Culture defeats economics
The problems with the standard neoclassical synthesis, as it is taught at both the school and university levels, are legion and well known. I have documented many of them across these pages over the past 6 years. At their core, these problems come down to the fact that the neoclassical synthesis makes a distinction between individuals and aggregates that simply does not hold up to serious scrutiny.
That synthesis says that the ideal form of competition at the individual level results in a completely undifferentiated mass of suppliers that cannot compete on price, because if they do, someone else will automatically come along to undercut them. In its most extreme forms, it argues that all new information about the state of the economy is always and everywhere readily absorbed pretty much instantly and becomes common knowledge very quickly. As such, information asymmetries - where you know something about the state of the economy, or about a pending piece of legislation, or about some public bit of information that affects the output and profitability of a traded company, which I do not - do not exist because they are immediately competed away.
That same synthesis also, preposterously, then turns around and argues that at the macro level of an entire nation or group of nations, people's wants and needs can be separated out into aggregates, and that it is possible to formulate a general theory of economics that is consistent with individual behaviour as well as group behaviour.
That "general theory", formulated by one John Maynard Keynes in his magnum opus, the now-legendary A General Theory of Unemployment, Interest, and Money, basically challenged the idea that free markets will self-regulate and self-correct and return to full employment as long as employees are willing to be flexible when it comes to wages. And, in fairness, that book did contain some rather useful insights.
Unfortunately, it was overwhelmingly an unreadable, mathematically incoherent mess.
Henry Hazlitt went through the entire book from start to finish, and found the whole exercise to be a dreary, self-flagellating, miserable experience, in order to write a book called The Failure of the New Economics. In the process, he systematically and comprehensively destroyed the entire edifice of Keynesian economics with simple, logic-based refutations that made it abundantly clear just what a load of nonsense the entire set of Keynesian arguments was.
Indeed, they were nonsense. Keynesians would have you believe that you can separate out the economy into vast undifferentiated "aggregates", with clear distinctions made between supply and demand - when, in fact and reality, everyone who consumes something must also produce something. Keynesians would also have you believe that increasing government spending and intervention into market processes during a recession can stabilise the economy during that time and correct the excesses made during the downturn - when the actual evidence tells us that, wherever this has been done, it has prolonged the recession and made things worse.
Keynesianism made several bold predictions, chief among which was that, when government spending and intervention was used correctly, it would be impossible to have long-term severe unemployment and long-term severe inflation at the same time. Government spending was supposed to soak up unemployment and restore the economy to full operating capacity quickly and effectively, at the cost of inflation due to all of the money being spent in the process.
But the 1960s and 1970s saw the complete breakdown of the entire idea, wherein several countries, including the USA, experienced very high structural unemployment as well as severe long-term inflation that destroyed the value of their currencies and plunged their economies into deep misery and despair.
To combat this particularly egregious form of nonsense known as Keynesianism, several other schools of economics rose up and challenged its ideas - most notably the monetarist school led by Milton Friedman. At the time, Dr. Friedman's approach was considered revolutionary because it focused on controlling the money supply and scaling back the nature and size of government spending, which they argued was ineffective and prone to severe corruption. They were right - well, partly, anyway.
But the reality is that there was nothing much revolutionary at all about monetarist ideas. It was all a neo-Keynesian heresy repackaged in some fancy clothes with some very impressive-looking mathematics behind it.
The present day brings us to a situation where every economic school of thought has been severely challenged. The Crisis of 2008 was never fully resolved. Keynesian and monetarist solutions were tried, and failed. Banks are now extremely tightly regulated, and have been forced to retain far more capital than they were ever used to holding in the past. Yet most of the wealth created since 2008 has been utterly illusory - it is mostly (though not all) paper money, with nothing behind it other than air.
The only school of economics to come along and explain what went wrong in anything like a coherent fashion was, and remains, the Austrian School of economics, which derives its name from the fact that its greatest luminaries all came from the Austrian part of the old Austro-Hungarian Empire. That school is still, to this day, the only one that offers a complete, cogent, testable, and precise explanation of the business cycle.
Yet even this school, too, has some serious problems.
The basic premise of the Austrian school of economics is that free men and free markets should be left alone to do as they see fit. This is not a bad thing, on the whole, and appeals to the independent nature and spirit that is in the breast of every man who wants nothing more than to be left alone to live his life as he pleases. This is why the Austrian School of economics is so popular among libertarians; it meshes in perfectly with their own live-and-let-live attitudes toward, well, pretty much everything.
