When social physics becomes a social problem:
economics, ethics and the new order
Juan Pablo Pardo-Guerra (Mexico)
© Copyright 2004- Juan Pablo Pardo-Guerra
In an official speech just a few weeks ago, Inacio Lula Da Silva, the polemical and ever so intriguing President of Brazil, threw hunger and poverty into that fashionable category of ‘weapons of mass destruction.’ Mr. Lula’s words were uttered not in a time of worldwide prosperity but in the midst of an international crisis of pandemic proportions: while global resources become increasingly endangered, the global governance system stands on the verge of collapse as some of the most powerful nations of the world disdain collaboration over intervention, concordance over imposition and dialogue over unilateralism. On the economic side of this dire picture, an important sector of the world’s population has been driven to take to the streets to manifest its discontent with the surge in global inequality, often attributed to the malformed policies of organizations such as the World Bank and the International Monetary Fund. In contrast and following the long tradition of economic thought that has permeated the West for generations, the heads of these same global organizations blame countries like Brazil, the home of Mr. Lula, for not adapting their domestic policies to the demands of these liberal times we live in. If this were only an inoffensive divergence in worldviews, nothing important would be at stake. However, at the core of this discussion lies the fate of millions of people, from the marginalized citizens of Michael Moore’s suburban USA to the famished refugees in Sudan. The destiny of global security lies not only in the proliferation of weapons of mass destruction or in the expansion of terrorist activities; the real peril lies in the increasing gap that inexorably divides the people of our world, the rich from the poor, the informed from the uninformed, the armed from the disarmed.
But who is to blame for the constant growth of this gap? Who is ultimately right: the alterglobalists1 that took to the streets in Seattle or the high management of the Bretton Woods offspring?
Concerning the Two Chief Systems of the World
It is virtually impossible, if not political suicide, to identify a single cause for the widening socioeconomic gap that divides our world. The alterglobalists often blame ‘the system’ that lies on the other side of the barricades, whilst those who work for ‘the system’ often blame the alterglobalists for being blind to the benefits of living in a global village. The fundamental problem here lies in the fact that, in some sense, both parties see the world from different perspectives and epistemological backgrounds, therefore making dialogue among them a monologue in two voices. It is an outspoken clash of two radically different cultures.
The economists and policy-makers who work in one of the myriad institutions devoted to putting some order into the global economy grew up in a world that tagged them and their jobs as eminently rational in nature; most went to colleges where they studied the rationality behind choices; they were taught that economics is a science, specifically a science of society; they read Adam Smith, John Maynard Keynes, Paul Samuelson, John Stuart Mill, and even Karl Marx. They believe they are following the right track simply because they are implementing the very things they were taught to do. Activists, on the other hand, grew up in a world where the premises that economists and policy makers defended were simply not real; they saw the demise of the economic policies of the last three decades; they’ve seen the poverty of those affected by an uncontrolled globalization; they understood that economics is not as scientific as it claims to be; and they know that rationality is far from being carvings on a stone. The tools they have for understanding the world, both learned from theory and from practice, usually are at odds with those of mainstream economists.
There are countless examples of this philosophical divergence in the vast literature on both activism and globalization that one can find in any average bookstore. Take, for example, one of the central referents of many alterglobal activists, Naomi Klein. Consider the following paragraph extracted from a column published during the first days of the World Trade Organization’s 2003 ministerial conference in Cancun, Mexico:
[the brutal economic model advanced by the World Trade Organization is itself a form of war] because privatization and deregulation kill--by pushing up prices on necessities like water and medicines and pushing down prices on raw commodities like coffee, making small farms unsustainable. War because those who resist and "refuse to disappear," as the Zapatistas say, are routinely arrested, beaten and even killed. War because when this kind of low-intensity repression fails to clear the path to corporate liberation, the real wars begin. (Klein, 2003)
These words, even at a rhetoric level, are in sharp contrast with those of Robert S. McNamara, former president of the World Bank, who in an interview with New Perspectives Quarterly mentioned:
Ninety-eight percent of the protesters are young people who are extraordinarily highly motivated, desiring to improve the welfare of the disadvantaged in the world, particularly in the developing countries, in China, the Indian subcontinent or sub-Saharan Africa. But they are totally wrong in their judgment that globalization is somehow the cause of poverty or standing in the way of reducing poverty. They are just totally wrong intellectually. (McNamara, 2003)
There is simply no immediate form of bridging the positions of the pro-globalists who believe in the predictions of the theory and the in situ practitioners who live the reality of the policies. And as countless news reports show, the combination of these two discursive worlds generates an explosive mix: thousands of protestors, clashes with local security enforcement agencies and—as was so terribly demonstrated during the 2001 G8 meeting in Genoa—even fatal outcomes. But despite all, there is a fundamentally simple way to defuse this deadly cocktail, one which is rather well-known but seldom referred to.
