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Time for a new Enlightenment?

November 2, 2011

It seems I underestimated the Christians. Not only have a number of Christian groups come out openly in favour of the Occupation movement, some have promised to actively non-violently resist any forcible eviction of the protest outside St Paul’s in London. There’s more blood on the carpet as the Dean has fallen on his sword. Rowan Williams has also spoken out – in a wishy-washy sort of way, it’s true, but he has spoken out, advocating the separation of day-to-day banking and speculation, and a Tobin Tax, a tax on speculative transactions, in order to reinvigorate the real economy. He also wants public money to be given to the banks with the condition they use it to invest in real economic activity. The banks, to my mind, cannot be trusted when they are paying their directors far more than they even were last year.

The Ankh-Morpork City Council, sorry, Corporation of London, having lost its ecclesiastical backing, now seem to find themselves a little uncertain if they can have people evicted from cathedral grounds if the cathedral authorities aren’t sure if they actually want them gone. It’s true that the Church of England still isn’t too sure how to reconcile social justice with modern banking practices (hint: it can’t be done!), but I’m a little less pessimistic about the Christians than I was.

As I mentioned, however, they still want to hang on to the old system, which, as we’ll see, is about as irrelevant as their religion.

In the early nineteenth century a few people broke away from the established belief systems of their time and increasingly began to question. Not a little of this work was done a few kilometres from where I’m sitting, just outside Edinburgh in Scotland. Their work led to the way we see our world today.

Their thoughts led to the idea of Deep Time and modern geology and palaeontology, introduced the notions of evolution, bioregionalism and what we now call ecology, they tinkered with ideas about the transmission of disease, starting with germs, leading to modern understandings of viruses, bacteria and moulds. Others tinkered with electricity, and mostly got away with it. Another man, the basis for a more famous fictional detective, laid the groundwork for modern forensic investigation. Someone else, working a little earlier, what’s now a couple of hours away by bus, tried to do the same with economics.

Some people still think that he did a good job of it.

Adam Smith’s big idea was that of the self-regulating market. In his less well-known magnum opus, The Theory of Moral Sentiments, Smith advocated the notion of an “invisible hand”, that, in consequence of the gluttony of the rich having clear bounds, they spend a fortune on servants – an early form of trickle-down economics. This has of course, been proven false: the gluttony of the rich appears boundless, short-term profit being little more than a means of keeping score, with scoreboards, in the form of rich lists, appearing annually in prominent newspapers.

Nevertheless, Smith promoted the idea of the benefits of acting out of self interest, which he saw as at least consistent with acting in the public good. Neo-Classical economists still follow this dictum.

Bear in mind that no modern scientist would go to Darwin for a modern understanding of evolution. Thinkers like Darwin and Alfred Russell Wallace put us on the road to a modern understanding, but we’re still having a (mostly) courteous, scientific bicker over the details of notions like punctuated equilibrium and the roles of transposons, based on the work of people who understood something of heredity, but nothing of DNA.

To be fair, Neo-Classical economists have moved on from Smith, but they haven’t moved on from Smith’s mistakes, and the invisible hand was far from Smith’s only mistake. They have also made plenty since. Bizarre notions of the free movement of the means of production persist. This is the basis of the daft idea that anyone can freely move to wherever the jobs are, which itself is behind the justification for a great deal of bullying by the social welfare offices of those countries that have social welfare, and the kind of negative commentary we’ve all come to know from certain tabloid newspapers that I don’t have to name.

Some commentators have observed that Smith wasn’t actually all that original, even tending towards the simplistic, and singularly failed to demonstrate the validity of his assumptions: any modern philosopher trying a stunt like that could not hope to be taken seriously, never mind be published in a reputable journal.

Meanwhile, monetary policy and so on has all been based on similarly unproven, if not downright , assumptions. Some of those assumptions may well be part of what got us into our current mess. There are good reasons for thinking this, but I’m not going into it here: the short version is that you should go and read some of the important work by Joseph Stiglitz and others on this, but keep some coffee handy, since it’s pretty dry, and a good cure for insomnia.

Part of the problem is that the economic models posit rationality. If you are going to posit rationality, you have to posit knowledge (and modern economic systems do tend to posit that all actors in the economy have knowledge of all the factors in it), but if that knowledge is lacking, then you can’t posit rationality. At some point, you’re guessing, not being rational. Stiglitz, to be fair, talks about “information asymmetries”, by which he seems to mean that some actors in an economy know more than others, and might be willing to exploit them by, for example, selling mortgages that the buyer will not be able to pay off, which provides short-term profit, and massive damage to the system in the medium term.

The upshot of all this is that the system is not so much broken, as not fit for purpose to begin with. Some wealthy individuals have used, and built upon, Smith’s mistakes to suit their own purposes (in short, make money, and keep the rest of us in line). The rest of us should be embarrassed that we were fooled for so long (again, to be fair, some of us weren’t, but getting the two-legged sheep to listen proved harder than it should have been for what is supposedly an intelligent species!).

I have a bad habit of dwelling on the past. The point is that we need another enlightenment; another period of people hanging round coffee shops trying to thrash out a system that might actually work. Today, unlike in the late eighteenth century, we have the advantage of the carping criticism of the internet and the process of peer review.

I have no idea where this process is going to lead. There has to be a better way of doing things: an economic system based on observable facts about the world but one run in the interests of everyone, not the wealthy few. So far, all we have is some bright ideas about ethical investment, microfinance, mutual societies, credit unions, co-operatives and so on, but no theoretical foundation based on solid observations to back it up. It might be argued that no theory is better than a disproved theory, but a good theory is probably better than no theory.

I’m not the first person to have suggested this. Joseph Stiglitz who, with others, systematically refuted the notion of the invisible hand, has already come up with the notion, and I’d love to see some suitable output from Stiglitz (or his ilk) on this. Failing that, we need some other minds tackling this problem.

Certain important factors will need to be taken into account. Greed (observable) must be one of them, and measures must be taken to curb it. Here’s an idea that will give some bankers sleepless nights: nobody should be allowed to get too rich; there has to be a point where enough is enough, and the surplus should be redistributed. Rationality in a market where nobody has perfect information is impossible: deal with it.

The whole thing needs to be integrated into a system where natural resources are finite, to reflect a fact in the real world that any ecologist recognises, but most economists conveniently forget.

Perhaps, in short, we need a way of looking at things that integrates modern ecology, with a more realistic view on economy, a recognition of human greed and irrationality, and social policy to bring the impact of the human species down to a sustainable level.

I’ll be the first to admit that a transition to a new socio-economic system is not going to be easy. There will also be vested interests trying to put a stop to it, and those for whom the familiar, however bad, is better than something new that might be better for everyone.

It’s time for a new enlightenment indeed.

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