How to Destroy Neoliberalism: Kill ‘Homo Economicus’

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By Nick Hanauer, a Seattle-based serial entrepreneur, venture capitalist, author, and activist with a knack for identifying and building transformative business models. Cross-posted from Evonomics.

This piece is adapted from a speech delivered September 30th at MIT, where Nick Hanauer won the 2018 Harvard and MIT Humanist of the Year award. Read more about the award, as well as Democracy Journal’s editor Michael Tomasky’s Q&A with Hanauer, here.

I’m thrilled to receive this award from such distinguished hosts—but I won’t lie: When I was told I would be honored as the “Humanist” of the year, the first thing I did was double-check the definition to make sure it was a good thing. And here I am. So—thanks!

As a person who comes from three generations of non-practicing, non-religious Jews, what you “are” can be somewhat confusing. I’ve never been comfortable with the conformity of organized religions, nor their traditions and rituals. And I never was impressed by moral reasoning that went something like “do the right thing, or we’ll burn your ass in Hell for all eternity.” I was often at a loss to culturally and morally locate myself. One of my friends used to call me a “WASP Jew.” Now you folks tell me I’m a “humanist.” Who knew?

Mostly in life, we are judged purely for our actions and accomplishments. And I have been honored in that way before: as a successful capitalist and as a philanthropist and for my civic activism. But this award is more interesting and personally gratifying because in this case, why I do what I do is as important as what I do, and for this I am deeply appreciative.

To me, the great attraction of humanism is not that it holds us to a higher standard, but that it asks us to hold ourselves to a higher standard. It’s relatively easy to do the right thing because of a looming reward or punishment—even in an afterlife. It is much harder, and therefore more meaningful, to do the right thing simply because it is the right thing to do—particularly if doing the right thing appears to involve personal trade-offs in the here and now.

But more consequentially, the more I have come to understand market capitalism, both as a practitioner and as a student of economic theory, the more I have come to understand that this humanist ethos is a prerequisite for human prosperity itself.

I did note that I am the first capitalist to be honored with this award. I suspect that this may be because you all view the world I inhabit, the world of business and economics, as somewhat “morally challenged.” To be clear, contemporary American business and economic culture does have a moral framework: neoliberalism. But I think it is safe to say that this framework is dependably orthogonal to the last 50,000 years of moral norms and traditions.

Is that too harsh? Maybe. But the canonical moral expression of modern capitalism—“It was a business decision”—has far more in common with The Godfather than with The Golden Rule. Let’s be honest: Whenever you hear somebody say, “It’s not personal, it’s strictly business,” you know that really terrible things are about to happen.

It is a sign of the times that one of the best-known moral claims by an American business is Google’s: “Don’t be evil.” At least they have one. But it is interesting to reflect on. Put aside whether Google has lived up to its credo or not. How did we get to the point where the highest standard a business will hold itself to is simply the absence of evil?

And how did we get to a so-called “ethics” of business that insists that the only affirmative responsibility of a corporate executive is to maximize value for shareholders?

I believe that these corrosive moral claims derive from a fundamentally flawed understanding of how market capitalism works, grounded in the dubious assumption that human beings are “homo economicus”: perfectly selfish, perfectly rational, and relentlessly self-maximizing. It is this behavioral model upon which all the other models of orthodox economics are built. And it is nonsense.

The last 40 years of research across multiple scientific disciplines has proven, with certainty, that homo economicus does not exist. Outside of economic models, this is simply not how real humans behave. Rather, Homo sapiens have evolved to be other-regarding, reciprocal, heuristic, and intuitive moral creatures. We can be selfish, yes—even cruel. But it is our highly evolved prosocial nature—our innate facility for cooperation, not competition—that has enabled our species to dominate the planet, and to build such an extraordinary—and extraordinarily complex—quality of life. Pro-sociality is our economic super power.

Economists are not wrong when they attribute the material advances of modernity to market capitalism’s genius for self-organizing an increasingly complex and intricate division of knowledge, knowhow, and labor. But it’s important to recognize that the division of labor was not invented in the pin factories of Adam Smith’s eighteenth century Scotland; at some level, it has been a defining feature of all human societies since at least the cognitive revolution. Even our least complex societies, small bands of hunter-gatherers, are characterized by a division of labor—hunting and gathering—if largely along gender lines. The division of labor is a trait that is universal to our prosocial species.

Viewed through this prosocial lens, we can see that the highly specialized division of labor that characterizes our modern economy was not made possible by market capitalism. Rather, market capitalism was made possible by our fundamentally prosocial facility for cooperation, which is all the division of labor really is.

