An
assumption had become a truth. The self-interested
model of human behaviour, that had been developed in the Cold War to
make the mathematical equations work, had now been adopted by these
economists as a fundamental truth about the reality of all human
social interaction.
A group
of economists in the early 70s arbitrarily adopted the
self-interested model of human behaviour that had been developed in
the Cold War, to explain the dysfunctionality of public institutions.
This perception would become a powerful tool in the hands of the
neoliberal ideology, carried by big banks and corporations, to
demonize the state and dismantle any state control upon them at the
expense of the societies.
In his
documentary The Trap, Adam Curtis explains:
In the
early 70s, the government bureaucracies in Britain began to collapse.
Those around them blamed a growing economic crisis, but it was clear
that something much more fundamental had gone wrong. What were
supposed to be institutions to help people, had become destructive.
Those around them seemed to turn against the very people they were
supposed to serve.
A group
of right-wing economists in America now put forward a theory that,
they said, explained why this was happening. At the heart of their
idea was Game Theory. They said that the fundamental reality of life
and society was one of millions of people continually watching and
strategising against each other, all seeking only their own
advantage.
An
assumption had become a truth. The self-interested
model of human behaviour, that had been developed in the Cold War to
make the mathematical equations work, had now been adopted by these
economists as a fundamental truth about the reality of all human
social interaction.
Economist
and game theorist, Thomas Schelling, says:
We
were always trying to infer the intentions of the other. We were
always trying to convey our intentions, either deceptively or
truthfully. We were always trying to find ways to make
believable promises, and sometimes to make believable threats.
Threatening the Soviet Union, threatening a misbehaving animal,
threatening a child, threatening a neighbour… I think what we were
doing is what we call strategising. ‘What does he think that I
think he thinks that I think he's going to do?’ It has to come to
some kind of equilibrium. What is it that we can both recognise, is
the obvious thing to do?
What
this meant, the economists argued, was that the politicians and
bureaucrats belief that they were working for what they called "the
public good" was a complete fantasy - because to do that
depended upon creating shared goals in society, based on
self-sacrifice and altruism. But in a world that was really driven by
millions of suspicious, self-seeking individuals, such concepts could
not exist.
Out
of this came a theory called "Public Choice", and a group
of economists who were determined to destroy the politicians’ dream
that they were working for the public interest.
Their
leader was called James Buchanan.
Buchanan
says:
There's
certainly no measurable concept that could meaningfully be called the
public interest, because how do you weigh different interests of
different groups and what they can get out of it? The public interest
as a politician thinks, does not mean it exists, it's what he thinks
is good for the country. And if he would come out and say that,
that's one thing, but behind this hypocrisy of calling something "the
public interest" as if it exists, that's what I was trying to
tear down.
In 1975,
Mrs Thatcher became leader of the Conservative Party. And Buchanan's
ideas had a powerful influence on her, and the group of radicals
gathered around her. A rightwing think-tank advising Mrs Thatcher
brought James Buchanan to London for a series of seminars. And he
explained starkly why the British state was failing. It was pure Game
Theory: because there was no agreed version of "the public
good", the bureaucrats and the politicians schemed and
strategised in their own self interest, building up their power and
their own empires. They claimed to be helping others. In fact it was
the very opposite, and the result was economic chaos, and a breakdown
of society.
As the
British economy spiralled out of control, the political and
bureaucratic elite who had dominated Britain since the war, found
themselves under attack from both the Right and the Left. Where once
they had been heroic figures who would create a new world, now they
were accused of being agents of control, not freedom.
And
these new theories began to spread into the public imagination. The
writer who was part of the group advising Mrs Thatcher, began to
write a sitcom [Yes Minister and Yes Prime Minister] that explicitly
put forward the theories of Public Choice. As well as being funny, it
was ideological propaganda for a political movement.
Good post.
ReplyDeleteThank you!
DeleteNatural human behavior, protecting finite resources in hand, is in mankind DNA. However, this became not the case for humans since 1712's steam engine in Britain - the observation that has been also written on passionately by William Jevons, back in the 1980's.
ReplyDeleteThe suspension of that instinct has played havoc with Economics, as now humans are unable to fathom the role of fossil fuels Energy in our civilisation.
Humans can NOT manufacture energy (a constraint depicted in a couple of diagrams below).
Economics and Social-Contracts written since Malthus, Adam Smith and Marx should now be re-written again for the coming, post abundant fossil fuels age.
Until then, "The Tragedy of the Commons" has now given its own law of thermodynamics!
https://the-fifth-law.com/pages/press-release?failedrev=economicsundermined