Alan Greenspan’s The Age of Turbulence contains a chapter titled The Modes of Capitalism which is full of revelations which Mr. Greenspan unfortunately failes to recognize. The chapter describes the numerous forms Capitalism has taken in a number of countries, mostly North American and European. Of course, that such different forms of Capitalism have been implemented in diverse countries is not news. But what Mr. Greenspan fails to notice is that similar chapters could not be written about physics, chemistry, geology, meteorology, astronomy, physiology, botany, astronomy, etc. but could effortlessly be written about Christianity, Islam, Hinduism, Buddhism, and even astrology. The point is, science does not have sects, but ideologies do. Of course, economists shun the word sect, preferring instead the euphemism school in an attempt to gloss over the non-scientific nature of economics. Mr. Greenspan’s modes of Capitalism are absolutely nothing a lot more than sects, and no endeavor that is comprised of sects is a science.
Mr. Greenspan’s attempts to explain the existence of these sects begins to reveal just how unscientific economists can be. He writes, “To me, the degree of willingness to take risks is in the end, the major defining characteristic that separates countries into the various modes of capitalism.” Mr. Greenspan ranks “the United States as the most ‘free’ of the larger economies” and believes, apparently, that consequently, Americans are less risk averse than individuals elsewhere. But there is not a lick, jot, fleck, or speck of evidence to support this belief. So although it may be true that the United States is the most no cost of the bigger economies, other factors for which there is considerable evidence can be cited as much more likely explanations. The most obvious of these is differences in educational systems. It may be, for instance, that Americans support this freer economic system because they are poorly educated and consequently much more gullible than individuals in countries that have much better educational systems.
There is no question that the American educational system is inferior to the educational systems in a lot of other countries. The will-publicized country-by-country comparisons that invariably show that American students are much less competent in a lot of areas of study require not be repeated. But there are far much more telling examples of American educational inferiority. When graduates of some of America’s most prestigious universities, such as the present crop of presidential candidates, can openly reject evolution and when several branches of the national government routinely rewrite scientific studies to make them conform to the administration’s political ideology, the failure of the American educational system becomes evident. In America, ideology trumps truth.
An explanation of the failure of even America’s universities to educate their graduates is not hard to uncover. That America has had a long-standing anti-intellectual culture has been nicely documented. See Richard Hofstadter’s Anti-Intellectualism in American Life, for instance The American educational program is fractured. Local control of main and secondary schools, frequently controlled by school-boards produced up of poorly educated individuals who seek to promote personal agendas, is a tradition dating back to the nation’s founding. The makeup of state school boards is not distinct, and there are fifty of these. No typical standards exist and even state-by-state comparisons are challenging to make. Then, too, American universities were not normally founded to educate men and women. They had been founded to train individuals for professions in impact, they were founded as vocational training rather than educational institutions. After the Civil War, the creation of the land-grant university program was explicitly developed for vocational training. As a result, students are taught how to carry out strategies, but rarely taught to critically examine the theories from which those strategies are derived. This description characterizes what goes on in most of the professional schools and colleges attached to our universities. It especially characterizes our graduate departments of economics. 1 tiny but revealing example offers anecdotal evidence that supports this view and the view that America’s universities promote ideology over truth is this: Gilles Raveaud, I think, commenting on Greg Mankiw’s teaching at Harvard has written, “Some of the students I had at Harvard have described Mankiw’s course to me throughout private conversations as ‘massive conservative propaganda.’ One of them told me that he thought that Mankiw manages to ‘indoctrinate a entire generation.’ In 2003, a protest against a similar course then proposed by professor Marty Feldstein, an ex-adviser to President Reagan, led to the creation of an alternative intro economics course, taught by radical economist Steve Marglin. But whilst Mankiw’s course gives the necessary credits to students, Marglin’s does not.” Just as there is no honor amongst thieves, there is apparently no honor in universities that get huge donations from America’s capitalists who have gotten their fortunes by picking the pockets of customers and employees and who would be loathe to see their capability to continue to pick those pockets restricted by some idealistic idea of truth.
Mr. Greenspan ignores fully 1 salient distinction between American and Continental educational systems. In the American educational program, analytical thinking prevails. Everything is considered in isolation from every thing else. Economic phenomena are examined as though they had no consequences to society in general. In Europe, nonetheless, phenomena are considered together as a gestalt. The consequences of changes in 1 social environment are related to the effects those adjustments have in other social environments. Whereas American economists feel nearly exclusively in terms of economic growth, Europeans feel in terms of society as a entire. American economists can often locate ways of excusing the adverse human consequences of an economic method the Europeans emphasize the adverse consequences to society as being more critical than the economic method. This distinction has been evident in economic circles considering that the formation of the so-referred to as historical school, and Mr. Greenspan ought to have recognized it.