This dispute over behavioral models has profound non-academic consequences. Many economists, while acknowledging its flaws, still defend homo-economicus as a useful fiction—a tool for modeling and understanding the economic world. But it is much more than just an economic model. It is also a story we tell ourselves about ourselves that gives both permission and encouragement to some of the worst excesses of modern capitalism, and of contemporary moral and social life.

If we accept that it is true—if we internalize that most people are mostly selfish—and then we look around the world at all of the unambiguous prosperity and goodness in it, then it follows logically, it must be true, by definition, that a billion individual acts of selfishness magically transubstantiate into prosperity and the common good. If it is true that humans really are just selfish maximizers, then selfishness must be the cause of prosperity. And it must be true that the more selfish we are, the more prosperous we all become. Under this logical construct, the only good decision is a business decision—“Greed is good”—and the only purpose of the corporation must be to maximize shareholder value, humanity be damned. Welcome to our neoliberal world.

But if, instead, we accept a prosocial behavioral model that correctly describes human beings as uniquely cooperative and intuitively moral creatures, then logically, the golden rule of economics must be the Golden Rule: Do business with others as you would have them do business with you. This is a story about ourselves that grants us permission and encouragement to be our best selves. It is a virtuous story that also has the virtue of being true.

I believe that prosperity is best understood as the accumulation of solutions to human problems. From curing cancer to a crunchier potato chip, every legitimate enterprise is in the problem-solving business, and because trade is reciprocal—you need a potato chip, I need a profit—every solution consumed is a mutual problem solved. But as our modern technological economy grows more prosperous, it’s problems inevitably grow more complex, and this requires ever greater degrees of social, economic, and technological complexity in order to sustain this virtuous cycle of innovation and demand.

Capitalism is the greatest problem-solving social technology ever invented. But knowing that capitalism works is different than knowing why it works. And contrary to economic orthodoxy, it is reciprocity, not selfishness that guides it—indeed—as if by an invisible hand. It is social reciprocity that builds the high levels of trust necessary for large networks of people to cooperate at scale. And it is only through these networks of highly-cooperative specialists that the complexity that defines our modern economy can emerge.

Dr. King said, “the arc of the moral universe is long, but it bends toward justice.” In the same way, thanks to the fundamental evolutionary logic of the market, the arc of the economic universe bends toward complexity. And these two arcs are just part of a larger circle that is anchored by justice, which creates the trust, that enables cooperation, which produces the complexity from which our prosperity emerges.

So this is the main point of my remarks: Properly viewed through this prosocial economic lens, we see clearly that it is our humanity, not the absence of it, that is the source of our prosperity.

But of course, in working to change the way we think about the economy, my ultimate goal is to change the way we act within it. And to this end, I’d like to close by offering four simple heuristics to guide your own actions and activism:

Heuristic number one: Capitalism is self-organizing, but not self-regulating.

The notion of market capitalism as a Pareto-optimal closed, equilibrium system is—to use the technical term—bullshit. Throughout the world, the most broadly prosperous capitalist economies are also the most highly regulated and highly taxed. To be clear: Government investment and intervention is not a necessary evil. It is just plain necessary.

Which leads us to heuristic number two: True capitalism is not shareholder capitalism.

The neoliberal claim that the sole purpose of the corporation is to enrich shareholders is the most egregious grift in contemporary life. Corporations are granted limited liability in exchange for improving the common good. Thus, the true purpose of the corporation is to build great products for customers, provide good jobs for employees, provide a fair return to shareholders and to make their communities stronger—in coequal measure.

Heuristic Three: Capitalism is effective, but not efficient.

Schumpeter’s “perennial gale of creative destruction” has proven extraordinarily effective at raising our aggregate standard of living, but it can also be extraordinarily wasteful, cruel, and unequal—unequal to the point that it threatens to destroy capitalism itself. If our economy and our democracy are to survive the ever-quickening pace of technological change, we must use every tool available to close “the innovation gap” between our economic institutions and our civic institutions.

And finally, heuristic number four: True capitalists are moral capitalists.

Being rapacious doesn’t make you a capitalist. It makes you an asshole and a sociopath. In an economy dependent on complex trust networks to facilitate the cooperative tasks from which prosperity emerges, and when prosperity itself is understood—not as money but as solutions to human problems—true capitalists understand that every economic act is an explicitly moral choice—and they act accordingly.

And so, to all the aspiring business and technology leaders in the audience today, I want to challenge you to adopt an alternative credo, far more ambitious—and more humanist—than Google’s “Don’t be evil”: “Be good.” Or maybe, “Always do the right thing.”

And when you do the right thing, do it with confidence that if it is the right thing to do for your customers, for your employees, for your community, and for the planet—then it is also the right thing to do for your shareholders.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

46 comments

  1. pretzelattack

    first, we make all the economists work a min wage job for a year. if they work two such jobs, they get off in 6 months. they don’t get to use their savings to make ends meet, they don’t get to live in their house, they have to find some place.

