Marx, Incentives, and Materialism

Andrew Chamberlain has a wonderful post in which he uses Marxian economics to explain the phenomenon of metrosexuals.

Andrew rightly notes that "Karl Marx got almost everything wrong," but he acknowledges Marx's contribution to understanding how the economic structure of society "profoundly shapes how we relate to one another in society. And those relations influence moral norms, and ultimately law."

I feel wary crediting Marx with anything positive. Suppose, for the sake of argument, that Adolf Hitler made some profound observations in Mein Kampf, and that these observations later proved useful to mainstream social science. Now, of course, this doesn't seem to be the case (most scholars reject Mein Kampf as a worthless piece of trash except as a historical document), but I sometimes wonder whether academics would have been so quick to adopt Hitler the way they adopted Marx. Of course, Marx wasn't directly responsible for the murder of millions of innocents in the same way Hitler was, but there is a strong case that he was at least indirectly responsible.

Regardless, Marx is credited with this observation, so I must give credit where credit is due, even though I truly despise the man.

In a similar line of thought to Andrew's argument, I noticed something interesting over at Crooked Timber. Over the past few days, there has been much discussion of poverty and its causes. The conservatives in the comment threads have argued that poverty is primarily a result of unwise decision making on the part of individual poor people, whereas the left-liberals have argued that poverty is primarily a result of a flawed economic system. In this argument, it seems Marx would fall squarely on the side of the left-liberals.

Yet in another comment thread, this time on the topic of campaign finance reform and political corruption, the positions seem to have switched. Now the left-liberals are arguing that political corruption stemming from campaign contributions is "largely a product of deliberate human decisions" rather than a "mechanical, automatic process - an Invisible Hand type thing, a law of nature type thing," in the words of Ophelia Benson, editor of the website Butterflies and Wheels. In contrast, I have been arguing along the lines of public choice theory, which posits that political actors, just like actors in other realms, respond to incentives. As political incentives rise, first through increased government intervention in the economy, second through a desire on the part of businesses to influence political outcomes in order to gain a competitive advantage, and third through politicians who receive large campaign contributions from these businesses, we expect political corruption to rise as well.

As I've noted previously on Catallarchy,

What is surprising is not how much money politicians spend on political campaigns, but how little. Considering that government spending is well over $1 trillion, while total campaign spending is a little over $1 billion, this seems like a damn good deal. I would certainly spend $1 to gain control of $1000.

This seems like a materialist explanation of political corruption, which mainly ignores the specific personality defects of individual politicians, just as Marx mainly ignores the specific personality defects of those who operate within his materialist understanding of economic and social structures.

Toward a Marxist libertarianism, perhaps?

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The biggest source of money

The biggest source of money corrupting politics is the way that incumbents spend money to buy our votes. Can you say "prescription drugs"?

Does your leverage look big now?

Yours,
Wince

Well, if it makes you feel

Well, if it makes you feel any better, Glen Whitman points out in a comment that my argument is more Neoclassical than Marxist:

http://www.haloscan.com/comments.php?user=junglestories&comment=107474006066915015#64845

On further reflection, I think it's actually a Classical rather than Neoclassical argument -- Adam Smith made these kinds of materialist arguments all the time, particularly about how emerging capitalism socially dismantled feudalism through changing technology and social relations.

But regardless of who said it first, it's still good economic methodology. I had a professor once who used to say that the "fundamental assumption of economics" was that "all social phenomena emerge from the choices individuals make in response to expected benefits and costs at the margin." That means that as economists, we ought to try to trace everything we see back to the incentives and constraints facing people who do those things. And since incentives and constraints are partly determined by material conditions and available technology, we should look for material causes of things first, and only look for other less solid explanations if that fails.

"whereas the left-liberals

"whereas the left-liberals have argued that poverty is primarily a result of a flawed economic system. In this argument, it seems Marx would fall squarely on the side of the left-liberals. Yet in another comment thread, this time on the topic of campaign finance reform and political corruption, the positions seem to have switched. Now the left-liberals are arguing that political corruption stemming from campaign contributions is "largely a product of deliberate human decisions" rather than a "mechanical, automatic process - an Invisible Hand type thing, a law of nature type thing," in the words of Ophelia Benson, editor of the website Butterflies and Wheels."