Perhaps the biggest obstacle that prevents these two rather distant worlds from establishing a steady dialogue can be traced back to the way in which economists are trained. I have chosen economists as the focal point of this assessment for they, in general, occupy positions that give them a more formal and official validation than that given to alternative social movements. Focusing our attention on economists is therefore following the track of political power and the channels that have a higher impact on the construction of history. But to understand and change the practice of economists one first has to comprehend their trade and this in turn requires understanding the complex web on which the modern economic discourse was built.
Building the ivory tower
Economics has suffered a series of dramatic changes over the last 200 years. From emerging as one of the strongest arms of moral philosophy, it has now come to resemble a formal, axiomatic dictum tailored with the patterns of physics and mathematics rather than with those of sociology and culture studies. In some sense, economics became an embodiment of the positive dream of a “social physics,” a discipline capable of finding the general laws that rule our societies and our lives (Comte,  2003). This is not at all coincidental. As Philip Mirowski (1989) showed, the development of modern economics was closely linked to the evolution of 19th century mechanics, a deterministic and materialistic vein of thought that remains entrenched in the very fabric of many sciences.
With the dawn of the 20th century, economics became ever so mathematical. The fast advancements in the formalization of mathematics along with developments such as the game-theoretical construction of Von Neumann and Morgenstern set the stage for a new economic discourse designed to fit the many industrial, social and political convergences of the 20th Century. The original moral character of economics consequently became enclosed by a sea of mathematical concepts, from Arrow and Debreu’s theory of value, to Stiglitz’s asymmetric information. Very few escaped the mathematization of the discipline; most of the survivors were old school economists of the type of Frederick Hayek and, to some extent, John Maynard Keynes. But today, decades after Bretton Woods and the institutionalization of economics as the basis of the world order, it is rare to find an economist who conceives mathematical formality only as a limited tool and not as the core of modern economic theory.
In the process of merging economics and mathematics two fundamental things were left behind. On a theoretical level, and repeating to some degree the path taken by physics, systemic complexity became something that could not be handled within the mainstream theory. Economic systems, just as ideal gases, were now seen as regulated by a small set of rules (utility maximization, cost minimization, benefit maximization, informational efficiency, general equilibrium and so forth) all of which were immutable, additive and universal. Even today, in a time where complexity studies have been present in academic circles for decades in areas such as technological innovation and financial economics, standard texts such as Hal Varian’s Intermediate Microeconomics (1999) still contain deeply reductionist ideas such as the one quoted below:
Economics is based on the construction of models of social phenomena. By a model, we understand a simplified representation of reality. […] The power of a model comes from the suppression of irrelevant details, which allows the economist to focus on the essential characteristics of the economic reality which he tries to comprehend.
Furthermore, and on a purely discursive level, the association between economics and mathematics allowed for a quick dissociation from ethical discussions. What had originally been in words of Kenneth Boulding a ‘moral science’ transmuted, due to the force of positivist influences, into a ‘hard science’ (Averly, 1999). Along with compacting complexity, this shift in worldviews allowed economists to isolate themselves from ethical issues through the same arguments of universality and value-independence that granted physicists a certain degree of immunity when they were involved in questionable research programs. One can still find amongst many mathematical economists the same arguments of beauty and cognitive purity that were seen in the physics community during the development of atomic weapons in the Cold War. From the time economics became fortified with the tag of ‘being scientific’, the global economic agenda was set beyond the boundaries of ethics, from a domain were the only acceptable dictums were those of the factual laws of our societies.