    Reply
    1. Amfortas the hippie

      hell yes.
      I’ve been flogging that idea for years: a requirement for an MBA from Wharton should be spending six months or a year in a trailer park, on food stamps, etc…struggling to stay warm and fed.
      I reckon this would be a great education for our would-be Masters of the Universe.
      A little humility shouldn’t be too much to ask.

      Reply
      1. John Wright

        I don’t know that this would be seen as anything other than “a course to take” to graduate.

        I went to school and stayed in an off-campus cheap apartment in an East Coast inner city neighborhood.

        In the apartment building were students and older people just hanging on (such as a retired hotel maid, a drug dealer down the hall who was killed in another part of town during my time there and a building superintendent who needed dental work).

        Given I grew up in the Los Angeles suburbs, this did give me a different view of a part of America I knew little about.

        But as far as my struggling and sharing in the local experience, the prime difference was that I was fairly certain I would be leaving for a new job, while the locals were “stuck for the duration”.

        I have suggested before that the Great Depression did set the stage for shared USA prosperity as many, many Americans had their lives reset and did feel hopeless about the future.

        My late dad, who graduated with a college degree during the Great Depression, told me he stayed awake at night wondering what he was going to do.

        But sending MBA’s/economists to “struggling people’s school” won’t help much BECAUSE the MBA’s/economists know the “required course” will be ending and they can move on.

        Reply
        1. Amfortas the hippie

          I hit on that originally because I learned from random encounters with elites, or their kids, that many of them were unaware of the reality of poverty…so insulated were they.
          reckon maybe even a little exposure would do them some good.
          or, if we’re feeling mean, we could keep the criteria for passing the Poor Experience secret.
          I’ve noticed the insulation even in my dad…who means well and should know better.
          he was ranting about a welder who works for him wanting “too much $” , having a brand new truck,and such.
          I pointed out that 1. we don’t know his circumstances. 2. he needs a decent truck to go to work(dad’s business is no longer shop-bound, and all employees are contractors). 3. has his own welder and tools to lug around and maintain,
          on and on.
          dad got real quiet for a while…then started talking about grandad’s experiences in the Depression and the War.
          so I think I hit a nerve…or tore the veil a little bit at least.
          It’s easy to drive through the projects and criticize the denizens thereof…any of us could find ourself doing that.
          It takes work to “walk a mile in their shoes”…and that work is tacitly discouraged in myriad ways by the systems we’re embedded in.

          Reply
          1. LyonNightroad

            If anything it just shows your dad doesn’t understand the current truck market. Used truck values are inflated to the point of comedy.

            The depreciation curve on trucks is insanely shallow.

            Cheap gas and yuppie demand is propping up the entire truck market to crazy levels where it’s completely irrational to buy a used truck. Drive through any yuppie neighborhood and you’ll see a 4×4 crew cab super short bed pickup or a Jeep in almost every driveway.

            3 year old trucks with 40-60k sell for virtually the same price as New (after incentives).

            10 year old trucks with 120,000 miles sell for more than 50% of their new cost despite having the better half of their life behind them.

            250,000 mile clapped out trucks that barely run almost never go for less than 4k. Anything with a diesel that moves under its own power wont sell for less than 8k.

            Every price on the curve in between is equally irrational.

            Reply
      2. wilroncanada

        Amfortas
        I’m sure that many, if not most, would do what they have been taught by their ‘higher education and elite status’…CHEAT!

        Reply
  2. Dylan

    The anthropological data does not suggest conclusively that hunter gatherer societies split their labour by gender. Women hunted as well as men. Does he have support for his statement?

    Reply
    1. makedoanmend

      Is there any support that denies his statement over the entire course of the history of Homo Sapiens? Is there any physical impediment that prevents females from hunting – then or now?

      And this is the topic that needs to be highlighted from this interesting and challenging article?

      Reply
      1. Lee

        When it comes to perpetuating the species, men are much more expendable than women. What with the hazards of childbirth, women had enough risk on their plates already. It would therefore make sense that men would engage in most other more high risk activities. But now, with current technology and human overabundance, we men have the luxury of retiring from the bleeding edge of high risk occupations and encouraging the ladies go for it. Frankly, I’m quite happy with this evolved cultural trend. At last, the crushing pressure is off. Pass the bonbons, please.

        Reply
    2. Steve Ruis

      Oh, come on! Nothing one can say about humans is an absolute. He is merely saying that many hunter-gathers divided labor along sex lines. They also divided labor along age lines. The very young and the very old rarely hunt, simply because of ability. So, women hunted and men gathered. This was not stated as an absolute, just a general pattern.

