Sunday, October 04, 2009

Problems with Pragmatism

Tibor R. Machan

In my columns I return to pragmatism now and then in part because so many prominent, influential folks embrace it and use it to justify the approach they take to public affairs. One such individual is President Barack Obama who has declared more than once that he is fiercely “loyal to economic pragmatism.” This in contrast to those he and many on his team regard as being ideological, people who, for example, adhere to a general economic viewpoint such as socialism, capitalism, welfare statism or the like.

Among the many 20th century thinkers, the economist John Maynard Keynes (the leading guide of Mr. Obama’s economic policies—via such figures as Princeton University’s Nobel Laureate and columnist for The New York Times Paul Krugman) was a dedicated pragmatist. About a decade before he wrote his most prominent and influential book, The General Theory of Employment, Interest and Money, published in 1936, Keynes wrote his very brief but packed little booklet, The End of Laissez Faire (1926), based on lectures he delivered in England and Germany the year before.

In this book, Keynes goes to great lengths to trace the history of both the term and the economic philosophy of laissez faire economics. After doing his best to keep a straight face about it all, he eventually shows his total disdain for the idea, mainly because he associates it with a somewhat vulgarized version of Darwin’s theory of natural selection, namely, the doctrine of the survival of the fittest in human social life, or Social Darwinism (as associated with Herbert Spencer).

Keynes is disgusted by this view, treating it as nothing but an excuse for the powerful in a society, including the economically successful, to remain undisturbed in their quest to remain powerful and rich. As Keynes saw it, the principles of laissez faire had as their purpose to make it easiest on the money seekers, to facilitate the pursuit of profit by the most lucky in society, never mind what wreckage they leave behind with all the poor who have to go without because of their greed and avarice. Keynes saw the free market as a zero sum game!

A particularly illustrious analogy of Keynes in his little book has to do with the wilds where in times of scarcity only the giraffes, with their long necks able to reach atop trees with abundant leaves, manage to survive and flourish, with all other animals left to suffer. He comments: “If we have the welfare of the giraffes at heart, we must not overlook the suffering of the shorter necks who are starved out, or the overfeeding of the long-necked ones, of the evil look of anxiety or struggling greediness which overcasts the mild faces of the herd.”

So as to remedy the unfairness the analogy is supposed to capture about laissez faire economic policy, Keynes recommends that governments must get involved an help level the playing field. In the process he dismisses the case for laissez faire as resting on nothing more than empty abstractions. As he put it, “We cannot … settle on abstract grounds, but must handle on its merits in detail what [Edmund] Burke termed ‘one of the finest problems in legislation, namely, to determine what the State ought to take upon itself to direct by the public wisdom, and what it ought to leave, with as little interference as possible, to individual exertion.’”

There is much to chew over here but I will focus on just one thing, namely, the point that economic policy needs to be determined case by case. Each issue “must be handled on its merits in detail.”

This is a pragmatic myth. No issue can be handled divorced from history and theory. If it isn’t going to be laissez faire, it will be something else and, indeed, throughout the book Keynes is very sympathetic toward socialism except for the fact that it isn’t economically feasible. But the sentiments behind it have merit. And the cases then are to be dealt with on their merit, meaning, of course, on whether they conform to socialist aspirations or are still better left to be dealt with by individuals’ exertion.

There is no such thing as leaving problems to be solved on their individual merit—it is humanly impossible except for people who act randomly. From this it follows that the dispute isn’t between a pragmatist and a laissez faire economic policy but between some other system and laissez faire. And when it comes to that, laissez faire is indeed the most promising system and departing from it is simply very costly.

Only by inventing magical devices such as Keynes’ famous multiplier can this be denied, a device that plainly defies the laws of logic and metaphysics. This is one reason why Keynes wants to discourage us from considering abstract grounds! But it will not do. And the failure of the New Deal illustrates this clearly.

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