Living in a pluricultural world
We now start to see a familiar terrain. The ‘ethics and science’ debate is part of an important tradition that criticises the administration of scientific resources and the consequences of research on our lives and the future in general. However, and for the most part, this debate has been concentrated on the role of hard sciences. Physicists are seen as the creators of nuclear weapons; chemists are seen as the developers of mustard gas and other deadly agents; and biologists and biochemists are associated to a vast array of bioweapons that pose a great danger to all of humankind. But rarely does anyone mention the other ‘weapons of mass destruction,’ namely poverty and hunger, overall far more critical than any of the weapons used so far in armed conflict. If we are to blame economics for this construct, then how should we confront the challenge of the ‘ethics of economics’?
The answer is not necessarily simple, though as a first step we could think of using the same strategies as the ones used in other disciplines (such as physics) but adapted to a primordially social context. This can be done by means of two different though not contradictory paths:
1. By strengthening the debate on the theoretical limits of economics and the impossibility of existing mathematical techniques to describe with no uncertainty or loss of complex phenomena, therefore opening an avenue for an ‘economic precautionary principle’.
2. By eroding the division between theory and practice in such a way that ethics becomes a necessary tool for coping with complex economic issues. In this sense, cultural environments should be thought of as the key element in the ethical debate: is it ethical to export economic structures to regions of the planet that have a different cultural background? How do we deal with inequality from an ethical perspective? This is, in itself, an educational pathway, one that is not present in most of the current curricula in economics.
The reason for establishing these two paths is simple. Firstly, they both have a certain degree of appeal that might draw important groups of non-economists into the debate, for example activists, politicians and the general public. Hence, it is important to see that, if incorporated into the educational process of economists and policy-makers, ethics could potentially serve as a bridge between the two worlds in which our planet is divided. Additionally, ethics serves as a conveyer of the local needs of a specific population, being capable of translating the local reality onto a variety of perspectives. This results in a better communication between groups, one that might help alleviate the problems of a vast sector of the world’s population. Secondly, they open new areas of research and expand the current possibilities of theoretical studies. Though complete awareness of our social universe is impossible, such a shift in views might create the need for new methodologies and analytical techniques not considered in the past. This is, in itself, an immensely valuable expansion of economic theory.
Independently of the choice, it is important to remember that ethics has the potential of being the ideal communication scheme across cultures and borders, including between the advocates and the opponents of the current economic model. Therefore, it is important to incorporate the ‘ethics and economics’ discussion into the ‘ethics and science’ debate.
A final note
How does all this affect the Post-Autistic Economics Movement? For one, it opens the possibility of collaborating with a whole new set of movements, that is to say, with those involved in the study of ethics and science. But more importantly, it presents itself as a concise policy recommendation: economics cannot be without ethics if our real objective is to help the world evolve into a better, more equal state, and not to perpetuate the divide that segregates our citizens, keeping them eternally confronted.
1. The term alterglobalist comes from the Spanish word “altermundista” which categorizes all the movements that are against the current mainstream economic trend. However, it is a much broader term than “anti-globalists.” For example, the Pugwash Conferences are an alterglobalist organization because they believe in a world free of nuclear weapons (something far from being the global trend over the past 50 years). However, Pugwash is not against globalization per se; instead it is seen as a potentially beneficial force.
Averly, J. 1999. An introduction to economics as a moral science. The Independent Institute.
Comte, A. 2003. 1830. La filosofia positiva. Mexcio: Editorial Porrua.
Klein, N. 2003. Free trade is war. The Nation, September 11 2003
McNamara, R. 2003. New Perspectives Quarterly, vol. 7, September, 2001
Mirowski, P. 1989. More heat than light. Cambridge: Cambridge University Press.
Varian, H. 1999. Microeconomia intermedia. Barcelona: Antoni Bosch.