      Reply
      1. JTMcPhee

        And some of those people divided labor along skill lines, like flint knappers and workers in leather, pottery, hut building, shamanism, war leaders, all that stuff. https://www.nytimes.com/2015/10/27/science/nothing-simple-about-hunter-gatherer-societies.html

        Of course one has to look at the complexity through the lenses that one wears: “Men and Women, Hunters and Gatherers,” http://www.worldclass.net/geo/Reilly/menwom1.htm

        Basic point is as the author sets it: “Homo economicus must be killed.” How many here recoil from doing at least that little bit of violence? Seeing, again, that H.e si killing almost all the rest of us, slower, faster, without regard to niceties…

        Reply
    3. Michael

      There have been many studies regarding gender differences in color discrimination. Earlier studies found no statistical differences, but more recent studies have shown that men require longer wavelengths than women to experience the same hue. Additionally, studies showed that men were better at tracking moving objects.

      The hypothesis advanced was that the division of labor in hunter/gatherers tended to be gender based due to evolutionary selection.

      Then there is also the differences in the way our hips are constructed. One is designed for successful childbirth, the other optimized for running after things.

      https://news.nationalgeographic.com/news/2012/09/120907-men-women-see-differently-science-health-vision-sex/

      https://bsd.biomedcentral.com/articles/10.1186/2042-6410-3-20

      https://bsd.biomedcentral.com/articles/10.1186/2042-6410-3-21

      Reply
  3. Doctor Duck

    A fine speech, full of noble sentiment. One big problem is that any company unilaterally hewing to his four principles (heuristics) will be eaten alive and spit out by the machine. Such a transformation would have to be, if not economy-wide, then at least industry-wide and almost instantaneous because it cedes profit to its competitors. In today’s neoliberal environment that would spell doom.

    Perhaps the only way such a change could occur is through regulation, lawmaking. Tough to get the current control group to give up their control, though. The Real Golden Rule gets in the way.

    Reply
    1. Newton Finn

      Afraid you’re right. As difficult as it is to imagine it happening, systemic change seems necessary, not only to humanize the economy but also to salvage what’s left of the global ecosystem. There’s a little throwaway line in the talk, where the use of a wrong word helps to point in the right direction: “you need a potato chip, I need a profit.” Actually, all the potato chip maker needs is an income, quite a different animal than a profit. Indeed, there’s no reason why potato chips–or anything else, for that matter–could not be mass produced on a nonprofit basis, as envisioned in surprising detail by a late 19th Century American novelist named Edward Bellamy. But as someone has said, it’s easier right now to imagine the end of the world than to imagine the end of neoliberal capitalism.

      https://newtonfinn.com/

      Reply
    2. lyman alpha blob

      Yes, this part struck me as a bit off in an otherwise good speech:

      . It is social reciprocity that builds the high levels of trust necessary for large networks of people to cooperate at scale. And it is only through these networks of highly-cooperative specialists that the complexity that defines our modern economy can emerge.

      He seems to forget about the role coercion plays in the capitalist system. Lots of people suddenty become willing to cooperate when there’s a gun pointed at their head, either figuratively or literally.

      Reply
    3. Roy G

      I can quickly think of at least two corporations who don’t hew to your heuristic: Patagonia and Mondragon. Surely there are others. Perhaps two such outstanding examples may encourage you to rethink your assumptions.

      Reply
    4. Will

      Yes. The structure of capitalism requires that enterprises innovate and grow, or else they’ll die. Growth and innovation need capital, and the source of that comes from surplus value, profit. To obtain maximal surplus, labor must be kept inexpensive and as efficient as humanly possible. Regulation can mitigate the harshness of this system, but so long as the system remains intact, capitalists will find ways to undermine regulation. That essentially has been the history of the 75 years since the inauguration of Roosevelt’s New Deal. Those regulations, augmented by the post-war boom in the US economy, led to the development of a reasonably robust American middle class. That “progress” has been largely undone through the take-over of the government by the corporate elite, and the drivers of it, strong unions and a militant working class supported by left-wing political organizations, have been destroyed. The chances that today’s lawmakers will take any meaningful action to restore strong, enforceable regulations are nil.

      Reply
  4. TheScream

    “True capitalists are moral capitalists”

    Well,that is, as the author likes to say, bullshit. It might be his normative, personal definition but it certainly does not apply to real human beings. Modern society (by which I mean post tribal society) has made sociopathic or anti-social behavior rewarding and relatively risk-free. Where people can get away with something, they generally do it, with perhaps some limits on violent crime for most. Capitalism, by its definitions, is either immoral or, at best, amoral.

    Now, if the author wants to change mankind, he is welcome to read various how-to guides like 1984 or A Brave New World or even Anathem. But man is man.

    p.s. yeah, yeah, I am a pessimist. A hobbesian. I ‘ve been around the block a few times.

