Martin Wolf on Political Economy

People have a sense of patriotism or other group identity that can be harnessed to get them away from their narrow self interest. An avowedly profit maximizing gov’t wouldn’t be able to harness that. The best service governments provide is protection from worse governments. A state without a patriotic population might be vulnerable to one which could extract more taxes and field more willing soldiers.

A basic assumption of economics is that individuals pursue their own self-interest. It seems that people in government are just as apt to do this as people not in government.

Therefore it seems to me that the government is already composed of people pursuing their own self-interest. It follows that we thus have a profit-maximizing government in the sense of individuals in government pursuing their own self-interest.

I felt that Wolf was arguing against ‘economism’ – i.e. the belief that economics should be the only, or at least the primary, social system.

I don’t think that there really are any economism advocates – it is really a straw man; however, people sometimes talk or write asif economics was the only think that mattered, the only set of rules which had validity. But shooting them down is a bit pointless and smug.

Economics can and should operate only in the economy, and the economy is shrinking – not growing – in terms of its _scope_. For example, there are many areas of human society which used to be bought and sold but are now excluded from the economy – judicial decisions, wives, places at university. etc.

The scope of the economy is therefore continually shrinking, even as its size and complexity is pretty-continuously growing. This is made possible by continuously increasing efficiency (productivity).

The tough question is how to get politics to work _like_ the economy; not to make politics run on economic evaluations, but to get politics to grow in productivity while continually _shrinking_ (not growing) in scope.

To be more explicit. The modern political system works almost the opposite way to the modern economy. The modern political system is continually growing in scope (whereas the economy is shrinking) – i.e. the political system is continually absorbing more aspects of life (this is the big problem about political correctness – and PC really _is_ a big problem).

But politics is – if anything – continually declining in efficiency (its hard to measure, but governments seem less and less capable of achieving even their own self-decided goals, and can only do so at the cost of vast inefficiency).

The deepest aspect of this problem is that we don’t even have a vocabulary to describe what politics is supposed to be doing, or what political efficiency would look like. This is why it is hard to avoid using economic language in politics.

This is the problem Mencius Moldbug is working on – my feeling is that the core of his ‘system’ is really that politics is about social stability and peacefulness, and that profit maximization is only conceived of as a means to this end.

Indeed MM is so devoted to stability that he sometimes seems indifferent to the need for growth. By contrast I have been hugely affected by the portrayal of the Malthusian trap in Greg Clarke’s Farewell to Alms – and regard permanent growth as the priority – without which we would (almost) all be starving almost all of the time forever (i.e. the world before 1800). Continual growth demands continual increases in productivity = science and technology (broadly conceived). Which seems to be pretty much what AK argues for.

But we are still no further forward in generating a distinctive description of politics as a social system.

Libra, yes, the strength of democracy is its perceived legitimacy. The big threat from without is other social institutions that command more legitimacy (e.g. Islam). Martin van Creveld argues that with the introduction of nuclear weapons, the real area of decisive conflict is legitimacy.

Kurbla, that reminds me of Tyler Cowen’s and Alex Tabbarok’s paper on high vs. low art. Stalin fiddled with death warrants late into the night. Hitler spent his spare time boring his entourage with interminable monologues. Saddam was relatively gauche with ostentatious building plans, though he had his interminable monologues too.

I agree that a shareholder-management relationship would probably not be stable, not when the CEO can have the board shot.

That is exactly my take on “creative capitalism”.

Hopefully, creative capitalism is just rhetoric for “let’s ‘crowd-out’ these ineffective governments and usurp them with market processes”. I really think those business guys are too proud to see something they’ve created (a fruitful economic system of ‘creative capitalists’) turned over to the whims of democracy, whether those whims are warlike or otherwise.

But seriously, have we really seen the shrewd Bill Gates turn to the big-government side? Has he really become the establishment? I think he’s just an engineer looking for a solution to a problem.