But Mr. Greenspan reveals some thing else about economics that is rarely referred to as attention to—the delusions economists labor under in relation to the real-world economy. When Mr. Greenspan makes risk-taking the characteristic of the American economy, he is delusional. Definitely America has its share of risk-takers. No matter whether it has much more or fewer risk-takers than other nations is questionable. But risk-taking does not characterize the American or any other economy. Economic risk-taken may possibly be thought of as a characteristic of entrepreneurs. But entrepreneurs alone cannot make an economy if everyone was an entrepreneur, no workers would exist to carry out entrepreneurial ventures. Kurt Wicksell in his Lectures on Political Economy nicely defines the entrepreneurial process: “He who borrows money at interest does not as a rule intend to maintain it, but to exchange it at the 1st suitable chance for goods and services, by the productive use of which he hopes to be able to acquire not merely the equivalent of their price but a surplus value. . . .” Although that may possibly be true of entrepreneurs, it is not why most people in today’s actual economy borrow money. When individuals borrow to acquire houses, automobiles, appliances, etc., they do not intend to use their purchases in approaches that will create surplus value. In truth, these folks are not investing at all. The cash they borrow is a sunk cost for a location to live, a indicates of transportation, and other such uses. And even though Americans have grow to be a nation of borrowers, they have not grow to be entrepreneurial risk-takers. Any economist who thinks of the economy in terms of entrepreneurial risk-taking is engaged in self delusion.
Mr. Greenspan is also delusional when he writes about creative destruction. Surely, creative destruction does occur, but not almost as typically as Mr. Greenspan and other economists appear to feel. As examples of creative destruction, Mr. Greenspan mentions the telegraph industry’s demise because of the introduction of the telephone, the tin can’s demise when the aluminum can became feasible, which he relates to the demise of the steel business. Certainly some workers were displaced when the telephone industry replaced the telegraph business and then the aluminum business reduced the steel industry. And certainly such displacements can not be avoided and no attempt should be made to prevent them. But that is not what is happening in America nowadays. When Fisher-Cost offshored the manufacturing of toys to China, it was not simply because the Chinese had developed new toy-creating technology. In reality, those Chinese employ older technologies than those what would have been utilized in America to manufacture the very same toys. When computer related industries offshore their helpdesks, it is not since new helpdesk technologies have been developed in the offshored countries. The technologies used in offshore locations is exactly the same technology that is becoming utilized in America or Europe or anywhere else. So although there is a phenomenon identified as creative destruction, what is happening in America nowadays is mere destruction. The other half of Mr. Shumpeter’s thesis is entirely absent, and for Mr. Greenspan to feel otherwise is delusional.
Once more, Mr. Greenspan writes, for instance, that “in a totally free society . . . the vast majority of transactions must be voluntary, which, of necessity, presupposes trust in the word of those with whom we do enterprise. . . .” And “It is remarkable how much trust we have in the pharmacist who fills the prescription ordered by our physician.” But this is sheer delusion. Folks do not trust the companies they obtain from. In the case of the pharmacist, individuals acquire from him since there is no alternative. And does any person trust the pharmaceutical firms that market the medicines we are prescribed? If they do, they should be wholly ignorant of the revelations that such firms hide from regulators, physicians, and customers information of adverse effects and even life-threatening dangers. Do I exhibit trust in Microsoft when I purchase 1 of its operating systems or applications, understanding full well that what I am obtaining are poorly coded programs containing innumerable bugs and security lapses that Microsoft will attempt to patch by incessant releases of what it euphemistically calls Service Packs? Trust is something that does not exist in company that is why contracts exist, and why firms such as Microsoft exempt themselves from all liability for damages within their contracts. If Mr. Greenspan trusts the firms he does company with, he is delusional.
But the unavoidable dilemma with Classical/Neoclassical economics, which Mr. Greenspan glosses, is its immorality. He writes that, “Clearly, not all activities undertaken in markets are civil. A lot of, although legal, are decidedly unsavory.” But he also writes, “When I was a child, jokes about the scruples of utilised-automobile salesmen were widespread, but in truth a flagrantly (italics mine) unscrupulous used-car salesman is 1 who will be out of business prior to lengthy.” Mr. Greenspan fails to recognize that this statement is entirely meaningless. It does not say that businessmen are not unscrupulous it does not say that competition puts unscrupulous businessmen out of enterprise it does not say just how unscrupulous a businessman ought to be to be flagrantly unscrupulous.