    Reply
    1. Barry

      As always with economics, you need to watch carefully to discern which statements are descriptive and which are prescriptive.

      I’m pretty sure the author was making a normative statement here; one which I endorse.

      To get better results from capitalists and economists, we need to understand what moral framework they operate under, and stop letting people treat economic issues as exempt from moral engagement.

      Reply
      1. TheScream

        His is a normative definition. He has narrowly defined capitalism as a moral, probably altruistic, venture. It might be nice to get everyone singing Kumbaya as they trade their stocks, build their factories, and build new inter-tubes, but it’s a fantasy. Ok, this is economics, so just as the Chicago school says their individual is omniscient, I suppose we could build a new branch of capitalism based on the Good Man.

        On the other hand, your last point is very valid. It is essential to stop measuring in purely dollar terms, at least not quarterly dollar terms. Longer term views (trans-generational) should be part of capitalism. This would be part and parcel of any moral capitalism. But, like Good Man Economics, I wish you luck with that. The last time someone seriously told the world to be nice to each other, we nailed him to a tree (D. Adams).

        Reply
  5. anon48

    “The more we learn about how people really think, the more we must rethink economic theory” Right… and this cycle will continue to repeat. So saying that trying to get one’s arms around the potential infinite number of variables in play in assessing the past and then using those observations to predict future behavior should generate humility in the observer, is actually an understatement of epic proportions.

    Reply
  6. Eclair

    OK, I’ll bite. First, a disclaimer: I am prejudiced against any one who (presumably) accepts the description of “serial entrepreneur and venture capitalist.” And, who sold marketing software (?) to Microsoft for $6.5 Billion, thus contributing to the general social welfare.

    Hanauer’s sentiments are admirable. And he gets bonus points for quoting Martin Luther King and using ‘heuristic’ and ‘orthogonal’ in multiple sentences. He debunks the model of myriads of selfish, rational, self-maximizing individuals somehow miraculously resulting in a perfect economy. He asserts that maximizing stockholder equity as the prime goal for corporations, is anti-social. He believes that cooperation, not competition, is the reason that ‘capitalism’ has been so successful. He seems to believe that regulation is imperative. He says all the right things.

    But, his assertion that capitalism is ok, if only it could be released from the bonds of neoliberalism (which is evil), leaves me confused. And, I am uncertain if he sees a relationship between capitalism and a free market. I am left with the feeling that he is throwing around terms that he thinks will emotionally impact his listeners. He is a ‘marketer,’ after all.

    So, I went hunting (or, maybe, gathering) on the internet. There were several articles on his activism in Seattle. He funded an initiative to increase property taxes in the city, to fund services for the homeless, which was lambasted as just adding to the problem of increasingly unaffordable housing in the city. He then funded another initiative to increase city sales tax, a notoriously regressive tax, for the same purpose.

    He is quoted, in his quest to back these initiatives, thus: “You do not want to be in my fucking way. Because I am ruthless in my pursuit of winning.” So much for ‘cooperation.’ Or, his idea of cooperation is: You cooperate with me.

    Again, to his credit, he has been pushing for the adoption of a $15 minimum wage.

    In my head, are images of Viking and Medieval warrior princes, who, because they were physically strong and charismatic, as well as aggressive, made out like bandits in their careers of pillaging , sacking and killing. Some were real jerks. Others took care of their fighters and servants, sharing a small portion of the spoils with them, realizing that if the people they relied on to do their bidding ever turned on them, they would be dead.

    Great choice for a post, Lambert. I have now spend a good part of my morning thinking about this. And there is the garden to put to sleep for the winter!

    Reply
    1. Will

      Again, to his credit, he has been pushing for the adoption of a $15 minimum wage.

      Which is still woefully inadequate. How many of us could live a middle-class lifestyle on a $15/hr 48-hr weekly wage? That comes to $720/week. If people worked an average of 48 weeks/yr, that yields a gross yearly income of $34,560. Subtract FIC at 7.65%, that total comes to about $30,000. Now subtract essential payments for mortgage loans or rent, taxes (real estate and sales), car loans, health and property insurance, co-pays, transportation, clothing, child care, and food. (What have I left out?) Then how much would be left over for non-essentials? Not a whole helluva lot. Also, consider that many businesses limit hours to avoid paying benefits or overtime. Part-time labor and gig economy jobs are on the rise. At the same time, government assistance is being cut by a conservative Congress, leaving people even more strapped. The recent move by amazon.com to raise its wages to $15/hr is a scam, as has been widely reported. It will actually reduce what many of the company’s workers bring home. The minimum wage should be considerably more than $15/hr, but good luck with that.

