Heath Replies to Tabarrok

25 04 2015

Joseph Heath

Two of the most interesting economic thinkers of our times have recently been in an online dialogue. Joseph Heath, the University of Toronto philosopher, recently published Enlightenment 2.0  Restoring Sanity to Our Politics, Our Economy, and Our LivesThis book builds on his earlier popular and academic work, including Filthy Lucre: Economics For People Who Hate Capitalism. As many readers will know, that book set out to debunk six common right-wing fallacies about the economy as well as six common left-wing fallacies.

In Enlightenment 2.0, Heath draws on the work of Daniel Kahneman.

Over the last twenty years, the political systems of the western world. have become increasingly divided-not between right and left, but between crazy and non-crazy. What’s more, the crazies seem to be gaining the upper hand. Rational thought cannot prevail in the current social and media environment, where elections are won by appealing to voters’ hearts rather than their minds. The rapid-fire pace of modern politics, the hypnotic repetition of daily news items and even the multitude of visual sources of information all make it difficult for the voice of reason to be heard.

In Enlightenment 2.0, bestselling author Joseph Heath outlines a program for a second Enlightenment. The answer, he argues, lies in a new “slow politics.” It takes as its point of departure recent psychological and philosophical research, which identifies quite clearly the social and environmental preconditions for the exercise of rational thought. It is impossible to restore sanity merely by being sane and trying to speak in a reasonable tone of voice. The only way to restore sanity is by engaging in collective action against the social conditions that have crowded it out.

Anyway, Tabarrok published a lengthy and thoughtful review of Enlightenment 2.0 that was entitled Is Capitalism Making Us Stupid? Heath replied with an extensive blog post on In Due Course. I got the impression that Heath has lots of interesting material that wasn’t presented in this book due to space consideration.

For instance, Heath writes in his blog post:

Last but not least, Tabarrok is unsatisfied by my discussion of Ayn Rand’s rationalism. “Heath recognizes the Ayn Rand problem but he brushes it aside. That’s a shame because a longer discussion might have been enlightening.” I’ve heard lots of complaints about this – that I don’t explain how we went from the left being so anti-rationalist in the ’60s, and Rand being the arch-rationalist, to essentially a reversal of the positions. There was initially a longer discussion in the book of conservatism, and why Rand is something of an exception in the broader tradition, which has always gravitated towards anti-rationalism. This got left on the cutting room floor, so I’ve brushed it off and cleaned it up. Let’s call it my one-minute history of conservative anti-rationalism. It’s still pretty sketchy, but at least it’s more than can be found in the book.

It sounds as if Heath has material that could be expanded into a follow-up book!

Yglesias on Glass-Steagall, Rockefeller, and the House of Morgan

15 08 2013

Matt Yglesias, who is one of the best economic commentators around right now, has published some interesting thoughts on how we could get some meaningful financial reform laws passed. His argument: let’s play off one finance company or faction of Wall Street against all the others.  This approach is inspired by economist Alex Tabarrok’s interpretation of the famous Glass-Steagall Act, which was passed during the Great Depression: Tabarrok argues that this law, which separated investment from commercial banking, was actually designed to advance the interests of the Rockefellers at the expense of Jack Morgan.   Tabarrok presented this argument in a 1998 article that Yglesias recently discovered online (see here).

To quote Tabarrok:

“More than anyone else, Winthrop Aldrich, representative of the Rockefeller banking interests, was responsible for the separation of commercial and investment banking. With the help of other well-connected anti-Morgan bankers like W. Averell Harriman, Aldrich drove the separation of commercial and investment banking through Congress. Although separation raised the costs of banking to the Rockefeller group, separation hurt the House of Morgan disproportionately and gave the Rockefeller group a decisive advantage in their battle with the Morgans.”

Yglesias’s blog post will doubtless interest everyone who wants to bring back Glass-Steagall.

I’m currently writing a review of a new book on the social history of J.P. Morgan’s company.  The author looks at the social connections of the Morgan partners to see how they influenced how the bank operated. The book is generally very good and also says some interesting things about the relationship between the Rockefellers and the house of Morgan in earlier period, but the author doesn’t really investigate whether there is much archival evidence to support the line of speculation advanced in Tabarrok’s paper. Perhaps this is something some other historian might do.

Alex Tabarrok on Infrastructure vs. the Warfare-Welfare State

5 08 2012

Economist and blogger Alex Tabarrok has published an article in The Atlantic in which he alleges that excessive U.S. government spending on the military and social services has crowded out spending on infrastructure. In other words, the U.S. government no longer has the money to spend on the sorts of great projects it funded in the past, such as the Hoover Dam and the Interstate Highway System. Tabarrok is suggesting the unwillingness of U.S. politicians to spend on infrastructure has contributed to the innovation slowdown in that country.

Created by A. Tabarrok

Tabarrok’s piece is interesting. However, I am astonished by the lack of comparative international data in it. Tabarrok clearly doesn’t like the priorities revealed by U.S. government spending. However, he doesn’t say which country has achieved the right balance between social, R&D, defence, and infrastructure spending!!!

I think that many economists would say that Japan goes too far in prioritizing infrastructure spending: some of the money spent on bullet trains to nowhere probably would should have been invested in measures designed to encourage Japanese people to have more children. I think that the Japanese data point could be used to support the thesis that too much infrastructure spending is bad for growth. I would also be interested to learn Tabarrok’s thoughts about Germany’s approach. I might add here that German visitors to the U.S. are frequently appalled by the state of the country’s infrastructure.

In this day and age, a parochial article of this sort is unacceptable. I’m particularly disappointed by Tabarrok’s Atlantic piece because a) Tabarrok is a citizen of one than more country, so you would expect him to be a bit more internationally minded b) he contributes to a blog that frequently contains excellent material about non-U.S. developments c) Tabarrok writes about innovation systems, which are increasingly international (e.g., Apple of California’s products contain components and intellectual property from dozens of countries).