morality, money, economics

That I have never managed to produce something on moralism, economics, and money is pretty convincing evidence I don’t have what it takes to maintain a blog. One more shot perhaps.

I would argue an implicit moralism is at work whenever we talk about money and economy, but the last few years has brought it out into explicit discussion a number of times. For example, widely-read Keynesians such as Brad DeLong and Paul Krugman have bemoaned the right’s transformation of macroeconomic policy into a “morality” play. In a similar vein (within the right) see Brink Lindsey’s (of the CATO institute) criticism of turning economic policy into a culture war. Recently, polls have “discovered” religious conservatives becoming concerned with public debt and Andrew Sullivan is happy. I find myself an uncomfortable observer. On one hand, I’m concerned about the type of morality raging in America and also quite cynical about how it is opportunistically used. On the other, I’m not convinced it is possible or even desirable to completely abstract morality from money.

In my dissertation I describe a tendency in economics (popular and academic) I call the realist dualism. My goal was to provide a framework for thinking about the ways monetary thought repeats itself in controversy after controversy. The simple idea of the realist dualism is that we hold a dualist understanding of the economy with a real and a monetary side. While it is possible to reject this dualism, saying is easier than doing. While the tradition of real analysis obviously falls within this dualism, I argue that most Keynesian falls in as well. Of course there are meaningful and interesting differences between a strict classical and a (new) Keynesian view of money and output, but this is better understood as a disagreement over the specific relationship between the real and the monetary.

What does this have to do with morality? Well, my argument is that this realist dualism is not a thin phenomena. It may express itself in the narrow technical terms of a wage flexibility assumption (in a simple macro model), but it is ultimately a social ontology. It has both ontological and ethical elements. A feature of the realist dualism is an understanding of money in opposition to reality. Money is less-real than the real economy, but what is reality? I’m not going to engage in pop-Baudrillardism here because it is unnecessary. The point is that our understanding of what’s really real, and what the defining characteristic of the real economy is (material things, productive activity, objects of utility, etc.) varies across time, place, and paradigm. Furthermore, the investments between reality (the what really is) and morality (the what really ought) are strong.

I’ve always found a noteworthy element of the Keynesian-Monetarist debate to be the debate over the source of their disagreement. The inability to definitively locate the rift in either empirical or technical-theoretical terms is the result of a much broader philosophical-methodology difference. We kind of approach this rift when we realize this debate is also political, but we shouldn’t use this term in a narrow sense.

Here is the baseline realist dualism people tend presuppose. There is a real and a less-real monetary economy. Money has multiple forms/function but there is one true or real function of money (this makes the less-real forms of money doubly-disadvantaged ontologically). The articulation between the real and the monetary may be harmonious or dissonant. An articulation that serves the real leads to harmony. One that serves the latter, dissonance and ultimately disaster. Good policy/politics is about promoting harmony and avoiding disaster.

A quick example. Consider a left Keynesian and what we could call a Neoliberal opinion on the merits of financial regulation. While each group would differer greatly over whether the pre-1970 or post-1970 institutional-regulatory environment is preferable, the contours of their arguments are similar. In each case, the good monetary-financial system is one that serves the real economy. For left Keynesians the post-WWII system of regulations provided constraints on the financial sector that forced it to serve the real sector. Deregulation allowed finance to serve itself, at the cost of the real economy. For Neoliberals, it is the inflexibility of regulation that prevents the financial sector from efficiently providing services (risk-sharing, information, capital allocation,etc.) to the real/general economy. It is not that there is no important difference between the two positions, but the significance of what they do share – the privileging of an idealized real economy that can/should be served by a financial sector as a goal of economic theory/policy – is overshadowed by the more obvious matters of contention.

The importance of serving the real economy is why moralism is so easily injected into monetary-economic debates. It is not that the moralizers are unconcerned with outcomes or consequences. Rather, they work with the relatively sensible assumption that an economy in tune with the real economy will create good outcomes, and a perverted economy that ignores or undermines reality will create bad outcomes. To be super clear, I’m not promoting this assumption because I (largely, if not completely) reject the whole realist dualism, but it is sensible. It is not shocking that people find this approach more satisfying than theoretical macroeconomics (with all its abstract math and strong assumptions) or macroeconometrics (where the layperson has little way to distinguish between contrasting studies without falling back on political inclinations anyhow). (I also argue that academic economics is built upon similar ultimately moral/political social ontologies but that is not my main point here.)

The wild success of mises.org-style Austrian economics is in part due its ability to tell a story about the US economy that is immediately (and fiercely) moral and intellectual (of a sort). (I’d also add to this: (1) the intellectual-theoretical style of Austrian economics is a perfect fit for the media through which people typically debate on the internet and (2) the official narrative of the American pro-business press switches from efficient markets during the boom to heroic investors navigating a fundamentally uncertain world during and after the bust.) I expect that as long as money exists there will be those whose problem with inflation is that inflation is inflation. Personally, I will continue to ask, “so what?” At the same, I do kinda understand. How do we expect to have a good (real) economy with fake money?! It doesn’t make sense unless you are stupid or part of the conspiracy to undermine America.

It would irresponsible not to point out that part of what’s happening with the profound moral dilemma of debt is crude party politics. I think Limbaugh’s recent criticism of Obama – that concerns about him can not be influenced by race because most people don’t view him as black anyhow since he went to good schools and is not from the “hood” – is evidence enough that some people get weird during times like these. At the same time, this narrow partisanism doesn’t explain the rhetorical and “intellectual” contours this moralism will take. Ok, once Obama enters office the debt is evil, but how do people understand and describe it as evil?

Returning to the thickness (overdetermination) of the realist dualism, the opposition between real and less-real economy is conditioned by all sorts of other binaries. For Aristotle:

nature vs convention; commodities vs money; money as means vs money as end; necessity vs contingency; sufficient vs unlimited; quality vs quantity; use-value vs exchange-value; real vs less-real.

In contemporary America we have (here with order reversed so read as less-real vs real):

west coast + northeast vs real america; ivory tower vs real world; technocrat vs common sense; central banks vs gold standard; output gap vs threat of inflation; unions vs hard working americans; community activist vs CEO aka job creator; society vs individuals; printing money vs working.

This is why we have a disconnect between support for austerity in the abstract (belt-tightening) but not so much in the details (we want to balance the budget without any costs to us on the revenue or expenditure side). Real Americans shouldn’t have to bear any costs. That would not be right. If we have problems it is because of perceived less-real Americans – running central banks, debasing our currency, eating arugula, practicing sharia law, palling around with terrorists, trying to solve problems with planning instead of hard work, etc. Tighten their belts and everything will be all right.

Without doubt, the center and left have their own narratives and dualisms. I’m more comfortable with them than I am with theocratic Christians banning sharia law and gold standards, but I can’t say they are really my thing. On one hand, an idealized real economy as a utopian assertion of what really matters is unavoidable and useful. For example, it is useful to point out that in terms of stuff per person our economy was fine even during the height of the recession. On the other, it is problematic to assume that there is some monetary-financial system that would fulfill the promise of this real economy. In my reading, this is the heart of Marx’s views on money. There is no way to produce an ideal monetary-financial servant of the real economy (one that would produce harmony) because society is not dualistic but overdetermined – a contradictory totality. The contradictions of capitalism are not dissonance produced by a short circuit between the real economy and its less-real monetary representation. They are the contradictions of capitalism, for better or worse. At my old age I’m pragmatic enough to prefer one set of reforms over another (I do not want to return to the gold standard), but if we must be pragmatic realists let’s at least be realistic about pragmatism.

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