      Reply
  7. Webstir

    Here’s another way to destroy Homo Economics — just reinforce the true definition of property law. Which, I actually just did about ten minutes ago over at Ian Welsh:

    The word money and property are virtually synonymous. Money simply being a subset of property. If you understand what property is, you understand what money is. Trouble is, very few understand what property is. Property is simply a social contract of various rights and duties. Meaning, it’s whatever we all agree it is. From there, it’s a chicken and the egg problem. Which came first, property or money? I’ll submit that the first time someone said “mine,” { https://www.youtube.com/watch?v=p-3e0EkvIEM } and used force to substantiate the claim, property came into being. Money evolved later to help with the portability problem.
    Thus, a subset of property law.

    The definitions economists bandy about only serve to reinforce the legitimacy of their profession. They don’t know what they’re talking about.

    And btw, the open thread over at Ian’s place is pretty interesting right now. I’d encourage checking it out.

    Reply
  8. cnchal

    But as our modern technological economy grows more prosperous, it’s problems inevitably grow more complex, and this requires ever greater degrees of social, economic, and technological complexity in order to sustain this virtuous vicious cycle of innovation and demand.

    The meek shall inherit the earth, after the psychopaths have burned it to a crisp.

    Reply
  9. Anthony K Wikrent

    It is much too easy, given the nature of the run-away economic injustice of financial capitalism today, to overlook the one major flaw in Hanauer’s argument: there ARE some people who ARE “perfectly selfish, perfectly rational, and relentlessly self-maximizing.” The real problem is that economic theory based on a model that ALL people are thus characterized, gives agency and legitimacy to the relatively small number of people who typify homo economicus, while denying agency and legitimacy to the much, much larger number people who are “other-regarding, reciprocal, heuristic, and intuitive moral creatures.”

    Moreover, economic theory based on homo economicus ignores and overlooks the immense amount of damage homo economicus does to other people, and to the environment. In fact, parts of economic theory based on homo economicus argue that such damage cannot occur because “markets are self correcting.”

    This major flaw — of overlooking the fact that there are “good” people and “bad “people” — is why I have come to firmly believe that we must revive a strong understanding of republicanism, and the fact that the USA was not created as a capitalist society, but as a republic, which in many ways is antithetical to capitalism. The fact that human nature is a duality is explicitly recognized by republican political theory; it is the basis for building systems of government in which the exercise of power is circumscribed and limited by checks and balances — or supposed to be.

    The great historical problem we face is that capitalism has replaced republicanism as the accepted characteristic of USA. The problem arises in large part because there has never been a thorough discussion and explication of what the political economy of a republic is supposed to be, and what discussion there was (by the American School economists in the 19th century such as Alexander Hamilton, Henry Carey, Friedrich List, Simon Patten, and E. Peshine Smith) has been largely written out of economics and business curriculum. Pick up any economics textbook, look in the index, and compare how many times these American School economists are mentioned compared to Adam Smith, David Ricardo, Karl Marx, and Milton Friedman.

    But I welcome Hanauer’s argument, because some very important social phenomena can be much more usefully studied by discarding economic theory based on homo economicus. For example, the dynamics and power relations of a society, such as ours, in which the majority of people, who are “other-regarding, reciprocal, heuristic, and intuitive moral creatures” are forced to work and live in institutional structures dominated by the small minority of people who are “perfectly selfish, perfectly rational, and relentlessly self-maximizing.” The results of these studies will not be much different than the results of studies using a Marxist framework, but note the singular fact that using a republican framework allows useful analysis of institutional structures created by Marxists, which Marxists themselves are unable to usefully analyze.

    Reply
  10. KLG

    Excellent gloss and Evonomics is very useful. Minor point and feel free to call me a pedant, but the term is properly Homo economicus (economic hominid) if we mean this as analogical to Homo sapiens (intelligent hominid). Correct usage matters ;-) Genus capitalized, species lower case, both in italics. Which reminds me, Ernst Haeckel called our (H. sapiens) direct ancestor Homo stupidus in an evolutionary tree describing primate evolution that he published in 1905. Unfortunately his arrow pointed only from stupidus to sapiens, so he got that wrong. Dollo’s Law of Irreversibility apparently doesn’t apply to us.

