Sunday, March 31, 2013

Ideas as Catechismic Devices

I think we often treat ideas as catechismic devices. By this I mean that we don't really care about the content of an idea, so much as we think of it as slotting into a particular sequence of arguments. That's natural, I suppose, but it probably results in the underutilization of the content of an idea.

I'll give two examples of this - one taking libertarians to task and one taking Keynesians to task.

This came to mind in reading a post by Eli Dourado talking about Matt Yglesias. I agree with a lot of Dourado's criticisms of Matt, actually, but I found this passage odd:
"Matt Yglesias argues that there is no such thing as a “market distribution” of wealth, because most wealth would not exist without the state. He lists “a few minor exceptions” to the maxim that market solutions are efficient...

In my view, Matt’s argument is not compelling. Take first his list of “minor exceptions” to the general rule that markets work best. Do we need state intervention to keep air pollution down to acceptable levels? There has never been a completely laissez-faire society that has had dirty air, so it is difficult to say. What we do know from the work of Elinor Ostrom is that we don’t need state intervention in all cases to solve problems associated with water usage or overfishing, which are structurally similar to that of air pollution (i.e., they have high transaction costs). It turns out that the threat of state-sanctioned violence is not the only solution to repeated prisoner’s dilemmas, even when transaction costs are high, either in theory or in practice." (emphasis mine)
I think this is a typical misuse of Ostrom's work. The catechismic sequence of argument (from a libertarian's perspective - others think this sequence runs a little differently) in which Ostrom is usually nested goes something like this:

Libertarian: we don't need government, use markets
Non-libertarian: but what about the roads?
Libertarian: Elinor Ostrom shows you don't need government for that stuff

And indeed she does. There are relevant follow up questions about whether non-state provisioning is optimal, of course, but this is certainly a fine retort to that particular sequence of arguments.

But the weird thing about Dourado's post is Ostrom actually militates in favor of Yglesias's argument that it doesn't make sense to talk about "market distribution", since Ostrom's whole research agenda is dedicated to the prevalence and success of non-market distribution! This, I think, is hard for some libertarians to process if you think of Ostrom's ideas as tools to use against statist arguments, as opposed to simply a set of thoughts and conclusions around non-market, non-state allocation.

It seems to me this is just a cognitive short-cut - an efficient way to classify, arrange, and utilize ideas. As such it's obviously not limited to libertarians. A good example of this for Keyesians (not that you can't be a Keynesian libertarian) is the liquidity trap. The liquidity trap as an idea is just a set of thoughts and conclusions around the trade-off between cash and other assets, and one particular shape of the demand for liquidity. It is often used catechismically, though:

Keynesian: we need some deficit spending to get us out of this slump
Non-Keynesian: Awful idea - that would crowd out private investment and since government is wasteful anyway you're just making matters worse - you're crowding out good spending with bad
Keynesian: but in a liquidity trap the whole point is that you will not be crowding out private investment until you are at the point when the economy has recovered (and then you stop anyway)

Again, this is all fine as far as it goes. There's nothing particularly wrong with this back and forth and it's a way to economize on the storage of ideas and have answers that are ready at hand. The problem is, too strong a reliance on this catechism leads some people to make problematic claims, for example around monetary policy - that further monetary policy is "pushing on a string". Now in a limited sense, if we are talking about traditional monetary policy and the interest rate channel that's not wrong. But of course there's more to monetary policy than just that, and if you really think about what the liquidity trap is as an idea (rather than just its role in this catechism), you're going to come to a different conclusion - that the liquidity trap offers reasons to doubt some channels for the operation of monetary policy, but not others.

The lesson is not "don't have catechismic devices". There's good reason to have those. The lesson is don't let those devices dominate the way you use ideas.

1 comment:

  1. Dan,

    You write, "Elinor Ostrom shows you don't need government for that stuff."

    Of course she did no such thing.

    Go on Amazon and buy a copy of Stuart Banner's Who Owns the Sky, which tells the story of how the biggest commons, The Sky, came to be owned by the US Gov't. Ms. Ostrom turned some efficiency studies into "wisdom" because it suited the bias of some. Had she looked that the small police and fire dept's in STL over time, for example, she would have found that they turned out not to be so popular once the unions gained control over the small local political machinery and raised wages above those paid in NY and Chicago.

    And, of course, everything about local gov't in CA disproves every word she ever wrote.

    As it turns out, what is critical is the 4th Estate. The sine qua non is not police dept size, it is whether a stupid decision by a police officer or a governing board will make the 6 o'clock news.


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