Tuesday, August 17, 2010

The Big Things That Matter

CounterPunch, former Reagan economic advisor Paul Craig Roberts meditates on the failure of deregulation:

Consider air travel. Admit it, if you are my age you hate it. The deterioration in service over my lifetime is phenomenal. Studies in favor of airline deregulation focused on short flights between A and B and concluded that small airlines serving high density areas were more efficient because they were not regulated. What was left out of the analysis is that regulated airlines served low density areas and permitted free stopovers. For example, if one was flying from the US to Athens, Greece, the traveler could stopover in London, Paris, and Rome without additional charges. Moreover, passengers were fed hot meals even in tourist class. In those halcyon days, it was even possible to travel more comfortably in tourist class than in first class, because flights were not scheduled in keeping with full capacity. Several rows of seats might be unoccupied. It was possible to push up the arm rests on three or four center aisle seats, lay down and go to sleep.

Perhaps the best benefit of regulated air travel for passengers was that airlines had spare airliners. If one airplane had mechanical problems that could not be fixed within a reasonable time, a standby airliner was rolled out to enable passengers to meet their connections and designations. With deregulation, customer service is not important. The bottom line has eliminated spare airliners.

With deregulated airlines, Wall Street calls the tune. If your flight has a mechanical problem, you are stuck where you are unless you have some sort of privileged status that can bump passengers from later fully booked flights. “Studies” that focus only on discounted ticket price omit major costs of deregulation and thereby wrongly conclude that deregulation has benefited the consumer.


Conservatives and especially libertarians romanticize “free market unregulated capitalism.” They regard it as the best of all economic orders. However, with deregulated capitalism, every decision is a bottom-line decision that screws everyone except the shareholders and management.

In America today there is no longer a connection between profits and the welfare of the people. Unregulated greed has destroyed the capitalist system, which now distributes excessive rewards to the few at the expense of the many.


Good essay, go read it. I don't really have much to add to its specifics--after all, I've pounded away at the folly of unfettered deregulation for years now. But reading Roberts' examples of the seemingly unrecognized adverse effects of deregulation again reminds me of the limitations of the entire field of economics, both in serious academia, and in public discourse.

That is, human existence is extraordinarily sophisticated. It is beyond our current ability to somehow distill its essence. I mean okay, we can distill its essence, and have been doing so for centuries: just go read some Shakespeare. But that simply drives the point home. Taking the human condition and putting it into a form that we can actually get our hands around is something that only poets and artists can do. Scientists, psychologists, economists, sociologists, all these fields can only understand a small fraction of what the human experience is all about. Scientists, real scientists, are quite honest with themselves, and the world at large, about this, generally limiting themselves to making only conclusions that are supported by real physical evidence, and going no further.

Psychologists and economists, who approach their fields in a manner that might be described as "scientific," on the other hand, usually start their thinking with assumptions about human behavior, or about society, or about how the world works, whatever, and then pile on observations which seem to be true or workable within the models they develop. Sometimes they get it right. Other times, it turns out that their starting assumptions were flawed, which wrecks the whole chain of thought, or they missed some phenomena or aspect of human behavior that renders real world application of their work problematic or impossible.

Really, this happens almost all the time. Back in the early 1960s, famed linguist Noam Chomsky, for instance, helped to destroy behaviorism as the dominant paradigm in American psychology simply by bringing up a lot of information that the behaviorists simply hadn't considered. A more recent example is how the deregulated finance industry, which should not have failed as dramatically as it did according to neoliberal pop philosophy, nearly took down the global economy.

I've said many times that these fields, psychology and economics, have great value, and have helped humanity enormously. But to say that they are inexact sciences is a massive understatement. Indeed, I wouldn't even call them sciences. They take on too much to be absolutely certain about anything. This isn't necessarily such a bad thing, mind you. It's good to have a thumbnail sketch, as it were, to guide us in trying to understand human behavior. But there are generally so many holes in such work as to give me, a guy who's only had a decent high school economics course and a college level macro-econ 101 class, a seat at the table when it comes to discussing the big issues, whether most people think that's legitimate or not.

When Roberts looks at specific unintended consequences of particular economic policies such as deregulation, he's exposing the stuff the economists missed when formulating such policy. And that's the attitude we should all take when discussing economics: maybe this is wrong; what have we forgotten to consider? Because right now economics is treated as though it came down from the mountain on stone tablets. And that's fucked up.