Like most of us, I want to understand the economy and the political economy for my teaching and for my own sake. I enjoy reading what we might call “popular” economics writing. For example, I always try to check out James Surowiecki’s column in the New Yorker called the “Financial Page.” Recently he wrote about the classic arguments about the source of unemployment: structural or cyclical factors (January 3,2100; page 23). He pointed out how a blind allegiance to a vague ideology explains the persistence of belief in the idea that there must be something structural with unemployment this time. In other words, the problem is that we do not have the “right kind” of workers for the available jobs. Stimulus can do nothing since we just need to wait for people to retrain or leave the labor force, or die, I suppose. If structural, then we just have to let labor markets “sort themselves out.” The problem with the structural argument, as Surowiecki points out, is that there is scant evidence for it. Payrolls are down and hiring stagnant across the board and not just in certain industries. What are the industries with openings and not enough supply of workers? None.
I have also picked up two books that I am making my way through. One is “Crisis Economics” by Nouriel Roubini and Stephen Mihm. I heard about him on the Planet Money podcast as one of the the economists who tried to sound the alarm bell on the housing bubble when no one was listening. I am not sure that makes him clairvoyant all the time (of course! He is an econmist!) but it seemed worth checking out. I am only into the second chapter, but he already said something I have repeated so often in my classes: greed does not explain the bubbles nor their negative after effects. My students almost universally will latch onto greed as the explanation and I see it as a key teaching need and challenge to get them off that well-worn groove.
There are two flaws in this kind of folk explanation. First, greed can only be an explanation if you ignore the complexity of human systems and assume that what we observe as facts is due to the choices of a few people. Given the complexity of human behavior and the way our actions are shaped by our history and context, one can not argue that it the recession is due to “some greedy people.” This is the flaw of an under-socialized theory of human agency. The second flaw is to grant the causal force of greed to the fact that some unspecified amount of people have just become more greedy. As Roubini points out as well, why would wall street types become more greedy from 2002 to 2008? Or from 1978 to 1998? Aren’t they always very acquisitive and ambitious? In fact, isn’t that exactly what my students admire and idolize about a career in finance? There is no clear causal argument for why many more people would become greedy. This line of folk reasoning makes invisible all of the inter-related organizational, institutional, and cultural forces that can interact to change the conditions of being “greedy” to make it either a controlled burn of energy or an uncontrolled conflagration. This is the second half of the under-socialized view (the term comes from the essay by Dennis Wrong) because it points out what needs to be added to have a more accurate theory of human agency.
In other words, greed ain’t enough to explain this shitstorm of economic problems. To rely on this flawed reasoning leaves one to argue that the solution is for people to out of the blue just be “less greedy” and “more moral.” To try to apply these solutions will only perpetuate an under-socialized view of human agency and any possibility for more effective action that addresses the conditions that enabled the recession.