    Reply
  11. Chauncey Gardiner

    Thank you for posting Hanauer’s speech. I hope he has some influence. Yes, the acolytes of Neoliberalism have “won” for now. They presently control all branches of government and many state and local governments, thereby controlling legislation, regulation, the interpretation and enforcement of legislation, executive action, as well as other key components of the institutional structure and the field of economics. But, if for no other reason than my own sense of well being until there is a shift, think I’ll go with the view expressed by novelist Enrico Pellegrini:

    “It is a fact that the law, as well as history, is written by the winners… Power shapes the laws, and the economics,… Yet we still have a say, right? We still can exercise our judgment… But in a world with no rules, isn’t the ultimate rule made by the players themselves – by you, me, us? A premise of deregulation (or neo-liberalism) is that you don’t need a light at an intersection, as the drivers will figure out a way not to crash into each other. Aren’t we the drivers? Whether there is another market crash or not, it is up to us to decide if we want to be part of it.”

    https://www.theguardian.com/books/2018/oct/14/something-great-and-beautiful-wall-street-crash-enrico-pellegrini

    And doesn’t such a position also apply to other spheres besides markets?… and isn’t that also consistent with what Hanauer is saying?

    Reply
    1. knowbuddhau

      Thanks, I like that a lot. “Aren’t we the drivers?…it is up to us to decide….”

      I don’t call myself “knowbuddhau” for nothing.

      I like a lot of what Hanauer’s saying. It’s a lot like what I’m on about. I’m not so sure capitalism is the right way to operationalize his humanist worldview.

      Maybe some of his zeal comes from having done the wrong thing: having rapaciously taken much more than he or his family will need, is he now trying to rationalize it? Trying to have it both ways? Still, it is encouraging at least to hear “even a billionaire” say these things.

      Is he trying to do the wrong thing, the right way? Is there a right way to be capitalist at scale? Why do some people think they get to live like royalty by impoverishing the vast majority? Can you prosper and be a decent human being? Why not?

      On my level, I own means of production; window-washing tools, a truck, and a full set of ladders from 2′ to 26′. I even have two clients, and counting (I hope). If I charge 50, take 10 for overhead, and pay me and a buddy 20 each, what’s wrong with that?

      I’d rather be a co-op. But my potential partner pool is mighty shallow. Not a drop in it, actually. Co-op’s not just a way of getting paid, it’s a way of being. Precious little of that around, sad to say.

      Reply
  12. Susan the other

    This is the new capitalist zeitgeist. How nice. Now please tell the world how to overcome war and plunder and outright brutality and socially seditious betrayals. And hopefully profit won’t get in its own benevolent way by forcing the inexorable struggle known as competition which itself becomes creative destruction which itself destablizes all that good capitalism. This is fine sentiment. I like it a lot, but it’s a little short on the reality of our times. Not a word here about capitalism in an overpopulated world, a world of extreme competition and environmental destruction. Capitalism is capital. But “money is a solution to a problem. ” Money does not require profit? But capitalism does in order to survive. I also take issue with the arc of justice – it is not created by complexity but by diversity. And at some point complexity and diversity are antagonistic. But still, this is considerably better than Uncle Milty and shareholder maximization.

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  13. Fastball

    The very first word that needs to be attached to Nick Hanauer’s introduction is the word billionaire.

    I’ve been following him ever since his notorious pitchforks article a couple of years back. Mr. Hanauer says “being rapacious doesn’t make you a capitalist, it makes you a — family blog — and a sociopath”.

    But, I’m sorry, retaining a billion dollars makes you rapacious. So, what are we left with in the end about Mr. Hanauer?

    Reply
    1. JTMcPhee

      “Do as I say, not as I do”? And “Don’t kill me, I’m on your side”? At least his words are somewhat illuminating, and useful in context.

      Reply
  14. JTMcPhee

    I iused to participate in a blog hosted by Jonathan Taplin. I can’t even recall the name, but his schtick was that “we are in a great interregnum,” with that quote by Gramsci as the text — all about the great variety of morbid symptoms that appear in such times, and what might be on the other side of the interregnum. Lots of great and often acerbic discussions, lots of trolling.

    Taplin was seemingly all about fixing the System, seeking discourse on ideas on how to do that. He is and was a rich guy, very successful as a financial person, entrepreneur, film producer, and author of works like “Move Fast and Break Things.” A parallel to Hanauer, maybe — lots of awards and stuff, but he has retreated into the monied places in California, got bored or frustrated with running a blog dealing with survival topics like the ones addressed here. A very smart guy, but in the end, where does he end up? Not going against class interests, unless he is doing secret stuff with Annenberg and the media and software geeks there.

    From Catch-22: “Ou sont les Neigedens d’antan?” Where are the Snowdens of yesterday?

    Reply
  15. Mongo

    “I’m cold”: It’s the Snowdens of tomorrow I worry about. Anyone of draftable age (I’m over 65 and already had my war, thank you) should be.

    Reply
  16. Sound of the Suburbs

    No one seems to know how the monetary system works or what small state, unregulated capitalism actually is.

    The neoliberal ideology comes from neoclassical economics.
    Neoclassical economics doesn’t come from classical economics.

    We thought small state, unregulated capitalism was something that it wasn’t as our ideas came from neoclassical economics, which has little connection with classical economics.