Everyone knows that businessmen routinely break even the most fundamental moral maxims, and any economist who denies this should explain the neologising and persistent existence of such phrases as Caveat Emptor, a pig in a poke, and letting the cat out of the bag. In an honest economy, these expressions would have no use. As a matter of reality, there is absolutely no reason to think that individuals in enterprise are any a lot more honest than the population in general, and there is good reason to believe that organization in a totally free-marketplace promotes crime and vice, both of which are epidemic in the United States. It is no mere coincidence that when the Soviet Union collapsed and when Israel was persuaded by the Reagan administration to abandon its socialist traditions and no cost-market practices had been introduced, both crime and vice emerged as important social troubles.
In fact, free-market economics institutionalizes immorality, which is confirmed by the mere reality that puffery is an acceptable practice. Companies that employ puffery to market goods will, with out batting an eyelash, discharge an employee who is found to have puffed up his resumé. I’m not talking about sophisticated moral philosophies such as Kant’s Categorical Imperative, but those basic maxims embodied in the Decalogue and the Golden Rule. These immoral practices of organization are widespread and far-reaching and they contradict a lot of of the favorite clichés of economists.
Mr. Greenspan claims, that free of charge markets increase material nicely-becoming to a greater extent than regulated markets. But tell me, how does the marketing of bottled water, which is never tested and whose source is rarely identified, increase the well-becoming of the folks who are snookered into getting it, particularly when ordinary tapwater is regularly tested, comes from a well-recognized source, and is considerably less expensive? In reality, doesn’t it reduce that nicely-becoming, because the funds wasted on it could have bought some thing that provided a actual material benefit? The very same questions can be asked about quite a few other products—the McDonalds hamburger, Taco Bueno’s tacos, pizza from quite a few pizza vendors—the list is endless. But there’s much more. The Fox affiliate in Dallas regularly runs a feature referred to as “Deal or Dud.” The channel buys products heavily advertised on television and has them tested by ordinary viewers. If a product works as advertised, it is called a Deal, if not, it is called a Dud. Each and every so often the channel comes up with Deals, but most products tested are Duds. As a matter of fact, Mr. Greenspan’s book is itself a dud. It was not published due to the fact of the merit of its content it was published merely because of the notoriety of its author. Mr. Greenspan’s name on the title page can be likened to other forms of puffery. So how does manufacturing and marketing products that don’t work increase the material well-being of consumers? And consider the snake-oils individuals are sold that are classified as dietary supplements? The manufacturers of these goods could effortlessly have them double-blind tested to decide their effectiveness. But they don’t. Is it since they know that if they did, the products couldn’t be sold?
Mr. Greenspan and other economists claim that the no cost marketplace results in the most efficient allocation of capital. But how can anybody claim that the capital expended on the goods mentioned in the prior paragraph is efficiently allocated? In fact, one could easily claim that it is fully wasted, as is the capital lost throughout economic downturns. So anyone who believes that American organization are generally honest are as deluded as the insane person who believes he’s Napoleon.
Not only is free-market economics immoral, there is some evidence that it could not exist if the immorality were removed. In an impressive new book, The Social Conscience, Michel Glautier asks regardless of whether a caring society can exist in a market economy? His analysis suggests that recent and continuing modifications to the market economy are putting the achievement of a caring society beyond reach. And the following passage comes from an abstract of a paper by Andrei Shleifer: Explanations of unethical behavior typically neglect the role of competition, as opposed to greed, in assuring its spread. Child labor, corruption, “excessive” executive pay, corporate earnings manipulation, and commercial activities by universities all promote censured conduct. When unethical behavior cuts expenses, competition drives down prices and entrepreneurs’ incomes, and thereby reduces their willingness to pay for ethical conduct. Regrettably, both authors are ambivalent when it comes to drawing difficult conclusions.
In a rational society, a distinction would be made between scientific enterprises, usually keeping in mind that all science is a function in progress, and enterprises grounded in mere belief. The political system would defer to scientists in matters involving the former and allow the men and women to determine the type of society they would prefer in matters involving the latter. So the choice of an economic program ultimately comes down to what sort of society individuals not only want for themselves but for their progeny in future generation. Do we really want an economic system that institutionalizes prevarication and encourages greed, crime, and vice? Those who answer this question affirmatively really should, maybe, have 666 tattooed on their foreheads.
In the second chapter of The Age of Turbulence, Mr. Greenspan writes that he “discovered that some of the scientists in the Manhattan Project subscribed to a philosophy known as logical positivism. . . . The mathematician in me embraced this stark analytical credo. . . . The world became a better location, I thought, if men and women focused exclusively on what was knowable. . . .” Unfortunately somewhere alone the way, Mr. Greenspan lost this focus and became an apologist for the free of charge-market program when he “decided to engage in efforts to advance free-market capitalism.” We are all now faced with the consequences of his choice.
Wise men know the significance of periodically asking themselves, What if what I think to be accurate is wrong? It is time that our economists begin asking themselves this question.
© 2008, John Kozy