One of the real problems we face is confusion about the interaction between economics and philosophy. Men are seen constantly arguing across a chasm of pedagogic division, with one shouting fiercely about certain principles of nature and man qua man, and another gesturing sharply toward the empirics of a science. The fact-value distinction has left some of us unable to communicate.
Megan McArdle wrestles with some of the same difficulties in this essay on the statistical history of Gross Domestic Product.
I propose that we need to repose in that discipline or field of study which proposes to bridge this divide; which proposes to make some balance or unity of facts and values. I mean, the field of politike episteme, a Greek phrase which translates directly to political science but (following Voegelin) I would say more closely resembles what we call political philosophy.
Consider this exchange:
“Efficient-markets theory says only that markets will give us the best estimate of value. Price is our best estimate of factual value. So on the evidence, all of our banks should have perished in 2008. They were ruined institutions. If I, as trader in bank-related credit derivatives, could have had my view made policy, all of your nationalization wishes could have come true. The banks were dead. We derivatives traders glimpsed it first. Policy should have reflected it. So why should I be blamed for a political system that won't let banks fail?”
“Any derivatives trader, by virtue of his labor activity, is complicit in the very trade which brought down the banks; all of which is to state that a derivatives trader creates the conditions of his own claims to knowledge, much like oil speculators in 2008 driving up the price of oil, after real estate tanked, and then claiming that the increased ‘demand’ for oil made it a great investment. One doesn't get to create one's own knowledge and then claim an especial prescience for ‘knowing’ it, or teasing out the implications of it. The implications of the derivatives trade were that the big Wall Street banks were insolvent, and ought to have been liquidated by the Feds; the derivatives trade caused this, more than any other factor. Moreover, the derivatives trade was not a necessary condition of this knowledge; one doesn't need a trade in occult financial instruments to know whether banks are insolvent or not; one needs only the information that banks have been required to disclose, even before derivatives emerged as a critical orgy site for Wall Street.”
Here is an argument which combines factual claims with philosophic principle. The speakers refer to facts and propose principles for weighing and interpreting said facts, with an eye toward applicable policy.
It is immaterial, for my purposes here, whether we agree with one statement or the other. What I’m concerned with is this intellectual structure of integrated science and philosophy. We can ask of the authors, with an empirical cast of mind, “Did the derivatives trade on the evidence indeed bring down the banks?” or we can ask of them, philosophically, “Ought governments to simply liquidate insolvent banks? in other words, ought policy to reflect the reality that derivatives revealed?”
The latter sets up a structure of moral obligation — insolvent banks don’t deserve to continue in business — in justice they deserve to fail — while the former presents an empirical conclusion from the facts.
The integration in one argument of these two branches of human intellectual endeavor is an instance of politike episteme. And it is vital to maintain some precision in this. An economist operating purely from the facts could dispute the factual conclusion; but if he is wont, rather, to dispute the principle that insolvent banks ought to be liquidated, he may be an economist by training but he is in this case acting as a philosopher.
Another way to look at this division is to realize that the “science” side of politike episteme is always available for counsel, but the philosophic side must call the shots. The economist advises the executive or statesman, who must in the end decide his policy or principle, and decide it from the facts but according to his vision of the nature and destiny of man.
The amount of confusion produced by ignorance on these points is something to behold. The vulnerability it presents, easily exploited by the unscrupulous, is considerable.
A fairly instructive example of this confusion can, I think, be made of Keynesian economics, popularly portrayed. I will present it with a considerably polemic edge for purposes of sharpening distinctions.
In the Financial Times some months back, though surrounded by some useful advice, I came to find this peculiar statement: “Keynes’s genius – a very English one – was to insist we should approach an economic system not as a morality play but as a technical challenge.”
Technical challenge drastically underestimates the character of what we face. It underestimates the character of what is called the economic system. It underestimates the nature of man.
It is common enough for modern man to assume that the technical characteristics of a thing amount to the whole. But this is a grave and crippling error.
The economist may think he has captured “demand” or “consumer confidence” or any other of a thousand elements — captured and bound it neatly to a number in a statistical model. But even he, if pressed, would acknowledge the reality of things like psychology, fear, exuberance, etc — things outside the competence of statistical models, or at least very incompletely assayed by models. So there is human psychology, which is not technical.
There is also the spiritual crisis of our age, which is about the farthest thing from technical. The spiritual crisis of modernity — that same streak of madness which shall insure that my generation is one of whom history may record that it invented the school-shooter, a particularly depraved innovation in suicide-murder — is quite real, despite the impotence of technical analysis to explain it. Modernity imagined it could dislodge man from the foundations of his spiritual order and his moral framework, and go on his technical mastery alone, but it was a terrible error. It is an error many centuries in the making. A colossal and ruinous error.
The spiritual nature of man cannot be apprehended by numbers and technique alone. And the spiritual nature of man affects everything about him, even his economic systems.
But our dear Keynesians, like all those crippled by the modern error, have stifled their perception of the spiritual nature of man, on the grounds that it is fundamentally unreal. Man does not kill or steal or defraud, or race off, enraptured, in reckless speculation, because of his spiritual nature, for the simple reason that there is no such thing as his spiritual nature. No, no: it's always the Technicals.
So the school-shooter or the thief or the high-finance charlatan is fundamentally an irresolvable puzzle to modern man. The depravity of man is not a feature of his “technical” apparatus or makeup. And unless we want to hold the view that the economic crisis is quite unrelated to the spiritual crisis, we must say that the economic crisis will be fundamentally a puzzle to the Keynesian as well. All the technical expertise in the world will not enlighten him.
The causes of this economic crisis lie, at base, in those things this Financial Times writer has dismissed as a “morality play,” and Keynes is commonly thought to have dismissed with his quip we’re all dead in the long run. The causes cannot be spiritual, for if so then they must be fundamentally unreal in his mind. For him it is always a technical question. The great Technicals will save us, in golly good English fashion.
To hell with that premise. It's part of what got us here in the first place. The modern vision of man as a creature always and ever driven by material factors — the doctrine that matter is all, or that matter is real and mind illusory, or that all mind is the mere epiphenomena of matter — is, as I say, a crippling error.
In truth man is a dualistic creature, matter and spirit, body and soul. In truth there is an objective moral order, conformity to which is a duty of that same man. His spiritual aspect or nature is quite real despite our general inability to quantify it, and sheer techne will never replace the moral arts or the science of theology. A man cannot leverage himself out of usury anymore than a Keynesian can save us by overcoming technical challenge.
So there is a transparently polemical plea to restore philosophy to its proper place, to not let the prestige of science crowd out that importunate fact of morality.
We should resist any attempt to segregate technicals from the life of man and his destiny on earth; any pretense that the spiritual nature of man, being a troublesome thing to quantify technically, can be safely ignored or dismissed.
An error from the other direction, as it were, can be just as crippling. To insist so fiercely on a principle that no fact or set of facts can ever force adjustment, is a reckless thing in a statesman or businessman or any other actor. Here my sense is that statesmen face some facts that are going to require philosophical adjustment, and that is going to be a painful and erratic process.
But that is another essay. For now I would counsel that, in all the jumble of economic and political-economic talk that suffuses the airwaves, we keep our heads about us when it comes to this distinction between economics and philosophy, and the unique field that attempts to bring them into some balance or unity.