    Economics, the time line:

    Classical economics – observations and deductions from the world of small state, unregulated capitalism around them

    Neoclassical economics – Where did that come from?

    Keynesian economics – observations, deductions and fixes for the problems of neoclassical economics

    Neoclassical economics – Why is it back?

    On bringing neoclassical economics back again, they lost everything that had been learned in the 1930s, by which time it had already demonstrated its flaws.

    Our knowledge of privately created money has been going backwards since 1856.

    Credit creation theory -> fractional reserve theory -> financial intermediation theory
    “A lost century in economics: Three theories of banking and the conclusive evidence” Richard A. Werner

    http://www.sciencedirect.com/science/article/pii/S1057521915001477

    The secrets of publicly created money have been rediscovered recently.

    https://www.youtube.com/watch?v=ba8XdDqZ-Jg

    We need to get the global economy back on a solid economic base.

    Reply
  17. Will

    Two comments:

    Schumpeter predicted the demise of capitalism exactly as it’s happening. It would devolve into corporatism and be replaced by socialism. It would enter a stage he called “liberal capitalism,” characterized by worker self-directed enterprises and “industrial democracy”. Whether it will end this way or by a violent revolution remains to be seen.

    Neoliberalism is the latest manifestation of capitalism, but the system has never been fair or humanistic. Its structure entails selfish behavior on the part of capitalists. Profit-maximization is built in: grow or die. Worker exploitation is built-in. Squeeze more out of labor to increase surplus. Marx laid it all out 150 years ago, and nothing fundamentally has changed since then.

    Reply
  18. Raulb

    This is too wishy washy to fly. The idea that you can talk to ideologues and appeal to reason and logic when the rewards of greed await is christian and cute.

    Greed is not new but justifying it, building a ‘moral framework’ to support dehumanization and to do so self righteously is perhaps the most odious evil ideology we have come up with.

    Neoliberalism has to be demolished not in the moral domain but in the scientific domain. The exposure of its systematic propagation by the rich through think tanks, fawning media and sellout economists is in process. Their dubious models, assumptions and data need to be completely debunked and exposed like Roubini just did for crypto and blockchain.

    Economists spouting nonsense like in the recent Bernie Sanders bill need to be mocked and held to account. This just shows that even in 2018 none of the lessons have been learned and the entire profession are happy to be shameless professional cheerleaders for power.

    The idiots that take them seriously and are foot soldiers of a neofeudal world are placing the blame of the direct effects of 30 years of neoliberalism on feminists, leftists, ‘cultural marxists’ and everyone but their masters, and yet managed to win power in the US and now all over Europe inspite of being logically incoherent. So it seems the left or whoever is supposed to counter this toxic ideology are absurdly clueless and incompetent.

    Reply
    1. JTMcPhee

      “Carrying capacity.” There used to be a lot of discussion about what the parameters and metrics of the “carrying capacity” of the only planet we’ve got might be. All sorts of expostulation and conclusion, with the winners of course being the MOARists. Whose winning argument, backed by force and organization, was “Who gives a rip, as long as the going-sideways-and-down-into-the-darkness does not affect me personally, and I can tickle my pleasure centers and enforce my will on everyone less wealthy-powerful than me?” Some folks still “cry out in the wilderness,” of course — http://worldpopulationhistory.org/carrying-capacity/

      Who were those ancients who were cursed to be “right on the money” on what was coming, but damned not to be listened to and believed? Cassandra, I remember her, https://www.greeklegendsandmyths.com/cassandra.html, but who was that other guy?

      I don’t think all of us humans are going to get away with what the Israel-ites aver that they did, time and again, “falling away from YHWH” but because they were so special, always getting re-admitted to the divine good graces. They repeatedly ignored their prophets, got smacked around a little, but then hey! We are back on the road to Rebuilding The Temple of Solomon! I wonder who the prime contractor is going to be…

      Reply
    2. Buckeye

      Hear, hear! The only way to get through this terrible era is to take on the powerful directly and indirectly. Ridicule and exposure will NOT result in their demise; they are not vampires who go *poof* when hit by sunlight. RUIN them! Take out their money, money systems, laws ( and enforcement structures) by analyzing, strategizing, and ACTING. Money is the key to Elites’ power, just like “The One Ring” from Lord of the Rings.

      And yes, I agree with your last statement that the self-proclaimed “Left” is ignorant and incompetent. It has done an execrable job of creating the political and social organization needed
      to mobilize people for analyzing, strategizing, and acting. For an ideology that worships “collective action” and “solidarity” leftists behave like total individualists. Ironically, the right-wing, which worships “individualism-uber-alles” has it’s people (and all of us) mindlessly goose-stepping to a future of tyranny.

      Reply

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