Dear President Obama,
The questionable epistemological status of mainstream economics is displayed daily in the press and on television as scholars trained in that discipline purport to derive explanations of the current crisis (and associated predictions and prescriptions) from a single prior case or period. For some everything went wrong with the deregulation of recent decades. For others today´s case is comparable to the recession of 1981 and 1982, or to the Great Depression of the 1930s, or to the crisis of 1873. The chairperson of your Council of Economic Advisors distinguished herself by studying monetary and fiscal policy in the 1930s, and she is on record as encouraging graduate students who wish to advance in the profession to do detailed empirical studies of particular historical cases similar to those she does herself.
If one accepts the two premises that (1) Observed phenomena do not reveal the causal powers that produce them, and (2) What is happening now, as we move from a chaotic present to an uncertain future, is not a repetition of any single pattern of past events; then we must conclude that comparisons with the Great Depression or any other period or case are not likely yield reliable guidance as we endeavor to select among the options available to us those present actions which will produce a better future.
To begin to dissolve economics into a broader socioeconomics that will be capable of explaining the phenomena we are experiencing, and of contributing to a more reliable guidance of social reconstruction, it helps to consider circumstances in which it is logically valid to draw general conclusions from a single case. When biologists study a single specimen, they have good reasons for believing that their findings will be true of all individuals of the same species. A beginning student who dissects a frog finds structures common to all frogs of the species dissected. A frog, unlike a Great Depression, is made of bones, tissues, and organs that repeat themselves over and over again in numerous similar cases.
Why? Because living beings are built according to instructions encoded in DNA. In a normal environment, a given seed will grow into a given plant or animal.
The ecohistorican Thomas Berry frequently remarks that the human species is biologically coded to be culturally coded. The same word used in speaking of DNA, the word ¨code,¨ can be employed to refer to cultural codes that organize behavior (norms, rules, customs, habitus). Up to a point the anthropologist can echo the biologist in generalizing from a single specimen, learning about a culture by interviewing and observing a single informant who has internalized its codes.
When applied to economics (or, rather, to dissolving economics into transdisciplinary social science) an approach that starts by detecting and articulating cultural structures built from codes (¨¨symbolic structures¨¨ in the terminology of Jürgen Habermas) calls for giving greater attention to what Joseph Schumpeter called ¨institutional framework¨, and for contextualizing what he called ¨¨analysis.¨ When Smith and Ricardo assumed that society divided into three classes of human beings: (1) the landowners, (2) the merchants and manufacturers, and (3) the laborers; they assumed what Schumpeter calls an institutional framework. When they took it to be the task of the science of political economy to explain the natural and proper division among the social classes of society´s annual produce (or, what for them was the same thing, its annual revenue), they were doing what Schumpeter calls analysis. They were proposing a theory of rent, a theory of profits, and a theory of wages.
In Schumpeter´s muddled mind it was possible to write a history of politically neutral economic analysis, devoted to explanation while rigorously avoiding prescription, while assigning to a separate discipline, sociology, the study of the constitutive rules of the institutions that created the phenomena observed. But we will not make much progress in improving the performance of our institutions until we reform our social sciences to bring the basic rules of institutional frameworks into focus; for they are the principal causes of the phenomena observed.
Dissolving economics into a transdisciplinary social science that studies the causal powers of cultural coding contributes to solving what Michel Foucault called the principal political problem of our times. Foucault remarked that the principal political problem of our times was lack of imagination. His remark describes the debates in the United States Senate and House of Representatives on the stimulus package, which were almost entirely about one or another proposal to get the economy moving again by restoring the confidence of the investors who invest, restoring the confidence of the consumers who buy, restoring the confidence of the bankers who lend, and restoring the confidence of the executives who manage firms.
Retiring economics from its splendid and disastrous isolation, connecting it with sociology and with history and all the arts and sciences, helps to free us in many ways. One of those ways is that it frees our imagination and therefore our vision. We see that basic cultural structures might change; we see that they have changed (“Always historicize!” wrote Fredric Jameson): we open our eyes and see that human behavior is in practice not nearly as dominated by profit-seeking as it has been in mainstream economic theory from Smith to Friedman.
We see the present crisis as an opportunity. It is an opportunity to wean ourselves from our excessive dependence on the for-profit subsector of the private sector. We see that the public sector and the non-profit sector can take up the slack when for-profit private business sags. Instead of chasing the will-of-the-wisp ¨confidence¨, which always depends (as Keynes taught us) not on any rational or objective standard whatever, but on people´s subjective perceptions of other people´s subjective perceptions, we can come down to earth and focus on the physical task before us: building sustainable cultures that mobilize resources to meet needs.
We can be thankful that just as global warming is getting out of control, while human population growth is continuing to spiral out of control, and –to generalize a series of ecological warning signs without naming each specifically—just as we are on the verge of destroying our habitat and therefore destroying our species; a financial crisis has come to save us. The financial crisis is slowing down the profit-driven machine that is destroying us. A better epistemology helps us to see the financial crisis as an opportunity to let the private for-profit economy slow down, as an opportunity to bring that machine under ethical and rational control, and as an opportunity to supplement it with other ways (public and non-profit) to mobilize resources to meet needs. The present crisis is our opportunity to become a sustainable species in a sustainable biosphere.
Peace and all good,