ethics leads to effective action. Existing solutions may not suffice, so pushing for new solutions to large scale problems is important with the proviso that the “perfect not become the enemy of the good”.
The Austerity Campaign Confuses Microethics and Macroethics
Neoliberalism, from which the austerity campaign has sprung, is a political-economic doctrine that, taking off from Adam Smith’s metaphor of the invisible hand in Wealth of Nations, assumes that macroethics is an appendage of a narrowed microethics, a microethics shorn of group-oriented impulses and oriented towards pursuing individual enrichment and self-interest. The notion of the invisible hand of the market which serves the highest common good by not imposing any transcendent ethical principle on social interaction, suggests that macroethics is not an important differentiated area of ethical concern. Progressives who want to salvage Smith for a more progressive politics point out that in Wealth of Nations as well as in his previous work of moral philosophy, Theory of the Moral Sentiments, Smith himself seems to contradict or supplement a “self-interest oriented microethics-only” view of optimal economic and ethical development. However, it is not my interest here to either rehabilitate Smith or revise what has become a dominant misreading of Smith that is at the foundation of neoclassical economic and neoliberal political economics: methodological and ethical individualism.
Margaret Thatcher, one of the prominent early neoliberal politicians, phrased the basis of neoliberal ethical cosmology most succinctly when she said “there is no such thing as society. There are individual men and women, and there are families”. While more “left” neoliberals such as Tony Blair, Bill Clinton and now Barack Obama, dilute their neoliberalism with calls to service to the common good, in critical areas of economic and social policy, the neoliberal trend towards individualized solutions to social challenges continued in full force in their policy prescriptions and perverse ideological loyalty to their nominal political opponents on the Right.
After the initial panic surrounding the global financial crisis of 2007-2008 subsided, an opportunistic brand of neoliberalism emerged that continued neoliberalism’s attack on government as a stabilizing, moderating force in society. This re-energized brand of neoliberalism advocates fiscal austerity and balanced government budgets, “worrying” that public bond issues floated during the economic stabilization process were “unsustainable” debts. That the prime drivers of fiscal austerity were representatives of the financial industry, which had just been bailed out by government and had gotten themselves into trouble via high levels of private “leverage”, has so far escaped the notice of most sectors of the press in Europe and the United States and therefore the consciousness of the public. Furthermore the potential future advantages to that same industry of austerity’s selective shackling of government’s ability to create and control the liquidity of the economy have also, so far, escaped the notice of a gullible press and by extension a good portion of the public.
The fundamental premises of austerity go against the re-discovery 80 years ago by John Maynard Keynes of the ancient paradox of thrift, that if everybody tries to maximize savings in an economy at the same time, the economy itself shrinks. The virtue of being thrifty, of saving, has appeal to each individual both micro-economically and also in terms of conventional morality. The paradox of thrift is one of the foundations of the distinction between macroeconomics and microeconomics and also of there being an equivalent macroethics by which leaders and the people who elected them attempt to guide their society overall. Resistance to Keynes’s discoveries and to the existence of a distinct macroeconomics has for the most part come from people who insist that personal and business experience are the only models for economic management and for economic morality. At basis, the resistance to Keynes may be viewed fundamentally as a denial of the idea that “more is different”, that at larger scales, social and natural phenomena require a different lens that is not necessarily a direct translation from day-to-day experience.
While the economic rationale for austerity is non-existent when viewed from the perspective of the economy as a whole, the austerity campaign operates on the level of political and (misguided) ethical argumentation. Austerity campaigners like Pete Peterson and Congressman Paul Ryan either are subject to and/or foment in others a fundamental ethical confusion between individual ethics and the macroethics of economic and political leadership. Repeated over and over again is the equation between a business or household budget and a national budget. So persistent is this mantra and so well placed its ideological sponsors that austerity’s perverse infliction of economic pain without gain seems to be hidden from politicians who delude themselves to think that the morality of political leadership is identical to the morality that applies to that of business owners or householders.
This fundamental moral confusion may be mere pretense in the sociopaths and Machiavellian political operatives who are no doubt crucial to the success of the austerity campaign. Yet their (fallacious) ethical argumentation has swept along more gullible political leaders who have not paused long enough to consider the uniqueness of their role as leaders of governments. These leaders, with the exception of the Euro-Zone countries, can move their governments to issue currency to bail their nations out of any real or imagined financial bind (though finances do not necessarily solve real economic difficulties). Either believing that the fiscal reality of currency-issuing governments was identical to that of a business or a household or fearing that their constituents would view them as immoral if they did not treat the national budget as that of a household, politicians have, so far, acted as if they do not recognize their distinct macroethical duties as regards the national budget.
Civilization and Macroethics
Neoliberalism and austerity mania have led to a perversion of the macroethics of government where politicians take as their primary ethical object conserving the virtual resource of the currency, mistaking dollars or pounds as a limited vital resource, while leaving almost entirely to one side the welfare of the real people and the state of the physical assets of the country that support their welfare. There are two flavors of macroethical and macroeconomic blindness to choose from in the political spectrums of the US and other countries but the people of the United States and European countries should not be confused: their welfare and the integrity of their economies is being overlooked or damaged by both sides of the traditional political spectrum as well as the compromising “centrists” in the middle of that spectrum. In the midst of a long economic downturn with private households unable to earn and spend adequately to fuel economic recovery and reconstruction, it is up to government to spend and reshape economies so that they can function and face emerging realities like climate change and the huge energy transition that it demands.
Without an effective macroethics our civilization and economy cannot survive; strong macroethical commitments by political leadership and a large swath of the population are not optional. Macroethics provides the implicit framework within which people give consent to government to represent them and lead them as well as to each other to behave in a manner that is respectful of the interests of one another. Broadly construed concepts of what is the “good” and what is the “bad” guide people to accept lawmaking that is more or less in their favor and to participate in large scale projects that in some way or another incorporate their hopes and aspirations. We face in climate change and human alteration of the natural basis of life, collective action problems of enormous dimensions. The civilization and global economy that have emerged in the last century and a half has been premised upon the availability of copious non-food energy used to power mechanical and electrical devices, which now must be sourced in an almost completely different manner than has been the case for that the last century. The fossil energy we have used endangers the stability of the biosphere from which we have, in turn, been able to produce the food that we need to survive.
If, persuaded by the neoliberal indoctrination of the last 30 years and the austerity mania of the last four years, political leaders and their constituencies believe that a widely shared macroethics is impossible, we will be unable to act in concert and retool civilization to face the upcoming challenges.