Tag: economic theodicy

Excerpt: Joseph Vogl, The Specter of Capital

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.

Excerpt: Joseph Vogl, The Specter of Capital

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.

Excerpt: Joseph Vogl, The Specter of Capital

Even if the concept of equilibrium has taken different theoretical and epistemological forms on its journey from classical economics, via the marginalists of the nineteenth century, to twentieth-century neoliberalism, these versions share a limited spectrum of basic assumptions. They assume that all market players are interested in maximizing profit or use-value, that a self-regulating relationship between different quantities, forces and other factors obtains, that exchange mechanisms operate most effectively when arbitrary intrusions and interventions are kept to a bare minimum, and hence that the market should be seen as an exemplary arena for the clarification of otherwise inscrutable and opaque forms of social interaction.

Joseph Vogl, The Specter of Capital (Stanford: Stanford University Press, 2015), p. 35.

Excerpt: Joseph Vogl, The Specter of Capital

There may be little agreement about the actual status to be accorded this equilibrium in the nascent discipline of political economy (for example, about whether it should be understood as an optimum, a principle, or a reality), and Smith himself may never have set out exactly what he understood by equilibrium; nonetheless, equilibrium theory became a crucial element of economic knowledge and was passed on through Ricardo, Walras, Jevons, and Pareto to the doctrines of the twentieth century. […] Economic theory was born as a theory of equilibrium.

Joseph Vogl, The Specter of Capital (Stanford: Stanford University Press, 2015), p. 31.

Excerpt: Joseph Vogl, the Specter of Capitalism

Since the seventeenth century — to put it briefly — the discourses of natural rights and moral philosophy have provided some of the building blocks for an all-purpose definition of homo economicus. These discourses connect assumptions about the state of the world with presuppositions about human nature, and they have led to a long-lasting, radical change in the moral household and in the economy of human interrelations. This means, first, that modern homo economicus appears on the scene not merely as a rational subject but also as a passionate one, whereby these passions are regulated via a mechanism of interests. Second, he acts as a blind subject with limited knowledge. It is precisely through this blindness that he produces — unintentionally and unconsciously — harmonious social relations. For this reason, he follows a specific path in life. Homo economicus acquires wisdom through his ignorance and gets ahead in life thanks to his limited awareness and narrow horizons. Incidentally, a similar contradiction can be found in the plot structure of the German Bildungsroman: Wilhelm Meister, too, arrives at his rightful place in life precisely through his limited knowledge and the unintended consequences of his actions, as if steered there by an invisible, “higher hand” […] Third, homo economicus is an enemy of the state in a special sense.  As far as he is concerned, the implementation of a good system — involving laws, institutions, administration, and so on — conflicts with the good implementation of systematicity itself. […] And fourth, this hostility to government interference does not detract, as might be expected, from homo economicus developing into an eminently governable character type.

Joseph Vogl, The Specter of Capitalism (Stanford: Stanford University Press, 2015), p. 27.

