Put somewhat crudely, we would have to speak here of the emergence of a liberal despotism. […] This momentous moral-philosophical shift was probably first made explicit by the physiocrats […] The market guarantees that natural laws can pertain equally to moral life; and the forces of the market make it possible for economic law, in particular, to represent natural rights in general. […] One inevitable consequence of this overall accommodation to the market is that the distinction, stemming from the modern theory of the state, between civil society and the state of nature no longer makes sense. The market cancels or elides this distinction and eliminates the associated aporias of natural law. It circumvents the social contract and presents itself as a kind of état de nature. [p.30] What later goes by the name of “liberalism” thus first took the form of naturalism, which defined so-called market freedoms primarily in terms of a duty and an obligation: the duty to relinquish control of economic subjects and a corresponding obligation to subordinate governments and their agents to primordial market laws.
Joseph Vogl, The Specter of Capitalism (Stanford: Stanford University Press, 2015), p.29.
Since the Middle Ages, the rudiments of a functioning credit system have been necessary conditions for the expansion of commercial capitalism. […] It is all the more surprising, then, that it was not until the end of the eighteenth century that a sufficiently systematic discussion of banking, capital, and credit mechanisms got underway. This may be due to a delay in the emergence of a systematic science of economics, which was notoriously late in catching up with manifest business practices; but it may also have owed something to a certain theoretical resistance to the fact that a genuinely capitalst structure — one that trades with credit, assets, prospective profits, and hence with time — could no longer be directly translated back into elementary exchange and balance relations. Though people still assumed that there was a balancing dynamic at work in the market, the constant circulation of debt, credit, and capital they observed seemed to contradict this assumption, and they were evidently alarmed by the wide-ranging impact of the economic decisions and actions being taken.
Joseph Vogl, The Specter of Capital (Stanford: Stanford University Press, 2015), p.41.
ABSTRACT: Bernoulli’s framework of expected utility serves as a model for various psychological processes, including motivation, moral sense, attitudes, and decision making. To account for evidence at variance with expected utility, we generalize the framework of fast and frugal heuristics from inferences to preferences. The priority heuristic predicts (i) Allais’ paradox, (ii) risk aversion for gains if probabilities are high, (iii) risk seeking for gains if probabilities are low (lottery tickets), (iv) risk aversion for losses if probabilities are low (buying insurance), (v) risk seeking for losses if probabilities are high, (vi) certainty effect, (vii) possibility effect, and (viii) intransitivities. We test how accurately the heuristic predicts people’s choices, compared to previously proposed heuristics and three modifications of expected utility theory: security-potential/aspiration theory, transfer-of-attention-exchange model, and cumulative prospect theory.
Read the full paper.
The Real-World Economics Review blog is having a survey. Why not go and vote?
A Storify of (most of) Stir to Action’s fascinating and energizing Alternative Finance workshop, held at Monkton Wyld Court two weeks ago.
The weekend was led by Brett Scott. Also check out Brett’s excellent 2013 Heretic’s Guide to Global Finance.
Forgive the typos!
This brings us to one of the most important component of the new social law and the oikodicy, a defining feature of homo economicus and his milieu, the market. Economic beings are reliable on account of their very limitations, they are social due to their lack of sociality, and it is only through their self-interested participation in trade that they can be brought to serve a purpose extrinsic to themselves. Above all, they best exercise control over themselves and others if they are left uncontrolled. There is nothing — and this will be one of the leitmotifs of the liberalism to come — more harmful than a government that wants to do good. On the contrary, what is called for here is a Mephistophelian agenda, one that takes its cue from a power “which would do evil constantly and constantly does good,” inadvertently producing what is best for all. Civil society, which constitutes itself as the milieu of homo economicus, is governed by the principle of nontransparency or inscrutability; there is no benevolent political actor, possessed of an all-encompassing overview and piercing insight, who might be willing and able to do what is good for everyone.
Joseph Vogl, The Specter of Capital (Stanford: Stanford University Press, 2015), p.24.
“I make my own money so I spend it how I like.”
“For those that doubted me, yeah this is payback.”
“The cash make us equal.”
“I’m probably just saying that because I don’t have to buy it.”
“Zama-Zam’uthath’ama chance cause in life I opportunity yok’fikela once.”
“I am serious bout my money.”
“All we know is that mula, benjis, franklins, & that guala, fetti.”
“What are those?”
“Nice cars, nice houses. So we’re going around …”
“I got the kind of money the bank can’t hold.”
“The bullshit, save it.”
“My seconds, minutes, hours, go to the almighty dollar.”
“I want art money.”
“I think y’all should give him his money.”
“Don’t act like you forgot.”
The critical mass of events endlessly argued over by economists resembles a picture puzzle in which reason and unreason, order and chaos, a foreseeable course of world events and sheer unfettered contingency appear as indistinguishable. Questions, exegetical efforts, and controversies of this kind weigh all the more heavily since they bear on the validity of one of liberal economic theory’s oldest and most deep-seated convictions: the conviction that market activity is an exemplary locus of integration mechanisms, harmonization, appropriate allocation, and hence social rationality, and that it demands to be represented in a coherent, systematic way. That is why it seems justified to identify, at the very heart of these disputes in the explanatory attempts occasioned by financial crises, the reprise of a problematic that only older attempts to establish a theodicy had been compelled to address with comparable [p.16] systematic rigor. Given that the capitalist economy has become our fate, given too our propensity to look to profit and economic growth to satisfy some remnant of the old hope for an earthly Providence, modern financial theory also cannot avoid confronting the baffling question of how, if at all, apparent irregularities and anomalies can exist in a system supposedly based on reason. In Leibniz’s terms: Which events appear to be compatible (and hence “compossible”) with which other events? Are relations between these events law-governed and if so, by which laws? And how can the existing economic world be “the best of all possible worlds”?
In any case, the questions that Kant used to test whether attempts at a theodicy were at all tenable would have to be directed, by analogy, to justifications of the current financial system. Here too it would be necessary to demonstrate that what seem to be “counterpurposive” and dysfunctional conditions are in fact nothing of the sort; or that they should not be judged as brute facts but as the “unavoidable consequence of the nature of things,” as tolerable side effects of a generally satisfactory world order; or that they are to be ascribed, in the end, to the flawed nature of “beings in the world,” the limited foresight of unreliable human actors.
Joseph Vogl, The Specter of Capital (Stanford: Stanford University Press, 2015), pp.15-16.