On the whole, the Austrian School of economics is a vastly more sensible and tractable philosophical approach to human behaviour and action than any of the more mainstream ideas. But, taken too far - which is very easily done - it descends into pure farce very quickly.
The libertarian types would have you believe that immigration, no matter what kind, is an unmitigated good thing. When people are free to move between borders, they bring the vast benefits of their own productivity and enterprise with them. This particularly myopic form of rose-tinted glasses with respect to mass migration affected even the aforementioned Dr. Friedman, whose intellectual powers were otherwise quite extraordinary:
Time has since proven quite clearly that mass immigration is a gigantic, civilisation-killing mistake.
The central conceit and assumption behind this idea of "free markets and free people" is that everyone wants to be free and act in a civilised, enlightened manner.
This is nonsense.
The reality is that most people DO NOT WANT to be free, and never have.
Freedom is a very peculiar and unusual condition. Its central requirement is best summed up by a phrase that I have often used around here - it is not mine - which goes something like this:
Freedom is the substitution of individual self-discipline for discipline imposed by someone else.
That's it. That's all there is to it. And yet, that makes freedom unbearably difficult for most people.
The reality is that most people - including most of the people who live in the freest and most prosperous countries in the world - WANT other people to tell them what to do, how to live, when to wake up and go to sleep, when to eat and drink and go to the lavatory, what to buy and how much to spend, who to date and have sex with and marry.
That is why the modern corporate technocracy exists.
Back when I was living in the States, I remember that for a span of at least 6 months, there was a defaced poster advertising a new ultra-modern and extremely fancy apartment complex being built right next to the subway station that I took to work every day. It had your typical happy couple on it, smiling those idiotic vapid smiles that make you either want to buy something from them, or smack the silly grins off their stupid faces.
The poster was rather cleverly defaced with a bit of graffiti. Whichever wag had done it had written, "EAT. SLEEP. CONSUME. OBEY."
That, my friends, is the endpoint of the "hur dur free markets" ideology. It is a form of mental slavery, and the fact is that most libertarians are simply too blind and too foolish to see it.
It is this ideological blindness that makes them unable to see that what Google, Facebook, Twitter, Apple, and other big tech companies are doing, by booting users off their platforms and abusing the laws of the land, set genuinely dangerous precedents. Their usual response to this behaviour is that these are private companies and as such can do what they like with their own platforms, and governments should not get involved.
The fact that this behaviour is blatantly illegal, given the clear legal distinction between platform and publisher, seems to escape them.
It also seems to escape them that the very immigrants that they claim to love so much, are the same types of people who come over to foreign countries looking for handouts. It escapes them that illegal invaders from shithole countries in the Dirt World are a massive drain on the public support systems available in the countries that let them in.
To this, the free-marketeer will typically respond by saying, "well then get rid of all welfare!".
I would be delighted to see most forms of government welfare removed and destroyed. I think that Social Security, for instance, is a mathematically ridiculous abomination that allows the old essentially to enslave the young, and amounts to a giant tax-based intergenerational wealth transfer. I think that most forms of public health care are illegitimate and immoral, and should be abolished forthwith.
But, the fact is that there will always be some form of welfare, some kind of charity, available within most civilised countries.
Because civilisation is built on civil and civic behaviour. And being civil and civic requires you to care, at least to some extent, about your neighbours and their needs.
It is not accidental or coincidental that the nations which have built the greatest civilisations, were the ones that clearly identified exactly who was "us" and who was "them", and acted accordingly by taking care of those who were part of the "us" in-group, while keeping away those who were part of the "them" in-group.
One of the best and most useful standard tropes for riling the Hell out of libertarians and anarchocapitalists everywhere is to bring up the example of Somalia. I've had this happen to me as well, back when I called myself a libertarian, and yes, I was annoyed by it. The trope basically goes something like this:
"If you like the idea of a society without rules so much, go to Somalia. They've got your ideal society right there in Mogadishu."
The reason why this annoys free-markets-free-people types so much is precisely because there is a strong element of truth to it. The plain fact is that Somalia is an anarchic, chaotic place, precisely because the Africans there are, by and large, unable to control themselves or each other - without the firm and highly lethal hand of a local warlord around to tell them what to do.
Nowadays, quite a decent chunk of those same Somalis live in the American state of Minnesota, with quite predictable results.
