She Knew She Was Right

The number of economists who have written novels is mercifully small; but the number of novelists who have written about economics is vast, and may equal the number of novelists, period. Jane Smiley has now taken her place in the Academy of Know-it-Alls. Some of this is unbelievable: Other Economists in the Room

English majors understand human nature better than economists do. ... To suppose at this late date that people are rational in anything, but especially in consideration of their own self-interest, is to be painfully, gaspingly ignorant. The works of all of these writers are full of characters who act irrationally -- who are greedy and cruel and selfish and angry when it would be far more pleasant and healthy to be a "rational actor."

Jane, you ignorant s***, novels are "full of characters who act irrationally" because that is the source of their drama. They are fiction, not documentary. The stories of Oedipus, Hamlet, and Raskolnikov are classics because they are so extreme, not because they are a reflection of everyday life. Surely you know this.

Is human nature basically good or evil? No economist can embark upon his profession without considering this question, and yet they all seem to. And they all seem to think human nature is basically good, or they wouldn't be surprised by the effects of deregulation. Have none of these guys been to Naples or Moscow? Or even seen a James Cagney movie? There can never be such a thing as a free market, because it is human nature to cheat, monopolize, and buy off others so as to corner the market. This is what leads people like me to feel that economists can hardly be so simple-minded as they appear -- they must be spouting this junk just to suck up to tyrants.

James Cagney movies?! I thought we were talking about de-regulation! And, Cagney was playing mobsters, not airline executives. De-regulation was rarely a theme in Cagney's films, unless you count the repeal of Prohibition. And, the last thing economists should think about is "good vs. evil." Rather than being distracted by sentiment and emotion over who is or is not being "oppressed," economists should worry about what policies and incentives can lead to the greatest benefit for the greatest number of people. Adam Smith rarely used the word "evil," but Marx used it as the basis of his critique. Speaking of which:

If you want to know what's happened to production in the US in the last generation, I suggest you read Marx

But don't call Jane a Marxist! That's McCarthyism!

I never forgot one piece of analysis, and that is that as the workers earn more money for their labor, the owners export the factories to the periphery of the industrial world in order to keep wages down. This perennial cycle means that the workers can never afford what they produce, and so the market for their goods is always somewhere else.

Has anyone told Jane that American manufacturing is often a highly unionized & expensive endeavor that proved lucrative to a couple generations of lucky workers and disastrous for the companies that employed them, and the employees who happen to be there when the whole concern goes bust? Or that new manufacturers pop up in the US every year? Just as an example, Monster Cable was founded in a garage down the street from my apartment in San Francisco's Richmond District by a guy who hand-rolled his cables. 25 years later, he had a huge facility in the South Bay (filled with hundreds of people earning middle class incomes) and the naming rights to Candlestick Park. Does it really matter where his damn factory is?

Speaking of goods, economists who have deigned to think about manufacturing have always resisted calculating the costs of raw materials by calling them "externals." For example, if I come to your country with my enormously expensive army and I steal, or attempt to steal, your oil, in order to make it into gasoline and blow ever more pollution of all kinds into the air, then the cost of the war (in lives, money, social, and environmental damage), the moral cost of the theft of someone else's resource, and the ultimate cost to the planet and its living beings of global warming will not, according to economics, be factored into the cost of the oil, because those things are "externals" and are considered to be free. Well, they are free, to the shareholders of Exxon, but they are not free to the planet.

You will find no better summary of the Left's belief system in the early 21st century than that paragraph. All of the boogeymen are there: the War for Oil, Global Warming, the Shock Doctrine, Exxon shareholders; all put across with the sort of smug anger - I call it "smunger" - that is the progressive's baseline emotional setting. Really, it's an impressive literary achievement. And, like all literature, it is a fantasy.

Who's paying these guys? One of the profound effects of economics in our day is that the people with the money and the power have embraced the guilt-free, external-less, everything-will-turn-out-okay-in-the-end philosophy of economics in order to justify their own evil works. And the economists, for the most part, have sucked up to that money. Aspen Institute? Let me in. Hoover Institution? That's not located in Kiev, is it? Oh, right -- Palo Alto.

Smiley casually throws around words like "corrupt" "evil" "sucked up" & "Aspen Institute" like Coleridge cutting loose in an opium den. It's a fog of rhetoric that flows everywhere and nowhere. Does Smiley know that the Aspen Institute is where Meg Whitman met Van Jones, and that Jones was a featured speaker there? Does it matter?

A pair of economists were moved to respond to all this. I won't quote from them too much, but they did come up with this statement, which might prove too subtle for Smiley to handle: Everything You Wanted to Know About Economists (but were afraid to ask)

Smiley, like so many others, confuses "capitalism" with "corporatism." Being in favor of capitalism, in the sense of free markets, does not mean we support whatever is in capitalists' interests. We support competitive markets, which often work against the interests of capitalists who would generally prefer cozy monopolistic relationships with the state, such as those likely to result if the state gets more power.

If Smiley actually deigned to read the works of free market economists, she might be surprised at how much time they spend railing against rent seekers and monopolists. Adam Smith spends most of "The Wealth of Nations" railing against the mercantilist policies of his era. Does Smiley really think free market economists look at the behavior of, say, GM and applaud? How about the TARP bailouts? my memory is that the free market economists were appalled and the House GOP, at least, voted against the damn thing. But, Smiley is in love with the drama, so facts be damned. It was progressives like Barack Obama and Nancy Pelosi who voted most enthusiastically for the bailouts and all that came after, but Smiley seems to think free marketers were behind all of it. Is it any wonder the Left often seems deranged? It must be hard work, constantly rewriting history to fit your pre-conceptions.

Smiley, God help us, is a best-selling author whose novels and political beliefs receive regular (indeed predictable) applause from the NY Times Book Review and the rest of the mainstream media. She is also a wealthy woman who has achieved the rare combination of critical acclaim and popular appeal. Yet, here she is telling us to "read Marx," a man whose intellectual heirs consigned the Jane Smileys of their day to the Gulag or to years of censorship, exile, and penury. It would be funny if it weren't so serious.

The best-educated, and best read among us are often the most ignorant.

UPDATE: I've wanted to link to this thought provoking post at the Money Illusion, and this is the pefect opportunity, as he discusses the division of labor between artists, economists and political scientists in advocating for the creation of society: What Is To Be Done?

Artists and economists are doing their part, but political scientists still haven’t figured out that the best policies are those favored by the voters, not by political scientists. So each group should stick to what it does best:

1. Artists should create empathy for others, through the narrative arts.

2. Economists should try to educate people about trade, markets, opportunity costs, and incentives.

3. Political scientists should advocate true democracy, not specific policies.

And be suspicious of anyone who oversteps his or her role, whether it be Lenin, or Ayn Rand.

Or Jane Smiley.