Now, Micha - that's just silly, and it's a silliness you disavowed on that thread yesterday. It's silly to generalize about what 'left-liberals' (which is not what I would call myself, by the way) say from one thing I said, and it's also silly to compare the two threads when the comments come from different people. 'Left-liberals' are not as univocal as you're implying, and furthermore the left is made up of more than 'left-liberals.'

You also kept tediously insisting on that CT thread - so tediously that I finally gave up on the thread because it seemed so beside the point - on how naive it is to think regulations and/or a change from Republicans to Democrats would fix the corruption problem. But no one said anything about regulations, so what's the point of attacking a position that no one has enunciated? And I explicitly said that I know very well the Democrats are just as bad on corruption as Republicans - so that one is even more irrelevant.

Surely there is plenty for us to disagree on without disagreeing with things that no one said. What's the point of that?

The contrast you point out

The contrast you point out between the positions taken on poverty vs. the positions taken on campaign finance reform in the discussion on Crooked Timber is fascinating. I wonder if we have to posit a strict dichotomy between "invisible hand" and personal choices. Doesn't the "invisible hand" function because of the myriad personal choices of the actors in the system that animates it?

Whether I live under a command economy or in a free market system (in the U.S., I live under a system that is not entirely either ;), a web of human decisions brought me the can of mackerel filets I just ate for lunch. These decisions were all made in response to the incentives and constraints imposed by the context. In a command economy, the decisions are relatively few, and made by a few central planners, probably not the persons best informed and best motivated to make the relevant decisions. In a market economy, the decisions of a great many more actors wove that web, all responding to the incentives in their respective areas (fish, oil, steel, production, packaging, shipping, retailing) based on the knowledge they have of these areas. Each acted more or less rationally in the process, and with a generally better knowledge of their role and interests in their part of the process.

Two points:

(1) in any web of decisions, the contexts of incentives and constraints for some deciders' decisions is determined in part or whole by the decisions of other deciders. One can imagine a sort of intertwined hierarchy of decisions, where some deciders occupy governing (in a loose sense) positions with respect to others.

(2) in any population of people, there will be some who make "outlier" decisions--the decisions could be irrational, or they could be criminal or otherwise morally flawed (and doubtless there are other suitable categories of decision).

When a person given to outlier decisions occupies a relatively high position in a decision web, their decisions exert a disproportionately greater distorting influence on the outcome of the entire decision web. And, if not irrational, they will be responding to incentives they perceive in the situation. The rational non-outliers don't make those choices because they perceive the cost of the moral or criminal trespass to be higher than the reward promised by the incentive.

When persons with serious enough character flaws occupy important positions in decision webs, or when enough people with a shared but less serious flaw occupy important positions in decision webs, they have the potential to distort the outcome of the decision web. In other words, it's both a wave and a particle.

Disclaimer: I'm coming at this rather naively, with no background in sociology or political science, and no formal training in economics. But I read good blogs!

Ophelia, I'm sorry if I

Ophelia,

I'm sorry if I mischaracterized your views; that was not my intent. I used your example merely as an example of a larger trend I have noticed; it may very well be the case that your personal views are internally consistent. I think its a fair point to make that conservatives generally focus on the individual while left-liberals focus on the system in the realm of poverty, but in the context of political corruption, left-liberals focus on the individual actors and laws rather than the flawed system as a whole, whereas libertarians don't think there is anything unusual about the individual actors or laws, but that the entire system is unworkable in its current form. If true, this is not particularly surprising, given the other political views of conservatives, left-liberals, and libertarians.

I'm not sure what you would call yourself, but from your website, you consider yourself part of the "political Left," and you also "call for the Left to reclaim its Enlightenment roots," which I assumed includes liberalism. Again, I apologize if this is an incorrect characterization.

But no one said anything about regulations, so what's the point of attacking a position that no one has enunciated?

