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Simple Theories of Everything

Paris before Haussman: natural order in real life.

US elites just love markets. There is no one in any branch of government or in the corporate world who even questions the magnificence of this construct. This phenomenon, the universal acceptance of an idea, always makes you wonder, why doesn’t anyone seriously question the idea? Take the ancient Greeks. You have to wonder why an apparently sensible group of people took up the idea of a pantheon of gods who intervened in human life, as evidenced by the myths and stories we know from Homer and, for me, at least, from Edith Hamilton and Thomas Bulfinch. The Greek state took them very seriously. According to Plato, Socrates was sentenced to death for, among other crimes, “not believing in the gods of the state”. It turns out that there was a long tradition of not believing in the gods of the state, which reached a climax with Epicurus about 350 BC. His writings have disappeared, but we have Lucretius:

For think of the endless fantasies your priests
devise that can subvert all reasoned thought
and turn your life to terror and confusion!
Of course! For if men saw that all their troubles
must one day end, they’d find the strength
to stand against the hierophant and his threats.
But for now they can’t stand ground nor make reply
for fear of eternal torment after death.

Frank Copley translation, Book 1, line 103 et seq.

The idea of Market seems to hold a similar place in our thinking. Economists spin endless fantasies about the marvelous Market and turn our lives to terror and confusion about the role of the state and of society in the construction and maintenance of the mythological market. Let’s ask this question: how did the idea of markets attain its current religious position in our thinking? Last week, I pointed to The Illusion of Free Markets by Bernard Harcourt, who excavated several possible sources. The point of that post was that any idiot could see that economic activity is riddled with liars, cheats and thieves, and people who are perfectly willing to poison their neighbors for the sake of a few dollars.

Harcourt describes in detail one strand of thought that led to the enshrining of markets as the genius of human economic activity. It springs from the writings of the French Physiocrat, François Quesnay (short pause to savor the notion that the wingnuts worship a myth created by a Frenchman). Quesnay believed that “The laws that govern societies are the laws of natural order, the most advantageous to humankind.” P. 78. Harcourt explains:

The economic domain, Quesnay believed, is governed by a natural order and constituted an autonomous, self-regulating system that required no external intervention – no administration, no “police.”

Harcourt follows this thread through other economists, eventually reaching Friedrich Hayek, who called it “spontaneous order”. He quotes Hayek: (P. 128):

…social theory begins with – and has an object only because of – the discovery that there exist orderly structures which are the product of the action of many men but not the result of human design.

That is certainly true as a descriptive statement. Just look at the streets of Paris. They grew out of footpaths, ancient property rights, shepherd trails and zig-zgs up hills, which turned into roads, and then into a bewildering maze. You can’t walk around the block in Paris, you’ll get lost. It was even worse before Baron Haussman came along to destroy whole neighborhoods and streets with his grand boulevards. But even the semblance of order he brought is utterly lost once you venture into a side street and turn once. Take a look at the map of the area around the Bastille Opera House. See all those little roads and their intersections? That’s spontaneous order for you. It makes for a lovely town, but it isn’t efficient for travel.

The problem is that economists like Hayek and the Chicago School take this descriptive idea and make it normative. They preach that if it came about as a result of natural human actions, it is bound to be objectively better than anything that anyone could design or even tweak into a better form. I can say from personal experience that without the giant tweaks of Baron Haussman, Paris would be unbearable. In any event, the lesson I take from the utter failure of the ideas of the Chicago School, most recently evidenced in the Great Crash, is that people, even really smart people, have a weakness for grand ideas that explain everything. Why else would an apparently bright person like Posner write something as facially silly as this:

This means that the criminal law is designed primarily for the nonaffluent; the affluent are kept in line, for the most part, by tort law. This may seem to be a left-wing kind of suggestion (“criminal law keeps the lid on the lower classes”), but it is not. It is efficient to use different sanctions depending on an offender’s wealth. 85 Col. L. Rev. 1193, 1204-5 (1985) fn omitted.

This nonsense is the justification for the failure to lock up any rich Wall Street executives for the crimes they committed before and after the Great Crash.

And if smart people believe and preach that simple theories are sufficient to explain and justify economic and other social arrangements, how much more likely are average people trying to get along in a complex world that they didn’t create and don’t govern to adopt other simple ideas? How much more likely are they to accept really bad ideas like feudalism? Because in the end, these simple and simply wrong theories are anti-democratic.

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I read a lot of books.