Excerpt: Joseph Vogl, The Specter of Capital

[…] how, if at all, does an idea of the coherence of the economic universe manifest itself here? Economics — this dogma of our time — is in principle quite prepared to use completely [p.11] different, contradictory interpretations to explain everything that happens in contemporary financial dealings, including crashes and crises. One of the most prominent of these interpretations is essentially orthodox in nature. It originates in the market fundamentalism of the Chicago school and calls itself the “efficient markets hypothesis.” According to this doctrine, financial markets represent the purest distillation of market activity in general. Unencumbered by transaction costs, unimpeded by transport needs and the difficulties of production, operated by rational, profit-oriented, and therefore reliable economic agents, they are the ideal, frictionless setting for price formation mechanisms and perfect competition. That is why prevailing prices and price fluctuations on these markets directly and exhaustively reflect all the available information. Under optimal conditions of market competition, so long as all players possess equal access to information relevant to pricing — for example, how much how quickly they can buy — current price quotations will accurately convey the truth about economic activity in general at any given time. The assets to which these prices refer are never really under- or overvalued. Any errors and inefficiencies that may eventuate, such as major discrepancies between actual and forecast returns, are due only to various irritating impediments to free market activity and can quickly be rectified, given favorable conditions. As late as 2007, one of the founding fathers of this school of thought, Eugene Fama, considered it self-evident that there are no such things as “bubbles” in financial markets — the very idea is without foundation and makes no sense. […] There is another interpretation, which is a little less conservative but no less orthodox. Taking the most diverse financial crises as examples, it focuses on bubbles, runs, busts, and booms, speaking of “financial panic” or “euphoric escalations.” Since the seventeenth century, and particularly since the nineteenth century, terms such as these have been used to address the sheer irrationality of speculative transactions that deviate fundamentally from all standard practices in the commodity market, from the principles of economic rationality, and from the basis of the so-called real-economy. […] 15] […] Whether or not lessons can be learned about future price flows and investments from the history of stock exchange movements; whether and how price fluctuations relate to fundamental economic data and conditions in the outside world; whether a fictitious play of signs has become detached from the so-called real economy, and if so, how this came about; whether movements on financial markets occur by necessity or by chance; to what extent sequences of monetary events are motivated or unfounded; whether the financial system functions efficiently or chaotically, or both at once; whether market dynamics represent rational interaction or the purest irrationality: all these questions reveal the models and hypotheses of finance economics to be action programs that take a historical and prognostic approach to the economic universe without reaching any consensus about what holds that universe together. Together, they lead us to the terrain of a dark and confused empiricism. They point to uncertainty about what economic reality actually is, and they hold a number of disappointments in store.

Joseph Vogl, The Specter of Capital (Stanford: Stanford University Press, 2015), pp.10-15.

Excerpt: Joseph Vogl, The Specter of Capital

Precisely because human beings are asocial — this is how the surprising argument goes — they help contribute to social order; precisely because they are unreliable, they can be integrated into society as reliable, known quantities. How is this possible? By what mechanism can lawfulness be produced from anomic beings? What dynamic is at play here and what is its overall function in the system? Here too the answers given by English empiricists, French moralists, and German social engineers coincide in one essential point: all these affective dynamics come together in the mechanism of self-interest. At the heart of all (mis)deeds and passions, all desires and inclinations, lies an irreducible element which, since the seventeenth century, has gone by the name of “interest” or “self-interest.” The concept of (self-)interest probably originated in raison d’état or national interest before passing into social theory […] [p.21] Even the vilest cravings and most heated passions are stabilized by a trace element of self-interest that dictates the choice of the more pleasant, less painful option […] It is in self-interest that the inclinations and passions of all parties meet, and it is precisely in their pursuit of that interest that the social and political laws of nature are revealed.

Joseph Vogl, The Specter of Capital (Stanford: Stanford University, 2015), p.20.

Excerpt: Joseph Vogl, The Specter of Capital

If, then, in modern times the earth not only begins to rotate around the sun but money too starts to rotate around the earth […] these revolutions are evidently complemented by an anthropological one, which no longer presents a mere “image” of mankind but manking as it “really” is — and this redefinition becomes the starting point for new conceptions of socio-political order. At any rate, ever since the Baroque, teachers of natural law and moral philosophers have generally agreed that human beings are no longer to be understood simply as zoa politika, as political animals who are directly and instinctively adapted to life in society. In contrast to most other creatures, human beings have instead shown themselves to be dysfunctional and quite unsuited to communal existence. By nature, they are disagreeable companions for their fellows — and an extensive literature [p.19] about such concepts as “self-love” or “self-preservation” proves that here, so far as human beings are concerned, we can only join Kant in speaking of “unsociable sociability” or a “nation of devils.” According to this view, “real” human beings find themselves in a hopelessly “ruined state”; they are “creatures filled with all kinds of wicked cravings.” […] The identification of a new type of human being thus coincides with novel conceptions of social order, conceptions in which market events and political economy will ultimately assume a privileged role.

Joseph Vogl, The Specter of Capital (Stanford: Stanford University 2015), pp.18-19