Well, Henry mentioned the Motion Picture industry and the Pharmaceutical industry in his title post, and the lobbying and political contributions they make to further their interests. Why are they interested in the political process? Because they want a favorable regulatory climate. Whether you wish to call these laws or regulations or legislation, I think my general point is the same.

And I explicitly said that I know very well the Democrats are just as bad on corruption as Republicans - so that one is even more irrelevant.

Yes, you did say that, and I wasn't trying to argue against it. My point is that regardless of who is in power or what the regulations may be, the results will be the same.

I must note, though, that I greatly enjoy Butterflies and Wheels, and it has heavily influenced my interest in philosophy. Keep up the good work.

Chuck, I wonder if we have

Chuck,

I wonder if we have to posit a strict dichotomy between "invisible hand" and personal choices.

Not at all. Nicholas Weininger, who, incidentally, is consistently one of the most interesting posters I have ever seen in comment threads (he posts on lefty blogs like Matthew Yglesias and Crooked Timber frequently), wrote on one of the poverty threads I referenced above:

    Why are people assuming that bad choices and bad luck are mutually exclusive? ?All her fault? and ?screwed by the market? are not the only two options here, y?know. My reading of her story leads me to believe that Caroline Payne made lots of bad choices and got a lot of raw deals, and both have contributed significantly to her present state. So her situation is neither 100% her fault nor 0%, and nobody can really say with any certainty where it is in between.

Since I'm not studying psychology but economics, I tend to focus on the materialist explanations rather than the personal ones. But you are very much correct that personal decisions do play a large part in this process. In the context of the political arena though, I don't think personality plays much of a role, because as many have stated before me, money is such a necessity for gaining political power.

Hi Micha, Sure, I take your

Hi Micha,

Sure, I take your point about the trend, and you may well be right. I spend a lot of time pointing out inconsistencies on the left myself! (And then by way of vacation I go to CT and point them out on the right.) But I really don't think it makes sense to use as an illustration of such inconsistency a comment in one thread by X and a different comment in another thread by Y and claim that the two exemplify inconsistency on the left - even if you have reason to think that both commenters are on the left. The left is pretty full of dissension these days! You'll make your case all the better if you use illustrations that really illustrate.

"My point is that regardless of who is in power or what the regulations may be, the results will be the same."

I know, I got that. But no one said otherwise, so it seems odd to argue quite so insistently (you did say it more than once) against something that no one said. No one discussed solutions at all, we discussed only the problem.

Yes, I am on the left, I'm not disavowing that, I just don't call myself a left-liberal. Don't know anyone who does, either. Sounds a bit redundant, really.

Anyway, I'm very glad you like B&W.

Ophelia, Just wanted to let

Ophelia,
Just wanted to let you know that I am also a big fan of B&W. Great writing!

Ophelia, You're right, I

Ophelia,

You're right, I should have been more clear. It wasn't even so much that I was using the comments as an example; it's just that I noticed something I had never noticed before. The comments were just a way of triggering that recognition.

The reason I consider you a left-liberal is because leftist sounds too strong, and I consider my own political ideology (libertarianism) to be a subset of liberalism.

Thanks, Jonathan! Micha,

Thanks, Jonathan!

Micha, thanks for seeing my point.

It is interesting noticing things like that. Bits of orthodoxy that cancel each other out. We all have them, of course. Ferretting them out, figuring out where they come from, trying to resolve them or re-think everything so that one or the other item becomes unnecessary, are all activities that make life interesting as well as damn difficult.

In fact one of the games at TPM Online is about exactly that - it tests you for tensions in your thinking. I took it once a couple of years ago and was flabbergasted to have no tensions. Jeremy (my colleague at B&W and editor of TPM Online) told me the percentage of no tensions is tiny, 9% of takers or something. Well - I must simply have had a good match with the questions, because I know damn well I have tensions. Incompatible wants, for example, such as between egalitarianism and meritocracy.

Or between various definitions of liberalism, speaking of left-liberalism and such. Martha Nussbaum has a really brilliant fascinating essay on the perceived and real tensions between feminism and (classical) liberalism in Sex and Social Justice. It's a great read, I recommend it.