Why is it that those Somalis who were exported to America, failed to become Americans? Isn't that what is supposed to happen when people who yearn to be free, come to a free society?
No. It's not. And anyone who pays any attention whatsoever to the lessons of history knows this. Furthermore, anyone who has done any serious study of history will quickly realise that if people want to live in a way contrary to what the rules of economics tell us, then they will find a way to do so.
The reality is that economic theory has very little power against the realities of culture.
Consider what happened in the case of another ancient and proud culture - the Spartans. They were perhaps the strongest military power in all of Greece for generations, and even after they got their asses kicked at the Battle of Leuctra by a gay Theban named Epaminondas, they were still so terrifying in terms of their reputation and battle prowess that neither Philip II of Macedon, nor his son, Alexander the Great himself, ever tried to dick with them.
What was their culture like?
It was weird, to say the least.
The Spartans held wealth in great disdain. They took pride in their poverty. Unlike the other Greeks, who used gold and silver and bronze for their currencies - which makes sense, given that these are metal-based coins and therefore the intrinsic value of these coins is tied to something real - they used iron bars. They were a proto-Communist society in every sense of the term.
Their entire economy was built on the backs of literal slaves, known as helots, who outnumbered the actual Spartan citizens by anywhere from 10 to 300 to one, depending on what time period you look at. (The original body of Spartiates, full-fledged homoioi or "peers" with the complete set of rights given to free-born Spartan citizens, went from 25-30,000 at their peak down to a mere 1,000 by the time of Leuctra.)
And yet... it was the insular, timocratic, xenophobic, deeply anti-capitalist Spartans whose culture endured for something close to a thousand years, while the sea-faring, democratic, mercantilist Athenians went from dictatorship to democracy to empire to dictatorship again within the span of about a hundred years, and eventually ended up as vassals to the Macedonians and then the Romans.
Obviously there are a number of details involved in both societies that I have skimmed over considerably, but the fact remains that no matter where you look in the world, history is replete with examples of societies where the laws of free markets have either broken down or been heavily modified, by the general consent of the people involved, and those societies have endured and in some cases even prospered, considerably. Witness, for example, Tokugawa-era feudal Japan, which closed itself off to outsiders almost completely for nearly 200 years and built a thriving society in the process.
The key to their prosperity and stability lay in the fact that they made a clear distinction between themselves and everyone else, and made a powerful social compact to preserve the elements of their culture that they felt deserved protection, against outside influences that would change and even destroy the same.
Such things are germane points to keep in mind when we see stories about how the work of His Most August, Blessed, Legendary, and Benevolent Celestial Majesty, the God-Emperor of Mankind, Donaldus Triumphus Magnus, and of his allies in the rapidly transforming Republican Party, is forcing foreign labour out of the United States and making America less competitive as a destination for foreign students.
It is true that this will result in foreign students refusing to come to the USA because they cannot be sure that they will get a job there. That is one of the reasons why I have stayed away from the USA after having been forced to leave - because if I came back to study, there is no guarantee whatsoever that I would find a job that would allow me to stay long-term. And I am not alone. Tens of thousands of foreign students from countries that are, at best, culturally dissimilar to the USA, are thinking the same thing and voting with their feet.
And the reality is that it doesn't matter.
Yes, American colleges and universities will feel serious pain from not being able to charge such massive fees to foreign students willing and able to pay them. And yes, this will result in a brain drain as foreign talent flees the USA. But the fact remains that most of those workers ARE NOT AMERICAN and never will be.
You can throw any amount of theoretical economic spaghetti at the nearest wall and try to make it stick. Nothing will change the fact that most of those students are not American and have little to zero respect for American traditions, heritage, customs, and norms.
The rather uniquely American experiment in individual self-governance, self-discipline, and self-mastery, is precisely that - uniquely American. You can look anywhere else in the world, including at the progenitors of the American experiment itself, the British, and you will quickly realise that nowhere else do those same norms and ideals hold with anything like the same power.
In the end, culture defeats economics. If you sacrifice a nation's culture, it does not matter what you impose as an economic system, whether it be totally free anarchocapitalism or totally state-owned ant-like Communism. Whatever you do will ALWAYS fail, because the culture will have been so thoroughly destroyed that the people involved will not recognise themselves or their neighbours anymore.
I leave the last words on the subject to Sir Roger Scruton, a true conservative who understands precisely why conservatism must, in fact, conserve what is good, what is beautiful, and what is true: